We will write a custom Essay on The Global Petrochemical Feedstock Developments: The Implications for GCC Players by Booz &Co specifically for you
301 certified writers online
The petroleum industry is one of the most volatile industries in the world. It dictates other industries in economies around the world. As Rouhollah (56) noted, any little change in prices of oil in the world market will result in direct effect on other industries because they directly depend on the oil industry. As such, governments around the world have been very keen on energy sector.
The recent reduction of the amount of natural gas has had negative impact on various sectors of the economy in different countries. Natural gas is one of the most important products of petroleum gas. It is used in various industries as a direct source of energy, or converted to other useful products.
Gulf Cooperation Council brings together several countries which include Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Oman and Bahrain. Gulf Cooperation Council has been concerned of the increasing decline of the natural gas in the member countries. Middle East is known for large production of natural gas, among other petroleum products.
The Gulf Cooperation Council has been keen to ensure that they benefit maximally from these products and the current trend causes a lot of worries to the council because it would soon bring down its revenue if nothing is done to avert it. A report by Booz & Company Inc. shows that the council is panic stricken due to the rate at which gas, which was one of their most profitable products, is getting depleted.
Firms across United States and Europe and other parts of Asia are keen to find alternatives to natural gas. Although most of the alternatives are a little more expensive than natural gas itself, firms are left with limited alternatives to choose from. This puts Gulf Cooperation Council at even more awkward situation. While one of their main products is getting limited in quantity, some of the main destination markets across the world are getting alternatives to this product.
Shale Gas in North America
The United States of America has advanced its gas production through Shale Gas. Shale Gas has increased production of gas in the United States, Canada and Mexico. According to Sandwick (67), this region has hoped that the petrochemical industry in the entire North America region has new hope courtesy of Shale Gas. When shale gas was discovered in early 1990’s, it was only in small amounts.
However, there has been a consistent rise of the gas, especially in Pennsylvania, Louisiana and Texas. These are the specific geographical locations where production of gas has been a success. One of the main reasons for the development of shale gas is the increasing technological advancements.
The emerging technologies have made the extraction of natural gas very easy. As such, the process of mining this natural gas and processing it has been made easier. Shale gas currently has its presence felt in Europe and China. Although it is yet to fully capture the two markets, it has succeeded in making an entry and receiving acceptance in these markets.
This has a negative consequence to Gulf Cooperation Council. This rise of America as a major producer of oil would mean that the major markets of the GCC would be reduced significantly. This country is the leading economy in the world. Its market is the most attractive and having a firm which is American would mean that the local market would gladly prefer it to any other firm in the market.
This would push Gulf Corporation Council out of this lucrative market. The development of shale gas is also a threat to GCC in the world market. It has already made entry into Europe and some parts of Asia. It would seek markets in other regions, and because of the country’s economic strength, it would easily displace GCC from the markets previously considered its strongholds.
According to Rouhollah (35), the US-Shale oil cannot be compared with the GCC. This is because GCC gas production is on the decline, while that of Shale oil has been consistently on the rise. The GCC has been facing serious economic challenges, unlike shale oil that has received massive support from the government. Moreover, shale oil has embraced the emerging technologies for all its operations, from extraction, processing, storage and transportation, to marketing strategies.
Conversion of coal to olefin in China
China is also keen to ensure that it does not over-depend on imports to run most of its operations. Being one of the fastest developing economies in the world, and with highly innovative minds in its populace, the country has been keen to ensure that it gets alternative source of fuel locally and possibly at cheaper prices and ensure that that supply is consistent.
Shale oil is fast taking roots in China. Shale oil requires a lot of water, a commodity that is rare in this region. Unlike the United States that has advanced its infrastructural facilities, China is not such developed. The initiative to convert coal into methanol is very ambitious. Popularly known as coal to olefin project, this project plans to convert this product into liquid for ease of transportation though pipelines.
This technology is very expensive and the final product may be a little more expensive than natural gas. It would also require technological advancements, especially the infrastructure. However, because of the reduced volumes of natural gas in the Gulf regions, such countries as China which are developing at a faster rate in its industrial sector may have little choice but to go for the supply that is in steady supply.
Get your first paper with 15% OFF
This option may be more expensive, but a firm may have limited option but to go for it. The petrochemical firms in China have recorded a massive development over the past few years. This development has had further injurious effects on Gulf Corporation Council operations in China and the entire Asian region.
Gulf Corporation Council therefore faces eminent threat in the market that they had previously dominated.
Gulf Cooperation Council SWOT Analysis
To clearly understand the current predicament of this council, a SWOT analysis would be appropriate.
Golf Corporation Council has some features that make it very strong in the market. Middle East is the leading producer of oil and other petrochemicals. The council includes some of the world’s leading petrochemical producers like the Kingdom of Saudi Arabia. This gives the region a stronger bargaining power.
The fact that they form a single unit makes it possible to have a stronger voice in the world market. Although the council’s member countries are not the leading producers of natural gas, it has enough wealth gained from its trade in other petrochemicals. This makes it easy for this council to undertake such activities as research that would make their marketing strategies better.
Although this council has the above mentioned characteristics that have seen it considered as one of the main players in this industry, there are some weaknesses that has made it difficult to patronize the entire industry. The main weakness of this council is the spirit of nationalism.
Some member countries have had the feeling that they can perform better when left to trade directly with the international market. This has created cracks within the council. This weakness is closely related to the other fact that member countries are at liberty to choose the products to sell through the council and the volume. This reduces the power of this firm.
The external environment poses some opportunities for this firm. Europe is experiencing serious shortage of natural gas. This offers the council a strategic market in this region. Moreover, the gas coming from the United States of America is not in a position to meet the demand for natural gas in such regions as China and other parts of Asia.
This makes the natural gas from this council fetch good price in the world market. The technological advancements in the world have also made storage and transportation of this product easy, reducing cost of availing the product to the market.
The external environment poses threats. The main threats come from the fact that there are other countries that are also producers of this product. The United States of America, the largest market for this product, is also one of the main producers, creating stiff competition in the market.
Rouhollah, Kennedy. The Gulf Cooperation Council: Record and Analysis. New York: The Gulf Cooperation Council, 1988. Print.
Sandwick, John. The Gulf Cooperation Council: moderation and stability in an interdependent world. Michigan: Westview Press, 1987. Print.