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United Arab Emirates Petrochemicals Report Q2 2010
Market |
Energy and Utilities |
Report Type |
Market Research |
Country |
United Arab Emirates |
Published |
3 March 2010 |
Number of Pages |
58 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
China will be key to the success of the UAE’s massive petrochemicals expansion, with the second phase of the Borouge complex due to come onstream in Q310 at a time when China’s economic recovery should be well under way, according to our latest UAE Petrochemicals Report. The second phase of the Borouge (60% Austria’s Borealis and 40% Adnoc) complex at Ruwais, Abu Dhabi, will boost ethylene capacity from 600,000tpa to 2mn tpa and creating 800,000tpa of propylene capacity. It will also raise polyolefin production capacity to 2mn tpa, including one 540,000tpa Borstar technology-enhanced PE unit and two 400,000tpa Borstar PP units. The new expansion will be located next to Borouge’s existing petrochemical complex in Ruwais, Borouge 1, a US$1.2bn complex with a 600,000tpa cracker and a 450,000tpa PE unit which was brought onstream in December 2001. The new capacity will be marketed mainly to the Middle East and Asia Pacific, targeting high-end applications in the pipe and high performance packaging areas. This will be followed in 2013 by a third stage, Borouge 3, which will have capacities of 1.43mn tpa PE and 900,000tpa PP.
At the same time as Borouge’s cracker is due to come online in 2010, growth in Asian markets is expected to be weaker than before the financial crisis of September 2008, although strong Q409 growth rates in China have helped boost confidence. Trends in UAE petrochemical production will remain closely tied to the Chinese market. There are still fears that the Chinese government’s stimulus plan for petrochemicals, which is set to involve investment in new refineries to speed up their construction, could create a problem of short-term oversupply in the UAE’s export markets in Asia. Much will depend on the strength of recovery in the automotive and home appliance sectors, which are expected to recover before the building sector.
The medium to long-term growth of the UAE petrochemicals industry will be highly dependent on China. The Chinese polymer resins market is set to expand by an average of around 6.5-7.0% in 2009-14. However, with domestic demand likely to continue to outstrip supply, China will remain a net polymers importer over the medium term and the largest importer in the world. In 2009, China depended on imports for at least a third of polymer demand. Most of the increase in demand will be covered by both Chinese and Middle Eastern supply from new petrochemicals plants due to come onstream in coming years, much of which will be located in Saudi Arabia. By 2014, China could represent 35% of the global PP market and 20% of global PE demand. This will directly benefit the UAE’s expanding petrochemicals industry. Borouge is shoring up is marketing and logistics operations in Asia, particularly in its main target market in the region, China. Borouge Pte (60% Borealis, 40% Adnoc), Borouge’s Singapore-based marketing arm in Asia, is establishing three logistics hubs in Asia as well as forming a new sales and marketing company in China. Outside China, Borouge is seeking to establishing sales and marketing operations in India. It has teamed up with India’s Machino Polymers, which will produce compounded PP for supply to the automotive industry from PP resin sourced from Borouge.
In our Middle Eastern Petrochemicals Business Environment Rankings matrix, the UAE has a score of 61.8 points, up 3.4 points since the previous quarter putting it 0.9 points behind Qatar and 3.2 points ahead of Kuwait. It has jostled with Kuwait for third place in recent months, but while the UAE is set for massive expansion in capacity in mid-2010, Kuwait has suffered as a result of policy reversals in the refining and petrochemicals sectors which has adversely affected its market risk score, while its overall country risk rating has fallen, which is in line with global economic trends.
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