Krung Thep, Thailand. The center of mass of the petrochemical industry is slowly on the move.  Middle eastern petroleum states are in the process of building increased capacity in the Middle East (ME). A reported 2.3 million barrels per day (MMBpd) of ME petroleum refinery capacity is due to come on stream in 2011.  A total of 10 MMBpd increase in world capacity is expected by this time.

US refiners have limited their recent upgrades largely to desulfurization and sour grade processing rather than distillation capacity. A relatively minor 500,000 barrels per day of new US capacity over several sites will be available by 2009.

Approximately 3/4 of the total petroleum reserves are controlled by NOC‘s- National Oil Companies. This is a crucial distinction. Only 1/4 of the known reserves are controlled by international corporate entities (the Majors).  The major oil consuming states are increasingly dependent on foreign, nationalized petroleum suppliers.

NOC’s are used for more than just oil production and distribution. They are used as a cash reserve for patronage, political leverage, and even mischief.  These entities are intermeshed in the global market and provide varieties of risk that are hard for the marketplace to understand.

In particular, ethylene cracking capacity is expected to shift significantly towards the ME, providing advantages for regional production and distribution of polyolefins. Despite advantageous feedstock costs, overall manufacturing costs may not be as low as anticipated. The dramatically increasing cost of refinery construction and logistic issues unique to the location appear to provide a leveling effect on cost structure. It is thought that the EU will see the biggest effect of the ME buildup in capacity.

It is unclear how this refinery capacity uptick will effect liquid non-fuel commodity prices (i.e., chemical feedstocks).