BMI Research predicts that major oil companies will increasingly invest in petrochemical projects to meet new market demand
Integration between Saudi Aramco and Saudi Basic Industries (SABIC) in refining and the petrochemicals will create more flexibility in the kingdom’s economy, according to a new analysis from BMI Research.
The two companies recently formed a preliminary agreement to jointly develop the world’s largest crude-to-chemical complexes in a deal which envisages a $20 billion investment in a facility capable of processing 400,000 barrels per day of Arabian light.
If approved, the plan could begin operating as soon as 2025.
“The joint project is significant as it deepens the integration of Saudi Arabia’s upstream and downstream, creating more flexibility and value for the economy,” the BMI report notes. “It is also targeting growth markets with the output, while securing demand targets for Saudi Arabia’s crude oil.”
BMI noted that the deal also increases the flexibility of feedstock available to SABIC, allowing the company to better cope with feedstock price swings.
The proposed complex is aimed at targeting the expanding chemicals market and diesel market, which is expected to strengthen after 2020 as the shipping sector increases turns to it.
“Critically, the complex will create more confidence behind long-term demand for Saudi Arabia’s crude oil – supportive of the IPO – by locking down further 400,000 barrel per day of domestic production well into the 2050s,” the report added.
Throughout 2017, BMI forecasts that major oil companies will increasingly invest in petrochemical projects due to the demand for plastics and other petrochemical products.
“The project will allow Saudi Arabia to maximise the value of its crude by leveraging the integrated opportunities of processing more oil domestically to meet growing demand for oil products,” the report concluded.