Saudi Basic Industries Corporation (Sabic) is considering plans for its oil-to-chemicals project at Yanbu on the Red Sea coast of Saudi Arabia that could cost the regions largest listed company $30bn to execute.
The project is in its very early stages and it is still unclear whether Sabic will develop the scheme alone or with a partner. However, to produce chemicals directly from crude oil and utilise all of its derivatives would require the construction of a complex that could be two or three times larger than anything ever seen before in the kingdom.
|Sabic output by business*|
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What you are looking at is a full oil refinery and three crackers to process the crude derivatives into intermediate chemicals, says a chemicals industry source based in the Middle East. This would create millions of tonnes of chemicals that would then supply several downstream units. This gives an idea of the sheer scale of this project.
A petrochemicals refinery would process crude and feed the offtake into three steam crackers. One would crack natural gas liquids (NGLs) and liquid petroleum gas (LPG), a second would crack naphtha and a third would crack fuel oil.
The product slate of the three crackers would include ethylene, propylene, butadiene, benzene, toluene and xylene. These would be fed into downstream processing facilities that would be constructed as part of the complex.
The technology for this is available and could be licensed from a number of sources, says the chemicals industry source. The main issue around such a complex is the cost of construction as well as the fuel required to power it.
The conservative budget for the complex has been estimated at below $30bn, but with spiraling costs for all large-scale schemes in the Middle East, the figure could be higher.
Another issue is the cost of feedstock to fuel the scheme. Oil-to-chemicals plants on this scale would require an additional 30-40 per cent of crude to provide the power to run the facility.
In Saudi Arabia, this would mean a subsidy of $36 a tonne for the crude used for power, equivalent to the $0.75 a million BTUs that the Oil Ministry charges for ethane in industrial use. Sources in the kingdom indicate that securing this price would be a central factor deciding whether the scheme becomes economically viable.
Buying crude at market price for the feedstock to produce chemicals is not an issue, but fuelling the facility will require a significant subsidy, says a source familiar with the proposed project.
The scope of the scheme is still unknown, but if the capacity is set at 400,000 barrels a day (b/d) then up to 160,000 b/d of additional crude could be required for fuel.
The scheme is gaining momentum and was mentioned in a speech given by Petroleum & Mineral Resources Minister, Ali al-Naimi, at the Saudi Downstream 2014 conference in Yanbu in early March.
The plans also form part of proposals being formulated by the Oil Ministry and Saudi Aramco that would see greater integration between the kingdoms refineries and petrochemicals industries.
MEED revealed in September 2013 that several petrochemicals initiatives were being planned across the kingdom that would utilise liquid feedstock such as NGLs and naphtha sourced from current or planned refineries.
Other potential locations identified by Riyadh include Ras Tanura in the Eastern Province and Jizan in the southwest.
Saudi Aramco and the US Dow Chemical are already building the largest single-phase petrochemicals complex in the world at Jubail in the Eastern Province. The $20bn Sadara Chemical Company complex is expected to start full operations in 2016 and will produce more than 3 million tonnes of performance chemicals and plastics products.
Sabic was not available for comment when contacted by MEED.