The Middle East region controls a significant amount of the oil & gas reserves. Besides a handful of downstream petroleum and petrochemical companies these countries have largely flourished by simply monetising the natural resource. However, few countries are now planning to better utilize the resource at hand leading to greater monetisation through value addition.
Iran is believed to be aggressively planning to establish itself on the global petrochemicals map. Over an estimated period of ten years the country is targeting ethylene capacity of 6 MMT. Indian sub-content petrochemical industry needs to be wary of Middle East producers due to inherent advantages of the neighbours. The Middle East has access to sufficient and cheap sources of raw material including gas (Iran has the largest gas reserves). The Indian sub-content also offers proximity to a large market. Further, much of the Middle East production is targeted for exports due to the low local consumption.
With deregulation in the petroleum sector the Government has mentioned rationalization in duty structure. The Government could consider providing a large tariff differential to protect the downstream petroleum industry. Nevertheless, the threat of large capacities in the Middle East could lead to a challenging domestic industry environment.
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