Oman-based Octal Petrochemicals has completed the initial phase of financing for its groundbreaking plastic packaging venture in Salalah Free Zone.

Octal chairman Sheikh Saad Suhail Bahwan and BankMuscat chief executive, AbdulRazak Ali Issa, formally agreed a $166.5 million loan facility for Octal’s APET sheet packaging plant, which is aiming for a 20 per cent share of the global market for APET.

The facility is made up of a $148.5 million term loan, of which $34.5 million has been syndicated to Bank Dhofar, and $18 million in working capital. Financing was raised in three stages over the last year and completes Octal’s initial $300 million investment in proprietary technology and custom-made production lines.

Sheikh Saad Suhail Bahwan said: “Octal is redefining the global plastic packaging industry and the initiative is taking place here in Oman, with Omani investors and the support of government. Octal is expected to be the largest exporter from the port of Salalah, a growing employer and a significant investor in local suppliers.”

He said: “This is a world-class, $1 billion company taking shape in Oman and we’re delighted to have the support of BankMuscat as our financial advisor. Our initial $300 million investment has been arranged on a 50:50 debt equity basis, which allows us to expand at speed. The equity placement was significantly oversubscribed which shows the enthusiasm of the local market.”

AbdulRazak Ali Issa of BankMuscat added: “Octal is a flagship venture for Oman and one which clearly demonstrates the growing competitiveness of the Sultanate, in terms of both its geographic location and economic flexibility. We are proud to be associated with the project and believe in its financial viability.”

Octal’s Oman-based investors include NIFCO (National Investment Fund Company), Muscat Overseas, Oman Investment Company, Malatan Trading and Contracting, Oman and Emirates Investment Holding, Suhail Bahwan Group, DIDIC, as well as BankMuscat. Individual and institutional investors in Saudi Arabia, Kuwait and the US are also committed to the project.

Octal Petrochemicals expects sales of its APET (amorphous polyethylene terephthalate) sheet packaging to reach $500 million per annum by the end of next year. Production capacity now stands at 30,000 metric tons per annum (tpa), but that figure will exceed 300,000 tpa by June 2008 as Octal corners a fifth of the world market for APET sheet, which was valued at $2.25 billion last year.

The move to develop one of the world’s fastest growing packaging companies in Oman responds to the increasing use of clear rigid plastic packaging for consumer products, convenience foods and merchandising. APET’s clarity, gloss and toughness make it ideal for goods that require protection and shelf impact, and the product is completely recyclable.

Rashid Saif Al Sadi, director of Octal Petrochemicals, said: “We have addressed significant cost and quality shortfalls in regular APET sheet manufacture to deliver a highly competitive solution to the growing packaging requirements of regional and global clients. Octal already has 40 customers, mostly in the UK, Europe and North America, and exports to China have just started.”

North America is a prime target for Octal. Oman’s total non-oil exports to the US were RO15.6 million in 2006, and Octal alone aims to increase that figure five-fold by the end of next year.

Octal is the first investor to build a plant in Salalah Free Zone and production started in December 2006. The built-up area of the plant, located less than one kilometre from the port of Salalah, will reach 135,000 sq m when an integrated PET resin and APET sheet complex comes on stream next April.

Octal’s managing director Nicholas Barakat said: “We’re excited to be the first company in Salalah Free Zone and proud that more than a third of our 75-strong workforce is from Oman.”