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Algeria’s petrochemicals industry is set for massive expansion over the next five years as the development of its low-cost ethane-fed chain of production undercuts facilities in its main European market. Yet delays are pushing back the completion of its ambitious projects, according to BMI’s latest Algeria Petrochemicals Report.

By tapping into locally available gas resources, the country’s development of an ethane-fed petrochemicals chain will enable Entreprise Nationale de l’Industrie Petrochimique, in its joint venture with Total Petrochemicals, to undercut European plants. With 1.1mn tpa of ethylene production capacity and integrated downstream plants (410,000tpa of MEG, 350,000tpa HDPE and 450,000tpa of LLDPE) and low labour costs, the US$3bn petrochemical complex being built at Arzew will be more economic and efficient to run than smaller and often isolated European facilities.

Over the short-term, demand is being held back by uncertainty, continued credit restriction and sluggish industrial revival complicated by the wind down of stimulus programmes, volatile raw materials, excess capacities and trade protectionism. With the sovereign debt crisis threatening to dent the fragile economic recovery, rates of demand growth will be low. However, the completion of the Arzew complex, delayed to 2014, will coincide with the full return to pre-crisis levels of demand and at a time when global markets will have adjusted and industries in Europe restructured in response to the massive increase in petrochemicals capacities in Asia and the Middle East in 2009-2011. This should ensure that increases in Algerian petrochemicals production will be profitable. However, an uncertain business environment and delays to the Arzew ethylene cracker are undermining the industry’s progress and there is a possibility that project targets will overrun. The projects are already well beyond the timeframe originally envisaged by the government, although the contracts mean that they are now likely to go ahead.

In 2009, Algeria had petrochemicals production capacities of 130,000tpa ethylene, 178,000tpa of PE, 40,000tpa of VCM, 35,000tpa of PVC, 120,000tpa of methanol and 990,000tpa of ammonia. The Algerian petrochemical industry is set to achieve massive growth in olefins, polyolefin, aromatics, methanol and fertiliser production from 2014 following the completion of the Arzew petrochemical complex and a number of urea and ammonia units. Algeria’s ethylene and PE capacities are forecast to remain static until 2014, after which they will increase with the addition of new capacity. By 2014, ethylene capacity should be 1.23mn tpa and PE capacity should reach 878,000tpa, with new capacity in the production of other derivatives. Methanol production capacity will increase by 1mn tpa to 1.12mn tpa in 2013. The expected completion of a plant by Sonatrach and new fertiliser plants should lead to ammonia and urea capacities of 5.59mn tpa and 3.59mn tpa respectively by 2013.

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