Low-cost naphtha could create a projects boom in the worlds manufacturing hubs
The global petrochemicals business is a diverse hybrid sector that blurs the lines between the oil and manufacturing industries.
Producing huge volumes of intermediate chemicals from hydrocarbons is much more closely related to the oil sector than a factory producing plastic bottles or components for the automotive sector, but the two are still referred to as petrochemicals.
The Middle East has always favoured the former with extremely cheap subsidised feedstock forming its foundation, which has seen the region become a global hub for polyethylene and polypropylene production.
Historically, almost the entire offtake of the regions polyolefins is exported to manufacturing hubs, such as China and India, to be made into end-user products. This is slowly changing, however, especially in countries such as Saudi Arabia, where conversion industries have been identified as the answer to chronic unemployment.
The collapse of oil prices over the past seven months has meant a swathe of multibillion-dollar petrochemicals schemes in the Middle East have been shelved or cancelled, which comes as no real surprise to anyone working in the industry. This is not the time to spend $6bn-plus on a petrochemicals plant.
What will be more worrying is that in those seven months, petrochemicals producers relying on naphtha have seen their feedstock price cut in half. This almost completely obliterates any cost advantage Middle east producers have when transport costs are taken into account.
If low oil prices continue, it will almost certainly result in a petrochemicals projects boom in East Asia and India. And this will be far more concerning to the regions producers than the cancellation of a few schemes in the Middle East.
You might also like...
Contractors win Oman Etihad Rail packages
23 April 2024
Saudi market returns to growth
23 April 2024
Middle East contract awards: March 2024
23 April 2024
Swiss developer appoints Helvetia residences contractor
23 April 2024
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.