With energy prices soaring in Asia, Europe, and the United States, the states of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—are becoming increasingly attractive locations for energy-intensive industries such as aluminum, petrochemicals, and steel. To date, most multinational companies have had only limited success in seizing this opportunity. To do better, they must offer more than technology and operational skills when they seek deals with the region's governments and companies.

Natural gas, the preferred fuel in many energy-intensive industries, is abundant and cheap in a number of GCC states, especially in Qatar, Saudi Arabia, and the UAE. Moreover, their labor costs remain competitive, and the business environment is favorable, with low corporate-tax rates. The Gulf now has, on average, only 5 percent of the total production capacity of six of the world's most energy-intensive commodities—aluminum, ethylene, polyethylene, propylene, styrene, and steel. Yet it's no wonder that companies in the region have announced plans to develop almost a quarter of the world's capacity expansions over the next five years (Exhibit 1).

Traditionally, multinational companies have contributed little to building production capacity in the Gulf, in part because the region has been relatively...