The petrochemicals industry of the Gulf region has seen tremendous success in the past two decades. The region's proximity to massive oil and gas reserves has been an added advantage for the petrochemicals industry. State-of-the art technology and expertise has helped generate employment for thousands. Access to cheap gas and petroleum has accelerated the growth of this industry. However, with increasing competition and prises, the region's advantage of access to cheap raw materials is gradually diminishing.
Experts believe that natural gas is soon going to become pricey and that the ethan reserves are declining. Petrochemicals companies will have no option but seek access to technology and major growth markets.
Natural gas is being used up at an alarming rate. Increased power usage has resulted in shortage of natural gas. With the consumption of this commodity expected to rise further and much of the natural gas set aside for exports, the petrochemicals industry is going to face a tough challenge of finding cheap feedstock.
The International Energy Agency noted that, "Demand continues to increase strongly in the Middle East, driven by power generation, water desalination and petrochemical projects, as well as own use in LNG and gas-to-liquids production. In some cases, low regulated gas prices have resulted in physical shortages of gas, as demand has outstripped local supply capacity.”
Added to the significant decline in availability of natural gas, Gulf region are likely to experience difficulty in increasing production of ethane- major by-product of natural gas and essential raw material for the petrochemicals industry. The existing supply of ethane has been set aside for on-going and new projects.
The shale gas revolution in the U.S. has revitalized their petrochemicals sector. The U.S. produced about one third of the world's petrochemicals products, but the sector gradually declined and its market share shrunk to 10 per cent by 2010. However, access to cheap natural gas has helped the sinking industry rise. The 110 new projects estimated to be worth 77 billion dollars are proof that the U.S. petrochemicals industry is emerging and this newly gained self-sufficiency will force Gulf companies to look for new markets.
The petrochemical industry within the Gulf states like Saudi Arabia, and Qatar have undergone radical changes and are as developed as anywhere in the world. Saudi Basic Industries Corporation (Sabic) is a key player of the market and is a Fortune 500 company.
The Middle East accounts for 13 per cent of the global petrochemicals production. Capacity expansion helped increase production, which reached 127.8 million tonnes in the previous year. Saudi Arabia is the leader of the regional petrochemical industry and produces nearly 86.4 million tonnes per annum (mtpa). Qatar on the other hand produces 16.8 million tonnes and Oman 9.5 mtpa. These three regions account for 88 per cent of the Gulf petrochemical industry. The UAE produces 6.1 million tonnes per annum and accounts for 5 per cent of the industry. When compared with the Gulf petrochemicals industry, the global industry has not develop at such an accelerated pace.
Petrochemical industry of this region is expected to produce 191.2 million tonnes by the year 2020, with Saudi Arabia in the lead. Saudi is likely to produce 40.6 million tonnes during this period, while Qatar and UAE are likely to add 10 million tonnes and 8.3 million tonnes, respectively.
Increased productivity of the regional industry, however, has not resulted in a significant rise in profits. Many companies have suffered a steep decline in their returns. But this setback hasn't disheartened the industry. Instead, the Gulf states continue to make heavy investments in this sector. Gulf Investment Corporation said, “GCC players are expected to continue their overseas investments in order to boost regional supply and asset acquisition."
There are as many as 65 projects, collectively valued at 150 billion dollars. Saudi Aramco and Dow Chemical recently established a joint venture- Sadara Chemical company, which will construct a polyethylene and propylene producing plant at Jubail Industrial City. The 20 billion dollars Sadara Chemical complex will be the first unit in Middle East to utilize refinery liquids . Sabic has decided to construct two downstream plants with production capacity of 250,000 tonnes per annum of methyl methacrylate (MMA) and 40,000 TPA of polymethylmethacrylate (PMMA) at Jubail.
In Qatar, Qatar Petroleum and Royal Dutch Shell are keen to construct an olefins plant at Ras Laffan. This 7 billion dollars project is expected to produce 1.1 million TPA of ethylene and 170,000 TPA of propylene. Qatar Petroleum is also planning to develop a petrochemical complex at Ras Laffan along with Qatar Petrochemical Company.
While in the UAE, International Petroleum Investment and Abu Dhabi National Chemicals Co. have planned to establish a 10 billion dollar aromatics, olefins and nitrogen chemicals project.
But the industry continues to face innumerable challenges.
The Gulf petrochemicals industry remains sensitive to the global economy. With newly gained self sufficiency, U.S petrochemical industry has been revamped and poses a major threat to the regional petrochemical sector. European economies, on the other hand, have been declining. Major emerging economies are also suffering from poor economic growth. In such a situation Gulf producers are likely to target Asian markets, especially India and China. However, China's own plans to develop its petrochemical industry at world scale will become a major obstacle for the Gulf petrochemical sector.
Only strategic planning can enable this region to maintain its stronghold in the industry. They should become a part of the ongoing shale revolution in the U.S. Increasing output of specialty chemicals will also be beneficial. The petrochemical companies of the region and the government are bracing themselves to face the tough challenges that lie ahead of them. The government is keen to produce value-added products and to consolidate the industry.
Only timely action will help the region maintain its position in the industry. It's now or never!
Experts believe that natural gas is soon going to become pricey and that the ethan reserves are declining. Petrochemicals companies will have no option but seek access to technology and major growth markets.
Natural gas is being used up at an alarming rate. Increased power usage has resulted in shortage of natural gas. With the consumption of this commodity expected to rise further and much of the natural gas set aside for exports, the petrochemicals industry is going to face a tough challenge of finding cheap feedstock.
The International Energy Agency noted that, "Demand continues to increase strongly in the Middle East, driven by power generation, water desalination and petrochemical projects, as well as own use in LNG and gas-to-liquids production. In some cases, low regulated gas prices have resulted in physical shortages of gas, as demand has outstripped local supply capacity.”
Added to the significant decline in availability of natural gas, Gulf region are likely to experience difficulty in increasing production of ethane- major by-product of natural gas and essential raw material for the petrochemicals industry. The existing supply of ethane has been set aside for on-going and new projects.
The shale gas revolution in the U.S. has revitalized their petrochemicals sector. The U.S. produced about one third of the world's petrochemicals products, but the sector gradually declined and its market share shrunk to 10 per cent by 2010. However, access to cheap natural gas has helped the sinking industry rise. The 110 new projects estimated to be worth 77 billion dollars are proof that the U.S. petrochemicals industry is emerging and this newly gained self-sufficiency will force Gulf companies to look for new markets.
The petrochemical industry within the Gulf states like Saudi Arabia, and Qatar have undergone radical changes and are as developed as anywhere in the world. Saudi Basic Industries Corporation (Sabic) is a key player of the market and is a Fortune 500 company.
The Middle East accounts for 13 per cent of the global petrochemicals production. Capacity expansion helped increase production, which reached 127.8 million tonnes in the previous year. Saudi Arabia is the leader of the regional petrochemical industry and produces nearly 86.4 million tonnes per annum (mtpa). Qatar on the other hand produces 16.8 million tonnes and Oman 9.5 mtpa. These three regions account for 88 per cent of the Gulf petrochemical industry. The UAE produces 6.1 million tonnes per annum and accounts for 5 per cent of the industry. When compared with the Gulf petrochemicals industry, the global industry has not develop at such an accelerated pace.
Petrochemical industry of this region is expected to produce 191.2 million tonnes by the year 2020, with Saudi Arabia in the lead. Saudi is likely to produce 40.6 million tonnes during this period, while Qatar and UAE are likely to add 10 million tonnes and 8.3 million tonnes, respectively.
Increased productivity of the regional industry, however, has not resulted in a significant rise in profits. Many companies have suffered a steep decline in their returns. But this setback hasn't disheartened the industry. Instead, the Gulf states continue to make heavy investments in this sector. Gulf Investment Corporation said, “GCC players are expected to continue their overseas investments in order to boost regional supply and asset acquisition."
There are as many as 65 projects, collectively valued at 150 billion dollars. Saudi Aramco and Dow Chemical recently established a joint venture- Sadara Chemical company, which will construct a polyethylene and propylene producing plant at Jubail Industrial City. The 20 billion dollars Sadara Chemical complex will be the first unit in Middle East to utilize refinery liquids . Sabic has decided to construct two downstream plants with production capacity of 250,000 tonnes per annum of methyl methacrylate (MMA) and 40,000 TPA of polymethylmethacrylate (PMMA) at Jubail.
In Qatar, Qatar Petroleum and Royal Dutch Shell are keen to construct an olefins plant at Ras Laffan. This 7 billion dollars project is expected to produce 1.1 million TPA of ethylene and 170,000 TPA of propylene. Qatar Petroleum is also planning to develop a petrochemical complex at Ras Laffan along with Qatar Petrochemical Company.
While in the UAE, International Petroleum Investment and Abu Dhabi National Chemicals Co. have planned to establish a 10 billion dollar aromatics, olefins and nitrogen chemicals project.
But the industry continues to face innumerable challenges.
The Gulf petrochemicals industry remains sensitive to the global economy. With newly gained self sufficiency, U.S petrochemical industry has been revamped and poses a major threat to the regional petrochemical sector. European economies, on the other hand, have been declining. Major emerging economies are also suffering from poor economic growth. In such a situation Gulf producers are likely to target Asian markets, especially India and China. However, China's own plans to develop its petrochemical industry at world scale will become a major obstacle for the Gulf petrochemical sector.
Only strategic planning can enable this region to maintain its stronghold in the industry. They should become a part of the ongoing shale revolution in the U.S. Increasing output of specialty chemicals will also be beneficial. The petrochemical companies of the region and the government are bracing themselves to face the tough challenges that lie ahead of them. The government is keen to produce value-added products and to consolidate the industry.
Only timely action will help the region maintain its position in the industry. It's now or never!
