The petrochemicals sector is making an increasing contribution to GCC economies, as capacity rises and production slates push further downstream.

Over the past six years, the industry has comprised an increasingly large portion of manufacturing gross domestic product (GDP), reaching 17 per cent in 2011, up from just under 14 per cent in 2007. The manufacturing sector as a whole accounts for 8.9 per cent of the GCC’s combined GDP. This is small when compared to the dominant oil and gas sector, which accounts for half of the bloc’s GDP, but the proportion is expected to grow further.

Qatar leads

Qatar is leading the way, with petrochemicals making up more than a quarter of manufacturing GDP. It is followed by the UAE with 18.2 per cent, predominantly accounted for by Abu Dhabi. Saudi Arabia and Kuwait both hover around 11 per cent, while in Oman and Bahrain the level is 7.3 and 4.6 per cent respectively. These figures will come as little surprise to those familiar with the markets.

In 2011 (the latest year for which data is currently available), petrochemicals accounted for 44 per cent of the GCC’s non-oil exports, or about $46.2bn out of a total of $105bn. More than 55.8 million tonnes of chemicals were shipped that year. In 2011, petrochemicals contributed on average about 2 per cent to the GDP of each of the six GCC states. The largest contribution was in Qatar, where chemicals made up 2.6 per cent of total GDP. Kuwait had the lowest contribution, at just 0.5 per cent.

GCC chemicals export revenue, 2011
  Total non-oil export revenue ($m) Petrochemicals revenue ($m) %
Saudi Arabia 47,000 30,700 65
UAE 31,000 2,700 9
Qatar  7,900 5,400 68
Kuwait 6,700 3,200 48
Oman 6,400 3,900 61
Bahrain 6,100 300 5
Abu Dhabi 3,100 757 24
Source: GPCA 

Unsurprisingly, the largest share was in Saudi Arabia, where the value of petrochemicals exports rose 40 per cent, compared with 2010, on the back of higher prices and increasing demand, with a 6 per cent rise in the volume shipped to 35.2 million tonnes.

Qatar’s chemicals sector has the largest share of non-oil exports at 68 per cent. It exported 11.5 million tonnes in 2011, an increase of 14 per cent on 2010, earning $5.4bn. Oman’s figures are similar, with exports rising to $3.9bn, representing 61 per cent of its total. In contrast, the role of the petrochemicals sector is relatively marginal in the UAE, representing only 9 per cent of total non-oil exports, worth $2.7bn out of $31bn.

Growing at about 13 per cent each year, the GCC’s total petrochemicals production capacity, including basic chemicals, polymers and fertilisers, reached 121 million tonnes a year (t/y) in 2011, up from 73 million t/y in 2007.

Basic chemicals

The region is still focused on producing petrochemicals such as methane and ethylene, the basic building blocks of the industry. In 2011, the two chemicals accounted for about three-quarters of the GCC’s total capacity.

Basic petrochemicals production capacity now stands at 45.2 million t/y, or about 37.5 per cent of total output. This is up from about 27 million t/y in 2007.

Propylene and mixed xylenes have seen the greatest growth among the basic chemicals over the past few years. Propylene capacity grew to 7.7 million t/y, representing 17 per cent of basic production capacity, and expanding at 27 per cent on a compounded annual growth rate (CAGR) basis, one of the fastest rates of the basic chemicals slate. Mixed xylene output grew even faster at 50 per cent CAGR, although this still only represents 5 per cent of the total. 

Fertilisers are the second-largest product group at 22 per cent and with a capacity of 27.4 million t/y. Polymers have seen the fastest growth, rising to 20.4 million t/y, compared with 11 million t/y in 2007.

Speciality chemicals remain marginal in the region and still only account for less than 1 per cent of the total petrochemicals capacity. However, this looks set to change. Saudi Arabia’s pressing need to create jobs for its growing young population is a major driver for its petrochemicals expansion, as well as its plans to push further downstream into chemicals that will create value, rather than its traditional focus on commodity chemicals.

The Saudi petrochemicals industry has witnessed massive growth in the past decade, with most firms now publicly traded and producing base chemicals in the olefins sector, such as ethylene and propylene.

Industrial parks

Saudi Basic Industries Corporation (Sabic), which is majority-owned by the government, plans to build eight industrial parks aimed at creating jobs in the downstream conversion industries. These will integrate smaller converters with larger upstream production, specialising in engineering plastics, paints and coatings, and additives among others.

The parks will each contain an anchor tenant that will feed factories manufacturing end-user products. About 57 per cent of these products are expected to supply the domestic market, with the remainder being exported.

Of all the product chains, aromatics production has seen the fastest growth in the region, at 26 per cent between 2007 and 2011, reaching 8 per cent of total capacity. This trend is set to continue as countries with limited ethane feedstock options push ahead with other schemes. The latest project to be launched in this area is in Kuwait. It awarded a contract in early October to the US’ Foster Wheeler to carry out a pre-feasibility study for a proposed aromatics plant for the local Petrochemical Industries Company. The study is scheduled to be completed by the end of the year.

For some petrochemicals, the GCC’s growth is unmatched globally. Combined ethylene capacity in the six GCC countries between 2007 and 2011 grew at 15.7 per cent, faster than even China and more than three times the global average of 4.8 per cent. Polyethylene growth was similarly robust at 12.4 per cent, trailing China at 14.7 per cent.

Propylene growth

The diversification into propylene and polypropylene production has been rapid, with the region growing at 27 per cent from 2007 to 2011, compared with 14 per cent in China and 6.4 per cent globally.

In 2000, propylene capacity in Saudi Arabia stood at less than 1 million t/y. In 2011, it was almost 6 million t/y. This increase was due to a shortage of ethane feedstock, as well as propylene’s versatility, which allows it to be used to manufacture a larger variety of downstream products.

The absence of new methanol projects highlights the region’s push away from basic chemicals in new projects. Methanol production has grown at only 4 per cent, compared with 32 per cent in China and 22 per cent in the rest of Asia.

Key fact

The chemicals sector contributed 17 per cent of manufacturing gross domestic product in 2011

Source: MEED