Wednesday, Oct 22, 2008
Gulf News
Dubai: The Gulf's petrochemical boom may be coming to an end amid a global demand downturn and project delays caused by rising costs and the tightening credit squeeze, experts said on Tuesday.
Last year, just $7 billion worth of engineering, procurement and construction (EPC) contracts were awarded in the petrochemicals sector compared with $16.3 billion in 2006 and $17.5 billion in 2005, according to Syed Rashid Hussain, vice-president of Al Azzaz Establishment, a Saudi consulting firm.
"This year the value of EPC projects could be less than $7 billion," he told Gulf News at an industry conference in Dubai organised by British-based firm World Refining Association.
Hussain said the fall in new contracts "appears temporary" and expects $84 billion worth of new contracts to be awarded in the Gulf in the next five years.
Gulf countries, in particular Saudi Arabia, have embarked on several multi-billion-dollar projects to produce petrochemicals to diversify their industrial base.
Roy Vardheim, chief operating officer of Abu Dhabi-based polymers maker Borouge, said in his presentation there will be an excess petrochemicals capacity of up to eight million tonnes between 2009 and 2011.
About 3.6 million tonnes of capacity will come onstream in the Middle East and India in the first quarter of 2009, according to Ashish Mukherjee, chief representative of India's Reliance Industries Limited. But consumption is not keeping up with rising production, he added.
Gulf petrochemical producers are investing to supply fast-growing Asian economies, while production in the US and Europe is declining.
Asian demand
Hussain said 60 per cent of the incremental demand in Asia will be met by Middle East producers.
"Fifty per cent of Chinese demand in 2010 will be met by the region," he said, adding that in this respect global economic downturn is "not much of a concern to the region".
The global economic slowdown has hit demand for petrochemicals used in making various industrial and consumer goods. Plastic products are in less demand in major consumer nations like the US because of the housing market crash and weakening automobile sales. China and Europe are also witnessing a weaker demand.
Gulf News 2008. All rights reserved.
