Low profit margins for refineries producing naphtha, a key petrochemicals feedstock, are driving major chemicals projects in the UAE. The price of naphtha, the lightest and most versatile refined oil product, usually commands a respectable premium over crude. But the price gap shrank during the recession and could narrow again due to a forecast increase in global naphtha supplies.
"That means we need to upgrade naphtha into petrochemicals," Oliver Habibe, a technical adviser to Abu Dhabi National Oil Company (ADNOC), told a conference yesterday in Abu Dhabi. Jasem al Sayegh, the general manager of ADNOC's refining unit Takreer, said the integration of Abu Dhabi's biggest refinery with petrochemicals plants in the emirate was one of the strategic objectives of its US$9.6bn (Dh35.26bn) refinery expansion at Ruwais.
He said the project would also enable Abu Dhabi to satisfy its growing domestic demand for oil products and increase its presence in international markets for products such as petrol and diesel while creating employment for qualified Emiratis. Amid a global downturn in petroleum refining, Takreer last November awarded the main contracts for the Ruwais expansion to four South Korean firms. The expansion will more than double the refinery's oil processing capacity to 817,000 barrels per day (bpd) from 400,000 bpd.
The contractors, Samsung Engineering, GS Engineering and Construction, SK Engineering and Construction and Daewoo Engineering and Construction, were chosen for their ability to optimise refinery-petrochemicals integration, Mr al Sayegh said. The refinery expansion is scheduled for completion by the end of 2013 and to come on stream in early 2014, by which time Abu Dhabi will have more than 900,000 bpd of total refining capacity.
The project is expected to increase Abu Dhabi's naphtha surplus by 50 per cent. About half of that would be piped to Taweelah, the site of a chemicals complex that the government-owned Abu Dhabi National Chemicals Company, or Chemaweyaat, aims to complete by 2014. Including additional refining projects under development in Fujairah and Pakistan, the total capacity for refined oil products controlled by the Abu Dhabi Government would swell by 90 per cent between next year and 2015, from 20 million tonnes to 38 million tonnes per year, Mr Habibe forecast.
The developments come as the two top OPEC oil producers, Saudi Arabia and Iran, are also aggressively expanding refining capacity. Abu Dhabi and Saudi Arabia are doing so for similar reasons: both expect domestic demand for transportation fuels to rise sharply in coming years, exceeding their current output capacities. Both are also pursuing gas development to address domestic shortages. That will increase their production of gas condensate, a type of light oil that is high in naphtha and requires refining.
Iran's rush to build oil refineries is spurred by the country's shortages of transportation and heating fuels and by the threat of new sanctions over its nuclear programme. The sanctions would aim to choke off imports of oil products. Mr Habibe predicted that ADNOC's output of natural gas liquids, including condensate, would increase by more than 50 per cent to surpass 18 million tonnes in 2015 from less than 12 million tonnes this year.
ADNOC's gas production also supplies gas liquids such as ethane and propane that are the feedstocks for a large petrochemicals complex at Ruwais. Abu Dhabi Polymers Company, or Borouge, which ADNOC controls, owns the facilities and is expanding them in a multiphase project. @Email:email@example.com