INSIGHT: Qatar’s dilemma highlights wider feedstock issues

21 December 2010 17:57  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--There aren’t that many largely gas-based plays left in the Middle East as feedstock availability changes.

Companies and countries are looking hard at the best ways to monetise gas - as liquefied natural gas (LNG), or in chemicals. At the same time ethane availability has been under close scrutiny given the constraints on oil production through the recession and financial crisis.

Shell must be encouraged by the signing in Doha of a memorandum of understanding (MoU) with Qatar Petroleum for a “world-scale, mixed-feed steam cracker” and a massive 1.5m tonne/year monoethylene glycol (MEG) plant at Ras Laffan in Qatar.

The project has been mooted for years but now the real feasibility work can begin - including a timescale for the cracker and the wider petrochemical project.

The MEG plant will use Shell’s Only MEG Advantage or OMEGA technology, which boasts a 99% ethylene oxide conversion rate and virtually no di- and tri- ethylene glycol byproducts. It is the world’s first entirely catalytic MEG process and has a very low ethylene consumption rate, Shell claims.

The MoU plants a stake in the ground in what has become a political game of one-upmanship between the oil/petrochemical majors in Qatar.

It is only a few weeks since Total suggested that it would be building a cracker complex in the country.

ExxonMobil had been working with Qatar Petroleum to develop a 1.6m tonne/year steam cracker, two 650,000 tonne/year gas-phase polyethylene (PE) plants and a 700,000 tonne/year MEG plant using ExxonMobil cracking and PE technologies, Qatar Petroleum said in January this year.

The project would use feedstock from gas development projects in Qatar's North Field, where the two companies had been expanding LNG extraction facilities.

Little has been heard officially of this project and the heads of agreement signed at the time, despite widespread rumours that it has been shelved because of poor economics.

Total said at the end of November that it was in the early stages of discussions with Qatar Petroleum for a mixed-feed cracker project. Earlier, South Korea-based Honam Petrochemical backed out of a cracker complex plan with the state-controlled oil and gas producer.

The long-running saga - it is not so long since Shell suggested that there might be enough feedstock for three world-scale crackers and MEG projects in Qatar - reflects not only on the discussions going on in Qatar concerning gas and liquids feedstock availability, but also on a much wider regional issue.

Consultants have suggested that (ethane) gas in Qatar is not as cheap as some might think, so attractive project economics are more difficult to establish. That certainly seems to be the case given that “mixed-feed” crackers are currently being discussed.

At the same time, Qatar has extended a moratorium on projects based on gas from the North Field until 2014. Qatar has to make decisions based firstly on the best estimates of what volumes of gas might be available, and secondly on how best to monetise those reserves.

Gas is being extracted for conversion to liquids and is being liquefied for export. Shell is involved in the giant Pearl gas-to-liquids (GTL) project that will produce a light naphtha for blending into gasoline, but not liquids for chemicals.

An alternative, of course, might be to leave the gas in the ground so that it can benefit future generations.

Across the Middle East, investors in petrochemicals are grappling with some tricky feedstock-related issues. Gone are the days of cheap (ethane) gas availability. Feedstock flexibility at least is a must for every new cracker project.

Governments particularly want access to a much broader (petro) chemicals product slate if they are to realise plans to flesh out nascent manufacturing industries, provide employment and develop a stronger and more diverse industrial base.

Monetising less readily available and sometimes more expensive feedstocks by conversion to chemicals can make sense but often in a different way than before.

The days of the large Middle East ethane cracker might well be numbered. Mixed-feed or liquids-fed projects can be made to work but the economics and the rationale behind their construction will be different.

Read John Richardson and Malini Hariharan's Asian Chemical Connections blog
To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

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