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Petrochemicals

PETROCHEMICALS

chemicals isolated or derived from petroleum or natural gas.

Petrochemicals include industrial and agricultural chemicals synthesized from refinery products, gases, and natural gas. Research into manufacturing processes was stimulated by the availability of raw materials (most of which would otherwise be waste products) and by foreign demand. The global petrochemicals industry remained relatively small until World War II, when the United States concentrated government investment in petrochemicals into a few large, privately owned plants and in newly constructed state-owned facilities operated by experienced firms. This huge investment in petrochemicals during the war left the U.S. industry in a dominant position for many years, making it very difficult for the national oil companies (NOCs) of Middle Eastern countries to compete. Before the nationalization of their oil industries, the NOCs were hindered by the operating companies' reluctance to supply enough raw materials and process technology to make the NOCs' local ventures competitive internationally. Exports were necessary because Middle Eastern domestic markets for petrochemicals were small. Another disadvantage grew out of the inability of the NOCs to conduct state-of-the-art research on process technology or to fabricate locally the equipment needed to establish and retain a position on the cutting edge of the industry.

These drawbacks decreased in importance after oil prices rose in the early 1970s. Increased costs of drilling for raw material in oil fields gave the NOCs a comparative advantage. Also helpful was the rise in importance of a third class of firms involved in petrochemicals: international contracting firms such as Fluor, Foster Wheeler, and Chiyoda, which were able to design and construct state-of-the-art turnkey facilities and associated infrastructure. During the 1970s and after, Middle Eastern oil-exporting countries found it relatively easy to acquire petro-chemicals facilities tailored to their needs.


Persian (Arabian) Gulf petrochemical producers have increased their market share of world petrochemicals from almost 0 percent in 1980 to about 10 percent in 2002. The cost of the feedstock (the raw material, i.e. natural gas or refined oil products) can account for between 40 percent and 70 percent of the final chemical product. Hence the Gulf producers of oil and gas with raw material costs of between $0.50 and $2.00 per barrel of oil have a natural advantage. As a consequence, the large petrochemical manufacturers in the Gulf have taken most of the increase in demand due to the growth of the Far Eastern economies. As of mid-2002, the Gulf countriesmainly Saudi Arabia, Iran, Kuwait, and Qatarproduced a total of 58 million tons of petrochemicals and had plans to start a further 57 million tons within the next five years.

see also natural gas: economic exploitation of; petroleum, oil, and natural gas; petroleum reserves and production.


Bibliography


Chapman, Keith. The International Petrochemical Industry: Evolution and Location. Oxford: Blackwell, 1991.

Tétreault, Mary Ann. The Kuwait Petroleum Corporation and the Economics of the New World Order. Westport, CT: Quorum Books, 1995.

mary ann tÉtreault
updated by jean-franÇois seznec

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