Saudi Aramco continues to expand its chemical footprint

Recently, Saudi Arabian National Petroleum Corporation (Saudi Aramco) CEO Amin Nasser said that the company is planning to continue to implement the global petroleum-downstream chemical integration strategy and invest in chemicals in India and China. Nasser said: "Although short-term adjustments to the integrated strategy of crude oil-to-chemicals may be necessary due to the impact of the decline in crude oil prices, we still firmly believe in the long-term forecast of value creation through growth and investment, and continue to evaluate and seek in Saudi Arabia. And opportunities in other countries such as China and India."

Chemicals are the main growth area

As chemicals and plastics account for a large part of petroleum demand and are still growing, Saudi Aramco will focus on converting more crude oil into chemicals and plastics rather than transportation fuels.

Nasser said: "We expect that in the next 10 years, half of the growth in oil demand will come from petrochemicals. Therefore, we expect chemicals to be a major growth area. We have made good progress in the development of crude oil-based chemicals technology. The experimental phase of thermal technology has been completed and we are entering the next phase. Since half of the future growth in oil demand will come from petrochemical products, our strategy is to let petrochemical products play a major role."

Although some major oil companies are reducing refining capacity by closing refineries or transforming to bio-refineries, Saudi Aramco expects its refining footprint to grow substantially and it will integrate with petrochemical production. Nasser said: "We have seen many companies announce the rationalization or closure of global refineries, including refineries in Europe and the United States. There are also certain scales in Asia, but we still see opportunities in some regions. We expect that in the next 8~ In 10 years, more than half of the world’s new refining capacity will be in Asia, of which 70% to 80% will be mainly concentrated in the plastics field."

Focus on China and India market

Saudi Aramco predicts that most of the increase in chemical demand will come from developing countries with growing populations, and the living standards of these countries are constantly improving. Nasser said: "Take India as an example, only 20 out of every thousand people own a car. In China, about 170 out of every thousand people own a car. In the United States and the UK, the figure is about 830 people per thousand. And 580 people. Even assuming that the number of car ownership per capita in India and China cannot reach the figures of the United States and the United Kingdom, we cannot deny the huge growth potential of these regions. With this in mind, Saudi Aramco is expanding the technology of thermally catalyzed crude oil to make chemicals. In order to achieve the conversion rate of petroleum-based chemicals to 70% or higher."

In India, Saudi Aramco is acquiring a 20% stake in Reliance Industries’ petrochemicals business for US$15 billion. This includes Reliance Industries’ plan to split its refining and petrochemical assets into a separate entity to facilitate the sale of equity. Reliance Industries expects the transaction to be completed in early 2021. Saudi Aramco also continues to cooperate with Abu Dhabi National Oil Company (ADNOC) and a consortium composed of Indian Petroleum Company (IOC), Bharat Petroleum Company (BPCL) and Hindustan Petroleum Company (HPCL) to plan a project on the west coast of India. Regard builds an integrated refining and petrochemical plant with a capacity of 1.2 million barrels per day. This investment will provide local production capacity for the Indian market and position the country as a major manufacturing center. In China, Saudi Aramco stated that its plans to build a new refinery and cracker joint venture project in Liaoning Province with China North Industries Corporation and Panjin Xincheng Group are in the design stage and will continue to cooperate with partners.

Nasser said that although India and China are the main areas of interest to Saudi Aramco, the company is also considering integrating more chemical production capacity into its existing refining assets in Saudi Arabia and the United States.

anchor downstream industry development strategy

In June 2020, Saudi Aramco acquired Saudi Basic Industries Corporation (SABIC) for US$69 billion, further expanding its business into the chemical and specialty polymer fields. This will be a key part of its petroleum-downstream chemical integration strategy.

Nasser said: "We believe that the acquisition of SABIC is the key to our transformation and the main driving force for the realization of Saudi Aramco's chemical strategy. SABIC has chemical production and marketing operations in many countries, which will enable us to seize opportunities. If you combine our upstream crude oil production capacity and refining capacity of more than 5 million barrels per day with SABIC's chemical asset base and global business, this has made us one of the world's top chemical companies." Nasser pointed out in 2019 The total output of petrochemical products of Saudi Aramco and SABIC has reached 90 million tons per year.

As for further mergers and acquisitions, Nasser said that Saudi Aramco is still focusing on integrating SABIC’s business while paying close attention to future transactions. "We do not rule out any good opportunities in the future. We will continue to evaluate some opportunities in major growth markets such as China and India as part of our long-term strategy."