Michael J Shannon & Paul Harnick
By Satish Kanady
DOHA: With the shale revolution set to change the dynamics of global chemical and petrochemical market, Qatar needs to look at long-term strategies for better positioning itself in the global market. The country also needs to move into diversification of downstream for higher value products, two top global experts told The Peninsula.
“Lot of dynamics going on in the global chemical and petrochemical market and they are mainly driven by shale gas. Right now shale gas may not be competing with Qatar and its market side; but there is definitely going to be a ripple effect throughout the chemical and petrochemical industry, where Qatar has currently a major stake. The emerging shale-powered market may automatically compete with the markets that Qatar is currently serving”, Michael J Shannon, Global Head of Chemicals and Performance Technologies, KPMG; and Paul Harnick, Global COO, Chemicals and Performance Technologies, KPMG said in a joint-interview on Sunday.
The emergence of new feed stock developments is expected to affect Middle East producers, including Qatar in long run. The cost and margin advantages that the companies in this region have been enjoying during the past will likely decline in the long run due to the US ethane from shale gas.
Qatar’s current cost of chemical and petrochemical production cost will be challenged in a big way in future, with the shale-induced cheaper products coming in from North America. Clearly, the ‘shale revolution’ will make the US products cheaper making the Qatari products more expensive than it is now. Qatar needs to address this market challenge in store, Paul noted.
The KPMG’s global experts foresee a direct competition between the Middle East petrochemical companies and the US shale-powered forces for the bigger piece of cake in the emerging Asian region in the long run. It is key for the companies in the region to analyze how the new market dynamics is going to play out. They certainly need to think on long terms strategies and how is it going to impact their businesses.
Of course, on short-term Qatar and Middle East producers will have advantage over North America in ASEAN markets. Currently, North America doesn’t have a petrochemical distribution network in the region. The Middle East companies are already serving the market. North America has to come a long way to the supply chain outside its borders.
The real challenge for Qatar and the rest of the Middle East chemical industry is to try to move away from just petrochemical production into some of the more speciality downstream chemical areas where increased margins can be achieved. There have been a lot of discussions around moving to downstream diversification. There are also reports that Middle Eastern companies are looking to expand down streams to get the higher value products. The world anticipates that it is going to happen through acquisition of assets, Michael noted.
“We have seen many other transactions of that scale moving downstream. Lot of companies are moving further downstream and investing in extreme assets for Middle Eastern companies extending portfolio and continuing further moving downstream. We are just seeing that’s going to happen in long term in a bigger way”, he said.
The Peninsula
