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QatarEnergy, Chevron Phillips Secure $4.4 Bln Financing for Petrochemicals Project

Ras Laffan Industrial City, north of Qatari capital, Doha. (Getty Images)
Ras Laffan Industrial City, north of Qatari capital, Doha. (Getty Images)
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QatarEnergy, Chevron Phillips Secure $4.4 Bln Financing for Petrochemicals Project

Ras Laffan Industrial City, north of Qatari capital, Doha. (Getty Images)
Ras Laffan Industrial City, north of Qatari capital, Doha. (Getty Images)

QatarEnergy and Chevron Phillips Chemical Company LLC announced on Monday that they have secured $4.4 billion financing for the Ras Laffan Petrochemicals project.

QatarEnergy revealed in a press release that the project is a world-scale integrated polymers complex in Ras Laffan Industrial City, Qatar.

The project financing comprises commercial and Islamic lenders and a group of export credit agencies.

Ras Laffan Petrochemicals is a joint venture company owned 30% by Chevron Phillips Chemical and 70% by QatarEnergy, the statement added.

The project is considered the largest petrochemical project in Qatar for which the Final Investment Decision was announced in January 2023.

“This oversubscribed financing package is an important testament to the financial community’s confidence in Qatar and in its energy and petrochemical industries,” said Qatar's Minister of State for Energy Affairs and President and CEO of QatarEnergy Saad bin Sherida al-Kaabi.

Al-Kaabi added: “This large-scale cornerstone investment represents a significant achievement and a major milestone for the Ras Laffan Petrochemicals project - the largest in the Middle East and one of the largest in the world. We are very pleased to enter this exciting stage of this project with our long-time partner Chevron Phillips Chemical.”

The complex, expected to begin production in late 2026, consists of an ethane cracker with a capacity of about 2.1 million tons of ethylene per annum.

It also includes two polyethylene trains with a combined output of 1.7 million tons per annum of High-Density Polyethylene (HDPE) polymer products, which are used in a wide range of applications, including packaging, construction, and consumer goods.

This complex will raise Qatar’s overall petrochemical production capacity to almost 14 million tons per annum.

The project is expected to generate significant economic benefits for the country, including increased tax revenue and foreign investment.

The two companies signed in January agreements to build the $6 billion complex.

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Saudi Market Prepares for Recovery

An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. REUTERS/Faisal Al Nasser
An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. REUTERS/Faisal Al Nasser
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Saudi Market Prepares for Recovery

An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. REUTERS/Faisal Al Nasser
An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. REUTERS/Faisal Al Nasser

Investors and financial markets are closely watching the US Federal Reserve’s upcoming decision on interest rates, which will be announced after the Federal Open Market Committee meeting on Wednesday. Debate is focused on whether the cut will be 25 or 50 basis points, with polls favoring a 50-basis point reduction.

With this decision looming, questions arise about its impact on Gulf markets, particularly Saudi Arabia. Asharq Al-Awsat spoke with financial experts who predicted positive effects on market liquidity, especially in key sectors.

Attracting Investments

Mohammed Al-Farraj, Senior Head of Asset Management at Arbah Capital, told Asharq Al-Awsat that the chances of the US Federal Reserve cutting rates by 50 basis points have risen to 68%. This would attract more foreign investment into the Saudi market, increasing cash flows and boosting trading volumes and liquidity in the Saudi stock exchange. Al-Farraj also noted that lower interest rates would have a positive impact on corporate revenues in the fourth quarter of this year and the first quarter of 2025, driving economic growth, reducing financing costs, and enhancing profit margins, which would raise the overall market value of the Saudi stock market.

Key Benefiting Sectors

Ibrahim Al-Nuwaibet, CEO of Qima Capital, stated that stock prices are unlikely to see a major change as markets tend to react to interest rate changes before they are officially announced. He explained that the market had already absorbed the potential rate cut, especially since a 25-basis-point reduction would have had more impact if it had occurred in July. Al-Nuwaibet noted that the sectors most likely to benefit include finance companies, which have been hurt by high interest rates, as well as sectors dependent on long-term contracts requiring bank financing. Additionally, the petrochemical sector, including companies like SABIC, Yansab, and Aramco, could benefit, though it may take longer for the global market to respond.

Gulf Central Banks

Gulf countries are expected to follow the US Federal Reserve with their own monetary easing once the rate cut is announced. Gulf central banks have closely tracked the Fed’s rate hikes since 2022 to manage inflation, given their currencies’ peg to the US dollar. Saudi Arabia’s central bank (SAMA) is expected to reduce interest rates in line with the Fed.

In July 2023, SAMA raised its reverse repo rate by 25 basis points from 5.25% to 5.50% and its repo rate from 5.75% to 6%, aligning with the Fed’s increase to a range of 5.25% to 5.50%. Similarly, the UAE and Qatar raised their rates to 5.4% and 6%, respectively.

Despite this, Gulf banks may face reduced profitability as interest rates fall, with Standard & Poor’s forecasting a 12% decline in profits for Gulf banks following the cut.

Inflation and Market Outlook

Abdullah Al-Jubaili, a member of the Saudi and International Analysts Union, told Asharq Al-Awsat that inflation in the US has significantly declined after two years of elevated interest rates, which has impacted both the US and global economies. He noted that a single rate cut of 50 basis points may not be sufficient to fully stimulate economic recovery.