INSIGHT: Europe can make more of next Mideast petchems wave

17 February 2010 17:15  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--European companies could play a more prominent role in Middle Eastern petrochemicals development - but haven’t all the cherries been picked?

Producers had tried to gain footholds in the region to tap into the clear low-cost ethane feedstock advantage but the going was tough with negotiations often protracted and sometimes far from fruitful. The BP Chemicals and then INEOS Delta project was a case in point.

Yet times have changed. Producers are looking at much broader product slates as feedstock availability changes. And regional economic expansion is expected to push up demand for a broader range of petrochemical intermediates.

European chemicals companies have a “window of opportunity” to invest in the Gulf Arab region, a Tasnee official said last week . He also suggested that European players had “lost decades” by not investing in the Gulf.

A widening derivatives product mix is providing opportunities for European companies to leverage their technologies, said Tasnee CEO Moayyed Bin Issa al-Qurtas at a World Refining Association petrochemicals conference. “Maybe there is still time for the European industry to catch up,” he added.

Attitudes have certainly had to change as the focus of global petrochemicals growth and development has shifted away from North America, Europe and Japan towards the Middle East and China. European players should not be as cautious as they once were. And they appear, by necessity, perhaps, to be much more open to opportunities.

There remains a balance, however, between where it might be best to invest - in the Middle East to take advantage of potential feedstock opportunities; or closer to the end market, whether that is China or somewhere else, so as to secure supply to the customer.

It is the development of a more extensive customer base that will be critical to the success of the broader development of petrochemicals in the Gulf region.

“Once the molecules are there, demand will be encouraged. It’s a snowball effect,” al-Qurtas said. There is growth in the automotive, construction, metals processing, packaging and consumer goods sectors which in Saudi Arabia is encouraged by government-backed cluster development.

Similar clusters are emerging elsewhere in the region with proposed petrochemicals projects the key raw material providers.

European producers are well placed to supply the push from technology for these plants. Companies based in faster growing parts of the world, such as India and China, probably do have enough on their plates coping with local market growth without having to bother too much about levering heir own growing technological expertise into the region.

Most (European) players have noticed that the window of opportunity is open. Go to any petrochemicals conference in the Middle East these days and European producers of intermediates are out in force.

Twenty five years ago, emerging regional players in the Middle East and their joint venture partners could tap into the clear competitive advantage provided by low cost ethane feedstock. Those days, however, they are forced to play a new game. They don’t know much about intermediates: they don’t have the technologies needed to make them or know how to sell them so they need partners.

“All the big European players are trying to get things to happen,” says Richard Sleep, a senior vice president with Nexant ChemSystems. “Something will come from that fairly soon. They are trying to engage.”

New project plans in the region continue to emerge. Some are publically only vaguely sketched out but talks with technology and engineering suppliers are in hand.

Producers in the Gulf with the vision and resources will underpin the next phases of petrochemicals development in the region. Largely as yet, it remains to be seen who will eventually partner with them.

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By: Nigel Davis
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