Middle East petrochemical consolidations pick up pace

Consolidation among major petrochemical producers in the Middle East is picking up pace as state-owned companies look to manage costs in a challenging global market.

Qatar's state-owned energy firm QP announced yesterday it will integrate petrochemical marketer Muntajat into its operations.

Muntajat is a major marketer of polyethylene (PE) and petrochemical products such as methanol, MTBE and linear alkylbenzene (LAB).

The move is part of efforts to strengthen Qatar's global competitive position in the downstream sector, QP said. It comes only two months after QP absorbed its LAB-producing SEEF joint venture into its operations.

Capex cuts

The integration moves come as other Middle East and global energy firms adjust to receding margins and high costs, against a difficult backdrop of the Covid-19 pandemic and a global economic downturn.

Saudi Arabia's state-controlled petrochemical giant Sabic last month declared a loss of 950mn riyals ($253mn) in the first quarter of this year, compared with a profit of SR3.41bn ($909mn) in the first quarter of 2019. The loss was the partly the result of a fall in the average prices of its products.

Sabic is planning to cut its capital expenditure (capex), in line with moves by other energy and petrochemical producers.

ExxonMobil has lowered its 2020 capex budget by 30pc, with the bulk of the reduction going to its Permian onshore shale operations in the US. BP's spending cuts for this year include a reduction of around $1bn on short-cycle onshore investment and deferrals of exploration activity. Shell, Total and Chevron have also announced sharp reductions in their 2020 capex budgets.

And even the world's biggest oil producer, state-controlled Saudi Aramco, is scaling back its 2020 capex plans in response to lower prices, with spending in the coming years "under review".

The market downturn has led to petrochemical projects around the world being delayed and spending decisions deferred as companies scrutinise costs.

Canadian midstream operator Pembina Pipeline in March deferred construction of an integrated propane dehydrogenation (PDH) plant and polypropylene (PP) facility as part of a plan to cut capital spending.

Thai petrochemical producer PTT Global Chemical last month pushed back making a final investment decision (FID) on its planned ethylene plant in Ohio, as Covid-19 cuts demand and prices.

Maximising spending

The corporate consolidations provide an opportunity for companies to restructure and maximise their operating spend in a turbulent market.

The Muntajat-QP integration follows a wave of similar tie-ups between state-owned oil companies and their petrochemical affiliates in the Mideast Gulf.

Oman last year integrated state-owned oil company OOC, refiner Orpic and seven other domestic energy firms.

The new entity, OQ, comprises OOC, Orpic, OOC's upstream arm OOCEP, Oman Gas (OGC), Duqm Refinery and Petrochemicals Industries (DRPIC), Salalah Methanol (SMC), Oman Trading International (OTI), oxo intermediates and derivatives producer Oxea, and Salalah Liquified Petroleum Gas.

Petrochemical consolidation is also a major theme in Saudi Arabia.

Sipchem, a Saudi producer of methanol, polymers and acetic acid, last year merged its operations with fellow Jubail-based Sahara Petrochemicals, a supplier of PP.

Saudi Aramco is also in the process of acquiring a majority stake in Sabic, as part of a wider drive to expand its downstream operations.

By Muhamad Fadhil and Kevin Foster