Abu Dhabi's petrochemicals producers investing and diversifying

When Abu Dhabi’s government looked at the future course of the economy’s development, preparatory to publishing the emirate’s long-term master plan, Abu Dhabi Economic Vision 2030, one area they were keen to see expand exponentially was petrochemicals.

Now, some years later, much of that vision has already been realised, yet more is still to come. New announcements in 2016 promise to see a rapid expansion of petrochemical capacity. Meanwhile, planners are now looking to the next period, in which diversification of product range and speciality chemicals may well play an increasingly key role.

Sector Structure

While Abu Dhabi has long been at the centre of the oil and gas sector in the UAE, its petrochemicals sector, which began with the establishment of Abu Dhabi Polymers Company (Borouge) in 1998, is a much younger industry. Borouge is a joint venture between the Abu Dhabi National Oil Company (ADNOC) and the Austria-based petrochemicals firm, Borealis, which is, in turn, 64% owned by the former International Petroleum Investment Company of Abu Dhabi (IPIC) – which merged with Mubadala Development Company in May 2017 to become the Mubadala Investment Company – and 36% owned by OMV, the Vienna-based oil and gas company that is also 25% owned by the former IPIC entity.

As the emirate and the UAE have moved towards a policy of economic diversification, aimed at reducing the country’s economic dependency on oil and gas, petrochemicals have taken on a more significant aspect, particularly with the launch of the Abu Dhabi government’s Economic Vision 2030 in 2008, which called for “a massive expansion of petrochemical facilities owned and operated by Borouge”.

At that time, the company was producing some 600,000 tonnes per annum (tpa) of ethylene and 580,000 tpa of polyethylene at its Borouge I plant in Ruwais, some 250 km west of Abu Dhabi City and adjacent to ADNOC’s main oil refinery. The following year Borouge II came on-line, tripling the company’s production capacity. Then, in 2015 Borouge III was completed, making the Ruwais site the world’s largest integrated polyolefins complex. The site has capacity for 2.3m tpa of polyethylene, 1.76m tpa of polypropylene, and 350,000 tpa of low-density polyethylene, produced for the plant’s cross-linkable polyethylene compounding facility, which has an 80,000-tpa capacity. Borouge 3 was operating at 100% utilisation by the end of 2016, and around that time ADNOC indicated large-scale expansion of domestic petrochemicals facilities were in the pipeline.

“Growth remains in the pipeline,” Ahmed Omar Abdulla, CEO of Borouge, told OBG. “Studies are under way to triple capacity to 11.4m tonnes per year. This will leverage the availability of cheap feedstock from associated oil and gas industries, which put constraints on other competitors around the world.”

Future Expansion

In 2016 ADNOC announced further major investments in petrochemicals over the next five years in response to rising domestic and international demand, particularly in Asia, where the petrochemicals market is set to double by 2030. To this end, the company will focus on expanding its refining capacity, with a focus on petrol and aromatics production, and additional polyolefin capacity.

The Borouge plant already possesses some of the most advanced petrochemicals equipment. This forms a centrepiece of the emirate’s petrochemicals cluster, which is able to access some of the world’s largest oil and gas reserves for its feedstock. At the same time, markets in Asia and Europe are easily accessed from the UAE’s ports. Asia is a major focus for Borouge, which has its main sales offices in Singapore.

The company also has an interest in China, establishing logistics hubs in Shanghai and Guangzhou in addition to Singapore, in 2010. The following year, Borouge also started a 50,000-tpa compounding plant in Shanghai, the company’s first overseas plant.

At the same time Borouge is a major investor in innovation. The Borouge Innovation Centre (BIC), located in Sas Al Nakhl, officially opened its doors in 2015. BIC is focusing on polymer development and application technology. More than 70 researchers are based there, including 25 UAE nationals, and the centre has historically collaborated with the Masdar Institute of Science and Technology and the Petroleum Institute, both of which merged with the Khalifa University of Science, Technology and Research in early 2017.

BIC also plays a role in providing technological support for the Borouge III plant. “The BIC puts us at the forefront of research and development, specialising in new product applications,” Abdulla told OBG. “We have approximately 400 patents, which account for 30% of all patents registered by UAE applicants in the World Intellectual Property Organisation database.”

Cluster Companies

Alongside Borouge in the Ruwais cluster are two other companies. The first is Abu Dhabi Oil Refining Company (Takreer), a supplier of feedstock. Takreer is a subsidiary of ADNOC and accounts for 80% of the UAE’s refining capacity. It has been engaged in an expansion project of its own recently, doubling the refining capacity at its Ruwais plants to 817,000 barrels per day (bpd) in 2015.

The second firm in the cluster is FERTIL, which was initially set up in 1980 to produce fertilisers. The company is another joint venture between ADNOC and France’s Total, with a shareholding of 2:1, respectively. Initially, FERTIL used lean associated gas from onshore fields to manufacture ammonia and urea. Its capacity in this area substantially improved in 2013, with the launch of FERTIL-2, which boosted combined complex production of granulated urea and ammonia to 5800 tpa and 3300 tpa, respectively.

Feedstock Challenge

While ongoing investments and rising demand indicate good future prospects for the petrochemicals sector, challenges remain. One of these is the supply of feedstock. Although Abu Dhabi has extensive reserves of oil and gas, these are both diminishing resources. The supply of natural gas is tightening, with the UAE a net importer of gas for the past six years. Over that period too, the country’s gas import needs have risen by around 20%, to around 725bn standard cu feet (scf) per year, according to local press reports. Much of the imported gas comes from Qatar, via the Dolphin pipeline, which can carry up to 25% of the UAE’s daily consumption.

Sour Gas Potential

This has led ADNOC to invest in the exploitation of sour gas fields via its newest gas business Abu Dhabi Gas Development Company (Al Hosn Gas), a joint venture with the US-based Occidental Petroleum. Sour gas contains a high percentage of hydrogen sulphide, which is difficult and expensive to process – an issue at a time of low gas prices. The Al Hosn sour gas field produces around 1bn scf per day of gas that is subsequently processed into 500m scf of network gas. The sour gas Bab field, 150 km south-west of Abu Dhabi, however, has not yet been developed (see Energy chapter).

One useful by-product of the sour gas refining process is the production of sulphur, with Al Hosn Gas producing an estimated 9000 tonnes per day of this pure granulated chemical. Much of the sulphur is expected to be channelled into urea and ammonia production going forward.

Specialty Chemicals

At the same time, Abu Dhabi is also taking a keen interest in projects such as liquid cracking and direct oil-to-chemical processes. Liquid cracking would involve a shift from Borouge’s current ethane steam crackers to naptha – a process that would also require a substantial new investment.

However, naptha would not only diversify feedstock for the industry, but also open up a wider range of co-products. “Given the UAE’s natural gas profile the expansion of the petrochemicals sector solely on the basis of ethane cracking has reached its peak, necessitating a diversification of the feedstock towards heavier feedstocks, such as naphtha,” Ali Vezvaei, president and CEO of Linde AG for the Middle East and North Africa, the engineering, procurement and construction contractor in charge of previous Borouge expansions, told OBG. “Naphtha is generally more economically stretched compared to ethane, however thanks to innovative technologies and optimisation of derivatives, it has the potential to yield acceptable margins. A deeper integration of the refining and petrochemical assets should be taken into account while building a growth strategy on liquid cracking.”

In the future, this may become increasingly important, as the industry becomes more competitive, and the optimal use of resources becomes even more crucial. Higher value-added, speciality chemicals might be one way for profitability to be maintained.

At the same time, any future moves to improve operational efficiency are likely to be welcomed, with mergers such as that between IPIC and Mubadala potentially the first of many, as a more integrated structure emerges. With the inauguration of ADNOC’s five-year plan as well as the Integrated Gas Master Plan, the year ahead is likely to be one of importance for the petrochemicals cluster in Abu Dhabi.