14 October 2003 13:46 [Source: ICIS news]
DUBAI, United Arab Emirates (CNI)--Petrochemical players in the Middle East should spend more time evaluating options to ship products to Far East customers, Mitchell Silver, managing director of Distribution Consulting Services (DCS), told delegates here Tuesday at the 2nd International Middle East Petrochemicals Conference.
Silver said transportation options tended to be the last thing producers considered when planning projects. But he advised that although players in the Middle East have a cost advantage in feedstocks, they should be cautious about the costs of shipping material to customers. Silver cautioned that in some cases shipping costs could be higher than the costs of capital investment and feedstock.
He outlined how transportation costs could impact overall economics. He said that if a 5000 tonne/day methanol project cost $450m-500m (Euro531m-Euro590m) to build and feedstock costs reached $756m over 20 years, assuming a gas price of $0.75/m Btu, then the cost of transporting the methanol to the Far East would be more than $1bn assuming an average freight cost of $30/tonne for 20 years.
Silver advised producers to consider the options they have when arranging transport. They should consider whether to opt for spot or contract arrangements on chemical parcel tankers and whether they should lease or own vessels.
He added that the cost of building ships has fallen by 50% over the last 10-12 years due to increased capacity and heightened competition.
Silver noted that there have been some gas developments in Asia, especially in western Australia, where price of gas feedstock could be as competitive as those in the Middle East.
Therefore, cost of transportation will be a key issue for Middle East producers in the coming decade as they look to compete more effectively with players in Asia, he said
The two-day conference, organised by IBC Gulf Conferences and Iranian Inc for Contemporary International Conferences & Fairs, ends Wednesday (15th October).
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