MOSCOW (MRC) -- Saudi Arabia is maintaining its leading position as the region's largest petrochemical producer with an annual 86.4 million tons of capacity a report from the NCB's Economics Department Research Team has confirmed, said Menafn.
But it says the recent discovery of North American shale gas and oil is likely to have an effect on the Saudi petrochemical sector in its trajectory toward remaining upstream or moving downstream. The expansion in ethylene production capacity has resulted in Saudi Arabia being the third largest producer worldwide accounting for 11 percent of global ethylene capacity.
According to the report the Saudi petrochemicals industry is not expected to see a massive rise in overall petrochemicals capacities until 2016 when the Sadara petrochemicals complex is due to come on-stream. Ethylene is a key building block in the petrochemical industry. In recent years the world has witnessed its largest ethylene capacity expansion growing at a compound annual growth rate (CAGR) of 4 percent between 2007 and 2012 to reach 155.9 million tons in 2012. In 2012 worldwide capacity additions were much lower than the record additions registered in 2010 when 11.4 million tons/year of ethylene capacity was added. However GCC capacity addition in 2012 trended downwards by 13 percent.
The majority of capacity additions within the GCC between 2007 and 2012 took place in Saudi Arabia which accounted for 64 percent of the regional capacity additions. With 17.5 million tons/year Saudi Arabia is the largest ethylene producer in the region accounting for 72 percent of the regional ethylene capacity up by 7.7mn tons/year compared to five years ago. This massive expansion in ethylene production capacity has resulted in Saudi Arabia becoming the third largest producer worldwide accounting for 11 percent of global ethylene capacity.
Ethylene's global cost curve reflects that the Middle East overall still has a comparative cost advantage. However according to industry analysts the recent leveling of US gas prices has the potential to render US ethylene more economically cost efficient than Saudi produced ethylene with the transfer price for ethylene in Saudi Arabia and the US amounting to 466 per ton and 323 per ton respectively.
However the recent discovery of North American shale gas and oil especially in the US is likely to have an impact on the Saudi petrochemical sector albeit the technology needed to extract it efficiently and profitably is still in its preliminary stages. Whether Saudi Arabia can retain its global leading position through technology differentiation while leveraging its natural resource abundance remains at the forefront of the sector's concern said the report.
The Saudi petrochemical sector is characterized by three main factors. First the Kingdom has substantial proven feedstock reserves with 264 billion barrels of crude oil 279.7 trillion cubic feet (tcf) of natural gas and an esti-mated 600 tcf of unconventional shale gas. Second low feedstock and energy costs have to-date led to a comparative and in turn a competitive advantage for petro- chemical producers. Third the Kingdom has strong industrial and regulatory infrastructure which have been integrated into specially developed industrial cities.
According to the Gulf Petrochemical and Chemical Association (GPCA) total GCC petrochemicals capacity reached 127.8 million tons in 2012 recording a 5.5 percent growth from the previous year. Saudi Arabia maintained its leading position as the region's largest petrochemical producer with 86.4 million tons of capacity representing 67.6 percent of the total regional capacity. In addition during the same period the Kingdom led production with 6 million tons coming on stream.
The majority of Saudi's nonoil exports consists of petrochemicals which include downstream plastic production and building materials.
MRC