An aerial view of the Chevron Phillips Chemical plant in Pasadena, Texas, US, August 31 2017. Picture: REUTERS/ADREES LATIF
An aerial view of the Chevron Phillips Chemical plant in Pasadena, Texas, US, August 31 2017. Picture: REUTERS/ADREES LATIF

Dubai — Chevron Phillips Chemical will help gas-rich Qatar build the Middle East’s largest plant for production of ethylene, a key ingredient in plastics.

Qatar Petroleum (QP) chose Chevron Phillips Chemical as its partner in a joint venture to produce as much as 1.9-million tonnes a year of ethylene, QP CEO Saad Sherida Al-Kaabi said in Doha. The venture will process the chemical from ethane, a natural gas liquid pumped at Qatar’s giant North Field.

The venture will cost billions of dollars, though a more precise estimate must await the completion of engineering studies, Kaabi said. State-run QP raised the production target from an initial plan for 1.6-million tonnes a year.

“We saw better results than expected from the North Field, and we were able to have more ethane available for extraction,” Kaabi said on Monday, referring to Qatar’s portion of the offshore reservoir it shares with Iran. So, QP increased the venture’s ethylene target, he said. “We like them big in Qatar.”

Qatar, the world’s largest exporter of liquefied natural gas (LNG), is boosting output at home and picking up assets abroad. This latest push into chemicals reverses its previous pullback from the industry, when it ended plans to build two projects valued at $12.5bn after oil prices collapsed in 2014.

The joint venture will be the biggest facility in the Middle East for processing ethane — or “cracking” it, in industry parlance — into ethylene, Kaabi said.

It will also produce high-density polyethylene, Chevron Phillips Chemical CEO Mark Lashier said. QP will own 70% of the project, with the Texas-based company holding the rest.

Qatar’s polyethylene production will rise to 4,300 tonnes a year when the plant is completed in 2025, from 2,300 tonnes currently, Kaabi said.

Petrochemicals are the building blocks of our daily stuff, from sports shoes to computer keyboards, created when oil and natural gas molecules are split, or cracked, to produce ethylene, propylene and other chemicals. Ethylene is used to make polyethylene, the most commonly used plastic.

Energy producers view these compounds increasingly as crucial to unlocking more profit from each barrel of crude they pump, and demand for these chemicals is growing faster than for oil and gas.

With oil at $65 a barrel, crude producers can earn $15 a barrel by refining their output and an extra $30 on top of that by converting it into petrochemicals, Abdulwahab al-Sadoun, secretary-general of the Gulf Petrochemicals & Chemicals Association, told Bloomberg in 2018.

Qatar, a sheikhdom in the Persian Gulf, plans to boost LNG capacity from 77-million tonnes to 110-million tonnes by 2024, which will lift its total domestic production of oil and gas to 6.5-million barrels of oil equivalent a day from 4.8-million currently. It has already made a “final decision” to proceed with the LNG expansion, said Kaabi, who also serves as the country’s minister of state for energy affairs.

Expansion at the North Field is going according to plan, and Qatar will award engineering, procurement and construction contracts for onshore facilities this year, Kaabi said.

Qatar is still to decide whether to produce LNG by itself or with partners. Its offshore Barzan gas project should start producing by the end of 2019, he said. Barzan, which is intended to supply the local market, has been delayed for years.

Qatar’s gas ambitions are not confined to the giant offshore field it shares with Iran. The country is going global, pledging $20bn for US gas and LNG, and picking up stakes in projects and exploration licences in Mozambique, Argentina, Mexico and Cyprus.