Abstract
Trends in Saudi petrochemical production are closely tied to its key export
markets, notably Asia’s
economic powerhouse China. BMI’s
latest Saudi Arabia Petrochemicals Report argues that the rise in
Chinese
capacities at a time of falling Chinese demand is the largest threat to Saudi
petrochemicals
production.
BMI believes that Chinese demand for
petrochemicals will have improved in H209 after some difficult
months
which have seen a sharp slowdown in building activity. This will be supported
by the
government’s economic stimulus programme. Although H209 will
be an improvement on the poor
performance seen in H208, levels of demand
growth are not forecast to return to 2007 levels until 2010 at
the
earliest. However, there are fears that the Chinese government’s
stimulus plan for petrochemicals,
which is set to involve investment in
new refineries to speed up their construction, could create a problem
of
short-term over-supply in Saudi Arabia’s export markets in Asia. Much
will depend on the strength of
the recovery in the automotive and home
appliance sectors, which are expected to recover before the
construction
sector. Taking a longer term view, China is set to remain a net ethylene
importer over the
next five years, requiring imports from Saudi Arabia.
The poor situation in export markets, which cannot
be remedied by the
relatively small GCC market, has contributed to deterioration in the
performance of
Saudi Arabia’s petrochemical producers.
Nevertheless, Saudi petrochemicals production continues to expand, with
investors keeping their eyes on
the post-recession era. In July, Saudi
Aramco and French major Total awarded 13 engineering,
procurement and
construction (EPC) contract packages for the 400,000 barrel per day (b/d)
Jubail refinery
to local and international companies at a cost of
US$9.6bn. The partners managed to make the best of the
economic downturn
by negotiating down the original US$12bn price tag to US$9.6bn. Aramco and
Total’s SATORP joint venture will process Arabian Heavy crude, plus
700,000 tonnes per annum (tpa) of
paraxylene, 140,000tpa of benzene and
200,000tpa of polymer-grade propylene.
BMI’s forecasts for the Saudi
petrochemical sector take into account long delays in project completion.
We do not believe the proposed Ras Tanura complex, with a 1.5mn tpa ethylene
cracker, will come
onstream before 2014. The commissioning of the Petro
Rabigh complex began in Q209, having been
delayed from Q408. Nevertheless,
ethylene capacity in 2013 is forecast to be more than double that of
2008
levels at 18.3mn tpa, with Jubail and Yanbu the focus of petrochemicals
developments. Our
projections for petrochemical capacity are based on
planned projects, but it is possible that some may not
come to fruition
due to the restriction on ethane feedstock and a possible downturn in the
Chinese market
at a time of rising Chinese capacities. Due to the
integrated nature of the megaprojects under
development, any delay further
up the supply chain causes delays in downstream developments.
Consequently, the delay in Petro Rabigh has led to a delay in the
commissioning of polymer plants with
capacities of 300,000tpa PE plants
and 700,000tpa PP. By end-2009, polyolefins production capacity
should
reach 10.78mn tpa and should rise by more than 40% to 15.18mn tpa by end-2013,
with most of
the growth coming from the PE segment.
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