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APPENDIX


OAPEC NEWS BULLETIN, october 1977
Kuwait’s Plans to Enter the Field of Petrochemicals


During the 18th Annual Meeting of the International Institute of Synthetic Rubber Producers, which was held last summer in Monte Carlo, Mr.Abdul Baqi Al-Nouri, chairman and managing director of the Kuwait-based Petrochemical Industries Company (PIC), delivered the lecture "Kuwait’s Plans to Enter the field of Petrochemicals".


In his introduction (not included here), Mr.Al-Nouri surveyed the successful development of infrastrcture in Kuwait, which can rightly be considered the connerstone of its industrialisation program.


The Petrochemical Industries Company and the challenge in the field of
Petrochemicals


The Petrochemical Industries Company was established on May 18, 1963, with the objective of making use the country’s natural resources to establish different types of petrochemical industries that would enhance and diversity the country’s national income. The first stage was to begin with nitrogenous fertilizer based on natural gas, available locally in large quantities.


Thus the Kuwait Chemical Fertilizer Company was established in Shuaiba Industrial Area in 1964 by the mother company, PIC, and foreign partners (BP 20%, Gulf Oil 20%). Its plant consists of four units for the production of ammonia, urea, ammonium sulfate and concentrated sulfuric acid. In 1969 PIC expanded on its own and built another two plants for ammonia and two plants for urea. During 1973 PIC bought BP and Gulf Oil equity in Kuwait Chemical Fertilizer Company and thus became the sole owner of the whole chemical Fertilizer, complex. In 1975 all producing plants were merged with the mother company under the name of "Petrochemical Industries Company", and the fertilizer division was formed. This division has now the following production capacity of nitrogenous fertilizer :

Table
PIC Production Capacity



Product


mt/d



Ammonia


2,000



Urea


2,500



Ammonium Sulfate


500



Sulfuric Acid (98%)


400




Since the establishment of the petrochemical complex in 1964 and until the end of 1976 this complex has produced 3,000,000 mts of liquid ammonia, 3,300,000 mts of urea, 640,000 mts of sulfuric acid, and 757,000 mts of ammonium sulfate.


All of the output has been exported to international markets including Europe, America, Southeast Asia, China, India and East Africa. PIC has established itself strongly and firmly in the market of nitrogenous fertilizers and has built up experience through exporting to over 45 countries. Over the past 11 years we have been able to compete on an international basis.


PIC has a liquid ammonia terminal with a storage capacity of 50,000 mt and is capable of pumping 2,000 mt/hr. Through this terminal PIC has exported more than 600,000 mt of liquid ammonia to different parts of the world during the last 4 years.


Today, after 11 years of hard and concerted effort, PIC has been successful in building up its own management and technical manpower, which is now able to operate and control all the activities at international standards. We have been successfully participating in the majority of symposia, seminars and meetings relating to our activities all over the world to update our technical know-how ; in some forums we presented technical papers.


PIC current and short-term plans


Since we have demonstrated our success in the field of nitrogenous fertilizers in its most advanced form of technology, the second logical stage in which to diversify would be the production of basic and intermeiate petrochemicals. We recognize that penetrating this field is not an easy task, but we have already established the proper policies in order to ensure our success. For instance, one of the questions which we have studied over the past four years is : Why and with what basic and intermediate petrochemicals should we start ?.


To answer why we list the following factors :


1. Local availability of raw materials in many forms for a very long time at competitive prices.


2. Availability of large financial resources to meet investments required for this industry.


3. The petrochemical industry is growing in importance and has spectacular annual growth rates with wide potential.



4. The economic necessity to improve the added value of crude oil and associated gases.


5. The economic necessity for Kuwait to control and develop its single resource.


6. The petrochemical industry has a very broad range of manufacturing avenues, rendering it highly flexible and easily adaptable to conditions of the world market.


7. The petrochemical industry forms the basis for diversified industries, ths offering opportunities for future industrial development and investment.


8. The establishment of a petrochemical industry will induce the establishment of specialized shipping companies.



The answer to the question of what kind of basic and intermediate petrochemicals to start with has been established on the following bases :


1. Should be able to produce products in plants of a capital-intensive nature in order to overcome the manpower shortage and to be easy to operate and maintain.


2. Should be mature product and well advanced in’its life cycle.


3. Should have a well established and internationally accepted specification.


4. Should be easy to store and transport.


5. Should be easy to sell in big quantities.


6. Should have a commercial cycle different from that of fertilizers.


7. Should be produced in economic quantities, but in all cases investment in any single product should not be more than a certain proportion of the total company investment so as to safeguard the company in cases of depressed market conditions.



After intensive surveys on the world market carried out by different organizations and consultants for PIC, it was not difficult for PIC to identify that, to penetrate the field of petrochemicals, two main basic building blocks should be produced. These are benzene, in the field of aromatics, and ethylene, in the field of olefins.


Accordingly the following projects have been seriously considered by PIC :


a) Aromatics Project


The project is ready to proceed. It will produce benzeneortho xylene and paraxylene from strainghtrum naphtha produced locally by two big export refineries. The following is some information about the ptoject.



Feed - Straightrun naphtha


31,000 b/d



Product - Benzene


283,000 t/y



P-xylene


86,000 t/y



0-xylene


60,000 t/y



All the production is for export until the olefins project is completed. Then the benzene will be converted to ethyl benzene and styrene. The by-product will be exported or sent to refineries or gasoline pools for blending prior to its exportation.


This project is scheduled to start in 1980. The expected added value to each barrel of naphtha from this project is about 35%.


Before I proceed with discussing the olefins complex, I might as well go through a brief explanation of the LPG project which is now under construction and which is basic for Kuwait’s future development and conservation of its resources.


LPG Project


This project, the responsibility of Kuwait Oil Company, will feed all the produced associated gas to a plant which will separate the propane, butane and natural gasoline and direct the other gases, mainly ethane and methane, to the other consumers.


After execution of this project, which is scheduled to start in 1978, there will be hardly any gas flared.


This plant will produce mainly : propane, 102,000 b/d ; butane, 55,000 b/d ; and natural gasoline, 42,000 b/d.


The lean gases left will be two main streams of methane and rich ethane gas of 84-85% ethane. Part of the second stream will be utilized by PIC to produce ethylene ; the rest will be mixed with methane to improve its calorific value. This LPG plant is composed of three parallel independent units which will ensure a continuous and dependable supply of ethane feed for the olefins complex.


b) Olefins Complex


Since 1973 PIC has been studying the economics of this project and has

used conservative assumptions in defining its viability. In 1976, after a market pre-feasibility study, the following conclusions were arrived at :


1. PIC can produce ethylene and obtain a share of the world market.


2. The ethylene that will be produced should not be exported as liquid ethylene due to huge expenses involved.


3. Ethylene should be converted to other downstream products or intermediates.



The project is now undergoing a detailed market and technical feasibility study which will be concluded next July 1977. The study is composed of five parts :


1. Selection of the processes and definition of the project production capacity.


2. As accurate an estimate as possible of the capital cost and total investment.


3. Detailed market study.


4. Economic study to show the rate of return.


5. Tender document specifications.



The complex is scheduled to be on stream in late 1981 and will produce the following :



Ethylene


350,000 mt/y



To be converted to low
density polyethylene


130,000 mt/y



Mono ethylene glycol


135,000 mt/y



Ethyl benzene and/or
styrene monomer


325,000 mt/y



Other projects which are being or have been considered are :


Butadiene from the available butane of the LPG plant.


Production of phthalic anhydride from ortho xylene.



Manufacture of styrene butadiene rubber.


Methanol production.



We expect this stage to be in existence by 1985 or 1990.


PIC participation in joint ventures


Apart from plants in Kuwait, the Petrochemical Industries Company holds 40% of the shares in the Mediterranean Fertilizer Industries in Mersin, Turkey, where nitrogenous and phosphatic fertilizers are produced. PIC provides MFI with part of its requirements for ammonia from the PIC Fertilizer Division, Kuwait.


Over the past decade PIC has acquired a great deal of technical experience and know-how in the operation of fertilizer plants. It is now proposed that the company’s activities outside Kuwait be expanded throught financial and technical participation in joint ventures in friendy countries. The company would supply some of the raw materials needed for projects.


Negociations for participation are now going on wih Jordan for the production of superphosphates and with Tunisia for the production of phosphatic and compound fertilizers.


PIC policy in development of petrochemical industry


It is the policy of the company to cooperate with and to encourage international firms with advanced technological development and know-how in the manufactoring and marketing of products to participate in new projects in Kuwait as minority shareholders, holding not less than 20%.
Every incentive is provided to make the cooperation attractive and mutually beneficial.


What PIC may provide to the partner




Opportunity to establish a presence in one of the future’s major petrochemical producing areas in the world.


First class infrastructure and comparatively low cost of utilities.


PIC’s long experience in operating large and complex plants.


Reliable long-term feedstock.


Assistance in obtaining loans from local financial institutions.



Sharing of the partner’s research expenses.



What PIC expects the partner to provide to the joint venture



Process and design expertise.


Management expertise.


Access to world markets with any technical application services if required.


Design and procurement facilities in developed countries.


Technical manpower for key positions.


What PIC expects the partner to be



A reputable manufacturing company which has successfully operated similar plants.


To have up-to-date technology and proven engineering capability and project management.


To be trading the same product of his own manufacturing.

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