Future Trends – The Middle East

Kuwait
May 2011
 Presentation structure

• The recent capacity wave and its impact

• Major issues affecting future
investments
• What’s in the pipeline?
 The last wave is drawing to a close

• Addition of around 8m
tonnes of total ethylene
capacity, 4.6m of PE and
2.7m of MEG during 2008-09
• Propylene and PP capacity
also increased (1.75m) in
Saudi Arabia with new
PDH/PP plants
• And also aromatics:
paraxylene – 1.6mtpa;
Source: ICIS
styrene – 450kta
 The next wave will be smaller

• Not too many projects

in the pipeline; time is
running out if projects
are to start in the
next 5 years

• WHY????

Source: ICIS
 Finding the feedstocks

• Ethane is running short; available

supplies have been allocated

• Gas demand, especially for power

generation, has been rising much faster
(thanks to the economic boom) than
supply

Source: Booz & Co

The future is not so simple

• Rich in reserves but investments

need to be made
• Some of the gas is sour, which
means higher cost of production
• Will governments continue to give
away gas cheap to petchems?
• Saudi ethane price and discounts
on propane/butane due for revision
 Naphtha makes inroads

• The last wave saw Saudi crackers

relied on butane/propane

• Now it is time for naphtha – region is

already a big exporter and volumes
will increase with refinery expansions

• Plans for greater refinery-petchem

integration; including more aromatics
 Moving down the chain

• Governments under
pressure to generate
employment
opportunities to meet
demands of a growing
population

• Also need to diversify

their economies
Going beyond PE/MEG

Source: HSBC
 And even plastics processing

Source: ICIS

• 3.3m polymer consumption in the GCC ; growing at 9%/year

• To aid diversification of their economies, Saudi Arabia and Abu Dhabi are
setting up plastics processing zones
– Strong government support through fiscal incentives
 Two views
"If you invest without
advantaged feedstocks you
might as well ask why not
invest in other regions of
the world. We [Sabic] will
be in China and elsewhere.
We will increasingly invest
in other markets as we
have to invest in added
value."
-Abdullah Bazid,
executive vice president,
corporate strategy &
planning, Sabic
“We need to create jobs. To
create jobs, we need to
promote downstream
products.
Once the molecules are
there, demand will be
encouraged. It’s a snowball
effect.”
-Moayyed Bin Issa al-
Qurtas,
-CEO, Tasnee
Projects pipeline
 Saudi Arabia

• Sabic and private players Company Product

focused on derivatives; no
Saudi Kayan Polycarbonate, ethanolamines,
new cracker project in the ethoxylate
near term Sabic MMA, PMMA, butyl rubber,
oleochemicals, polyacetal,
• Saudi Aramco working on polyurethane
refineries/aromatics at Al Sipchem Ethyl acetate, EVA
Jubail, Yanbu and Jizan;
plus joint ventures with PetroRabigh Elastomers, MMA, PMMA, caprolactam,
phase 2 polyols, acrylic acid, suberabsorbent
Dow and Sumitomo (Under study) polymer, nylon 6

Source: ICIS
 Qatar & Abu Dhabi

• With the world’ 3rd largest gas

reserves, Qatar can build more
– 3 crackers planned by QP; but
only one is progressing

• Moratorium on new gas projects

extended to 2014
• Abu Dhabi has huge ambitions
and also feedstocks
– Borouge 3 targeted for
completion in 2013; room for
Borouge 4?
– Chemaweyaat now working on
aromatics
 Iran’s ambitions look doubtful

• Nuclear ambitions
/politics/policies have
consistently derailed plans

• Also needs investments

upstream – oil, gas and refining

• Privatisation – will it be
another complication?

Source: Jam Petro

 Conclusion

• After a decade of hectic activity, investments in Middle East

have slowed
• Companies searching for new models of growth
• Significant shift in the type of investments now being pursued
• Slower pace of investments creates room for expansions in
Asia