Long-term regional petrochemicals plans will pay off

Economic uncertainty is hindering petrochemicals producers’ expansion plans and, going into 2009, the short-term picture for the industry is decidedly gloomy.

With oil at $150 a barrel as recently as July 2008, Gulf producers could afford to continue pumping out large volumes of base polymer products almost regardless of the price they were fetching.

But now global demand for poly-mers has dropped due to lower manufacturing output in the world’s largest economies, and prices have dived by 40 per cent since September.

Holding polymer prices steady will be near impossible for producers as the economic downturn spreads.

As with many industries in the region, petro-chemicals producers are taking their time in predicting how the market in 2009 will shape up.

But the petrochemicals industry has to take a long-term view - the new plants in which producers in Qatar, Saudi Arabia and the UAE are currently investing will have a life cycle of 20 years or more, putting the financial crisis of 2008 into perspective.

Projects may be put on hold for a few months while the global lack of liquidity stalls the signing of new deals, but the Gulf’s producers will still pursue their long-term plan: to double the region’s capacity.

For the global petrochemicals industry, the main story of 2009 will be how the Gulf’s competitors in Europe and Asia respond to the region’s appetite for investment.