NEW DEALS HIGHLIGHT OPPORTUNITIES IN SAUDI PETROCHEMICALS

Jubail and Yanbu Industrial Cities Co. (JYIC), owned by the Royal Commission for Jubail and Yanbu (RCJY), signed a deal with Saudi Arabia Basic Industries Corp. and Dutch firm Vopak Holding Terminals BV to acquire a 20% stake partner in Jubail Chemical Storage and Services Company (Chemtank).

The deal is vital in achieving goals set out by the National Industrial Development and Logistics Program, a key initiative of Saudi Vision 2030, building on the long-term partnership between SABIC and will allow Royal Commission Cities to achieve sustainability and efficiency.

“It invests in the development of the industrial investor logistical services sector, which plays an active logistical role in serving industries, especially petrochemicals,” according to Abdullah Al-Saadan, president at RCJY. “This will help create an attractive environment and enhance capabilities of the business sector.”

The partnership sets the stage for Chemtank to deliver further growth, said Eelco Hoekstra, CEO of Royal Vopak.

“The entry of JYIC cements a partnership in which the Royal Commission, SABIC and Vopak have jointly collaborated over the past 20 years to create a world-class supply chain infrastructure in Jubail and Yanbu,” said Hoekstra.

After the deal, SABIC will acquire 58% of the company and Vopak Holding Terminals BV will own 22%.

SABIC has now been fully integrated in Saudi Aramco, and has helped the company maintain its position as one of the world’s largest refining businesses, with refining capacity of 6.4 million barrels per day (mbpd) by the end of September.

“Following the successful close of the SABIC transaction, the third quarter of 2020 marks the first full quarter in which SABIC’s financial results are incorporated into Aramco’s Downstream results. Integration with SABIC continues to progress and drives forward the Downstream strategy of creating value from integration across the hydrocarbon value chain,” Aramco said in its third quarter results.

Aramco’s downstream segment consumed 39.5% of its crude oil production, which helped to ensure a secure and reliable supply of refined products to its customers.

As oil and petrochemical product prices fell during the period, Aramco’s downstream earnings before interest and taxation (EBIT) for the first nine months of 2020 stood at a loss of USD 6.208 billion, compared to a profit of USD 1.299 billion during the same period last year.

“EBIT in the first nine months of 2020 was primarily impacted by inventory re-valuation losses and lower refining and chemicals margins, stemming from the macroeconomic difficulties brought on by the COVID-19 pandemic,” the company said.

Saudi Aramco and SABIC are also considering integrating existing refineries in Yanbu, with a mixed feed steam cracker and downstream olefin derivative units, as part of their planned oil-to-chemicals project.

"This is done by taking into consideration both companies’ future plans and opportunities. SABIC and Saudi Aramco are looking at opportunities for integration with existing facilities to maximise the economic value while evaluating the optimal technical options and market risks," SABIC said in a Tadawul filing.

"Consequently, both parties intend to re-evaluate the scope of the crude-oil-to-chemicals (COTC) complex project and study the integration of Saudi Aramco’s existing refineries in Yanbu with a world-scale mixed feed steam cracker and downstream olefin derivative units."

The planned full-integrated complex, first proposed in 2017 and initially scheduled for completion in 2025, is expected to process 400,000 barrels per day of crude oil to produce about 9 million tonnes/year of petrochemicals.

While the petrochemicals sector is feeling the impact of lower product demand due to COVID-19 and subdued economic activity, the news of a promising new vaccine suggests that the industry can look forward to robust growth next year.

The Saudi petrochemicals sector is among the best positioned to take advantage of the global economic upturn.

Indeed, the kingdom is proceeding with a number of projects.

Earlier this year, Saudi firm Advanced Global Investment (AGIC) and South Korea's SK Gas Petrochemical (SKGP) said they will go ahead with a USD 1.8 billion propane dehydrogenation (PDH) and polypropylene (PP) project in Jubail. Construction on the 843,000 tonnes per year (t/yr) PDH facility and 800,000 t/yr PP units is expected to start in 2021.

UK-based INEOS Group Holdings S.A. has also pledged to build three new plants in Jubail, its first investment in the Middle East, in collaboration with partners Aramco and France’s Total SA.

A new state-of-the-art 425,000 tonne acrylonitrile plant will use INEOS technology and catalyst, and will be the first plant of its kind in the Middle East when it starts up in 2025.

INEOS will also build a 400,000 tonne linearalphaolefin (LAO) plant and associated world-scale polyalphaolefin (PAO), which claim to be the most energy efficient in the world when they begin production in 2025.

Swiss bank UBS Global Wealth Management believes Saudi Arabia is among the countries that will benefit as the world rush towards supporting energy transition.

“Saudi Arabia has competitive advantages in both renewable and non-renewable energy. In addition, the kingdom’s economically advantageous access to hydrocarbons means it has potential to diversify into the growing sector of petrochemicals, which taken together can help ease fiscal strains, boost economic diversification, and create jobs,” said Abdallah Najia, head Saudi Arabia at UBS Global Wealth Management.