As feedstock dynamics change, expansions in the kingdom should focus on value-added products
For decades, Saudi petrochemicals producers have enjoyed the highest profit margins in the world by selling low-cost, high-volume commodities to the global market. Ample supplies of discounted ethane feedstock have helped the region become the driving force in petrochemicals, allowing regional producers to undercut foreign competitors.
But presenters at the MEED Middle East Petrochemicals 2012 conference held in Dubai on 20-21 March agreed that the sector must expand downstream to continue to capture margins.
As a shortage of easily extractable ethane feedstock looms, new producers will be unable to rely solely on discounted inputs, and must find value in chemical chains largely overlooked in the region until now.
Sahara Petrochemicals Company is backing four joint venture projects in Jubail, which are expected to come onstream in 2014, with products such as chlor-alkalis, acrylics, superabsorbent polymers and butanol. Kuwait’s Qurain Petrochemical Industries Company has also announced plans to establish a $1.2bn project for the integrated production of polyethylene terephthalate.
The increasing use of naphtha as an alternative feedstock in the GCC will create opportunities to move into new supply chains such as aromatics and butane derivatives.
Cracking naphtha provides the opportunity to develop a whole raft of downstream plants that produce chemicals including polyurethane, solvents, polyesters and phenol.
However, the further downstream the Saudi chemicals industry moves, the more it will face competition from technologically advanced producers in the US, Europe and Japan. This will present a whole set of new challenges.
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