Octal Petrochemicals Signs Agreement with Port of Salalah for $50 Million Liquid Chemicals Tanker and Storage Terminal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Octal Petrochemicals (Muscat, Oman), a leading producer of polyethylene terephtalate (PET) and amorphous PET in the Middle East, entered into an agreement with the authorities of the Port of Salalah in Oman to develop a $50 million liquids terminal and storage facility, the first of its kind in the region. The proposed "tank farm" will enable the firm to source large quantities of raw materials from the Middle East at the lowest possible cost.

According to the agreement, Octal will have a dedicated deep-water berth to receive tanker shipments of feedstock chemicals and its own storage facilities. The company will also have specialized underground pipeline transportation facilities over a distance of 1,000 meters to supply liquid chemicals via the tank farm to its Sapphire PET-manufacturing unit in the Salalah Free Zone.

The tank-farm project was first announced in February 2008. Octal has already completed the first phase of the terminal, which includes the development of two stainless steel tanks designed to receive monoethylene glycol, a key raw material in the manufacture of PET. While earlier reports indicate that each tank will have a storage capacity of 5,000 tons, more recent reports cite figures of 5,000 cubic meters.

The second phase of the project will involve the development of a third monoethylene glycol tank of similar capacity. Tenders for the second phase of the project were to be floated in September 2008, and the third MEG tank was scheduled to be developed by September 2009. The third tank is now slated for development by mid-2010. The third phase of the project will see the development of six tanks of similar capacity for receipt and storage of other liquid chemicals. The entire tank farm, comprising nine tanks, will be developed by 2011.

Stainless steel for the proposed tank farm is being imported from China. The tanks are being designed in Germany. The supply-processing equipment including pipelines, cables and electrical accessories are also being procured from Germany. Fluor Corporation (NYSE:FLR) (Irving, Texas), an engineering, procurement and construction services firm, is the technical advisor and project manager for the upcoming terminal.

The agreement also covers the lease terms for the land on which the terminal is being developed. A land area of 10,600 square meters has been earmarked for Octal's tank farm at the Port of Salalah. The piping and supporting transportation infrastructure for the terminal have already been developed and are currently in operation.

Established in 2006, Octal Petrochemicals is a subsidiary of Octal Holding and Company SAOC (Muscat). In late 2006, Octal commissioned a PET sheet plant in the Salalah Free Zone, the first manufacturing unit to be developed in the region. The plant has a manufacturing capacity of 150,000 tons per year of PET resin and 180,000 tons per year of PET sheet. In January of this year, the firm commissioned its second PET plant in the region. The integrated PET resin and sheet facility has a capacity of 300,000 tons per year, making it the largest PET resin facility in the Middle East and the world's largest clear rigid PET sheet manufacturing unit. Octal shipped its first orders of PET resin to Europe in January and expects sales to reach $400 million in 2009. The company is planning to further increase production capacity by 2011. While the first unit was set up with an initial investment of $350 million, the ongoing expansion is likely to increase total investments in the facility to $1 billion by 2011.

The tank-farm project will support the capacity expansion activities being undertaken by Octal, which hopes to become the largest manufacturer of PET resin in the Middle East and capture 20% of the global market for amorphous PET sheets, valued at $2.25 billion. Octal will primarily target the food and consumer packaging markets of the U.S., Europe and China for exports.

The terminal facility is also expected to enhance the image of the Port of Salalah as a regional cargo hub. Located in West-Central Asia, the region is strategically situated at the heart of the Indian Ocean Rim along the major East-West shipping lanes. The port provides connectivity to the Middle East, East Africa and the Indian subcontinent. The Port of Salalah is the largest port in Oman being developed with the largest private investment in the region.

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