How the Gulf not Kyoto can save the planet

13 April 2006

Jubail Industrial City, an hour's drive north of Dammam on Saudi Arabia's Gulf coast, is one of the world's greatest heavy manufacturing centres. It has a refinery, the biggest Middle East steel smelter, the largest fertiliser complex in the Gulf and about 10 per cent of global bulk petrochemical capacity.

An expansion is under way that will double Jubail's area. Nowhere will use more energy for at least a generation. To the south lies Dhahran, headquarters of Saudi Aramco, now engaged in a $60,000 million plan to raise oil, gas and refining capacity. In between is Ras Tanura. It is the site of the biggest crude export terminal on earth. Plans for a multi-billion-dollar downstream petrochemical project linked to the existing 550,000-barrel-a-day (b/d) Ras Tanura refinery should be finalised later this year. Two new Saudi export refineries, one to be built in Jubail, are on the agenda.

Jubail is built on hydrocarbons. It is an unlikely place to find concern about climate change and the threat posed by soaring carbon emissions to the future of the planet. But the Gulf ascending is an unusual place.

With steam billowing from a cracker column in the background, Arabian Petrochemical Company (Petrokemya) president Abdullah al-Rabeeah turned to the challenge as oil prices in April headed towards $70 a barrel. 'Hydrocarbons are too valuable to burn,' he said. 'And there should be an alternative to using gas to produce plastics.'

The 1997 Kyoto protocol is failing. Disastrous global warming seems inevitable. But oil prices above $50 a barrel are converting Gulf energy leaders into carbon missionaries. The reason is economic. Oil and gas are too important to waste.

Saudi Arabia's new refineries are being built because shipping complex hydrocarbons thousands of miles to be processed abroad is a poor alternative to refining at home. Jubail's petrochemical plants will turn most of Saudi Arabia's exportable gas into plastics and other petrochemical products that command higher market prices. Both developments will reduce carbon emissions.

New Gulf thinking suggests that methanol could become a clean automotive alternative to gasoline, which produces carbon-based emissions and other pollutants. This would set the scene for new projects based on the Gulf's abundant methane, most now burnt in the region's power stations or exported for similar purposes.

Using liquids to produce plastics entails cracking naphtha and heavier, low-value refinery products rather than premium ethane, butane, propane and lighter natural gases. This requires a technical revolution in petrochemicals, but necessity is the mother of invention.

Some in the Gulf argue that gas, which now sells in the US at more than $8 a million BTUs, should not be used to produce bulk electricity. The long-term alternative is solar and nuclear power. In the future, gas should be burnt only for premium purposes, principally in domestic gas cookers.

These proposals are inspired by the idea that imagination and technology will do more for global warming than Kyoto and quantitative restrictions on hydrocarbon use. What makes them different is that oil exporters would be part of the solution, not the problem. Gulf energy leaders, the 21st century masters of world oil and gas, are beginning to look beyond financial survival to the opportunities and responsibilities that growing affluence and influence will bring. It is in their interest to do so. And in ours too.

Sceptics have been savaging my Gulf Vision 2030, which envisages a stable and prosperous region in 25 years' time coming together to address common problems (MEED 7:4:06, Last Word). But if I have lost the plot, I am not the only one.

The US Energy Department's annual energy outlook, published in February, shows its reference forecast price for crude oil imported into the US rising by 39 per cent to $50 a barrel at 2004 prices. Its projection is

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications