INEOS $2bn Saudi investments aimed at pent-up demand - exec

Author: Nigel Davis


LONDON (ICIS)--Pent-up regional demand and a desire for a more globally balanced asset footprint lie behind the decision by INEOS to invest $2bn in three new production units in Saudi Arabia, according to director Tom Crotty.

INEOS said on Monday that it plans to build the units in the Amiral project – Jubail 2 – in Saudi Arabia as part of a $4bn development of downstream petrochemicals production capacity.

The investments will be in acrylonitrile (ACN), with 425,000 tonne/year unit, linear alpha olefins (LAO), with 400,000 tonnes/year, and polyalphaolefins (PAO), with capacities described as "worldscale" by the company.

Jubail 2 is being developed by national crude oil major Saudi Aramco and French major Total alongside the second phase expansion of their joint venture SATORP refinery.

“We have looked at Middle East investment over the years several times,” Crotty said, adding that there is significant pent-up demand for these products in the region now.

INEOS holds a particularly strong global position in ACN which is growing with increased consumption of acrylonitrile-butadiene-styrene (ABS) plastic in automobiles and electronics.

And INEOS has acquired a long heritage in LAO and PAO technologies which it will be able to lever through the new production units.

The planned investments can be seen as INEOS moving smartly to expand and, at the same time, defend its market position as demand for the intermediates and chemicals grows.

The plants will tap into feedstock produced in Jubail, but feedstock availability is not a primary driving force for the investment.

Growing demand in Asia, and China in particular, is.

The production capacities will be able to meet increasing demand in Saudi Arabia and to help provide jobs as the drive is made to shift the Kingdom’s economy away from its reliance on crude oil.

“There is a desire in the Kingdom to reach out and bring people in [to the economy],” Crotty said.

Saudi Arabia is trying to attract high employment-type industries such as automotive and aerospace, he added.

The investment plans are also related to the desire by the company to have a broader geographic base.

Built by acquisition over the past 20 years, INEOS is finding it more difficult to expand through currently expensive merger and acquisitions (M&A) activity.

The producer is also a much bigger company than it was only a few years ago.

In recent months and years, it has announced a string of investments clearly designed to help the company grow in future.

“It’s a combination of things,” Crotty (pictured) said, adding that it was about broadening the firm's the base.

“The focus here is eastwards, where demand is, [towards] China and the Far East,” he said. “Our desire to grow continues.”

INEOS assets are very much focused on Europe and the US, but INEOS Styrolution bought two polystyrene (PS) plants in China from Total earlier this year.

Further investment in Asia could follow, according to INEOS Styrolution' CEO Kevin McQuade.

Also in China, in an agreement with SP Chemicals, INEOS will use the world’s largest ethane carrier to ship ethane from the US to one of the country’s new crackers.

The feedstock will be shipped in the 40,000-tonne (85,000-cubic metre) ethane vessel INEOS Marlin and another similar vessel.

The INEOS "virtual pipeline" for transporting natural gas liquids (NGLs) from the US is expanding, Crotty said, and will be the carrier for ethane and propane to the company’s planned cracker and propane dehydrogenation (PDH) unit planned for Antwerp, Belgium.

There has been some non-governmental organisation (NGO) opposition to the company's plans in Antwerp, but Crotty said the new unit would be the most efficient cracker in the world in terms of carbon dioxide (CO2) emissions.

INEOS is in the midst of a big recruitment drive for the Antwerp project, which is “running at pace,” Crotty said.

He said initial contracts for the project will be signed in a matter of months.

Top pictured: Gas flaring in the Saudi desert, archive image
Pictures sources: Monkey Business/Shutterstock, INEOS

Interview article by Nigel Davis