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Middle East petchem industry faces North American competition
By Ashok Dutta
The wider implications of North America’s shale gas boom are
considerable. From a global petrochemical perspective, the
continent’s producers are setting themselves up to compete with
their Middle Eastern counterparts for a larger share of the Asian
The majority of petrochemical products from the Middle East and
North Africa are sold in Asia under various term-supply contracts.
“We have been selling into that market [Asia] for over 30 years,
with China and India being our two largest customers for PE
[poly-ethylene], PP [poly-propylene] and fertilisers,” a former
technical advisor to Qatar’s oil minister, Abdullah Hussain
Sallatt, told Downstream MEA
in a telephone interview from Doha. “With more investments planned
in Saudi Arabia, the UAE and Qatar, we will spare no efforts to
enter deeper and find a permanent footing for our products in
Competition is at hand, however, from producers in North America.
“China is our target market and we need to be there sooner
[rather] than later,” Alberta’s energy minister, Ken Hughes, said
recently at the inaugural session of the Canadian Energy Research
Institute’s (CERI) annual petrochemical conference in the Canadian
province. “We are working towards exporting bitumen and LNG to
Asia and we will now need to add chemicals to that portfolio.”
Hughes’ statement came against the backdrop of an anticipated
return of North America as a competitive supplier of petrochemical
products by 2018-19, when ‘mega’ new facilities are due to be
commissioned in the US.
“We see a reinvigoration of investments in North America, as
companies take advantage of low ethane feedstock prices from the
rapid development of the shale gas industry,” a vice president
with Houston-based IHS Chemical, Mark Eramo, said at the event.
Since March this year, two new mega projects have been announced
in the US.
The first is a petrochemical complex to be built by Shell
Chemical, including PE and mono-ethylene glycol (MEG) units, in
the Appalachian region. The second is a project planned by
ExxonMobil Chemical, which will construct a 1.5 million tonne per
year ethylene plant at its Baytown, Texas, olefins complex and two
PE units, each with a capacity of 650,000 tonnes per year.
Shell and ExxonMobil are joining companies including Dow
Chemical, Chevron Phillips Chemical and Formosa Plastics in
pursuing greenfield projects to expand ethylene and polymers
production in the US. Other companies including Ineos,
LyondellBasell, Williams, Westlake Chemicals and Nova Chemicals of
Canada are planning brownfield expansions, debottlenecks and/or
retrofits to add ethane consumption capacity and increase ethylene
If developed, the proposed expansions would raise US ethylene
production by nearly 10.5 million tonnes per year, Eramo said.
In comparison, by 2018-19 in the Middle East and North Africa,
around 14 million tonnes per year of new capacity will be added
once new projects are commissioned by joint ventures among Saudi
Basic Industries Corp. (Sabic), Abu Dhabi Polymers Company
(Borouge), Sadara Chemical Co., Qatar Petrochemical Co. and the
Qatar Petroleum/Shell Group mega-plant, to name a few.
Although no mega investments are planned in Alberta, the
provincial government will initiate efforts to overcome the
challenges of making available ethane and natural gas liquids
(NGL) feedstock at ‘competitive’ prices.
“We will be more engaged, pragmatic and do all that is necessary
to provide ethane feedstock for petrochemical producers. One of
our biggest new sources will be offgas [a mixture of ethane,
propane and pentane] from the bitumen and heavy oil upgraders,”
Middle East progress
In the Middle East, onsite construction work is under way at the
Sadara project in Saudi Arabia – which will produce over 3 million
tonnes per year of 26 specialist chemicals from three multi-feed
crackers. Meanwhile, earlier this year, Shell signed a heads of
agreement (HoA) with Qatar Petroleum to develop a petrochemicals
plant at Ras Laffan at an estimated cost of US$6.4 billion.
The agreement set out the scope and commercial framework of the
project, which would include a steam cracker and a MEG plant with
a capacity of 1.5 million tonnes per year. The complex will be
designed to produce 300,000 tonnes per year of linear alpha
olefins as well.
“We have been holding discussions for [a long time] with
ExxonMobil, Total and Shell for the facility, as there is a
growing demand in Asia and the Far East for such exotic products.
The Shell project signals our entry into the next generation of
chemical products,” Sallatt said.
More downstream project activity is also planned by Qatar
In February this year, Qatar Petroleum put pen to paper on another
HoA with Qapco to develop a new mega petrochemical complex at Ras
The complex will include a world-scale steam cracker and will
produce 1.4 million tonnes per year of ethylene, 850,000 tonnes
per year of high-density polyethylene (HDPE), 430,000 tonnes per
year of linear low-density polyethylene, 760,000 tonnes per year
of polypropylene and 83,000 tonnes per year of butadiene. The
project is scheduled for completion in 2018.
“Undoubtedly, the Middle East will always be ahead of the game,
but there is still a chance of competition from North American
producers,” a managing consultant with Calgary-based Purvin &
Gertz, Gerry Goobie, said. “[The] delivered price of chemicals
into Asia will be a deciding factor.”