(EnergyAsia, April 25 2012, Wednesday) — Securing natural gas feedstock in the Middle East has become increasingly difficult in the last few years, threatening the region’s dominance as the most economical petrochemicals producer, according to a new report by business intelligence company GlobalData.
The report said the Middle East is facing a natural gas scarcity due to increasing demand and inefficient utilisation of subsidised natural gas by energy-intensive industries in the region.
Over the last decade, the region developed its huge natural gas reserves into a source of cheap feedstock to realise its goal of becoming a global hub for petrochemicals production.
Petrochemical companies were able to purchase subsidised natural gas at a cost 60-70% cheaper than their competitors in Europe and North America, said GlobalData.
However, over time, the subsidies offered by natural gas producers such as Saudi Arabia, Iran and Qatar have led to inefficient use of the fuel and rapid decline in the supply of ethane, a key feedstock for petrochemicals. This could seriously affect the long-term profitability of the petrochemicals industry in the Middle East.
GlobalData said the Organization of Petroleum Exporting Countries (OPEC)’s quota on crude oil output will also limit associated natural gas production. Middle East countries are not producing enough natural gas to Despite all Gulf countries producing more than their allotted quota, production is insufficient to meet the burgeoning collective demand for natural gas from the power, transportation and petrochemical sectors.
According to Global Data, Saudi Aramco, the sole supplier of ethane in Saudi Arabia, stopped allocating ethane to new petrochemical projects in 2006, while customers with supply agreements have not been receiving their allocated limits since 2009.
Iran has been unable to increase ethane supplies due to the lack of investments in its non-associated gas reserves while Qatar has imposed a moratorium on further development of gas reserves and has stopped allocating supply for industrial projects until 2014.
GlobalData said its report,“Petrochemical Industry – Key Geographies Experiencing Change in Feedstock Scenario,” provides an in-depth analysis of the petrochemical feedstock supply scenario in key locations while explaining the reasons for a decrease in the supply of ethane feedstock in key producing areas like the Middle East and Canada. It also explains the impact of new oil and gas discoveries on the petrochemicals industries in the US, Brazil and Canada.