SALALAH // Octal, a US$650 million petrochemical project in Oman, is eyeing an initial public offering by 2019 as it expands its facilities globally to cater to a growing clientele for its plastics products, according to company officials.
Octal, which was set up in 2006 in the southern port city of Salalah, is spending $110m over a five-year period to produce new products, add capacity and expand its footprint into regions such as South America, according to Nicholas Barakat, the company’s chief executive.
With regards to the IPO, the company has not finalised plans for size or location.
“We look at different scenarios,” Mr Barakat said. “Markets are very fluid now in the Middle East. With the numbers we have, we qualify to float from Hong Kong to Tokyo to New York.”
Octal has in the past relied on loans and its own resources to fund expansion.
The company is forecasting a 16 per cent increase in sales this year over last year, similar to 2016, as it expands its product range and enters new markets.
The company’s current capacity is 1 million tonnes a year of petrochemicals from plants in Salalah, the US and Saudi Arabia, 98 per cent of which is exported, with the US taking the lion’s share. The new capacity has not been finalised yet as the company mulls adding capacity from a new undisclosed location.
“The objective here is to continue to invest in our asset base to produce more products out of the same machines,” said William Barenberg Jr, the executive vice president and chief operating officer. “The other part is to incrementally add capacity this year aggressively both in Salalah and in Cincinnati in the USA.”
The company, which is based in Salalah’s free zone, produces resin and sheet used in packaging. It uses a technology that transforms resin directly into sheet, bypassing costly processes that are used in other petrochemical projects, according to the officials.
It uses as raw materials purified terephthalic acid (pta), which is mainly imported from Asia, and mono-ethylene glycol (meg), which is mainly imported from Saudi Arabia and Kuwait.
These two raw materials combine to form DPET, the company’s polythene terephthalate (PET) brand. PET is a polymer used in the packaging industry.
The company’s US market faced some hiccups, however, with anti-dumping and anti-countervailing duty [anti-subsidy] cases.
“There was no finding for countervailing duties and the anti-dumping case was a minimal finding,” Mr Barenberg said. “We don’t consider it a significant hindrance for our future relationship.”
The company is not worried about threats of protectionism in the US, where president Donald Trump has promised to revive local industries with his “America first” motto.
“We think right now the atmosphere is still for an open trade relationship between Oman and the US, and we are quite intending to continue our business as usual and growing our business whether through sales from Oman or whether through direct investment,” Mr Barenberg said.
Overall, the petrochemical industry in the Gulf is booming as governments seek to diversify their income away from oil, create jobs and carve a local downstream industry.
Petrochemical production in the region is forecast to have increased by about 2.6 per cent to 148.4 million tonnes per annum (mtpa) in 2016 from 144.6 mtpa in 2015, according to the Dubai-based Gulf Petrochemicals and Chemicals Association.
The association is projecting an additional 6.65 mtpa of petrochemical capacity this year, depending on completion of projects, according to Abdulwahab Al Sadoun, the association’s secretary general. Although the rate of growth compared with previous years may be lower, it will be derived from higher value products.
dalsaadi@thenational.ae
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