Like developing economies, the bigger petrochemicals plants become, the more difficult it becomes to make them work. And for better or worse, huge petrochemicals production complexes are the future for many of the region’s oil-rich countries.
Petrochemicals remain a vital part of most of the Gulf states’ plans for economic diversification and job creation, a quick way to turn barrels of oil into new industries and to create new export markets.
In the past Gulf states used the low-cost natural gas ethane to make basic plastics such as polyethylene and polypropylene, but now they must now turn their hands to much more complex operations. Ethane allocations are drying up, as the volume of gas produced remains static and demand increases for domestic power generation.
The solution is to use the gasoline product naphtha as a feedstock. This brings with it advantages – a much wider range of chemicals – and disadvantages. Gasoline can be sold on the open market, and a petrochemicals plant based on naphtha needs to be at least able to generate the same tonne-for-tonne profit as a direct sale in order to be cost effective.
The best way of making this work is to cut out transport costs, building production complexes next to refineries, and integrating the facilities. And economies of scale mean the bigger the plant, the better the margins.
But building these plants is not easy. Saudi Aramco’s planned Ras Tanura Integrated Petrochemicals project, a joint venture with the US’ Dow Chemical, will have 36 individual process units. The scheme is so complex that the design process alone will probably go a year over schedule.
The plant is vital to the kingdom’s economic future, but Aramco knows it cannot be built at speed. Failure on a $3bn project is nothing compared to making a mistake on a $17bn scheme like Ras Tanura.