Octal Petrochemicals LLC FZC has received $296 million to expand its 250-acre integrated PET resin and sheet production complex in Oman, thanks to funding from six Middle Eastern banks.
In a Jan. 18 telephone interview, Managing Director Nicholas Barakat said a second plant will make resin for PET bottle preforms, with 30 percent of production slated to end up in North America, 30 percent going to Europe, 30 percent to the Middle East and Africa, and the remainder elsewhere.
We're allocating the capacity to the large buyers. The packaging industry is the third-largest industry in the world, after guns and cars. Everything's moving to clear, rigid packaging. There's really no dedicated supplier to that segment, Barakat said.
[Extruders are] using bottle chips and recycled bottled chips to make the sheet when really you need a better formulation to address the subtleties of the manufacturing process, he said.
The parties on Jan. 17 inked a deal for $296 million in senior term loans to Octal from a financing group including Bank Muscat, Bank Dhofar, National Bank of Oman, Bank Sohar, Ahli Bank and Qatar National Bank. Current shareholders Muscat Overseas and Oman & Emirates Investment Holding Co. also have agreed to provide a junior debt facility of $15 million, according to a news release from Muscat, Oman-based Octal.
Octal Chairman Sheikh Saad Suhail Bahwan called the signing ceremony a landmark for Octal and proud moment for Oman.
The company opened a full-scale resin and amorphous PET sheet facility in Salalah, Oman, in January 2009. The plant currently has 882 million pounds of combined product capacity, according to Octal.
Phase two of the complex, which should be complete in June 2012, will add 1.2 billion pounds of PET resin production, making Octal the world's largest producer of PET resin on one site, according to the company.
All 882 million pounds of production capacity at the existing Salalah plant will shift over to the second plant, which makes Octal's DPET (direct PET) brand of APET sheet for thermoformed packaging, he said.
Joe Barenberg, Octal's chief operating officer, said there has been tremendous interest from North American buyers in Octal's plans.
One [group] is the injection molders for bottle preforms, and certainly we intend to enter North America and become an important supplier to that sector, he said. In addition, people who extrude [APET sheet] in North America are also interested in looking in Octal as a potential one-stop shop, to really support their business in terms of buying their sheet directly.
I think the timing of the [expansion] is very appropriate, because North America has had some [APET sheet] capacity overhang for a while. These forces are coming together pretty much right on prediction, Barenberg said.
Privately owned Octal Petrochemicals, a subsidiary of Octal Holding & Co SAOC of Muscat, launched production of APET sheet in December 2006 in clear and limited colors using a pilot line with capacity of 44 million pounds per year. That plant boosted capacity to 66 million pounds in September 2007.
The company claims to be the world's largest producer of APET sheet. According to Barakat, Octal's sales have grown at a phenomenal rate, from $58 million in 2008 to $350 million in 2009 and about $500 million in 2010, and are expected to reach about $600 million in 2011.
Officials are forecasting $1.5 billion in annual sales in 2012, once the second phase of the Salalah site is complete.
We are putting in half a million tons of capacity, and we're already running the [original] plant at 120 percent of capacity. It's pretty massive, Barakat said.
He said Octal has not given up on its search for PET sheet production sites in Western Europe or North America, but cost considerations are still paramount.
He added that the firm is likely to announce new sheet plants outside Oman at the Interpack trade show, set for May 12-18 in Dusseldorf, Germany.