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Gulf region the clear favorite for investment in the Petrochemical Industry says Alpen Capital’s Gulf Petrochemicals Industry report

Dubai, 7th March, 2010

Alpen Capital (ME) Limited today announced the publication of its Gulf Petrochemicals Industry Report as a part of its Industry Research services. Other recent reports from Alpen Capital have covered the GCC Takaful, Insurance, Healthcare, Retail and Cement industries.

Alpen Capital launched its Industry Research services at the beginning of last year to complement its existing Corporate Advisory services, including Debt advisory, Mergers & Acquisitions advisory, Equity advisory and Credit Ratings advisory. Regulated by the Dubai Financial Services Authority and based at the DIFC, Alpen Capital is the associate of Bank Sarasin-Alpen (ME) Ltd, a subsidiary of the Swiss private bank Sarasin & Co Ltd, Switzerland.

“Our Gulf petrochemicals industry report talks about the prospects for the industry, emerging trends, financial performance, valuations and governance” says Sanjay Vig, Managing Director at Alpen Capital. “The report covers eight of the largest Gulf petrochemicals firms as well as comparative statistics on an international peer group”, he adds.

Global petrochemicals industry facing avalanche of new capacity

The global petrochemical industry is facing an avalanche of new production capacity, largely owing to cost-advantageous feedstock. Alpen Capital estimates additional ethylene and polyethylene production capacity of about 32 million metric tons (mmt) and 23 mmt respectively over the next six years from 139 mmt and 90 mmt in 2009. The supply demand mismatch is expected to worsen in the short run, but gradually improve as the global economy recovers and more downstream projects come on-stream.

The majority of the world’s petrochemical capacity growth is concentrated in the Gulf, which now accounts for around 10% of global supply. The region has natural competitive advantages in access to cheap feedstock and being located relatively close to demand-dense Asian countries.” says Tommy Trask, Executive Director and Head of Industry Research services at Alpen Capital.

The region is facing a rising shortage of ethane supply however due to lack of growth in exploration and production activity and increasing gas demand for electricity generation. As a result, Gulf producers are gradually shifting toward heavier feedstocks. The move has both advantage and disadvantages. Although ethane is the more cost effective choice, it only enables production of basic olefins, whereas heavier feedstock can be used to produce a more diverse range of petrochemicals.

2009 was defined as a year of recovery, when petrochemicals prices moved up from the cyclical trough of 2008. The price trend has also been encouraging over the past quarter. The price trend in 2010 will be a function of downstream sector growth, global economic recovery and new supply initiatives overcoming feedstock, technical and human skill-set constraints.

Please click here for a copy of the Gulf Petrochemical Industry Report.