Market and product

Access to cheap local sources of ethane feedstock will ensure that Qatari margins remain healthy during a period of global over-supply in 2010, according to our latest Qatar Petrochemicals Report. Trends in Qatari petrochemical production are closely tied to its key export markets, notably Asia`s economic powerhouse: China. In 2009, China depended on imports for at least a third of polymer demand. Most of the increase in demand will be covered by both Chinese and Middle Eastern supply from new petrochemicals plants due to come on stream in coming years. By 2014, China could represent 35% of the global polypropylene (PP) market and 20% of global polyethylene (PE) demand. This will directly benefit Qatar`s expanding petrochemicals industry both domestically and with its investments in China. A massive rise in petrochemicals capacity in China and the Middle East will lead to a softening of global prices in 2010, but with its cheap feedstock, Qatar is set to maintain strong petrochemicals margins. Nevertheless, we forecast declining Middle East cracker operating rates from 90% in 2008 to 78% by 2011, before returning to 2008 levels by 2013-2014.

Positive prospects for Qatar`s petrochemical industry have been dampened as several major projects have been delayed or put on hold altogether amid international financial turbulence, tightening credit markets and the threat of over-capacity in global petrochemical markets. Notably, Qatar Petroleum (QP) and Honam Petrochemical announced that their US$2.6bn mega petrochemical complex planned for Mesaieed would be put on indefinite hold. The project, already delayed to 2012, may now only be reviewed when market conditions improve.

However, there was good news in January when QP and ExxonMobil signed an agreement to progress the joint development of a petrochemical complex in Ras Laffan Industrial City, nearly five years after signing an initial agreement. ExxonMobil Chemical Qatar said that the proposed complex would include a 1.6mn tonnes per annum (tpa) ethylene cracker, two 650,000tpa polyethylene plants and a 700,000tpa ethylene glycol plant. QP and ExxonMobil are already working jointly to diversify the use of Qatar`s North Field gas, including the expansion of facilities to export liquefied natural gas (LNG) and the supply of pipeline gas to domestic customers. Start-up of the proposed facility is estimated in Q415. Other projects that have overrun their target start dates include the Qatofin/Q-Chem joint venture (JV) 1.3mn tpa ethylene cracker project in Ras Laffan, which was scheduled to launch in early 2009 but started operations in December 2009.

In 2009, Qatar had ethylene capacity of 2.6mn tpa feeding downstream units that included 400,000tpa lwdensity polyethylene (LDPE) and 450,000tpa high-density polyethylene (HDPE). In the fertiliser segment, Qatar had capacities of 2.15mn tpa ammonia and 3.0mn tpa urea. In addition, it possessed 835,000tpa of methanol capacity. By 2015, it should have ramped up capacities, with olefins capacities including 6.25mn tpa ethylene and 900,000tpa propylene, feeding downstream units providing 1.6mn of PE capacity, 700,000tpa of PP and 220,000tpa of polystyrene (PS). Qatar will represent 30% of the increase in the Gulf Co-operation Council (GCC)`s total cracker capacity between 2009 and 2015.