GPCA 2018: Aramco to invest $100 billion in chemicals over next decade

November 28, 2018

Saudi Aramco plans chemical investments of more than $100 billion over the next decade, excluding a possible acquisition of SABIC, as it seeks to lift its downstream business to the same level of prominence as its upstream operations, Amin Nasser, president and CEO of Aramco told attendees at the 13th Gulf Petrochemical and Chemicals Association (GPCA) annual forum. GPCA kicked off in Dubai today with more than 2,000 delegates

Chemicals were highlighted as the most promising element of the company’s downstream strategy. “Saudi Aramco will make the most of those prospects with chemicals investments of more than $100 billion over the next 10 years—not including a prospective acquisition,” Nasser said. “We are expanding this business both in Saudi Arabia and in fast-growing overseas markets like China and India, with the aim of converting 2 million barrels per day [b/d] of crude oil into petrochemicals—and we may eventually move our target higher to 3 million barrels.”

Chemicals will account for about one-third of world oil demand growth between now and 2030, and nearly half by 2050, Nasser said. “Petrochemicals will add nearly 7 million b/d of oil demand by 2050, reaching a total of some 20 million b/d. This growth will be driven by an expanding world population and a growing middle class enjoying more affluent lifestyles.”

Aramco’s “ultimate target of 8–10 million b/d of integrated refining and marketing capacity will create a better balance between our upstream and downstream segments,” Nasser said.

Saudi Aramco’s downstream strategy seeks to enhance its resource base by building stronger integration across the hydrocarbon value chain. “With a diversified, integrated, and robust business portfolio, our supply, trading, and marketing model will mitigate oil price volatility, generate additional revenues, and expand opportunities for conversion industries, local manufacturers, and service providers,” Nasser said.

Negotiations are under way for a majority stake in SABIC with the aim of creating one of the world’s strongest integrated energy and chemicals companies, Nasser said. The acquisition would leverage Saudi Aramco’s innovative developments in crude oil–to–chemicals technology, which can convert crude oil directly into petrochemicals, he said.

In response to questions about Aramco’s planned IPO, Nasser said that 2021 would be the earliest the listing could happen. This would follow antitrust approvals for the acquisition of SABIC and for the combined operation to function for at least one year to provide accounting transparency.

Industry is being transformed
In a GPCA welcome address, Yousef al-Benyan, chairman of GPCA and CEO of SABIC, said the global industry is going through a transformation. “We have seen shifts in technology, feedstock, and markets.” These changes are forcing global and GCC (Gulf Cooperation Council) chemical industry players to accelerate their transformation by focusing on their portfolios, competitiveness, and growth.

“It is a moment of change in the global economy,” Benyan said. “Given the structural challenges that our end-use markets and our suppliers are facing, we are bound for transformation.” SABIC is in the process of being acquired by Saudi Aramco.

Players are also pushing for growth in the high-growth Asian markets, such as China, which aims to add around 21.4 million metric tons of ethylene capacity between 2018–25. China will account for 65% of incremental demand, according to future projections for the chemical industry. Benyan stressed that companies need to have a global footprint. “If you don’t have any presence in the major markets, such as North America or China, you need to question your long-term viability.” Benyan reminded delegates that the feedstock advantage that the GCC region enjoyed for the last 40 years no longer exists.

By Natasha Alperowicz

Source: Chemical Week