High oil prices provide those investing in new crackers in the Middle East with a feedstock advantage. In addition, increased competition for traditional feedstocks means more natural gas will be diverted to GTL projects, which in turn provide high-value feedstocks (such as ethane, propane and butane) for other petrochemical industries. Iran's accelerating petrochemical footprint is no coincidence. After Russia, Iran has the World's largest natural gas reserves, closely followed by Qatar.

According to analysts, industrial gas revenue growth of up to 20 percent per annum is possible over the next five years in the Middle East, which could prove pivotal as major projects come onstream. The regional market was valued at $865m in 2005.

Middle East ethylene capacity - a yardstick for petrochemicals growth - is expected to increase by a further 300% over the next decade, around a half of new capacity worldwide. Sabic's vice chairman and CEO Mohamed Al-Mady says: $quot;By 2010 ethylene production in Iran and the GCC countries is estimated to account for about 20 percent of the global capacity$quot;. Sabic's ongoing petrochemical capacity expansions alone are worth some $20bn and will boost capacity from 43 to 64 million tonnes by 2008.

Qatar emerges as world GTL hub
Qatar's industrial gas revenues grew an impressive 45 percent between 2004 and 2005 to $29m. GTL technology has thrown up a few problems in the past, but second generation GTL technology has now been developed by the oil majors, led by South Africa's Sasol. The process is only about 60 percent thermal energy efficient, adding economic constraints. So gas-rich nations like Qatar have a number of options: exporting the natural gas to domestic markets; using it as a feedstock in GTL plants; or producing liquefied natural gas (LNG) for export.

The historic Oryx GTL complex at Ras Laffan in Qatar started up in January, incorporating two of the world's largest ASUs provided by Air Products. Oryx is a Qatar Petroleum and Sasol joint venture. The GTL process requires mixing natural gas with oxygen to yield syngas, followed by Fischer-Tropsch synthesis to waxy syncrude. Hydrogen is used to crack the syncrude into high-grade liquid fuels. The ASU's produce up to 7,000 tpd of oxygen. $quot;The volumes of oxygen required in the GTL manufacturing process are unprecedented and make it a significant part of the overall production cost,$quot; according to Air Products vice president for tonnage gases, Europe and Middle East, Richard Boocock. Sasol-Chevron told gasworld that it is working with Qatar Petroleum, with the intention to increase the plant's capacity to more than 100,000 bpd. The partners are also exploring building an integrated GTL plant with a capacity of about 130,000 bpd in the future. Sasol-Chevron says it's too early to release the date or details of this project, although a tentative date of 2010 was suggested at the projects inception in 2004.

The Oryx GTL project is just one of a series of planned expansion and development projects Air Products has underway in Qatar. The company opened new offices in Doha in 2006. $quot;Qatar is a country of great importance to us as energy is one of our growth platforms,$quot; said an Air Products' spokesperson, adding that: $quot;we want people to consider us the number one choice as an industrial gases partner in Qatar.$quot;

Air Products lost out to Linde, however, in the bid to supply eight huge air separation units to Qatar's next GTL behemoth, the Shell Pearl GTL project. Pearl will be the world's largest integrated GTL project and will make Qatar arguably the GTL capital of the world. Also based at Ras Laffan, Pearl will convert natural gas into 140,000 barrels of liquid hydrocarbon products plus 120,000 barrels of condensate, liquefied petroleum gas and ethane every day. The ASUs will supply 860,000m3 per hour (29,500 tpd) of oxygen. This is the largest ever single contract for air separation units. GE's oil and gas business is to supply six gas turbines to the project, the first phase of which is due onstream at the end of the decade.

Qatar's vision for Ras Laffan is big, it is $quot;gearing up to be the single largest complex and most comprehensive gas processing city in the world$quot;: Initial projections indicate that there will be 16 LNG trains, seven GTL projects, five gas plants, six or seven ethylene plants and a variety of other industries. The size of the port is set to double, as is the geographical size of the city itself. However, two out of four planned GTL plants are on hold after Qatar declared a moratorium on new projects from its North Field gas reservoir in 2005. Qatar does not expect to complete the study of the reserves until 2009, after which it will decide whether to give the go-ahead for any more liquefied natural gas (LNG) or GTL projects. In the meantime, the potential for industrial gas companies is very good. Air Liquide has positions in both helium production and a jv for on-site supply projects. There are two local privately-run gas companies that supply the $30m market. As all the GTL projects are captive there will be little impact on the industrial gases market apart from the organic growth from high construction activity which drives demand for industrial gases.

Saudi Arabia
Saudi Arabia is the region's biggest industrial gas market, largely based around the Al-Jubail (Gulf Coast) and Yanbu (Red Sea) petrochemical hubs. The Kingdom's industrial gas revenues grew by over to 30 percent to $295m in 2004-05. The first of the Kingdom's economic cities was launched in December 2005 at Rabigh, 200 kilometres north of Jeddah to house petrochemicals and other energy related industries. The city will see one of the world's largest seaports constructed as well as a vast industrial area and a new financial district.

At the end of 2005 Linde announced it had secured its largest individual order ever for air separation plants in Saudi Arabia, worth over €300m ($395m). The two production facilities for pure oxygen were commissioned by National Industrial Gas Company (NIGC), which is the largest industrial gases company in the Middle East (and a subsidiary Sabic). The plants are scheduled to start operation in April 2008, and will generate 3,000tpd of oxygen. Aldo Belloni, Linde AG board member responsible for Gas and Engineering said: $quot;The majority of the oxygen required at the Yanbu and Al Jubail sites will be generated by Linde installations, including the largest air separation unit in the Middle East, which is currently under construction.$quot; Linde also has a joint supply deal worth €70m ($92m) with Mitsubishi Heavy Industries Ltd to provide oxygen from an ASU with nameplate capacity of 108,000m3 to a new methanol plant in Al Jubail, due onstream in 2008.

Elsewhere, Air Products and the Kingdom's largest private gas company Abdullah Hashim Gases and Equipment are set to supply nitrogen and hydrogen to Emirates Float Glass in Abu Dhabi, under a 15-year agreement. Abdullah Hashim is headquartered in Jeddah, where it has special gas production facilities and is building a second unit in Al-Jubail. The company has ASUs in Jeddah and Dammam.

SIGAS is another merchant market supplier of industrial, medical and speciality gases. As well as supplying local businesses with liquid nitrogen, oxygen and argon, SIGAS also exports gases, most notably to Yemen. Primarily based in Dammam, the company also has plants in Riyadh and Jeddah. SIGAS operates a fleet of tanker trucks to deliver liquid gases throughout the region. The third largest company Riyadh Oxygen focuses on supplying central Saudi Arabia with bulk and cylinder gases for medical and industrial applications.

United Arab Emirates
Construction and off-shore oil services have both boosted gas demand in the UAE, where gas revenues grew 17 percent to $68m in 2005. The UAE has been an important trading post for liquid helium. The majority of helium (85 percent) has traditionally been sourced from the US. The new helmium production plant in Qatar is likely to be the main source in the region when it is fully operational. BOC opened a helium distribution centre in Dubai at the end of 2005 to supply Asian markets, having tapped into the Middle East's only current helium source, supplied from Qatar's huge gas reserves at Ras Laffan.

Gulf Industrial Gases Co. is located in the Mussafah Industrial area of Abu Dhabi, and provides high-purity anaesthetic gases. Dubai Oxygen Establishment started its production in 1971, and today supplies medical, industrial, construction and technical markets throughout the UAE.

Kuwait has essentially two industrial gas companies - Kuwait Oxygen and Acetylene Company (KOAC) (with a sister company KIGP) and Refrigeration and Oxygen Co (ROC). Some of the governmental requirements for industrial gases - especially the medical related supply - are alternated between the two industrial gas companies on a two yearly basis but all other companies requiring gas are competitively fought over. However, in recent years we have seen demand for larger volumes of gas to rise, particularly related to the petrochemical and refining facilities around Shuaiba.

KIGP started up a new ASU two years ago, which includes an oxygen pipeline feed into the Equate petrochemical facility to support the increased demand for oxygen in the EO/MEG plant. (Equate is a joint venture between the Kuwaiti company Petrochemical Industries Company (P.I.C.), and Dow Chemical subsidiary Union Carbide). Nitrogen pipelines also stretch to some of the refineries to back up their requirements.

Air Liquide is also active in a number of Middle Eastern countries, including Egypt, Oman, Qatar, Lebanon, and is now becoming involved in Kuwait's growing petrochemicals industry. Air Liquide's joint venture with KIGP, Shuaiba Oxygen, is to supply petrochemical company Equate Petrochemical Company with production gases for the major expansion of the Equate petrochemical complex in Shuaiba, Equate 2. Shuaiba Oxygen will invest nearly €70m ($92m) in an ASU with a capacity of 1,500tpd of oxygen, which will be commissioned during the third quarter of 2008, to supply the site's ethylene, ethylene glycol and polyethylene production facilities. The joint venture partners persuaded Equate management that an on-site supply scheme was best for the company and this major project is now underway, industry sources suggest.

The huge growth in petrochemical, gas processing and refining across the region has also boosted demand for argon for welding and liquid nitrogen for oil services in Kuwait. Argon will be readily available from the new Shuaiba Oxygen joint venture. Isotank leasing and industrial gas trading business Cryorent has grown on the back of this demand to be one of the region's largest isotank suppliers in just a year. Cryorent is located in Dubai.

Of the global gas companies, Praxair seems notably absent, except in Israel. Here the company's jv Maxima Air provides atmospheric and semiconductor process gases for Israel's growing semiconductor industry. Praxair CEO Steve Angel recently told gasworld that the rest of the region: $quot;is an area that we would invest under the right circumstances$quot;. Gas revenues here grew by over 10 percent to $102m in 2005.

Turkey has experienced rapid economic growth, and has the largest merchant gas market in the Middle East. Linde acquired industrial gas producer Karbogaz in August. With annual sales of approximately €27m ($36m) and some 230 employees Karbogaz is the biggest CO2 producer in the Middle East. Karbogaz will initially merge operations with Linde Gaz Istanbul and will be renamed Linde Gas, eventually moving to new premises in Istanbul and seving Turkish and Middle Eastern markets. The Turkish market in 2005 was valued at $129m, with a growth of ten percent a year.

As the Middle East market becomes increasingly sophisticated, consolidation seems likely among the smaller players. The influx of major gas companies, growing petrochemical production and major oil and gas feedstock advantages form facets of an economic boom that herald further opportunities for gas suppliers active in the region, although timing will be critical as investment costs rise.