Additional woes for petrochemical makers in the Gulf region

01-Oct-15

Revenue of petrochemical makers in the Gulf region is expected to further decline this year after sliding 20 to 30% in the 12 months to June because of the oil price slump, as per thenational.ae. China, the market that consumes a major chunk of Gulf output, is trying to build its own petrochemical projects to be self-sufficient. Also the economic slowdown in China is expected to hit petrochemical demand. “We think the petrochemical prices will maintain this level in 2015,” said Abdulwahab Al Sadoun, the secretary general of the Dubai-based non-profit Gulf Petrochemicals and Chemicals Association. Brent tumbled by more than 40% between June this year and the last year because of an oil supply glut and weaker demand from Asia and Europe. Their key market China is currently on a self-sufficiency drive. However, this is not going to have an immediate impact,” said Mr Al Sadoun, adding that volume-wise there will be an increase in capacity and this will offset slightly the overall sales revenue [drop].” Total petrochemical production in all six Gulf states is projected to grow at 7.5% to about 144 mln tons this year, less than the compound annual growth rate of 11% recorded between 2004 and 2014. The growth rate will see some slowdown because there is constraint in the supply of gas. All Gulf states, except Qatar, are facing a gas shortage which is set to limit expansion of petrochemical projects, which rely on cheap gas. The Gulf region is boosting investments in gas projects to address this shortage. As the region’s petrochemical industries compete with power generation and other industries over gas supply, some petrochemical producers are choosing to use the oil derivative naphtha rather than gas, or ethane, as feedstock. Utilising naphtha will help companies produce a more diversified range of products, but at a higher cost that will pit them against other countries in Asia, for example, that use naphtha as feedstock. “With population growth in our region, power and water in our region becomes critical and so they have taken their share from those [petrochemical] industries, and this has pushed the drive to have a mixed feedstock rather than just ethane,” said Mr Al Sadoun, as per www.the national.ae