GCC petrochem expansion unabated

The GCC's petrochemical industry saw a 3.7 per cent increase in output last year and is well positioned to become the "centre of gravity" in the mid-term, according to Sheikha Lubna bint Khalid Al Qasimi, UAE's Minister of Foreign Trade.

She said that due to cost efficiency, the region is set to supply 40 per cent of incremental Asian demand for polyolefin and produce a significant supply of ethylene for the emerging markets.

Although global economy shrunk by 4.6 per cent, the Gulf's expansion continued with production surging 3.7 per cent last year, she said.

"Production went up across the Middle East last year with Saudi Arabia posting an increase of 6.3 per cent, UAE (Abu Dhabi) 4.4 per cent, Kuwait 4.2 per cent and Qatar 7.4 per cent," she told the GPCA Forum on Wednesday. "Even with tough economic environment where capital infusion has increasingly been challenging, the ability of GCC producers to fund their expansion projects has not been an issue."

It was in the early 1980s when the Gulf governments embarked on a programme aimed at utilising the abundant supply of natural gas to support the region's rapid industrialisation. Particular focus was the development of petrochemical industry, which provided good value to gas and associated products as well as to protect the environment by avoiding flaring.

By the end of this year, the Gulf will have more than 4m ethylene capacity and by 2015, the region will see nine new crackers and downstream plants come on stream - five in Saudi, two in Iran and one each in UAE and Qatar.

Ethylene is the raw material used in the manufacture of polymers as well as fibres and other organic chemicals. These products are used in a wide variety of industrial and consumer markets such as the packaging, transportation, electrical/electronic, textile and construction industries as well as consumer chemicals, coatings and adhesives. Polyolefin on the other hand is used for blown film as well as rash guards or under garments for wetsuits, seat cushion, arm rest and spa pillow.

In Saudi, 7m of ethylene capacity will be added through 2014, accounting for 25 per cent of global ethylene global growth. In Abu Dhabi, Borouge has commissioned the world's largest cracker, which aims to triple the company's annual production capacity to over 4.5m tonnes within the next four years.

Sheikha Lubna said the global ethylene share of the Gulf petrochemical producers is expected to reach 16 per cent by end of this year and reach 20 per cent by 2014, a long way from the five per cent market share at the beginning of the previous decade.

Domestic and international demand is slated to grow, especially with global petrochem supply migrating away from the traditional production centres in Europe and North America towards low cost region such as the Gulf region.

"Industry analysts suggest that this downturn could see further migration of the industry to the Middle East and Asia making the Gulf region the future centre of gravity for the global petrochemical and chemical industry."

"The emerging markets led by China are key outlets for petrochem production for the Gulf region, which is expected to supply up to 40 per cent of incremental Asian demand for polyolefin in the medium term," Sheikha Lubna added.

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