RIYADH: ARAB NEWS
Published — Thursday 3 January 2013
Last update 3 January 2013 4:58 am
Economists and experts said that the petrochemical sector in Saudi Arabia needed to shift from manufacturing primary products to intermediate and advanced ones, if companies want to survive in domestic and international markets, Al-Eqtisadiah newspaper reported.
Otherwise, they said, they would face great challenges if Saudi Aramco decided to raise the price of gas, which is now sold to them at a low price.
The petrochemical sector has been growing steadily and contributes to 15 percent of the gross domestic product (GDP).
Ahmed Al-Ohali, CEO of Saudi International Petrochemical Company (Sipchem), pointed out that the petrochemical industry shifted its operations from basic chemical products to specialized manufacturing that is more competitive in global markets.
According to Abdul Rahman Sultan, a Saudi economist, the petrochemical sector has a primary role in supporting the national economy, as it achieves the added value to the economy. “One flaw of this sector is that the bulk of these products are preliminary chemical products, but did not evolve into intermediate or advanced products,” said Sultan. This significantly reduced the required feasibility, and the added value to the economy.
He pointed out that the Kingdom’s intentions to increase its share of primary products to 15 percent in global markets by 2015, is a serious indicator that Saudi Arabia will continue to manufacture primary products. “This trend will induce many international companies to leave the market open for Saudi companies, while shifting operation to the production of intermediate and advanced products to take advantage of the cheaper prices of primary products.
Mohammad Aldhyan, another Saudi economist, explained that in spite of increasing the production capacity of petrochemical companies, and the profits that have been realized over the past months, the sector did not achieve any records of share prices, though its contribution to GDP increased.
Aldhyan referred to the importance of expanding and diversifying the sector’s products. “The existence of large companies, such as SABIC, would help in acquiring big stakes in global markets, considering that this sector enjoys the support of the state,” said Aldhyan, stressing on the need to diversify the sector’s products to increase its share globally.
Unfortunately, he said, the performance of petrochemical companies was not as good as had been expected as a result of the global economic conditions in many countries of the world. “Less demand on the sector’s products has put pressure on their prices in global markets,” he added.
However, 2013 will witness an increase in demand for petrochemical products, due to the improved global economic conditions, he concluded.