Petrochemicals ambitions define Saudi downstream
9 March 2023
Saudi Aramco began a gradual pivot towards petrochemicals in 2007 when it partnered with Dow Chemical Company to build the Sadara chemicals project in Saudi Arabia.
Aramco’s majority acquisition of Saudi Basic Industries Corporation (Sabic) in June 2020, however, marked the formal integration of the kingdom’s oil and gas and petrochemical industries.
Just a month after completing the $69.1bn transaction with the Public Investment Fund to acquire a 70 per cent stake in Sabic, Aramco announced a reorganisation of its downstream business to create four dedicated commercial units: fuels (including refining, trading, retail and lubricants); chemicals; power; and pipelines, distribution and terminals.
Since taking these two significant steps in 2020 to bring Sabic into its fold and reshuffle its downstream business to make it more efficient and profitable, Aramco has sanctioned significant capex allocation to increasing petrochemicals production and broadening its products portfolio.
So much so that the volume of Saudi petrochemical projects in different pre-execution stages, valued at $36bn according to MEED Projects, dwarfs the pipeline of oil refining and gas processing projects.
Aramco/Sabic is currently overseeing progress on at least three mega petrochemical projects in the kingdom.
Amiral petrochemicals scheme
Saudi Aramco and Total Refining & Petrochemical Company (Satorp) is moving closer to awarding the main engineering, procurement and construction (EPC) contracts for its estimated $7bn Amiral petrochemicals project in Jubail, Saudi Arabia.
The lowest bidders have emerged for the four main EPC packages of the project, which represents the expansion of Satorp’s crude oil refining operations in Jubail into petrochemicals production.
Satorp’s petrochemicals complex, which will be the centrepiece of the Amiral development, will feature the Middle East’s largest mixed-feed cracker, processing 50 per cent ethane and refinery off-gases and with the capacity to produce 1.5 million tonnes a year (t/y) of ethylene, 500,000 t/y of propylene and related high-added-value derivative products.
The Amiral petrochemicals facility, which has recently been chosen to receive support from the Saudi government’s Shareek programme, will be integrated with Satorp’s existing 440,000 barrel-a-day (b/d) capacity refinery in Jubail to give the upcoming complex competitive feedstock advantage.
Satorp and the Royal Commission for Jubail & Yanbu are calling on third-party investors to commit up to $4bn to build chemicals plants that will derive feedstock from the main Amiral complex.
Aramco slated to escalate upstream spending
Integrated Yanbu project
Sabic recently confirmed progress with another project to build an integrated refinery and petrochemicals project in Yanbu, on Saudi Arabia’s Red Sea coast.
Sabic and its parent company Aramco signed a memorandum of understanding (MoU) with China Petroleum and Chemical Corporation (Sinopec) in December for the Chinese chemicals company to partner in the planned petrochemicals project in Yanbu.
The aim of the MoU, signed on 15 December, is for the partners “to study the economic and technical feasibility of developing a new petrochemical complex to be integrated with an existing refinery in Yanbu, Saudi Arabia”, Aramco stated.
MEED understands that the MoU relates to a partnership for the planned Integrated Yanbu Project (IYP). The proposed project calls for integrating the Yanbu Aramco Sinopec Refinery Company’s (Yasref) existing refinery facility with a greenfield petrochemical-producing facility in Yanbu.
The petrochemicals unit will draw crude oil derivatives such as naphtha as feedstock from the Yasref refinery to process into chemicals.
Crude oil-to-chemicals complex
Sabic recently also announced the start of a feasibility study and initial engineering work to establish a large-scale complex that will convert crude oil and liquids into petrochemicals in Ras al-Khair, Saudi Arabia.
The planned complex has the capacity to convert 400,000 b/d of oil directly into chemicals.
Sabic said it would “announce progress on the [oil-to-chemicals] project in the next few years”, without providing other details, such as if it had appointed a consultant for the feasibility study on the project.
The petrochemicals giant announced in November last year that it was due to start the feasibility study into the proposed project in Ras al-Khair, located in the kingdom’s Eastern Province.
The plan to build an oil-to-chemicals facility in Ras al-Khair, instead of the previously selected location of Yanbu, is the latest move by Sabic over the past five years or so to establish such a project.
Sabic’s ambition to build a large-scale facility that converts crude oil and liquids directly into petrochemicals has faced obstacles in the past, mainly due to its capital-intensive nature and technological challenges.
Downstream oil and gas
These huge petrochemical projects aside, Aramco continues to advance projects not just to boost the throughput of its refineries and gas processing plants but also to improve its environmental credentials, in line with its net-zero carbon emissions by 2050 pledge.
Last year, Aramco awarded EPC contracts for a pair of projects to modify sulphur recovery units (SRUs) at its Riyadh and Ras Tanura refineries. French contractor Technip Energies secured the Riyadh refinery desulphurisation contract, which could be worth up to $250m.
Egypt-headquartered Engineering for the Petroleum & Process Industries (Enppi) won the main contract for the Ras Tanura refinery in Saudi Arabia’s Eastern Province, estimated to be worth $300m-$400m.
The Saudi energy giant is now moving ahead with a major desulphurisation programme to modify SRUs at its key gas processing plants in the kingdom.
Aramco expects third-party investments of up to $2bn in the desulphurisation programme, which entails building a large downstream tail-gas treatment (TGT) facility to collect and process tail gas discharged from SRUs at identified gas plants.
The facilities will be developed on a build-own-operate-transfer basis, making it one of Aramco’s initial public-private partnership exercises in its main oil and gas business. Investors are preparing proposals for the scheme, which are due by the end of March.
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Following a considerable level of capital expenditure (capex) on petrochemical and specialty chemical projects in the first half of this decade, Saudi Aramco and its subsidiary, Saudi Basic Industries Corporation (Sabic), are expected to reduce spending in 2026.
Two primary factors are behind this anticipated drop in regional chemical project capex this year. With the bulk of their projects under execution – and on course to enter operation between this year and the end of the decade – Aramco and Sabic are set to achieve their short- to mid-term capacity expansion goals.
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Steady spending in 2020-25
An estimated $30bn of petrochemical and specialty chemical projects are in the engineering, procurement and construction (EPC) stage in Saudi Arabia. Main contracts for most of these projects were awarded between 2020 and 2025, according to MEED Projects data.
The biggest chemical project under EPC execution is the $11bn Amiral project, which represents an expansion of Saudi Aramco Total Refining & Petrochemical Company (Satorp) into petrochemicals.
Satorp – owned 62.5% by Aramco and 37.5% by France’s TotalEnergies – operates a major crude refinery complex in Jubail with the capacity to process 465,000 barrels a day (b/d) of Aramco’s Arabian Heavy crude. The refinery produces diesel, jet fuel, gasoline, liquefied petroleum gas, benzene, paraxylene, propylene, coke and sulphur.
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The expansion is expected to attract more than $4bn in additional investment across a variety of industrial sectors, including carbon fibres, lubricants, drilling fluids, detergents, food additives, automotive parts and tyres.
Recalibrating ambitions
The largest capex programme in the chemicals sector in Saudi Arabia – and in the wider Middle East and North Africa (Mena) region – is Aramco’s liquids-to-chemicals programme. Its central aim is to achieve a direct conversion rate of 4 million b/d of crude oil into high-value chemicals.
Aramco has divided its liquids-to-chemicals programme into four main projects. It has taken major steps forward this year by signing joint-venture investment agreements with foreign partners on the different projects, which include:
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- Yasref (Yanbu): Conversion of the Yanbu Aramco Sinopec Refining Company (Yasref) complex into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. China’s Sinopec is a joint-venture partner in the project.
- Samref (Yanbu): Conversion of the Saudi Aramco Mobil Refinery Company (Samref) complex into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. US oil and gas producer ExxonMobil, Aramco and Samref signed a venture framework agreement in December to begin preliminary feed work on the project.
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So far this year, Petrokemya, a Sabic affiliate, has awarded China National Chemical Engineering Group Corporation the main contract for an ethylene oxide catalyst project.
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https://image.digitalinsightresearch.in/uploads/NewsArticle/19435889/main.gif - Sasref (Jubail): Conversion of the Saudi Aramco Jubail Refinery Company (Sasref) complex into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. The project also involves building an ethane cracker that will draw feedstock from the Sasref refinery. Front-end engineering and design (feed) is under way and is being performed by Samsung E&A, although progress has been slow.
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Six groups qualify for Saudi Arabia’s Qassim airport PPP
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These include:
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Previous tenders
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Dubai sets October deadline for metro Gold Line
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Oman power firms move closer to merger
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