ME petchem makers will enjoy cost advantage even on feedstock shift: analyst
Dubai (Platts)--10Dec2012/442 am EST/942 GMT
Middle Eastern petrochemical producers will continue to enjoy
considerable cost advantage compared with their counterparts in Southeast
Asia even as a scarcity of gas forces them to shift to other feedstocks, Jaap
Kalkman, a partner at German consulting firm Roland Berger, said on Sunday.
"The energy cost [expenditure on power] of a naphtha cracker in the
Middle East will be about 50% lower than that of a naphtha-fed cracker in
Singapore and Japan," Kalkman, who is also Head of Energy and Chemicals for
the Middle East, said. "The feedstock cost for a Middle East naphtha-based
producer will be lower as compared to an Asian producer, in the range of
He attributed this to easier access to oil reserves and growing refining
capacity in the region.
Platts assessed naphtha at $928.88/mt CFR Japan, Friday. Downstream
ethylene was assessed at $1,255/mt CFR NE Asia and $1,210/mt CFR SE Asia.
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In a report released Friday, Alembic Global, a New York based global
petrochemicals advisory firm placed the average price for naphtha in November
for Fareast Asia at $899/mt and the corresponding price for October at
Middle Eastern producers using ethane feedstock to produce ethylene
incur a cost of $200-500/mt. "Petrochemical producers in Saudi Arabia who
have gas allocation receive gas at a cost of 0.75/MMBtu which means an
ethylene production cost of about $200/mt. Iranian petrochemical facilities
receive their gas allocation at $1.25/MMBtu which means an ethylene
production costs of around $250/mt," another analyst said.
MIXED FEEDSTOCK IS A REALITY IN MIDDLE EAST
All the major petrochemical projects in the region including Petro
Rabigh Phase II, Kuwait Petrochemical Industries Company's Olefins 3 and the
UAE's Chemaweyaat, all of which will come up over the next five years, plan
to use either naphtha-based or mixed-feed crackers.
"In reality, feedstock cost in Saudi Arabia has already risen," Moayyad
Al Qurtas, CEO of Riyadh-based petrochemicals producer Tasnee, said at the
Gulf Petrochemicals and Chemicals Association annual forum held in Dubai late
"Only a small proportion of feedstock being used in petrochemicals
industry in Saudi Arabia is ethane. The rest is LPG," Al Qurtas said,
explaining the high feedstock prices.
Riyadh-based investment bank Al Rajhi Capital said in a report early
this year that gas prices in Saudi Arabia are likely to be raised in 2013.
Saudi Industrial Investment Group Managing Director Suliman Al Mandeel said
in November that Saudi petrochemical producers were concerned over a likely
rise in gas prices that could impact their margins.
Talking of the link between oil and gas prices, Kalkman said: "Over the
next 10 years gas prices in the Middle East will have a much stronger link to
the global gas markets. This is because the governments will want to provide
the benefits of subsidy to those most in need of it and instead of
subsidizing gas they will want to provide monetary benefits to a growing
He added that "higher gas prices will mean more revenues for Middle East
economies" that can be used to "dole out the monetary benefits."
--Shashank Shekhar, firstname.lastname@example.org
--Edited by E Shailaja Nair, email@example.com