Rabigh Refining & Petrochemical Co. (2380.SE)

Major Petrochemical Projects in Middle EastCountry/CompanyProductTargetedcompletionStatusAbu DhabiBorouge II Olefins and derivatives 2H10 Under constructionBorouge III Polyolefins 2014Feasibility studystageChemaWEyaatOlefins, aromatics andUnder preliminary2014derivativesengineeringQatarExxonMobil/Qatar Petroleum Ethylene Post 2012FEED awardHonam Petrochemical/QatarPetroleumOlefins and derivatives Post 2012OmanDuqm Refining &Refinery, olefins andPetrochemicalderivativesPost 2012* FEED – Front-End Engineering DesignSource: Chemical Industry News & IntelligencedelayedDecision on projectdeferred to 2H12DelayedBenzene prices improve onincreased demand fromAsian producersIndia, China contribute tothe rise in demand forpolypropyleneBenzene is the basic raw material for a number of petrochemical intermediaries including styrene,phenol, acetone, cyclohexane and nitrobenzene. Demand for benzene as a raw material for theproduction of styrene constitutes 52%, while cumene used in the manufacturing of phenol andcyclohexane accounts for 19% and 13%, respectively. Nitrobenzene and other chemicalintermediaries account for the rest of the demand for benzene. Off late, the demand for benzene hasbeen increasing buoyed by higher gasoline consumption in Asia. According to the CMAI, the demandfor benzene is expected to witness an absolute growth of 1.3 million tonnes per year through 2011. Onthe other hand, the supply side dynamics remain tight mainly due to a shortage of investments in thesector. However, rising demand has necessitated additional capacities to be installed. According to theCMAI, approximately 9 million tonnes per year of benzene capacity is likely to be added over 2007-10.Further, according to the CMAI, around 3.1 million tonnes per year of new benzene capacity is likely tobe added across Northeast and Southeast Asia during the next five years. In the Middle East, 1.5million tonnes of new annual benzene capacity will be added over 2007-11. However, on the flip side,increased capacity is likely to strain utilisation rates, which are expected to fall to 80%. Benzeneprices, which follow crude oil and natural gas prices, have increased significantly since the start of2Q09 mainly due to higher demand for styrene from Asia. The price of benzene shot up sequentially66.9% during the first two months of the second quarter. Moreover, the Asian demand for benzene isincreasing fast and the trend may necessitate exports from the US and the Europe. However, in thelong run, with an increase in capacity, the price for benzene is expected to exhibit a better correlationto the cost of production.Polypropylene (PP) is the basic raw material for the production of a variety of products including fibers,yarns, and textiles. It is also used in food packaging, electronic films, photo and graphic artsapplications and automobiles, where its low weight serves as an inherent advantage. Historically, thedemand for PP has grown at around 7-8% mainly due to its versatility and relatively low costcompared to other polymers. According to the CMAI, the demand for PP is expected to increase atapproximately 6% per annum over the 2007-12 period buoyed by rising demand from India and China.However, the overcapacity build-up in Middle East and Asia is expected to become a key challenge forthe industry as 9 million tonnes of annual capacity gets added over 2008-10. The scenario is alsoexpected to intensify the competition for the export markets with North America likely to lose itsleadership position and Europe turning into a net importer. Meanwhile, China continues to remain thelargest consumer of PP. According to the China Petroleum & Chemical Industry Association (CPCIA),the PP production is likely to increase to 12 million tonnes by 2010 from an estimated 7.13 milliontonnes in 2007. Further, according to International Construction Information Society (ICIS), a cost andspecification information provider for the construction industry expects at least 11 new PP plants withtotal capacity of 3.9 million tonnes per year under construction to come on-stream between 2008 and2011.