Saudi drone attacks threaten around 10% of global ethylene capacity

BARCELONA (ICIS)–Facilities producing around 10% of global ethylene capacity are threatened by feedstock disruption after the weekend’s attack on Saudi Arabia’s oil distribution infrastructure and the subsequent closure of 5.7m bbl/day of refinery capacity.

The attack on 14 September damaged the Abqaiq and Khurais crude oil processing installations which supply oil to Saudi Arabia’s three main petrochemical sites.

Some refineries feeding petrochemical sites have been shut, cutting supplies to Jubail in the east and Rabigh and Yanbu on the west, facilities which are connected by an oil and natural gas liquids pipeline across the country.

In 2018, these sites produced 16.6m tonnes of ethylene, or 10.4% of global production, as well as 6.2m tonnes of propylene, or 5.8% of global production, according to the ICIS Supply & Demand database.

They also produced 183,000 tonnes of butadiene (BD), or 1.5% of global production.

The sites also represent 9.9% of global ethylene capacity.

Availability of chemical feedstock has been curtailed by between 16-50%, depending on the sites’ exposure to ethane, other natural gas liquids or naphtha from associated refineries fed by the disrupted installation.

Petrochemicals major SABIC said some of its subsidiaries faced curtailment of supplies of feedstocks “in different proportions with an approximate average of 49%” as of 14 September.

Saudi Kayan pegged its own feedstock supply decline to 50%; Yanbu National Petrochemical Co (Yansab) at about 30%; Advance Petrochemical Co at about 40%; Sadara Chemical Co at 16%; Sahara International Petrochemical Co (Sipchem) at about 40%; and the National Industrialization Co (Tasnee) at about 41%.

According to Michael Connolly, ICIS senior consultant from the global refining team, the damaged Abqaiq facility processes mainly crude from onshore fields which produce Arab light and extra light oil.

These crudes are used by the Samref refinery at Yanbu, the Petro Rabigh refinery at Rabigh and the Sasref refinery at Jubail. Abqaiq also feeds about 40% of Aramco’s Ras Tanura refinery.

He pointed out that chemical production in Japan, South Korea and Thailand could also be affected, as these rely most heavily on refining light grades of Saudi oil.

“There is loads of Aramco inventory around the globe, but if it goes on for an extended time, the Saudi light grades make up about 25% of Japan’s crude imports so it might start to hurt Japan. South Korea is also a big importer (10-15% of supply) and IRPC in Rayong with a lot of chemical production downstream takes a lot of Arab light,” said Connolly.

He added that Saudi refineries typically store around 10-20 days of inventory.

Chemical markets in the region and globally are likely to tighten with the possibility of force majeures from some of the affected facilities.

Asia naphtha prices spiked by 13%  in response to soaring oil prices in the aftermath of the attack.

The Houthi rebels in Yemen, who claimed responsibility for the attack, have threatened to carry out more actions.

This interactive map shows major chemical capacities for the sites threatened by feedstock disruption.

Top picture: Aramco storage tanks at the North Jiddah bulk plant, Saudi Arabia
Picture source: Amr Nabil/AP/Shutterstock 

Focus article by Will Beacham

Additional reporting by Pearl Bantillo, Antonio Biancofiore, Paolo Scaffeta, and Melanie Wee

Interactive content by Miguel Rodriguez-Fernandez