Saudi Arabia to Invest $46 Billion in Three Petrochemical Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a bid to strengthen the country's leading position in the global petrochemical sector, Saudi Arabia has announced plans to invest about $46 billion in three of the world's largest and most ambitious petrochemical projects. These include the $27 billion Ras Tanura integrated refinery and petrochemical project, the $9 billion Saudi Kayan petrochemical complex at Jubail Industrial City, and the $10 billion Petro Rabigh refinery upgrade project. Together, the three projects will employ more than 150,000 technicians and engineers working around the clock.

These projects will enable Saudi Arabia to expand its petrochemical portfolio into a greater variety of polymers and polymer byproducts and significantly increase the nation's market base. Saudi Arabia is a leader in the petrochemical sector and accounts for more than 7% of the global supply of basic petrochemical products. The country supplies more than 100 other countries and has come a long way from being a net importer of petrochemicals in the 1970s.

Upon completion in 2015-16, the Ras Tanura integrated refinery and petrochemicals project will become the world's largest petrochemical facility of its kind with a combined production capacity of 11 million tons per year of different petrochemical and chemical products. The products will include ethylene, propylene, aromatics, polyethylene, ethylene oxide, chlorine derivatives and glycol. The project is being implemented at Ras Tanura in Saudi Arabia's Eastern Province as a joint venture between Saudi Arabian Oil Company (Saudi Aramco) (Dhahran, Saudi Arabia), and The Dow Chemical Company (NYSE:DOW) (Midland, Michigan). KBR Middle East (KBR ME) (Dubai, United Arab Emirates), a subsidiary of KBR Incorporated (NYSE:KBR) (Houston, Texas), is the project management consultant as well as the front-end engineering and design (FEED) consultant. The FEED work is being executed by KBR ME and is expected to be completed by the third quarter of 2010. Tenders for the other contracts will be launched in 2010. The project includes the expansion of Saudi Aramco's Ras Tanura refinery from the existing 550,000 barrels per day (BBL/d) to 950,000 BBL/d, followed by integrating the refinery to the new petrochemical facility. The Saudi Aramco-owned Juaymah gas processing plant also will be expanded and integrated with the petrochemical facility.

The Saudi Kayan petrochemical complex is being developed at the Jubail Industrial City in eastern Saudi Arabia by Saudi Kayan Petrochemical Company (SAU:2350) (Al Jubail, Saudi Arabia), a venture formed by Saudi Basic Industries Corporation (SAU:2010) (SABIC) (Riyadh, Saudi Arabia) and Al-Kayan Petrochemical Company (Riyadh, Saudi Arabia). The complex will have a production capacity of 6 million tons per year and is expected to be commissioned by late 2010. Some of the contractors involved in the project are KBR ME, Fluor Corporation (NYSE:FLR) (Irving, Texas), Samsung Engineering Company Limited (SEO:028050) (Seoul, South Korea), Simon Carves Limited (Cheshire, United Kingdom), Tecnicas Reunidas SA (MCE:TRE) (Madrid, Spain), and the Van Leeuwen Pipe and Tube Group (Zwijndrecht, Netherlands).

The upgrade project at the Petro Rabigh Refinery will increase the production capacity of the plant to 2.4 million tons per year of refinery products and petrochemical liquids and solids. The complex will effectively turn into one of the world's largest integrated refinery and petrochemical complexes. Commissioning activities of the project began in March. The project is being implemented as a venture between Sumitomo Chemical Company Limited (TYO:4005) (Tokyo, Japan) and Saudi Aramco, each of which holds a 37.5% stake in the venture. The remaining 25% stake is owned by public investors. The complex will refine Arabian light crude and produce high-value light petroleum products, along with other refinery and petrochemical products such as ethylene and propylene. A few of the contractors involved in the project are Shaw Stone & Webster (NYSE:SHAW) (Baton Rouge, Louisiana), Maire Tecnimont SpA (BIT:MT) (Rome, Italy), Mitsui Engineering & Shipbuilding Company Limited (TYO:7003) (Tokyo, Japan), Royal Dutch Shell Plc (NYSE:RDS.A) (The Hague, Netherlands), Foster Wheeler AG (NASDAQ:FWLT) (Clinton, New Jersey), and Invensys Process Systems (Plano, Texas).

According to analysts, the fall in oil prices and production will bring down Saudi Arabia's profits in the hydrocarbon sector in 2009, but the fall is expected to be offset by growth in the non-oil sectors. While the hydrocarbon sector may decline almost 10%, the non-hydrocarbon sector is expected to grow about 2% because of a sharp increase in government investments in the non-oil sector. As a result, the overall economy may decline only about 1% in 2009. Infrastructure projects in transport, water, electricity and education are the main sectors that are expected to show the maximum growth. The real estate sector is expected to contribute about 5.8% to the nation's gross domestic product (GDP) at the end of the eighth development plan in 2009.

In February 2009, the Saudi Arabian cabinet approved a plan that aimed to increase the contribution of the industrial sector to Saudi Arabia's GDP by 20% within 2020. The principal aim of the plan is to diversify from the existing oil-based economy and increase the competitiveness of the industrial sector.

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