Riyadh – Decypha: With over 200 active projects, the Kingdom of Saudi Arabia is known for its heavy investments in its petrochemical sector. Proving that the petrochemical industry is strategic to its long-term economic interest, the country is the largest producer in the Middle East of petroleum derivitaives; it recorded an expansion of 5.8%, according to the Gulf Chemical and Petrochemical Association (GPCA).
Saudi Arabia was the only country to add to the production capacity in the GCC last year, the association continued. It produced 99.1 million tons of the capacity which represents 66% of the total regional capacity.
During the past year several new downstream projects were announced, a $500 million chemical complex in the Jubail industrial city.
Challenges vs Growth
The oil-rich kingdom, similar to many other petrochemical producers, has faced hard times due to the plumpiting oil prices; however, Saudi petrochemical companies experienced a compounded crunch when the government announced an increase in the prices of feedstock, in support of the country’s fiscal goals to reduce budget deficit, Mondaq reported. Despite their significant contribution to the world production, the high cost of feedstock and the lower final prices led to an unstable environement throughout the industry.
The kingdom’s refining and petrochemical sector scored a double digit growth year-on-year since 2007. About 10% of the world’s petrochemical export products have been manufactured in Yanbu and Jubil in Saudi Arabia’s east coast. These cities are the center of the Kingdom’s petrochemical industry and is a key part for the country’s development of its hydrocarbon-based industries, according to a report released by Shearman.
The report continued that the kingdom is planning to expand its petrochemical sector over the next ten years to build new plants and develop the existing ones. Companies of Aramco and SABIC (to a lesser extent) are constantly participating in new petrochemical projects.
Petrochemical Industry and Vision 2030
The local industry will benefit from the plan of diversifying its economy and the development of new industries, according to GPCA.
Saudi Aramco, for example, will develop its petrochemicals feedstock capabilities in order to help the diversification plan of Saudi Arabia, the company said in the publication of Vision 2030.
“At the same time as diversifying our economy, we will continue to localize the oil and gas sector. As well as creating a new city dedicated to energy, we will double our gas production, and construct a national gas distribution network,” the company said in the publication, adding, “We will also make use of our global leadership and expertise in oil and petrochemicals to invest in the development of adjacent and supporting sectors.”
The petrochemicals sector in Saudi Arabia makes up 60% of its non-oil exports; which will remain a key part of the country’s 2030 visison, according to a study conducted by Jadwa.
Overall, and according to Jeddah Chamber, the petrochemical sector in Saudi Arabia is set to become the dominant player in the GCC region by 2020.
By Toqa Ezzeldin
