MENA's near $100 bil of planned petchem deals may not be completed: analyst

Dubai — Petrochemicals producers in the Middle East and North Africa region face challenges in achieving almost $100 billion of planned investments over the next four years, energy analyst Mostefa Ouki told a webinar held by Arab Petroleum Investments Corp. on Oct. 15.

The sector saw a $4 billion increase in planned projects to $95 billion for 2020-2024, compared with the forecast last year, APICORP said in an Oct. 12 report.

"If we look at the pattern of funding petrochemical project, about 50% would be expected to be financed by the private sector," Ouki, an independent energy consultant, told the Oct. 15 webinar to discuss the APICORP report.

"The strategy is pretty obvious; to capture more value [in downstream markets], compared to what used to be done in the past, exporting bulk chemicals like methanol," he said.

"They are right in their idea of adding value," Ouki said, but cautioned that it remained unclear whether there was a commercial justification for such a large investment, especially in countries within MENA that do not have established petrochemical infrastructure.

"MENA is not a homogeneous region," he said.

"It will be challenging for even 60% of these projects to be executed."

The estimate for committed petchemicals projects for 2020-24 fell by 37% from last year's five-year outlook to $20.3 billion due to the completion of several deals in 2019, APICORP said in the report. Egypt, Iran and Saudi Arabia are the top three MENA countries in terms of committed petrochemicals investments, driven by the localization of specialty chemical industries and feedstocks import substitution.

More consolidation in the petrochemicals industry is also coming, Leila Benali, APICORP's chief economist, told the webinar. After Saudi Aramco took over some small players in Saudi Arabia, "we know that some other medium-sized players or even niche players are looking to potential merging and mergers and acquisitions possibilities," she said. "So this is a potential change of additional consolidation in a relatively fragmented petrochemical market in the region."