Saudi Arabia Petrochemicals Report Q4 2009

Saudi Arabia Petrochemicals Report Q4 2009

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.

Executive Summary .5
SWOT Analysis7
Saudi Arabia Petrochemicals Industry SWOT 7
Saudi Arabia Political SWOT 8
Saudi Arabia Economic SWOT. 8
Saudi Arabia Business Environment SWOT 9
Global Market Overview10
Global Ethylene Capacities 10
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) . 10
Polypropylene 13
Global Oil Products Market Review 16
Table Global Oil Prices, 2003-2013 (US$ per barrel). 20
Gulf Regional Overview21
Table: Announced Ethylene Cracker Projects In The Gulf Region .. 23
Saudi Arabia Market Overview..24
Table: Saudi Arabia’s Ethylene Capacity . 27
Table: Saudi Arabia’s Ethylene Projects .. 28
Table: Saudi Arabia’s Polyethylene Capacity.. 28
Table: Saudi Arabia’s Polyethylene Projects 29
Table: Saudi Arabia’s Polypropylene Capacity.. 29
Table: Saudi Arabia’s Polypropylene Projects 30
Table: Saudi Arabia’s Cracker Capacity, 2007-2013 (‘000tpa) 30
Petrochemicals Business Environment31
Table: Middle East And Africa Petrochemicals Business Environment Ratings . 31
Limits Of Potential Returns. 32
Risks To Realisation Of Returns 32
Industry Trends And Developments ..34
Projects And Expansions . 34
Co-operation Between Sabic And Saudi Aramco 41
Finance 42
WTO Accession. 43
Saudi Arabia-China Links 43
Saudi Arabia-India Links. 45
Industry Developments – Related Industries. 45
Industry Forecast Scenario .46
Table: Saudi Arabia Petrochemicals, 2006-2013 .. 48
Macroeconomic Outlook.. 48
Table: Saudi Arabia – Economic Activity, 2006-2013 . 50
Company Monitor51
Sabic . 51
Royal Dutch Shell 55
ExxonMobil 56
Sipchem .. 57
ChevronPhillips 58
Country Snapshot: Saudi Arabia Demographic Data59
Section 1: Population. 59
Table: Demographic Indicators, 2005-2030. 59
Table: Rural/Urban Breakdown, 2005-2030 60
Section 2: Education And Healthcare. 60
Table: Education, 2003-2005 . 60
Table: Vital Statistics, 2005-2030. 60
Section 3: Labour Market And Spending Power . 61
Table: Employment Indicators, 1999-2006 61
Table: Consumer Expenditure, 2000-2012 (US$) .. 61
BMI Methodology 62
How We Generate Our Industry Forecasts 62
Chemicals And Petrochemicals Industry .. 62
Cross Checks 63
Business Environment Ratings 64
Table: Petrochemicals Business Environment Indicators And Rationale 64
Weighting 65
Table: Weighting Of Indicators . 65