Saudi Arabia evolves into a global petrochemicals hub

Capital investment in hydrocarbon sub-sectors in the Kingdom of Saudi Arabia is slated to reach $94.4 billion in the years 2004-2009 according to Dr. Abdulwahab AlSadoun, the Director General of the E

Dr. ِِAlSadoun illustrated Saudi Arabia’s emerging strength as a global hub for petrochemicals at the ISF Petrochemicals Forum held recently in London. Spearheading the Kingdom’s investment strategy, SAGIA continues to drive reforms and developments to create the enabling environment for investments in the energy sector and its value chain.

Saudi Arabia’s petrochemicals industry continues to grow at a consistent and exponential pace accounting for 7% of the global supply for basic and intermediary petrochemical products.

The Kingdom’s strong infrastructure, significant cost advantage due to lower average variable and fixed cost and the competitive and fixed natural gas prices render it an attractive destination for investments in crackers of Olefins and derivatives. Moreover, SAGIA’s energy strategy promotes diversification into downstream and the development of export-oriented plastic conversion industries resulting in further opportunities.

Strategic foresight on the part of the Kingdom’s leadership has resulted in a winning formula in petrochemical investments exemplified by Jubail and Yanbu industrial cities, and the building of a gas network by Saudi Aramco which formed the backbone of SABIC’s petrochemical industrial plants. From the start-up of Ar-razi Methanol Plant in 1983 to the liberalization of the upstream petrochemicals sector in 1995, to the shift to refinery integration through PetroRabigh, Saudi Arabia has strategically guided the evolution of its petrochemical industry.

The industry’s success story and investor’s confidence is mirrrored by the large investment commitments made by global names over the last few years via joint ventures and expansions. Over 70% of the first wave of projects in 2004 came in the form of joint ventures with ExxonMobil, Shell and Mitsubishi followed by newcomers Chevron Phillips, Sumitomo, Basell and Acetex. Furthermore, 2004 alone saw the production of over 34 million tons of petrochemicals by 15 industrial plants.

Examining the industry’s growth pattern, Saudi Arabia’s share of petrochemicals will represent about 13% of world capacity by 2009. Of the 59 petrochemicals projects in hydrocarbon sub-sectors, 74% are green field projects.

As SAGIA continues to promote the exploitation of the energy advantage and the petrochemical industry’s center of gravity moves towards best cost area, Saudi Arabia gears up to be the world’s first choice for petrochemicals and production as well as the best choice for investment in the sector.