April 2016

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Editorial Comment: Despite uncertainty, global petrochemical capacity continues to rise

Over the past several years, the world has witnessed the announcement of a massive amount of new petrochemical capacity.

Nichols, Lee, Hydrocarbon Processing Staff

Over the past several years, the world has witnessed the announcement of a massive amount of new petrochemical capacity. From emerging economies in regions such as the Middle East and Asia to the development of the US shale gas boom—which is fueling one of the largest industry expansions to ever occur in North America—the global petrochemical sector will see strong growth through the end of the decade. This petrochemical buildout does not come without significant uncertainty, however. The primary culprit is the drop in oil prices.

The oil price drop has changed the dynamics of the petrochemical industry in significant ways. Since June 2014, the downstream hydrocarbon processing industry has witnessed over $130 B in project cancellations, holds or delays. Of the $130 B in project cancellations, approximately 27%, or $35 B, were in the petrochemical sector. These projects included large CAPEX projects in regions such as Asia-Pacific, Eastern Europe and the Middle East.

Secondly, the drop in oil prices has made naphtha cracking operations more competitive. The shrinking of the oil-to-gas spread has made naphtha cracking operations in regions such as Western Europe and Northeast Asia more viable than they have been in years. Ethane cracking operations in regions such as the US and the Middle East still maintain a sizable price advantage against cracking naphtha, but the gap has shrunk considerably. This has provided naphtha cracking operations with new opportunities, as feedstock costs have dropped dramatically over the past 18 months.

Regardless, each region is investing in the development of petrochemical infrastructure. At present, Hydrocarbon Processing’s Construction Boxscore Database has tracked over 400 new petrochemical project announcements globally over the past three years (Fig. 1). This represents a total CAPEX of more than $80 B. The Asia-Pacific region and the US have led the charge in new petrochemical projects over this time frame. These two regions have collectively accounted for over 60% of the announced petrochemical additions in the past few years.

Although the Middle East’s new petrochemical project market share has declined, the region maintains the second-highest total amount of active petrochemical projects, second only to the Asia-Pacific region. Over the next five years, the Middle East will witness a substantial increase in its petrochemical sector. This increase will include the construction of new mixed-feed crackers, as well as ethylene derivatives capacity.

For additional information regarding the global petrochemical landscape, Hydrocarbon Processing will feature a two-part series on the present state of the petrochemical industry. This analysis will include new project developments, as well as regional outlooks for the petrochemical construction sector. This overview can be read in the Business Trends section. HP

 

  FIG. 1. New petrochemical
  project announcements,
  2014 to present. Source:
  Hydrocarbon Processing’s
  Construction Boxscore Database. 

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