A positive outlook for the petrochemicals industry has been hard to come by in the past two years. Plummeting demand and prices for commodities on the back of the global financial crisis of 2008-09 saw producers’ profits hit hard, with the US’ Lyondell Basell even forced to enter into bankruptcy proceedings.
With the worst of the crisis over, prices starting to rise, and demand from China helping to buoy commodity market sentiment, things are improving in 2010.
Renewed optimism in future demand is being borne out in the Gulf as several government-run and private companies move ahead with plans to build massive new petrochemicals production facilities.
MEED reports this week that Petro-Rabigh, a joint venture of Saudi Aramco and Japan’s Sumitomo Chemical Company, has approached construction contractors over a $5bn-plus expansion of its existing Rabigh petrochemicals complex.
Meanwhile, Abu Dhabi National Chemicals Company (Chemaweyaat) and another Aramco joint venture, with the US’ Dow Chemical, are also moving towards building two of the world’s biggest $10bn-plus petrochemicals complexes in their respective home territories after a troubled 2009 for both projects.
Although these developments will all be backed by solid national oil companies with billions of dollars to play with, the excitement in the industry should be tempered by a pragmatic approach to building new plants.
With millions of tonnes of new petrochemicals capacity due to come online during the next five years and global economic growth likely to remain slow over the next two, the new capacities being developed will have to force more established, but expensively-run plants abroad out of business. The way may be clear for the region’s producers, but progress will come at the cost of foreign majors such as Dow and Sumitomo.