Strategic Assessment of Middle East Impact on the Asian Petrochemical Industry

Nexant is projecting that approximately 19 million tons of ethylene capacity will be added in the Middle East in the next five years, as illustrated in Figure 1. This "fourth phase" of capacity additions in the region can be characterized as follows:

Some crackers (e.g., in Qatar, Iran, Oman and Egypt) are being based on ethane extracted from non-associated gas. This is a "first" for the region.
Greatly increased use of alternative feedstocks (e.g., propane and/or butanes), especially in Saudi Arabia, where the government is only considering mixed-feed allocations.
Local private sector participation is increasing at the expense of state-owned companies.
New industrial sites are being developed in countries such as Qatar, Saudi Arabia, Iran, and Oman.
Major focus on specialties. This is particularly evident in Saudi Arabia, where the government has explicitly made considerations such as increased value-added via downstream derivatives production and job creation part of the allocation selection process.

The export buildup from the Middle East would most likely remain targeted towards Asia, the fastest growing region of global petrochemical demand and the region with a substantial deficit in commodity chemicals. However there is overwhelming concern in the Asian petrochemical industry that the rapidly growing Middle East capacity will not only preclude further investment in Asia for the medium and longer term, but also perhaps drive certain existing petrochemical producers to exit. As such, the Asian petrochemical industry is at a critical point in its development, as players will need to make major decisions in the near term that are expected to have lasting ramifications.

Figure 1 Ethylene Capacity Growth in the Middle East

To better understand the issues facing the Middle Eastern and Asian petrochemical industries, Nexant’s recently completed strategic evaluation not only examines the current and future structure of the Middle Eastern petrochemical industry but, more importantly, the structure, competitiveness, and future direction of the Asian industry—with a view toward identifying the opportunities and threats for existing Asian producers and potential new entrants. The study analyzes a number of key issues, including:

Macroeconomic backdrop
Feedstock analysis
Petrochemical refinery integration opportunities
Supply/demand balance and impact on global net trade
Impact of technology and oil price developments
Competitiveness of production
A range of strategic issues, including risks to development

The study covers the following petrochemical intermediates and products:

Intermediates—ethylene, propylene, butadiene, benzene, and para-xylene
Primary derivatives—LDPE, LLDPE, HDPE, MEG, polypropylene, styrene, purified terephthalic acid (PTA), methanol, EDC, and VCM

The study’s geographic coverage includes all of the countries playing a primary role in the development of the Middle Eastern and Asian petrochemical industry over the next decade, including:

Middle East—Saudi Arabia, Iran, Qatar, Kuwait, United Arab Emirates, Oman, and Turkey
Asia—Japan, China, South Korea, Thailand, India, Singapore, Philippines, Taiwan, Malaysia, Indonesia, and Brunei

The study was published in September 2006 and is available immediately. For further information, please contact Mr. James Virosco at telephone +1-914-609-0318 or email: jvirosco@nexant.com, or Dr. Andrew Spiers at telephone +44-20-7950-1560 or email: aspiers@nexant.com.