Major Petrochem Output by GCC Members

Massive investments by the UAE, Saudi Arabia and other Arab hydrocarbon producers into the petrochemical industry will allow them to control nearly a quarter of the world’s total petrochemicals output, an official report has said.

By the end of 2007, the Arab nations produced nearly 8.5% of the global petrochemicals output and the level is projected to leap in the next two years as a result of mega projects being constructed in the region, mainly in Saudi Arabia, which could become the world’s top producer of such substances, said the report by the 10-nation Organization of Arab Petroleum Exporting Countries (OAPEC).

The Kuwaiti-based OAPEC, which groups the UAE, Saudi Arabia, Kuwait and other key Arab hydrocarbon producers, said most regional nations have embarked on mammoth petrochemicals projects as part of economic diversification programmes, adding that such projects could push petrochemical producers in the West to suspend planned expansions given the Arab region’s huge gas reserves, which make such ventures far more feasible and profitable.

“These projects will push the combined Arab petrochemicals production to nearly 25% of the world’s total output within two years,” it said in a study. “As a result of this sharp increase in the region’s petrochemicals output capacity, producers and investors in North America and West Europe are expected to face obstacles in their plans to expand their production capacity and this could prompt them to suspend expansion projects, leading to removal of bottlenecks.”

OAPEC, which controls more than 60% of the world’s recoverable oil resources, said the bulk of petrochemicals ventures in the Arab world are based in Saudi Arabia, which aims to boost capacity to 75 million tones at the end of this year and nearly 110 million tones per year in 2015. “This means Saudi Arabia could become the world’s largest petrochemical producer, accounting for more than 10% of the global output during that year…the Kingdom is already the third largest urea producer in the world, with a production of around 2.5 million tonnes per year,” OAPEC said.

In the UAE, the main petrochemical producer, Borouge has been locked in major expansion plans which could add around 1.5 million tones of ethylene per year, 540,000 tonnes of polyethylene, 400,000 tonnes of polypropylene and nearly 725,000 tonnes per year of olefins, the report said. “The petrochemical industry in the Arab region has been passing through an unprecedented boom reminiscent of the boom in late 1970s.This is due to several factors including the availability of massive gas resources, a large consuming market, a strategic location between eastern and western markets and the intensifying efforts undertaken by regional governments to develop non-oil industries and diversify their economies,” OAPEC said.

The study stressed that Arab producers need to create what it called “an entity” that will coordinate their industries, safeguard their interests and provide the necessary services as is the case in Western petrochemical producers. “Arab nations should also set up an integrated data network that will cover developments in the local and foreign markets…this will allow stronger coordination and upgrade marketing policies in this sector.” OAPEC’s figures showed the petrochemical industry in the Arab world had largely developed over the past few years and the bulk of the increase has come from Saudi Arabia, the UAE, Kuwait and Qatar.- Emirates 24/7