Aramco picks Yanbu for new crude-to-chemicals venture

04 November 2018
Complex is expected to process 400,000 barrels a day of crude oil

Saudi Arabia is moving ahead with plans to build a pioneering new facility to convert crude oil directly to petrochemicals, with state energy giant Saudi Aramco and Saudi Basic Industries Corporation (Sabic) selecting Yanbu on the west coast of the kingdom as the planned site for their joint development.

The planned new complex is expected to process 400,000 barrels a day (b/d) of crude oil to produce approximately 9 million tonnes a year (t/y) of chemicals and base oils when it starts operations in 2025.

The complex is expected to create an estimated 30,000 direct and indirect jobs, Aramco said in a statement on 1 November.

Earlier this year, the two industrial giants awarded two front-end engineering and design (feed) and project management consultancy (PMC) contracts for the project to the UK’s Wood Group and US firm KBR.

They are now working on finalising the selection of 'leading edge technologies' to complement their technologies, Aramco said.

This follows a heads of agreement in June last year to carry out a joint feasibility study. The planned facility will bypass the need for traditional refining methods, purifying the crude before sending it to a catalytic cracking unit to produce olefins, the basic building blocks for commodity plastics such as polyethylene and polypropylene.

Once complete, the facility will take Saudi Arabia's domestic downstream capacity to about 3.621 million b/d, up from 2.821 million b/d currently.

Saudi Aramco is also close to completing construction on another 400,000 b/d refinery at Jizan on its southern Red Sea coast near the border with Yemen, which it aims to start in early 2019. The $4bn refinery is expected to supply 20 per cent of the kingdom's fast-growing demand for oil products – in particular gasoline and diesel, with no fuel oil produced.

Sabic, which produces petrochemicals and metals in the kingdom, is already listed on the Saudi Stock Exchange. Aramco is in the midst of negotiations to buy a 70 per cent stake in Sabic, and could also be partly listed at some point in the next few years, under a new economic development plan outlined by Crown Prince Mohammed bin Salman. The plans include both companies being owned by the state's Public Investment Fund.

While Aramco has long cemented its place as the world’s biggest upstream oil company, with a production capacity of more than 12 million b/d, it has lagged in the downstream sector. Aramco plans to more than double its global refining footprint to 8-10 million b/d and CEO Amin Nasser said in late-October the company is looking to become a leader in petrochemicals.

The new Yanbu complex will be a major step towards Riyadh's goal of integrating and broadening the scopes of its petroleum, minerals and industrial sectors. It could also help push Saudi Arabia up the petroleum value chain, allowing the kingdom to export more of its oil in the form of value-added fuels and petrochemicals products in place of crude. The expansion will also shift Aramco’s focus away from the transport sector.

"We are aiming for more integration," Nasser was reported as saying at a conference in Riyadh. "Instead of 4-7 per cent crude to chemicals, the normal integration, we are looking at 25, 30, 35 per cent. More integration is the way forward.”

The plans fit with the Paris-based International Energy Agency's forecast for petrochemicals to account for more than a third of global crude oil demand growth by 2030 and 50 per cent until 2050.

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