Related Articles
Aramco CEO Amin Nasser
Forward article link
Share PDF with colleagues

Saudi Aramco pins its hopes on petchems

The NOC heavyweight wants to the biggest of beasts in the petrochemicals world too

Aramco’s ambition is “to be the world’s preeminent integrated energy and chemicals company”, the Saudi state-owned oil firm said in mid-July. Its completion of a $69.1bn takeover of petchems-focussed counterpart Sabic in June was a huge step towards realising that goal.

It can now boast of being the fourth-largest chemicals firm in the world, as well as its premier oil company. And while internal governmental financial calculations were a motivator in transferring a chunk of Aramco cash to Sabic’s former owner, the rapidly expanding Public Investment Fund, Saudi’s de facto ruler Crown Prince Mohammed bin Salman has also seen a strategic fit in putting the two firms together since taking the economic reins five years ago.

Bold ambitions

The powerful royal banged heads together as early as 2016 to force collaboration on a downstream complex planned at Yanbu. The plan was to use innovative technology to convert some of Aramco’s vast crude reserves directly into chemicals and to lower the proportion refined into transport fuels, which face future demand uncertainty.

$100bn – Aramco's planned investment in petchems

The facility was envisaged as converting 400,000bl/d of crude into about 9mn t/yr of chemicals and base oils. But it remains at the design stage, certain to miss an initial 2025 completion target.

Aramco has subsequently signed contracts with a Chevron joint venture and, separately, an Anglo-French consortium of TechnipFMC and Axens to collaborate on developing technologies capable of converting up to 80pc of the feedstock to chemicals. “The traditional model of integrating a refinery with a petchems plant has a conversion rate of c.15-20pc,” says Patrick Kirby, principal analyst at consultancy Wood Mackenzie. “In China, some plants can do 60pc [refined products]/40pc [petchems]. Conversion rates of 70-80pc would be transformational for the industry.”

Aramco first dipped its toe into the integration model 15 years ago, teaming up with Japan’s Sumitomo to add petchems capacity at its Saudi west coast Rabigh refinery. And it struck a 2018 agreement with Total to integrate a new petchems complex at the pair’s Satorp refinery at Jubail—with a $4bn downstream derivatives cluster also planned.

International horizons

Outside the kingdom itself, the 2014-17 downturn for its production arm encouraged Aramco to strike deals on refining and petchems ventures across the Asia-Pacific region—in China, India, Indonesia, Malaysia and South Korea. Albeit not all of them have yet made it off the drawing board.

And in the US, the Saudi firm is sole owner of the country’s largest refinery, following the 2017 dissolution of a partnership with Shell. It had planned to add a chemicals complex there before Hurricane Harvey highlighted a risk of asset concentration in the Gulf of Mexico. But a petchems plant elsewhere in the country remains on the table.

In 2018, Aramco CEO Amin Nasser set a target of converting 2-3mn bl/d of the company’s crude capacity to chemicals and investing some $100bn in the sector by the end of this decade. Given that other NOCs and IOCs share petchems growth ambitions, an acquisition element to the strategy was not ruled out.

Last August, Aramco pledged to pay India’s Reliance Industries c.$15bn for a 20pc stake in its downstream business—including the world’s biggest refinery complex, the 1.2mn-bl/d Jamnagar facility in Gujarat. Future petchems integration is likely under consideration.

The deal had been targeted to close in March and, while market volatility has meant wrangling over the purchase price, it should eventually proceed.

Also in this section
Southeast Europe bets on gas
13 August 2020
Greece and Bulgaria plan dashes for gas to fuel cleaner energy futures
Aramco advances plan to lease out pipelines
5 August 2020
The cash-strapped Saudi NOC is looking to replicate the recent divestment success of its Emirati counterpart Adnoc
ExxonMobil announces Power Play finalists
4 August 2020
Community voting is now open across the three categories for the awards, which champion inclusion and diversity by celebrating remarkable women and men in the LNG industry