Saudi International Petrochemical Company (Sipchem) is shelving plans to build a mixed-feedstock cracker as part of its third-phase olefins and derivatives complex at Jubail, as its cost would push the project over budget.
Speaking at MEED’s Middle East Petrochemicals 2008 conference in Bahrain on 16 June, Abdullatif Bhairi, vice-president, planning and project development at Sipchem, said there were too many challenges facing the cracker development.
“Various options and schemes were examined and more than 20 technologies investigated with several potential joint venture partners,” he said. “But there were major challenges: the cost, schedule, availability of contractors, financing and other uncertainties.”
Instead, Sipchem says it will source ethylene and propylene from the excess capacity of existing crackers in Jubail.
The company will pay for this under toll arrangements with the other producers. It is thought to be the first time such a system has been used in the kingdom.
To develop each plant, Sipchem is likely to form joint venture part-nerships with international contractors. “The integration and synergy between products will result in cost competitiveness,” said Bhairi.
Two groups of contractors – Germany’s Linde with South Korea’s Samsung Engineering Company, and the US’ KBR with South Korea’s GS Engineering & Construction – had been bidding for the cracker construction contract (MEED 16:3:08).
In spring 2006, Sipchem was the last major producer in Saudi Arabia to receive a highly valued ethane feedstock allocation from the government.
Bhairi declined to say what had happened to the ethane allocation, but several sources tell MEED that it will stay in Jubail and will most likely be taken up by the new cracker project planned by Arabian Petrochemical Company (Petrokemya), which is wholly owned by Saudi Basic Industries Corporation (Sabic).
If this is the case, it will represent a major coup for Sabic, which has been seeking to buy into the Sipchem project for some time, as well as find a feedstock allocation for its plant.
It would, however, represent a major blow for the development of the petrochemicals private sector, which has struggled to cope with an environment of rapidly rising engineering, procurement and construction costs. This is also affecting the ability of private sector firms to acquire project financing for their schemes, a problem exacerbated by the tightening of global credit markets.
Available ethane – the feedstock of choice because of its massive cost advantages over non-regional feedstocks – has become severely limited in Saudi Arabia and, as a result, petrochemical project development in the kingdom has slowed dramatically.
Increasingly, the private sector is having to focus on smaller, inter-mediate chemical prod—uc—tion projects making use of feedstocks supplied by other domestic producers.
From the supplied ethylene and propylene, the company will produce a range of products including:
Apart from polyvinyl acetate, all the products will be made in the kingdom for the first time.