Saudi Arabia is pursuing an aggressive downstream agenda, both at home and internationally, by restructuring its domestic petrochemical industry and pursuing large-scale investments overseas.
The ambitious drive is likely to feature more consolidation of key energy and petrochemical companies to achieve greater integration and efficiencies.
State-owned oil firm Saudi Aramco plans to acquire a 70pc stake in petrochemicals giant Sabic, either later this year or in 2020, which will make it one of the largest petrochemical companies in the world.
Sabic is a major producer of products such as ethylene, ethylene glycol, aromatics, methanol and polymers.
Aramco and Sabic are already collaborating on a crude-to-chemicals plant in Yanbu that is due to be commissioned by 2025 or 2026. The massive project is expected to process 400,000 b/d of crude into 9mn t/yr of chemicals and base oils.
Aramco has also restructured its chemical trading arm and established a new subsidiary, Aramco Chemicals (ACC), effective in January this year.
ACC will handle sales and distribution of polymers produced by Aramco joint ventures such as its Saudi-based PetroRabigh partnership with Japan's Sumitomo, and South Korea's S-Oil.
ACC will also market polymers from its Pengerang joint venture in Malaysia with the country's state-owned oil firm Petronas. The project is expected to produce 900,000 t/yr of polypropylene (PP) and 750,000 t/y of polyethylene (PE) starting later this year.
The restructuring of Aramco is part of a wider wave of consolidation that is already taking place within the Saudi petrochemical industry.
Sipchem, a diversified chemical producer, will tie up with major PP supplier Sahara Petrochemicals in the next few months.
Global ambitions
Aramco is also targeting global upstream and downstream investments worth $500bn in the next decade, including new petrochemical projects in Asia's two most important growth engines, China and India.
This will enable Aramco to source feedstock more effectively outside Saudi Arabia, where ethane and naphtha availability is tight, and at the same time be closer to its core customers in Asia.
Aramco, Chinese industrial conglomerate Norinco and local government-owned Panjin Sincen established a joint venture in February to develop a fully integrated refining and petrochemical complex in the Chinese city of Panjin.
The new entity, Huajin Aramco Petrochemical, will include a 300,000 b/d refinery with a 1.5mn t/yr ethylene cracker and 1.3mn t/yr paraxylene (PX) unit. Operations are due to start in 2024.
Huajin Aramco Petrochemical will build on the Saudi firm's already solid downstream footprint in China. Aramco already has a stake in the Fujian Refining and Petrochemical (FREP) venture with ExxonMobil, state-controlled Sinopec and the Fujian provincial government. FREP operates a 280,000 b/d refinery, 1.1mn t/yr ethylene cracker, 960,000 t/yr PE unit, 550,000 t/yr PP plant and aromatics complex.
Aramco last month also further consolidated its position in China with the purchase of a 9pc stake in an 800,000 b/d refining and petrochemical complex owned by private-sector Zhejiang Petroleum and Chemical in Zhoushan city. The project's first 400,000 b/d phase is in the process of coming on line.
The company is also active in India, and last year agreed to take a 25pc stake in a proposed 1.2mn b/d refining and petrochemicals complex. Abu Dhabi's Adnoc also has a stake of the same size. But the project is facing land acquisition problems and local authorities this week confirmed it would be moved from the original site at Ratnagiri in Maharashtra state.
Aramco is in further talks with India's Reliance Industries for further investment opportunities in the country.
Elsewhere in Asia, Aramco last month signed a preliminary agreement to build a 300,000 b/d refining and petrochemical plant at Gwadar in Pakistan.
Longer-term goals
Over time, Aramco will look to acquire new technology that will enable it to move beyond commodity chemicals and diversify into higher-value added products and specialty chemicals.
This drive to move further downstream is aimed at revenue maximisation amid a period of oversupply for chemical products such as PE and methanol.
Aramco's ownership of Arlanxeo, which it bought from German chemicals firm Lanxess last year, will support its push into synthetic rubber and elastomers, products that are widely used in the global tire industry.
And Sadara, a joint venture between Aramco and Dow Chemicals, uses proprietary technology to produce toluene diisocyanate (TDI), used in car seats and mattresses.
