The Middle East (ME) is currently undergoing a dramatic change in petrochemical supply and refining capacity. Multiple projects in several countries are underway that will offer greater capacity of key hydrocarbon feedstocks as well as fuels. 

The current run up in crude oil prices has produced an abundance of cash for oil producing states in the ME.  Acutely aware of the transient nature of their oil reserves, the cash generated has been applied to infrastructure. Social infrastructure as well as industrial infrastructure has been expanded in the ME with facility no doubt eased by the nationalized nature of the petroleum companies. 

In the USA, a run up in crude oil prices has not resulted in a major uptick in refinery capacity, port expansion, or the birth of new universities. Instead, US oil companies have plowed investment into new discovery activity in an attempt to sustain the current rates of consumption. Profits are channeled into CEO salary packages and to shareholders, who, in turn, go to great lengths to shelter their funds from taxes that support US infrastructure.

Saudi crackers alone are expected to add 14m tonnes/year of extra ethylene capacity by 2015. ME market share of PE and PP is expected to double by 2011. So large will the demand for ethane be that there is considerable skepticism that the full potential of the buildup will be realized.

Since ethylene comes from the cracking of ethane, and presently a large share of ethane comes from natural gas, the question arises as to the effect on natural gas prices as ethane scarcity becomes apparent.  Naphtha crackers are part of the answer to the question of supply. The US has (had) abundant natural gas and a corresponding reliance on the extraction and cracking of ethane from this resource. Elsewhere in the world, a large fraction of ethylene comes from naphtha feedstocks.

And so it is that the Saudis are building crackers to bolster their feedstock supplies. The Dow/Siam Cement JV is also addressing their ethylene supply issue with a second naphtha cracker in Map Ta Phut (ICIS, 2007, December 3-16, p 6).

The largest petrochemical complex in the world is under construction at Ras Tanura in the eastern province of Saudi Arabia.  This US$20 Bn project is being developed jointly by Dow and Saudi Aramco and is expected to come onstream in 2012. The goal is to integrate the existing Ras Tanura and Yanbu refineries into a single operation offering petroleum refining and production of value added hydrocarbons like ethylene.  Clearly, the principals have downstream conversion in mind. The project will have the first naphtha cracker in the ME and will offer ethylene cracking and aromatics capacity as well.

According to the article in ICIS, Basell claims that the ME will be the only net PE and PP exporting region by 2011.  And so it was that the petroleum scare in the first decade of the 2000’s financed and expedited the migration of dominance in the polyolefin industry to the Middle East.