And as if that wasn’t enough, the high crude oil price environment has honed Middle East producers’ competitive edge even further. With crude prices showing no sign of retreating below $60 a barrel, regional petrochemicals firms buying feedstock such as ethane at a low, fixed price have a clear advantage over those relying on the market-driven oil derivative naphtha. The regional bonanza is led by Saudi Basic Industries Corporation (Sabic), which continues to post record profits on a quarterly basis.
The result of such buoyant market conditions is clearly visible all over the Gulf, which sits at the heart of the boom, and – to a lesser extent – in Egypt. New petrochemical complexes are emerging from the desert sands, existing plants and infrastructure are being upgraded or expanded and the world’s top industry players are taking an ever-greater interest in the region. Companies such as ChevronPhilips Chemical Company and Dow Chemical Company, both of the US, and Europe’s Basell have invested heavily in the GCC countries, with more to come. Others – such as the UK’s Innovene, a new BP spin-off – have recently arrived.
Newcomers to the industry have discovered the petrochemicals sector as a promising area for investment. With liquidity in the region high, and investment opportunities somewhat limited to capital markets and real estate, the petrochemicals sector is receiving considerable attention from investors without a petrochemicals background.
‘Non-traditional petrochemical players, such as private sector investors with money, are increasingly looking at the sector,’ says Roger Green, petrochemicals manager for UK-based consultancy Nexant. Private Saudi investors are among the most prominent of those taking stakes in new petrochemical projects. Institutional investors are also aware of the opportunities – Kuwait Finance House, for example, is promoting an integrated petrochemicals and power and water complex in Bahrain as well as a complex in the Divided Zone (see pages 44-46).
This is not the only emerging trend. Since the mid-1990s, the industry’s main focus has been on building up ethylene and ethylene-based derivative capacity. According to Nexant, the Gulf countries, led by Saudi Arabia, Qatar, Abu Dhabi, Kuwait and Iran, will see annual ethylene production 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).
More recently, though, producers have been looking at other options. ‘There is increased interest in a diversified mix of broader based derivatives, rather than just polyolefins,’ says Andrew Pettman, director of Europe and Middle East olefin studies at US-based Chemical Market Associates (CMAI).
Nexant’s Green agrees: ‘The simpler concepts such as [converting] ethylene to polyethylene [PE] and ethylene glycol [EG] have not been exhausted but repeated a lot. There is a desire to compete on different points.’
In Saudi Arabia, the trend is partly driven by feedstock limitations. With ethane (C2) in short supply, Saudi Aramco has in the past two or three years started allocating a mix of feedstocks to project developers. New projects by Sabic and private sector players such as Tasnee Petrochemicals will crack an ethane/propane (C3) mix or, in the case of Project