Dubai: Weak oil prices and a weary economic outlook in China will continue to put downward pressure on revenues from the Arab Gulf’s petrochemical sector that is already experiencing weaker volume growth.
Revenues fell between 20 and 30 per cent in the 12 months from June 14 when oil prices started their decline from a high of around $115 a barrel to a low of $45 a barrel for benchmark Brent crude, Abdul Wahab Al Sadoun, Secretary-General of the Gulf Petrochemicals and Chemical Association (GPCA), which represents the region’s biggest petrochemical producers, said on Wednesday.
Speaking to reporters at the GPCA offices in Dubai, Al Sadoun, however, did not say what revenues fell to between June 2014 and June 2015. In a statement given to reporters, the GPCA said in the calendar year 2014, revenues fell 1.56 per cent to $88 billion compared to $89.4 billion in 2013, meaning the industry likely hurt the most in the first half of 2015. The pressure is also translating onto the regional stock markets. Shares in Saudi Arabia’s largest petrochemicals company, Sabic (Saudi Arabia Basic Industries Corporation), listed on the Tadawaul exchange, are down 36.88 per cent in the past 12 months.
Colin Chapman, President of Euro Petroleum Consultants, an independent downstream oil, gas and petrochemical consulting company, said revenues will continue to decline with some regional projects likely to slow down. In January 2015, Shell and Qatar Petroleum announced they were exiting the Al Karaana petrochemicals project.
Al Sadoun said additional production capacity should make up for some falling revenues. The region increased production by 8.3 per cent in 2014; however, Al Sadoun forecast this to drop to a 7.5 per cent growth in 2015, lower than the compound annual growth rate of 10.9 per cent between 2004 and 2014. Al Sadoun said the drop in production is due to gas shortages.
