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Strategic Assessment of Middle East Impact on the Asian Petrochemical Industry A Structural and Strategic Evaluation A Multi Client Study designed to deliver real competitive advantage to subscr

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									Strategic Assessment of Middle East Impact
on the Asian Petrochemical Industry
A Structural and Strategic Evaluation

A Multi-Client Study designed to deliver real competitive advantage to
subscribing organisations




Prospectus
                        Prospectus


  Strategic Assessment of
 Middle East Impact on the
Asian Petrochemical Industry
       A Structural and Strategic Evaluation
          A multiclient study designed to deliver
  real competitive advantage to subscribing organisations


                      September 2006




  Griffin House, 1st Floor South, 161 Hammersmith Road, London W6 8BS, UK
                Tel: +44 20 7950 1600 Fax: +44 20 7950 1550
Contents
Section                                                                                                                           Page

1    Introduction..............................................................................................................      1
2    Report Objectives ....................................................................................................          4
3    Report Scope and Coverage....................................................................................                   5
     3.1        OBJECTIVES................................................................................................           5
     3.2        PRODUCT COVERAGE ..............................................................................                      7
     3.3        GEOGRAPHICAL COVERAGE..................................................................                              8
4    Table of Contents .....................................................................................................         9
5    Methodology .............................................................................................................     15
6    Nexant’s Experience ................................................................................................          16
     6.1        BACKGROUND ...........................................................................................             16
     6.2        DESCRIPTION OF SERVICES ...................................................................                        16
     6.3        ASSIGNMENTS UNDERTAKEN WHICH COVER THE MIDDLE EAST
                AND GCC STATES......................................................................................               18
7    Subscription Form ...................................................................................................         23
     7.1        THE SUBSCRIPTION FORM......................................................................                        23




                                         Strategic Assessment of the Middle East Impact on the                                       i
                                                      Asian Petrochemical Industry
Section 1                                                                                                                                                  Introduction

The Middle East Petrochemical Industry stands on the verge of yet another period of massive
expansion, the largest so far. About 19 million tons per year of ethylene capacity and a similar
amount of ethylene derivative capacity is expected to come on stream over the next five years as
illustrated in Figure 1.1.
                                                             Figure 1.1 Ethylene Capacity Growth in the Middle East
                                                     40

                                                     35               1st Phase               2nd Phase                3rd Phase               4th Phase

                                                     30
              Total Installed Capacity
               (Million tons per year)




                                                     25

                                                     20

                                                     15

                                                     10

                                                             5

                                                             0
                                                                 1980     1983 1986      1989     1992 1995         1998    2001 2004     2007 2010

                                                                  Saudi Arabia        Iran                Qatar              Abu Dhabi         Kuwait
                                                                  Oman                Egypt               T urkey            Israel            Iraq
                      PP: P&M Prospectus AIS1


With the inherent economies of scale (associated with Middle East petrochemical investments)
and the Middle East’s indigenous advantage of low feedstock costs, these factors combine to
create a compelling story for the Middle East to take the lion’s share of new global growth.
Figure 1.2 presents Nexant’s views on the expected capacity increase during 2005-2010 for
major commodity chemicals.
                                         Figure 1.2 Planned Capacity Increase by Region, 2005-2010
                                                                 30
                                                                                                                           PE            MEG
                                                                 25                                                        EDC           PP
                                                                                                                           Styrene
                                     Million tons per year




                                                                 20

                                                                 15

                                                                 10

                                                                  5

                                                                  0
                                                                        Middle East       Asia            Western          Eastern       Central
                                                                                                          Europe           Europe        Europe
                                                  PP: P&M Prospectus AIS1




                                                                             Strategic Assessment of Middle East Impact on the                                       1
                                                                                        Asian Petrochemical Industry
Section 1                                                                                                                 Introduction




It is most likely that the key destination for the export build up from the Middle East will remain
targeted towards the fastest growing region of the global petrochemicals industry – ASIA.
Figure 1.3 shows the general trend expected in respect to the growing inter-dependence of the
regions for trade in selected petrochemicals.

                                              Figure 1.3 Net Trade for Selected Petrochemicals
                              15 000
                                                LLDPE              HDPE                       MEG           Methanol

                              10 000
              Thousand tons




                               5 000


                                    0


                               (5 000)


                              (10 000)
                                             Asia   Middle      Asia      Middle       Asia      Middle   Asia   Middle
                                                     East                  East                   East            East

                                                                   2000     2005      2010     2015
                    X L: P&M Pro sp ect us




With the level of supplies (exports) increasing by such a magnitude, there is overwhelming
concern in the Asian petrochemical industry that the significant build up in petrochemical
capacity in the Middle East will preclude further investment in Asia for the medium and longer
term. In fact, with the general trend in declining tariffs in many Asian countries coupled with
advantaged Middle East competitiveness, the concern is that in addition to the lack of new
project development, certain existing petrochemical producers/operations may be driven to exit.

Therefore, the Asian petrochemical industry is at a critical point in its development. Players in
the industry will need to make major decisions, which will have lasting ramifications, and these
decisions will need to be taken in the near term. Some of the questions they may ask are:
            Asian regional demand growth provides compelling rationale to invest - but are such
            investments financially beneficial and competitively sustainable against the onslaught of
            Middle East capacity and Middle East feedstock advantages?
            Energy policies are driving a number of countries in Asia to pursue gas-based strategies -
            will this yield potential opportunities for gas-based petrochemical development as well as
            taking possible advantage of increased naphtha availability in selected countries?
            A significant number of sub-optimal petrochemical operations continue to exist.
            Middle East supply will bring further pressure to restructure, consolidate or
            exit/shutdown operations in Asia: how will this unravel?



                                                    Strategic Assessment of Middle East Impact on the                              2
                                                               Asian Petrochemical Industry
Section 1                                                                                       Introduction




            Inaction - will this create opportunities for others and set the stage for fundamental shifts
            in industry structure in Asia?
            The Middle East appears to be poised to take advantage of the major opportunities in the
            Asian petrochemical industry. How far is the Asian industry planning for the
            repercussions?

This study was designed to provide a strategic evaluation not only of the Middle Eastern industry
structure (current and future), but more importantly the structure, competitiveness and the future
direction of the Asian petrochemical industry with a view towards identifying opportunities and
the threats for existing and potential Asian producers.




                                    Strategic Assessment of Middle East Impact on the                    3
                                               Asian Petrochemical Industry
Section 2                                                                          Report Objectives

The overall objective of this report was to provide a strategic evaluation of the impact of the
substantial increase in Middle Eastern capacity/exports on the Asian Petrochemical Industry.
The report provides a rigorous examination of a number of key dimensions of this complex and
competitively driven industry, with the principal objective to assess the future structure and
strategic direction for the Asian petrochemical industry.

The results of the report provide the basis for companies to establish market, investment, and
business strategies to achieve effective future participation in the Asian petrochemical industry.
As such, this report addresses the following critical questions:
       How competitive will Middle East supply to Asia be in the future, considering such key
       factors as Middle East feedstocks (availability and cost), evolving demand growth and
       trade patterns for Middle East petrochemicals, evolving and increasing logistical costs,
       and other key cost structure considerations?
       How competitive is the existing Asian petrochemical industry? How competitive are the
       already committed new Asian investments?
       Are there opportunities for additional Asian investment in petrochemicals? What are the
       drivers to make such investments financially sound and competitively sustainable?
       How will investment in the Middle East and China ultimately unfold? Will China be able
       to close the trade gap? What are the risks of an increasing dependence on imports?
       Will the Middle East onslaught be restricted to commodity grade materials, and therefore
       provide some respite to the Asian producers involved in specialties production? Will
       these Asian producers be able to maintain a specialties niche?
       With the direction of reduced Asian tariffs for imports (as driven by WTO entry and
       various bi-lateral trade pacts within Asia) how will the Asian petrochemical industry
       evolve and achieve the ability to be sustainably competitive?
       What will be the future shape of the Asian industry structure considering Middle East
       evolution and the Asian opportunities? How should the Asian industry evolve and what
       are the measures needed to push the industry in that direction? (Strategic Alliance or
       joint investment in the Middle East and Asia, others)?

The report provides a valuable resource for strategic planning purposes at a critical time in the
development and evolution of both the Middle East and Asian petrochemical industries. As
such, it provides the necessary insights required by existing petrochemical producers in Asia and
the Middle East for establishing company strategies, as well as providing a guide for
organisations considering major investments or new entry into this dynamic and competitive
industry.




                               Strategic Assessment of Middle East Impact on the                  4
                                          Asian Petrochemical Industry
Section 3                                                                Report Scope and Coverage

3.1     OBJECTIVES
Growth in the Middle Eastern petrochemical industry will impact Asian petrochemical
development in two major respects:
        Inexpensive exports from the Middle East will put Asian regional producers under
        pressure, which in certain cases will prohibit further expansions.
        The attraction of capital from multinational companies who have the option to invest
        either in Asia or the Middle East.

The main focus of the study, therefore, was to consider the likely developments in the
Middle East, assess the fundamentals of the Asian petrochemical industry and develop a strategic
evaluation of the likely reactions, evolution and direction of the Asian petrochemical industry.

Although the overall interdependence is quite clear, both the Asian and the Middle Eastern
regions are expected to have their own set of challenges/issues. Some of the pertinent issues that
have been considered are presented in the following paragraphs.

3.1.1   Issues/Concerns for Asia
        Well established players in Asia are looking to grow, driven by need to both increase
        shareholder wealth and take advantage of being located in the fastest growing
        petrochemical market globally. Which products to invest in, where in the value chain to
        invest, where to strategically locate such investments and most importantly, how to
        achieve sustainable competitiveness are some the key fundamental concerns?
        The Chinese petrochemical industry is characterized by a high degree of fragmentation
        and low scale –will such a structure be able to survive against producers with global scale
        and advantaged (or strong) feedstock positions in the Middle East and/or other parts of
        Asia? Will there be consolidation, restructuring, exit or fundamental shifts in industry
        structure in China?
        Many players in established Asian exporting countries like Singapore, Korea and
        Thailand are considering new major investments – are these viable and competitive?
        Malaysia has a well developed petrochemical industry built principally on gas and largely
        focused on its domestic market. With such a strong foundation, will new investments
        emerge in Malaysia targeting China?
        Is the Japanese petrochemical industry capable of sustainability or will it be driven to
        evolve its structure?
        Over time the Indian petrochemical industry has emerged as a major international player.
        There are many investment initiatives by both private and public sector groups under
        consideration with levels of feedstock integration providing potential for high levels of
        competitiveness. How will these initiatives evolve and how will India impact the rest of
        Asia?




                                Strategic Assessment of Middle East Impact on the                5
                                           Asian Petrochemical Industry
Section 3                                                                               Report Scope and Coverage




            Indonesia is a massive potential market and has significant gas reserves. Will Indonesia
            push for a larger share in the Asian petrochemical industry?
            Other Asian countries are looking to develop or enhance their petrochemical positions
            including Philippines, Brunei and others. Some have feedstock positions and/or
            emerging domestic markets to provide a basis for investment. How will these
            developments evolve?
            What will be the long term impact on the Asian petrochemical industry from the wave of
            new capacity coming up in the Middle East?
            Is investing in the Middle East to take advantage of feedstock positions the correct
            strategy for Asian petrochemical producers looking for sustained corporate growth?
3.1.2       Issues/Concerns for the Middle East
            Regarding the Middle East region’s ability to continue providing attractive feedstock
            pricing, what is likely to happen and what will be the implications of any such changes?
            The Middle Eastern industry has enjoyed unprecedented access to capital at highly
            favourable rates. While this has been due in part to fortuitous market timing, banks have
            also taken a benign view of market risk given the low production cost in the region and
            ever rising Asian import demand. With all projects looking to target Asia as their key
            market, how will these risks be viewed in future and will this affect the ability to finance
            future mega – projects?
            The private sector is keen to invest in certain countries but limitations on feedstock
            supply and their costs or access to indigenous markets are concerns that need to be
            clarified. What is the current status, what are the government policies, how is private
            sector involvement likely to develop, and what are the implications for petrochemical
            development?
            The Middle Eastern players have started to “buy” markets by participating in or buyout of
            overseas companies – is there an opportunity for the Asian producers to invest in the
            Middle East to secure some of the feedstock advantage and hence become at-least
            somewhat on a par in costs with the exports expected from the other producers?
            How important will security concerns be? Will risk profiles play an even more important
            role in overseas companies looking to invest in the Middle East? Can the Asian players
            capitalise on this weakness?
            Multinationals aiming at globalisation are all looking at the growing market in Asia.
            What is the best way to access this and achieve added value? Should one be investing in
            the Middle East for attractive feedstock pricing or closer to/within the marketplace in
            Asia, where other benefits can be achieved?
            New technology has been under development to utilise methane, ethane and LPG
            feedstocks, an example being ethane to VCM. Such technologies can provide the greatest
            economic benefit in the Middle East. What is the status of these technologies and are
            they likely to impact developments in the region over the study period?
            New capacity addition in Europe has slowed down substantially, which will result in the
            region becoming a net importer in the future. How will this impact global trade patterns?




                                    Strategic Assessment of Middle East Impact on the                         6
                                               Asian Petrochemical Industry
Section 3                                                                              Report Scope and Coverage




            Middle Eastern national oil companies have been looking to secure outlets for crude oil in
            Asia through refinery investment, e.g. Saudi Aramco in Petron, Ssangyang and Fujian. Is
            this expected to increase? What is the strategy of the national oil companies? In
            addition, the offshore investment interest of the likes of SABIC needs to be considered.
            As a result of the above considerations, what is likely to be the future investment
            direction for the Middle East and Asian petrochemical industries?

3.2         PRODUCT COVERAGE
3.2.1       Derivatives
Product coverage focused on products of key competitive threat from the Middle East. The main
petrochemical building blocks covered are:

                              Intermediates              Primary Derivatives
                                  Ethylene                    LDPE
                                  Propylene                   LLDPE
                                  Butadiene                   HDPE
                                  Benzene                     MEG
                                  para-Xylene                 Methanol
                                                              EDC
                                                              VCM
                                                              Polypropylene
                                                              Styrene
                                                              PTA

As the commodity petrochemicals dominate business in the region, the primary focus is on this
sector. However, based on the ambitions recently expressed by a number of private and State
companies in the region, opportunities for further forward integration into more value- added
applications like bimodal polyethylene, copolymers and acetyls are also discussed.
3.2.2       Feedstocks
It can be expected that feedstock availability and pricing will continue to remain the key driver
for capacity addition in the Middle East. The availability of feedstocks in Asia was also
reviewed. Key petrochemical feedstocks were included and a supply/demand outlook was
provided by country covering natural gas, ethane, LPG and naphtha/condensate. Views on the
outlook were presented to 2015. The current and future development of the refining industry was
reviewed to consider the availability of streams for petrochemical development. Opportunities
for refinery-petrochemical integration were also highlighted.
Although feedstock pricing strategies adopted in the Middle East to date have little or no
relevance to crude oil prices, the overall competitiveness of the region is inherently affected by
the crude oil price environment. Low crude oil prices reduce the region’s competitive advantage,
and thus impact any new investment decisions. Conversely, a high oil price improves the
prospects for new investment. The impact of high and low crude scenarios was examined,
especially on the relative competitiveness of supply into major markets such as China.


                                   Strategic Assessment of Middle East Impact on the                         7
                                              Asian Petrochemical Industry
Section 3                                                                                Report Scope and Coverage




3.3         GEOGRAPHICAL COVERAGE
Geographical coverage included all countries that are expected to play a role or are likely to be
impacted by the developments outlined earlier. Countries to be covered in depth are:

                  Middle Eastern Countries                     Asian Countries
                      Saudi Arabia                                  Japan
                      Iran                                          China
                      Qatar                                         South Korea
                      Kuwait                                        Thailand
                      United Arab Emirates                          India
                      Oman                                          Singapore
                      Turkey                                        Philippines
                                                                    Taiwan
                                                                    Malaysia
                                                                    Indonesia
                                                                    Brunei

The Middle Eastern countries considered in the study are those that already have substantial
petrochemical capacity or are looking to establish their presence in this business, while the Asian
countries shortlisted above represent key consumption markets, countries with existing (and
committed new investments) “important” production facilities, and countries which have
emergent possibilities (exploiting feedstocks not previously exploited).

The study period for all considerations will be recent history with forecasts to 2015.

The table of contents from the report follows in Section 4.




                                     Strategic Assessment of Middle East Impact on the                         8
                                                Asian Petrochemical Industry
Section 4                                                                                                    Table of Contents

Section                                                                                                                                   Page

1    Executive Summary .............................................................................................................       1-1
     1.1    OVERVIEW .............................................................................................................         1-1
     1.2    INTRODUCTION.....................................................................................................              1-2
     1.3    MACROECONOMIC OVERVIEW.........................................................................                                1-3
            1.3.1 Key Findings/Issues .....................................................................................                1-3
            1.3.2 Recommendations ........................................................................................                 1-4
     1.4    FEEDSTOCK ISSUES .............................................................................................                 1-5
            1.4.1 Key Findings/Issues .....................................................................................                1-5
            1.4.2 Recommendations ........................................................................................                 1-7
     1.5    PETROCHEMICAL REFINERY INTEGRATION OPPORTUNITIES .................                                                             1-8
            1.5.1 Key Findings/Issues .....................................................................................                1-8
            1.5.2 Recommendations ........................................................................................                1-11
     1.6    SUPPLY/DEMAND BALANCE AND IMPACT ON GLOBAL TRADE..............                                                                1-12
            1.6.1 Key Findings/Issues .....................................................................................               1-12
            1.6.2 Recommendations ........................................................................................                1-16
     1.7    TECHNOLOGY AND OIL PRICE DEVELOPMENTS .........................................                                               1-18
            1.7.1 Key Findings/Issues .....................................................................................               1-18
            1.7.2 Recommendations ........................................................................................                1-19
     1.8    COMPETITIVENESS OF PRODUCTION..............................................................                                   1-20
            1.8.1 Key Findings/Issues .....................................................................................               1-20
            1.8.2 Recommendations ........................................................................................                1-26
     1.9    OTHER STRATEGIC ISSUES ................................................................................                       1-28
            1.9.1 Key Findings/Issues .....................................................................................               1-28
            1.9.2 Recommendations ........................................................................................                1-34
     1.10   OVERALL CONCLUSIONS ...................................................................................                       1-35
2    Macroeconomic Overview ...................................................................................................            2-1
     2.1    HISTORICAL REVIEW...........................................................................................                   2-1
     2.2    FORECASTING METHODOLOGY/ASSUMPTIONS...........................................                                                 2-2
     2.3    PROJECTIONS OF ECONOMIC GROWTH (MEDIUM CRUDE OIL SCENARIO)                                                                     2-3
     2.4    ASIA ECONOMIC PERFORMANCE.....................................................................                                 2-5
            2.4.1 Asia Excluding Japan and China..................................................................                         2-5
     2.5    MIDDLE EAST ECONOMIC PERFORMANCE....................................................                                          2-11
            2.5.1 Middle East (including Turkey) ...................................................................                      2-11
     2.6    INFLATION .............................................................................................................       2-15
     2.7    CRUDE OIL SCENARIOS ......................................................................................                    2-16
3    Feedstock Analysis ...............................................................................................................    3-1
     3.1    OVERVIEW .............................................................................................................         3-1
     3.2    OIL AND GAS RESERVES AND PRODUCTION ................................................                                           3-2
            3.2.1 Middle East ..................................................................................................           3-2
            3.2.2 Asia Pacific ..................................................................................................          3-4




                                           Strategic Assessment of Middle East Impact on the                                                9
                                                      Asian Petrochemical Industry
Section 4                                                                                                                             Table of Contents




       3.3    ETHANE...................................................................................................................          3-7
              3.3.1 Middle East ..................................................................................................               3-7
              3.3.2 Asia Pacific ..................................................................................................              3-8
       3.4    LPG DEMAND AND SUPPLY OUTLOOK ...........................................................                                          3-9
              3.4.1 Middle East ..................................................................................................               3-9
              3.4.2 Asia Pacific ..................................................................................................             3-11
       3.5    NAPHTHA DEMAND AND SUPPLY OUTLOOK ...............................................                                                 3-15
              3.5.1 Middle East ..................................................................................................              3-15
              3.5.2 Asia Pacific ..................................................................................................             3-17
       3.6    FEEDSTOCK PRICING...........................................................................................                      3-20
              3.6.1 LPG ..............................................................................................................          3-20
              3.6.2 Naphtha ........................................................................................................            3-23
              3.6.3 Ethane...........................................................................................................           3-26
       3.7    CONCLUSIONS.......................................................................................................                3-28
4      Petrochemical Supply and Demand....................................................................................                       4-1
       4.1    ETHYLENE ..............................................................................................................            4-1
              4.1.1 Global Overview ..........................................................................................                   4-1
       4.2    LOW DENSITY POLYETHYLENE (LDPE)..........................................................                                         4-42
              4.2.1 Global Overview ..........................................................................................                  4-42
       4.3    LINEAR LOW DENSITY POLYETHYLENE (LLDPE)........................................                                                   4-69
              4.3.1 Global Overview ..........................................................................................                  4-69
       4.4    HIGH DENSITY POLYETHYLENE (HDPE) ........................................................                                         4-99
              4.4.1 Global Overview ..........................................................................................                  4-99
       4.5    MONO ETHYLENE GLYCOL (MEG) ...................................................................                                   4-130
              4.5.1 Global Overview ..........................................................................................                 4-130
       4.6    PROPYLENE............................................................................................................            4-157
              4.6.1 Global Overview ..........................................................................................                 4-157
       4.7    POLYPROPYLENE .................................................................................................                  4-197
              4.7.1 Global Overview ..........................................................................................                 4-197
       4.8    BENZENE.................................................................................................................         4-230
              4.8.1 Global Overview ..........................................................................................                 4-230
       4.9    PARA-XYLENE (PX) ..............................................................................................                  4-269
              4.9.1 Global Overview ..........................................................................................                 4-269
       4.10   STYRENE.................................................................................................................         4-298
              4.10.1 Global Overview ..........................................................................................                4-298
       4.11   PURIFIED TEREPHTHALIC ACID (PTA) ............................................................                                    4-332
              4.11.1 Global Overview ..........................................................................................                4-332
       4.12   METHANOL ............................................................................................................            4-361
              4.12.1 Global Overview ..........................................................................................                4-361
       4.13   EDC...........................................................................................................................   4-395
              4.13.1 Global Overview ..........................................................................................                4-395
       4.14   VCM..........................................................................................................................    4-419
              4.14.1 Global Overview ..........................................................................................                4-419
       4.15   BUTADIENE ............................................................................................................           4-449
              4.15.1 Global Overview ..........................................................................................                4-449




                                                Strategic Assessment of Middle East Impact on the                                                  10
                                                           Asian Petrochemical Industry
Section 4                                                                                                                            Table of Contents




5      Petrochemical Refinery Integration ...................................................................................                    5-1
       5.1    OVERVIEW .............................................................................................................             5-1
       5.2    THE REFINERY - PETROCHEMICAL INTERFACE...........................................                                                  5-2
       5.3    PROCESS DESCRIPTIONS FOR MAJOR INTEGRATION OPTIONS ...............                                                                 5-5
              5.3.1 Catalytic Cracking........................................................................................                   5-5
              5.3.2 Aromatics (Benzene, Toluene, Mixed Xylenes (BTX)) Separation from
                      Reformate.....................................................................................................            5-15
              5.3.3 n-Paraffins from Kerosene ...........................................................................                       5-17
       5.4    REFINERY PROCESSING CAPACITIES FOR PETROCHEMICALS ................                                                                5-19
       5.5    REFINING SECTOR CATEGORISATION ............................................................                                       5-20
              5.5.1 Fluid Catalytic Cracking (FCC) ...................................................................                          5-20
              5.5.2 Reforming ....................................................................................................              5-26
       5.6    IMPACT ON FUEL SPECIFICATIONS .................................................................                                   5-33
              5.6.1 Historical Development................................................................................                      5-33
              5.6.2 Main Quality Parameters..............................................................................                       5-33
              5.6.3 Gasoline........................................................................................................            5-34
              5.6.4 Asian Product Quality Trends ......................................................................                         5-36
       5.7    CONCLUSIONS.......................................................................................................                5-37
6      Impact of the Regional Demand Growth in Asia on Global Trade .................................                                            6-1
       6.1    INTRODUCTION.....................................................................................................                  6-1
       6.2    LDPE.........................................................................................................................      6-3
              6.2.1 Asia Demand and Outlook ...........................................................................                          6-3
              6.2.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-4
              6.2.3 Impact of Asia on Global Trade and the Middle East ..................................                                        6-6
       6.3    LLDPE ......................................................................................................................       6-7
              6.3.1 Asia Demand and Outlook ...........................................................................                          6-7
              6.3.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-8
              6.3.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-10
       6.4    HDPE ........................................................................................................................     6-12
              6.4.1 Asia Demand and Outlook ...........................................................................                         6-12
              6.4.2 Capacity Build Up and Supply Capability in Asia.......................................                                      6-13
              6.4.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-15
       6.5    MONO ETHYLENE GLYCOL (MEG) ...................................................................                                    6-17
              6.5.1 Asia Demand and Outlook ...........................................................................                         6-17
              6.5.2 Capacity Build Up and Supply Capability in Asia.......................................                                      6-18
              6.5.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-19
       6.6    POLYPROPYLENE .................................................................................................                   6-21
              6.6.1 Asia Demand and Outlook ...........................................................................                         6-21
              6.6.2 Capacity Build Up and Supply Capability in Asia.......................................                                      6-22
              6.6.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-23
       6.7    BENZENE.................................................................................................................          6-25
              6.7.1 Asia Demand and Outlook ...........................................................................                         6-25
              6.7.2 Capacity Build Up and Supply Capability in Asia.......................................                                      6-26
              6.7.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-28
       6.8    STYRENE.................................................................................................................          6-29
              6.8.1 Asia Demand and Outlook ...........................................................................                         6-29
              6.8.2 Capacity Build Up and Supply Capability in Asia.......................................                                      6-30
              6.8.3 Impact of Asia on Global Trade and the Middle East ..................................                                       6-32



                                                Strategic Assessment of Middle East Impact on the                                                 11
                                                           Asian Petrochemical Industry
Section 4                                                                                                                              Table of Contents




       6.9    PARA-XYLENE (PX) ..............................................................................................                     6-33
              6.9.1 Asia Demand and Outlook ...........................................................................                           6-33
              6.9.2 Capacity Build Up and Supply Capability in Asia.......................................                                        6-35
              6.9.3 Impact of Asia on Global Trade and the Middle East ..................................                                         6-36
       6.10   PTA ...........................................................................................................................     6-38
              6.10.1 Asia Demand and Outlook ...........................................................................                          6-38
              6.10.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-39
              6.10.3 Impact of Asia on Global Trade and the Middle East ..................................                                        6-41
       6.11   EDC...........................................................................................................................      6-43
              6.11.1 Asia Demand and Outlook ...........................................................................                          6-43
              6.11.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-44
              6.11.3 Impact of Asia on Global Trade and the Middle East ..................................                                        6-46
       6.12   VCM..........................................................................................................................       6-48
              6.12.1 Asia Demand and Outlook ...........................................................................                          6-48
              6.12.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-49
              6.12.3 Impact of Asia on Global Trade and the Middle East ..................................                                        6-51
       6.13   METHANOL ............................................................................................................               6-53
              6.13.1 Asia Demand and Outlook ...........................................................................                          6-53
              6.13.2 Capacity Build Up and Supply Capability in Asia.......................................                                       6-54
              6.13.3 Impact of Asia on Global Trade and the Middle East ..................................                                        6-56
       6.14   CONCLUSIONS.......................................................................................................                  6-57
7      Impact of Technological and Oil Price Developments ......................................................                                   7-1
       7.1    INTRODUCTION.....................................................................................................                    7-1
       7.2    METHANOL TO OLEFINS.....................................................................................                             7-5
              7.2.1 Methanol ......................................................................................................                7-5
              7.2.2 Methanol to Olefins (MTO) .........................................................................                           7-21
              7.2.3 Methanol To Propylene - Lurgi MTP® Process ..........................................                                         7-26
       7.3    GAS TO LIQUIDS....................................................................................................                  7-32
       7.4    ALKANE ACTIVATION.........................................................................................                          7-45
       7.5    CHEMICALS FROM ACETYLENE .......................................................................                                    7-47
              7.5.1 Calcium Carbide Processes ..........................................................................                          7-47
              7.5.2 China Perspective.........................................................................................                    7-55
              7.5.3 Middle Eastern Perspective..........................................................................                          7-59
              7.5.4 Butanediol via Acetylene/Formaldehyde (Reppe Concept) .........................                                               7-59
              7.5.5 Vinyl Chloride Monomer via Acetylene ......................................................                                   7-65
              7.5.6 Vinyl Acetate via the Acetylene Process .....................................................                                 7-68
              7.5.6 Acrylic Acid via the Reppe Process .............................................................                              7-71
       7.6    COAL GASIFICATION ...........................................................................................                       7-73
              7.6.1 Moving-Bed Reactors ..................................................................................                        7-74
              7.6.2 Fluidised-Bed Reactors ................................................................................                       7-75
              7.6.3 Entrained-Flow Reactors..............................................................................                         7-76
              7.6.4 Coal Characteristics Affecting Gasification.................................................                                  7-76
              7.6.5 Commercial Gasification Systems ...............................................................                               7-77
              7.6.6 Summary of Commercial Gasification Systems ..........................................                                         7-88




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Section 4                                                                                                                              Table of Contents




       7.7     INTEGRATED GASIFICATION COMBINED CYCLE (IGCC) ...........................                                                         7-90
               7.7.1 Power Generation Only................................................................................                       7-90
               7.7.2 Co-Production of Power and Other Products ...............................................                                   7-95
       7.8     OLEFIN METATHESIS...........................................................................................                      7-98
       7.9     CONCLUSIONS.......................................................................................................               7-104
8      Competitiveness of Middle East and Asian Production....................................................                                    8-1
       8.1     OVERVIEW .............................................................................................................             8-1
       8.2     METHODOLOGY....................................................................................................                    8-2
               8.2.1 Leader Plant Concept ...................................................................................                     8-2
               8.2.2 Cost of Production Definition and Basis......................................................                                8-2
               8.2.3 Capital Cost Definition and Basis ................................................................                           8-4
               8.2.4 Pricing Basis.................................................................................................               8-7
               8.2.5 Profitability Analysis and Basis ...................................................................                        8-11
               8.2.6 Currency Basis .............................................................................................                8-12
       8.3     REGIONAL COST COMPETITIVENESS..............................................................                                       8-13
               8.3.1 Ethylene........................................................................................................            8-13
               8.3.2 Benzene/Toluene/Xylenes (BTX) ................................................................                              8-20
       8.4     DELIVERED COST COMPETITIVENESS ............................................................                                       8-26
               8.4.1 Low Density Polyethylene (LDPE)..............................................................                               8-26
               8.4.2 Linear Low Density Polyethylene (LLDPE)................................................                                     8-28
               8.4.3 High Density Polyethylene (HDPE) ............................................................                               8-30
               8.4.4 Mono-Ethylene Glycol (MEG) ....................................................................                             8-33
               8.4.5 Ethylene Dichloride (EDC)..........................................................................                         8-35
               8.4.6 Vinyl Chloride Monomer (VCM) ................................................................                               8-37
               8.4.7 Benzene/Toluene/Xylenes (BTX) ................................................................                              8-41
               8.4.8 Styrene..........................................................................................................           8-43
               8.4.9 para-Xylene ..................................................................................................              8-46
               8.4.10 Purified Terephthalic Acid (PTA)................................................................                           8-48
               8.4.11 Methanol ......................................................................................................            8-50
       8.5     IMPACT OF CAPITAL COSTS ..............................................................................                            8-53
               8.5.1 Recent Increase in Capital Costs ..................................................................                         8-53
               8.5.2 High Density Polyethylene (HDPE) ............................................................                               8-54
               8.5.3 Vinyl Chloride Monomer (VCM) ................................................................                               8-55
               8.5.4 para-Xylene ..................................................................................................              8-57
       8.6     CONCLUSIONS.......................................................................................................                8-59
               8.6.1 Margin and Profitability Analysis ................................................................                          8-60
               8.6.2 Impact of Crude Oil Pricing .........................................................................                       8-64
9      Strategic Issues .....................................................................................................................     9-1
       9.1     FEEDSTOCK ISSUES .............................................................................................                     9-1
               9.1.1 Ethane...........................................................................................................            9-1
               9.1.2 LPG ..............................................................................................................           9-2
               9.1.3 Naphtha ........................................................................................................             9-2
               9.1.4 Petrochemical/Refinery Integration .............................................................                             9-3
       9.2     DEMAND AND SUPPLY ISSUES..........................................................................                                 9-6
               9.2.1 Impact of Chinese Demand Decrease ..........................................................                                 9-7
               9.2.2 Impact of Increase in China’s Capacity Expansions ....................................                                      9-10
               9.2.3 Role of Chinese Government in Controlling/Guiding Investments .............                                                 9-12
               9.2.4 Role of Asian Governments in Controlling/Guiding Investment.................                                                9-15



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               9.2.5 Slow-Down in Middle East Project Developments......................................                                           9-16
               9.2.6 Infrastructure to Support Investment and Trade...........................................                                     9-17
       9.3     COMPETITIVENESS ISSUES ................................................................................                             9-18
               9.3.1 Primary Issues ..............................................................................................                 9-18
               9.3.2 Secondary Issues ..........................................................................................                   9-25
       9.4     STRUCTURAL CHANGES.....................................................................................                             9-31
               9.4.1 Middle East ..................................................................................................                9-31
               9.4.2 Potential for Restructuring in the Next Downturn .......................................                                      9-41
               9.4.3 Implications of Middle East Capacity Additions .........................................                                      9-42
       9.5     INVESTMENT ISSUES ...........................................................................................                       9-46
               9.5.1 Capital Cost Location Factors ......................................................................                          9-47
               9.5.2 Equity Structures and Partner Roles.............................................................                              9-49
               9.5.3 Capital Structures and Sources of Debt and Equity .....................................                                       9-51
               9.5.4 Incentives .....................................................................................................              9-52
               9.5.5 Risk Versus Reward in New Petrochemical Projects – A Balance ..............                                                   9-55
               9.5.6 Investment Opportunities and Where to Invest............................................                                      9-56
       9.6     SUMMARY OF ISSUES..........................................................................................                         9-58
               9.6.1 North Asia ....................................................................................................               9-58
               9.6.2 China ............................................................................................................            9-59
               9.6.3 Other Asia ....................................................................................................               9-59
               9.6.4 Middle East ..................................................................................................                9-60
               9.6.5 The Americas and Western Europe..............................................................                                 9-61
10     Strategies for Development..................................................................................................                10-1
       10.1    “LOW-COST”...........................................................................................................               10-1
       10.2    “CLOSE TO CUSTOMERS” ...................................................................................                            10-3
       10.3    “CLUSTERING” ......................................................................................................                 10-4
       10.4    “CAPTURING ADDED VALUE” ...........................................................................                                 10-6
       10.5    “INDUSTRIAL DEVELOPMENT”.........................................................................                                   10-7
       10.6    “BALANCING GEOPOLITICAL RISKS”..............................................................                                        10-8
       10.7    “TECHNOLOGY APPLICATION”.........................................................................                                   10-9
       10.8    CONCLUSIONS.......................................................................................................                 10-10

Appendix                                                                                                                                          Page

A      Cost Data...............................................................................................................................    A-1
B      Provisional Management Measures of Foreign Investment Project Ratification (China)                                                          B-1




                                                Strategic Assessment of Middle East Impact on the                                                   14
                                                           Asian Petrochemical Industry
Section 5                                                                          Methodology

The study was managed and conducted by Nexant’s Petroleum and Chemicals staff with
extensive industry experience in petrochemicals as well as direct experience in the Middle East
and Asian industry.

Commercial information and forecasts were developed using Nexant’s ChemSystems in-house
databases including its award-winning ChemSystems Online® tools, augmented by a programme
of regional fieldwork. Discussions were held with key industry and government officials in the
regions to provide a thorough understanding of the dynamics of the current and future industry in
the various countries. Nexant’s Bangkok and London offices were heavily involved in this
exercise.

The insights were supplemented by experience gained from previous single and multi-subscriber
studies carried out by Nexant.

The commercial programme was based on developing accurate and complete information,
followed by analysis using a team of expert professionals with prior expertise and by application
of appropriate analytical tools. The approach covered:
       Finalising an information development plan, with a focus on fieldwork in the region.
       A series of interviews with:
       −      ministries and government agencies
       −      local chemical companies (including personnel in marketing, technology,
              planning and manufacturing)
       −      feedstock producers and suppliers
       −      importers, distributors, traders
       −      end-users
       −      engineering contractors and technology licensors
       −      industry and regional associations.
       Review of extensive in-house and published information on the GCC/Middle East and
       relevant global petrochemical industries.
       Development of preliminary views on industry dynamics, macro-economic and country-
       related issues.
       Carrying out multi-faceted analysis to arrive at preliminary conclusions.
       Further fieldwork in the region was completed as necessary to supplement the analysis
       and clarify specific issues. Given the global nature of these businesses, all analysis was
       supported by professionals from Nexant’s network of global offices.
       Nexant considered the lessons learned from other developing regions to test the initial
       findings and to further refine conclusions regarding the future likely direction of the
       industry.

This study was completed in September 2006.



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Section 6                                                                          Nexant’s Experience

6.1     BACKGROUND
Nexant was established on 1 January 2000 and prior to that date, the staff of Nexant operated as a
separate consulting group within a major engineering company. Nexant is now an independent
company owned by a number of investors. Nexant acquired ChemSystems on 1 September 2001,
and the combined entity (“Nexant”) now has access to even more enriched and extensive
experience and resources, offering services that include:
       Master planning/feasibility studies.
       Technology evaluation.
       Techno-economic and commercial analyses.
       Financial evaluation (cashflow modelling, etc).
       Benchmarking.
       Monitoring project implementation.

Nexant is very well qualified to undertake the technical, commercial, economic and financial
evaluations, from its own offices, without the need to subcontract. Owing to its extensive
experience, and known for its “out-of-the-box” thinking, Nexant’s ChemSystems Group has also
received the honourable award of “Best Large Consultancy” by the British Consultants and
Construction Bureau. This award was contended by a number of companies, however, Nexant
was judged the winner for its outstanding contribution in developing a real-time, on-line
chemical industry simulator.

6.2     DESCRIPTION OF SERVICES
Nexant is a specialist, not a generalist company. Our area of expertise is the energy and process
industries, including oil refining, natural gas, petrochemicals, polymers, chemicals,
pharmaceuticals and fertilizers. Our business has been built upon providing broad management
consultancy services to leading companies active in these industries, and also to banks, suppliers,
governments and others interested in these sectors.
Nexant’s strengths lie in its combination of technoeconomic, commercial and strategic
capabilities. These "competencies" are described below, followed by an outline of the practice
areas into which the Group is organised.
6.2.1   Technology/Economics
From its foundation in chemical engineering and industrial chemistry, Nexant offers distinctive
expertise in process technology and economic analysis. Assignments may be performed on a
separate, stand-alone basis or as input to broader consulting engagements.
Services include:
       economic and financial analyses of projects or businesses
       valuation of assets or businesses
       technical audit of existing facilities
       project feasibility/planning



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Section 6                                                                              Nexant’s Experience




            technology innovation and assessment
            comparative/competitive technology audit and appraisal
            process design and cost estimation
            technology availability, screening, licensing arrangements
            contractor pre-qualification, evaluation and selection
            project management including resident advisory services
            price, margin and profitability forecasting.
This discipline is supported by comprehensive economics, cost and price databases.
6.2.2       Commercial
Based upon a technical and commercial understanding of the industries we serve, Nexant
supports clients through a variety of market and commercial activities. As with our
technoeconomic work, these commercial assignments may be performed on a stand-alone basis
but are more normally an input to broader consulting engagements.
Services include:
       feedstock and product market analysis
       marketing and market research
       supply/demand analysis and forecasting
       studies of trends and future markets
       "benchmarking" of costs and competitiveness
       medium- and long-range planning.
The commercial discipline is supported by databases of global supply, demand and capacity
developments in all major petrochemicals.
6.2.2.1      Strategic Planning
Industry-specific expertise and an understanding of world market forces distinguish Nexant’s
work in Strategic Planning. Various innovative tools and methodologies tailored to the energy
and process areas are used to challenge conventional thinking. Nexant extends its traditional
project team approach to engaging clients directly in the Strategic Planning process. Interactive
client-consultant relationships promote consensus, a critical factor for successfully developing
pragmatic, implementable solutions.
Services include:
       definition of corporate and business visions
       portfolio planning
       entry strategy evaluation
       diversification, acquisition, divestment studies
       competitive analysis and business positioning
       global competitiveness
       trade flow and impact studies
       strategic options, selection and implementation.



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Section 6                                                                               Nexant’s Experience




6.3         ASSIGNMENTS UNDERTAKEN WHICH COVER THE MIDDLE EAST AND ASIA
6.3.1       Multiclient Work
During the past five years, Nexant’s ChemSystems Group has completed a number of major
multisubscriber studies. Selected studies include:
       Strategic Directions for the Middle East Petrochemical Industry
       Logistics and Shipping: Strategic Impact on Global Chemical Industry Competitiveness
       Petroleum and Petrochemical Economics (PPE) - Asia
       Polyolefins Planning Service (POPS)
       The Indian Agenda
       Asian Petrochemical Pricing
       The Global Polyolefins Industry
       Polyester Intermediates - A global assessment
       Global PVC/VCM/EDC Industry
Nexant’s ChemSystems Group has also completed a number of definitive studies on specific
regions. These studies have analysed the business structure and opportunities for many of the
chemicals covered in this proposed study within the context of a changing economic
environment.
       Restructuring and Growth of the East Asian Petrochemical Industry
       Chemicals and Plastics in China
       Compounding Plastics in Asia
In addition to these studies, Nexant ChemSystems’ Group maintains a global commercial and
technoeconomic database covering the principal petrochemicals, intermediates and polymers.
6.3.2       Single Client Studies
6.3.2.1 Asia
        Asia (Confidential): Nexant undertook a detailed study evaluating the techno/economic/
        commercial aspects of a proposed new olefins complex in Asia. The cracker was located
        adjacent to an existing refinery and the hydrocarbon and other interfaces between the two
        facilities formed a major element of the evaluations.
        Asia (Confidential): Nexant undertook a detailed study evaluating the interfaces for a
        new refinery/petrochemical/power/port complex in Asia.              The covered included
        hydrocarbons/utilities/services/storage along with the supporting management/
        building/planning/IT functions and facilities. A key component of the analyses and
        advice focused on the commercial agreements and optimisation of the overall complex,
        taking into particular consideration the different ownership and management of the
        separate legal entities that formed the overall complex.
        PET Technology Evaluation, China - Nexant assisted the China National Technical
        Import and Export Corporation (CNTIC) with the implementation of a 40 000 tons per
        year PET copolymer chip plant in Guangdong. The project began with project initiation
        and continued through signed construction contracts, including technical analysis,
        preliminary licenser evaluations, invitation to bidders, bid analysis, contract selection and
        contract development.



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                                               Asian Petrochemical Industry
Section 6                                                                                Nexant’s Experience




            Project Feasibility Study, China - Nexant conducted a feasibility study and training for
            two World Bank funded fertilizer projects in the Hubei Province; worked with several
            Chinese provincial Chinese Industry Design Institutes on project feasibility study;
            conducted a prefeasibility study with Shenzhen Petrochemical Industry Corporation.
            Partner Assessment, China - Our client, a leading participant in a petrochemical
            complex joint venture with a global major petrochemical company that will be
            responsible for most chemical exports (30 percent of the joint venture's production), was
            interested in an evaluation of the exclusive exporting rights agreement. Nexant assessed
            the global company's ability to market and distribute chemicals from the joint venture on
            an export basis primarily in the Asian region.
            Petrochemical Joint Venture Development, China - Nexant assisted a client define and
            formulate a negotiating position for a proposed petrochemical joint venture with Sinopec.
            The study included a market analysis, feedstock sourcing, capital cost estimation and
            project profitability and risk assessment for a complex producing a broad range of olefin
            and aromatic derivatives.
            PET and Polyester Fibre project, China - For a client and its lead bank Nexant
            prepared a technical and market review for purposes of project financing. This included a
            review of the technology, design, engineering, procurement and implementation plans for
            the project. The market review provided a forecast for PET and its major raw material
            PTA, focusing on the Asian region.
            Aromatics Plant Feasibility, Indonesia - In a follow-up study to an Aromatics
            Prefeasibility Study, Nexant conducted a feasibility study to prepare the commercial and
            technical information required by financial advisors raising funds for a condensate
            processing facility. Nexant consulted with the engineering company selected to design
            the facility, reviewing basic process configurations, material balances, product quality
            definitions, utility requirements and capital cost estimates in order to develop preliminary
            project cash flows. Cases, sensitivities and feedstocks were developed to ensure that the
            condensate facility was economically attractive, technically acceptable, flexible and
            strategically compatible with the clients corporate objectives.
            Petrochemical Complex Market Assessment - For two financial institutions interested
            in financing the development of the Chandra Asri complex in Indonesia, Nexant assessed
            the outlook for the complex with regard to markets, feedstock availability, operating
            costs, product sales/prices and overall project economics/cash flow. The study
            encompassed the key global regions of US, Western Europe and Japan, reviewing ten
            years of history and developing estimates for ten years in the future.
            Project Opportunity Analysis, Indonesia - The government of Indonesia through
            P T Pupuk Kaltim commissioned Nexant to assess, at pre-feasibility level, the
            development of an aromatics-based complex to produce petrochemicals and derivatives.
            The products were slated to meet demands for these materials primarily in Indonesia and
            other ASEAN countries. The study analysed: markets in Indonesia and other ASEAN
            countries, an overview of the world situation; site selection and evaluation of the project;
            project logic, units to be included in the complex, and representative technology;
            incentives offered by governments to develop comparable industries and
            recommendations for this project; project economics and analysis potential for successful
            implementation.


                                    Strategic Assessment of Middle East Impact on the                   19
                                               Asian Petrochemical Industry
Section 6                                                                              Nexant’s Experience




            Petrochemical Masterplan, Malaysia - In an effort to become a key player in the
            ASEAN petrochemical industry, Petroliam Nasional Berhad (PETRONAS) engaged
            Nexant to assist them to determine the optimal composition of the Malaysian
            petrochemical industry. Nexant’s assistance was directed at identifying and ranking
            products/processes across a wide range products - olefins, aromatics, inorganics and their
            derivatives and assessing the financial and commercial attractiveness of projects proposed
            by others. Phase I of the study encompassed commercial and technical analyses of
            feedstocks and markets; financial modelling of investment cost, financing, feedstocks and
            products and timing; project ranking and recommendations. Phase II developed a
            strategy for industry development - identification of strategic focus using competitive
            advantages - low cost feedstocks, growing domestic markets and technology access; plan
            to implement each of the projects - method of entry, share of ownership and project
            timing. PETRONAS worked closely with Nexant throughout the project to ensure that
            requisite technical, market and analytical skills were transferred from Nexant to the
            PETRONAS staff.
            Master Plan for the Utilisation of Natural Gas, Malaysia - Petroliam Nasional Berhad
            (PETRONAS) retained Nexant and Davy McKee to develop a Master Plan for the
            utilisation of natural gas in Malaysia. Nexant provided current and future energy demand
            pattern within Malaysia, and developed a natural gas utilisation program which
            emphasises the maximum use of natural gas and natural gas liquids as a potential
            replacement for crude oil derived products (principal focus was diesel and gasoline
            displacement by natural gas and natural gas liquids); evaluated the Malaysian, regional
            and global petrochemical markets which identified natural gas and natural gas
            liquids-based petrochemical products which should be produced in Malaysia;
            recommended alternative technology; formulated an investment program, by region
            within Malaysia, in accordance with the identified alternative natural gas utilisation
            options; provided an overall project implementation plan as well as detailed
            plans/schedule for each project, and training staff on methodology and special software
            developed for the project.
            Olefin/Polyolefin Market Review: An Indonesian bank required an independent review
            of the technical, commercial and economic situation for olefins and polyolefins in
            South-East Asia against the backdrop of global polyolefins.
            An Assessment of an Asian HDPE Market: This study was carried out for a Western
            exporter of HDPE in order to assess the market size and product requirements in a
            specific Asian market for HDPE. Distribution channels and competitive structure were
            also addressed.
            Polyethylene in China: This study gave detailed background support to a European PE
            producer planning an integrated complex in China. Factors driving the Chinese markets
            and supply/demand balance issues were discussed.




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                                              Asian Petrochemical Industry
Section 6                                                                              Nexant’s Experience




6.3.2.2 Middle East
            For Ministry of Petroleum, Egypt – Chemical Industry Masterplan As part of a joint
            team with the Ministry of Petroleum, Nexant developed the masterplan for the
            development of the industry. This developed a 20 year view on how the industry should
            develop and addressed the importance of site integration and technology selection, as
            means to differentiate the industry. The lessons learnt from the development of industries
            globally were used to provide recommendations.
            Petrochemical Investment Strategy - Middle East Government: Nexant was engaged
            to work with the planning group of the state oil corporation to review investment options.
            Nexant provided comprehensive market, technoeconomic and commercial inputs to help
            identify those options offering the highest returns and to develop an overall investment
            strategy.
            Dolphin Energy Limited (DEL) – Market Consultant: DEL is undertaking a number
            of gas development projects, which include the implementation of a major pipeline to
            export natural gas from the North Field in Qatar to other nearby Middle East countries.
            These developments also include the production and sale of a number of associated
            hydrocarbons (condensate, propane and butane). The scope of work included a review of
            the global energy markets, competitiveness of DEL’s produced hydrocarbons and
            development of a marketing strategy.
            Confidential, Qatar – Marketing Advisor: The task was undertaken for a large joint
            venture company pursuing investment opportunities in the polyolefins industry. The task
            involved developing a number of “Polyolefin industry landscapes” which explored
            various “what-ifs” regarding future growth in this industry. The results were utilised to
            carry out a number of sensitivity analyses on market growth and also on pricing.
            Confidential, Qatar – Marketing Advisor: Carried out a comprehensive analysis for
            various hydrocarbon markets for the national petroleum company. The objective of the
            engagement was to assess the marketability of proposed hydrocarbons to various regional
            and global markets. This information was utilised to adjust the company’s business plan
            to incorporate quality issues and hence the available outlets for their key products.
            Confidential, Bahrain – Feasibility Study – Nexant performed an independent market
            study for polyolefins products to be produced from a proposed petrochemical facility.
            The Consultant’ analysis included an evaluation of the merits of development of various
            polyethylene facilities.
            Oman Refining Company: Nexant is currently retained by ORC to provide independent
            technical and market advice to its $1 billion planned Sohar Refinery Project and adjacent
            Polypropylene Project. The Consultant is currently provided a lead role in finalising
            License Agreements (with UOP) and the tender and award of the project Front End
            Engineering Design (FEED) contract and tendering of the EPC contract. Nexant assisted
            OOC in the selection of PP technology and associated JV partner, taking a lead role in
            negotiating the numerous License Agreements, Performance Guarantees and Supporting
            Services and Product Offtake Agreements, along with the JV agreements. This assistance
            is ongoing.




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Section 6                                                                                Nexant’s Experience




            Confidential – Petrochemical Complex, Iran: Evaluation of olefins and polyolefins
            project in Iran. Includes technology comparisons and evaluation, market assessment plus
            cash flow modelling. This assistance is ongoing.
            Confidential, Kuwait– Feasibility for New Petrochemical Complex.             Nexant
            performed a technoeconomic and commercial assessment for the opportunity for a large
            scale complex to be associated with the refinery network. Recommendations were
            provided as to the overall complex configuration.
            Royal Commission Jubail (KSA): Feasibility planning and appraisal study in respect of
            a potential new industrial city. The study evaluated infrastructure requirements, facility
            cost and economics, implementation strategies and ownership options and alternatives.
            This assistance is ongoing.
            For Ministry of Petroleum, Egypt: Nexant is currently engaged in work to develop an
            infrastructure masterplan to support a developing petrochemical industry in Egypt. The
            consultant will also identify potential joint venture partners and provide support to enable
            the masterplan to gain financing.
            For NAMA (Apicorp as Lenders): Nexant was the Lenders Technical consultant for
            this chemical project now in operation in Saudi Arabia.
            Texaco, Saudi Arabia: Nexant assisted Texaco in the development of its recent
            submissions to Saudi Arabia relating to proposed investment projects in the Kingdom.
            Core Ventures, KSA: The consultant is assisting sponsors on two of the large core
            venture projects under planning in Saudi Arabia.
            Methanol Market Consultant – Nexant reviewed the global methanol markets, pricing
            and delivered cost competitiveness for a Saudi Arabian company wishing to invest in a
            methanol project in the Kingdom.
            Global Methanol Business Outlook – Nexant undertook a study into the likely change
            in US demand for MTBE and potential growth of fuel cell usage. The study included
            global and regional supply/demand outlook, price forecasts and an analysis of the
            competitiveness of the Middle Eastern client's proposed plant against international
            competition.
            MTBE Markets, Prices and Feedstock Pricing – Nexant carried out a study for a
            Middle Eastern Company contemplating building a world-scale field butane based MTBE
            unit. It focused in great detail on pricing mechanism for butanes, MTBE and methanol in
            Western Europe, USA and Saudi Arabia.




                                    Strategic Assessment of Middle East Impact on the                   22
                                               Asian Petrochemical Industry
Section 7                                                                          Subscription Form

7.1    THE SUBSCRIPTION FORM
We wish to subscribe to Nexant ChemSystems’ study:
       “Strategic Assessment of Middle East Impact on the Asian Petrochemical Industry”
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                               Strategic Assessment of Middle East Impact on the                  23
                                          Asian Petrochemical Industry
Section 7                                                                                    Subscription Form




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            Nexant Limited/ChemSystems (UK)               Nexant. Inc.
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                                    Strategic Assessment of Middle East Impact on the                     24
                                               Asian Petrochemical Industry
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                                           Strategic Assessment of Middle East Impact on the                                       25
                                                      Asian Petrochemical Industry
Prospectus

								
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