Boubyan Petrochemical Company recorded a fall in profits, from KD1,278,918 to KD763,829, but as chairman Marzouq A Alghanim noted the slide was because its subsidiary Equate Petrochemical Industries Company had capitalised its subordinated loan, resulting in a severe decrease in interest income.

Boubyan, he first private sector petrochemical company in Kuwait, was established in 1995 as part of a privatisation endeavour. The company has a paid-up capital of KD30 million and is actively traded on the Kuwait stock exchange with shareholders around 20,000. The Kuwaiti government (PIC) has a 10 per cent share and the balance 90 per cent is owned by the public. Boubyan Petrochemical holds a 10 per cent stake in Equate, the other shareholders being Petrochemcl Industries Company and Union Carbide Corporation, both 45 per cent each.

Since its incorporation as a Kuwaiti public shareholding company its main activity has been to invest in Equate's equity and advance a loan to it. Equate, a $2 billion project producing polyethylene and ethylene glycol, was formed to build and operate a petrochemical plant in the Shuaiba area of Kuwait.

Equate itself achieved a record net profit for 2000 of $183 million due to good petrochemical prices and the general rise in oil prices as well as a reduction of banking costs and loans' interest after capitalising the shareholders' subordinated loans. For Equate it was a grand recovery from the previous year's lost of $19 million.

Chairman Alghanim noted that since Equate's inception, Boubyan Petrochemical Company had not received any profits from them as Equate had accumulated losses that reached $349 million in 1999, since reduced to $166 million at the end of 2000.

Alghamim remarked that Equate would begin distributing profits within the next couple of years.

Equate was formed with the understanding that it would help meet rising demand for different kinds of polyethylene and ethylene glycol. The main raw material for Equate's production processes, ethane gas, was found in large quantities in Kuwait. Ethane gas is produced together with crude oil and is being used as fuel. The conversion from ethane gas to ethylene and its components was considered the most cost-effective method for the production of those essential petrochemicals.

Union Carbide was considered one of the largest petrochemical companies and one that enjoyed the most advanced technology in the production of Equate products. Union Carbide owns several factories around the world and has a fair share of the petrochemical market.

As well as Equate, Boubyan Petrochemical Company has invested in several other enterprises.

Boubyan Al Sharq Downstream Industries Factory, which was recently constructed, specialises in plastic products with a production capacity of around 6,000 tonnes per year. "An awareness of the products in the local market as well as some of the GCC countries, particularly the Kingdom of Saudi Arabia, has already been created so as to enable us to enter the market from the very first production," observed Alghanim.

The factory contains the best technological equipment and machinery. The Saudi partner in the project (40 per cent) is Al Sharq Factory for Plastics.

Another Boubyan Petrochemical subsidiary is Al Jubail Downstream Industries, a closed Saudi company. Boubyuan's equity participation is 7.5 per cent of the total capital of SR300 million.

The factory began production of epoxy at the beginning of 2000 under the supervision of Seba, one of the biggest epoxy producing companies. Al Jubail Downstream Industries' products have been approved by such companies as Sipco, Hempel Paints, Sigma Paints and Juton Corro-Coat Saudi Arabia.

According to Alghanim, the company enjoys 20 to 25 per cent of the Saudi market share and has captured 30 per cent of the GCC market . "It is highly expected that in the very near future, the second year of production, the epoxy market will be much wider and the demand will be high in local markets, GCC as well as European and East Asian.

Allghanim also announced plans to establish a factory for epichlorhydrin, a raw material for epoxy resins. Technology for the plant will come from the Japanese company Showa Denco. The product is also used in the automobile industry and in special engineering equipment.

Another Boubyan subsidiary is the Dubai Wire Group, formed from the merger of Dubai Wire Fze, Twisdale Distribution and E Tools and Fasteners.

Boubyan Petrochemical has also participated up to 4.8 per cent in United Development Company, Qatar, which has a total paid up capital of QR500 million. UDC is in the process of preparing studies to establish primary petrochemical factories. UDC is interested in participating in oil derivatives, gas electrical power supply, desalination plants and petrochemical industries.

"Boubyan is planning to participate in a substantial way in the downstream derivatives of PIC's olefin II and aromatics projects. It has completed pre-feasibility studies and awaits the progress of upstream projects," said operations manager Ayad F. Al Khatrash.

"Boubyan is pursuing many investments very actively and with the investment return from Equate in the near future, it foresees a bright and active role in the private sector in the GCC region."