Arabian Petrochemical Company (Petrokemya) has shelved its plans to build a new $300m plastics plant at Jubail.

The decision to put the project on hold indefinitely was made in late 2009 because Petrokemya decided the rate of return on investment is not attractive enough, say sources close to the project.

A hike in construction costs since the plant was first planned in 2007 and major falls in both demand and prices for petrochemical commodities on the back of the global financial crisis are understood to have been key to the decision.

Petrokemya which is wholly-owned by local petrochemicals giant Saudi Basic industries Corporation (Sabic), awarded the US’ Shaw Group the contract to design the 200,000 tonne a year (t/y) acrylonitrile butadiene styrene (ABS) plant in March 2009.

The front end engineering and design (Feed) study was completed in the third quarter of the year and Petrokemya had planned to invite companies to bid on the engineering, procurement and construction (EPC) contract to build it by the end of that year.

ABS is a thermoplastic, which is most commonly used in the automobile industry.

Producers in the Gulf have long harboured ambitions to move into specialised petrochemicals in a bid to move away from basic plastics based on the cheap gas feedstock ethane, but have struggled to make these projects cost effective (MEED 29:4: 10).