Petrochemical industry is undergoing a major metamorphosis in the last decade or so, as the Middle Eastern region is increasing its strength in petrochemicals- particularly in ethylene and its derivatives such as polyethylene (PE) and ethylene glycol. Conventionally, North America, mainly USA , has been the largest producer as well as consumer of petrochemicals. However, North America's lion share in petrochemical consumption is being eroded due to an increasing demand of petrochemicals in China , India and other fast growing regions of Asia on one side, and building up of cheaper petrochemical projects in the Middle Eastern region on the supply side. The reason for the region's prominence can be attributed to easy access to feedstock, access to the latest technology, and strategic location at the intersection of the Americas, Asia and the rest of the world.

The region is expected to contribute more than 60 million tons of petrochemicals to the world in 2007. Reports and studies indicate that global ethylene supply will increase from 100 million tons in 2005 to 160 million tons by 2012. It is feared that the Middle Eastern region will become the major supplier of PE to China by 2010, as by that time the Middle Eastern region will build an additional capacity of 10 million tons of ethylene based products-almost the same capacity that exists at the end of 2005. On the other hand, no new cracker capacity is envisaged in North America until 2010 or even longer. Also, the present petrochemical plants in North America are running at more than 90% capacity utilization. In fact, this high capacity utilization does not provide any scope in the event of a major outage of any of the petrochemical plants, and could result in very tight supply in the short term, inevitably resulting in increase in price of products in a short term. For instance, the North American ethylene capacity that was operated at 93% during 2005, resulted in a loss of 4% of bulk petrochemicals. This situation is expected to reconcile and the region is expected to recover with a solid growth of 10% in 2006. With the commissioning of 10 million tons of ethylene based derivatives in the Middle Eastern region by 2010, the short term oversupplies of these products, particularly of PE cannot be ruled out. This will bring a tremendous pressure on price and profitability. The World leading consultant Nexant predicts that the petrochemical industry in North America will see a down cycle until 2011, when the additional capacity will be consumed satisfactorily coupled with increase in capacity utilization to a healthy level.

Due to its abundant supplies of gas enriched in ethane, the Middle Eastern region has so far been strong in ethylene but not strong in propylene, butadiene as well as benzene derivatives. The Middle Eastern region, which was so far concentrating on ethylene based products, has now turned its attention to increasing propylene based products as well. By the turn of 2010, the Middle Eastern region will develop an additional polypropylene (PP) capacity by 8-9 million tons, causing an over supply of PP also, in the global market, with inevitable pressure on margins as PP price will certainly see a reduction by that time. The price of PP will remain weaker for at least 3-4 years until the additional capacity gets utilized and capacity utilization reaches more than 85%.
The petrochemical sector in the Middle East is poised to capture a significant portion of the US$70 billion project finance; almost double compared to 2005; to be raised by the region this year. the region's growing appetite for project finance, which at US$33 billion is more than one-third of the global total of US$98.5 billion raised in the first half of 2006, underscored the fast growing industrial prospects of a region currently emerging as the most vibrant base for the petrochemical industry.

Experts are increasingly looking at the region as the centre of gravity for the global industry. While North America will continue to be a force to reckon with in the petrochemical industry, it will lose its leadership position to the Middle Eastern region by the end of this decade in production, and to the Asian countries, particularly to China in consumption.