THE time has come for the petrochemical industry to address global oversupply and enter a stage of phasing-out and industrial reconstruction. While the US remains in the driver’s seat, having either consolidated its position through partnerships or partially transferred ownership to foreign partners, the Middle East could become a significant buyer, with Kuwait potentially involved in either the US or Europe. This industry is crucial for the profitability of the global refining business and the petrochemical sector, driving substantial revenues.

This industry is the backbone for the profitability of the global refining and petrochemical sectors. The challenge lies in building and investing in both petrochemical and refining projects simultaneously rather than sequentially, which is the case in Kuwait. After completing the projects, Kuwait realized that it had missed three previous opportunities. It is now time to invest in this sector, exemplified by projects such as the Al-Zour refinery and the joint refinery with Al-Duqm in Oman.

Major producers in Asia and Europe are now selling parts of their assets and shutting down old plants. Their challenge involves securing cheaper feedstocks, such as ethane, rather than the more expensive naphtha, and cutting costs. This may require transitioning to more cost-effective methods to avoid losses. Naphtha as a raw material appears increasingly unviable, except for ventures in highly specialized industries, such as the medical and pharmaceutical sectors, which can take full advantage of such a highly sophisticated, exclusive industry.

This raises questions about the $22 billion joint venture between Saudi Aramco and Dow, which is still awaiting its financial and profit-and-loss results. The rationalization process in Europe and Asia will likely continue, with current difficulties extending beyond the typical five years to seven years due to prolonged capacity buildup, especially in China. In conclusion, the message for our Arabian Gulf petrochemical business partners is clear - Kuwait must be selective in choosing Aclass petrochemical partners, like our current partner, Dow, despite the past challenges. It is crucial to act decisively, as time is not favorable for new entrants into this industry.

By Kamel Al-Harami
Independent Oil Analyst

Email: [email protected]