It is a high-risk strategy. Limited availability of gas feedstock and rising project costs have driven up the capital cost of manufacturing sophisticated products. This is causing concern for investors, while some analysts question the benefits of processing base chemicals into derivative products, arguing that, with each step downstream, producers are diluting the profitability of a region whose major advantage is cheap feedstock.
But governments are right to try to develop the region’s leading manufacturing industry. They must take a long-term view, in which diversifying the petrochemicals sector allows governments to tackle their greatest challenge: creating jobs.
The presence of the region’s top petro-chemicals producers at November’s Dusseldorf K Show plastics exhibition emphasises the commitment of the Gulf states to think in global terms, targeting the giant markets of Europe, the US and China to keep growing.
But care must be taken to engage in joined-up thinking where production is concerned, to be sure that competing with each other to sell the same products into the same inter-national markets does not pose another tough challenge.
All the stories from MEED’s Petrochemicals special report
Overview: Growth through specialisation
The drive to move downstream
Producer rankings: Sabic towers over regional rivals
Gulf’s leading producers by capacity
Qatar: A shock to the system
Soaring costs force project changes
Muscat moves downstream
Introducing new processes to the market
Libya: Petrochemicals industry in its infancy
Renewed investment in a slow market
Fertilisers: Growth industry in the Middle East
Middle East set to dominate global production