New Report Available: Algeria Petrochemicals Report Q3 2016

Algeria has focused on low added-value production, relying on commodity chemicals that are highly price-responsive to market fluctuations and easily undermined by capacity elsewhere in the world. The industry is some distance from competing on equal terms with European petrochemicals producers with regard to product diversification. As a result, it will be vulnerable to market fluctuations in the narrow range of products it produces, although the effects on margins should be cushioned by the local availability of competitively priced feedstock.

Domestic consumption of petrochemicals is set to be lacklustre in 2016, with economic growth at a relatively subdued 2.9% and consumer and business confidence remaining low. Lower oil prices are responsible for the erosion of economic performance. Additionally, they militate against Algeria's ability to capitalise on its gas resources to establish gas-based petrochemicals production.

The country has around 178,000 tonnes per annum (tpa) of polyethylene, 40,000tpa of vinyl chloride monomer, 35,000tpa of polyvinyl chloride, 120,000tpa of methanol and 990,000tpa of ammonia, which should increase to 5.6mn tpa when new fertiliser plants enter production. These rises in capacity will also result in the production capacity for urea hitting 3.59mn tpa.

Full Report Details at
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BMI has removed 1mn tpa of extra methanol capacity from the five-year forecast due to slow progress on announced projects.

Based on data from the Ministry of Energy & Mines (MEM), we estimate crude and lease condensates production of 1.37mn barrels per day (b/d) in 2014, y-o-y growth of 4.6%. The growth is significant, ending six consecutive years of decline. However, in 2015 we estimate the sector endured a decline in output of 3.2% to 1.33mn b/d.

We have revised down our 2015 gas production forecast, based on data released from the MEM and due to repeated delays to output from the third train at In Amenas. We now forecast 2015 gas production at 82.3bn cubic metres, a y-o-y decline of 2.0%. The volatility of oil refinery output and declining gas production will be a disincentive to expand petrochemicals production.

Algeria's Petrochemicals Risk/Reward Index (RRI) score remains unchanged this quarter at 35.0 out of 100, down 0.2 points since the previous quarter due to a downward revision in its country risk score. This maintains its bottom place in the table for the Middle East and Africa RRI table. The falling price of oil has undermined the refining sector, while market activity is increasingly sluggish. With no new petrochemicals capacities expected in the next five years, it is unlikely Algeria's position will improve.

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