Rising crude oil prices give advantage to Middle East petrochemicals firms
The high price of crude oil has given regional petrochemicals firms an increased competitive edge, according to experts speaking at the first ever Middle East Plastics conference in the Kingdom of Bahrain, November 29 – 30.
Conference chairman Edmund O’Sullivan said: “The high oil price, and the resulting buoyant market conditions is clearly visible all over the Gulf. New petrochemical complexes are emerging, while existing plants and infrastructure are being upgraded or expanded.
“What is clear is that the world’s top industry players are increasing their interest – and presence – in the region.”
The GCC’s growing plastics industry – which is tipped to account for up to 20 per cent of the world’s ethylene capacity by 2010 – is led by Saudi Basic Industries Corporation (SABIC), which continues to post record profits on a quarterly basis.
According to O’Sullivan, the petrochemicals industry in the Middle East can achieve these high predictions and more. “The world’s largest hydrocarbons reserves ensure access to plentiful and cheap gas feedstock, giving producers a natural edge.
“Meanwhile, the region’s relative proximity to India and China, where demand growth for petrochemical products is highest, is another advantage, particularly over European producers.”
Since the mid-1990s, the industry’s main focus has been on building up ethylene and ethylene-based derivative capacity.
Annual ethylene production in the region, led by Saudi Arabia, Qatar, Abu Dhabi, Kuwait and Iran, will climb to 23 million tonnes in the next five years, accounting for 20 per cent of global capacity.
Saudi Arabia alone is estimated to produce 14.5 million tonnes in 2010, according to the Saudi Arabian General Investment Authority (SAGIA).
Discussing sector growth at the MEED conference are: Dr Hassan A Fakhro, Bahrain’s Minister of Industry and Commerce and Harri Bucht, CEO of Borouge (the Abu Dhabi Polymers Company Ltd).
Newcomers to the industry have discovered the petrochemicals sector as a promising area for investment. With liquidity in the region high, and investment opportunities limited at present, the petrochemicals sector is receiving considerable attention from new investors.
Assessing the direction of the industry is Roger Green, global manager of Polyolefins Planning Service. He said: “Non-traditional petrochemical players, such as private sector investors with money, are increasingly looking at the sector.”
Private Saudi investors are among the most prominent of those taking stakes in new petrochemical projects. Institutional investors are also aware of the opportunities, including Kuwait Finance House, which is promoting an integrated petrochemicals and power and water complex in Bahrain.
In the short term, there are challenges for the industry despite the boom, said O’Sullivan. “Driven by strong demand, raw materials and equipment prices are rising and both are often in short supply.
“The few major international players capable of implementing the large-scale and complex projects planned in the region have full order books. Meanwhile, project costs have risen.
“However, it is clear that new capacity coming on stream in 2009 – 10 will lead to falling prices and a balancing of the sector; long-term, the Middle East petrochemical industry will continue to do well.
“Petrochemicals is now the third key source of growth and employment for Gulf economies after oil and gas, and international companies cannot afford to ignore the Middle East.”
Middle East Plastics, one of MEED’s niche sector conferences, will be held at the Diplomat Radisson SAS Hotel, Manama, Kingdom of Bahrain, on November 29 - 30. Already confirmed as sponsors are: British Offset (BOO); Ciba Specialty Chemicals; Innovene and European Plastics News.
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