The 11th Industrialists Conference for GCC Member States launched in Abu Dhabi

Global Petrochemical industry witnessed a lot of changes and challenges in the last few years; amongst them is the increase in crude oil and gas prices, which are still continuing to increase. At the time when petrochemical industry profit margin in GCC reached record levels, plants in western countries face critical conditions due to this increase.

Economies of China and India continued to grow and this was clearly and strongly reflected on the market and petrochemicals' prices. Besides, the growth of engineering contracting, construction and building sector which leads the costs of projects - and amongst them the industrial ones- to record levels is a noteworthy challenge that this industry faces.

For example, the State of Kuwait duplicated the budget allocated to Al- Zour Refinery to reach over $12bn. Also, economic societies talk about the duplication of budgets allocated to the coming projects in more than one industrial sector due to the increase in the costs of projects in some Gulf states.

According to the estimations of the Gulf Organization for Industrial Consulting (GOIC), it is expected that the investment size in chemicals and petrochemicals sector in GCC reaches $120bn during the coming five years. While the investment size in this sector reached some $70bn in 2006 (compared to $52bn in 2000). KSA takes over some 63% of those investments, and then comes the State of Qatar in the second rank with some 14% of the total investments. The number of working companies in this sector is 1969, with a workforce of some 155 workers.

According to a report issued by GOIC, participants in global petrochemicals industry should precisely take into consideration the impact which GCC member states can leave on global markets. For example, the expected share of Middle East countries of basic petrochemical production and polymers such as Ethylene and Poly-Ethylene will reach over 20% by 2010.

Despite the discrepancy in the prices of raw materials used in chemical and petrochemical industries in the Gulf, what distinguishes them all is the availability of those raw materials in competitive prices in a manner that encourages investment in hydrocarbons' production. As such, this facilitates for Gulf producers processes of production and manufacturing of some petrochemical materials such as Polyphones in a competitive price that is less than 75% compared to its Chinese counterpart or another; taking into account that Polyphones is highly demanded in China in the first place, then comes India. At the long terms, the Middle East region will leave a growing impact on global petrochemical markets due to the availability of raw materials. Besides that, the development in petrochemicals will lead to the growth of energy-intensive and export-oriented industries such as complementary industries, and processing industries.

GOIC recognizes a big opportunity for the development of petrochemicals by means of best utilizing the available energy in GCC member states, which means a bigger capability in producing energy-intensive chemicals. In addition to that, a level that is not lower than the development of the value chain of petrochemicals' industries can be achieved through export oriented approach.

GOIC mentioned that many of GCC member states such as KSA, Kuwait, Qatar, and UAE have established a strong base for producing petrochemicals that are based on Methane, Ethane, and liquid raw gas, through large-size plants that deploy the best and most up-to-date technologies. With the boom of basic and complementary chemicals' production, producers started to explore additional opportunities for industries connected to this sector which have to create diversification and increase the added-value of this industry. Also, producers started to largely cooperate with their other counterparts in petrochemicals' industry to deploy new technologies and benefit from their expertise.

Although large industrial cities in GCC member states provided infrastructures that suite the previous stage, where governments of GCC member states devoted large amounts in this regard; also they invested in ports, roads and buildings to support industrial development; yet, there is a real need for other specifications for industrial infrastructures that suite the new concepts and modern technologies which should find their ways in Gulf industrial cities. Also the available areas in the current industrial cities become limited due to the big growth rate which the region recently witnessed, thus additional developments become necessary to support future growth.

As for direct foreign investments, GOIC reported that they did not sufficiently grow in the last decade, and were restricted to some common foreign investments with companies like Shell, ExxonMobil, Dow, Total, and Chevron Philips.

Petrochemical industry is considered amongst the dynamic industries due to the multiplicity of its uses, products and complexions, further to its wide range of applications in most modern life aspects. Accordingly, it provides GCC member states with the opportunity to restructure its processing industry in a way that achieves more integration, correlation, and balance; and therefore provide it with more strength and competitiveness in global markets.

A conference that discusses the future of petrochemicals

To this end, the 11th Industrialists Conference for GCC Member States was launched in Abu Dhabi yesterday, Sunday. The conference which discusses the future of Gulf Petrochemical industry in 2020, was launched by H.H. General Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces of the UAE, with the attendance of a large number of ministers concerned with industry, commerce, planning and development.

The two-day conference, with the presence of international keynote speakers, aims at drawing a wide-ranging strategy for the future of petrochemicals industry; determining a vision that is based on integration and correlation; and diagnosing the challenges that might face the industry.

In terms of conference organization, besides GOIC, each of the Ministry of Finance and Industry in UAE, and Abu Dhabi Chamber of Commerce & Industry contribute in this event's origination, in coordination with the GCC General Secretariat, and Federation of GCC Chambers, in addition to the Federation of U.A.E Chambers of Commerce and Industry.

Tomorrow, the conference will present work papers on: Shaping the Future with Plastics: a Differentiated Approach; Petrochemical Industry - Technological Trends; What is happening in the Asian Petrochemical Industry?; Financing the Gulf Petrochemical Industry; An Example of Flexible Strategic Management; and Feedstock Availability in GCC - Current Situation & Future Trends. The open discussion session will be devoted to discussing the international investment in GCC petrochemical industry.

The importance of the conference theme

The Petrochemicals Industry represents one of the fundamental pillars of the GCC economy. Over the last two decades, the Petrochemicals industry in most GCC member states experienced an unrivaled phase of sustained growth, which is expected to continue unabated in the foreseeable future. Indeed, there is a widespread consensus that the Region is extremely well positioned to take a leading role in the Petrochemicals industry throughout the 21st century.

It is expected that investment size in this sector reaches $120bn by 2010. For example in Ethylene, one of the fundamental Petrochemical products, half the world's capacity growth in the next five years will be concentrated in the Middle East. As a result, by 2010, Ethylene production from Iran and the GCC member states will double to 20% of global capacity.

Furthermore, statistics indicate that the average growth rate of Gulf investments in chemicals and petrochemicals industry reached 5% between 2000- 2006; as it increased from some $52bn to $70bn, and this constitutes a share of 59% of the total Gulf investments in the processing industries which equals $118.3bn. Workforce in this sector reached in 2006 some 163,134 workers, while there were 122,735 workers in 2000, i.e. a growth rate of 32.5% in the designated period.

The production capacity of Ethylene, the basic material in petrochemicals industry, in GCC member states reached over 10 million tons in 2007, thus constituting some 9% of the global production capacity of this material. It is expected to rise to 15% in 2020.