Special Report: Petrochemicals - Region gains from downturn

Ever since it was first realised that a plastics industry could be established on the back of the kingdom’s rich hydrocarbons endowment, Riyadh has invested heavily in building up its petrochemicals sector.

Since the 1970s, petrochemicals plants have had access to cheap feedstock to produce vast quantities of base polymers.

With oil prices enjoying record highs over the past five years, the Saudi government could afford to effectively subsidise the creation of new jobs in industry. Job creation came cheap with oil at $150 a barrel.

But the slowdown in the global economy is changing the picture. The cost of subsidising new jobs has surged because of the lower oil revenues.

And a feedstock shortage has forced the government to shunt petrochemicals businesses away from pumping out large volumes of polyethylene towards more niche markets further down the ethylene chain.

This undermines the cost advantage for Saudi companies, effectively putting off private companies from investing in new production capacity.

It also puts the government’s social agenda in jeopardy - the less investment there is, the fewer jobs will be created.

List of stories:

• Cooling market in the Gulf signals consolidation

• Gulf petrochemicals producers put expansions on hold

• Algerian policy shift threatens upgrade plans

• Private firms in Saudi petrochemcials sector look for a niche

• Capacity boost suffers a setback in Qatar

• Commentary: Long-term regional petrochemicals plans will pay off