GPCA predicts 4% petrochemical growth over the next decade

Despite the recent challenges with oil price volatility, the forecast for the petrochemicals industry remains positive due to attractive investment environments, government commitment and future demand, said speakers at the 10^th Annual Forum, organised by the Gulf Petrochemicals and Chemicals Association (GPCA).

“40 years ago [the Arabian Gulf was] in a very different place. Though the region was already one of the leading oil producers in the world, the industry had no method of capturing the associated gas byproduct that would eventually be used in the basic chemicals produced today,” said H.E. Eng. Abdullatif Ahmad Al Othman, Governor and Chairman the Board of Directors, SAGIA. “In Saudi Arabia, we created the master gas system to capture, treat, and process the gas through a very large and sophisticated gas network system of more than 4000 km in length, with a production capacity of 9 billion ft3/d. This transformed our industry and economy to include petrochemicals, resulting in a revolution over the past four decades.”

According to GPCA estimates, the GCC petrochemicals industry manufactures 136.2 million t of product as of 2014, earning US$87.4 billion in revenues. “Today, we contribute 13% of the world’s petrochemical output by volume,” he continued.

H.E. Al Othman outlined Saudi Arabia’s ambitious development strategy, which includes goals to double employment, investment and economic growth in the next decade. The downstream sector is expected to play a major role in this vision, with the potential to create 200 000 direct jobs in this period and investment potential of more than US$150 billion, according to SAGIA estimates.

“Saudi Arabia is expected to be home to over 50 million people in the next decade. We have the raw materials, an emerging logistics and transport hub and some of the most progressive investment laws in the world,” said H.E. Al Othman. “We have a strong business case for investors as we have the right market, right economy and right investment climate.”

From a global perspective, the GCC’s petrochemicals industry is also developing a reputation. “The concept of a global petrochemicals market was born here in the Middle East more than 40 years ago,” said Neil Chapman, President of ExxonMobil Chemical. “Today, the Middle East accounts for 80% of the world’s interregional chemical exports.”

However, recent developments in the global energy market prove that the evolution of the chemicals industry can be challenging. “Change is the norm. At the first GPCA forum 10 years ago, no one anticipated that the US was about to emerge as a hotspot for chemicals investment. But today, we see the US pursuing a model similar to what the Middle East did decades ago, capitalising on domestic natural gas supplies by building capacity to serve overseas growth,” said Chapman. “While the US has a long way to go before it might rival the Middle East, change in our industry isn’t always measured in years and decades. As recent twists in the oil market have made clear, the economics of petrochemicals can be transformed in a matter of months.”

“The long term outlook remains positive,” predicts Chapman. Global demand is expected to grow an average of 4% in the next decade, with two thirds of this demand coming from non-OECD countries, especially China and India.

“What’s driving this demand? It’s the fact that plastics and other petrochemical products are integral to modern living standards and, happily, the world is about to see the largest collective rise in living standards in history,” continued Chapman. “This is a great time to be a part of the petrochemical industry. We are all playing a major role in creating better lives for billions of people, and making products that enable the progress of humanity, just as we have for the past 100 years and more. Looking ahead, integration will be key to achieving this growth potential, [however] integration is not a buzzword…it is really about knowing how to gain an advantage in the use of feedstock, and in knowing our customers’ businesses well enough to deliver the solutions they require,” concluded Chapman.

Adapted from press release by Francesca Brindle

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