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Wed 27 Feb 2008 11:45 AM

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High prices to boost Qapco earnings

State petrochemicals firm plans to raise production to capitalise on higher prices for products, GM says.

High prices to boost Qapco earnings
RISING PRICES: Al-Mulla said Qapco would raise production around 38% this year.

State-controlled Industries Qatar's chemicals unit said it expected to benefit this year from higher production and prices for its products, tapping rising demand in Asia.

Qatar Petrochemicals Company (Qapco), a venture with France's Total SA, also said construction of its third low density polyethylene (LDPE) plant, planned for next year, is likely to cost more than initially expected.

Output of ethylene, a base chemical used in making plastics and Qapco's main product, will probably rise about 38% this year to 720,000 tonnes, compared with 520,000 tonnes last year after completion in August of a $230 million expansion of an ethane cracker, Qapco General Manager Mohammed Al-Mulla told newswire Reuters.

"We are going to perform very well at all levels," Al-Mulla said in an interview in the Qatari capital, Doha. "We are still ethylene and polyethylene producers, and there is huge demand."

Ethylene prices could rise 10% this year, Al-Mulla said. "We are not expecting the price to go much higher than $2,000 a tonne... The average price at the moment is $1,820."

Industries Qatar, which groups chemicals, fertiliser and steel-production businesses, last week posted its third consecutive record profit in the fourth quarter on higher prices. No details were given about the individual companies.

The company is the second-largest maker of chemicals by market value in the Gulf after Saudi Basic Industries Corporation (Sabic).

"Engineering, procurement and construction costs have risen by 25 to 30% this year on last year," said Al-Mulla.

"If I award the contract at the end of this year, it will be more than now," Al-Mulla said of plans to build the 250,000 tonnes per year LDPE plant. The project will cost 910 million riyals, according to Industries Qatar's website.

Al-Mulla said he expected to approach banks later this year to help finance the project, but declined to give more details.

Qapco sales rose almost 8% to 1.35 billion riyals in the third quarter, and profit rose 21% to 1.09 billion riyals. (Reuters)

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