The GCC chemical industry was recorded to produce sales of USD 84.1 billion in 2018, with a production capacity exceeding 174.88 million tons, reflecting a 1.8% increase in national GDP output. According to the report released by GPCA, the GCC chemical industry’s production capacity grew by 13.3 million tons in 2018, due to the increased demand in chemicals worldwide.
The chemical industry in the GCC region is rapidly reaching new heights in terms of production, job creation, as well as portfolio diversification. The region’s chemical production expanded greatly at a CAGR of 10.7% between 1978 and 2018. Currently, the industry is predominantly focused on petrochemicals, which make up 72% of its total production. This progress was mainly driven by innovative national leadership which supports economic diversification programs, focusing on developing the non-oil sector.
Driven by refining expansion and chemical integration, GCC chemical capacity is further projected to increase by 33.6% in the next decade, reaching 231.8 million tons. Overseas production capacity is also expected to expand by a CAGR of 7.6%, reaching 38.7 million tons by 2027, with the majority of growth set to take place in Asia.
The GCC chemical industry will also continue to attract new investments as the region is exploring more higher-value downstream opportunities amid continued volatility in oil prices. Chemical investments in the region exceeded USD 140 billion in the first 10 months in 2019, done through joint ventures as well as an increased number of merger and acquisition (M&A) deals.
Evolution of Portfolio Diversification
In terms of evolution in its portfolio diversification, the industry’s pace of development and product portfolio have largely been influenced by the volume and the type of feedstock available. However, chemical producers have shifted their focus from volume to value in recent years.
According to GPCA, Phase 1 (1981-1994) of GCC chemical production was concentrated to produce basic and forward commodities from associated gas. Mixed feedstock production came to the fore, as natural gas resources began to diminish, giving rise to more differentiated commodities in Phase 2 (1994-2009).
As for Phase 3, chemical producers are producing more performance polymers as well as specialty chemicals, as they have been focusing on refinery integration and naphtha cracking, The industry is about to witness the beginning of Phase 4 (2024 inwards) which is characterized by Crude Oil-To-Chemicals (COTC) production and significant volume of aromatics.
Other Countries’ Performances
According to GPCA’s report, Oman has the largest GDP share of the chemical industry among the GCC countries, doubling the amount in the country by 5.1 million in 2018. This accomplishment is due in part to the inclusion of the manufacturing sector within the National Diversification Program of Oman.
As for Saudi Arabia, the Kingdom has maintained its status as one of the world’s top ten chemical exporters. Saudi Arabia also holds the largest volume output and income from chemical exports, generating a revenue of USD 62 billion in 2018. Saudi chemical industry is also considered as a powerhouse in terms of asset diversification, with GPCA member companies in the Kingdom manufacturing up to 126 goods totaling a capacity of 119.2 million tons.
Meanwhile, the chemical industry for UAE is primarily based in Abu Dhabi, where the industry is built in line with Abu Dhabi’s Economic Vision 2030 and creates new job opportunities. The Gulf Petrochemicals and Chemicals Association (GPCA) stated that the GCC chemical industry grew by 157,000 in 2018, with the UAE being the second largest employer to earn approximately 18% business share.
Revenue trends in the UAE chemical industry have increased by 28.4%. The UAE chemical output in 2018 was recorded at 14.5 million tons, including basic chemicals (33%), polymers (28%) and fertilizers (30%).
The highest revenue growth was achieved by Bahrain’s with revenue growth of 39% in 2018, attributed primarily to higher revenue from fertilizer products. The country’s production capacity also reached 1.4 million tons, generating a revenue of USD 327 million in 2018.
Kuwait ranked as the second-highest chemical revenue growth of 32% in the same period. With industrial expansion being a top priority as part of the long-term development priorities in Kuwait’s 2035 strategy, this achievement further seals its position as a global center for petrochemical production.