LONDON: Advanced Petrochemical and South Korean SK Gas plan to develop a $1.8bn petrochemical complex in Jubail that could help plans to develop a homegrown car industry in Saudi Arabia.
It comes amid increased economic cooperation between Riyadh and Seoul following an $8.3 billion economic co-operation pact struck this week during the first visit of Saudi Crown Prince Mohammed bin Salman to South Korea.
The Saudi petchem producer said it signed a memorandum of understanding with SK Gas to build a propane dehydrogenation and polypropylene complex. The project is expected to produce “high value plastics grades for the automotive industry” as well as other specialized grades that are currently being imported into Saudi Arabia, Advanced Petrochemical said in a filing to the Tadawul stock exchange on Wednesday.
Separately the company said it has received propane feedstock allocation from the Kingdom’s Ministry of Energy, Industry and Mineral Resources for the project, which is slated to start in 2024.
Advanced Petrochemical also disclosed in a third filing that it was conducting a feasibility study for a cracker project in the Kingdom.
These latest deals reflect twin objectives to develop high-value manufacturing in the Kingdom to create jobs while also investing heavily in the petrochemicals sector to capitalize on rising global demand for high value plastics.
Saudi Arabia is the largest new automotive sales and auto parts market in the Middle East, accounting for an estimated 40 percent of all vehicles sold in the region, according to the US export.gov website.The addition of potentially as many as 3 million women drivers to the roads is expected to further spur domestic demand.
Saudi companies, spearheaded by Saudi Aramco, are investing billions of dollars in petrochemical projects worldwide to meet rising global demand. Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then, according to the International Energy Agency (IEA).
Demand for plastics — the key driver for the petchem industry — has outpaced all other bulk materials (such as steel, aluminum, or cement), nearly doubling since 2000, the IEA estimates.