• Decline in revenues comes amid collapse in prices paid for petrochemicals products
  • Shortage of ethane is weighing on GCC petrochemicals production
  • GPCA’s members account for 95 per cent of chemicals output from the Arabian Gulf

The value of petrochemicals produced in the GCC is set to see a drop of 20-30 per cent in 2015 compared with 2014, according to the Gulf Petrochemicals & Chemicals Association (GPCA).

“The exact value will depend on a number of factors including prices and volumes produced,” says Abdulwahab al-Sadoun, the group’s secretary-general.

The decline in revenues comes amid a collapse in prices paid for petrochemicals, which is linked to the drop in oil prices since June 2014.

The price of Brent crude dropped by 47 per cent between June 2014 and June 2015, falling from $114.02 to $60.75.

“Amid the drop in oil prices, petrochemical prices have also declined, but not to the same extent,” says Al-Sadoun.

GPCA says that between June 2014 and June 2015, the prices of petrochemicals it tracks declined by 20-30 per cent, a factor that has undermined revenues for producers and will affect full-year figures for 2015.

While revenues for producers are set to drop between 2014 and 2015, GPCA is expecting the volume of petrochemicals produced in the GCC to grow by 7.5 per cent, rising to 144 billion tonnes.

This is 3 percentage points below the 10.5 per cent compound annual growth rate the sector recorded between 2004 and 2014.

Factors weighing on prices include a slowdown in economic activity in China and increasing petrochemicals production in the US and Europe.

Pressure on margins for GCC producers has been compounded by a shortage of ethane gas, which is used as feedstock in the majority of GCC facilities.

Over recent months, several high-profile petrochemicals projects have seen major setbacks in the Middle East.

Qatar’s $7.4bn Al-Sejeel complex was put on hold in September 2014 and the $6.4bn Al-Karaana facility, which was also due to be built in Qatar, was cancelled in January this year.

GPCA has 34 members and 206 associate members. The organisation’s full members account for 95 per cent of chemicals output from the Arabian Gulf.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Android devices