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Kuwait Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 47
Kuwait Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kuwait's food and drink industry.
The authors believe that by using naphtha as its primary feedstock for petrochemicals production, Kuwait will struggle to compete with ethane-based production in the UAE and Saudi Arabia, according to this latest Kuwait Petrochemicals Report. The country will also fail to realise its full potential in the Chinese market due to its narrow product portfolio, which is focused on exporting polyethylene and monoethylene glycol. Moreover, in terms of the Gulf region, the Kuwaiti investment climate is comparatively poor, despite the potential for a larger cluster of petrochemicals industries around the current market leader, Equate, in combination with the low financial barrier to entry for many converters. Indeed, Kuwait has failed to keep up with the pace of manufacturing growth seen in the UAE and Saudi Arabia.
However, there are some promising recent developments that signal an expansion in downstream industries. In October 2010, Kuwait Aromatics Company (Karo) – owned 40% by Petrochemicals Industries Company (PIC), 40% Kuwait National Petroleum Company (KNPC) and 20% Qurain Petrochemical Industries (QPI) – indicated it was studying plans to develop a downstream project from the company’s recently completed paraxylene plant at Shuaiba. Karo completed construction of the Kuwait Paraxylene Production Company (KPPC) aromatics complex in December 2009 and it will start selling heavy aromatics during 2011. The complex, which cost about US$2bn to build, is designed to produce 822,000tpa paraxylene and 370,000tpa benzene. The plans were at the feasibility study stage in Q410 and the company aims to finalise the study during 2011. The authors believe it likely that Karo is looking to establish a purified terephthalic acid-polyethylene terephthalate chain, which would revive previously proposed plans. Karo has already received licenses from the Public Authority for Industry to establish the plants.
PIC pursuing other petrochemical projects. In August 2010, it announced projects worth US$10bn over the next four years as the company seeks to expand its operations at home and abroad. The plans include a US$5bn mixed-feed olefins facility, Olefins III, with ethylene production capacity of 1.4mn tpa. Downstream plants will include EG, PE and PP, although capacities will depend on the feed mix. The project is set to come onstream in 2016. It is not yet clear if the project will be executed by state-owned PIC on its own or with Equate, a joint venture between PIC and Dow Chemical.
By 2010, Kuwait had ethylene capacity of 1.7mn tpa feeding downstream units that included 825,000tpa LLDPE. It also has 370,000tpa of benzene, 822,000tpa of xylenes, 1mn tpa of EG, 765,000tpa of EO and 160,000tpa of PP capacity. In the fertiliser sector, Kuwait has capacities of 1.04mn tpa urea and 885,000tpa ammonia. Levels of olefins and polyolefins capacities are unlikely to be increased before 2015 with the main expansion projects completed in 2009.
The authors have not changed Kuwait’s petrochemicals rating, which stays at 58.2 points. This puts the country in fourth place, 3.1 points behind the UAE and 1.2 points ahead of Iran. Kuwait’s score decllined over 2010 due to uncertainty over the future of the Al-Zour refinery, which has attracted considerable controversy over its tendering process. Kuwait’s score has also come under pressure in recent months due to deterioration in country risk caused by the economic downturn coupled with the declining investment environment following the cancellation of KPC’s planned JV with Dow, although overall its Country Risk ratings are still better than mid-2009 due to an improvement in the country’s outlook.
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