GCC to meet 20% of petrochem demand

Petrochemical industries in Abu Dhabi and Saudi Arabia will add a total of 10 million tonnes to their existing capacity in 2010, office bearers of Gulf Petrochemicals and Chemicals Association (GPCA) said yesterday.

The GCC will meet 20 per cent of world's petrochemical demand by 2020, according to GPCA estimates.

While the capacity expansion in 2010 will be spearheaded by Saudi major Sabic and Abu Dhabi-based Borouge, petrochemicals producers in the GCC as a whole will increase their production capacity to 115 million tonnes from the current 63 million tonnes by 2015.

Mohamed Al Mady, Chairman of GPCA and CEO of Sabic, said new capacity will come into operation even as some old capacity is shut down. "There will be some shutdowns. Obsolete technology will be replaced with new one," Al Mady said.

He said it is the right time to launch new projects considering the petrochemical sector is currently witnessing the "bottom of the trough".

"Construction costs have come down by as much as 30 per cent. So it is logical for the petrochemical companies to continue with their new projects," Al Mady said.

"At present about 12 per cent of the world's ethylene production is in the Gulf, which is expected to reach 20 per cent by 2015. This will translate into significant growths in ethylene derivatives capacities in the Gulf. By 2015, the region will produce 33 per cent of the ethylene glycol output and about 13 per cent of the global polypropylene output," Al Mady said.

Petrochemicals industries in the region will see substantial diversification in their downstream divisions Al Mady said, adding that fertilisers, liquid petrochemical products will be produced more in the region.

Financing for new projects will be difficult in the region as post-crisis banks will be much more careful in choosing projects, Al Mady said.

"However, good projects will find it easier to obtain financing," he said.

Hamad Al Terkait, President and CEO of Kuwaiti petrochemicals major Equate, said the cost of financing new projects will become difficult.

The GPCA is meeting for three days in Dubai from December 8 to December 10 to discuss strategies to face the still stagnant global petrochemicals markets.

Sabic eliminated its first-half dividend and cut production after the worst global recession since the Second World War cut sales of plastics. Access to discounted feedstock may give Sabic and other Middle East-based producers a competitive advantage over rivals also suffering from slump in the automotive, construction and consumer industries.

Sabic is expanding in China to tap that nation's rising consumption of chemicals used to make auto parts, packaging and plastics, while Abu Dhabi is investing in new plants to boost capacity in the UAE.

Production capacity for about 10 million tonnes of petrochemicals is set to come online in Saudi Arabia and the UAE this year.

Sabic plans to boost production mainly from a joint venture with China Petroleum and Chemical Corporation (Sinopec), and from the Yanbu and Asharq facilities in Saudi Arabia.

A $3 billion (Dh11bn) joint venture complex with Sinopec in Tianjin, China, is set to start production in the first quarter next year and Asharq will begin production by the end of the year.

Saudi Kayan Petrochemical Company will start production at the world's biggest ethylene-glycol plant at the end of 2010. (With inputs from agencies)

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