Royal Dutch Shell plc and Qatar Petroleum's (QP) cancellation of its $6.5 billion Qatari petrochemical project Al-Karaana, will “significantly change the global supply and demand balances” for [PET] resins used in bottling, an analyst has claimed.
Tison Keel, director, global EO & Derivatives at IHS Chemical, said QP and Shell are heavily exposed to oil and gas markets, which weighed significantly on the decision to cancel Al-Karaana.
The Al-Karaana olefins complex had been set to produce 1.1 million metric tons per year of ethylene and 170,000 million metric tons per year of propylene. Downstream units had been expected to include a 1.5 million metric-ton-per-year ethylene glycol plant; a 300,000 metric-ton-per-year linear alpha-olefins unit, and a 250,000 metric-ton-per-year oxo-alcohols plant.
In addition, Keel warned “the exposure that fixed-cost, or low-cost ethane-based operators have to changes in polymer and other derivative markets is large.
“The reduction seen in Asian and European market prices, which have yet to fully absorb the impacts of the current energy market, will directly lower earnings for Middle East producers, with only those exposed to market-related feedstock pricing seeing any similar impact on costs.
“From an operational perspective, this is far from critical, these Middle East units are still the lowest–cost producers on a global basis, but companies who have been used to $1,000 per ton margins may struggle when those margins are only $300 per ton to $400 per ton.”
The two companies announced the project in 2011, with QP set to own 80 percent of it. They announced the cancelation in a Jan. 14 news release.
Keel added that in addition to the Al-Karaana project, IHS anticipated similar cost pressures for other early-stage projects in the region.
QP President and CEO Saad Sherida Al-Kaabi, said in a Jan. 15 announcement that the company will conduct feasibility studies to assess other ways to use the ethane feedstock made available following the Al-Karaana cancellation.
“The studies will be carried out by QP in cooperation with Qatar Petrochemical Company (QAPCO), Qatar Chemical Company (Q-Chem) and Ras Laffan Olefins Company (RLOC), with the aim to expand and further develop the petrochemical plants under Industries Qatar (IQ) and Mesaieed Petrochemical Holding Company (MPHC),” the company said.
Qatar, owner of one of the world's largest gas reserves, has said it is planning to invest $25 billion in its petrochemical sector up to 2020.