Cepsa, the Spanish energy company fully owned by Mubadala, will spend $500 million (Dh1.83 billion) over the next three years to develop its linear alkyl benzene (LAB) business, of which $300m will be spent in Abu Dhabi alone, according to its chief executive.
LAB, one of Cepsa’s key speciality petrochemical products, is a chemical used in the manufacture of biodegradable household and industrial detergents.
Cepsa, which signed an agreement to build a 150,000-tonne LAB plant with state-owned Abu Dhabi National Oil Company, values the project between $575m and $625m, according to chief executive Pedro Miro.
"Our estimation for the LAB plant here is $575 and $625m, and since it's a 50:50 joint venture, it will be $300m each way," he told The National.
Cepsa, which held back its plans for an initial public offering at a domestic exchange, operates LAB plants in Spain, Canada, Brazil, and one with Adnoc at its expanding downstream facilities in Abu Dhabi's western region of Ruwais.
The Spanish company is in the process of upgrading some existing plants, on which it would spend the remainder of its capital expenditure.
"We have a little bit less than $100m in Spain, $50m in Brazil and another $25m to $30m in Canada,” said Mr Miro.
"All of this gives us [a capex] of $500m for [the LAB business] in the next two and half to three years, keeping in mind we have a partner in Brazil, Petrobras, which is sharing 27 per cent and we have 73 per cent, so the total capex for LAB plants Cepsa is involved in is higher,” he clarified.
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In Abu Dhabi, Cepsa has undertaken front-end engineering and design (Feed) works on its planned LAB facility, and is expected to award a contract soon.
“We have launched the tendering process for the Feed, these rounds have been finalised and in a matter of days Feed will be awarded to an engineering company,” Mr Miro said, declining to name the firm.
The design work will take nine months from now, with the project expected to be sanctioned during “summertime” in 2019, he said.
"We’re looking at summertime [for the project to] be sanctioned and one of the advantages we have for the LAB is that we know the market and the customers because we use our own technology,” he added.
Apart from LAB, Cepsa was also awarded a 20 per cent stake in Adnoc's Umm Lulu and SARB offshore concessions earlier this year, which will see its first cargo shipped "in the coming weeks", according to Mr Miro.
The expansion of production “was progressing” with 100,000 barrels per day output capacity targeted by the beginning of the first quarter of 2019.
He said the quality of the Umm Lulu crude, which Adnoc recently graded and began to market, was "good and widely accepted" and expected to fetch a good price among buyers from the east.
