Middle East: The Region Wants To Beat Its Cracker Addiction | January 10, 2011 Issue - Vol. 89 Issue 2 | Chemical & Engineering News
Volume 89 Issue 2 | p. 16
Issue Date: January 10, 2011

Cover Stories: World Chemical Outlook

Middle East: The Region Wants To Beat Its Cracker Addiction

Department: Business
Keywords: Middle East, petrochemicals, ethane
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After years of delays and operational difficulties, a long-anticipated 7 million-metric-ton-per-year slug of Middle Eastern petrochemical capacity finally came on-line in 2010. But to maintain its growth, the region will need to expand beyond simple ethylene derivatives.

Three affiliates of Saudi Basic Industries Corp. (SABIC) inaugurated ethylene crackers and derivatives units during the year. Projects also started up in Iran, Qatar, and the United Arab Emirates.

At a press conference in October 2010, SABIC CEO Mohamed H. Al-Mady acknowledged that his company wasn’t immune to the region’s construction woes. Two of SABIC’s affiliates—dubbed Sharq and Yansab—encountered minor project delays, he said, and its Saudi Kayan joint venture faced cost overruns. “The engineering contractors were being stressed thin in the area,” Al-Mady said, adding that other firms faced delays of up to two years.

Leslie McCune, managing director of the Middle East-focused consulting firm Chemical Management Resources, says SABIC has more experience bringing projects on-line than its regional competitors.

Even in the Middle East, feedstocks are becoming increasingly scarce, and Middle Eastern producers are trying to extract more value from the resources they have. McCune says the producers are increasingly emphasizing operational reliability, efficiency, supply chain management, and other value-enhancement practices that are common elsewhere in the world. “The value drive is being more heavily expressed in the Middle East, where the focus has been more on iconic projects,” he says.

The feedstock problem is acute, McCune says. For example, Saudi Arabia currently turns out about 8.5 million barrels of oil per day, he says. But to yield enough associated ethane to feed its crackers, the country needs to produce about 10 million bbl of oil.

Thus, the industry is looking beyond its current model of pushing ethane through crackers to supply plants that make polyethylene and other basic derivatives. It aims to balance its feedstock diet with heavy liquids and also produce more value-added products such as specialty chemicals and engineering polymers.

Last month, Khalid A. Al-Falih, CEO of Saudi Aramco, told a Gulf Petrochemicals & Chemicals Association forum that the region’s chemical business could do better. “When we consider downstream conversion and finished products—that is, areas of the value chain that are much richer in terms of value and employment potential—the broader region has a lot of catching up to do,” he said.

 
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