Soaring construction costs, dwindling feedstock supplies and falling product prices may delay petrochemical projects in the Middle East, the Arab Petroleum Investments Corp (Apicorp) has said.

Oil prices, to which the price of chemicals such as ethylene is linked, may fall by as much as 40 per cent by 2011, making chemical production less profitable, said Saudi Arabia-based Apicorp, which helps finance oil and gas projects in Arab states, according to a Reuters report.
“The industry ... may face a price downturn in the medium term. Depending on the depth and length of the down cycle, project sponsors may well review the timing and magnitude of their investment,” Apicorp said.
Shortages of natural gas, from which chemical products are extracted, may also raise the cost of production, it said.
The Middle East and North Africa accounted for 12 per cent of global production of ethylene, a chemical used to make plastics for goods such as toys and textiles.
“Anecdotal evidence suggests that some countries ... are likely to be facing dwindling high-quality and low-cost gas supplies,” the organisation observed, without being more specific.
Shortages in ethane feedstock and growing capacity in the global chemicals industry could squeeze profit margins of Gulf petrochemical firms, the chief executive of Saudi Basic Industries Corp (Sabic) said recently.
Ethane is a relatively cheap gas on which Sabic, the world’s largest petrochemical company by market value, has relied to expand output. Expected shortages of the gas will force the industry to use heavier fuels such as propane and naphtha as feedstock, Mohammed Al Mady said at a conference in Dubai.
Still, Saudi Arabia, the world’s fourth-largest holder of natural gas reserves, may boost supplies of ethylene to 10 million tonnes by 2011, Apicorp said. Iran may produce about 5.1 million tonnes and Qatar 4.1 million tonnes.