Saudi Arabia could become global ethylene hub: NCB

24 Jul '13

2 min read

Saudi Arabia could well become a global hub of ethylene and its derivatives, according to a latest report released by the National Commercial Bank (NCB).

The recent shale oil and gas deposit discoveries in Saudi Arabia would drastically change the global landscape of the petrochemical industry over the next five years, according to the NCB’s Semi-Annual Sector Review.

The review states large capacity additions are to be expected from both Asian as well as Middle Eastern producers due to these discoveries, whereas high-cost producers from other parts of the world would be squeezed out and petrochemical prices are likely to come under pressure in the long term, reports Saudi Gazette.

The abundance of ethane rich associated gas sold at a subsidized rate of US$ 0.75 per million btu has initiated the launch of a series of projects in the country which would make it a global hub of ethylene and its derivatives.

The NCB report said the proximity to dominant Asian markets would allow producers from the country to capture a greater share of demand and also encourage foreign investment.

The country’s capacities of ethylene and polyethylene are forecast to reach 16.08 million tons per annum (mtpa) and 5.45 mtpa by 2015, respectively.

This would lead to the procurement of propane at discounted rates to the naphtha export price thereby making propylene a commonly used olefin.

However, the report also suggests that the petrochemicals sector would face challenges most importantly due to the scarcity of ethane and the need to diversify into more versatile feedstock such as naphtha.

Saudi Arabia is considered among the largest producers of polymers in the world with an annual production of more than 8 million tons. In 2012, Saudi Arabia produced more than 18 million tons of ethylene, the most basic petrochemical that is also used as a raw material for the textile industry.

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