Global Interest Grows in the Middle East's Booming Petrochemical Industry

08-03-2012: The Middle East has triumphantly emerged as the most economical region for petrochemicals production due to the advantage of cheaper feedstock, a new report by business intelligence expert GlobalData has found.   

The new report found that the Middle East has witnessed a significant increase in joint ventures during the last five years due to its abundant and cheaper natural gas reserves, hoisting the country into the limelight as an important destination for petrochemicals.

The global economic crisis led North American and European markets to lose demand, and subsequently led companies from these regions to develop working partnerships with Middle-Eastern companies. The Middle East saw a total of 10 joint venture deals being made in 2010, representing 22% of all joint ventures agreed globally during that year. Co-operative projects between European and Middle Eastern companies account for 27.7% of all joint ventures set up for planned projects in the Middle East.

The subsidies provided by various governments in the Middle East on the feedstocks used for petrochemicals production means that ethane in the Middle East has become five to six times cheaper in comparison to that found in European countries. It is difficult for producers in other regions to compete with these significantly cheaper production costs, and many are therefore partnering with Middle Eastern companies in joint ventures to benefit from this cost advantage.

Due to highly economical production cost, the petrochemicals capacity in the region has increased substantially. Led by Saudi Arabia, the Middle East has built massive petrochemicals production facilities that are among the most cost-competitive in the world.

Apart from benefiting from the feedstock advantage, the Middle East region is likely to maintain a high growth trajectory using its regional proximity to booming Asian markets, which are currently growing faster than those in North America and Europe. Petrochemical companies seeking high profits in the coming years are therefore endeavoring to become involved in joint venture projects based in the Middle East.