KUWAIT - Kuwait's Petrochemical Industry.

The petrochemical sector in Kuwait is making good profit and is expanding. It was losing money from November 1997, when the $1.93 bn Equate olefins complex came on full stream, until end-1999. Since then, Equate has been making major profits. Expansions beyond Equate are Olefins II, a styrene venture and an aromatics plant.

Petrochemical Industries Co. (PIC), a unit of state-owned Kuwait Petroleum Corp. (KPC), is optimistic about the prospects for this decade. It believes that a robust petrochemical industry should help diversify Kuwait's sources of income. Equate and the other petrochemical ventures would form a low-cost base for exports to Europe and Asia, with Asian demand expected to grow rapidly. This would give Kuwait a strong competitive downstream position overseas.

PIC's partner in Equate is Dow Chemical Co. of the US, the world's largest chemical producer. Dow will triple its Middle East production capacity over the next two years with completion of joint venture projects in Kuwait and Oman.

Dow's CEO Andrew Liveris made his first trip abroad in early March 2005 to Kuwait to attend the ground-breaking ceremony for the Olefins II and styrene projects in the Shu'aiba industrial zone. With a seismic shift taking place in the global petrochemical industry to areas of low-cost production, Dow is intent on expanding its Middle East presence.

Dow has established two JV production companies in the Middle East - Equate in Kuwait and Arabian Chemical Co. (ACC) in Saudi Arabia - as well as a regional office in Dubai and a JV in Oman (see background in down23KuwtPetchmJun6-05).

Dow is helping PIC extend its geographical reach, having formed July 2004 two 50:50 JVs with the Kuwaiti firm: MEGlobal, based in London, produces and sells ethylene glycol (EG); Zurich-based Equipolymers has a similar role for polyethylene terephthalate (PET) resins and purified terephthalic acid (PTA).

Nor is PIC a newcomer to the petrochemical business. PIC and the Kuwait Investment Office (KIO) have equity in chemical ventures in various parts of the world, including plants in Tunisia, China, Turkey and Bahrain, plus a stake in Hoechst of Germany which has merged with Rhone-Poulenc of France and their entity Aventis has become a world life sciences leader (see overseas ventures in next week's DT 25).

Because of limited supplies of natural gas, the $3.8 bn Olefins II complex currently under construction at Shu'aiba was seen as likely to be the last in Kuwait. But about 35 TCF of gas reserves have been found in Kuwait, which will encourage KPC to expand in the petrochemical business later on in this decade.