Gulf region set for 5% petchems growth as downstream attracts funds
The chemical production capacity in the Gulf Cooperation Council (GCC) countries will jump from 147 million tonnes a year in 2014 to about 198.6 million tonnes in 2020, Abdulwahab Al-Sadoun, secretary general of the Gulf Petrochemicals and Chemicals Association (GPCA), said.
The GPCA expects chemical production in the region to continue to grow at an annual rate of 5% through 2020, based on the current pipeline of petrochemical and downstream construction projects, compared to an average of 8% per year over the last decade.
In parallel, petrochemical firms are increasing investments in the less cyclical downstream chemical sector to lessen their dependence on oil and gas prices.
GCC countries produced 140 million tonnes of chemicals in 2014, registering a 94% utilization rate, Al-Sadoun said. Petrochemical output alone rose by 4.5% in 2014 to 67.6 million tonnes, the second highest growth region in the world, according to the GPCA’s Annual Report 2014.
“Our  forecast is very conservative,” Al-Sadoun said, “taking into consideration that there will be some constraints in the supply of gas because the regulators are also giving priority to other industries that are critical, such as power generation and water desalination.”
The Gulf is the world’s lowest-cost region for petrochemical production. GCC manufacturers account for 20% of the global output of ethylene glycol, 18% of global linear low-density polyethylene production, 17% of the output of high-density polyethylene, 14% of global ethylene production, 13% of the polypropylene production and 11% of global methanol output, according to Al-Sadoun.
The region currently exports around 80% of its output to more than 80 countries, amounting to 66.1 million tons of chemicals, and will continue to rely on exports as production is expected to exceed domestic demand, according to GPCA estimates.
In the next 5 years, the GCC region will see an increase in new cracking and derivatives capacity, and these projects are valued at between $60 billion and $80 billion, according to Aman Amanpour, president of petrochemical & energy consultancy Amanpourconsult.
Below is Petrochemical Update's interactive map of the major petrochemical projects in the GCC region (under construction or proposed) that are expected to be completed by 2020.
Major petrochemical projects in the GCC (under construction, proposed). Customize and filter the data here. Data sources: Petrochemical Update, Hydrocarbon Processing, Zawya
Saudi Arabia, the biggest chemical producer in the region, is proceeding with three major petrochemical projects and two expansions, for a total of about $50 billion in capital expenditure by 2020, Amanpour said.
Sadara, a joint venture developed by Saudi Aramco and the Dow Chemical Company, is currently building the world’s largest chemical complex to ever be constructed in a single phase, with 26 world-scale manufacturing plants in Jubail Industrial City II, Saudi Arabia, valued at $20 billion. The project is expected to be commissioned later in 2015 and become fully operational in 2016.
Sadara will be the first chemical producer in the Gulf to use naphtha as a liquid feedstock.
Meanwhile, the United Arab Emirates (UAE) is projected to invest about $10 billion in major petrochemical construction projects in the next few years, Amanpour said.
As part of this plan, ChemaWEyaat is preparing to bring a major chemical complex on stream in the Taweelah district of Al Gharbia in Abu Dhabi around 2018-2019. The first phase of the project will produce 1.4 million tonnes per year (mtpa) of paraxylene and 0.5 mtpa of benzene.
Oman has a series of construction projects totalling around $10 billion, according to Amanpour. As part of its Liwa plastics project, Orpic is planning a 1.4 mtpa steam cracker unit, which will use mixed feedstock to produce polypropylene and, for the first time in Oman, polyethylene.
In 2014, the Takamul Investment Company and the Oman Oil Company also announced plans to build an ammonia plant in Salalah.
Takamul is also developing a purified isophthalic acid (PIA) project in Sohar, capable of producing 100,000 tons a year of PIA, an intermediate chemical used in the production of plastic resins.
In 2013, BP signed a memorandum of understanding with the Ministry of Oil and Gas to build a proposed 1 mtpa acetic acid plant in Duqm.
Though GCC petrochemical producers are expected to keep their competitive advantage in the global markets, Qatar recently cancelled two major petrochemical projects.
In January 2015, state-owned Qatar Petroleum and Shell said they would not pursue the proposed Al Karaana petrochemical project and would stop further work on the site, citing high capital costs that rendered the project “commercially unfeasible.”
Qatar Petroleum is exploring the possibility to expand the debottlenecking of some of its existing plants in Mesaieed and Ras Laffan, and to diversify its product portfolio, which is currently 100%-based on ethane feedstock.
The company does not plan any greenfield projects in the short term, Tahir Jalal Baig, senior project development engineer at Qatar Petroleum, told Petrochemical Update.
The shelving of the Al Karaana project came just months after Industries Qatar said in a statement to the Qatar Exchange that Qatar had halted plans to build the Al Sejeel petrochemical plant, a joint project by Qatar Petroleum and the Qatar Petrochemical Company (QAPCO).
Industries Qatar, which holds a stake in QAPCO, has said it is studying a new downstream petrochemical project that is expected to yield better economic returns but has not provided further details about its plans.
The company said in a statement in January it is “conducting a number of detailed feasibility studies in order to take advantage of the ethane feedstock available following the decision not to proceed with the proposed Al-Karaana Petrochemical Project.”
The strategy is part of Qatar’s plans to diversify its exports away from the oil and gas sector and into chemical products. The country is already the second largest exporter of chemicals in the Gulf, representing 17% of the region’s exports, according to the GPCA.
Even though the current GCC petrochemical industry is predominantly ethane-based, many of the new projects under construction are designed to use mixed feedstock. GCC producers are moving toward cracking heavier fuels such as naphtha, LPG, C3 and C4, both for lack of additional ethane and as part of an overall strategy to diversify the region’s product offering.
Saudi Arabia, in particular, has not built any pure ethane crackers since 2004-2005, Amanpour told Petrochemical Update.
The GCC petrochemical industry is expanding its portfolio by moving into higher-value speciality and performance chemicals. Companies across the region are transforming their business models and supply chain strategies to increase the value of their products and shield themselves from the volatile global markets.
Among the new products added to the industry’s portfolio since 2005, 39% were new downstream chemicals, followed by intermediates, which accounted for 19% of the newly launched products, according to the GPCA.
“We are not observing any big fresh announcements in Saudi Arabia in terms of petrochemical investments this year or actually last year as well,” Amanpour said. “What we are seeing instead is a series of downstream chemical investments.”
Sadara’s new petrochemical complex will add downstream value chains to expand Saudi Arabia’s existing chemical landscape, supplying several industries that either don’t exist in the kingdom or only exist through imports of raw materials, including the first isocyanate and polyol (polyurethane) plants.
In 2014, Sabic, Saudi Aramco and Saudia Arabia’s Public Investment Fund launched a new company, the Saudi Arabian Company for Industrial Investment, which will develop conversion industries that rely on petrochemicals, plastics and fertilizers, among others.
The region is also seeing a pipeline of new industrial parks under development, including Petro Rabigh’s PlusTech Park near Rabigh, Saudi Arabia; the PlasChem Value Park in Jubail developed by the Royal Commission of Jubail & Yanbu and the Sadara Chemical Company; and Tasnee’s Downstream Complex in Hail City, Saudi Arabia, scheduled for completion in the first half of 2015.
Also in 2014, Sabic and Mitsubishi Rayon formed a joint venture to construct two plants in Jubail worth $1.2 billion. The plants are expected to come on stream in 2017 and will produce 250,000 metric tonnes of Methyl Methacrylate Monomer (MMA) and 40,000 metric tonnes of Polymethyl Methacrylate (PMMA) per year.
Sabic’s affiliate Ibn Sina and Celanese are also constructing a 50,000 mtpa polyacetal plant, which will produce specialty chemicals using methanol when it comes on stream in the fourth quarter of 2016.
Meanwhile, Sipchem is expected to commission a PBT plant in 2015 with an annual capacity of 63,000 tons. A number of other downstream petrochemical projects have been announced or are already under way through 2020.