Executive focus: Mideast's role vital in petrochemicals

Feb 23, 2002 01:00 AM

by Andrew Pettman

CMAI Europe is the largest independent petrochemical consulting company in the world, and as its director for Europe and Middle East Olefins Studies, Andrew Pettman is well-positioned to provide an insight into this emerging industry. "The Middle East, especially the GCC countries and its neighbours, have a crucial role to play in the development of the global petrochemical industry, but there are some challenges," he says.
First, there is a very large infrastructure capital requirement for investment on greenfield sites, and resources for project management are limited in some parts of this region.
Second, the very large number of projects being attempted at one time, particularly in Iran, may stretch the project management resources available.
Third is the competitive environment being created as a number of Gulf countries look to investments for 2005-08 for start-up at the same time. "That's not all," he continues. "The uncertainty of crude oil prices is another challenge. Low prices mean lower investments for petrochemical products."

Having said that, the fast-talking Pettman points out that these challenges can be easily outweighed by the advantages on offer in many of the countries here, most notably the chance to access low-cost feedstocks and have a base from which to supply the growing markets of Asia. According to him, there are motivating factors for the region's investors to spur on their investments at this time.
"Nearly all the petrochemical projects in the region are sponsored directly or indirectly by the need for countries to develop. And to do this, countries need to leverage their economies around the abundant competitive re-sources in the form of hydrocarbons." Undoubtedly, Pettman says, the countries here, particularly Iran and Saudi Arabia, have resources that can be developed and sold to petrochemical markets at a price that offers long-term cost advantage.

In the availability of feedstock, both these countries have "complimentarity roles", since Saudi Arabia is very strong in oil reserves and the petrochemical feedstocks associated with oil, while Iran is very strong in gas reserves and associated feedstocks. "In both these locations, as in other parts of this region, reserves are expected to last for many, many years, whereas in Europe, north-east Asia and north America, such reserves have a much shorter lifespan," he notes.
Alluding to new steam cracker projects in the Gulf, Pettman says the UAE's Borouge and Qatar's Q-Chem are really the last crackers of "what we call the second Middle East wave of steam crackers." The third wave, on stream most likely between 2004 and 2011, will be focused on steam crackers that are world scale in size and primarily based on highly competitive ethane or gas.
"There are at least five steam cracker projects in Saudi Arabia, all bar one an offshoot of the Saudi Arabian Gas Initiative. Also, there are plans to build new crackers in Kuwait and Qatar," he says.

However, Pettman says, the biggest area of increase is in Iran, where NPC, either on its own or with joint venture partners, will construct six new steam crackers, five of them being worldscale, over the next four to six years.
"These crackers will catapult Iran into the top league of petrochemical producers from its relatively modest position. Moreover, these investments will put the Iranian petrochemical industry in direct competition with the current giant of the region, Saudi Arabia."
Investment in the region's petrochemicals industry will continue, says Pettman, stating that a key reason for continuing investment in this region is the access to long-term export markets. "The region's investments tend to target two markets outside the Middle East and Africa, which is Asia and Europe. Ringed as it is in the centre, this region is naturally placed to supply the growing deficit in north-east Asia."

Relating petrochemicals to crude oil prices, Pettman says, when the crude oil price rises the cost position in the Middle East remains relatively stable, whereas the costs in Europe, North East Asia and North America all rise substantially.
"Since many companies now have a higher crude oil price planning outlook than in previous years, this higher crude oil environment increases the attractiveness of investments in this region and is a third key reason for companies wanting to invest here," he adds.

Andrew Pettman is CMAI Europe's director for Europe and Middle East Olefins Studies.

Source: Gulf News
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