Mesaieed Q-Chem Petrochemical Complex, Qatar

The project, estimated to cost $1,26 billion, is a major ethylene and polyethylene plant, located in Mesaieed Industrial City (MIC), approximately 40km south of Doha in Qatar. The contract was awarded in June 1999 and the completion date is August 2002. The plant is owned by a joint venture between Qatar Petrochemical Company (QAPCO), 80% owned by Qatar General Petroleum Corporation (QGPC), and Phillips Investment Company, a subsidiary of Phillips Petroleum Company. Phillips has a 49% share in the venture. The remaining 51% is held by QGPC.

Doubts about the viability of the Q-Chem project were raised early on due to the low oil price. The main benefit of the Middle East location - access to cheap feedstock - was now enjoyed by all producers, while Middle East producers still suffered from the high transport costs to Asia and Europe. Fortunately for the Q-Chem project, the subsequent rise in the oil price reverses the position.

The overarching aim of the project, along with the other four Qatari hydrocarbon and related schemes currently underway, is to move Qatari industry to the more value-added part of the petrochemical spectrum. This will make it less vulnerable to overcapacity and price falls.

MESAIEED PETROCHEMICAL PRODUCTION COMPLEX

When completed, the new plant will have an ethylene capacity of 500,000t/yr. This will be used as feedstock for the polyethylene plant, which will have a capacity of about 450,000t/yr for either high- or low-density polyethylene. There will also be an hexene unit capable of producing 47,000t/yr and a number of ancillary and utility related structures.

The new facility will receive ethane rich gas as feedstock from the natural gas to liquids (NGL) 4 plant, which has been put out to tender by QCPC. Indeed, construction on the NGL 4 plant has already begun. The company hopes that its feedstock will give it a major cost advantage over its naphtha-based rivals.

EPC CONTRACT AWARDED TO KELLOGG BROWN & ROOT AND TECHNIP

The engineering, procurement and construction (EPC) contract, estimated to be worth $800 million, was awarded to Kellogg Brown & Root and Technip. Kellogg Brown & Root is a subsidiary of Halliburton International. Technip is a process contractor with sales of almost $3 billion and around 10,000 employees. The contractors defeated rival bids by putting in an offer that was significantly lower than their rivals. Construction began in the second half of 1999. The project is being managed jointly from Technip's Paris office and Kellogg Brown & Root's Houston office. Kellogg Brown & Root will supply the ethylene technology. Phillips will provide the proprietary technology for the hexene-1 and polyethylene units.

QATAR INVESTMENT

Q-Chem is one of four major projects in Qatar, which are worth more than $2.5 billion collectively. The plant's output will be sold through the spot market to Asia, Europe and the Middle East. Ethylene is seeing a number of projects designed to increase capacity across the world. The commissioning of the Qatar plant in 2002 should coincide with the continuing upswing in Asian chemicals markets, ensuring profitability.

The Q-Chem project is financed through an $750 million loan, arranged through a consortium of 24 banks. The selected arrangers are ABN Amro (security trustee and accounts bank), ANZ, Apicorp (regional bookrunner), Bank of Tokyo-Mitsubishi, Banque Nationale de Paris, Barclays Capital (documentation bank and facility agent), Bayerische Hypo-und Vereinsbank, Bayerische Landesbank, CIBC, Commerzbank, Credit Lyonnais, Dai-Ichi Kangyo Bank, Deutsche Bank, EDC, Fuji Bank, Greenwich NatWest, Gulf International Bank, HSBC (international bookrunner), Industrial Bank of Japan (technical bank), KBC Project Finance, Paribas, Qatar National Bank, Royal Bank of Scotland (modelling bank) and WestLB (insurance bank). These banks are eager to jump on the last major project in Qatar for the foreseeable future.