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Petrochemicals forecast remains bright despite ongoing challenges, say speakers at GPCA Annual Forum

Dubai, United Arab Emirates; November 19, 2015: Despite the associated challenges with the recent oil price volatility, the forecast for the petrochemicals remains positive, due to attractive investment environments, government commitment and future demand, said speakers at the 10th Annual Forum, organized by the Gulf Petrochemicals and Chemicals Association (GPCA).

“Forty years ago, we [in the Arabian Gulf] were in a very different place. Though the region was already one of the leading oil producers in the world, the industry had no method of capturing the associated gas by-product that would eventually be used in the basic chemicals we produce today,” said H.E. Eng. Abdullatif Ahmad Al Othman, Governor and Chairman the Board of Directors, SAGIA. “In Saudi Arabia, we created the master gas system to capture, treat, and process the gas through a very large and sophisticated gas network system of more than 4000 kilometers in length, with production capacity of 9 billion standard cubic feet every day. This transformed our industry and economy to include petrochemicals, resulting in a revolution over the past four decades.”

According to GPCA estimates, the GCC petrochemicals industry manufactures 136.2 million tons of products as of 2014, earning US$87.4 billion in revenues. “Today, we contribute 13% of the world’s petrochemical output by volume,” he said.

H.E. Al Othman outlined Saudi Arabia’s ambitious development strategy, which includes goals to double employment, investment and economic growth in the next 10 years. The downstream sector is expected to play a major role in this vision, with the potential to create 200,000 direct jobs in this period and investment potential of more than US$150 billion, according to SAGIA estimates.

“Saudi Arabia is expected to be home to over 50 million people in the next decade. We have the raw materials, an emerging logistics and transport hub and some of the most progressive investment laws in the world,” said H.E. Al Othman. “We have a strong business case for investors as we have the right market, right economy and right investment climate.”

From a global perspective, the GCC’s petrochemicals industry is also developing a reputation.

“The concept of a global petrochemicals market was born here in the Middle East more than 40 years ago,” said Neil Chapman, President, ExxonMobil Chemical. “Today, the Middle East accounts for 80 percent of the world’s interregional chemical exports.”

However, recent developments in the global energy market prove that the evolution of chemicals industry can prove challenge.

“Change is the norm. At the first GPCA forum 10 years ago, no one anticipated that the United States was about to emerge as a hotspot for chemicals investment. But today, we see the U.S. pursuing a model similar to what the Middle East did decades ago, capitalizing on domestic natural gas supplies by building capacity to serve overseas growth,” said Chapman. “While the United States has a long way to go before it might rival the Middle East, change in our industry isn’t always measured in years and decades. As recent twists in the oil market have made clear, the economics of petrochemicals can be transformed in a matter of months.”

The long- term outlook remains positive, predicts Chapman. Global demand is expected to grow an average of 4% in the next decade, with two- thirds of this demand coming from non- OECD countries, especially China and India.

“What’s driving this demand? It’s the fact that plastics and other petrochemical products are integral to modern living standards – and, happily, the world is about to see the largest collective rise in living standards in history,” continued Chapman. “This is a great time to be a part of the petrochemical industry. We are all playing a major role in creating better lives for billions of people, and making products that enable the progress of humanity – just as we have for the past 100 years and more.”

Looking ahead, integration will be key to achieving this growth potential.

“Integration is not a buzzword… it is really is about knowing how to gain an advantage in the use of feedstock, and in knowing our customers’ businesses well enough to deliver the solutions they require,” concluded Chapman.

Marking its 10th anniversary, the GPCA Annual Forum gathered 2,000 delegates. The forum hosted global and local leaders from both the upstream and downstream industry to discuss strategies that enable companies to achieve growth.

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