Qatar Petroleum and Technip of France have signed a letter of intent for an $800 million (Dh2.9 billion) ethylene cracker venture, Qatar News Agency said.

The total cost of the project is estimated at $3.4 billion (Dh12.47 billion), said Abdullah Bin Hamad Al Attiyah, Qatar's second Deputy Premier and Minister of Energy and Industry.

He is also chairman of Qatar Petroleum.

Attending the signing ceremony in Paris were: Hamad Rashid Al Muhannadi, director-general of Qapco; Daniel Faloute, chief executive of Technip; James Faloukli, chief of Chevron Phillips USA; and Jane Bernard, chief of Total Petrochemicals.

The cracker venture will be owned by Qatar Petrochemical Company Ltd (Qapco) and Total Petrochemicals through their Qatofin joint venture, plus Qatar Petroleum with Chevron Phillips Chemical Company, through their Q-Chem II joint venture.

With production capacity of 1.3 million tonnes per year, the ethylene cracker, to be located in Ras Laffan Industrial City, will provide ethylene feedstock via pipeline to derivative units planned for the development at Mesaieed industrial city.

About $800 million will go towards the cost of the ethylene plant. The remaining $2.6 billion (Dh9.5 billion) will go towards the cost of the pipeline and the Q-Chem II and Qatofin plants slated for construction at Mesaieed.

The ethylene cracker at Ras Laffan and the Q-Chem II project at Mesaieed are expected to begin operating in late 2008.

Q-Chem II will include a 350,000 tonne-per-year polyethylene plant and a 350,000 tonne-per-year normal alpha olefins plant. These will be located adjacent to the existing Q-Chem complex. Both will utilise Chevron Phillips Chemical Company's proprietary technology.

Qatofin is involved in the construction of a new polyethylene unit, with annual capacity of 450,000 tonnes per year.

The unit, one of the largest of its kind in the world, is to go into service in 2008 and will be located in Mesaieed, alongside the existing Qapco polyethylene units.