10 October 2008 15:57 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Petrochemical and polymer players may worry about the ‘mountain’ of new capacity due to come on stream in the Middle East over the next two to three years, but what comes next may prove more influential.
The received wisdom is that the region will become the supplier of low-cost olefin-based products and polymers to the world.
Some also believe that a move to a more broadly-based feedstock slate will see regional producers gaining ground in other important petrochemical product markets.
This, however, was yesterday’s view.
The global financial crisis has and will change a great deal. It will rip through project plans and shift company strategies.
A worldwide recession will also not simply change the industry landscape but the outlook too.
To be successful in petrochemicals a company needs access to feedstocks, energy, technology, markets and capital. Push the envelope too far on any one of these and a project fails.
The steep increase in the cost of engineering, construction and essential commodities has led to the delay of some projects.
But the world’s olefins and polyolefins players know that the next two years will be hard from a supply and demand standpoint simply because so much new capacity is coming on stream.
Yet other drivers make the outlook for some projects planned to start up in the early years of the next decade decidedly uncertain.
A new petrochemicals plant, let alone an integrated petrochemicals complex, costs a great deal: the sort of outlay that few, if any, corporations individually can afford.
The big petrochemical projects in the ?xml:namespace>
Significant shifts in the global financial system alter project profiles and will push some schemes to the edge.
A shifting oil price also challenges the viability of projects that are liquids-based. Taking a long-term view on oil now is a difficult game to say the least.
But if private concerns are challenged to question their investment plans then attention falls on government-backed schemes. These tend to be the most grandiose mega-projects that in most instances take years to come to fruition.
Governments could lose a taste for chemicals very quickly and be moved to ponder anew the question of just how important a more broadly-based chemicals sector is to a developing, sustainable 21st century economy.
Power and other infrastucture projects rapidly become more important than chemicals.
Until now, chemicals production in the
Gaining access to low-cost feedstock for the next phase of development has not been easy. It is likely to get more difficult.
This will drive companies to take a more rounded global view. The petrochemicals map will change but possibly not in the way that many now think.
The faster growing markets for petrochemicals are in Asia, Latin America and Central and
If feedstock is available, and the technology works, then in the current environment some of the project plays in closer-to-market locations look increasingly interesting: methanol-to-olefins in
The oil majors know a thing or two about the downstream business and it is not surprising that ExxonMobil's and Shell’s next big olefins projects could be in
Over the longer term, the energy majors will seek to take chemicals and refined products to market. Greater downstream integration is the key.
Clearly, the worldwide search for feedstocks has widened, and as fields are developed new opportunities arise.
Gazprom this week offered an intriguing picture of developing gas-to-chemicals operations between 2014 and 2024 in the vastness of
The energy giant could add value to gas produced in these regions and push polyolefins into a widening
In the face of global financial turmoil it is clear that those wanting to advance major petrochemical projects over the next few years will need stable balance sheets or deep pockets - or both.
As always, the industry will not be for the faint-hearted but for those with a clear purpose. The fundamentally disadvantaged will be exposed.
To discuss how the financial crisis is affecting the chemicals industry visit this thread on ICIS connect
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