Sector News

Saudi Aramco, SABIC launch bidding at key chemical project

August 28, 2017
Chemical Value Chain

Saudi Aramco and Saudi Basic Industries Corp (SABIC) have launched bidding for engineering work on their joint crude oil to chemicals project, industry sources said, a key step towards developing the $20-billion-plus complex.

The project, known as COTC, the first major scheme to bring the two giants together, is expected to process Arabian Light and Extra Light crude oil, one of the sources told Reuters.

Several plants are expected to be built including a 400,000-barrels-per-day integrated crude distillation and vacuum unit, a distillate hydrotreater, a vacuum gas oil hydrocracker, a residual fluid catalytic cracking unit, a mixed feed cracker, as well as polyethylene, polypropylene, butadiene and aromatics recovery units.

Aramco and SABIC are still considering where to locate the chemicals site; at Yanbu, near a power plant; or in Jubail, close to Sadara, which is an Aramco joint venture with U.S. company Dow Chemical.

The closing date for bids for pre-front end engineering and design work (pre-FEED) and FEED for the COTC is Sept. 25, one of the sources said, adding that the plant is expected to be commissioned by the end of 2024.

Another source said pre-FEED is expected to be completed by late 2018, with FEED to be finalised by late 2019. Aramco and SABIC are expected to launch bidding for construction by mid-2020.

SABIC did not immediately respond to a Reuters request for comment. Aramco said it “declines to comment on rumor or speculation”.

Aramco’s chief executive has said it was a priority for the company to convert crude oil to chemicals as the state oil producer aims to diversify operations in the run-up to an initial public offering of shares next year.

Downstream, which covers refining and chemicals, will help Aramco boost value from hydrocarbons by securing revenue streams and become less vulnerable to oil price swings.

LESS GAS

Analysts say the project will help reduce natural gas usage in petrochemicals at a time when the kingdom is trying to use more gas to generate power, rather than burning crude oil, as it seeks to diversify its energy mix.

“What is new and different is that the prices of crude and gasoline/diesel have come down more than petrochemicals. This makes the incentive to produce petrochemicals greater than to make gasoline and diesel,” Mark Routt, chief economist for the Americas at KBC Advanced Technologies, said.

“It certainly could usher in a new ’wave’ of investments in producing those petrochemicals,” he said.

The project is strategic for Saudi Arabia, which plans to expand further into the petrochemical chain to export more end products and grow beyond oil.

It is also crucial for Saudi Arabia’s economic reform plan and could create as many as 100,000 jobs.

SABIC’s CEO told Reuters in May that COTC could produce more than 18 million tonnes of materials yearly.

By Reem Shamseddine

Source: Reuters

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