"United Arab Emirates Petrochemicals Report Q2 2016" now available at Fast Market Research

The UAE is set to face a challenging year as it doubles output at the massive Borouge petrochemicals complex. The combination of an end to sanctions on Iran, a Chinese slowdown and Saudi Arabia's opening of its massive Sadara complex will work to keep petrochemicals prices low. Meanwhile, the UAE's dominant ethane feedstock will struggle to compete with falling oil-derived naphtha feedstock used by rivals in Asia and Europe.

Ethane availability and feedstock pricing will remain key to the growth of the UAE's petrochemical industry. Rising feedstock prices, limited ethane feedstock availability, increasing construction costs and the anticipation of slower demand growth in key markets are expected to lead to a decline in the number of new project announcements. A significant risk factor for the UAE's petrochemicals industry is its current reliance on naphtha feedstock.

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Chemaweyaat's complex will start up in 2016 and will include an olefins plant, an aromatics complex and a range of downstream polymer and chemical units. The first part of the development, Tacaamol, will use heavy naphtha feed for aromatics units and a lighter naphtha feed for a 1.5mn tonnes per annum (tpa) mixed feed cracker. The second project, al-Chemeya, will use propane feedstock to produce propylene and derivatives. This is still in the pre-feasibility phase, and joint venture partners are being sought. Tacaamol is expected to be the world's largest fully integrated grass roots chemical complex with capacities, aside from the ethylene unit, including 690,000tpa propylene, 950,000tpa polyethylene and 440,000tpa polypropylene.

The Gulf Cooperation Council (GCC) is already seeing a slowdown in petrochemicals output growth, which fell to 7.5% in 2015 from 11% CAGR in 2004-2014, and is set to fall to 3.2% on average over the next five years. Constraints in gas supply have been blamed and this tightness in the gas market is leading to upward pressure on ethane costs.

Expansions in the United Arab Emirates made over 2015 have increased the country's regional market share from 6% to 20%. The focus for the country in the immediate term will be cost control as the primarily ethane-fed industry contends with improved competitiveness of naphtha-fed competitors due to low oil prices. The company's expanded facilities aimed to reach maximum production in Q116, following which it will affect European markets.

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