Sonatrach, Ronesans ink contract for $1.4bn petrochemical complex in Turkey

Sonatrach, Ronesans ink contract for $1.4bn petrochemical complex in Turkey
Published: 2 October 2019 - 6 a.m.
By: Martin Menachery
Sonatrach, through its subsidiary SPIC (Sonatrach Petrolium Investment Corp) and the Turkish company CPEY, subsidiary of Ronesans, conducted in Istanbul, the signing of all contracts necessary for the launch of studies engineering of the petrochemical complex for the production of propylene and polypropylene (PDH-PP), which will be carried out in the Ceyhan region of Turkey, in the presence of minister of energy Mohamed Arkab; the two Turkish ministers, the minister of industry and technology and the minister of energy and natural resources; presidents of two groups, Rachid Hachichi and Erman Ilicak; as well as directors of the project company, the contractor FEED GS (South Korea), the board PMC ISS (Italy), the licensor of UOPL Licenses (UK), the licensor Lyondel Basell (Italy) and the local authorities Turkey.

Sonatrach and Ronesans also proceeded, on 19 August 2019, to the creation of the project company, a mixed company under Turkish law called ‘Ceyhan Polipropilen Üretim Anonim Şirket’ with a shareholding structure of 34% for SPIC and 66% for CPEY.

The purpose of this project company is the design, engineering, procurement, construction and operation of a 450,000-tonnes-a-year polypropylene production complex at the Ceyhan industrial zone dedicated to the development of the petrochemical industry.

The investment of this project is estimated at about $1.4bn and it will be financed in ‘Project Finance’ mode, without recourse to the guarantees of the shareholders, for nearly 70% by the banks and 30% by the shareholders .

Sonatrach and Ronesans have made every effort to ensure the success of this project, particularly with regard to the land base allocated to the industrial zone, from the supply of the raw material ‘propane’ to the project provided by Sonatrach to the project, horizon 2040, tax benefits granted to the project by two decrees signed by the Turkish President Recep Tayyip Erdoğan.

This project represents a strategic interest for both Turkey and Algeria. For Turkey, as this project will enable the realisation of the world's first world-class petrochemical unit in Turkey and is considered a precursor for the development of petrochemicals in Turkey. The project will meet a significant demand for petrochemicals in the region and seize the opportunity of a potential polypropylene market of more than two million tonnes per year located at a hundred kilometres from the project site.

For Algeria, this project reinforces Sonatrach's investments in the field of transformation, a strategic option adopted in its SH2030 vision, after that of ARZEW, and also reflects the desire for its international deployment with particular importance since it is the first project out of Algeria with such a capacity, which will place Sonatrach among the actors of the polypropylene production industry.

This project will also enable Sonatrach to secure a long-term outlet for Algerian propane up to 2040 for a quantity of 540 thousand tonnes per year, and to benefit from dividends as a shareholder of 34% in this area.

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