Plastics set to wrap up bright future

The Asia-Pacific region is by the far the most important part of the world when it comes to UAE oil exports. In 2008, 98.7 per cent of crude exports went to the area. While Japan is the biggest consumer of UAE crude in the Asia-Pacific region, China is also a major purchaser. But UAE petrochemical companies are looking beyond selling oil to the Middle Kingdom to focus on value-added petrochemical-related exports. Among them is the Abu Dhabi and Singapore-based Borouge, which is becoming a major supplier of plastics in China.

The company is a joint venture between the Government-owned Abu Dhabi National Oil Company and Borealis, based in Austria, which is part-owned by Abu Dhabi Government-linked interests. Borouge has dedicated logistics centres in Shanghai and Guangzhou and earlier this year inaugurated a factory in Shanghai that makes compounded plastics from raw materials sent from the UAE. The company recently announced plans for a second factory, in Guangzhou, and has indicated it may build a third in northern China, also near a car making centre,as it aims to increase sales of compounded plastics for automotive and white goods manufacturing.

Borouge is also rapidly growing capacity at its facilities in Ruwais in Abu Dhabi, with production tripling this year as the company invests in its Borouge 2 facilities. Significant further increases are planned. Andy Liu, Borouge's Shanghai-based general manager for north Asia, says China is set to become the largest market in the world for polyolefins, the polypropylene and polyethylene products Borouge makes. As a result, much of the increase in production in Ruwais is with China in mind.

"Other countries will go very fast, like India, but China will be the key market for our future business development," says Mr Liu, who visits the UAE regularly. "Almost half of the Borouge 2 volume will be [exported to] China. This is why Borouge sees China as so important." Borouge's Guangzhou factory will take advantage of the demand for plastics from car makers such as Nissan, Toyota and Honda, which have assembly plants nearby. Door fittings, bumpers and dashboards are all made from compounded plastics.

So great is the importance of China as a market for petrochemical-related products, such as those produced by Borouge, that earlier this year Abdulwahab al Sadoun, the secretary general of the Gulf Petrochemicals and Chemicals Association, said China's growth was "the engine behind the excellent performance of the petrochemical companies in the Middle East".