OCTAL Petrochemicals substitutes 90% of Oman’s PET imports
August 16, 2009

• Emerging global packaging leader accounts for 85 per cent of import-export traffic through the port of Salalah

• OCTAL monthly exports now exceed US$25 million

Muscat Oman Emerging global packaging leader OCTAL is on course to become a US$1 billion company by 2011, with export volumes to global markets expected to triple over the next two years.

OCTAL Chairman Sheikh Saad Suhail Bahwan said total sales of polyethylene terephthalate (PET) were US$25 million in June and would reach US$100 million per month by the middle of 2011.

OCTAL ships more than 1,200 containers per month from Oman and now accounts for 85 per cent of import-export traffic through the port of Salalah.

Sheikh Saad said: “Despite the downturn, our business is growing on the strength of scale, reliability of supply and product quality offered by our advanced manufacturing operation in Salalah Free Zone. In two years we will be a US$1 billion company. We are winning new customers while the competition cuts back or closes down and making steady progress in converting the market to PET.”

OCTAL, which opened the world’s first integrated PET resin and sheet complex in January, exports to more than 60 customers in 33 markets. It has also substituted 90 per cent of PET resin imports into Oman, valued at nearly US$42 million a year.

June was OCTAL’s busiest month to date, with 22,000 metric tons (m/t) of PET resin and sheet sold to local, regional and international customers.

Eng. Awadh bin Salim Al Shanfari, CEO of Salalah Free Zone, said: “Salalah Free Zone’s competitive advantages and its prime location in the West Central Asia region provide a platform for a variety of business and downstream industries. OCTAL’s dramatic growth shows what can be achieved and underlines the fact that Salalah Free Zone is the ideal location from which to expand.”

OCTAL exports 66 per cent of its products to Europe, 30 per cent to North America, and the remainder to Middle East and Asian markets.

OCTAL produces PET resin for soft drink, water and edible oil packaging, and PET sheet, the world’s fastest growing material in clear rigid plastics, which is used for food, dairy and consumer product packaging.

Built at an initial cost of US$350 million, OCTAL’s integrated PET complex has a production capacity of 330,000 metric tons (m/t). Total PET capacity will increase to 830,000 m/t following the completion of a second phase of expansion in 2011. At that point, OCTAL will be the world’s largest PET producer on one site.

OCTAL’s Sheikh Saad said: “OCTAL is a growing business and is reinvesting resources in the development of local talent, creating new jobs and training for young Omanis. We are proud that a third of our workforce of more than 350 employees is made up of Omani nationals.”

He said: “In 2008, total exports for the year were US$48 million. After five months of operations at our new complex in Salalah Free Zone, monthly sales are US$25 million. By 2011, as one of the largest producers worldwide of PET packaging materials, OCTAL will have annual exports of US$1 billion.”

OCTAL has already closed on the equity and mezzanine financing it needs to complete phase two of its expansion.

OCTAL has raised US$100 million in equity from its existing Oman- and GCC-based investors and aims to secure US$130 million in additional debt from local and regional banks, maintaining a high ratio of equity to debt (55 per cent versus 45 per cent).

Sheikh Saad said: “Our annual running rate of exports now stands at around US$300 million and will increase to $400 million by December. Despite being a new company, the financial community recognises our impressive track record and ability to become a world leader in PET based out of Oman.”

Since its official launch in 2006, OCTAL has secured US$194 million in long-term loans and US$68 million in working capital loans from Bank Muscat and Bank Dhofar.

OCTAL has also arranged US$32 million in mezzanine financing from Bank Muscat, an investor in OCTAL’s parent company. The Middle East and North Africa Fund of HSBC acquired a minor stake in OCTAL Holding in 2008.

Commenting on OCTAL’s phase two expansion, Bill Urquhart, Senior Vice President of Townsend Solutions, the US-based plastics consultancy and market research firm, said: “OCTAL’s world-scale site, technical advantages, and its ready access to feedstock chemicals save costs and offer unique integration. This is the new model for global competitiveness in PET. OCTAL’s phased development and product seeding are aiding sales growth and delivering a superior quality product.”

OCTAL Petrochemicals is a wholly-owned subsidiary of OCTAL Holding & Company SAOC, a joint stock company listed on the Muscat Securities Exchange.

OCTAL’s investors include the National Investment Fund Company (NIFCO), Muscat Overseas, Oman Investment Company, Malatan Trading and Contracting, Oman and Emirates Investment Holding, Suhail Bahwan Group, Dhofar International Development and Investment Holding Company (DIDIC), Bank Muscat, and the MENA Infrastructure Fund (HSBC).