(EnergyAsia, April 20 2012, Friday) — The Middle East is rapidly expanding its petrochemicals and plastics industries to reduce its economic dependence on the production and export of crude oil and natural gas.

In a new report, industry intelligence company GlobalData traced the emergence of the region’s upstream petrochemicals industry over the last decade, which is now the most competitive in the world thanks to its low-cost feedstock advantage.

The report said that the basic petrochemicals capacity in the Middle East grew by a compounded annual average rate of 11.1% to reach 46.61 million tonnes a year between 2000 and 2011.

As a follow through, the region led by Saudi Arabia is building a higher-value plastics sector that will deliver higher profits and create secondary manufacturing industries and services.

In a statement, GlobalData said:

“Middle Eastern countries all derive a significant portion of their gross domestic product (GDP) from petroleum exports, and this high dependency on the oil sector has led to their vulnerability to the frequent fluctuations in crude oil prices.

This exposure to economic instability has driven many countries to attempt to diversify their sources of income by establishing petrochemical industries.

“The region’s basic petrochemical industry was boosted at the start of the decade when producers began receiving ethane feedstock at subsidized prices, which led to lower production costs, making the Middle East the hub of the global basic petrochemical industry.

“Continuous government support has seen foreign investments welcomed and higher efficiency achieved through the integration of petrochemical operations with refinery operations previously under government control.”

GlobalData said the region’s strong basic petrochemical industry will serve as a feedstock provider for the downstream industry.

The focus on the downstream petrochemical industry will also help the Middle East to offset the competition it faces from China in the basic petrochemical market, which is currently suffering from over-capacity.

“The Middle Eastern plastics processing industry will be a big winner from its drive to diversify its economy. While the region has a thriving plastic resin production market, its plastic processing industry is very small and scattered.

“To encourage domestic processing, many countries in the region plan to start cluster programs, which will allow plastics processors to establish a unit in a polymer park.

“The processing units will benefit from the integrated supply chain and tax benefits by the government, while the polymer parks will cater to the domestic plastics conversion industry to increase plastics output. Two polymer parks have already been established: the Abu Dhabi Polymer Park situated in the UAE and the Rabigh Conversion Industrial Park situated in Saudi Arabia.”

The report discusses the reasons for the region’s increased petrochemical and plastic exports to Asian countries, focusing on the trade in the major products like polyethylene, polypropylene, polyethylene terephthalate (PET) resins, polystyrene and polyvinyl chloride (PVC). The study also provides details on the capacity growth for the basic petrochemicals (ethylene, propylene, butadiene, benzene, toluene, xylenes and methanol) and major plastics in the Middle East.