Saudi Arabia to Move Further Downstream in 2011



photo : zawya.com

According to the excellent MEED, Saudi Arabia is set to further expand its downstream petrochemicals industry in 2011 with more than $20BN of new investments. With high unemployment rates and a growing young population, the government has recognised the need to provide extra jobs for the local population.

As we move down the petchems chain, many more jobs are created, particularly if consumer goods are produced locally. The country already has a solid cracker and polymers industry with SABIC and Saudi Aramco the major players. Saudi Arabia  is not alone in this thinking, with the development of the ADBIC polymer park in Abu Dhabi.

Although plastics consumption per capita is relatively high in the region, the markets are fairly small in terms of population. So to attract international companies and bring in the knowledge and expertise, attractive investment conditions will be required.

However, where there is a will, there is a way. The fact that the Saudi Government recognises the overwhelming need to create employment, means that things will certainly happen. Watch this space!

PetroRabigh I Inaugurated - Now For Phases 2 and 3

photo : Petrorabigh

On 8th November, the huge Petro Rabigh I project was inaugurated by the Saudi Oil Minister Ali Al Naimi. With Petro Rabigh I now in the start-up phase, attention is now switching to the next phases of the project

Phase I of the project, a joint venture between Saudi Aramco and Sumitomo, comprises an integrated refinery/petrochemicals compex with production capacities of 1250 kT ethylene, 900 kT propylene and downstream PE, PP, PO and MEG.

The memorandum of understanding for the feasibility study for Petro Rabigh II was signed back in April. Phase 2 includes expansion of the cracker, construction of an aromatics unit and various downstream units such as MMA, PMMA, LDPE/EVA, caprolactam, polyols, cumene, phenol/acetone, acrylic acid, SAP and Nylon-6.

It is also being suggested that a phase 3 will be considered, to expand production at the site and achieve further downstream integration.

The development is a part of the the Kingdom's plan to diversify the economy and income resources, and to create new job opportunities for Saudi citizens. Many thousands will be employed, housed, and schooled in Rabigh, which will make it a major city in Saudi Arabia. The Rabigh development is also linked to the development of the nearby King Abdullah University of Science and Technology (KAUST), which opened in September 2009 amd is planned to become a world class university and research centre.

Altogether a stunning project and one which can only enhance the on-going development of Saudi Arabia.

SATORP Achieves Substantial Cost Reduction

Following on from my previous post on the cost savings achieved by Dow and Saudi Aramco at Ras Tanura, I have now learned that Total and Saudi Aramco have reported cost savings of over 20% on the SATORP integrated refinery project. This has been achieved by slightly delaying the project and lengthening the EPC selection process in order to take advantage of lower construction costs. As noted previously, the IHS CERA downstream index showed an increase of over 40% for construction costs between 2006 and Q3 2008, reflecting the significantly increased demand for new construction in this period. Even so, to achieve a 20% reduction in cost for a project as large and as complex as SATORP and in such a short period of time is highly impressive. I'm informed that Saudi Aramco and Total will be presenting details of this project as a case study at the forthcoming Petchem Arabia meeting , which takes place in Abu Dhabi during October.

Dow and Saudi Aramco Achieve Savings on Ras Tanura?

I was very interested to read a report this week in Reuters claiming that Dow and Saudi Aramco had achieved savings of $4BN on an estimated total investment of $20BN in the Ras Tanura petrochemical complex.

As reported previously in this blog, construction costs are down, with the CERA downstream index showing that on average, the cost of building new refineries and petrochemical plants fell 9 percent between the third quarter of 2008 and the second quarter of 2009, after several years of steady and significant increases.

If the reported savings at Ras Tanura are correct, then Dow and Saudi Aramco have been highly successful in demanding cost reductions from managing contractors. Clearly, the managing contractors will be looking to their sub-contractors and equipment suppliers to achieve substantial savings. In some cases, where order books are weaker, this will create major problems and some may not survive.

After years of very high inflation in new plant construction, it is now necessary for all parties to work smartly to achieve economies and satisfy the end clients. The days of 'just get it built' are clearly over.