Substantial net profits despite a lengthy maintenance shutdown, the signing of a financial agreement for expansions and an outstanding industrial safety record were significant developments at Equate Petrochemical Company in recent months.

The company achieved net profits of $566 million in 2006, despite a 30-day maintenance shutdown, and was able to produce 994,000 tonnes of polyethylene and ethylene glycol, surpassing the targeted level by six per cent. Net profits in 2005 were $588 million.
Equate is in the midst of major expansions including the Olefins II project.  President and CEO Hamad Al-Terkait said the expansion project has been progressing within timetables and that production would reach five million tonnes by the end of 2008.
  The financial deal, worth $2.5 billion, was signed with 33 leading international, regional and local banks to fund the $3 billion expansion at the Equate site in the Shuaiba Industrial Area of Kuwait.
Abdulkarim Mubarak, chief financial officer of Equate, said: “Raising this size of a loan facility is a major challenge in itself but also our task was further complicated because the expansion is being undertaken in three different companies - Equate itself and two companies specifically set up for the expansion - The Kuwait Olefins Company (TKOC) and The Kuwait Styrene Company (TKSC).”
The arrangement was necessary because the shareholding and the contractual structure were not identical in each case. To address these issues, the Equate finance team came up with a novel structure. Equate was made the borrower for all the loans and it then on lent loans to the two other companies participating in the expansion.
 “This arrangement considerably simplified the loan structure and at the same time, because of Equate’s excellent track record, it provided the necessary comfort to the banks to allow us to get highly competitive terms from them,” said Mubarak.
TKOC is a joint venture between Dow Europe Holding (42.5 per cent), Petrochemical Industries Company (PIC) of Kuwait (42.5 per cent), Boubyan Petrochemical Company (9 per cent) and Al Qurain Petrochemical Industries (QPIC) (6 per cent).
TKSC is a joint venture between Dow Europe Holding (42.5 per cent) and Kuwait Aromatics Company (57.5 per cent).
Established in 1995, Equate supports markets in the Middle East, North Africa, the Far East and Europe with a range of high-quality petrochemical products at competitive prices. It produces polyethylene (capacity 600,000 tonnes per year) and ethylene glycol (capacity 400,000 tonnes per year) utilising Union Carbide’s sophisticated Unipol II and Meteor process reactors. With over 1,000 reactor-years of successful operation, these technologies offer the safest and most environmentally sound polyolefin processes in the world.
Polyethylene is the world’s most versatile and widely-used plastic. Equate markets a range of polyethylene - from linear low density (LLDPE) to high molecular weight - high density resins (HDPE). The company has a resin for most applications such as packaging films, grocery sacks, trash bags, high-strength shipping sacks, blow moulded bottles and containers.
Ethylene glycol is a primary constituent in polyester fibre, which is the highest volume synthetic textile fibre produced. Polyester is widely used by virtue of its diversity and flexibility when used on its own or in combination with natural fibres such as cotton or wool. Polyester is also of importance in industrial applications, such as for example its use in automotive tyres, seats and seat belts.
Equate also produces polypropylene on behalf of its partner, PIC.                       
Equate’s ownership pattern has Dow Chemical Company and PIC each retaining 42.5 per cent of the company with Boubyan Petrochemical Company holding 9 per cent, and QPIC, a private company established in 2004, holding the remaining  6 per cent.      
PIC and Dow are constructing a new ethylene and derivates complex in Kuwait. The project builds on the successful business relationship in Equate between PIC and Union Carbide Corporation (UCC), a wholly owned subsidiary of Dow. Following the groundbreaking ceremony in March 2005, the Olefins II project is being constructed on the site adjacent to Equate, which will manage, operate and maintain the Olefins II facilities.
The Olefins II project encompasses three specific elements, one of which is an 850,000-tonne ethane cracker, owned by TKOC. The second element is a 600,000-tonne ethylene oxide/ethylene glycol plant using UCC’s Meteor 1 ethylene oxide technology, also owned by TKOC. The third element is the expansion of the existing capacity of 600,000 tonnes per year (tpy) for polyethylene by 225,000 tpy, using UCC’s Unipol polyethylene technology.
  In addition to Olefins II, PIC and Dow are building an ethylbenzene/styrene monomer unit of 450,000 tpy. This plant, owned by TKSC, will be supplied with ethylene from Olefins II and benzene from the aromatics complex. The aromatics complex is being built by Kuwait aromatics Company.
“Given Equate’s excellent production performance, competitiveness and outstanding levels of financial performance, as well as sustained and strong sales growth, it was a logical decision made by the partners to appoint Equate to operate and maintain the expansion projects,” said Al-Terkait.
Safety was another area of success for Equate as the company achieved for the first time 10 million consecutive hours of safe working in 2006.
“This is a clear proof of the company’s keenness to preserve safety of its workers,” said Al-Terkait, attributing the achievement to safety awareness programmes carried out by the company and the best practices performed by Equate’s workers.
He also referred to what he said was a major contribution it made towards establishing the Gulf Petrochemicals and Chemicals Association (GPCA).
Al-Terkait, who is also the vice chairperson of GPCA, said that the regional association would bolster cooperation among companies, research centres and specialised non-profit organisations in the safety, health and environment field as well as product standardisation.
He expects a promising year for the petrochemical industry in 2007, especially for the Gulf region, which is set to become the world’s most significant supplier of petrochemical products. He also expects prices of petrochemical products to be stabilised, noting that any significant changes in energy prices up or down would have an impact on derivatives prices.
The prices of naphtha, he explained, had always been the basics to determine the cost of producing ethylene, which is the feedstock for Equate’s products: polyethylene and ethylene glycol. Hence, any changes in naphtha prices would absolutely impact petrochemicals’ prices, he added, noting that stabilised or lower naphtha prices would ensure better profits in 2007.
 Al-Terkait also expected the demand on petrochemical products to continue growing as forecasted due to rapid growth in the world’s major industrial sectors. This would cause the petrochemical products prices to increase to higher levels. “If this expectation proves to be right, Equate’s profits will definitely bump up, especially that the company would not carry out during 2007 any major maintenance project, like the one executed in 2006,” he said.