Neighbourhood watch

The Abu Dhabi Polymer Park, launched in June, is expected to attract US$4 billion of inward investment.

With the region's predilection for forming aggregated areas, business bundles and cluster concepts, it was only a matter of time before we saw downstream districts, polymer parks and chemical communities begin to flourish across the Middle East.

Hub strategies, such as Jebel Ali Free Zone, have long been associated with Dubai's measured expansion, and have undoubtedly proved successful models. In the downstream business it makes perfect sense to locate near competitors. Isolating your business simply means higher costs.

Jointly investing in infrastructure which can be pooled, or distributing the outlay for common facilities between occupants, can reduce some of the massive costs associated with new petrochemical plants. Laying pipelines, investing in tank farms and building road networks helps reduce the burden, and benefits all tenants.

The Middle East is no stranger to this theme, and is ploughing ahead with cluster developments at an unprecedented rate. Saudi Arabia's Jubail Industrial City entered the Guinness Book of Records back in 1983, with the accolade of being the largest single engineering and construction project ever attempted. JIC II is now underway and will see additional plants come online soon.

More recently, Abu Dhabi snared the headlines with its Polymer Park, the brainchild of ADBIC, which will form a US$4 billion dedicated downstream plastics district in Abu Dhabi. And in July, the development contracts for Saudi Arabia's long-awaited Plastic Valley were put to paper.

However, such concentration does have its drawbacks.

As more plastics manufacturers choose the region for their operations, production capacity will skyrocket. All tenants will face similar logistical costs getting products to global markets, so distinguishing between producers will become harder.

Differentiating your product or service will be more important than ever. Regional stockpiling will have a deflationary impact on prices. When customers can go next door to haggle for a better price you can be certain that they will.

Staying ahead of the curve by developing relationships with customers outside the region will be what makes the difference. In a saturated market, selling goods through brokers will not cut it. The real challenge is marketing those goods, and allocating your projected capacity early.

Daniel Canty is the editor of Oil & Gas Middle East.

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