Saudi Arabia Petrochemicals Report Q4 2012
Business Monitor International, September 2012, Pages: 71
The Saudi Arabia Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Saudi Arabia's petrochemicals industry.
The Q412 Saudi Arabia petrochemicals report examines the declining profitability of the Saudi downstream industry and assesses whether the diversification of the country’s production portfolio will help overcome the immediate challenges.
The report analyses how trends in Asian markets will affect strategic decision-making in the industry amidst a slowdown in demand growth and the threat of global over-capacity in some segments. It also examines whether naphtha and ethane feedstock supply to the industry will be able to sustain planned growth.
Saudi petrochemicals companies reported a drastic fall in profits in Q212 as product prices declined and softening demand in Asia hit operating rates. BMI expects the situation to stabilise in H212, partly as a result of base effects but also because the depletion of global inventories is likely to have abated by then.
There are concerns that the industry is growing too fast, a situation that would increase Saudi competition with Asian production. BMI has been warning that overcapacity could become a problem in the short term amid a downturn in domestic demand growth, but that in the long term it will continue to see petrochemicals demand growing faster than domestic capacity expansion, requiring continued imports.
The Asian petrochemicals market will be crucial to growth and profitability in 2012 and going into 2013.
Uncertainty has increased due to the volatility caused by the Eurozone crisis coupled with plant restarts in Asia. Exports to the Asian market were more constrained as Q212 progressed, as production in Europe was absorbed by a seasonal increase in consumption and Indian activity slowed as a result of falling domestic naphtha volumes.
- The commencement of commercial operations at the Saudi Polymers Company in early 2012 should increase national output in 2012 with new capacities of 1.17mn tonnes per annum (tpa)
ethylene, 445,000tpa propylene, 1.1mn tpa poly ethylene (PE), 400,000tpa polypropylene (PP),
200,000tpa polystyrene (PS) and 100,000tpa hexane-1.
- Sadara Chemical Company, a joint venture (JV) between Saudi Aramco and Dow, is set to add 2mn tpa of monomer capacity with a mixed feed cracker and will produce more than 3mn tpa of high value-added chemical products and performance plastics, with all of the units due to come online in 2016. The province of Jubail and the port city of Yanbu are the focus of petrochemicals developments. Our projections for petrochemicals capacity are based on planned projects, but it is possible that some may not come to fruition as a result of the restriction on ethane feedstock and a possible lacklustre recovery in the Chinese market at the same time as Chinese capacities rise.
- By 2016, BMI forecasts ethylene and propylene capacities will rise to 18.02mn tpa and 7.0mn tpa respectively, with Saudi Kayan’s commercial operations set to contribute most to the increase. Total PE capacity will rise to 8.86mn tpa by 2016, polypropylene (PP) will increase to 5.60mn tpa, polystyrene (PS) will reach 375,000 tpa, and polyvinyl chloride will remain unchanged at 855,000 tpa.
- In BMI’s Middle Eastern Petrochemicals Risk/Reward Ratings, Saudi Arabia is rated as the most attractive country out of the 11 surveyed by some margin, with a score of 77.7 points, up 0.1 point since the previous quarter due to a modest increase in its country risk score. The country is placed ahead of the UAE, which is in second place with 63.7 points, and a cluster of other Gulf countries that cannot compete with Saudi Arabia’s feedstock or economies of scale.
- Saudi Arabia is well placed in terms of resources, with annual gas production set to rise 22% to 106bn cubic metres (bcm) and refining capacity likely to grow nearly 50% to exceed 3mn barrels per day (b/d) by 2016. This is expected to support total petrochemicals production of more than 100mn tonnes by 2016, representing 250% growth over 2006 levels, based on government projections.
Saudi Arabia’s main weakness has been its dependence on commodity petrochemicals and a lack of high performance and speciality grades, which can add value to exports and put the industry in direct competition with Japanese producers and other more mature markets. The government is seeking to diversify production and add value down the value chain by including 120 new petrochemicals and chemicals products. Total investment will hit US$150bn. Saudi Arabia’s manufacturing base is expected to grow, which will move the country away from exporting basic chemicals and importing finished goods as it grows its five industrial clusters – mineral and metal processing, automotive, plastic and packaging,
home appliances and solar energy.
Executive Summary 5
SWOT Analysis 7
Saudi Arabia Petrochemicals Industry SWOT 7
Saudi Arabia Political SWOT 8
Saudi Arabia Economic SWOT 9
Saudi Arabia Business Environment SWOT 10
Global Petrochemicals Overview 11
Petrochemicals Market Overview 11
Table: World Ethylene Production By Country, 2011 And 2016 (‘000 tonnes capacity) 11
Financial Results 15
Table: Financial Results – Major Petrochemicals Companies, 2011 15
Global Oil Products Price Outlook 16
Table: BMI Oil Price Forecasts, 2011-2016 16
Middle East Regional Overview 23
Table: Planned Ethylene Crackers In The Gulf Region 25
Saudi Arabia Market Overview 26
Table: Saudi Arabia’s Ethylene Capacity 28
Table: Saudi Arabia’s Ethylene Projects 28
Table: Saudi Arabia’s Polyethylene Capacity 29
Table: Saudi Arabia’s Polyethylene Projects 29
Table: Saudi Arabia’s Polypropylene Capacity 30
Table: Saudi Arabia – Cracker Capacity ‘000tpa, 2009-2016 30
Industry Trends And Developments 32
Developments 32
Sahara Petrochemicals 33
Sadara Chemical Company 34
Petro Rabigh 35
Saudi Kayan 36
Ma’adan 36
Sipchem 36
Ibn Rushd 37
SAAC 38
Safco 38
Kayan 38
Satorp 39
Other Projects 40
Related Industries 41
Industry Forecast Scenario 43
Table: Saudi Arabia’s Petrochemicals Sector, 2009-2016 46
Petrochemicals Risk/Reward Ratings 47
Saudi Arabia Petrochemicals Risk/Reward Ratings 47
Table: Middle East And Africa Petrochemicals Risk/Reward Ratings 47
Saudi Arabia Petrochemicals Report Q4 2012
© Business Monitor International Ltd
Page 4
Macroeconomic Forecast 50
Table: Saudi Arabia - GDP By Expenditure, Real Growth %, 2008-2016 52
Company Profiles 53
Sipchem 53
ExxonMobil 55
Royal Dutch Shell 57
Sabic 58
ChevronPhillips 61
Demographic Outlook 62
Saudi Arabia's Population By Age Group, 1990-2020 ('000) 63
Saudi Arabia's Population By Age Group, 1990-2020 (% of total) 64
Saudi Arabia's Key Population Ratios, 1990-2020 65
Saudi Arabia's Rural And Urban Population, 1990-2020 65
Glossary Of Terms 66
Table: Glossary Of Petrochemicals Terms 66
BMI Methodology 67
How We Generate Our Industry Forecasts 67
Chemicals And Petrochemicals Industry 67
Cross Checks 68
Business Environment Ratings 69
Table: Petrochemicals Business Environment Indicators And Rationale 69
Weighting 70
Table: Weighting Of Indicators 70
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