OMAN - The Petrochemicals Sector.

Muscat has been keen on having a petrochemicals industry since the early 1990s. But in view of the huge costs and market risks involved, the sultanate has been extremely cautious on this. It had a big setback in October 1999 as BP Chemicals pulled out of a JV with OOC to have a polyolefins complex built at Sohar.

BP, chosen as a partner in 1996, withdrew mainly because OOC was insisting that it build and own a costly gas separation plant nearby to provide the complex with ethane feedstock. Now the ethane is to be extracted from gas being supplied at Sohar by pipeline from Fahud. If all all goes according to plan, petrochemicals exports will exceed 6m t/y by 2009 and Oman will have joined the major league of Gulf producers.

Oman Petrochemical Industries Corp. (OPIC) is to have a $2-2.5 bn polyolefins complex built in Sohar with a 1m t/y ethylene plant based on ethane and units to produce HDPE, LDPE and LLDPE. A feasibility study is being prepared for this. BNP Paribas is the financial adviser.

This is a JV of Dow Chemical (50%), the Omani state (25%) and OOC (25%). The complex should be on stream by end-2008 if construction begins soon, which is unlikely, or in 2009.

Liwa Petrochemical Co. (LPC) on May 31, 2005 signed a $300m worth licence-technology-core equipment supplier agreement with Uhde of Germany for its ethylene dichloride (EDC) plant in Sohar. The agreement was signed on LPC's on behalf by Muhammad bin Hamad al-Rumhi, Oman's minister of oil and gas and chairman of the company, and Helmuth Knauthe, member of Uhde's executive board. Rumhi told Oman News Agency: "With this agreement, we believe that Uhde will provide the finest technology services for the EDC plant because of its experience in the field. We hope this agreement will be a successful beginning of a long partnership between Uhde and Liwa". The capacity of the plant is 300,000 t/y and output will be used in manufacturing plastic products by downstream projects in Sohar, and exported to international markets. The plant will also produce 240,000 t/y of caustic soda.

The project will provide 170 direct employment opportunities, in addition to several others in the future potential downstream plastic industries. LPC is owned 33.4% by OOC, 33.3% by LG International (LGI) of South Korea, and 33.3% by the state-owned National Petrochemical Co. (NPC) of Iran's. The JV agreement was signed in November 2004. The LPC project is 70% debt-financed, with construction to begin soon and commissioning due in the second quarter of 2008. The EPC contract is to be carried out by a consortium led by LGI and including LG Engineering & Construction. A long-term ethylene feedstock agreement has been reached with NPC as ethylene from OPIC's Sohar olefins project will not be available for third-party use. NPC will also offtake 33.3% of the plant's output while LGI will take 50% and OOC the remaining 16.7%.

OOC is conducting a feasibility study into construction of a polyvinyl chloride (PVC) unit downstream from its EDC plant at Sohar. The project would be carried out in joint venture with NPC. OOC and NPC are considering tie-ups for petrochemicals projects at Bandar Assaluyeh in Iran as well.

OOC in late 2004 also signed an agreement to acquire 33% in LG Energy, a unit of the LG Group, which owns and operates a power plant in the Pyongtaek region of South Korea - the Omani company's first venture into the power sector (see DT No. 7).