Petrochemicals in the Middle East

Iran

Further easing of sanctions on Iran will be a big boost for the country’s petrochemicals sector, according to BMI. However, BMI has said that infrastructural challenges will continue to impede growth even if sanctions are eased. When it comes to the maintenance of the sector’s facilities, BMI has said that the industry will need improved access to the European market to purchase spare parts to made domestic facility repairs.

Due to sanctions, European banks are continuing to refuse to clear petrochemical transactions that originate in Iran due to fears of legal repercussions from the US. Also, with no markets to absorb production from Iranian facilities, a number of companies are continuously lowering their petrochemicals output. Some plants, according to BMI are unable to even consider increasing production, due to the lack of spare parts, regardless of sanction impacts on trade.

Israel

BMI has said that increasing export levels will support growth in Israel’s petrochemicals industry, however, the domestic economy will remain soft. In the first quarter of the year, external market performance was up and chemical exports increased 1.5% year on year on year, as well as the plastics and rubber sectors which increased 2.8% year on year.

BMI expect private consumption to expand in the near future and real growth in the sector is expected at 3.1% for 2014 and 3.5% for next year. However, there has been depressed domestic demand for final products in the petrochemical chain due to the drop in purchases in consumer durables at the start of the year.

Kuwait

It has been reported by BMI that the Petrochemical Industries Company (PIC) has voiced plans to increase its petrochemical income to make up more than 50% of Kuwait’s non-oil income. The company is seeking to expand aromatics and olefins III projects and is looking to enter the specialised section of the petrochemicals industry. Also, BMI has said that further value added to petrochemicals is essential to developing the production chain and making sure that the industry is buffered from the impacts of increased competition from other markets.

Kuwaiti government has outlined plans to increase downstream capacity in the country to 1.4 million bpd by 2018, up from the current 930 000 bpd level. However, BMI has said that there is a sizeable downside risk as a result of slow progress and setbacks that are currently impacting downstream projects in the region. India is named by BMI as a key market for Kuwait’s petrochemicals, despite subdued growth from the Indian market in recent months.

Qatar

Fertiliser is listed by BMI as a key part of the petrochemicals sector. Qatar is now one of the world’s leading producers of chemical fertiliser however, it is facing rising feedstock costs and over supply in the Asian market is threatening this position.

Looking at the broader petrochemicals industry, BMI has said that Qatar’s reliance on ethane feedstock is limiting the industry as it does not produce the same range of by products as other countries which us naphtha as a feedstock. As a result, BMI believe that Qatar could be sidelined in the special chemicals markets, however, the government is looking to address this problem.

By 2018, BMI expect the country’s ethylene capacity to hit 7.4 million tpy, followed by a 180% increase in PE capacity and a 540 000 tpy increase in polypropylene production. It has also been reported that over the next 10 years, the country is looking to spend US$ 25 billion on expanding its domestic petrochemical industry, and is intending to double its annual petrochemical production capacity to 23 million t by 2020.

Saudi Arabia

Petrochemicals margins in Saudi have improved in recent quarters, according to BMI, as a result of growth in external markets. However, the company has said that the costs of production are increasing and the establishment of new plants is also getting more expensive.

BMI expect the country to continue with its petrochemicals development programme this year, focusing on intermediate chemicals, including adding 75 000 tpy of ethylene glycol, 420 000 tpy of polyethylene terephthalate, 200 000 tpy of paraxylene, 100 000 tpy o linear alkyl benzene and 6000 tpy of polysilicon. However, the sector is not expected to see huge increases in basic petrochemicals capacity until the 2016 – 2018 period when 3 million tpy of ethylene capacity, as well as substantial downstream facilities are due to come online.

In the medium term BMI has said that the Saudi petrochemicals sector is confident due to export growth and price stability is expected for producers in the country this year with room for an increase to 2018. This is all despite the shale revolution in the US. BMI, as a company, however is not so optimistic and expects increasing self sufficiency in China and India to put a downward pressure on prices into 2015.

UAE

BMI has said that even though the UAE is driving up petrochemical capacity, producers are facing a challenging external market as well as the prospect of rising naphtha feedstock prices. Borouge is currently the main focus of the UAE’s plans and is looking to bring an additional 2.5 million tpy online this year.

In the short term, BMI see the UAE’s export market as challenging. This will be due to moderating economic activity in Europe and Asisa, as well as the continuing growth in capacity in the emerging markets. BMI expects China and India to remain key markets for the UAE’s petrochemicals sector with manufacturing industries playing a major role in exports.

Edited from report breifings by Claira Lloyd

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