No major petrochemical projects in coming years – Clear message to GCC govts

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There will be no major petrochemical projects in the coming years — This was the main message at the petrochemical conference that was recently held in Dubai.

The message is clear to the Arabian Gulf countries that no one is interested in investing in this region or any other parts of the world in the next ten years because of the low oil prices and abundant supply of cheap shale oil in the USA.

Today, USA is enjoying the best environment for investing, particularly with its cheap energy prices and electricity and transportation costs compared to other major industrial countries. Regarding the Gulf countries, the world has one place to go to, particularly with the shortage of natural resources and lack of other cheaper raw materials.

For 40 years, our region was very attractive to the chemical companies and we all invested without any exception. With Kuwait leading the way in early 1960 followed by rest of the GCC countries, the last investment is ‘Al-Sadara’, the ongoing joint venture between Saudi Aramco and Dow Company which is worth $20 billion and will be on-stream by the end of this year.

The petrochemical business has created a new industry in our Gulf region with annual income of more than $80 billion per year, high job opportunities, and use of new skills and knowledge in this highly sophisticated industry, which requires more of skilled labor and is highly dependant on research and development. However, it seems as though we have come to a halt and have to go overseas and invest in others countries or at least agree on some sort of ownership arrangement.

For instance, this industry has created more than 600,000 jobs in Saudi Arabia, which is quite commendable. However, maintenance is essential for the industry to continue growing and using more sophisticated products with higher margin of profits. This should happen with the new Saudi JV and Dow, which may offer more than 4,000 jobs for the time being. However, naphtha being the main raw material for its main feed stock, costs will be higher than the cheap USA shale gas, but no one thought of such low feed stock price five years ago.

Today, all the Gulf countries are on the same boat without exception unless they get their act together and start the process of cooperation and joint ventures in order to streamline their activities, cut costs and properly compete with the international market in order to hold onto any hopes for long-term survival.

The lack of investments in our land represents an opportunity for us to explore and study about how to improve the situation, and invite and convince foreign investors rather than waiting for ten years or more doing nothing to upgrade our industry. The latter is definitely not an option or a long-term solution.

The message last week in Dubai was clear. Necessary action must be taken before losing other non-oil business and with it, job opportunities for our coming generation.

email: [email protected]

By Kamel Al-Harami

Independent Oil Analyst

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