Gulf Arab countries will account for about 20 percent of the world's ethylene production by 2010 as they expand petrochemical output capacity, the secretary general of a Gulf petrochemicals lobby said on Monday.

The Gulf Arab region now produces about 8 percent of world's ethylene, the basic feedstock for petrochemical plants.

The Gulf is the new home of the petrochemical industries and 50 percent of the world's ethylene projects are in the area, Abdullah bin Zaid al Hagbani, secretary general of the Gulf Petrochemicals and Chemicals Association (GPCA) said.

In 2010 production will reach 30 million tonnes, which is about 20 percent of the world's total ethylene production, Hagbani told Reuters.

GPCA, established in Dubai last March, is a non-profit organization which acts as a regional lobby for the petrochemical industries and a platform for information exchange.

Demand for ethylene, mainly produced by cracking crude oil derivative naphtha, is accelerating around the world, particularly in Asia, Hagbani said.

If there is are more doors open for petrochemical investment, Gulf production will reach 40 percent of the world's total in 10 years, he said.

In May, Qatar, the home to the world's third largest reserves of natural gas after Russia and Iran, started work on an $800 million ethylene cracker. Officials said it would be the world's largest.

Last week, Saudi Arabian Basic Industries, the largest listed company in the Arab world, said it will buy the UK division of U.S. chemicals manufacturer Huntsman Corp.

The Saudi company is the world's fourth-largest producer of polyolefins, the raw material for plastics, producing more than 5 million tonnes per year, according to its Web site.

Hagbani said that the petrochemical industry in the Gulf could double its output in a few years.

But there we will see some challenges as feedstock prices are escalating and the availability of some feedstock is also diminishing. There is definitely a shortage of methane and ethane, Hagbani added

Russia Dubai