Abu Dhabi's IPIC to focus on projects and acquisitions

Organic focus for 2010

14 June 2010 00:00  [Source: ICB]

Following an acquisitive 2009, Abu Dhabi's IPIC is spending this year expanding through organic growth, while still looking for purchases

After the acquisition of Canada's NOVA Chemicals in 2009, Abu Dhabi's International Petroleum Investment Co. (IPIC) is this year focusing on moving ahead with domestic projects, as well as keeping an eye out for overseas acquisitions and joint ventures (JVs).

 Rex Features
The company's most ambitious long-term chemical project is the Abu Dhabi National Chemicals (ChemaWEyaat) development, which has just been scaled back to a more realistic level.

The site for Tacaamol, the first stage of the ChemaWEyaat project has now been formally agreed, according to Khadem al-Qubaisi, managing director of IPIC.

"Now that a site has been established, site-specific planning can take place, once board approval has been obtained. People know what they're dealing with and can move forward much more quickly on defining exactly what this complex will look like," he says.

It is to be located at the Taweelah-based Chemicals Industrial City, part of the Khalifa Port and Industrial Zone. The next task is for the project to move on and finalize the scale and type of production followed by front-end engineering and design.

The original $20-25bn (€16-24bn) plan listed downstream propylene and ethylene derivatives; a worldscale reformer, xylene, benzene, cumene, phenol and derivatives units, using naphtha as a feedstock.

The latest plan is to spend around $16bn on a 1.5m tonne/year naphtha cracker with a smaller slate of ethylene and propylene derivatives. "People have taken a second look at what is involved in planning and starting up a super-giant, worldscale plant that is highly integrated from day one. It's an absolutely huge challenge, so we've asked if this is the way to go when you're giving yourself so many opportunities to fail," says Al-Qubaisi.

The idea is not to lose sight of the original plan but to do it in several phases instead of all in one go. "There will be 11-12 projects, making it the cornerstone of the future development of Abu Dhabi's domestic petrochemical and chemical industry. We're looking at five and a half years to completion for Tacaamol, but that is not fixed."

NOVA's AST technology is to be used together with Austria-headquartered Borealis's Borstar technology, both on offer from a single site. "Borealis has excellent technology producing grades at the high end of the market. Asian markets for these products, especially in China, are growing at a high rate. Nova will also produce premium grades, but the overlap with Borstar will be minimal," says Al-Qubaisi.

ChemaWEyaat shareholders - IPIC (40%), Abu Dhabi Investment Council (40%) and Abu Dhabi National Oil Co. (Adnoc - 20%) hope the scheme will add value downstream so the country can create meaningful employment for its young and growing population.

"The idea is for Abu Dhabi to fully develop its chemical and petrochemical potential. There's no reason why we couldn't be a similar story to Saudi Arabia, which has a bigger economy and more oil, if not gas," adds Al-Qubaisi.

Borouge is a JV between IPIC and the Adnoc. Its Borouge 2 facility at Ruwais will be starting up in the fourth quarter (Q4) of 2010 and, when combined with the existing Borouge 1, will boast total polyolefins capacity of 2m tonnes/year (see table above right).

In May, German industrial gases group Linde signed a $1.07bn contract for a 1.5m tonne/year ethane cracker for the next stage of this development, Borouge 3. It will have total polyolefins capacity of 2m tonnes/year, with start-up expected in 2014.

Borouge 3 has not yet been allocated its ethane feedstock. "Borouge is competing with other projects wanting natural gas. There is a bit of a queue and different voices want to be heard. There's no question about the availability of the feedstock. It's a question of 'when', not 'if'," Al-Qubaisi says.

 "People have taken a second look at what is involved"
Khadem al-Qubaisi, managing director, IPIC

Elsewhere in the United Arab Emirates, Al-Qubaisi says IPIC is hoping to sign a JV in Qatar in petrochemicals based on natural gas: "We'd be well placed to bring technology to this," he points out. IPIC sees little prospect of much new capacity being added to its European assets, based on Borealis, a JV between IPIC and Austrian oil company OMV. "Excess demand will be filled from the Middle East," says Al-Qubaisi.

He explains that further afield, "China is already a strong market for Borealis, which is doing well at the top end. With the Nova acquisition, we have extended our PE grades." Borouge is establishing compounding units in China as part of its supply chain initiatives for the additional volumes from Borouge 2.

Al-Qubaisi sees real potential in India, but is holding back, like many chemical producers, because of problems with the business environment there. "There are difficulties. It is often unclear who has authority between the national and regional governments. Past experience has left us cautious, but the growth story is compelling."

Reliance Industries, which dominates India's chemical sector with a 62% market share in ethylene, is also a tough competitor. "Competition from Reliance is formidable: it has immense power and influence with the government. They also have engineering competence and can deliver. It's difficult to see how exporters can compete against the largest domestic producers."

IPIC is still looking for a major European petrochemical acquisition, but less intensively than in 2009. "An acquisition will need to be reevaluated: whether or not it goes ahead is an open question. It could still happen - the chances of it happening in 2010 are somewhat less than 50%, but not vanishingly small either," he says.

In November 2009, the company was in talks with five major petrochemical players in the US and Europe, including Germany's Bayer MaterialScience, and expected to close a European acquisition earlier this year.

Now, Al-Qubaisi says: "We were looking at a large, major European producer - in commodity petchems. [A major European acquisition] is not ruled out, but it's on the back-burner for now and I would not anticipate that it would occur as early as Q3 this year." He adds: "IPIC and [investment group] Aabar had a very aggressive 2009, reflecting the opportunities that became available that year following the global financial crisis.

"It's likely that in 2010, we'll see a far less aggressive attitude because we want to digest the investments that we made to make sure we exploit the additional synergies. We're opportunistic in nature and if good opportunities come along, we'll certainly look seriously at them."

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Borealis 64%
ChemaWEyaat 40%
Hyundai Oilbank 70%
NOVA Chemicals 100%
Aabar Investments 71%

Product Location Capacity (tonnes/year) Date on stream Status Contractor
Ethylene - - 2014 study Consolidated Contractors International, Linde,Maire Tecnimont
Acetone Ruwais - 2012 study -
Phenol Ruwais - 2012 study -
Cumene Ruwais - 2012 study -
Propylene Ruwais - 2012 study -
Linear low density polyethylene Ruwais 540,000 Q4 2010 in construction Maire Tecnimont
Propylene Ruwais 800,000 Q4 2010 in construction Samsung Engineering
Polypropylene Ruwais 800,000 Q4 2010 in construction Maire Tecnimont
Ethylene Ruwais 1.5m Q4 2010 in construction Consolidated Contractors Group, Linde Source: ICIS plants and projects/IPIC

By: Will Beacham
+44 20 8652 3214

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