InterviewGPCA ’13: Saudi industries 'want dialogue on gas price policy'

21 November 2013 14:28  [Source: ICIS news]

DUBAI (ICIS)--Saudi petrochemical industries are urging the local authority to communicate with local industry stakeholders, academics and consultants as part of a consultative process for determining the country’s future gas price policy, a senior executive of NATPET said on Thursday.

Industry stakeholders in particular should have a role in the change process because the Saudi government’s plans to raise domestic propane prices will have a direct impact on local industries, he said.

“We still believe that raising feedstock prices in Saudi Arabia will have serious implications for the local industries,” said Jamal Malaikah, president and chief operating officer of National Petrochemical Industrial Co (NATPET).

He was speaking to ICIS at the sidelines of the 8th annual Gulf Petrochemicals and Chemicals (GPCA) Forum in Dubai.

The Saudi authority should not raise gas feedstock prices in Saudi Arabia on the assumption that US gas prices will rise in the future on increased domestic and global demand, said Malaikah.

Higher ethane and propane gas prices in Saudi Arabia will deter foreign investment and drive investors to the US, he said.

It is already more economical to build a petrochemical plant in the US where the availability of skilled workers and advanced technology enable higher efficiency, he said.

“Shale gas is a game changer. If US producers enjoy lower-cost propane, they will export lots of polyethylene [PE] and polypropylene [PP] to Asia and the Middle East,” he added.

He thinks that it will make sense for Saudi propane prices to be benchmarked against propane prices in the US, instead of naphtha prices in Japan.

Saudi propane prices are based on naphtha import prices in Japan, minus 28% and freight costs, he said.

US propane prices were around 27% lower than Saudi prices in September, he added.

There is an urgency for Saudi Arabia to maintain its feedstock advantage, particularly with the recent rise of protectionism in global trades where countries or regions impose or raise import tariffs, he said.

The GPCA forum started on 19 November and will end on Thursday.

By: Chow Bee Lin
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