State-owned Saudi oil giant Aramco and diversified chemicals company SABIC are “one step closer” to being the first ever to use crude oil directly, rather than using refined products such as naphtha or ethane gas as feedstock, to create chemicals, according to reports and announcements by the companies on Saudi Arabia’s stock exchange.
The achievement would cut out a costly intermediate link in the production of plastics, according to Bloomberg. “Oil companies normally refine crude into transportation fuels including gasoline and diesel and leave byproducts such as naphtha to be processed separately into chemicals…The companies could ‘substantially’ increase Saudi Arabia’s production of petrochemicals, while enabling them to boost exports and spur industrial diversification, Aramco Chief Executive Officer Amin Nasser, said in the statement.”
Khalid al-Falih is the new Minister of Energy, Industry, and Natural Resources.
“The company decided to enter into the HOA [Heads of Agreement] with Saudi Aramco based on the results of the company’s own preliminary study of crude oil-to-chemicals projects,” Sabic told Saudi Arabia’s stock exchange, the Tadawul.
The plan for the company is to build the oil-to-chemicals plant in Yanbu on the Red Sea coast, Bloomberg also reported.
Both Aramco and SABIC will have a majority ownership by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, Deputy Crown Prince Mohammed bin Salman told Bloomberg in an interview with the magazine this spring.
According to Arab News, SABIC has previously said the proposed project could cost as much as $30 billion. The english-language newspaper in early May quoted Mazen Al-Sudairi, head of research at Al-Istithmar Capital, as saying “[t]he change in feedstock prices prompted SABIC to change strategy — they want to produce specialty products — and with Aramco possibly joining them as an investor, it will open a big door for them.”
