The boom in unconventional oil and gas developments in North America is set to have a profound effect on the role of the GCC in global markets, and not only for crude oil.
Capacity to produce petrochemicals, including nitrogen-based fertilisers, is on the rise in the US, driven by the low cost of gas feedstock.
Between 2000 and 2005, the US nitrates sector was the least competitive in the world in terms of feedstock costs, but the US now has the second-lowest prices after the Middle East. A rush of investment has seen more than 25 new projects start to be planned, with the US set to cut its imports by 50 per cent over the coming years. Americas growing self-sufficiency will see the market to supply Asian countries intensify, while fertiliser producers will hope to see Africa emerge as a major importer.
A similar story is evolving in petrochemicals, with surging US gas capacity set to feed a new generation of ethane crackers, and see the North American petrochemicals sector emerge from years of decline.
The US capacity to produce ethylene the key building block for commodity plastics production is now expected to increase by 37 per cent by the end of the decade.
This swift increase in capacity for both ethylene and nitrogen-based fertilisers, such as urea and ammonia, could eventually lead to overcapacity later in the decade, causing a downturn in prices, which would also impact Middle East producers.
However, demand for fertilisers in the GCCs core export markets in Asia is set to grow faster than in any other region. Despite the increasingly competitive US industry, the GCC is likely to maintain its competitive feedstock advantage over the rest of the world in addition to its logistical edge over potential US exports.
Capacity additions in the GCC are likely to be dominated by Qatar with its abundance of natural gas and Saudi Arabia, which is expanding its fertiliser sector to create jobs for its fast-growing population.