Certainly the high oil price has lead to a significant rise in project activity in the region \\$quot;“ especially related to petrochemicals.

So what is attractive about the region \\$quot;“ particularly when in the past it has been mainly ignored by the major international industrial gas suppliers, apart from plant and equipment sales? The answer is oil and gas and the opportunities for a huge expansion in the use of industrial gases as the oil rich nations cash-in on the high oil prices to invest in downstream activities other than oil production.

According to Spiritus Consulting the market size has reached $865m in 2005, growing from a level of $510m in 1997 \\$quot;“ representing a average annual growth rate of seven per cent over the period.

The largest markets are those in Turkey, Israel and Saudi Arabia. Figure 1 graphically represents the split by country of the market in the Middle East \\$quot;“ which includes Turkey, the East Mediterranean zone (excluding Egypt), the Arabian Peninsula and Iran. Growth is expected to accelerate to above 14 per cent per year over the next fi ve years as new projects come on-stream and the activities of some of the major international gas companies such as Air Liquide and Linde drive application know-how in the region.

Over the past year there have been a number of major developments in the gases business. Here are the highlights of that activity in the Arabian/Persian Gulf area.

Qatar is fast becoming a centre of attraction for the gases business \\$quot;“ driven by the potential to consume vast quantities of oxygen in various gas-to-liquid (GTL) projects. As gasworld recently reported the first major GTL project in the Middle East is by Qatar Oryx for the production of 34,000 barrels a day of transport fuels. Air Products has supplied two 3,500 tpd ASUs for the project and these were commissioned in June. There is a second GTL project being planned by Shell which would be at least double the size of the Oryx GTL facility, requiring at least 14,000 tpd of oxygen.

Split by country of the market in the Middle East///

This year we also saw the start-up of the first liquid helium recovery facility in Qatar, built by Air Liquide, with a shared production output with BOC. This recovery unit produces around 650 million SCF per year (18million Nm3). The unit is recovering the contained helium in the natural gas at the LNG liquefaction facilities in Ras Laffan. Qatar has huge natural gas reserves in the North Dome field to the North East of the country in the Arabian Gulf. Much of the helium is heading to the East Asian and the Far East markets from the facility.

Air Liquide also announced that it had entered into a joint venture with a subsidiary of Qatar Gas to develop on-site opportunities in the country \\$quot;“ especially related to the petrochemical facilities in Umm Said.

The largest independent gas company in Qatar is NIGP \\$quot;“ owned by the Almana family. NIGP is headquartered in Qatar but has a number of subsidiary companies in the Gulf region \\$quot;“ including the UAE and Saudi Arabia.

There are some important industrial gas production facilities in Kuwait, supplying pipeline gases to refineries and petrochemical facilities. Two privately owned local gas companies operate in the country \\$quot;“ Kuwait Oxygen and Acetylene Company (KOAC) and Refrigeration and Oxygen Company (ROC). KOAC is a merchant gases company and has a sister company, KIGC, which operates the ASUs producing on-site tonnage gases and also liquid. KOAC is one of the largest independent gas companies in the Arabian Peninsula (see AIGCO commentary).

Recently KIGC and Air Liquide formed a joint venture, Shuaiba Oxygen, to manage a major on-site plant supplying the new Equate 2 petrochemical facility. This will require a 1,400 tpd oxygen facility, which should be on-stream by 2008.

Saudi Arabia
Due to its high demand for tonnage gases, Saudi Arabia has by far the largest market in the region, mainly based around the petrochemical centres of Al-Jubail
(Gulf Coast) and Yanbu (Red Sea). There are some 9,000 tons of oxygen capacity already installed at both locations \\$quot;“ much of it owned by NIGC \\$quot;“ the SABIC
majority-owned industrial gas production company.

NIGC is currently constructing a 3,600 tpd unit in Al-Jubail to supply a mega methanol facility (due for completion in 2007). Another 3,000 tpd unit is being
built to supply an ethylene glycol facility in Al-Jubail (April 2008), an additional 3,000 tpd plant in Yanbu (April 2008).

There are a number of other plans to build petrochemical facilities, for example in Ribagh (west coast) and a second industrial city at Al-Jubail. If the plans
include additional crackers and EO/MEG plants then all these facilities will require ASUs.

The largest independent gas company is Abdullah Hashim head quartered in Jeddah and run by Khalid Hashim, a son of the group founder. Abdullah Hashim is one of the oldest gas companies in the Kingdom and has expanded its presence throughout the country \\$quot;“ with ASUs located in both Jeddah and in Dammam. Abdullah Hashim has developed special gas production facilities in Jeddah and is building a second unit in Al-Jubail.

SIGAS is also an important supplier to the industrial gases merchant market in Saudi Arabia. The company is located in the Dammam area but also has a production
facility in Riyadh and Jeddah. The company also has a special gas production facility.

The third largest company is Riyadh Oxygen \\$quot;“ the 50 per cent JV of NIGP (Qatar) which is focussed on the central region in the Kingdom. There are several smaller industrial gas companies in the Kingdom supplying basic welding and cutting gases.

United Arab Emirates
Probably the most active merchant market in the region \\$quot;“ the UAE is known as the trading post of the Middle East, and this also applies to industrial gases. In the past 20 years production of industrial gases has become more important than trading of the more valuable gases and special gases.

There are a number of interesting activities taking place in the Emirates. Most people will be familiar with the huge construction projects taking place \\$quot;“ both on land and in the sea. The Palm Island and World Island projects, as well as the drive for UAE to become the \\$quot;˜Hong Kong\\$quot; of the Middle East, have boosted gas demand. However, we must not forget the important activity in off-shore oil services which is a large consumer of helium, nitrogen and carbon dioxide.

Until recently, the UAE was the important trading entry point for liquid Helium \\$quot;“ with two companies establishing important trans-fill facilities in Jebel Ali Pure Helium Gulf Ltd (BOC Helium distributor) and Air Products. While these companies are still very active, the new source of liquid helium from Air Liquide in Qatar will no doubt alter the competitive picture. BOC has established an ISO tank repair, preparation and maintenance facility in Jebel Ali as well.

Argon is also an important traded gas and here both Air Products and Pure Helium have some activities but perhaps the largest is AIGCO \\$quot;“ who have a series of 20 foot ISO tanks for moving liquid argon from sources in the Arabian Gulf to Iran, Pakistan, India and elsewhere.

A number of leading independent players have established a presence in the UAE \\$quot;“ these include the KOAC Group\\$quot;s subsidiary \\$quot;“ AIGCO, NIGP of Qatar also has subsidiaries in the Emirates and ROC of Kuwait has an important subsidiary - Emirates Industrial Gases.

At present there are few on-site supply schemes in the UAE \\$quot;“ mainly because the major petrochemical works in Abu Dhabi have captive ASUs. New projects geared for the site may see additional industrial gas production in the next few years \\$quot;“ including the possibility of a major source of CO2.

Above the politics that surround Iran \\$quot;“ there is a very interesting industrial gas business that is evolving in the country. According to the Iranian Industrial Gases Association there are about 100 companies producing industrial gases in the country, essentially in every major town or city in Iran. However, there are a few privately owned companies that are of particular note \\$quot;“ Roham Gas is probably the largest independent in the country. Located near Tehran, the company operates an ASU and also wholesale purchases surplus liquid from steel mills and petrochemical facilities. Varian Gas is probably the second largest followed by Arkan Gas. Pars Ballon \\$quot;“ owned by Mr Hajarifard - is an up and coming company moving into more specialised gases and helium.

The majority of installed capacity in Iran is captively owned by National Iranian Oil or its subsidiary petrochemical companies. Major steelworks also own
their own plants. Linde Engineering has of late been successful in supplying large plants to the petrochemical facilities in the country. However, Delvar Afzar Gases is building, in conjunction with Linde, a 550 tpd ASU on-site at Khouzestan Steel in Ahwaz. This is due on-stream later this year.

The Sohar Petrochemical Complex requires an ASU which Air Liquide has negotiated a supply agreement. We also understand that a CO2 recovery plant may well be built but may be for enhanced oil recovery rather than for the merchant market. There are three independent gas companies that have been operating for some years in the country. Oman Industrial Gases, MH Darwish and Muscat Gases. KOAC has also established a presence in the country.

So the prospects are bright for industrial gases in this part of the world \\$quot;“ according to NIGC, if oil prices remain where they are today \\$quot;“ they would be installing a new ASU every other year in Saudi Arabia. However, while there is buoyant demand for tonnage levels of gases, the merchant market till remains relatively under-developed - but we believe that the infl uence of major gas companies will start to have an indirect positive impact on the merchant market as well.

Additional Articles:
An interview with Mr Naji Skaf of AIGCO
1st Iranian oxygen enrichment project