At the Gulf Petrochemicals & Chemicals Association Forum on 8 December, the Saudi Aramco chief executive outlined his vision for the region’s chemical industry.
Khalid al-Falih spoke about the next decade being a golden age for the region. He said that petrochemicals production should be used as the foundation for industrial diversification and that he envisaged the Gulf becoming a mega-cluster of global stature.
In the GCC, people know that a golden age for Aramco usually means a golden era for all
When constructing a major petrochemicals plant, you have two choices. You can build your facility close to the cheap feedstock or next to the market. The Middle East naturally falls into the first category. The products the region produces are usually semi-finished, such as ethylene derivatives, which are then exported to other markets to be made into actual products.
South Korea and China fall into the second category. Despite the lack of cheap local feedstock, South Korea still produces about 50 million tonnes-a-year of petrochemicals, almost all of which are sold on the domestic market. Many of the products are high-end specialised chemicals used in the country’s huge automotive and electronics industries.
While Al-Falih’s vision to increase sales of chemicals produced in the region from $40m to $150-200m in 2020 is admirable, it is only achievable if there is also a large domestic market. This is why the idea of building industrial clusters around Aramco’s two major petrochemicals projects is a vital step. Aramco knows it is not a global operation like Saudi Basic Industries Corporation (Sabic) and cannot spread its product mix across many continents.
Sabic can afford to produce basic chemicals in the region because it can ship them to its own factories in Europe, Asia and the US, to be made into specialist chemicals that can be sold on local markets. Aramco has not got this luxury.
In the GCC, people know that a golden age for Aramco usually means a golden era for all.