Petrochemicals
Enhanced supply from new refineries and increased investment in differentiated chemicals are transforming Saudi Arabia’s petrochemicals sector.
Heralding a period of growth and diversification
The petrochemicals sector is the largest non-oil sector in KSA. Saudi Arabia is the world’s 11th largest petrochemicals supplier, accounting for 7-8% of total supply. While the nation’s current strengths lie in the production of basic petrochemical building blocks such as ethylene and methanol, there are plans to diversify its petrochemical portfolio into more complex, distinctive products such as specialty chemicals and engineering thermoplastics. At the same time, Saudi Arabia is investing in raising its world petrochemical market share profile to 13-14% by 2010.
The petrochemicals market enjoys very encouraging regional and global demand trends. With global growth driven by industrial activity in emerging markets, the petrochemicals sector has enjoyed strong utilization rates and firm pricing trends. Local end markets such as automobiles, construction, plastics and appliances are showing strong growth as the economy continues its rapid expansion.
KSA’s competitive advantages
Meanwhile, Saudi Arabia’s accession to the WTO and unbeatable geographic position give exporters excellent access to buyers across Europe, Asia and Africa in an industry frequently driven by proximity to market. Saudi’s competitive advantages in global logistics will only be enhanced as new infrastructure projects come online, including major investments in seaports, airports, roads, and railways.
Poised to become a strategic hub
With the world’s largest proven oil reserves and a strategic location at the center of east-west trade, Saudi Arabia is set to become a strategic hub for the expanding petrochemical industry. Newer, large-scale facilities, particularly ones with competitive feedstock supplies, are expected to enjoy a competitive edge over the coming years. A number of highly integrated refining and petrochemical investments are expected to leverage Saudi Arabia’s national competitive advantages in coming years.
Historically dominated by 70% state-owned petrochemical giant Saudi Basic Industries Corporation (SABIC), KSA’s petrochemical sector is gaining momentum from private sector participation. In a paradigm shift, KSA is now actively encouraging private investment in the sector in order to bolster its status as a global petrochemical leader and to diversify towards value-added specialty chemicals, formulated products, and performance polymers. As a result, private-sector contribution to the sector is expected to quadruple in the next ten years.
Good reasons to invest
- Saudi Arabia is the only country in the GCC that has opened up its petrochemical sector for private investment
- Attractively priced gas and liquid feedstock in a highly competitive petrochemical infrastructure offers attractive project economics; long-term feedstock supply security is unparalleled
- Strategically located to serve vast markets in both Europe and Asia; WTO membership allows free access to new export markets for Saudi petrochemical producers
- Rapidly developing petrochemicals cluster creates significant business opportunities for support services providers
- World-class infrastructure in Jubail and Yanbu is undergoing continuous upgrades
- Large scale of current coastal petrochemical clusters is driving highly competitive capital costs
- Strong demand growth from new, local post-production industries in end markets such as automobiles, construction, plastics and appliances
- Additional supply and diversification of petrochemical derivatives create new value chains and attractive opportunities for value-added industries downstream