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Saudi Arabia Wants to Be Rated the Top Petrochemical Producer

Saudi Arabia : 12 October 2010

SAOGA 2010 finds leaders in government and business working with local and international oil and gas professionals to reach Saudi’s goal of becoming a lead player in the petrochemical production business.

It makes perfect sense that Saudi Arabia would reach for this goal.  Although the enormous petroleum resources of the nation are shipped away in stabilized crude oil form to other regions for processing, they could be used for many different purposes right in the kingdom.  Conversion into ethylene would bring in more revenues as it has a higher exported price than crude.  Ethylene can also be used to make thousands of products with both domestic and international demand.

When considering job creation and rising economic activity, the push for local petrochemical production would serve the young and growing population of the nation well.

Currently Saudi Arabia falls in at number 10 when ranking for petrochemical derivative production and seventh for basic petrochemical production.  Ali Al-Naimi, Minister of Petroleum and Mineral Resources, noted that projects currently in the works or up and running might help the Kingdom become the third largest producer of petrochemicals by 2015.  As of today there are over 80 projects in various stages.

Al-Naimi stated that the petrochemical production in Saudi Arabia has swollen since 1970, when the capacity was two million tons and started by the Master Gas System, Saudi Basic Industries Corp. and the Royal Commission for Jubail and Yanbu.  Saudi now has a production of nearly 60 million tons.

These numbers indicate that Saudi Arabia is capable of substantial growth, having achieved these gains over only three decades and now claiming around eight per cent of the global production.  Forecasts put the nation’s production at 100 million tons by 2015, which is a 12 per cent annual growth rate.

Investments have also grown from the $500 million seen in the early 1980s to approximately $20 billion in 2000.

Saudi Arabia has about 25 per cent of the proven global reserves for petroleum, around 264 billion barrels.  Besides oil, the nation also has enormous reserves of natural gas and mining ores like phosphate and bauxite, among others.

The Minister stated that Saudi Arabia has been the largest and leading oil production and exporting nation in the world for the last five decades and will continue to be throughout the 21st century.

Saudi also has gas reserves totaling 250 trillion cubic feet, which is the fourth largest amount globally.  Exploration by Saudi Aramco and global firms in the area around Rub Al-Khali indicate that additional gas fields will give a substantial boost to the reserves and production of the Kingdom.  Jubail and Yanbu, industrial city centers brought about by Royal Commission 30 years ago, have created a foundation for diversification within the economy.  The Kingdom needs to reduce its reliance on oil and get involved in global industrial product markets.

The cities of Jubail and Yanbu have become well recognized successes.  Establishing a wide range of supports and infrastructure, the cities have brought in investments within the primary and secondary industries and partnered with nations in the Americas, Europe and Asia on joint ventures and job creation aimed at Saudi nationals.

These successes have led the government to start working on Jubail II (or Jubail Industrial City II).  Found only three kilometers west of Jubail, the next industrial city will be developed over four stages.

All of the infrastructure, such as roads, gas electricity, utilities, cooling of the seawater, potable water, feedstock and treatment of wastewater, are covered by the Royal Commission.  King Fahd Industrial Port is set for expansion and a product pipeline corridor will be constructed between the port and the new city.  Developments will begin soon on the utilities extension from the park over the KRT corridor (Kuwait-Ras Tanura), a Saudi Armco corridor that is 1.5 km wide.  The project will be taken care of by Bechtel on behalf of the Royal Commission.

The new city is an attempt to capitalize on Saudi’s abundance of hydrocarbon resources in an effort to maximize the social and economic benefits of the nation.  Jubail II is also intended to strengthen the country’s current petrochemical industry that is already globally competitive.  It will also be a key element in Saudi’s development strategy and is twice the size of the original Jubail, extending 6,200.

The nine initial plants in Jubail II involve 1,900 hectares of the 6,200 hectare development.  Bechtel is also handling development of Jubail II, after successfully creating the original Jubail.

The daytime population of Jubail is 143,500.  Permanent residents total around 94,500, which indicates that many commute into the industrial center.  There was approximately SR22 billion invested by the Royal Commission into residential projects and commercial developments in Jubail.

The area was a small fishing village before 1977, when the work and development on the industrial city began.  Infrastructure was developed or imported as large, pre-made modules.

Primary industries cover 80 square kilometers of the city, while secondary and supporting industries account for 16 square kilometers.  There is a port and harbor center that includes a commercial pier of 20 berths, as well as a national airport.  Utilities include water treatment and power distribution, as well as sewage collection and treatment for both domestic and industrial customers.  There are seawater cooling services, highways and roads and also telecommunications across the city.

These features and services combine into a residential community that is entirely self-sufficient and provides full services. Housing, hotels, mosques, medical facilities including clinics and a hospital and schools are all found in Jubail, as well as an advanced and globally recognized industrial training center.

The original Jubail is currently the largest center of natural gas resource conversion into petrochemicals, controlling between six and seven per cent of the global market.  Jubail is the home of 17 leading facilities focusing on primary-industrial natural resources and around 150 facilities that service secondary manufacturing operations.

The city continues rising to world prominence as more and more partnerships and ventures are agreed on and major capital investments move forward.  Currently 30 industrial plants are being built, two are involved in major expansions and 44 more plants are in the planning stages.

King Abdullah opened Yanbu National Petrochemicals Co. (or Yansab), the SR 20 billion firm that has the capacity to produce four million tons of petrochemicals annually.  The Custodian of the Two Holy Mosques also did the inauguration for SR 574 million in projects at Jubail and Yanbu (RCJY) for the Royal Commission.

There has been SR 296 million in infrastructure improvement projects at Yanbu II Industrial City, as well as SR 133 million in road and bridge work, SR 145 million in construction of educational facilities and SR 2 billion in development projects.

King Abdullah opened a group of projects for SABIC (or Saudi Arabian Basic Industries Corporation) totaling SR 5.75 billion.  Included in that amount was a project for electricity expansion worth SR 3 billion and aimed at generating 500 megawatts.  There was a variety of industrial projects totaling SR 7.25 billion as well as a collection of private projects that totalled SR 5.5 billion.  The king’s approval was given for the SR 7.25 billion project involving the construction of an integrated water desalination facility with a 550,000 cubic meter water capacity and 1,700 megawatts of electricity, designed for Madinah’s requirements.

Saudi Aramco is also involved with overseas partners.  Combine that fact with the approved projects above and the massive industrial growth potential becomes evident.  The joint venture at Rabigh, which is an integrated petrochemical refinement facility and hub of manufacturing dubbed PetroRabigh, is well under way in the port city on the Red Sea.  Saudi Aramco partnered there with Japan-based Sumitomo.

Saudi Aramco is also involved with Dow Chemicals on the Arabian Gulf coast.  Exploration is under way towards developing an integrated petrochemical refinery close to the Ras Tanura Refinery.  This development would result in a further increase for Saudi’s potential in the petrochemical industry.

SAOGE 2010 (Saudi Arabia Industrial Oil and Gas Exhibition 2010) is set to address the current challenges facing the industry.  All of the projects involving petrochemicals and the large amount of capital and feedstock required present a variety of challenges including integration and financing.

Also, optimizing the leverage of the industry’s investments and assets throughout the worldwide economic slowdown is a current concern.  The goal to place Saudi Arabia at the top of the refined hydrocarbon resource industry stands as a priority and reaching it will result in a boom for industrial jobs and the economy.

Andrew Reid, Staff Writer, Gulf Jobs Market News
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