Algeria Petrochemicals Report Q4 2009

Algeria Petrochemicals Report Q4 2009

State-owned Algerian energy producer Sonatrach has signed a slew of big-budget contracts for the
development of upstream infrastructure which should bolster future growth of downstream
petrochemicals industries, according to BMI’s latest Algeria Petrochemicals Report. However, the
industry has not been immune from the global economic downturn and financial crisis with a two-year
delay in the Arzew petrochemical complex, which will include a 1.1mn tonnes per annum (tpa) ethane
cracker and units with capacities of 410,000 tpa of MEG, 350,000tpa of HDPE and 450,000tpa of
LLDPE. This will be overseen by a 51:49 joint venture (JV) between Total and Sonatrach. Early 2009
reports suggest that the technology and design contract awards for the cracker will be made in H209 and
that the completion of the complex would take place in 2014 and not 2012 as originally planned. The
Almet consortium was also granted a US$1bn contract to build a 1mn tpa methanol plant. As a result of
the delays, Algeria’s ethylene and PE capacities are forecast to remain static at 130,000tpa until 2014,
after which they will increase with the addition of new capacity. By 2014, ethylene capacity should be
1.23mn tpa and PE capacity should reach 930,000tpa, with new capacity in the production of other
derivatives.
In July 2009, Sonatrach awarded Samsung Engineering with a US$2.6bn order to expand and improve a
refinery facility in Skikda. Samsung Engineering said that the contract size was expanded from the initial
US$1.2bn project awarded to the firm in May. The contract will increase the refinery's capacity by
30,000b/d to up to 330,000b/d. The order also involves plants with capacities of 700,000tpa isomerate,
220,000tpa PX and 200,000tpa benzene. The project is due to be completed within three years and forms
part of Sonatrach’s goal of raising refinery capacity from 500,000b/d to 1mn b/d and diversify
downstream products. Samsung will perform engineering, procurement and construction (EPC) services
on a lump-sum turnkey basis while bulk materials and construction costs will be settled on a reimbursable
contract basis.
In May 2009, Saipem was awarded an engineering, procurement and construction contract worth about
US$265mn to build an export terminal near Arzew for Sonatrach. The marine terminal will handle export
of urea and ammonia from new complexes that Sonatrach is building with its joint venture partners. In
addition, two major new fertiliser complexes are on track in Arzew. The US$1.9bn Sorfert Algérie
complex, a 51:49 JV between Egypt’s Orascom Construction Industries (OCI) and Sonatrach, is
scheduled to complete in 2011. Sorfert was formed in April 2007 to construct two ammonia trains – one
designed for 1.2mn tpa and the other for 800,000 tpa – and a urea production facility designed to produce
3,450 tonnes per day.
Algeria’s ethylene and PE capacities are forecast to remain static at 130,000 tpa until 2014, after which
they will increase with the addition of new capacity. By 2014, ethylene capacity should be 1.23mn tpa
and PE capacity should reach 930,000tpa, with new capacity in the production of other derivatives. This
is two years later than we forecast in the previous quarterly report. In the Middle Eastern Petrochemicals
Business Environment Rankings matrix, Algeria remains in 10th place with an overall score of 35.2
points, down 2.7 points since the previous quarter due to the two-year delay to the Arzew petrochemical.
On nearly every indicator, Algeria comes last by a long margin and is likely to remain that way until the
complex comes onstream.

Executive Summary .5
SWOT Analysis7
Table: Algeria Petrochemicals Industry SWOT . 7
Global Market Overview..8
Global Ethylene Capacities .. 8
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) 8
Polypropylene 11
Global Oil Products Market Review 14
Table Global Oil Prices, 2003-2013 (US$ per barrel). 18
Africa Regional Overview19
Table: Africa’s Gas Reserves, 2008 (bn cubic metres) 19
Table: Africa’s Oil Reserves, 2008 (bn barrels) . 19
Table: Africa’s Cracker Capacity, 2007-2013 (‘000 tpa) 22
Algeria Market Overview..23
Market Structure.. 24
Table: Production Of Petrochemicals, 2004 And 2005 (tonnes).. 25
Table: Algeria’s Petrochemicals Sector – Cracker Capacity, 2006-2013 (‘000 tpa) 25
Industry Trends And Developments ..26
Upstream 26
Olefins And Polyolefins. 30
Table: Petrochemical Capacity At The Planned Arzew Complex . 30
Petrochemicals Business Environment32
Table: Middle East And Africa Petrochemicals Business Environment Ratings . 32
Limits Of Potential Returns. 32
Risks To Realisation Of Returns 33
Algeria’s Business Environment 34
Industry Forecast Scenario .36
Table: Algeria’s Petrochemical Sector – Arzew Complex Capacities, 2012 (‘000 tonnes). 38
Table: Algeria’s Petrochemical Sector, 2005-2013 .. 38
Macroeconomic Activity .. 39
Table: Algeria – Economic Activity, 2006-2013 . 41
Company Monitor42
Sonatrach/ENIP 42
Country Snapshot: Algeria Demographic Data49
Section 1: Population. 49
Table: Demographic Indicators, 2005-2030. 49
Table: Rural/Urban Breakdown, 2005-2030 50
Section 2: Education And Healthcare. 50
Table: Education Levels, 2002-2025 .. 50
Table: Healthcare – Vital Statistics, 2005-2030 . 50
Section 3: Labour Market And Spending Power . 51
Table: Employment Indicators, 2001-2006 51
Table: Consumer Expenditure, 2000-2012 (US$) .. 52
BMI Methodology 53
How We Generate Our Industry Forecasts 53
Chemicals And Petrochemicals Industry .. 53
Cross Checks 54
Business Environment Ratings 55
Table: Petrochemicals Business Environment Indicators And Rationale 55
Weighting 56
Table: Weighting Of Indicators . 56