GPCA: Huntsman CEO discusses the pros and cons of Middle East development downstream

09 December 2011 16:16  [Source: ICB]

Peter Huntsman, president and CEO of Huntsman Corporation, discusses the advantages and challenges to downstream development in the Middle East

Peter Huntsman sees the Middle East as an extraordinary but challenged region for the development of downstream chemical production.

On the one hand are the region's considerable advantages, such as an abundance of certain raw materials, a desire to diversify its industry, strategic geographic location and a healthy business ethic, according to the president and CEO of US-headquartered differentiated chemicals producer Huntsman Corporation.

Peter Huntsman CEO, Huntsman Corporation

On the other hand, there are significant challenges, such as the economic and political turmoil sweeping the region, difficult access to some of the raw materials necessary for specialty chemical production and potential hurdles for investments by smaller companies, Huntsman adds.

"I think with the Arab Spring - as enthusiastically as some people are greeting it - it does add a dimension of instability to an already unstable financial market," he says.

"Boards of directors today are asking pointed questions about the use of capital" in the region. While the ultimate impact of the turmoil could be positive or negative, it is adding "a sense of instability in an already unstable world and that doesn't help the situation".

A speaker at the Sixth Annual Gulf Petrochemicals & Chemicals Association (GPCA) Forum, Huntsman says those seeking to develop downstream production in the region may also confront the challenge of securing raw materials for some chemicals.

With its abundance of natural gas and oil, the Middle East has plenty of raw materials for chemicals such as polyethylene (PE), ethylene glycol (EG), polypropylene (PP) and others. But for a product like methyl-di-p-phenylene isocyanate (MDI), getting access to upstream chemicals such as chlorine and others might be more difficult.

"So as you move further downstream you have to have access to a number of different raw materials that typically are not readily available in a commodity chemical sort of environment," Huntsman explains.

"That is why we typically see specialty chemicals flourish in places like North America and Europe, where they have such a wide variety [of raw materials] and a much older industry that has been developing into so many different branches of chemistry."

The Middle East can develop downstream capacity, but Huntsman warns it will not happen overnight.

He also questions whether the region's reliance on large "national champions" in petrochemical production is the best way to develop downstream production.

The region is dominated by "massive projects that are being undertaken by Saudi Aramco and SABIC and others," he says, but oftentimes it is the smaller companies that develop downstream chemistry.

"You are not talking about multi-billion dollar companies. Usually you are talking about smaller companies that are investing in intellectual capital, investing in technology. I question if the environment is going to be such that these smaller companies are going to have equal treatment to some of the national champions that already exist there."

However, Huntsman suggests that "certainly from a raw material perspective if they are available in the Middle East, they are usually quite competitive."

Geographically, "the area sits very nicely between Europe, India and China, so you are kind of in the middle of some very robust markets", he adds.

Finally, the region is actively trying to attract a chemical industry by "focusing on educating engineers and striving to build what has been a great industry in North America and in Europe," he says. "I am not sure in those markets it is seen as a great industry any more."

He adds that "in the Middle East, at least through our experience, we have found that in virtually every country there has been an extremely honest and very ethical group of companies, and I think that speaks very positively for the area as well."

Huntsman says he expects some of largest projects to be announced by his company in the next 12 months will be in the Middle East. Huntsman and Saudi Arabia's industrial holding company Zamil Group plan to build a plant to produce morpholine and diglycolamine (DGA) agent at Al-Jubail in Saudi Arabia, making Huntsman the world's largest supplier of morpholine and DGA agent. Start-up is expected in 2014.

Morpholine is an intermediate used in the manufacture of a wide variety of products including rubber vulcanization accelerators; optical brighteners; coatings; pharmaceuticals; dyes and textiles; and photographic chemicals. DGA agent can be reacted with fatty acids to form amides and amine salts for foam-boosting surfactants, stabilizers, detergents, as well as in other applications.

"I think we have publicly announced that we are looking at yet another joint venture with the Zamil family on DGA," Huntsman says. "We continue to evaluate a number of projects in the region."

More information on Huntsman's activities

By: John Baker
+44 20 8652 3214

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