| The Middle East will be one of two regions in the world that is expected to raise petrochemicals capacity over the long-term, according to a new report by the International Energy Agency (IEA). The Middle East enjoys a strong competitive advantage over other regions, thanks to its abundant natural gas supplies, which can produce low-cost ethane – a key petrochemical ingredient. In the longer run, Asia and the Middle East – led by Saudi Arabia – will increase their market share of high-value chemical production by 10 percentage points, while the share coming from Europe and the United States decreases. By 2050, India, Southeast Asia and the Middle East together will account for about 30% of global ammonia production. The IEA report noted that the Middle East is generally at the lower end of the cost curve among regions for primary chemical production. Currently, it has 12%, 9% and 15% of the world’s production capacity for high value chemical (HVCs), ammonia and methanol, respectively. “The region is thought to have strong potential growth. Of the region’s total crude oil production (about 28 million barrels per day), only about 7 million bpd is refined locally, with the rest exported to global markets. Over 90% of naphtha output is also exported rather than being used locally as feedstock, partly as a result of the ample availability of far cheaper alternatives, such as ethane and LPG, which together make up more than half of regional HVC feedstock,” the IEA said in its report. Indeed, the Middle East has headroom to grow, as its level of petrochemical/refinery integration is low compared to other regions.
DOWNSTREAM INVESTMENT In May, Abu Dhabi National Oil Corporation (ADNOC) announced plans to invest USD 45 billion in developing one of the world’s largest refining and petrochemical facility by 2025 in the Al Ruwais Industrial City. “We will invest significantly in Ruwais and open up attractive partnership and co-investment opportunities along our extended value chain to create a powerful new downstream engine and springboard for growth that will benefit our country, our company and our partners,” said Dr. Sultan Ahmed Al Jaber, UAE minister of state and ADNOC Group CEO. “Importantly, the expansion plans for Ruwais will also support Abu Dhabi and the UAE’s economic development and diversification, create high-skilled jobs and enhance the country’s status as a globally attractive destination for energy investments.” Saudi Aramco and SABIC have announced a large crude-oil-to-chemicals project of 400,000 bpd capacity, five times the size of the only similar facility operating now, ExxonMobil’s plant in Singapore. The Saudi project is expected to come onstream in the mid-2020s. Saudi Aramco is also developing a proprietary technology, based on thermal cracking of crude oil to produce chemicals, which promises a 70% to 80% yield of chemicals. A commercial design is expected to emerge by 2019. “Whether such technology will spread to other regions is uncertain. In oil-importing regions, the margins from direct crude-oil-to-chemicals processes will be lower, due to inherently higher energy requirements (relative to standard technologies) and transport costs for the feedstock,” the IEA said. “Concurrently, Saudi Aramco is also pursuing other avenues for growth in its petrochemical operations.”
EYE ON ASIA SABIC is also cementing its position in the growth markets of China and India. In September, SABIC signed a memorandum of understanding (MoU) with the Fujian Provincial Government of the Republic of China, which sets out the framework of co-operation between the two parties to enable SABIC to develop a world-scale petrochemical complex located in Fujian. The MoU does not have a definitive timelines. The MoU is part of SABIC's strategy to diversify its operations, seek new investment opportunities and strengthen its position in the Chinese market. In India, SABIC aims to build on its 25-year presence in the country and participate in the South Asian nation’s ‘New India 2022’ initiative, which aims to boost the ‘Made in India’ brand. “With an investment of more than USD 100 million in the Technology & Innovation Centre in Bengaluru – one of the largest investments in India by a Saudi company, the focus has been to build research competencies to support growing market needs in India and SABIC worldwide,” said SABIC, noting that India’s chemical sector is projected to grow at an annual rate of 8% to 10% annually to reach USD 300 billion by 2025. | 
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