The sky’s the limit for the chemical sector in Saudi Arabia
As some of you may know, the Saudi chemical market is the largest in the Middle East and North Africa, including one of the grandest integrated chemical complexes worldwide. In 2016, investments in the sector were 40 percent higher than any other global market, amounting to $1 billion and helping production capacity grow by 5 percent.
The Kingdom now has the 5th largest chemical production market in the world and takes up a 10 percent share of total global output, generating operating revenues of $637.5 million in 2016. Saudi Arabia is also the global production leader of several key products, including ethylene, glycol, polyethylene and methyl tert-butyl ether (MYBE). Furthermore, Saudi Arabia is one of the most cost-efficient places in the world in its ethylene production, helping the Kingdom to take a 10 percent share of total global production.
The chemicals sector is expected to double in size by 2030 due to the increasing demand for basic, intermediate and specialty chemicals. Furthermore, the industrial growth led by the Ministry of Energy, Industry and Mineral Resources and the diversification of the Kingdom’s economy represents key components that are driving this market forward.
Saudi Arabia has already embarked on a transformational program that will generate a significant industrial growth in various sectors, which will be the main driver for the development of the chemicals sector in all segments — basics, intermediates, and specialties.
The Saudi General Investment Authority (SAGIA) has recently sponsored the signing of an agreement between Italmatch Chemicals and Sadiq Industries for establishing an integrated industrial chemical complex for the phosphorous industry in the city of Waad Al-Shamal and the Jubail Industrial City, with an estimated investment volume of $300 million.
The project aims to enable development of new chemicals in the Kingdom which will promote more manufacturing industries and contribute to the growth of the Saudi economy and exports.
Moreover, state-run Saudi Aramco is planning to invest more than $100 billion over the next 10 years in the chemicals sector through substantial expansions in refining, marketing and lubes, in addition to prospective acquisitions.
Saudi Arabia is strategically located at the crossroads of several markets with a high demand for chemical products. The Asian market size is currently $1.8 trillion per year and is expected to grow at a rate of 8 percent annually. European demand currently sits at $750 billion per year and is expected to grow at a rate of 4 percent annually. In Africa, the market size is valued at $50 billion and is also expected to increase at 4 percent annually.
I strongly believe that increasing chemical production is crucial to our country’s “Vision 2030” blueprint. It will eventually help to create higher-value products and materials which are used in several industries, including water treatment, oil and gas, lubricants, and plastics, making it a lucrative market for chemicals companies that have the capabilities to provide added value in a local and decentralized framework.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.