News Code : 45207


Petrotahlil -The peace agreement between Israel and the UAE could open up new opportunities for polymers trade in the Middle East, but may have limited impact on overall market dynamics in the region.

The two countries formally agreed in August to "normalise relations" in a US-brokered deal, which requires Israel to stop its plan to annex parts of the West Bank.

Israel previously had no diplomatic relations with Gulf Arab countries. The UAE is the third Arab nation to reach such a peace deal with Israel, after Jordan and Egypt.

Israel and the UAE have yet to work out an actual detailed agreement for the peace treaty, which, according to newswire agency Associated Press, is due to be signed in the US on 15 September.

The UAE was the second largest exporter of chemicals in the Gulf Cooperation Council (GCC), behind Saudi Arabia, according to latest data from the Gulf Petrochemicals and Chemicals Association.

The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

With an 8% contribution to GCC chemicals output in 2018, the UAE is the third largest producer in the region. Its share to the region’s total chemicals output has doubled over a period of 10 years from 2008.

Oman and Bahrain are also reportedly in discussions to normalise ties with Israel.

The peace agreement could provide a window of opportunity in the future for Gulf producers to export polymers to Israel, said ICIS senior consultant Fabrizio Galie.

"From the point of view of polyolefins, I personally won’t expect an upheaval," Galie said.

"As far as I know, there is no customs tax on the import of polyethylene (PE) and polypropylene (PP) to Israel. So overall, there could be some space for volumes coming also from the UAE in the future, and yes, they could maybe substitute some of the traditional volumes from Europe," he said.

"The domestic market [of Israel] seems quite mature, [polyolefins] demand is generally expected to grow by 1-2% per year in the long term, which could even be optimistic," Galie said.

Israel's imports of petrochemicals are limited as the country is generally self-sufficient in most basic chemicals, except polyolefins.

Its imports of linear low density polyethylene (LLDPE) in 2019 grew 13.3%, while those of polypropylene (PP) increased 22.6% from the previous year, according to ICIS Supply and Demand Database.

Israel's polyolefin imports are mostly sourced from from Asia, Europe and the US, according to Galie.

UAE producer Borouge has previously refrained from doing business with  Israel before the peace treaty was signed, according to a UAE-based distributor.

"Israel was sourcing polymers from Borealis Europe. With this landmark [peace] deal between the two nations, we think the Israel market may open up for Borouge," the distributor said.

"[I have] yet to see any impact of the deal in the broader petchem market."

Borouge is a joint venture between the Abu Dhabi National Oil Co (ADNOC) and Austria's Borealis.

With 4.5m tonnes of annual capacity, Borouge runs the world’s largest integrated polyolefins complex at Ruwais in Abu Dhabi and has plans to more than double its current capacity by 2030.

There is potential for crude and refined products trade between the UAE and Israel “should politics allow”, said ICIS senior analyst Ajay Parmar.

The volumes, however,  would be so small that trade values would be pretty insignificant for both countries involved, he said.

“In a hypothetical trade deal, Israel may well replace some Russian crude with UAE crude but the volumes overall are very small and pretty insignificant compared to UAE crude production of around 3m bbl/day,” Parmar said.

“Israel’s oil demand is only 0.2m bbl/day (a very small amount considering world demand is around 100 m bbl/day). By comparison, a mid-sized European country such as the UK or Spain has a demand of 1.0m-1.5m bbl/day. It mainly purchases crude from Russia and Turkey right now,” he added.

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Source : ICIS


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