Investments into Arabian Gulf Expected to Increase Despite Rising Oil Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Arabian Gulf continues to attract increasing investment, even though the project prices charged by contractors are expected to increase by 14% in 2008, according to Industries Qatar. The underlying push in the price hikes is caused by high oil prices increasing the cost of producing petrochemicals in Europe and North America. It is estimated that about 50% of global production capacity growth of ethylene will be in the gulf in the next five years. In 2006, Saudi Arabia took 63% of investments made in the region with Qatar taking 14%.

The Gulf Cooperation Council's (GCC) official Gulf Organisation for Industrial Consulting (GOIC) reports that investments into GCC countries reached $70 billion in the petrochemicals sector in 2006 compared with $ 52 billion in 2002. Currently, 1,969 companies are working in the petrochem sector, employing 155,000 people. The annual investment in petrochem projects in the region is expected to reach $120 billion per year within the next five years. The GOIC has reported that the Middle Eastern countries will produce more than 20% of global basic petrochemicals and polymers by 2010.

Although the basic hydrocarbon feedstock prices vary from country to country, in terms of the global market, they all supply feedstock at prices that provide an incentive to invest in hydrocarbon production. Gulf-based producers claim to produce petrochemicals, such as polyolefins, at prices typically under 75% of the cost in China. Demand for the products comes mainly from China with a significant margin from India.

Saudi Arabia, Kuwait, Qatar and the United Arab Emirates have existing base chemical production that utilizes methane, ethane and gas-based liquid feedstock in petrochemical production facilities. With world-scale plants using the latest technologies, and base and secondary chemical production flourishing, producers have begun exploring tertiary industries that offer diversity and enhanced added value to the industry. There is strong cooperation between local and international companies in terms of technology and expertise transfer.

To accommodate the continuing high growth rate in the sector, fed by the availability of feedstock, additional zones and complexes must be developed as space in the existing industrial cities is becoming limited. The GOIC says that further petrochemical development will lead to growth in tertiary, energy-intensive and export-oriented conversion industries.

For related information, see the following articles:

•October 9, 2007 - Contax Identifies Market Signals as Middle East Project Costs Escalate

•October 23, 2007 - Middle East 2008 Forecast Good with Risks Attached

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