Qatar is set to lead growth in regional output in 2010, with 7.5 percent increase in petrochem production on the back of massive recent and continuing capacity expansion and the resumption of growth in the global economy, Business Monitor International (BMI) latest “Qatar Petrochemicals Report” said. “This compares with global petrochemicals output growth of 4.5 percent in 2010, offsetting the 4.5 percent contraction in 2009,” the report noted. The Qatari petrochemicals industry will remain highly exposed to global markets, particularly Asia. Demand growth in Asia, led by the surging Chinese market, has underpinned global petrochemicals growth and is the basis for growth in Qatari output. The report also forecast that real GDP will grow to 8.8 percent, then will slow to 7.5 percent in 2011. Qatar remains in second place in the rankings for Middle East and Africa with 62.7 points, up 0.9 points since the previous quarter due to new capacity being brought onstream and an improvement in the country's risk rating. The ranking put it 5.1 points ahead of Kuwait and 10.7 points behind Saudi Arabia. However, the report pointed out that rising construction costs and tightening lending conditions could hamper the country's progress in raising its petrochemical capacity. Nevertheless, Qatar's petrochemical-specific ratings are strong, with cracker capacity set to increase significantly over the next five years and the country hosting the second largest polyolefins production capacity in the GCC after Saudi Arabia. Despite optimism, the report noted that “relative lack of economic diversification” compared with other countries in the region might seems to be the country's “weak” point. The Chinese polymer resins market should mirror if not exceed economic growth rates, leading to a rise in prices and reversing the temporary drop in profitability seen in 2009. With domestic demand likely to continue to outstrip supply, China will remain a net polymers importer over the medium term and the largest importer in the world. By 2014, China could represent 35 percent of the global PP market and 20 percent of global PE demand. Qatar will also be able to leverage its advantage in ethane feedstock, with the price differential with naphtha feedstock rising as oil prices climb while a situation of oversupply restrains polymer prices. Its other strengths are the size of its units and the high level of integration, which make it more economical and competitive. “This competitive advantage should ensure that, even in the event that Chinese demand is not as strong as hoped, Qatari production will continue to have a market and operating rates will be maximized. BMI believes that Qatar will undercut naphtha based Asian rivals. This will directly benefit Qatar's expanding petrochemicals industry, both domestically and with its investments in China,” the report noted. In March, the Ras Laffan Olefins Company ethylene unit was started, with a capacity of 1.3mn tpa. The cracker is expected to reach full capacity by August 2010. Shareholder Q-Chem II's offtake from the plant will feed a 350,000tpa HDPE and a 345,000tpa normal alpha olefins plant being built at the Ras Laffan site. Start-up was expected in Q310. Only 10 percent of its output will be consumed on the domestic market, with around 35 percent of the HDPE output exported to Europe and Africa and 55 percent to Asia. “These moves will help bring Qatar closer to its output target of 30 million tpa by 2014, from 18 million tpa at present. To meet this objective, Qatar's total investment in Qatar Petrochemical Company (Qapco) will rise from the current $1.7 billion to US$12 billion by 2012. Moreover, the report said competitive ethane based production will lead to the shuttering of undersized petrochemical facilities in places like Japan, North America, and Western Europe with rationalization already under way and likely to accelerate in coming years. By 2010, Qatar had ethylene capacity of 2.6 million tpa feeding downstream units that included 400,000tpa LDPE and 450,000tpa HDPE. In the fertiliser segment, Qatar had capacities of 2.15 million 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 6.25 million tpa ethylene and 900,000tpa propylene, feeding downstream units providing 1.6mn of PE capacity, 700,000tpa of PP and 220,000tpa of PS. Qatar will represent 30 percent of the increase in the GCC's total cracker capacity between 2009 and 2015.
