Saudi Arabia concluded nearly $50bn agreements last week
Saudi chemicals sector poised for 5.6 per cent growth over the next four years
Saudi Arabia's petrochemicals sector is expected to grow by an average of 5.6 per cent over the next four years, as the kingdom accelerates development of large-scale downstream projects, according to the research consultancy BMI.
Growth for the current year is forecast at 1.9 per cent, but project activity is expected to pick up as the country awards multi-billion dollar refining and chemical schemes in its upcoming industrial cities.
"Saudi Arabia will continue to boost its petrochemical capacity in the years to come in response to growing demand as the country seeks to leverage cheap feedstock and lessen its economic reliance crude oil exports," the Fitch subsidiary noted in its report.
Saudi Arabia, the world's biggest oil exporter has looked to boost its profit margins from the sale of complex products and plastics in growing markets across Asia. The oil price slump has encouraged traditionally oil producing countries in the Middle East to expand refining and chemicals capacities required to meet growing demand for chemicals. Saudi Arabia, for instance, plans to nearly triple its existing petrochemicals capacity to 34 million tonnes in 2030 from 12 million tonnes in 2016.
State-owned Saudi Aramco last week signed contracts to build integrated refining and petrochemical plants in its eastern industrial city of Jubail and also in western India.
The $44bn integrated scheme to be built with an Indian consortium in Maharashtra state will have refining and petrochemical capacities of 1.2 million barrels of crude and 18m tonnes per year of products respectively.
Just days before Aramco concluded that deal, it confirmed plans to develop a $5bn petrochemicals complex with France's Total in Jubail during the visit of Saudi Arabian Crown Prince Mohammed bin Salman to Paris. The development could attract as much as $9bn in investments, Aramco said.
The announcements follow a period of concerted momentum over the past couple of years, with the kingdom seeking to maximise the value of every barrel of oil produced. Last year, the country announced plans to develop the world's largest oil-to-chemicals plant in Yanbu, at an estimated to cost of up to $30bn.
While local downstream activity is expected to be accelerated as part of Saudi Arabia's Vision 2030 agenda, Aramco, which is scouting international exchanges for a public listing this year, has plans to grow its refining capacities abroad.
Its Indian deal noted Sushant Gupta, research director, Asia-Pacific refining at energy consultancy Wood Mackenzie supports Aramco's corporate strategy of increasing its global refining capacity towards 10 million barrels per day to help with "security of demand".
"Their recent interests and stakes in [Malaysia's] RAPID [refinery and petrochemical integrated development] and an expansion [of] refinery in Indonesia points out that they want to focus more on the demand growth centres in Asia - India and South East Asia," he said.
"Saudi Aramco would also want to focus more on projects which are deeply linked with petrochemicals. This mega refinery in India has indicated that they would have about 30 per cent output of petrochemicals. Typically, refinery and chemicals integrated sites provide higher margins which would help to improve the ROI [return on investment] of a project," he added.