Middle Eastern petrochemicals

Iran

It has been said by BMI that the easing of sanctions will have a positive effect on the Iranian petrochemicals industry with hope for improved growth in output. However, BMI has said that the weak external markets, the declining cost differential between naphtha and ethane and domestic feedstock constraints will undermine government targets this year. Even though the country began exports to the EU in January this year, the collapse in crude prices and their effect on naphtha prices has undermined the competitiveness of the country’s largely ethane fed petrochemicals industry. Also, Iran is expected to undershoot the government’s production and export targets for the last financial year, this undermines the credibility of the petrochemicals development programme. The main reason for the failure of the government’s programme is the deleterious effect of prolonged sanctions, which deterred investment and caused domestic economic decline. Any resumption of sanctions will cause further negative effects on the industry, BMI has said.

Israel

BMI has commented that lower naphtha prices will help support Israeli petrochemicals margins in the medium term, while in the short term producers are likely to benefit from a recovery in the domestic market. During 2014, Israel’s petrochemicals industry included capacities of 450 000 tpy of ethylene, 345 000 tpy of propylene, 125 000 tpy of benzene, 230 000 tpy of xylenes, 165 000 tpy of polyethylene, 450 000 tpy of polypropylene, 160 000 tpy of PVC and 60 000 tpy of methanol. BMI has said that it does not envisage any substantial increase in capacities to 2019, and there are no plans in the country for any new petrochemicals plants over the medium term.

The domestic petrochemicals market is expected to supported by a recovery from poor performance in 2014, when the economy was hit by the effects of the government’s conflict in Gaza, however the strength of recovery will be determined in large part by the security situation. Petrochemicals competitiveness will continue to be determined by naphtha and the risks are to the upside in the country’s relatively small, naphtha fed petrochemicals industry.

Kuwait

Even though there is currently an expansion of Kuwait’s olefins and polyolefins capacities, BMI has warned of possible delays at Olefins III and has said that they could affect the project at is would further diminish revenues that could have been generated had it become functional at an earlier date. BMI has also said that adding value to Kuwaiti petrochemicals is essential to developing the production chain. Downstream diversification would ensure that the industry is buffered from the effects of increased competition in external markets. However, most of the current plans are focused on aromatics, olefins and polymers with little in the way of specialisation. This, BMI has said puts Kuwait in a vulnerable position when competing in Asian markets where prices are facing downward pressure. On the upside, declining naphtha prices are likely to diminish the cost gap between Kuwait and rival ethane fed producers, particularly the US.

Qatar

The drive toward petrochemicals development in Qatar has slowed due to the cancellation of projects. This has also undermined the country’s stake in global production growth and is preventing the country from realising multi billion dollar revenues from downstream diversification, BMI has said. The country’s competitive edge as a whole has also been undermined of late due to a number of factors, including rising construction costs, the planned surge in US shale and the diminishing cost advantage of ethane as naphtha prices fall in line with oil prices.

The country is reliant on ethane feedstock and this has also limited the petrochemicals industry to some extent, BMI has said, as the country does not produce the same range of by products as its competitors which rely on other feedstocks. Due to the lack of diversification, Qatar is likely to be sidelined in the special chemicals market. However, the government is reportedly seeking to redress the balance with mixed crackers, but other industries are also capitalising on the increasing global demand, which will cause Qatar t be left behind.

UAE

Margins in the UAE should be supported by lower naphtha costs this year, even if the impact of the Borogue expansion drives down product prices. Over the last four months of last year, UAE product prices dropped 40% as markets slowed and naphtha feedstock prices declined. The situation was compounded by the commercialisation of output from the new Borouge 3 complex which includes one of the world’s largest cracker units qith 1.5 million tpy of ethylene production capacity. Downstream units in the UAE include 1.08 million tpy polyethylene, 960 000 tpy polypropylene, and a 350 000 tpy LDPE unit. The project is also going to include a 80 000 tpy cross linked polyethylene plant.

Edited from report briefs by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/07042015/bmi-mid-east-petrochemicals/