Market intelligence: Middle East producers must adapt to feedstock, end-market changes

The threats to growth for petrochemical, polymer and chemical producers in the Gulf Cooperation Council (GCC) countries are highlighted by recent sector statistics.

The data present a worrying trend for producers that have relied heavily on cheap oil production-based light feedstocks. The demand for imports in major target markets is declining. Fundamental petrochemical, plastic and chemical demand trends also underscore the shifting landscape in which companies have to operate.

Their response came under the spotlight at the annual Gulf Petrochemical and Chemical Association (GPCA) meeting in Dubai. Immediately before the event, Saudi Aramco and SABIC said they had made further progress on their proposed oil to chemicals complex in Yanbu, Saudi Arabia.

This mega project, that will produce 9m tonnes of petrochemicals directly from crude, tears up the oil refinery/petrochemicals integration rule book. It looks forward to a time when chemical producers may be finding it hard to secure the olefins and aromatics they need for further processing.

It is, in effect, locking in the integration of chemicals to oil and doing away with the overarching influence of transport and other fuels on processing the barrel. What is striking is the fact that the SABIC/Aramco process could be $200/tonne cheaper on a cash cost basis compared to naphtha cracking.

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The oil-to-chemicals project tears up the refinery/petrochemicals rule book

Patents filed by SABIC in 2013 describe an integrated process configuration of conventional oil refining units targeted towards the production of petrochemical feedstocks. This could deliver conversion of more than 60% of the barrel to steam cracker feedstocks. Heavier fractions would flow to an Aramco-developed deep fluid catalytic cracking unit.

The partners on Sunday 26 November announced the signing of the memorandum of understanding (MoU) on the project which lists them move on the front end engineering FEED) stage and towards a final investment decision (FID).

They said the complex would achieve an unprecedented conversion rate in processing 400,000 bbl/day of crude oil.

“This project converges the commercial and strategic interests of both Saudi Aramco and SABIC, while reinforcing Saudi Aramco’s efforts to optimise the investment of our petroleum resources. COTC [crude oil to chemicals] will also help expand our downstream portfolio, reducing our focus on the transportation sector and securing new and promising commercial opportunities,” said Saudi Aramco CEO Amin H Nasser.