SAUDI PETROCHEMICALS SECTOR UNPERTURBED BY COVID-19

Saudi Arabia’s petrochemicals sector is fiscally stable to withstand the pressures of the pandemic. Indeed, it is also playing a leading role in fighting COVID-19 as it produces a number of products that protects consumers from the virus.

The petrochemicals sector was designated as one of the essential businesses in the kingdom, which will remain open even as the wider economy was in lockdown, underscoring the sector’s importance.

The majority of products manufactured by the Saudi Basic Industries Corp. (SABIC) are considered essential during this crisis and the company is not only supplying material, but also supporting customers in the selection process for materials needed for many life-critical applications,

“SABIC is part of the essential industries that are fighting the coronavirus pandemic,” said Yousef Abdullah Al-Benyan, vice chairman and chief executive officer of SABIC. “More than ever, we are on the frontline and actively contributing to the response in Saudi Arabia and globally.”

The array of manufactured goods include hygienic products, emergency ventilators and personal protection equipment for healthcare professionals, security bodies and supermarkets, but also food and non-food packaging.

SABIC’s total sales in the first quarter stood at SAR 30.8 billion, an 18% decline over the same period last year, due to slower global growth and economic downturn in the key market of China and wider Asia.

“Product prices remain challenged with no improvement in the supply/demand balance for key products in the first quarter of 2020 compared to the previous quarter,” the company said. “This was further aggravated by COVID-19 becoming a global pandemic and the significant decline in oil price towards the end of the quarter.”

The Independent Commodity Intelligence Services’ (ICIS) global petrochemical index fell to just 150 points, its lowest level since 2009, as prices of petrochemical products dropped on the back of declining in crude oil prices.

The kingdom’s petrochemicals industry is persevering with its expansion plans.

Saudi Aramco, which has identified petrochemicals as one of its key growth areas, said its downstream business remained robust in the first quarter. The company’s gross refining capacity stood at 6.4 million barrels per day (bpd) in the first quarter, compared to 4.9 million bpd in the same period last year. Downstream segment consumed 35.5% (Q1 2019: 36.9%) of Saudi Aramco’s crude oil production during the period.

Late last year, Aramco completed a 17% stake in South Korea’s Hyundai Oilbank for USD 1.2 billion to expand its global footprint in key markets in profitable integrated refining, chemicals and marketing businesses.

In March, Saudi Arabia’s Advanced Global Investment (AGIC) and South Korea's SK Gas Petrochemical (SKGP) said they will build a USD 1.8 billion propane dehydrogenation (PDH) and polypropylene (PP) project in the Saudi industrial city of Jubail.

Construction of the 843,000-tonne-per-year PDH facility and 800,000-tonne-per-year PP units is expected to start in 2021, while commercial operations will begin by the second half of 2024. Propane feedback for the new PDH unit will be supplied by state-owned Saudi Aramco.

“The project will be financed 25% by equity from shareholders and remaining 75% will be financed by JV Co. through borrowing from lenders,” the companies said. “AGIC will own 85% equity stake in JV Co. which will be financed by Advanced while the remaining 15% will be owned by SKGP.”

AGIC is a subsidiary of Jubail-based Advanced Petrochemical Co., which operates a 455,000-tonne-per-year PDH unit and a 450,000-tonne-per-year PP plant in the industrial city.

In June, Nusaned Investment, a company owned by SABIC and German firm Schmid Group, said they had received regulatory approval to proceed with a joint venture to manufacture Vanadium Redox Flow Batteries (VRFB). During the next two to three months, the Riwaq Industrial Development Company will join the JV as additional investors and shareholders.

“The proposed manufacturing facility and R&D centre is going to be developed in Dammam 3rd Industrial City,” SABIC said in a statement. “The facility will be built under a Build-to-Suit lease agreement with MODON. The project site has been identified and construction is expected to start in the first half of 2020. The facility will have an annual production capacity of 3 GWh and will be among the biggest flow batteries production facilities worldwide.”