Why the Ministry of Industry will supervise petrochemical sector

Why the Ministry of Industry will supervise petrochemical sector

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King Salman has issued a royal order authorizing the Ministry of Industry and Mineral Resources to supervise the petrochemical sector.

This comes a year after the establishment of the Ministry of Industry and Mineral Resources, which was separated from the Ministry of Energy.

Since the launch of Vision 2030 in April 2016, some ministries and government agencies have been restructured to meet the objectives of promoting non-oil income and the petrochemical sector as a primary part of Saudi industry. To this end, the oil, gas, petrochemical, energy, electricity, industry and mineral resources sectors were placed under a single portfolio in Saudi Arabia.

The separation of industry and mineral wealth activities into a standalone ministry reflects the broader push to develop a diversified industrial base.

Two weeks ago, a royal decree made the minister of Industry and Mineral Resources the chairman of the board of the Local Content and Government Procurement Authority, further empowering local content in industry. 

The royal decree for the ministry to take over supervision of the petrochemical sector reflects the Saudi Vision 2030 strategy to enhance the added value of petroleum and petrochemical products.

It paves the way for the ministry to begin supporting manufacturing industries locally through comprehensive integration in the hydrocarbon industries chain. It contributes to economic diversification by strengthening manufacturing industries based on petrochemicals, plastics, fertilizers, iron, steel and aluminum. This will positively affect the prosperity and growth of the economy by building local content and generating and localizing jobs.

Instead of basic petrochemical products and their derivatives being exported to global markets and then returned as final products, Saudi Arabia will consider manufacturing the final products locally.

Saudi Arabia already has the raw materials and feedstock for the petrochemical industry and is a major producer of both key building block petrochemicals and their derivatives.

While Saudi Arabia is a large producer of ethylene, very little of that ethylene is produced from refinery-integrated facilities. Saudi Arabia also exports a significant quantity of naphtha — derived from refineries. Therefore, two key feedstocks that act as enablers for other international petrochemical industries are routinely exported from Saudi Arabia, mainly to Asia.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq

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