2012-11-12 12:28:07 - New Energy market report from Business Monitor International: "Algeria Petrochemicals Report Q1 2013"
The Q113 Algeria Petrochemicals Report examines how new government legislation has made the country's petrochemicals market more attractive to investors and international oil companies (IOC) alike. However, it also warns that the gloomy global economic climate has had a negative impact on the US and European economies, with an inevitable impact on demand for Algerian petrochemicals. This report considers Algeria's search for new petrochemicals markets and warns that the country faces tough competition from strong Middle Eastern and new Asian industries, as it looks to emerging markets and developing economies to generate business.
Furthermore, BMI explores the opportunities for long-term growth which emanate from the automotive and construction sectors - both domestically and elsewhere in Sub-Saharan Africa (SSA). The impact of
a potential decline in oil and gas resources on domestic consumption and hydrocarbons imports is also addressed.
Full Report Details at
- www.fastmr.com/prod/499754_algeria_petrochemicals_report_q1_2013 ..
The recent government announcement concerning an increase in the state-owned Oil and Gas company Sonatrach's investment budget will also be considered, as it will not only result in a number of exploration and production (E&P) ventures with foreign companies and investors, seeking to capitalise on Algeria's 600 trillion cubic feet of unconventional and shale gas reserves, but will also have an impact on the petrochemicals industry further downstream, not least because these could hold the ethane resources necessary to power new cracker capacity.
The start-up of the 1mn tpa methanol complex, which was planned by Sonatrach and is being built by a consortium of companies led by Kuwait's Qurain Petrochemical Industries Company (QPIC), is still suffering delays, and is not expected to enter production until 2014 due to Sonatrach being restructured.
With 1.1mn tonnes per annum (tpa) of ethylene production capacity, integrated downstream plants and low labour costs, the US$3bn petrochemical complex at Arzew should be more economical than smaller and often isolated European facilities.
Over the last quarter, BMI has revised the following forecasts/views:
* Delays in current projects indicate that the realisation of the country's full potential in petrochemicals is unlikely over the forecast period. These delays will not only raise costs and reduce margins in the long term, they will create a more opaque business environment that will undermine progress and put the industry's significant cost advantages - in terms of domestic natural gas feedstock availability - at risk.
* New government incentives that are being used to kick-start an automotives production industry in Algeria could have an extremely beneficial effect on related petrochemicals consumption. Similarly, a number of new construction and transport infrastructure projects, including a highway, tram extensions, a port and the world's third largest mosque, will have an equally marked impact on domestic demand, particularly for those petrochemicals used in construction, such as poly vinyl chloride (PVC).
* The closing of the Skikda complex during H212 has not noticeably affected the Algerian petrochemicals market, mainly because production was raised and then stockpiled prior to the closure. It is due to re-open this quarter and production should resume as normal.
* The change in government tax legislation makes foreign investment and partnerships in the hydrocarbons industry more likely in the future. The former law established an 'exceptional profits tax' to be levied at rates of 5-50% on the full value of foreign companies' gross Algerian average daily oil production volumes for each calendar month in which Brent crude averaged more than US$30 per barrel (bbl). This resulted in huge tax expenses and subsequent lawsuits from angry foreign oil companies. This is no longer in effect and so foreign interest should grow accordingly.
* If reports of a government allocation of US$14bn to build three new fertiliser plants, with a capacity of 35mn tpa, by 2020 are correct, then BMI believes that this could take care of all domestic demand and still leave sizeable amounts for export.
Overall, the petrochemicals market will undergo a period of massive change over the next decade as unconventional shale and gas reserves are produced which will dynamics at play within the market. Given the vast reserves thought to be available in Algeria, the impact of these hydrocarbons resources cannot be underestimated.
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