Saudi to bet big on petrochemicals to diversify economy: BMI

Saudi Arabia will boost its petrochemical capacity going forward, as the country seeks to leverage cheap feedstock and reduce its reliance on crude oil exports, BMI Research said in a recent report.

The Kingdom is set to capitalize on growing demand for plastics at a time when excess refining capacity combined with tepid demand for refined fuels weighs on margins in the oil refining industry.

According to BMI Research, real growth in the sector is expected to accelerate from 1.9 percent in 2018 to an annual average of 5.6 percent between 2019 and 2022.

Earlier this month, state-owned Saudi Aramco and France-based Total announced a joint venture to build a $9 billion petrochemical complex to the existing SATORP refinery in Jubail. Aramco owns 62.5 percent of SATORP, while Total holds a 37.5 percent stake.

The proposed investment comes on the heels of a recent uptick in petrochemical-related project activity, following a preliminary agreement between Aramco and SABIC to conduct a joint feasibility study on developing a $30 billion oil-to-chemicals project in Yanbu.

According to the report, these investments align with several Saudi government goals such as expanding petrochemical production to 34 million metric tonnes by 2030 from 12 million in 2016; moving Aramco further up the hydrocarbon value chain; and attracting private investment into the country’s infrastructure sector.

"Given the confluence of interest underpinning petrochemical investment in Saudi Arabia, we expect similar investment pledges to proliferate in the coming years," BMI Research said.