Petrochemicals projects have become the dominant source of spending in North African hydrocarbons with investment in the region’s oil sector struggling to pick up.

In the period between 2010 and 2013, just over $32bn is expected to be awarded to contractors developing hydrocarbons projects in Algeria, Egypt, Libya, Morocco and Tunisia, according to data from regional projects tracker MEED Projects.

More than $18bn is forecast to be spent on petrochemicals, making up 57 per cent of the region’s total, even when disregarding the lucrative agrochemicals sector in Morocco and Egypt.

For a region with significant oil and gas reserves – particularly in Algeria and Libya – North Africa has suffered from persistent underinvestment. The region faces significant challenges to convert its natural advantages into a diverse energy and petrochemicals industries.

The Arab Uprisings in 2011 have also hampered investment opportunities in Egypt, Libya and Tunisia, as new governments take over the national energy strategies. Meanwhile Algeria has long failed to attract large investments from international oil and chemicals companies.

North African operators are expected to spend $5.4bn in main contracts for hydrocarbon projects in the second half of 2012, compared with $4.7bn in the first six months of the year.

The first half of the year was dominated by the $3.75bn Tahrir petrochemicals complex to be built by Egypt Hydrocarbon Corporation (EHC) in Ain Sokhna, Suez governorate. The project will include a 1.3-million-tonne-a-year (t/y) cracker and downstream polyethylene, propylene, butadiene and benzene units.

In the past 12 months, Egypt has spent $7.6bn in petrochemicals contracts, including $1.1bn awarded for EHC’s Ain el-Sokhna petrochemicals complex and Egyptian Petrochemicals Holdings Company’s (Echem) ethylene derivatives complex in Alexandria.

Another major chemicals project, the Arzew methanol plant in Algeria, could be awarded by the end of 2012. The project, led by state oil group Sonatrach, has a planned capacity of 1.6 million t/y.  

The region is also expected to see significant gas investments in 2013. Algeria is developing several major gas fields in the southwest of the country. Africa’s largest country faces rising pressure to meet rising domestic demand and export commitments to the EU, while allotting enough feedstock to fuel its petrochemicals ambitions.

Two packages on Sonatrach’s midstream pipeline network are expected to be awarded in 2013, each estimated at a value of $1.8bn. The company’s project to develop the Timimoun & Adrar gas field, a joint venture with Spain’s Cepsa and France-based Total, could also be awarded next year for $1.5bn.

Many of these projects could still face delays, as tentative agreements between national and international companies often break down in the region due to profit-sharing disputes. With more than $14bn in contracts expected to be awarded, 2013 could be a make-or-break year for the North Africa hydrocarbons sector.