INSIGHT: Saudi Aramco petchem plans take shape

27 June 2006 18:06  [Source: ICIS news]

By Nigel Davis

Saudi Aramco's Ras Tanura complexLONDON (ICIS news)--Saudi Aramco’s plans to develop its Ras Tanura and Yanbu refineries in Saudi Arabia into large integrated petrochemicals manufacturing complexes may not be surprising but could mark a watershed in Middle East industrial development.

Saudi Arabia wants to broaden chemicals output and develop a much stronger export-led downstream position. The strategy is to make use of a wider range of feedstock options and galvanise Aramco to upgrade its output of refined and chemicals products.

Saudi Aramco makes the point that the Ras Tanura integrated refining and petrochemical project to be located next to Aramco’s existing Ras Tanura refinery and Ju’aymah natural gas liquids (NGL) plant will feature the first application of full-range naphtha cracking in the Middle East along with ethane cracking and aromatics production.

Ras Tanura is close to Al-Jubail, the major centre for petrochemicals production in the east of the country. The aim is to develop a much stronger, indeed advanced, export-oriented manufacturing industry to include businesses such as synthetic rubber and automobile parts.

The operations would be backward integrated to the 555,000 barrels a day refinery. The over-arching plan is to produce about 3m tonnes a year of olefin and aromatics and more than 4m tonnes of polymers and other petrochemicals.

Put alongside other projects, including Aramco’s plans for Yanbu as part of the Yanbu petrochemical master plan, the scale of development is immense.

Aramco wants to create new value in chemicals and is in the position to do so.

“If we decide to export crude, then others will build; if we decided to export in a different form then we will capture value,” director of the oil giant’s new business evaluation department, Azzam Shalabi, said earlier this year.

There may be many large privately held and joint venture petrochemicals projects planned for the Kingdom but the oil giant has the power to bring its schemes to fruition.

Aramco’s advantage will rest on integration and development of the right projects at the right time. The government may want to spread the benefits of petrochemicals development more widely but it also wants to achieve much stronger downstream integration.

New world-scale plants producing a broad range of petrochemicals will put immense pressure on smaller, older units in more established producing regions like Europe. While polymer and upstream petrochemicals players shiver now at the prospect of significant new capacity from the Kingdom coming on-stream in this decade, others will view with some trepidation the arrival of more broadly based production potential possibly within 10 years.

By: Nigel Davis
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