Plunging oil likely to render several petrochemical projects in the Middle East unfeasible

19-Jan-15

As oil continues to plunge, additional petrochemical projects in the Middle East may be rendered unfeasible, and trigger a huge scale back in capital investments by regional players, as per industry in ICIS. Capital spending is often limited during times of low crude oil prices as energy majors "rein in and adopt cautious positions", according to a polymer source based in the Middle East. Governments will need to step in with new incentives to encourage major producers to start spending again. For now, capacity expansion in the region may have to be put on hold until the energy markets stabilise. The first casualty is the US$6.5bn petrochemical project in Qatar -a joint venture between Qatar Petroleum and Shell. The Al Karaana project in Ras Laffan was supposed to include a 1.5m tpa monoethylene glycol (MEG) plant; a 277,000 tpa oxo-alcohols unit; and a 300,000 tpa linear alpha olefins (LAO) facility. Ongoing construction of some petrochemical projects in the Middle East may not be totally scrapped but these may suffer delays, industry sources said, adding that producers with sunken costs won’t suddenly scrap their mega projects. But delays are possible.