Petrochemicals are products derived from petroleum or natural gas, and they are an essential part of the chemical industry today.

Historically, the oil and gas industry’s involvement in the petrochemical industry can be traced to a desire to add further value to certain low-value product streams, arising out of crude oil refining and natural gas processing. Over time, as the versatility of petrochemicals became evident, and new end markets emerged, petrochemicals offered the major oil companies, beside current revenues, a strong growth potential.

During World War II, the demand for synthetic materials to replace costly and less efficient products caused the petrochemical industry to develop rapidly and steadily into a major player in today's economy and society. Before then, it used to be an experimental sector, starting with basic materials: synthetic rubbers in the 1900s, Bakelite, the first petrochemical-derived plastic in 1907, the first petrochemical solvents in the 1920s, polystyrene in the 1930s... and it then moved to a variety of end-users segments - from household goods (kitchen appliances, textile, furniture), to food packaging, and to medicine (heart pacemakers, transfusion bags), from leisure (running shoes, computers, CDs,...) to very specialized fields, such as criminology and archaeology.

Petrochemicals are non-fuel compounds, derived from oil and natural gas. They fall under organic chemistry, which is concerned with hydrocarbons and oil or natural gas derivatives. Organic chemicals account for approximately 85 percent of all the substances, produced in the chemical industry - from basic plastics through to complex pharmaceuticals. For many of these, the oil and gas industry plays a fundamental role in providing the essential inputs.

Typically, the petrochemical plant receives its basic inputs (feedstock) of petroleum gases, naphtha, and light gas oil from an oil refinery, to which it is affiliated. It also receives from natural gas processing plants, such inputs as methane, ethane and liquefied petroleum gases (LPGs). A closer integration of refining and petrochemical plants has become in recent years an increasingly important source of operational efficiency.

The conversion of refinery feedstock into final products entails three main stages. The first stage is the manufacture of the base chemicals or the building blocks (e.g. ethylene, propylene, benzene). They are shown in Table-1 and typically produced in large quantities in mega production facilities. They are next converted into intermediate products (e.g. ethanol, ethylene glycol, propylene glycol, styrene, etc.). In the third stage, these intermediate products are then either further processed or converted into products that are used directly by industry to produce finished consumers products (e.g. polyethylene, polypropylene, polystyrene, polyvinylchloride).

The oil and gas industry involvement in petrochemicals is primarily in these three stages, that is, the manufacture of base chemicals all the way through to their subsequent conversion into plastics resins (polyethylene and polypropylene). As shown in Table-1, the "Base Chemicals" can be broadly classified into two groups: olefins and aromatics. Olefins are characterized by chains of carbon atoms as their backbone while aromatics contain a ring of carbon atoms at the core of the molecule.

In an olefin plant, the long chained carbon molecules are cracked (split) into smaller chains, such as C2 (ethylene), C3 (propylene) and C4 (butadienes). The two cracking methods used are thermal cracking (high temperature) and catalytic cracking (in the presence of a catalyst), both of which are highly energy intensive.

Naphtha and natural gas/LPGs (liquefied petroleum gases) are rich in ethane, propane and butane, the major feedstock in olefin production. Naphtha is the dominant feedstock in Europe while natural gas/LPG is predominant in the U.S. and the Middle East. Naphtha is essentially a crude form of gasoline and obtained from the fractional distillation of crude oil. Table-2 shows the major feedstock, consumed in the main producing regions of the world.

The GCC region has become a significant global producer of commodity petrochemicals. Its position in the global market will grow over the coming 5 years due to the on-going staggering growth wave, which will add significant petrochemical capacity. As a result, the overall share of the GCC region in the world petrochemical capacity is projected to grow markedly. This growth, fueled by massive foreign and domestic investment inflow, is coinciding with the shift in the petrochemicals industry's centre of gravity towards the best cost area with access to markets and demonstrated by the increasing involvement of a number of the industry's global majors in the GCC petrochemical industry. This development is expediting the rapid emergence of the GCC region as a major global hub for commodity petrochemical manufacturing.