US Shale Gas Unlikely To Affect Middle East

Middle Eastern producers are at a stage in their development where pure ethane players are difficult to secure and the industry is moving towards heavier feedstocks.

However with the development of new shale gas resources in the United States, the region needs to prepare to capitalise on potential opportunities in its own petrochemical sector.

According to Dr Christian Gunther, partner at McKinsey, this is unlikely to affect Middle East aspirations of growth in a major way -” the US is estimated to add around 9 to 11 million tonnes of ethylene capacity within the next ten years, which can be absorbed by the forecast global demand growth of around 50 million tonnes and still leave space for other players.

Moreover, prices will remain set by liquids-based producers, as significant quantities of liquid-based ethylene will be needed to meet global demand.

Feedstock allocation

“Cracking naphtha primarily produces ethylene, propylene and butadiene,- said Dr Gunther. “If the US shifts to cracking ethane, the supply of propylene and butadiene may reduce and force prices to increase, making it an opportunity for producers with access to C3 and C4 to invest in.

The real challenge for the petrochemical industry in the Middle East will likely be the availability of advantageously priced ethane. From a country perspective, Dr Günther believes that the right feedstock allocation decisions by regional governments as well as enhanced education and capability building are required.

At the same time, chemical companies will have to accelerate their move towards functional excellence in operations, capex, procurement and marketing and explore opportunities beyond their traditional products to ensure the Middle East remains globally competitive.

Petchem Arabia 2012

Eli Andjelich, vice-president (Business Development) of Middle East from Chevron Phillips Chemical Company recently participated in an interview with The World Refining Association ahead of Petchem Arabia 2012 to explain the changing global scenario of petrochemical production from the Middle East to the West.

Petchem Arabia, running from September 30 to October 3 in Manama, Bahrain will address these challenges and explore future directions for the region’s industry.

Eli Andjelich said that announcements have been made over the past year regarding the high probability that several (four to six) new crackers will be constructed in the US based on feed supply from the growth of shale gas production.

If these announcements are built, the US would become a larger exporter of ethylene and ethylene derivatives.

With the development of new shale gas resources, the US petrochemical industry is announcing significant expansions of US petrochemical capacity and these new resources are a major driver for Chevron Phillips Chemical’s new investments in the US.

The company is on track to build a 1.5 million metric tonnes per year ethane cracker at its Baytown plant in Texas.

Times of Oman

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