Kuwait Petrochemicals Report Q4 2009

Kuwait Petrochemicals Report Q4 2009

Kuwait is pressing ahead with its rapid expansion of petrochemicals in 2009 with the recent election of a
more moderate parliament likely to improve the chances of the approval of the massive Al-Zour refinery
project, according to BMI’s latest Kuwait Petrochemicals Report. A number of new projects are coming
online as part of the expansion of the Equate joint venture between the state-owned Petrochemical
Industries Company, Dow Chemical and Boubyan Petrochemical Company. In June, Equate
Petrochemical started up a new HDPE/LLDPE unit which raised its total PE capacity to 825,000tpa. A
large proportion of its output will be exported to China. The amount of capacity brought online and
Equate’s competitive advantage in feedstock costs has prompted some traders and analysts to warn that it
will put pressure on petrochemicals margins across Asia and could lead to cuts in cracker utilisation rates.
Equate’s Kuwait Paraxylene Production Company (KPPC) plans to bring its planned 822,000tpa PX
and 370,000tpa benzene plants at the Shuaiba Industrial Area online by Q309. They will be operated by
Equate, with 560,000tpa of by-products also to be produced at the site. The associated 450,000tpa
ethylbenzene-styrene unit, operated by Equate affiliate Kuwait Styrene Company, was already running
by Q209. The projects form part of the expansion of Equate’s facilities, which also include cracker
capacity of 1.7mn tpa of ethylene, 1.15mn tpa of EG and 110,000tpa of PP.
Confusion continues to surround plans to build the Al-Zour refinery in Kuwait amid allegations of
corruption in the award of contracts rules out a potential source of naphtha. In June 2009, the Kuwait
National Petroleum Company (KNPC) re-submitted the refinery for approval by the Supreme
Petroleum Council with cheaper costs and a more transparent tendering process. Without Al-Zour and
with non-associated gas production dedicated to power generation, there is little scope for significant
capacity additions beyond those currently planned by Equate.
Kuwait’s petrochemicals score has fallen 4.5 points to 51.8 points to seventh place in BMI’s Middle East
Petrochemicals Business Environment Rankings. Kuwait’s score has deteriorated due to rising
uncertainty over the future of the Al-Zour refinery, which has attracted considerable controversy over its
tendering process. This put it 4.6 points ahead of Kuwait and 1.5 points behind South Africa. Kuwait’s
score has come under pressure due to deterioration in country risk caused by the economic downturn,
coupled with a declining investment environment after the cancellation of KPC’s planned JV with Dow.
In the short term, PE and EG sales from the Greater Equate project are expected to continue to benefit
from strong Asian demand. Equate’s slim portfolio, while not that sophisticated, does include the most
frequently used plastic in the world. China is the key driver of this demand. According to BASF
estimates, by 2015, the Asia Pacific region is expected to account for about 34% of global petrochemicals
demand, with China the single largest contributor. However, much of the feedstock for additional
capacity in 2009 is likely to be imported, with Kuwait set to see net imports of 10bcm of gas by 2013.

Executive Summary .5
SWOT Analysis6
Kuwait Petrochemicals Industry SWOT 6
Kuwait Political SWOT 6
Kuwait Economic SWOT. 7
Kuwait Business Environment 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
Gulf Regional Overview19
Table: Announced Ethylene Cracker Projects In The Gulf Region .. 21
Kuwait Market Overview..22
Petrochemicals Business Environment24
Table: Middle East And Africa Petrochemicals Business Environment Ratings . 24
Limits Of Potential Returns. 25
Risks To Realisation Of Returns 25
Overview Of Kuwait’s Business Environment.. 26
Foreign Investment Policy .. 27
Political Developments . 28
Industry Trends And Developments ..30
Upstream 31
Refining .. 32
Corporate Developments . 34
Olefins And Polyolefins. 34
Aromatics 35
Table: Upcoming Projects In Kuwait.. 36
Overseas Investments. 36
Industry Forecast Scenario .38
Table: Kuwaiti Petrochemicals Sector, 2006-2013 (000 b/d, unless otherwise stated) 39
Macroeconomic Outlook.. 40
Table: Kuwait – Economic Activity, 2005-2013.. 42
Company Monitor43
Petrochemicals Industries Company (PIC) 43
Equate Petrochemical Company 44
Country Snapshot: Kuwait Demographic Data 46
Section 1: Population. 46
Table: Demographic Indicators, 2005-2030. 46
Table: Rural/Urban Breakdown, 2005-2030 47
Section 2: Education And Healthcare. 47
Table: Education, 2002-2005 . 47
Table: Vital Statistics, 2005-2030. 47
Section 3: Labour Market And Spending Power . 48
Table: Employment Indicators, 1997-2006 48
Table: Consumer Expenditure, 2000-2012 48
BMI Methodology 49
How We Generate Our Industry Forecasts 49
Chemicals And Petrochemicals Industry .. 49
Cross Checks 50
Business Environment Ratings 51
Table: Petrochemicals Business Environment Indicators And Rationale 51
Weighting 52
Table: Weighting Of Indicators . 52