GCC Petrochemicals to Grow 46% by 2015 as Sector Cycle Changes

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The petrochemical industry in the Gulf Cooperation Council (GCC) countries has been vulnerable to financial crisis, as it has consistently seen up and down cycles in recent years. These cycles follow the refining industry cycles with a six- to 12-month lag. But, Abdulmohsen Al Majnouni, chairman of the Saudi Arabian section of the American Institute of Chemical Engineers, said that with recent advances in the petrochemical industry, the cyclic effect may no longer be the case.

Speaking to the World Refining Association, Al Majnouni said: "The introduction of specialty or performance chemicals has differentiated the refining from petrochemical industries. The more creative manufacturers are in developing new enhanced products, the more sustainable they become. The more efficient the petrochemicals industry becomes, the less susceptible and less prone to financial crisis they are."

According to the Gulf Petrochemical and Chemicals Association, the region's petrochemical capacity is estimated to increase from 77.3 million tons per year to 113 million tons per year at the end of 2015, representing a 46% rise in capacity.

GCC petrochemicals production capacity grew 13.5% in 2011 to nearly 116 billion tons. Saudi Arabia alone was responsible for more than half of the $100 billion in sales generated by the GCC petrochemical sector. According to the Kuwait Financial Center (Markaz), Saudi Arabia tops the list with $12 billion of projects under execution and another $41 billion in future projects. In the GCC, projects worth $19 billion are under execution, providing opportunities in both the long- and short-terms.

"The major short-term opportunities are in the more integrated specialty and performance chemicals," Al Majnouni said. "These are basically secondary and tertiary industries. This is especially true for the Middle East countries, as the supply of cheap feedstock is questionable."

In the long term, the opportunities will be found in the compounding industries, detergent basics, pharmaceuticals, rubbers and tires, he said.

Previously, companies operating in the GCC have enjoyed subsidized feedstock and less competition in the petrochemical sector. Now, competition and the availability of feedstock are two factors that demonstrate promise and excitement, Al Majnouni said.

"Now, not only has the feedstock become scarce and limited, but the entrance of many international companies in the business has made it very competitive," he said. "Companies have become smarter, energy efficient, cost effective and more sustainable."

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