Saudi Arabia’s petrochemical growth accelerates with strategic investments and Vision 2030

Saudi Arabia’s petrochemical growth accelerates with strategic investments and Vision 2030
As the Kingdom seeks to reduce its dependence on oil revenue, its petrochemicals sector has emerged as a cornerstone of its industrial strategy, playing a pivotal role in Vision 2030. Shutterstock
Short Url
Updated 06 October 2024
Follow

Saudi Arabia’s petrochemical growth accelerates with strategic investments and Vision 2030

Saudi Arabia’s petrochemical growth accelerates with strategic investments and Vision 2030

RIYADH: Saudi Arabia’s rise as a global leader in the petrochemicals industry is a product of strategic foresight, substantial investments, and a commitment to economic diversification, experts have told Arab News. 

As the Kingdom seeks to reduce its dependence on oil revenue, its petrochemicals sector has emerged as a cornerstone of its industrial strategy, playing a pivotal role in Vision 2030.

Strategic investments, advanced infrastructure, and cost advantages have rapidly positioned the nation as a global leader in chemicals and plastics production, significantly boosting the sector in just a few years.

Hector Casas, principal at Arthur D. Little Middle East, highlighted in an interview with Arab News that Saudi Arabia’s petrochemical capacity is expected to “double in the next five years, from approximately 75 million tonnes per year to more than 140 million tonnes per year.”




Hector Casas, principal, Arthur D. Little Middle East (Supplied) 

The Kingdom’s access to competitive energy prices will drive this expansion and strengthen its position as a major player in the global petrochemical industry, making it exceptionally competitive in the sector.

“This growth encompasses projects in both basic petrochemical products and high-specialty products that add more value to the oil molecule,” he said.

Nadim Haddad, partner in the Energy Practice IMEA and global head of Oil and Gas at Oliver Wyman, added: “Saudi Arabia is acquiring assets globally in the petrochemical industry that will further cement its role as a pioneer and leader of the industry.”

The global petrochemical market is expected to grow significantly in the coming years, driven by rising demand for plastics, chemicals, and advanced materials in emerging markets. 

“Saudi Arabia is strategically positioned to capitalize on these opportunities, reinforcing its status as a global petrochemical powerhouse,” added Casas.

As part of Vision 2030, Saudi Arabia aims to diversify its economy, with the petrochemicals industry playing a key role in reducing reliance on oil and driving industrial growth through technological advancement and strategic partnerships.

Foundations of the petrochemical industry

The foundations of Saudi Arabia’s petrochemical industry are deeply intertwined with the history of its oil and gas sector. Following the discovery of vast oil reserves in the 1930s, the Kingdom quickly recognized the potential of petrochemicals as a means to add value to its hydrocarbon resources.

The establishment of Saudi Basic Industries Corporation – also known as SABIC – in 1976 marked a turning point, as the Kingdom began to channel its abundant natural gas resources into the production of chemicals and plastics.




Nadim Haddad, partner in the energy practice IMEA and global head of Oil and Gas, Oliver Wyman (Supply).jpg

SABIC has grown into one of the world’s largest and most diversified chemical companies, with operations spanning over 50 countries. Its success is driven by a strategic focus on vertical integration within the hydrocarbon value chain, allowing the company to produce a wide range of petrochemical products at competitive costs. 

This leadership not only reflects Saudi Arabia’s natural resource wealth but also its strategic investments in infrastructure, research, and human capital development.

Casas emphasized the significance of Saudi Arabia’s strategic investment in downstream petrochemical industries, particularly the acquisition of SABIC: “With the energy transition, the demand for oil as fuel will potentially start to decrease, while the demand for petrochemical-based products like plastics and synthetic fibers is increasing.”

He added: “Saudi Arabia is cognizant of this shift and understands that it possesses potentially more oil reserves than could be exploited, given expected trends in demand.”

Haddad highlighted the importance of the Kingdom’s integration with the oil and gas value chain which he said is built on the availability of feedstock to build an advantageous cost position on the global market.

“Jubail Industrial City, one of the largest industrial cities with state-of-the-art infrastructure, played a key role in building the foundation that helped accelerate the growth of the petrochemical industry,” Haddad explained.

Economic diversification and Vision 2030

The government’s focus on economic diversification is driving significant investments in the sector, including the development of new production facilities, the expansion of existing capacities, and the adoption of advanced technologies that enhance efficiency and sustainability.

Vision 2030 envisions Saudi Arabia as a global industrial hub, attracting foreign investment and fostering innovation in high-value industries. The petrochemicals industry, with its vast potential for value addition, is a key component of this vision. 

The Kingdom’s strategic location at the crossroads of Europe, Asia, and Africa, combined with its state-of-the-art infrastructure, makes it an ideal destination for investors seeking to capitalize on the growing demand for petrochemicals in emerging markets.

Haddad underscored the importance of downstream investments in this strategy: “Downstream investments in chemicals are one of the key pillars of Saudi Arabia’s industrialization strategy, creating the link between the petrochemical industry and end uses.”

He went on to explain that these investments will allow Saudi Arabia to capture the economic value-add that it was previously unable to capture, localize value chains, reduce reliance on imports, and increase the diversification of its exports.

Expanding production capacity and technological innovation

Saudi Arabia’s petrochemical sector has seen remarkable growth in recent decades, with production capacity reaching approximately 118 million tonnes annually. This has been driven by continuous investments in infrastructure, technology, and capacity expansion.

The Kingdom’s focus on producing more advanced specialty products, such as performance polymers, engineering plastics, and high-value chemicals, reflects its commitment to moving up the value chain and capturing a larger share of the global market.

Technological innovation plays a crucial role in the competitiveness of Saudi Arabia’s petrochemical industry. The Kingdom is investing heavily in research and development to drive innovation across the value chain.

SABIC’s dedicated R&D centers, located in strategic regions around the world, are at the forefront of developing new materials and processes that enhance efficiency, reduce environmental impact, and create value-added products. 

As Casas pointed out: “Saudi Arabia is very active in R&D and technology in the petrochemical sector. SABIC’s R&D program and Home of Innovation are a clear showcase of this.”

Moreover, Saudi Aramco, the world’s largest integrated energy and chemicals company, is making significant strides in integrating its upstream and downstream operations. 

The acquisition of a 70 percent stake in SABIC for $69.1 billion has further strengthened Aramco’s downstream capabilities, positioning it as a global leader in the production of petrochemicals. 

Casas noted the strategic impact of this acquisition: “The acquisition of SABIC by Aramco has not only positioned the latter as a major petrochemical player worldwide but also enabled significant optimization and synergies in procurement, supply chain, manufacturing, marketing, and sales.”

In terms of technological advancements, ADL’s expert highlighted four key fronts: “The development of mega-scale oil-to-chemical complexes, the focus on high-specialty chemicals, the digital transformation to drive efficiencies, and the emphasis on emissions reduction and sustainability.” 

These advancements are crucial for Saudi Arabia to maintain its competitive edge in the global market.

Strategic partnerships and international collaborations

Saudi Arabia’s petrochemical industry has benefited significantly from strategic partnerships and international collaborations. Joint ventures with leading global companies have been instrumental in bringing advanced technologies, expertise, and capital to the Kingdom. 

These partnerships have not only enhanced Saudi Arabia’s production capabilities but also facilitated the transfer of knowledge and technology, which is critical for the industry’s long-term growth.

One of the most notable examples of such collaboration is the Sadara Chemical Company, a joint venture between Saudi Aramco and Dow Chemical. 

Established with an investment of $20 billion, Sadara is the largest integrated chemical complex in the world built in a single phase. The facility produces a wide range of value-added chemicals and plastics, many of which are being produced in Saudi Arabia for the first time. 

Sadara’s success underscores the importance of international partnerships in driving innovation and expanding the Kingdom's petrochemical portfolio.

Haddad elaborated on the role of such partnerships: “Joint ventures and partnerships are not new to Saudi Arabia's petrochemical sector; there is a rich history of collaborations that have significantly accelerated the industry’s development.”

“These collaborations will facilitate the development of technologies that promote cleaner operations and products,” he added.

Environmental sustainability and green initiatives

Saudi Arabia’s petrochemical industry is increasingly focused on sustainability and reducing its environmental footprint. The Kingdom is investing in technologies that improve energy efficiency, reduce emissions, and enable the production of more sustainable products. 

Carbon capture, utilization, and storage is one area where Saudi Arabia is making significant advancements. By capturing carbon dioxide emissions from industrial processes and utilizing them in the production of chemicals and fuels, the Kingdom is reducing its carbon footprint while creating new revenue streams.

Green hydrogen is another area where Saudi Arabia is leading the way. The Kingdom’s abundant solar and wind resources provide a competitive advantage in the production of this fuel, which is produced using renewable energy sources. 

The development of the Neom Green Hydrogen Project is a key component of Saudi Arabia’s strategy to become a global leader in sustainable energy. 

The project aims to produce 650 tonnes of hydrogen per day by 2025, making it the largest such facility in the world.

“Saudi Arabia's petrochemical industry is firmly committed to integrating environmental sustainability into its operations,” Casas said, highlighting the Kingdom’s efforts in sustainability.

He added: “SABIC, for instance, has committed to achieving carbon neutrality from operations under its control by 2050 and is actively pursuing carbon capture technologies to decarbonize its operations.”


Saudi inflation holds steady at 1.9% despite global price pressures: GASTAT

Saudi inflation holds steady at 1.9% despite global price pressures: GASTAT
Updated 9 sec ago
Follow

Saudi inflation holds steady at 1.9% despite global price pressures: GASTAT

Saudi inflation holds steady at 1.9% despite global price pressures: GASTAT

RIYADH: Saudi Arabia’s annual inflation rate reached 1.9 percent in October compared to the same month last year, driven primarily by higher housing costs, official data showed.

According to the General Authority for Statistics, actual housing rents saw an annual increase of 11.6 percent, with apartment rents rising by 11.3 percent. 

Overall, expenses for housing, water, electricity, gas, and other fuels rose by 9.6 percent compared to the same period in 2023. 

Saudi Arabia’s inflation rate remains among the lowest in the Middle East, highlighting the nation’s effective measures to stabilize the economy and mitigate global price pressures. 

A World Bank report last month noted Saudi Arabia’s economic resilience, projecting the Kingdom’s inflation rate to remain steady at 2.1 percent in 2024 and 2.3 percent in 2025, lower than the Gulf Cooperation Council average.

“The increase in this section (housing) had a significant impact on the continuation of the annual inflation pace for the month of October 2024 due to the weight formed by this section, which amounted to 25.5 percent,” stated GASTAT. 

The report also highlighted that prices for personal goods and services rose by 2.3 percent in October, led by a 24.1 percent rise in the costs of jewelry, watches, and precious antiques. 

Restaurant and hotel expenses saw a 1.9 percent annual increase, while education costs rose by 1.1 percent. Food and beverage prices saw a slight increase of 0.1 percent in October, driven by a 2.6 percent rise in vegetable prices. 

In contrast, prices for furnishings and home equipment fell by 3.1 percent year on year in October, while expenses for clothing and footwear declined by 2.7 percent. Transportation prices also dropped by 3.1 percent annually, influenced by a 4.2 percent decrease in vehicle purchase prices. 

Compared to September, Saudi Arabia’s Consumer Price Index experienced a modest 0.3 percent rise. 

“This monthly inflation index was influenced by a 0.8 percent rise in the section of housing, water, electricity, gas, and other fuels, which in turn, was affected by a 1 percent increase in actual housing rents and prices,” added GASTAT. 

Prices for personal goods and services rose 0.4 percent month on month in October, while transportation expenses increased by 0.3 percent. Food and beverage prices and health expenses, however, saw slight declines of 0.2 percent and 0.1 percent, respectively. 

The World Bank projects GCC inflation to reach 2.2 percent in 2024 and 2.7 percent in 2025. Saudi Arabia’s gross domestic product is forecast to grow by 1.6 percent this year and accelerate to 4.9 percent in 2025. 

Wholesale Price Index 

In a separate report, GASTAT revealed that Saudi Arabia’s Wholesale Price Index increased by 2.4 percent in October year on year. 

“This increase is mainly attributed to a 5.4 percent increase in the prices of other transportable goods, affected by a 12 percent increase in the prices of refined petroleum products, as well as a 9.6 percent increase in furniture and other transportable goods,” the authority stated. 

Agricultural and fishing product prices saw an annual rise of 0.8 percent, as agricultural product costs increased by 2 percent. Metal products, machinery, and equipment also saw a 0.5 percent increase in October, led by a 3.5 percent rise in basic metals. 

Conversely, prices for ores and minerals dropped by 2.7 percent due to a decline in costs for stones and sand. 

Food, beverages, tobacco, and textiles decreased by 0.1 percent, driven by a 4.6 percent decline in the prices of meat, fish, fruits, vegetables, oils, and fats. 

Compared to September, the WPI declined by 0.2 percent, influenced by a 0.6 percent drop in prices of other transportable goods. 

Average Price Index 

In an additional report, GASTAT noted shifts in the average prices of goods and services across Saudi Arabia in October. 

Prices of Abu Sorra Egyptian oranges increased by 7.29 percent compared to the previous month, while green bean prices rose by 6.98 percent. Turkish plums and imported honey also saw monthly increases of 5.38 percent and 4.58 percent, respectively. 

In contrast, the price of imported barley fell by 6.16 percent, and the costs of hay and local melon dropped by 4.93 percent and 4.02 percent, respectively, in October. 


Oil Updates – prices ease on fears of higher output, sluggish demand

Oil Updates – prices ease on fears of higher output, sluggish demand
Updated 22 min 1 sec ago
Follow

Oil Updates – prices ease on fears of higher output, sluggish demand

Oil Updates – prices ease on fears of higher output, sluggish demand

LONDON: Oil prices slipped in early trade on Thursday, reversing most of the previous session’s gains, weighed down by worries of higher global production amid slow demand growth, with a firmer dollar exacerbating the declines.

Brent crude futures fell 35 cents, or 0.5 percent, to $71.93 a barrel by 7:00 a.m. Saudi time. US West Texas Intermediate crude futures declined 42 cents, or 0.6 percent, to $68.01.

“Oil is tackling the (earlier) weaker demand forecast narrative by OPEC, who deferred rolling back additional production for yet another month, fearing the adverse effect on prices,” said Phillip Nova’s senior market analyst Priyanka Sachdeva in an email.

On Tuesday, OPEC cut its global oil demand growth forecast to 1.82 million bpd in 2024, down from 1.93 million bpd forecast last month, on weak demand in China, India and other regions, sending oil prices to their lowest in nearly two weeks.

Meanwhile, the US Energy Information Administration has slightly raised its expectation of US oil output to an average 13.23 million barrels per day this year, or 300,000 bpd higher than last year’s record 12.93 million bpd, and up from 13.22 million bpd forecast earlier.

The agency also raised its global oil output forecast for 2024 to 102.6 million bpd, from its prior forecast of 102.5 million bpd. For next year, it expects world output of 104.7 million bpd, up from 104.5 million bpd previously.

The EIA’s oil demand growth forecasts are weaker than OPEC’s, at about 1 million bpd in 2024, although that is up from its prior forecast of about 900,000 bpd.

Market participants are now waiting for the International Energy Agency’s oil market report, due later in the day, and the EIA’s US crude oil and product stockpile data for further trading cues.

Concerns about China’s demand remains a key contributor to softening prices, analysts say.

“Despite various stimulus measures implemented by Chinese authorities, there has been little to no improvement in economic activity or sentiment within mainland China,” said Phillip Nova’s Sachdeva.

China continues to be the “sore joint” for oil demand and the primary reason why oil markets are bracing for an oversupply in 2025, she added.

Also weighing on prices, the US dollar rose to near a seven-month high against major currencies on Wednesday after data showed US inflation for October increased in line with expectations, suggesting the Federal Reserve will keep cutting rates.

“..the stronger USD is creating strong headwinds for commodities,” ANZ Research said in a note.

A firmer dollar makes commodities priced in the greenback expensive for buyers using other currencies.


Mizuho to launch Saudi ETF with sovereign fund PIF

Mizuho to launch Saudi ETF with sovereign fund PIF
Updated 22 min 13 sec ago
Follow

Mizuho to launch Saudi ETF with sovereign fund PIF

Mizuho to launch Saudi ETF with sovereign fund PIF

TOKYO: Japan’s Mizuho Financial Group is partnering with Saudi Arabia’s Public Investment Fund to create a Tokyo-listed exchange-traded fund featuring Saudi shares, providing retail investors easier access to a promising emerging market.

A report from leading Japanese business publication Nikkei says Asset Management One, a joint venture between Mizuho and Dai-ichi Life Holdings, plans to create an ETF this fiscal year, linked to the FTSE Saudi Arabia Index.

The fund will mainly track large, creditworthy stocks such as banks and Saudi Aramco, making it accessible for inexperienced retail investors. The minimum investment is expected to be in the thousands to tens of thousands of yen, putting it under $1,000.

The goal is to attract capital for the fund from a wide range of investors, with PIF and Mizuho Bank as the anchors. Mizuho also will aid PIF’s efforts to raise capital overseas as it aims to strengthen ties with the Saudi finance sector. The Japanese bank will use its fundraising expertise to coach personnel from the sovereign wealth fund, as well as provide support for the country’s transition away from oil.

In April, PIF announced a partnership with BlackRock, the world’s largest asset manager, under which the fund will contribute up to $5 billion to an investment platform that aims to draw money for domestic and overseas investment. Mizuho is the first Japanese private-sector financial institution to partner with PIF.

Nikkei describes Saudi Arabia as “increasingly appealing as an investment destination,” noting how the country’s stock market ranked eighth in the world by market capitalization last year.

This article also appears on Arab News Japan


Saudi PIF raises over $1bn with 2% stc stake sale 

Saudi PIF raises over $1bn with 2% stc stake sale 
Updated 46 min 16 sec ago
Follow

Saudi PIF raises over $1bn with 2% stc stake sale 

Saudi PIF raises over $1bn with 2% stc stake sale 

RIYADH: Saudi Arabia’s Public Investment Fund has raised SR3.86 billion ($1.03 billion) through the sale of a 2 percent stake in telecom firm stc. 

The offering, consisting of 100 million shares priced at SR38.6 each, was met with strong demand from both local and international institutional investors, according to a statement. 

The transaction represents the largest accelerated bookbuild offering ever conducted in Saudi Arabia and the broader Middle East and North Africa region, underscoring robust investor appetite for exposure to the region’s telecom sector and strategic assets managed by PIF. 

“PIF reiterates the strategic importance of its ownership in stc and its diverse partnerships with the company through a number of PIF portfolio companies,” the statement said.  

“PIF looks forward to supporting stc’s leading role in shaping the future of the ICT sector in Saudi Arabia, one of its priority sectors,” it added.  

Following the sale, PIF retains a 62 percent ownership in stc, equivalent to 3.1 billion shares.  

The sale aligns with PIF’s broader strategy to recycle capital into emerging sectors within the local economy, as the fund moves toward its vision of becoming a global investment powerhouse.  

Currently managing around $925 billion in assets, PIF aims to drive economic transformation in Saudi Arabia and influence global markets. 

In a disclosure on the Saudi Exchange on Wednesday, it was noted that Goldman Sachs Saudi Arabia and SNB Capital are acting as joint global coordinators and bookrunners for PIF in the transaction. The was to be executed as off-market negotiated deals on Nov. 14, under the Negotiated Deals Framework set by the Saudi Exchange. 

PIF has actively invested in both public and private sectors since its re-launch in 2017, establishing 99 companies and supporting a shift towards a sustainable economy.  

This approach positions Saudi Arabia as an emerging leader in economic and social transformation, providing avenues for both local and global stakeholders to engage in the Kingdom’s evolution. 

With this latest transaction, PIF continues to underscore its dual objectives of capital growth and strategic reinvestment, supporting both economic diversification in Saudi Arabia and the fund's role as a catalyst for sustainable global investment. 


Dogecoin soars as Trump announces a government efficiency group nicknamed DOGE

Dogecoin soars as Trump announces a government efficiency group nicknamed DOGE
Updated 14 November 2024
Follow

Dogecoin soars as Trump announces a government efficiency group nicknamed DOGE

Dogecoin soars as Trump announces a government efficiency group nicknamed DOGE
  • Dogecoin got a bump after US President-elect Trump named Tesla’s Elon Musk as one of the heads of a new “Department of Government Efficiency,” which is not a government agency but does have the acronym DOGE

NEW YORK: Wow, much bull market.
Dogecoin, the cryptocurrency whose mascot is a super-cute dog that muses things like “much wow,” has been racing higher in value since Donald Trump won the presidential election last week. It got another bump after Trump named Tesla’s Elon Musk as one of the heads of a new “Department of Government Efficiency,” which is not a government agency but does have the acronym DOGE.
All this makes sense and is maybe humorous for anyone who’s chronically online. For others, here’s some explanation about what’s going on:
What is dogecoin?
It’s a cryptocurrency, whose value rises and falls against the US dollar based on however much people will pay for it.
At first, it was seen as a joke. But over time, dogecoin has amassed a group of fans who have periodically sent its price soaring. Like other cryptocurrencies, supporters say it could be used to buy and sell things on the Internet without having to worry about a central bank or government affecting how many are in circulation.
How much has dogecoin climbed?
One dogecoin — which is pronounced dohj-coin — was worth less than 16 cents just before Election Day. It’s since more than doubled to nearly 38 cents, as of Wednesday afternoon, according to CoinDesk. It briefly got above 43 cents earlier Wednesday.
Why is it climbing so much?
Cryptocurrencies have generally been shooting higher since Trump’s election. Bitcoin, which is the most famous digital currency, has set an all-time high above $93,000 after starting the year below $43,000.
Excitement is racing because Trump has embraced crypto and said he wants the United States to be the “crypto capital of the planet” and create a bitcoin “strategic reserve.”
What does Elon Musk have to do with any of this?
Musk has become one of Trump’s close allies. He’s also been one of the most famous fans of dogecoin. In 2021, Musk played a character on “Saturday Night Live” who went by the nickname, the “Dogefather.”
In 2022, Musk made more headlines when he suggested Twitter should perhaps accept dogecoin as payment for subscriptions.
It all came to a head Tuesday, when Trump announced the “Department of Government Efficiency,” which will work from outside the government to offer the White House “advice and guidance” and will partner with the Office of Management and Budget to “drive large scale structural reform, and create an entrepreneurial approach to Government never seen before.”
It has the acronym DOGE, which is also the ticker symbol under which dogecoin trades. Musk will lead it, along with former GOP presidential candidate Vivek Ramaswamy.
This all sounds weird.
Dogecoin’s history is interesting.
In 2021, on April 20, dogecoin fans tried but failed to get its value above $1 on what they were calling “Doge Day.”
April 20 has long been an unofficial holiday for marijuana devotees, and Musk himself has referred to 420 several times in his career, including his tweet in 2018 saying he had secured funding to take Tesla private at a price of $420 per share.
Is the Shiba Inu whose picture is in the meme getting special treats because of all this?
Sadly, no. The dog, whose real name was Kabosu, passed away in Japan earlier this year at 18 years old. Much rest, may she have.