GPCA '13: GCC petrochemicals under threat from US shale boom: GPCA

18 November 2013 08:37  [Source: ICIS news]

DUBAI (ICIS)--Gulf Council Cooperation (GCC) countries’ polyethylene (PE) producers may see significant decline in revenues following a petrochemicals revival in North America, driven by unconventional gas resources development, Gulf Petrochemicals and Chemicals Association (GPCA) said over the weekend.

"The availability of large volumes of hydrocarbons in the US will drive cost competitiveness amongst domestic petrochemical companies, and also increase exports in plastics to Europe and Asia, two key markets for GCC petrochemical producers, Abdulwahab Al-Sadoun, GPCA secretary general said in a statement.

"GCC polyethylene manufacturers could, therefore, experience a significant drop in revenues,” he said.

The GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The Gulf States exported 16.4m tonnes of PE, roughly 26% of the global export market in 2012, according to a joint report recently prepared by the GPCA and consultancy firm Stratley. The US, in comparison, exported 18.6m tonnes of PE in the same period.

Al-Sadoun said the US shale gas boom has revived the US chemical industry, which is becoming increasingly competitive globally, with access to guaranteed supplies of gas and cost-efficient processes.

The shale gas revolution in North America will drive investments in chemical plants producing fertilizers and ethylene derivatives like polyethylene, he added.

PE – a plastic product used to make food packaging and plastic bags – will be a major trade commodity for the US, with exports expected to double by 2020.

Technically, global recoverable shale gas resources are estimated at 6,240 trillion standard cubic feet, of which around 8% are in the US, 10% in Europe and 20% in China, according to the US Energy Information Administration (EIA).

Reserves are likely to significantly increase in the near future as more exploration data becomes available.

Shale gas is available on all continents in large amounts and much more widely distributed than conventional oil and gas resources, EIA said.

In the medium term, however, Al-Sadoun said that the outlook is positive for GCC manufactures as the region's PE exports will reach 20.3m tonnes by 2016.

“But GCC producers need to adapt to changing market conditions now in order to realize continued growth. Further innovation in products and processes will be key,” he said.

The GPCA and Stratley report titled “Shale Game: Impact of the global shale development on the GCC' indicated that the development of shale reserves in the GCC is currently in its infancy.

In Saudi Arabia, the largest identified deposit of shale gas is located in Rub al Khali, which is close to the giant Ghawar oil field.

Saudi Aramco is leading exploration activities, with seven shale gas test wells set to be drilled by the end of this year in Saudi Arabia.

Despite these developments, challenges such as limited access to water for extraction purposes are likely to delay large-scale development of these resources to 2020.

The shale gas phenomenon will be a key focus at the GPCA annual forum, to be held this week in Dubai. The GPCA- Stratley report will also be released at the forum, Al-Sadoun said.

The statement came just ahead of the 8th annual GPCA conference to be held in Dubai from Tuesday to Thursday.

By: Aamir Ashraf

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