Chemical  Projects In overseas markets,  looking at the mega petrochemical complex planned by U.S. and European majors in China, three ethylene centers for BP, BASF, and Shell have started con- struction. Amidst these moves, we secured an EPC contract for constructing SM/PO and MPG/Polyols plants from CNOOC and Shell Petrochemicals Company Limited. In addition, following the successive completion of the latex and polystyrene plants in the previ- ous fiscal year, we completed a converted epoxy resin plant for Dow Chemical in fiscal 2002. We have also licensed our proprietary acetic acid manufacturing technology (ACETICA$^{®}$) to a Chinese firm for potential construction of a plant.  For large-scale gas chemical plants to diversify the use of gas in producing countries, we won the contract for the world’s largest methanol plant in Saudi Arabia, where we have a significant track record of executing large-scale gas chemical plant projects. On the other hand, chemical industry investment in China is shifting to higher value-added functional chemical products from general-purpose chemicals. Although there are many projects in this field, the market is smaller than that of general-pur- pose chemicals and the number of projects in which we can exert our technological superiority is limited. Therefore, we have carefully selected projects in which we can make the most of our strengths. China is expected to grow into a giant consumer market from its current position as the world’s factory. While investment by U.S. and European majors and quasi-majors continues, more Japanese firms are expected to enter the market. New regulations enacted by the Chinese government at the end of 2002 make it difficult to win EPC contracts on a lump-sum basis, but we will aim for higher valued services with quality pro- jects, utilizing our project management expertise through alliances with international firms. In the domestic market,  we saw price hikes of butadiene, styrenemonomer, and paraxylene, led by an increasing demand for these products in China. The rise in prices, however, was not enough to induce the new investment in Japan. Chemical companies are changing their business stances, strengthening propylene production to counter the growth of ethane-based eth- ylene. The move toward increased propylene production will involve FCC unit revamping of petroleum refineries and should result in plant and equipment investment in propylene downstream derivatives. These moves by chemical companies concur with the petroleum refining companies’ search for higher value-added products besides gasoline, and we expect continued integration of chemical firms and refiners. In the pharmaceutical industry,  fierce competition to develop new drugs has accelerated. As a result, major pharmaceutical manufacturers are further specializing in research and development, while spinning off drug manufacturing and laying the groundwork to under- take entrusted manufacturing from third-party companies. Nevertheless, we won a contract from a major foreign pharmaceutical manufacturer to diag- nose the existing facilities and develop a plan for integration of its factories. And we will aim at winning repeat orders for world-class research centers from major manufac- turers, focusing on high value-added projects where we can make the best use of our technologi- cal expertise. 17 Chiyoda was involved in the construction of all polycarbonate plants for Teijin in Singapore. Pharmaceuticals factory for Eisai Co., Ltd.  (Artist’s rendering) 1 0 We }