(MENAFN - Khaleej Times) The Gulf petrochemicals industry is bracing to sustain competitiveness keeping in mind the new market realities that provide a lot of opportunities, but there are also challenges.
Gulf producers are exploring opportunities to expand capacity, diversify production and realise the region's full potential to meet oncoming challenges and opportunities, following the success of the 7th Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum, held in Dubai last month, Dr Abdulwahab Al Sadoun, secretary-general of the GPCA, said in a statement on Wednesday.
The theme of the forum, 'Sustaining competitiveness in a rapidly changing world,' reflected the scale of the challenges and opportunities facing the regional petrochemicals industry. Latest GPCA data show that petrochemicals capacity is continuing to expand in the GCC. Regional capacity grew by 10 per cent in 2011, reaching 121 million tonnes per annum.
Between 2007 and 2011 regional petrochemicals capacity expanded at 13 per cent compounded annual growth rate. At the same time, wage inflation and rising raw materials costs, incurred as the global economy edges out of recession, are having a knock-on effect on the bottom line of the GCC petrochemicals sector.
"The success of the 7th Annual GPCA Forum highlights the Gulf petrochemicals industry's remarkable growth over the years. The industry has come so far by making optimum use of the opportunities available. No doubt, the regional industry is facing uncertainties but we have managed to demonstrate strong growth in spite of the challenging market conditions," said Al Sadoun.
Gulf countries currently hold around 20 per cent of the world's proven natural gas reserves. Despite the cost competitiveness of Gulf-based petrochemicals producers built on such strategic assets, experts at the forum urged the industry to prepare themselves for new challenges, especially because a cooling Chinese economy will lead to reduced demand for Gulf exports.
Nova Chemicals chief executive officer said that shale gas discoveries in North America are adding significant volumes to global energy supplies, which is another area of concern for Gulf producers. While the shale gas boom in North America promises to provide fresh impetus to petrochemicals producers there, options are getting limited before Gulf producers, as the Eurozone offers limited growth opportunities amidst the current financial crisis.
The most worrying problem of all is that the region appears to running short of natural gas despite its massive reserves. According to the latest BP Statistical Review of World Energy, the region is sitting on an estimated 1,496.2 trillion cubic feet of natural gas. However, this is not enough to sustain the growing demand for gas. More and more industries besides petrochemicals are now competing for natural gas.