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Growth in Middle Eastern petrochemical industry expected to achieve 5 percent GDP growth

September 15/2009
September, 15 ( -- The Middle Eastern region expects tremendous growth in petrochemicals, and market share of its petrochemicals sector could ultimately as big as that of oil and gas production. CMAI estimates this region will produce about 20% of the world’s basic petrochemicals and polymers by 2010.

The population of the Arab world, which includes the traditional Middle Eastern countries as well as Algeria, Libya, and Egypt, is currently almost on par with that of the U.S.

At the same time, population in this region is growing at 3% pa or even more. The main economic issue Governments face is to develop strategies to grow per capita GDP at least at 5% keeping in view the rate of population growth and inflation growth of 1.5% pa.

Oil revenues and the benefits of integration and continued downstream development have served the Middle East region well over the past 40 years. The income, as measured by the World Bank and other institutions, has improved significantly. Life expectancy has increased substantially. At the same time, the number of citizens below the poverty level has decreased due to significant efforts by local governments. Islamic traditions encourage individuals to give a portion of wealth to the poor, further contributing to the low poverty levels in relation to the region’s income levels. Unemployment rates of more than 10% exist in many countries in the region despite this growth of oil industries. Governments are therefore promoting both primary (basic) and secondary (intermediate and finished goods) petrochemical industries. The finished products demand lower capital and can result into moderate in GDP growth.

The Middle East enjoys an enviable and unparalleled advantaged energy and feedstock position, and the revenue from oil and gas production supports further investment and development. Oil prices impact petrochemical development when they are high or low. High oil prices help the Gulf countries to maintain a share of oil markets. Of course, higher oil prices also adversely impact the world economy and also slower growth of petrochemical markets. Prices of oil have to drop drastically lower for the majority of Middle East ethane-based producers find difficult to compete on a PE. Low oil prices for a very long time would result in stronger worldwide economic growth. Low oil prices would also put more pressure on the Middle Eastern Governments to diversify in other products and away from oil.

Governments and companies in the region are actively forming collaborative relationships with petrochemical industry players to gain access to characteristics critical to market success. Governments and petrochemical producing entities are taking the necessary steps to form alliances and ventures to promote further development. With the exception of Saudi Basic Industries Corporation (SABIC), most Middle East petrochemical companies require the participation of international petrochemical companies to provide access to technology and markets. This will change over the next 5-10 years as more companies, such as NPC of Iran, reach critical mass in the competitive global marketplace.

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