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Aramco steps in to boost Saudi steel potential

10 May 2023

 

As the main engine facilitating Saudi Arabia’s Vision 2030 socio-economic transformation, Saudi Aramco is working to ensure its localisation initiatives meaningfully contribute to the programme.

The company is intensifying its localisation efforts by cultivating an in-kingdom supply chain to not only meet its business requirements, but also create specialised jobs for Saudi nationals.

Local manufacturing is a major element of this strategy, and Aramco has made key investments in the production of steel products – a vital business requirement – as part of its commitment.

SeAH Gulf Special Steel Industries (GSI), a joint venture (JV) in which Aramco is a stakeholder, began constructing a facility in February that will mainly produce steel pipes. The estimated $240m factory is located in the King Salman Energy Park (Spark) industrial facility. When it enters operation in 2025, it will have the capacity to produce 20,000 tonnes a year (t/y) of stainless steel seamless pipes and tubes.

On 1 May, Aramco entered into another JV to establish an integrated steel plate manufacturing complex in Saudi Arabia, which will help “increase localisation of the steel value chain”, according to Fahad M al-Abdul Kareem, senior vice-president of Industrial Services at Aramco.

Ras al-Khair steel complex

Aside from Aramco, the JV that will build the steel-plate production complex includes the kingdom’s sovereign wealth institution, the Public Investment Fund (PIF), and the Chinese steel manufacturing conglomerate Baoshan Iron & Steel Company (Baosteel).

The complex, deemed the first of its kind in Saudi Arabia, will be located in Ras al-Khair in the kingdom’s Eastern Province, which was recently designated as one of four new Special Economic Zones by Saudi Crown Prince Mohammed bin Salman.

The planned facility will have an output capacity of 1.5 million t/y and “serve strategic industrial sectors including pipelines, offshore platforms, rigs, tanks, pressure vessels, shipbuilding and others”, Al-Abdul Kareem tells MEED.

“The complex will bring together Aramco’s unrivalled energy and industrial services ecosystem, Baosteel’s advanced steel plate industry capability and PIF’s investment expertise,” he says.

Engineering, procurement and construction work on the project has been divided into several packages, which will be tendered soon, with a contract award expected by the second half of this year.

The steel complex will be able to start operating with hydrogen fuel without major equipment modifications as soon as the new hydrogen technology is ready
Fahad M al-Abdul Kareem, Aramco

Environmental impact

“This complex aims to be one of the lowest-carbon emissions, large-scale steel plate manufacturing facilities in the world based on currently announced projects,” says Al-Abdul Kareem.

Aramco signed a memorandum of understanding with Baosteel to conduct an engineering and feasibility study for the proposed steel plate complex in September 2021.

The plant will be equipped with a natural gas-based direct reduced iron (DRI) furnace and an electric arc furnace to reduce carbon dioxide (CO2) emissions from the steel-making process by up to 60 per cent compared with a traditional blast furnace, Aramco announced recently.

“The steel complex has also been designed to be hydrogen-compatible as a substitution for natural gas,” Al-Abdul Kareem adds. “It will therefore be able to start operating with hydrogen fuel without major equipment modifications as soon as the new hydrogen technology is ready for application.”

“This would enable the complex to make steel with up to 90 per cent less CO2 emissions than traditional coal-based steel production processes,” he explains.

Economic contributions

The steel plate factory’s workforce is expected to comprise 80 per cent Saudi nationals to meet Aramco’s Saudisation goals, he says. It is also projected to contribute $1.7bn to Saudi Arabia’s GDP every year.

The JV aims to export 30 per cent of its capacity to Middle East and North Africa (Mena) markets. “Through this plant, the kingdom is expected to be able to substitute imports by amounts close to SR4.9bn, or $1.3bn, annually,” says Al-Abdul Kareem.

To maximise its economic potential, the proposed complex will receive support from the Saudi government’s Shareek incentives programme for large companies. It has also been brought under Aramco’s Namaat local industrial investments programme.

“This project has the potential to create a tangible impact on the kingdom’s economy and contribute to Saudi Arabia’s GDP growth, generate new jobs, support the [In-Kingdom Total Value Add] iktva programme targets by adding to the local content production and lead to considerable import substitution,” the Aramco executive concludes.

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Indrajit Sen

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