The lack of government feedstock allocations over recent years has limited the growth of Saudi Arabia’s petrochemicals industry, according to a manager from one of the kingdom’s leading producers.

“The non-availability of gas has limited our growth. There has been no allocation since 2006 except for Saudi Aramco projects,” said Samir al-Jishi, general manager of planning and project development at Saudi International Petrochemical Company (Sipchem).

“This gives limitation to all petrochemical companies in Saudi Arabia for new projects like crackers or methanol plants,” he added, speaking at the MEED Middle East Petrochemicals conference in Dubai.

Al-Jishi said that the lack of feedstock allocation was the driving force behind Sipchem’s expansions downstream on the petrochemicals value chain, as further basic chemicals production is not possible.

“We are now developing projects based on our own materials,” he said. “We are using our material to develop projects, which will hopefully add value and create jobs.”

Producers in Saudi Arabia are also facing the possibility of an increase in the price of ethane feedstock, which could further damage competitiveness.

The price for the industrial use of ethane in the kingdom is $0.75 a million BTUs, which has traditionally given the kingdom’s petrochemicals producers a significantly lower cost-base compared with producers from nations that use oil-based feedstocks, such as naphtha.

The government has been discussing this for last two or three years,” said Al-Jishi. “I feel there will be an increase in the gas price. To what level I cannot say, or when it could take place.”

“An increase in the price will definitely decrease margins for all producers,” he added.