The petrochemical industry in the Gulf region grew at 3.7 per cent in 2016 reaching 150 million tonnes of capacity, according to an annual study by the Gulf Petrochemicals and Chemicals Association (GPCA), outpacing the global average growth of 2.2 per cent.

The figures emerged from ‘Arabian Gulf Industry Year in Review’ part of GPCA’s recently released annual report.

The study highlights that the industry’s growth is largely due to new capacity added in Saudi Arabia, the region’s largest petrochemical producer with 99.1 million tonnes of capacity, representing a 66 per cent share of regional capacity.

While the report highlights a fall from the Gulf chemical industry’s growth rate of 5 per cent in 2015, due in part to feedstock supply constraint and global economic uncertainty, ‘transformational’ new, highly complex projects in the region, such as the $20 billion Sadara Chemical joint venture between Saudi Aramco and Dow, and Kemya Elastomer Plant, an affiliate of Sabic and ExxonMobil Chemicals, point to a positive medium term outlook for growth.

The drop from 2015 figures can also be attributed to new capacity additions coming from specialty chemicals, which tend to be lower in volume but higher in value compared to commodity petrochemicals.

In addition, the report notes that GCC chemicals capacity utilisation is more than 90 per cent over the past five years, twelve percentage points above the 78 per cent global industry’s utilisation average in 2016.

Dr Abdulwahab Al Sadoun, secretary general, GPCA, said: “The regional industry continues to grow healthily by integrating new technologies, building better strategic partnerships and navigating smartly around global economic uncertainties.”

“The region continues to make significant investments in greenfield plant operations as well as brownfield efficiency gains as GCC producers explore new and often unconventional sources of feedstock to drive chemical output,” he said.

Al Sadoun: the regional industry continues to grow healthily

“Apart from advancing investment and innovation in the industry, the multibillion dollar project announcements, new technologies and capacity addition have contributed to a surge in job opportunities,” he added.

“The results of the 2016 report are a testament to the agility and resilience of this region’s industry,” Al Sadoun said.

The performance of the industry continues to depend on factors linked to feedstock and energy prices, along with labour productivity, capital intensity, links with the customers, knowledge of markets and uncertainty around the world, it said. In 2016, projects worth $13 billion were announced in the region, coming online between 2020 and 2024 and adding eight million tonnes production capacity. The projects contribute to as many as new 4,000 jobs. Beyond the GCC, chemical production in North America expanded by 1.1 per cent in 2016.

In addition, chemical production in Western Europe demonstrated a modest growth in 2016 of 1 per cent, much lower than in the previous period. Growth decline in Europe was the highest among other parts of the world despite the fact that European chemical sites, benefited from low oil prices compared with US competitors whose production is based on gas, it stated.

GCC POLYMER INDUSTRY

The GCC polymer industry which is developing at a compound annual growth rate (CAGR) of 3 per cent, while supporting further downstream development, is expected to reach 34.5 million tonnes by 2022, said a recent report.

The industry’s capacity expanded in 2016 by 5 per cent, reaching 27.1 million tonnes, according to the report titled ‘GCC Plastic Industry Indicators 2016’, by GPCA. The report  said that future plastic capacity growth will be driven by Saudi Arabia, Kuwait and Oman.

In 2016, GCC plastics producers’ sales represented 4 per cent of the global industry sales revenue, reaching $33 billion. In previous years, Saudi Arabia alone accounted for 2 per cent of global polymer sales, and ranked as the eighth largest plastics producer globally, it said.

Dr Al Sadoun said: “Petrochemical producers are increasingly diversifying their portfolios, investing in new products and moving away from traditional commodity polymers towards specialties such as engineering plastics and elastomers.”

“This is, in turn, supporting the expansion and development of the entire downstream industry in the region,” he said.

Synthetic rubbers will witness the biggest number of products introduced in the following years, benefitting from expected growth in the transport and automotive sectors, the report said.

By 2022, nearly 70 per cent of all incremental supply growth will come from commodities polymers, which represent 89 per cent of the GCC polymers capacity. GCC engineering and specialty polymers output grew by 15 per cent in 2016, reaching 2.5 million tonnes. The industry also comprises nearly 40,000 employees with additional 118,000 in supporting sectors.

GCC polymer consumption increased by 4 per cent in 2016, reaching 5 million tonnes. Saudi Arabia accounted for 67 per cent of the GCC polymer resins production in 2016 and was the largest polymers consumer in the GCC, followed by the UAE which accounted for 19 per cent.

Industrial packaging is the fastest growing end user market for polymers in the region. Consumer packaging accounts for 44 per cent, followed by the construction industry which accounted for more than a fifth. Plastic consumption in the GCC is increasing rapidly and reached 94 kg per capita in 2016.

Plastics consumption in Qatar is the fastest growing in the region, growing at 14 per cent between 2006 and 2016. This is double the growth posted by market leaders Saudi Arabia and UAE. Qatar, however, has the lowest consumption ratio to total polymer output. In 2016, that was just over 11 per cent, much lower than in other countries. In 2016, Oman enjoyed the highest ratio of polymer consumption to output in the region (48 per cent), the report said. 

A number of industrial parks focused on polymer conversion and multi industry are under development in Saudi Arabia, UAE and Oman, with some being built next to big resin production facilities, added the report. The first and second phases of Khalifa Industrial Zone Abu Dhabi (Kizad) will accommodate various types of light, medium and heavy industries, including petrochemicals. Built by Sharjah Asset Management, the investment arm of the Government of Sharjah, Al Saja’a Industrial Oasis is expected to be one of the largest industrial projects in the region.

INVESTMENTS SEEN AT $55BN

Gulf investments in the plastic industry amount to around $55 billion, Dr Al Sadoun said. The plastic sector is projected to attract $17 billion of fresh investments over the coming five years, bringing to $72 billion the total volume of businesses in this platform by 2022.