A resurgence in the US chemicals sector and China’s relentless industrial expansion should force companies think extra carefully before committing to major new petrochemicals projects in the Middle East.

The Gulf region has seen an unprecedented expansion in chemicals capacity over the last ten years as it enjoys burgeoning demand from emerging Asian economies.

But the dynamics of the market are shifting. The pace of China’s economic growth is likely to slow over the coming years while the country continues to add new petrochemicals capacity.

Taking ethylene as an indicator of chemicals production, China is on the path towards self-sufficiency and will continue to shrink as a market for global chemical exports.

China Petrochemical Corporation (Sinopec) is set to become the world’s number one petrochemicals producer with four years, overtaking Saudi Basic Industries Corporation (Sabic) and Germany’s giant BASF.

At the same time, the increasing use of cheap shale-gas-based feedstocks has turned the US petrochemicals sector around, and American companies now looking towards major expansions.

There is estimated to be 10 million tonnes of potential new ethylene capacity being planned in the US since the start of the shale gas boom – over half the current capacity of the Middle East.

As the US and China become increasingly self serving, Middle East project developers will need to ask some tough questions about where the customers will be for any further ethylene expansions.

Only modest growth in chemicals demand can be expected from mature markets in North America, Western Europe and Japan.

After the current generation of crackers under development in the Middle East – including Saudi Aramco and Dow Chemical’s Sadara project in Jubail and Borouge 3 in Abu Dhabi – there are at least five projects that could come on stream by the end of the decade.

These include the Duqm petrochemicals complex in Oman, Borouge 4 and Chemeweeyat/Adbic in the UAE, Petro Rabigh Phase 2 in Saudi Arabia and at least two projects in Iran.

While the Gulf still has a strong advantage over the US and Europe in supply fast-growing demand markets in Asia, it will not be enough to sustain all the new projects under consideration.

Middle East producers need to focus on producing specialty chemicals to meet the needs of specific customers, matching the model developed by innovative established companies in the West.

This could be achieved through more joint greenfield projects with overseas chemicals groups or the acquisition of smaller companies to add technological knowhow.

For the first time in the Middle East petrochemicals sector’s staggering growth period, there is not enough demand worldwide to justify all the new cracker projects being planned.