Royal Dutch Shell Plc  .com Rotating Header Image

Bloomberg: Formosa, Mitsubishi to Gain From Mideast Chemical Plant Delays

By Trisha Huang

May 17 (Bloomberg) — Formosa Petrochemical Corp., Mitsubishi Chemical Holdings Corp. and other Asian producers may benefit as escalating steel and labor costs delay projects to boost output in the Middle East.

Two ventures in Iran and a third in Qatar to turn natural gas into ethylene, the raw material for plastics, may be postponed, said Steve Zinger, Asia managing director of Chemical Market Associates Inc. Construction costs have risen 60 percent in four years as the price of stainless steel more than doubled, said Formosa Director Lin Keh Yen.

The setbacks are expected to limit a collapse in chemical prices because of a glut once all the proposed plants are built. Ethylene prices in Asia have slid 24 percent from a record $1,430 a ton reached in September. Iran, the Middle East’s second-largest chemicals maker, may take longer than expected to expand output.

“We expect the delays in Iran to lessen the trough in margins, but not eliminate it,” said Singapore-based Zinger, who is scheduled to talk about the outlook for ethylene prices at the 2007 Asia Petrochemical Industry Conference in Taipei today.

Rising demand for fuel and chemicals in China, the world’s second-largest energy market, has spurred investments in oil refineries and crackers, plants that make ethylene from naphtha or natural gas. Exxon Mobil Corp., Saudi Basic Industries Corp., the Middle East’s biggest chemicals maker, and Royal Dutch Shell Plc are among companies planning ethylene projects at cost of more than $2 billion each.

Prices, Engineers

“Oil prices have doubled, but the number of engineers hasn’t,” said Tony Regan, an energy consultant at Nexant Inc. in Singapore. “The high demand for engineers and resources will continue in the next three to five years.”

Prior to the delays, ethylene production capacity in Asia was set to rise by 8.2 percent a year between 2007 and 2010, more than double the 4 percent growth in demand over the same period, according to Chemical Market Associates.

Qatar and Iran are working to expand petrochemicals output by tapping the world’s biggest natural gas field, which extends across the offshore boundary between the nations. In Qatar, it’s known as the North Field. In Iran, it’s called South Pars.

Qatar’s ethylene capacity is expected to more than double to 2.8 million tons by 2010, Koichi Ishihara, an industry analyst at Japan’s Mizuho Securities Co. said in an April 17 report. Iran, which plans to start production at two new crackers this year, plans to make 8 million tons of ethylene a year by 2010, according to Ishihara’s study.

Iran’s state-run National Petrochemical Co. has postponed the start-up of new crackers because of labor shortages and rising costs, Ishihara said.

Ninth, Tenth

National Petrochemical may delay Arya Sasal Polymer Co., known as Ninth Olefins, and Jam Petrochemical Co., or Tenth Olefins, both set to start in the second half of this year, Zinger and Ishihara said. Together with Marun Petrochemical Co., which started production behind schedule earlier this year, the plants would double Iran’s exports.

“Both crackers are already at least a year delayed from the original plan,” Zinger said.

In addition, Qatar’s planned 1.3 million-tons-a-year Ras Laffan ethylene cracker project may be delayed to 2009 from 2008, Ishihara said. In Taiwan, the start of Formosa Petrochemical’s 1.2-million tons-a-year cracker has been delayed several times, Zinger said.

“The cost of building a new cracker has gone up by about 60 percent, compared with four years ago,” Formosa’s Lin said at an interview in Taipei. “It can take as long as two years or longer to get equipment delivered from manufacturers.”

To contact the reporters on this story: Trisha Huang in Taipei at [email protected] ;

Last Updated: May 16, 2007 22:05 EDT

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comment Rules

  • Please show respect to the opinions of others no matter how seemingly far-fetched.
  • Abusive, foul language, and/or divisive comments may be deleted without notice.
  • Each blog member is allowed limited comments, as displayed above the comment box.
  • Comments must be limited to the number of words displayed above the comment box.
  • Please limit one comment after any comment posted per post.