Saudi Arabia’s renewed commitment to its petrochemicals sector, with three locations earmarked for a series of new facilities, offers a glimpse into the future of the country’s hydrocarbons industry.

The kingdom’s refining petrochemicals integration initiative aims to maximise the value chain of oil reserves, and create employment opportunities for Saudi nationals.

Riyadh has traditionally used gas as a feedstock in its chemicals sector, but future developments will use refined products such as naphtha and natural gas liquids (NGLs). Previously, these products were usually sold on the international market or, in the case of NGLs, offered to local producers at a relatively modest discount.

Saudi Arabia’s $70bn investment plan, which relies on refined products as a feedstock, can be interpreted in different ways. Saudi Aramco is the world’s largest oil exporter, but it also has obligations to ensure energy provision for power generation and industrial uses. The firm sells oil at about $5 a barrel for power production, a huge discount considering the current market price of $114 a barrel. It offers ethane for industrial use at $0.75 a million BTUs, among the cheapest in the world.

Gas is a more efficient fuel for power production, while heavy oil offers chemicals producers the opportunity to produce a more diverse slate of chemicals. Freeing up more gas for power production would mean the kingdom’s oil could then be used for petrochemicals without impacting exports too heavily.

Pushing further downstream would also provide Riyadh with insulation if oil prices drop due to a rise in the availability of unconventional energy. With multibillion-dollar spending planned in the next decade, the kingdom is desperate to ensure it maximises its revenue base.

If successful, the integration plan promises to meet several of Riyadh’s economic policy goals, including creating jobs and promoting economic development in different areas of the country.