The region’s petrochemicals industry cannot rely on past advantages, experts say, and must invest and innovate to meet the growing competitive threat coming from a shale gas-driven petrochemicals revival in the US and new coal-to-chemicals technology in China.
In the face of these threats, top industry executives gathering in Dubai for the annual GPCA Forum called for a number of responses, including investment in more sophisticated plants and encouragement of entrepreneurship and a small and medium-sized enterprise culture.
With pressures on the industry coming from lower oil and gas prices, and the development of coal-based polyethylene products in China, “there is a growing need to get more innovative, to get more competitive,” said Mohammed Al Sada, Qatar’s energy minister and chairman of Qatar Petroleum.
That sentiment was echoed by other executives. “To date, our advantages [particularly abundant cheap feedstock] have carried us through, but the existing model will not carry us through as the global industry landscape is changing and creating stronger competition,” Khalid Al Falih, the chief executive of Saudi Aramco, said in a keynote address.
Driven by relatively cheap shale gas, “North American plastics and chemicals production will nearly double over the next decade and they will export to markets that we have assumed over the years were ours for the taking. To the east, in Asia, things are changing also as Japan rationalises its petrochemicals industry and China experiences a relative economic slowdown and places more emphasis on … coal.”
In China this year, Wison Clean Energy successfully used technology licensed from a Honeywell company to convert methanol derived from coal into ethylene and propylene, two of the most widely used petrochemical derivatives.
China and other emerging markets will account for 60 per cent of petrochemicals demand over the next decade, according to McKinsey, a consultancy firm, because average annual incomes there are approaching US$10,000, the point when demand for plastics tends to be at its highest.
Mr Al Sada of Qatar said the Gulf region’s petrochemical industry had grown tremendously and would continue to do so.
“Cheap feedstock, economies of scale and large investment has made a compelling story, and it has made [petrochemicals] the second largest manufacturing sector in the region, with sales of $100 billion a year,” he said, citing also GPCA projections that the GCC petrochemicals industry will double output by 2020 to 900 million tonnes annually.
But innovation is lagging, Mr Al Sada said. Although the industry spent $380 million last year on research and development, that accounted for less than 1 per cent of the global total and patents granted to GCC firms was less than 0.4 per cent of the global total. And even of those patents, three-quarters were geared towards existing processes rather than new chemistry.
Mr Al Falih said one of the main objectives of Aramco – which should be supported by others in the GCC – is an effort to use more plentiful naphtha as a feedstock and to work towards bypassing refining altogether by developing processes to convert oil directly into chemicals.
He said that a company had already been chosen to conduct a pilot oil-to-chemicals project. “It is still in the research phase but ultimately that is the way to go. Petrochemicals demand is growing at 4 to 5 per cent [a year] and no matter what happens with shale, gas [as a feedstock] will not be enough.”
Aramco also is partnering with Dow Chemical to build the largest chemicals complex in the world at Jubail, with start-up expected in the middle of next year.
The Sadara plant at Jubail “is not just a basic chemicals plant but is the hub for building multiple products, multiple business”, that would create more much-needed jobs, said Andrew Liveris, chief executive of Dow Chemical.
amcauley@thenational.ae
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