Mesaieed Petrochemical Surges 400% on First Trading Day in Qatar

A staggering trading day for Qatar’s Mesaieed Petrochemicals points toward serious expectations for the company.  The trading price rose 400% in a single day, immediately after it had completed Qatar’s largest IPO in five years.

Mesaieed Petrochemical Holding rose more than five fold on its first day of trading after completing the country’s biggest initial public offering in five years.

The shares closed at 55 riyals after opening at 10 riyals on the Qatar Exchange. The stock rose as high as 73.9 riyals during the day.

State-run energy company Qatar Petroleum raised 3.2 billion riyals ($880 million) by selling a 26 percent stake in Mesaieed to Qatari nationals last month. The share sale is the nation’s biggest since Vodafone Qatar raised $1 billion in 2009, and the largest first-day gain for an IPO in the Middle East and Africa since 2009 when Saudi Arabia’s Ace Arabia Cooperative Insurance Co. (ACE) sold shares, according to data compiled by Bloomberg.

“The IPO was at 10 riyals which is a significant discount to what this company is worth,” Bobby Sarkar, head of research at Qatar National Bank Financial Services, said in a phone interview. “This is a solid petrochemical, QP-backed company.”

Mesaieed was formed in September and owns Qatar Chemical Co., Qatar Chemical Co. II and Qatar Vinyl. The government valued the company at 12 billion riyals for the IPO, below an initial valuation of 16.7 billion riyals, Finance Minister Ali Al Emadi said last month. Foreigners are allowed to trade in the company’s shares once they have been listed.

Mesaieed is the first company to be listed on the country’s bourse since MSCI Inc. (MSCI) agreed to upgrade Qatar to emerging-market status in June. It raises to 43 the number of companies traded on the Qatar Exchange, Chief Executive Officer Rashid al Mansoori said in an interview in Doha today.

By Robert Tuttle of Bloomberg

The full article is visible via the link below – Pankaj Oswal


Article: ‘Qatar has major petrochemical expansion plans’

KPMG is obviously excited about the prospect of petrochemical development in Qatar, making some bold projections.  While there is potential, meetings do not always lead to projects.  The argument encouraging downstream manufacturing in Qatar and the Middle East is good and can be realistically put into action.

DOHA: Qatar has greater petrochemical expansion plans than any other country in the region over the next 5-10 years and is well positioned for success, a global team of chemicals experts said ahead of their two-day visit to Qatar to meet with CEOs and CFOs of leading petrochemical companies in Qatar and discuss key issues facing this industry.
Paul Harnick, COO of KPMG’s global chemicals practice, based in the US remarked: “Qatar is taking good steps to continue their success in the petrochemical industry and is responding to potential threats from the international marketplace. As US producers are now benefitting from low cost shale gas as a feedstock, it will make the US the cheapest place in the world to manufacture petrochemicals.

“Over the next five years, the US plans to invest over $100bn in petrochemical facilities. When this product starts to come on-stream, much of it is likely to flow into the Asian market – putting it in direct competition with the product from the Middle East.”

Mike Shannon, global head of KPMG’s chemicals practice commented: “Petrochemical companies in Qatar have some really big decisions ahead of them. They are facing the choice of defending their markets in Asia against the low cost US product – with a potential impact on price and margin. Or, do they change their strategy and look to expand into Europe, where they will still have a significant price advantage but will have to reinvent supply chains and establish new customer relationships. One alternative strategy which many Middle Eastern chemical producers have considered, but not yet conquered will be to acquire or develop technology to produce more specialized premium products which can then attract higher prices and margins.”

Gopal Balasubramaniam, Qatar-based Head of Oil and Gas for KPMG in the Middle East, said: “The real challenge for Qatar and the rest of the Middle East chemical industry is to try to move away from just petrochemical production into some of the more specialty downstream chemical areas where increased margins can be achieved.”

“There are already several interesting developments taking place in Qatar. Firstly, Qatar is planning to set up some SME’s based on the byproducts produced by the existing petrochemical plants which will further boost the industry here. Secondly, Qatar has started to market petrochemicals through a separate entity, ‘Muntajat’, which aims to improve the prices fetched by the petrochemical companies in the international marketplace”, Gopal added.

KPMG works with many of the top petrochemical companies in Qatar and the Middle East to provide strategic advice across their core functions of audit, tax and advisory services.

Article: Qatar: Major boost for chemicals production

This was an intriguing article about the proactive position taken by the Qatari Government to boost petrochemical production.  The Government is planning to inject USD$25 billion to more than double production in the country in the next seven years.

A move to bring the marketing and sales side of Qatar’s chemical, fertiliser and polymer operations under one umbrella is an indication of the country’s plans to build a larger and more vibrant downstream petrochemicals sector, which is expected to see increased revenues from plans to more than double production by 2020.

While Qatar is already the world’s top exporter of liquefied natural gas (LNG), the government is keen to add value downstream and reduce the country’s economic dependence on gas and oil revenues in line with the state’s National Vision 2030, Global Arab Network reports according to OBG.

The Qatar Chemical and Petrochemical Marketing and Distributing Company (Muntajat), which was launched in December 2012, is expected to consolidate the marketing and sales activities of the country’s nine producers by mid-2013. The Minister of Energy and Industry, Mohammed Bin Saleh Al Sada, told local media the new company would “…position Qatar as the world’s pre-eminent chemical and petrochemical hub”. Muntajat will hold exclusive rights to purchase, market, distribute and sell Qatar’s chemical and petrochemical products.

Under its long-term plans, the government is looking to boost production of petrochemicals from 10m tonnes per year to 23m tonnes by 2020 on the back of a $25bn investment in the industry, Al Sada said at Muntajat’s launch. The country will also use its hydrocarbon reserves to increase the focus on producing more complex chemicals and petrochemicals.

Data from the Gulf Petrochemicals and Chemicals Association show that Qatar boosted its capacity for the production of both petrochemicals and fertiliser by 13% and 15%, respectively, between 2007 and 2011. The industrial state giant, Industries Qatar (IQ), announced record revenues of QR18.7bn ($5.14bn) in 2012, up 13% year-on-year (y-o-y), which was attributed mostly to growth in the fertiliser sector.

Competition is growing in the global chemical and petrochemical industry following a boom in US shale gas production and a move towards self-sufficiency in China. However, readily available, competitively priced gas and full state coffers have given Qatar an edge in the field. “We have embarked upon a major expansion of our downstream sector to ensure greater diversification in monetising Qatar’s abundant natural gas resources,” Al Sada said in a speech to the Meed Qatar Projects 2013 conference.

Qatar Fertilizer Company (QAFCO), IQ’s joint venture with Norway’s Yara International, saw profits for 2012 rise 34% on the previous year’s results, driven largely by the completion of two new production facilities, local media reported. The new developments enabled QAFCO to increase its global market share of urea production to 15% and become the world’s leading producer of the chemical.

However, Qatar Petrochemical Company (QAPCO), a subsidiary of IQ, reported flat revenues and a 6% drop in profits for the year ending December 31, 2012. The company cited weak demand for the low-density polyethylene (LDPE) used in thermoplastic processing, pricing and lower sales volumes at the group’s fuel-additives joint venture as the reasons for the results.

Longer term, however, the future looks promising for Qatar’s petrochemicals industry on the back of rising demand. Industry analyst ChemSystems Global expects worldwide demand for polyolefins, which includes LDPEs, along with other Qatar-produced compounds, to reach 200m tonnes in 2020, up from 111m in 2006.

A wave of new petrochemical projects currently under construction will also support growth. In a separate initiative, for example, Qatar Petroleum has embarked on a joint venture with Shell to construct a $6.5bn petrochemical complex in Ras Laffan, local media reported in March.

Meanwhile, Qatar Fuel-Additives Company (QAFAC), another IQ subsidiary, recently began putting plans in place to roll out one of the world’s largest commercial-scale Carbon Dioxide Recovery plants. The facility, which is scheduled for completion next year, will break new ground in Qatar by capturing CO2 and injecting it into the existing methanol process to increase production capacity.

By 2017, Qatar will have invested $17bn of the $25bn earmarked for the petrochemicals sector, adding about 1.6m tonnes of intermediate products and around 1.5m tonnes of final products to current production capacity levels, according to QNB. “Qatar is moving up the value chain from basic petrochemicals to more complex products,” the bank said.

Muntajat’s CEO, Abdulrahman Ali Al Abdulla, told The Peninsula that he expected Muntajat to increase efficiency, reduce lead times and build strong relationships with customers. The firm assumed responsibility for the global marketing of Qatar Fuel Additives Company (QAFAC) in February, before completing the integration of marketing activities for QAFCO in March. Having now also taken over the sales and marketing of SEEF Limited and Qatar Vinyl Company (QVC) in April, Muntajat’s consolidation plans look to be well on track.

“Muntajat promises customers consolidated logistics for reduced lead times and reliability of supply to meet demand,” Al Abdulla told OBG. “Through the consolidation effort we are reaching a high-level scale that benefits our customers.”

The full article is visible below – Pankaj Oswal