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Middle East threat: the return

Posted 21/12/2011 by sevans

But this is not the threat from the current unrest resulting from the so-called Arab Spring, but the return of a much earlier threat – the resurgence of the chemicals sector in the Middle East and the threat it represents for the European chemical industry.

A couple of decades ago, the European industry was pushed into restructuring and consolidation by the threat of petrochemical developments in the region, based on the abundance of feedstocks derived from crude oil production. Back then the threat was limited to basic petrochemical exports from the Middle East to Asia, a major market for European producers at the time. 

Today the threat takes a different form – now those Middle East producers are also moving into specialty chemical production – again for export to Asia. Apart from a pressing need to develop employment in the region, producers are looking to add value to their hydrocarbon base while diversifying away from oil, gas and petrochemicals.

As consultancy KPMG points out, downstream chemical production generates more employment, compared with petrochemicals, up to 20 job for every $1m of investment , compared with just one for the same investment in an ethylene cracker.

A recent report from KPMG says that the Arabian Gulf region is set to capture 20% of global petrochemical capacity by 2015, with five or six of the top ten global chemical producers by revenue headquartered in the Middle East or Asia, compare with just two in 2008.

So history is repeating itself, with a renewed threat for European chemicals, not just from the Middle East, but also now from the US, which once again is set to cash in on low natural gas prices resulting from the shale gas supplies that are now coming on stream.

Europe managed to weather the threat last time but does it have the resolve, the funds and the resilience to weather it again?

Neil Eisberg - Editor

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