Steven poruban
Senior Editor
As of late, Saudi Arabia is making strides to achieve higher value from its abundance of crude oil and natural gas through the production of chemicals and chemical products, according to the state-owned company's senior vice-president of finance.
Speaking recently at the Saudi chapter of the American Chemical Society in al-Khobar, Abdullatif A. Al-Othman noted, "Our nation and our region have a strong foundation for the chemicals industry—and we should be very proud of it—but we also have a tremendous amount of unrealized upside potential, especially with much more sophisticated, higher-value chemical products."
Al-Othman said, "Despite the significant chemicals businesses we already have, and despite Saudi Arabia and the gulf region's tremendous comparative advantage in producing oil and gas, the precursors of many chemicals, we have not nearly realized our potential for adding value downstream."
Al-Othman noted that chemical company stocks account for 40% of the Saudi Bourse and that Saudi Basic Industries Corp. (Sabic) already was a global giant on par with BASF in terms of capitalization.
He said that despite this strong foundation, the region's share of the chemicals market is quite small. Compared to Saudi Arabia's one-quarter share of the world's hydrocarbon resources, the kingdom's share of the chemicals market is less than 2%, he noted.
Al-Othman said, "Compared with either reserves or current output of oil and gas, our performance in manufacturing chemicals has a long way to grow, especially in the areas of specialties, pharmaceuticals, and life-science products."
The kingdom's upside potential in this area, Al-Othman noted, is "tremendous." There are growth opportunities for existing players as well as for Aramco, he said, adding that growth will generate related businesses and employment opportunities.
Joint ventures
Al-Othman noted that while Sabic uses gas as a feedstock, Aramco's new joint ventures use natural gas liquids and refined products as feeds, which are natural extensions of its NGLs and refining business. Aramco's current and planned JVs include those with Sumitomo Chemical Co. (PetroRabigh) and Dow Chemical Co., he said.
"Within the next 2 years, Aramco will begin independently marketing high-value chemicals," Al-Othman said of PetroRabigh. "Within the next decade, we aim to launch into the top tiers of the global chemicals business," he forecast (OGJ Online, May 25, 2011).
He also spoke of the economic potential of the JV with Dow. Aramco and Dow are planning a $20 billion facility at Jubail on the Persian Gulf coast, where it also will develop a joint 400,000-b/d refinery and petrochemicals plant with Total SA.
"The Jubail project plans to make chemical products never made before in Saudi Arabia or the Middle East, such as polyurethane raw materials used in systems houses for production of foams, elastomers used for a variety of auto and appliance applications, and glycol ethers used in solvents and specialty fluids," he said (OGJ Online, Feb. 28, 2011).
"The project will offer a significant number of partnering opportunities downstream of the facilities in new industrial value parks geared at industries that strongly support the kingdom's National Industrial Cluster Development Program," he said.
He added that the project is expected to create 3,000 jobs at the facility with an equal number of direct jobs likely to be created in the chemicals and plastics value parks associated with the venture.
Key to added value
Al-Othman said the key to this added-value proposition was to "diversify the kingdom's economic base while providing jobs for young Saudis who will be joining the nation's workforce in the coming years."
He said, "With a large population bulge entering the job market, the kingdom needs more than ever to create meaningful job opportunities. With the public sector able to accommodate only a small percentage of the jobs needed, the private sector has to be the engine of job creation."
He noted, "By 2030, there will be 10 million people in the labor force—more than double the number according to the most recent official statistics of 2009. If private enterprise does not create these jobs, the standard of living will suffer."
Al-Othman concluded, "Quantum leaps in both the size and the quality of the kingdom's chemicals industry—with all that this signifies for economic growth—is within our ability."
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