SAUDI EYES BRIGHT FUTURE AS DOWNSTREAM HUB

With all the news about Saudi Aramco’s initial public offering – making it the world’s most valuable listed company – it is often forgotten that the oil and gas giant also has a formidable petrochemicals business.

Aramco, of course, launched its IPO in December on the Tadawul stock exchange, which quickly smashed all expectations and has become the world’s first USD 2 trillion company.

Aramco has a majority stake in Saudi Arabian Basic Industries Corp. (SABIC), which gives its chemicals business foothold in more than 50 countries and allows it to produce a range of chemicals, including olefins, ethylene, ethylene glycol, ethylene oxide, methanol, methyl tert-butyl ether (MTBE), polyethylene and engineering plastics and their derivatives. As of 31 December 2018, SABIC had a net and gross chemical production capacity of 16.7 million and 33.2 million tonnes per year, according to the company prospectus.

Aramco’s chemicals business continues to grow through capacity expansions in the kingdom, increasing ownership positions in affiliates and new investments, including the proposed acquisition of the Public Investment Fund’s 70% equity interest in SABIC, which is currently expected to close in the first half of 2020.

The IPO proceeds will help Aramco “to become a major petrochemicals producer globally,” as stated in its prospectus.

Aramco believes it can leverage its experience as an efficient and low-cost operator to improve operational and financial performance of its downstream business, including capacity increases, asset upgrades, improvements in product yield and petrochemical integration at low capital requirements.

It also mentioned that with operational efficiencies, it can increase its net refining capacity in excess of 70,000 barrels per day (bpd) at SATORP, a joint operation with French company Total SA and YASREF, a joint venture with Chinese oil giant Sinopec.

Other major Saudi companies are also contributing to the kingdom’s effort to emerge as a downstream hub.

In November, Saudi Arabian General Investment Authority, or SAGIA, signed five memorandums of understanding (MoUs) amounting to USD 2 billion with a number of major petrochemical companies to boost refining and petrochemical activity in the kingdom.

SAGIA and Japan’s Mitsui & Co signed a USD 1 billion deal to evaluate the creation of an ammonia plant in Jubail with an estimated production capacity of 1 million tonnes per year in a sustainable manner. In addition, both entities agreed to jointly develop a specialty chemicals downstream opportunity.

A separate deal was signed with BASF SE of Germany “aimed at evaluating and assessing opportunities in Saudi Arabia.

Another MoU was inked between SAGIA and French company SNF Group to evaluate the establishment of a polyacrylamide plant in Jubail – a city in the Eastern province of Saudi Arabia.

SABIC also said that it was partnering with Advanced Metallurgical Group N.V. and Shell Overseas Services Ltd. for a USD 400 million deal to assess the feasibility of building a facility to reclaim and recycle valuable metals in the kingdom.

The MOU will allow SAGIA, Shell and AMG to explore the feasibility of building a world class facility to reclaim valuable metals by recycling spent residue upgrading catalysts generated by refineries in Saudi Arabia and the surrounding region, according to the companies.

“Residue upgrading catalysts help refineries upgrade the bottom of the oil barrel into more valuable products, including generation of petrochemicals feedstocks. Such a facility would help maximise the benefits from the kingdom’s natural resources while addressing the need to provide environmentally responsible management of spent residue upgrading catalysts,” the companies said.

Separately, SAGIA also agreed with Shell to look into the possibility of building a state-of-the-art residue upgrading catalyst manufacturing facility in a USD 150 million MoU.