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NEXANT FORECASTS SHARP INCREASE IN MIDEAST PETROCHEMICAL PRODUCTION
New Study Foresees Major Impact on Asian Producers
October 11, 2006---White Plains, NY---A newly published study by Nexant, Inc.-Strategic Assessment of Middle East Impact on the Asian Petrochemical Industry-highlights the impact that the planned expansion of Middle Eastern petrochemical production will likely have on the Asian petrochemical industry. This massive increase in Middle Eastern capacity-the region's largest expansion to date-is driven by the indigenous advantage of low feedstock costs coupled with the inherent economies of scale associated with large petrochemical investments. These two factors provide compelling reasons why the Middle East is poised to take on the lion's share of new global capacity growth.
Nexant is projecting that approximately 19 million tons of ethylene capacity will be added in the Middle East in the next five years. This "fourth phase" of capacity additions in the region can be characterized as follows:
- Some crackers (e.g., in Qatar, Iran, Oman and Egypt) are being based on ethane extracted from non-associated gas. This is a "first" for the region.
- Greatly increased use of alternative feedstocks (e.g., propane and/or butanes), especially in Saudi Arabia, where the government is only considering mixed-feed allocations.
- Local private sector participation is increasing at the expense of state-owned companies.
- New industrial sites are being developed in countries such as Qatar, Saudi Arabia, Iran, and Oman.
- Major focus on specialties. This is particularly evident in Saudi Arabia, where the government has explicitly made considerations such as increased value-added via downstream derivatives production and job creation part of the allocation selection process.
The export buildup from the Middle East would most likely remain targeted towards Asia, the fastest growing region of global petrochemical demand and the region with a substantial deficit in commodity chemicals. However there is overwhelming concern in the Asian petrochemical industry that the rapidly growing Middle East capacity will not only preclude further investment in Asia for the medium and longer term, but also perhaps drive certain existing petrochemical producers to exit. As such, the Asian petrochemical industry is at a critical point in its development, as players will need to make major decisions in the near term that are expected to have lasting ramifications.
To better understand the issues facing the Middle Eastern and Asian petrochemical industries, Nexant's recently completed strategic evaluation not only examines the current and future structure of the Middle Eastern petrochemical industry but, more importantly, the structure, competitiveness, and future direction of the Asian industry-with a view toward identifying the opportunities and threats for existing Asian producers and potential new entrants. The study analyzes a number of key issues, including:
- Macroeconomic backdrop
- Feedstock analysis
- Petrochemical refinery integration opportunities
- Supply/demand balance and impact on global net trade
- Impact of technology and oil price developments
- Competitiveness of production
- A range of strategic issues, including risks to development
The study covers the following petrochemical intermediates and products:
- Intermediates-ethylene, propylene, butadiene, benzene, and para-xylene
- Primary derivatives-LDPE, LLDPE, HDPE, MEG, polypropylene, styrene, purified terephthalic acid (PTA), methanol, EDC, and VCM
The study's geographic coverage includes all of the countries playing a primary role in the development of the Middle Eastern and Asian petrochemical industry over the next decade, including:
- Middle East-Saudi Arabia, Iran, Qatar, Kuwait, United Arab Emirates, Oman, and Turkey
- Asia-Japan, China, South Korea, Thailand, India, Singapore, Philippines, Taiwan, Malaysia, Indonesia, and Brunei
The study was published in September 2006 and is available immediately. For further information, please contact Mr. James Virosco at telephone +1-914-609-0318 or email: jvirosco@nexant.com, or Dr. Andrew Spiers at telephone +44-20-7950-1560 or email: aspiers@nexant.com.
ABOUT NEXANT
Nexant's products and services help clients solve critical strategic and operational challenges in several key areas: chemicals and petrochemicals, oil and gas, electric power, energy management, energy technology, retail and wholesale power markets, and enterprise risk management. The company is headquartered in San Francisco, CA and maintains offices in London, U.K.; Bangkok, Thailand; Tokyo, Japan; Beijing, China; Seoul, South Korea; White Plains, NY; Washington, D.C.; Houston, TX; Madison, WI; Boulder, CO; Salt Lake City, UT; Phoenix, AZ; and Los Angeles, CA. The company is owned by a select group of investors and Nexant management and employees. Nexant® is a proprietary trademark of Nexant, Inc.
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