Ras Laffan – Olefins Complex

The dominant sectors continue to include the petrochemical and refining sectors, with estimated Capex of c.$76bn and c.$74bn respectively, already planned for award by the end of 2012. Qatar continues to support a project Capex position of c.10% worth of the investment planned within the GCC energy space by 2012.

Contax Partners’ robust and regular analysis of the ‘Impact of the Financial Situation on GCC Energy Project Workload’ indicates that the project postponement trend seen over the past few years has resulted in a considerable amount of award and execution schedule slippages.

Despite the high level of project awards in 2009, this trend looks set to continue in the near future. Nevertheless, given the GCC’s commitment to solidifying its global ‘petrochemical and refining hub’ position and developing its downstream presence, it is anticipated that a number of key strategic projects will be realised in the long run.

A major project that is expected to help Qatar achieve this goal is the Ras Laffan Olefins Complex (RLOC).

Background and Strategic Importance
In 2006, QP and ExxonMobil Chemical Qatar (a subsidiary of ExxonMobil) agreed on a 51:49 JV to build a world-scale petrochemical complex at Ras Laffan Industrial City located on the northeast coast of Qatar.

During 2009, as forecast by Contax Partners, the project faced heavy delays as a result of the uncertainty around feedstock allocation and the rising project costs.

Nevertheless, in January 2010, the JV signed an agreement to progress with the development of the complex as result of the decrease in EPC costs during 2009, certainty around feedstock allocation and the increase in demand for ethylene derivatives from countries such as China, India and other Asian markets.

The US$6bn petrochemical complex, which includes a world-scale 1.6 million metric tonnes per annum (MTA) mixed gas cracker and associated derivatives units, is expected to begin operations in 2015, three years after the original completion date.

ExxonMobil’s steam cracking furnace and LDPE technologies will be employed to produce approximately 2 million MTA of commercial products; monoethylene glycol, ethylene, LDPE and LLDPE.

Ras Laffan’s coastal location is of strategic importance to the JV, allowing an easy export route to Asian and European markets where premium products are in demand in these two areas.

Development of the RLOC project looks set to satisfy a number of key strategic objectives:

• The investment will utilise feedstock from gas development projects in Qatar’s North Field to capitalise on the surging demand for ethylene derivatives in rapidly developing nations like India and China.
• RLOC is part of Qatar’s investment programme to build its petrochemicals output capacity and be recognised as a leading petrochemical producer in the region with a diversified and carefully balanced portfolio.
• The initiative will bring foreign expertise and innovative chemicals production into Qatar’s petrochemical industry and give it access to ExxonMobil’s global marketing network.
• RLOC will enable ExxonMobil to capitalise on its core competencies whilst utilizing Qatar’s competitive feedstock prices. This will provide ExxonMobil with a competitive advantage and a platform for further growth in the Middle East.
• The complex will produce mono-ethylene glycol, ethylene, LDPE and LLDPE which in turn will provide raw materials and many investment opportunities, creating more jobs for Qatari nationals and helping the Qatari government with its Qatarisation initiative.

Scope of Work

The RLOC scope comprises of four main packages:

• Mixed Gas Cracker
• Offsites & Utilities
• MEG Units
• LDPE/EVA Units
• Challenges

Economic and market dynamics continue to question the validity and schedules of many of the energy projects within the GCC.

With the continued recession in buyer economies, desire for project owners to take advantage of perceived lower critical input costs by driving down EPC bid prices and project financing issues; projects are being postponed and cancelled on a weekly basis.

Contax Partners’ continuous analysis of the impact of the current market dynamics on GCC Energy Project Workload provides clients with clarity around which projects have a greater than 70%, between 40-70% and less than 40% probability of proceeding within the current economic climate and thus which sectors and countries will present the greatest opportunities.

Following the recent signing of an agreement to progress with the development of the project and thus the renewed commitment from the JV parties, Contax Partners believes that the RLOC project has a high probability of going ahead as planned.

Contax Opinion:
Likelihood of Project Realisation
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Kathleen Bury,
Director Market Analysis, Contax Partners
With eight years of experience in strategy development and implementation, project management, EPC contracting, strategy implementation and knowledge management, Kathleen is director of market analysis at Contax Partners.

She has worked with FTSE 100 and other international companies in the United Kingdom, Middle East and Africa. Kathleen has a strong background in the energy, utilities and construction sectors.