The easy access to competitive feedstock in Saudi Arabia has made it a global hub for the petrochemical industry. This position has attracted major international players to the region, looking for partnerships with local producers.
Chevron Phillips Chemical Company LLC (CPChem) is one such company, operating several petrochemical joint venture projects with its local partner Saudi Industrial Investment Group (SIIG) located in Jubail industrial city, including Saudi Chevron Phillips which produces benzene and Cyclohexane, and Jubail Chevron Phillips which operates an olefins cracker that is integrated with world-scale ethyl benzene and styrene production facilities.
CPChem and an affiliate of SIIG, National Petrochemical Company, are also starting up a new facility owned by their Saudi Polymers Company (SPCo) joint venture company. “Our major project in Saudi Arabia right now is our Saudi Polymers Company project which is a 1.2 million tonne/year (t/y) ethylene cracker and a 1.1 m tonne/year of polyethylene, 400000 tonne/year of polypropylene, 200000 tonne/year of polystyrene and 100000 tonne/year of 1-hexene. That plant is mechanically complete and we are now in the process of commissioning and starting up all the units. We expect commercial production in the first quarter 2012,” Peter Cella, president and CEO of Chevron Phillips Chemical Company tells Refining and Petrochemicals Middle East.
“That’s where our focus is right now, to run the plant safely and profitably,” he adds.
SPCo began construction in January 2008 and has created approximately 950 jobs, with a high percentage being occupied by Saudi nationals.
Upon the completion of the project, SPCo’s products -including olefins and alpha olefins- will be marketed through the Gulf Polymers Distribution Company. “Chevron Phillips will be the exclusive selling agent for the distribution company outside of the Gulf region, and we will market these materials to our current market in EU and Asia as well as outside the gulf region,” he adds.
The company and its local partner are boosting their investments in Saudi Arabia, and have recently launched a new project called Petrochemical Conversion Company (PCC).
“Our next tranche of investment is a nylon 6.6 project and converted products operation,” says Cella. “It is a 50/50 project and we have received the necessary approval for project execution,” he explains. “The project is expected to be completed by 2013 and will produce 50000 tonne/year of nylon, 20000 tonne/year of nylon compound and 120000 tonne/year of conversion capacity to make a whole array of downstream products such as high pressure pipes, drip irrigation systems, automotive fittings, electrical fittings.”
The total project cost is over $500 million for that investment which is a 50/50 joint venture between Chevron Phillips Chemical and Saudi Industrial Investment Group (SIIG), with current paid capital of $40 million.
All CPChem’s projects in the Kingdom are with SIIG or its affiliated company. “We seek opportunities around the world and we seek partners who understand our business model, respect our technology and our marketing prowess through the world,” Cella says. “This has been a great partnership with SIIG and we don’t see any reason to change that.”
CPChem is proud of the technical and commercial successes of its joint ventures in Saudi Arabia and Qatar, Cella said “We deeply value the relationships with our partners and host governments. We are especially proud of the demonstrated and sustained environmental, health, and safety performance of these facilities. Each operation continually ranks among the best in its respective country and within the Chevron Phillips Chemical portfolio,” he says.
Competitive feedstocks are crucial to the success of petrochemical companies and that’s what Chevron Phillips Chemical seeks around the world. “We seek competitive feedstocks here in the region and in the US,” says Cella. “Shale gas resources developed around the world could also open investment opportunities in other parts of the world,” Cella adds.
“We don’t control the pricing of our feedstocks - it’s a function of the markets and host government’s policies. We seek competitive feedstocks no matter where they are in the world,” he adds.
“We are constantly pursuing new projects around the world including this region,” says Cella.“
Despite the current global financial situation, the company has a strong financial position and doesn’t plan to tap the debt markets to finance projects. “We are generating sufficient cash flow from our own operations to fund our entire capital programme looking forward, and we have very healthy owners who can fund us if we need it,” says Cella. “The SPCo project was funded with assistance from commercial lenders and government agencies, including the Saudi Public Industrial Fund “PIF” fund.”
Oversupply is something that Chevron Phillips Chemical is always watchful for says the CEO. “We see the global economy finally coming out of this recession and our industry pulling out of the trough of the petrochemical cycle. If you look at the ethylene capacity utilisation which tends to be the bellwether for all the petrochemicals, we are actually in recovery mode,” says Cella. “We hit a downturn in 2010, and we look at 2012 to continue to ramp up the capacity utilisation, with more favorable market conditions approaching the next peak in 2015-16,” he adds.
Speaking on the petrochemical industry in the region, Cella says that GCC petrochemical industry has a very strong foundation. “We’ve demonstrated that in each of our individual companies and collectively, and I see nothing but strong industry growth in the future,” Cella concludes.
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