The expansion of the Kuwaiti petrochemical industry has been dealt a double blow in recent months with the cancellation of two major foreign investment projects: a US$17bn global joint venture (JV) with Dow Chemical and the US$15bn Al-Zour refinery. This will limit Kuwait's ambition to become a major exporter of petrochemicals, according to BMI's latest Kuwait Petrochemicals Report. The cancellation of Al-Zour is a major blow to the foreign companies that have signed preliminary deals to participate in the project, but will also limit the country's potential to supply naphtha as feedstock to the petrochemical industry. The cancellation would also suggest downside risks to investment in the country's upstream and downstream segments. Kuwait needs to expand its refining capacity and without the 630,000 barrels per day (b/d) that Al-Zour was designed to provide it would need to upgrade all its existing plants. This will be a challenge, particularly as foreign investors will be less willing to assist by committing capital to the country if contract stability is in doubt following the cancellation of the Al-Zour deals. Cancelling contracts with foreign investors is a bad move and will damage Kuwait's attractiveness as an investment destination. Meanwhile, Equate Petrochemicals - a JV between the Kuwait Petrochemical Company (KPC) and Dow Chemicals - is planning to complete the construction of two major petrochemicals plants, producing styrene and aromatics, at Shuaiba in May. However, the aromatics plant is not scheduled to reach full production capacity until Q309. The associated ethylbenzene unit was already running by Q209. The aromatics unit is projected to produce 325,000 tonnes per annum (tpa) of benzene, 768,000tpa of paraxylene and 560,000tpa of by-products. The Kuwait Styrene Company will operate the styrene plant while Kuwait Paraxylene Company will run the aromatics plant, both of which are Equate affiliates.
BMI forecasts that PE capacity will double to 1.2mn tpa in 2009, alongside a doubling of ethylene production capacity to 1.7mn tpa. However, much of the feedstock is likely to be imported, with Kuwait set to see net imports of 10bn cubic metres (bcm) of gas by the end of the forecast period. In April 2009, Equate announced that it had curtailed production rates. The company issued a statement saying it was 'experiencing a feedstock shortage due to the recent incident at Kuwait National Petroleum Company (KNPC)', but did not elaborate. The company said it expected to resume its normal capacity. It utilises feedstock supplied by KNPC's nearby liquefied petroleum gas (LPG) plant. For Q309, BMI's petrochemicals ratings show that Kuwait has fallen to 56.3 points. The decline in is attributed to the deterioration in country risk caused by the economic downturn, with the declining investment environment following the cancellation of KPC's planned JV with Dow, and the scrapping of the Al-Zour refinery. The deterioration is offset by the completion of an 850,000tpa ethylene plant at OL2K, which will supply downstream units that should be completed in 2009. On the downside, petrochemicals-
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