DUBAI (Zawya Dow Jones)
Chevron Phillips Chemical Co. plans to raise as much as $1.8 billion in project finance by the first quarter of 2008 as part of plans to build a large petrochemicals complex in eastern Saudi Arabia, the company's chief executive said Wednesday.
The funds will be used for the construction of an estimated $5-billion petrochemicals complex known as National Chevron Phillips, or NCP, a 50:50 joint venture between Chevron Phillips and Saudi Industrial Investment Group.
"We got very good response from the banks and we would expect to have financial close early next year, in the first quarter," Ray Wilcox, Chevron Phillips' chief executive and president, told Zawya Dow Jones in an interview in Dubai.
NCP is the third petrochemical complex planned by Chevron Phillips and Saudi Industrial at Jubail, an industrial city located at the Persian Gulf.
Contracts to build the plants are close to be awarded, Wilcox said. "We expect to award the EPC (engineering, procurement and construction) contracts before the end of the year," he added.
Companies including JGC Corp. of Japan and Italy's Snamprogetti are among those competing for the contracts, according to the Zawya.com projects monitor.
The facilities will include a 1.2 million ton a year ethylene plant, a 1.1 million ton a year polyethylene unit, a 400,000 ton a year polypropylene unit and a 100,000 ton a year 1-hexane plant, according to Zawya.com.
A second project being implemented in Jubail by Chevron Phillips and Saudi Industrial, known as Jubail Chevron Phillips, or JCP, is on schedule to come on stream in early 2008, Wilcox said.
"That one will start up in the first quarter of next year," he said. "We will go through the commissioning right after the first of the next year."
Chevron Phillips, itself a venture of Chevron Corp. (CVX) and ConocoPhillips (COP), targets completion of another large-scale petrochemicals complex in neighboring Qatar in early 2009.
The project involves construction of an ethylene plant at Ras Laffan and a pipeline to the industrial area of Mesaieed, where the ethylene, a natural gas derivative, will feed a polyethylene plant that is presently undergoing expansion as well as an alpha olefins unit, Wilcox said.
"That will start up in the first quarter of 2009," he said.
Companies such as Chevron Phillips, Dow Chemical Co. (DOW) and Basell are investing in petrochemicals in the Persian Gulf due to the wide availability of cheap natural gas, commonly used to make plastics.
This has given the region a competitive over petrochemical industries in Europe and the U.S., which are largely based on naphtha, a crude oil derivative that has become more expensive as oil prices have risen to record levels. The shift towards petrochemicals production in the Middle East is now threatening jobs elsewhere.
Dow Chemical earlier this month announced plans to cut 1,000 jobs and close down a number of underperforming plants, including in the U.S. and France, while focussing on higher-growth opportunities.
"I think anywhere in the world where the facilities are not able to compete in the first quartile, you'll continue to see selective closures. By the same token one has to take into consideration any transportation cost of products," Wilcox said.
Hydrocarbon-rich countries in the Middle East are also benefitting from booming global demand for petrochemical products, especially from fast-growing markets in Asia, where manufacturers produce ever more consumer goods made of plastics.
At the same time the petrochemicals industry is emerging as a key sector amid plans by countries like Oman, Kuwait and Saudi Arabia to diversify their economies away from oil and to create jobs for their young and growing populations.
According to the Gulf Petrochemicals & Chemicals Association, export of petrochemicals from the Gulf will reach more than 50 million tons by 2008.
"By 2010, petrochemicals industries in the Gulf will grow by another 13%," the GPCA predicts. "Saudi Arabia, which represents about 80% of the GCC petrochemicals capacity, is rapidly emerging as a global hub and is expected to be one of the top four global producers within the next five years."
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