Qatar Petrochemicals Report Q4 2009

Qatar Petrochemicals Report Q4 2009

The overwhelming optimism over the rapid growth of Qatar’s petrochemicals industry has dissipated
somewhat in the face of the global financial crisis and the downturn in Chinese demand, but BMI’s latest
Qatar Petrochemicals Report argues that the country’s competitive advantage will ensure current projects
go ahead, albeit with delays of one to two years.
Trends in Qatari petrochemical production are closely tied to its key export markets, notably Asia’s
economic powerhouse China. A deterioration in Chinese economic conditions has put pressure on
demand both in China and other Asian markets. BMI believes that demand for petrochemicals will have
improved in H209 following some difficult months which have seen a sharp slowdown in construction
activity. This will be supported by the government’s economic stimulus programme. Although H209 will
be an improvement on the poor performance seen in H208, levels of demand growth are not forecast to
return to 2007 levels until 2010 at the earliest. However, there are fears that the Chinese government’s
stimulus plan for petrochemicals, which is set to involve investment in new refineries to speed up their
construction, could create a problem of short-term over-supply in Qatar’s export markets in Asia. Much
will depend on the strength of the recovery in the automotive and home appliance sectors, which are
expected to recover before the construction sector.
Qatar’s strength lies in its cheap feedstock, the size of its units and the high level of integration, which
make it more economical and competitive. Nevertheless, the addition of large amounts of capacity at a
time of economic downturn in key markets such as China could mean that Qatari facilities run at lower
rates than operators hoped. Some figures put excess olefins capacity at up to 30mn tpa, which is five
times more than during previous downturns. Despite the threat this poses to Qatari profit margins and
planned projects, BMI still believes Qatar is better placed than most other petrochemical-exporting
countries.
Doubts are emerging over planned projects after a decision by QP and Honam Petrochemicals to delay
their US$2.6bn plant by one year. Previously, BMI reported that the project would be delayed until 2012,
due to problems securing finance. Reports have now emerged that the project will be delayed until early
2013. There were concerns that it may not go ahead at all after the partners said they were putting the
plans on ‘indefinite hold’. The cornerstone of the complex was to be a cracker with capacity of 1mn tpa
of ethylene using mixed feedstock, with other capacities including 900,000tpa of propylene, 700,000tpa
of PP and 220,000tpa of PS. The partners have declared they are still planning to complete the project, but
BMI is highly cautious and mindful of Honam Petrochemical’s own problems with rising losses,
although it has little or no debt.
Meanwhile, a number of other projects have overrun their target start dates. Others are still under
discussion, but the tightening credit market, threat of over-capacity in the global petrochemicals markets
and concerns that Qatar will not have enough feedstock to justify such megaprojects have dampened the
previously positive prospects for the Qatari petrochemical industry. The Qatofin/Q-Chem 1.3mn tpa
ethylene cracker at Ras Laffan has been pushed forward to the latter half of 2009, with resulting knock-on
effects for other projects. The Q-Chem II PE complex, which was expected to be onstream in H208 with
capacities of 350,000tpa HDPE, 345,000tpa normal alpha olefins and 1.3mn tpa ethylene, may only start
in H209. Qatofin’s PE complex, with 450,000tpa LLDPE capacity, missed its scheduled Q109 start-up
and now looks unlikely to come onstream before Q309. The Qapco PE plant, with 250,000-300,000tpa of
LDPE, is also unlikely to be completed before 2011, a year behind schedule. Discussions of further
petrochemical development projects, still in the discussion stage, have slowed and could be abandoned.

Executive Summary .5
SWOT Analysis7
Qatar Petrochemicals Sector Industry SWOT. 7
Qatar Political SWOT.. 8
Qatar Economic SWOT 8
Qatar Business Environment SWOT .. 9
Global Market Overview10
Global Ethylene Capacities 10
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) . 10
Polypropylene 13
Global Oil Products Market Review 16
Table Global Oil Prices, 2003-2013 (US$ per barrel). 20
Gulf Regional Overview21
Table: Announced Ethylene Cracker Projects In The Gulf Region .. 23
Qatar Market Overview .24
Table: Qatar’s Petrochemical Plants . 24
Petrochemicals Business Environment26
Table: Middle East And Africa Petrochemicals Business Environment Ratings . 26
Limits Of Potential Returns. 27
Risks To Realisation Of Returns 27
Qatar’s Foreign Investment Policy.. 28
Industry Trends And Developments ..31
Downstream Developments. 33
Olefins . 37
Derivatives. 41
Table: Upcoming And Recent Projects .. 42
Qatar-China relations 42
Financial Developments .. 43
Industry Forecast Scenario .44
Table: Qatar’s Petrochemicals Sector, 2006-2013 46
Macroeconomic Outlook.. 46
Table: Qatar – Economic Activity, 2006-2013. 49
Company Monitor50
Qatar Petrochemicals Company (Qapco). 50
Qatar Chemical Company (Q-Chem) . 51
Qatar Vinyl Company (QVC).. 52
Qatar Fertiliser Company (Qafco) .. 53
Qatar Fuel Additives Company (Qafac) 54
Qatar Plastic Products Company (QPPC) 55
Country Snapshot: Qatar Demographic Data56
Section 1: Population. 56
Table: Demographic Indicators, 2005-2030. 56
Table: Rural/Urban Breakdown, 2005-2030 57
Section 2: Education And Healthcare. 57
Table: Education, 2002-2005 . 57
Table: Vital Statistics, 2005-2030. 57
Section 3: Labour Market And Spending Power . 58
Table: Employment Indicators, 2001-2004 58
Table: Consumer Expenditure, 2000-2012 (US$) .. 58
Table: Average Annual Manufacturing Wages, 2001-2005 58
BMI Methodology 59
How We Generate Our Industry Forecasts 59
Chemicals And Petrochemicals Industry .. 59
Cross Checks 60
Business Environment Ratings 60
Table: Petrochemicals Business Environment Indicators And Rationale 61
Weighting 62
Table: Weighting Of Indicators . 62