Q1 2019

16 MEA MARKETS / Q1 2019 , Joseph Chang, Global Editor, ICIS Chemicals Business Middle East ‘Big Oil’ to Boost Global Petrochemicals Footprint While the US cracker wave on the back of the shale gas boom is getting much of the attention, big oil and gas players in the Middle East are lining up mega projects that could shift the landscape of global petrochemicals from 2025 and beyond. Driving this push from oil companies is the growing realisation that oil demand for transportation fuel will plateau with the electrification of vehicles and improving fuel efficiency. Thus, the future for hydrocarbons is not in gasoline and diesel, but in chemicals, where demand should continue to climb alongside GDP growth. And it’s clear that “Big Oil” is no longer satisfied simply providing feedstock for the downstream chemical sector. ADNOC’S $45BN INVESTMENT PLAN Abu Dhabi National Oil Company (ADNOC) wants to “stretch the dollar” from the barrel of oil to the maximum through producing chemicals, said CEO Sultan Ahmed Al Jaber. ADNOC is embarking on a $45bn investment plan with a goal to more than triple petrochemicals capacity at its Ruwais site from a 2016 base of 4.5m tonnes/year to 14.4m tonnes/year by 2025, and adding new downstream product chains in construction chemicals, oilfield chemicals, surfactants and detergents. In February 2019, its 50/50 joint venture company Borouge awarded front-end engineering and design (FEED) contracts for the 4th phase of its expansion in Ruwais which will include a 1.8m tonne/year mixed feed cracker and add a total of 3.3m tonnes/ year of olefins and aromatics capacity. The cracker will be the first in the country to use mixed feeds. The feedstock slate will be ethane, butane and naphtha. “The Middle East is running out of cheap natural gas. All new projects are mixed feed, with a typical mix of about 35% ethane, and 65% propane, butane and naphtha which is not as advantaged as ethane,” said Hassan Ahmed, analyst at US- based investment research firm Alembic Global Advisors. While ADNOC and JV partner Borealis plan to finalise the downstream configuration within three months of the FEED contract awards, it should include polyethylene (PE) and polypropylene (PP). ARAMCO’S COTC AND $100BN PLAN Saudi Aramco’s planned crude oil to chemicals (COTC) complex with SABIC in Yanbu, Saudi Arabia is perhaps the most watched project on the planet as it could have stunning implications for the petrochemicals sector. Featuring a budget of around $30bn and a process to convert 400,000 bbl/day of crude oil to 9m tonnes of chemicals and base oils, the mega complex is expected to start operations in 2025. The initial plan was to convert 45% of each oil barrel to petrochemicals. However, Aramco aims to boost that figure significantly by advancing its proprietary process technology. Aramco believes it can convert between 60-70% of the oil barrel into petrochemicals using this technology. Petrochemicals are averaging about 10-15% of global refinery output, with wide differences between integrated complexes. “In recent years, refiners have increasingly raised their share of petrochemical output at the expense of traditional fuels. Some of the new refineries in China can convert up to 40%,” according to Stefano Zehnder, vice president of consulting at ICIS. “In Saudi Arabia the original base concept is rapidly evolving. It’s clear Aramco is looking to scale up to commercial size its crude- to-chemicals technologies,” said Zehnder. “With the potential for further increase from the base 45% yield, this points to even higher petrochemicals and base oils capacities than the 9m tonnes/ year base. The final configuration will be function of the desired balance between petrochemicals, base oil and fuel products,” he added. Ahmed from Alembic Global Advisors notes that crude oil-to- chemicals is all about “integration and trying to be more efficient both upstream and downstream”. That’s because “every new facility in the Middle East puts them higher on the cost curve”, a function of the mixed feedstock slate. Aramco plans to invest an eye popping $100bn in petrochemicals over the next 10 years, CEO Amin Nasser said at the Gulf Petrochemicals Association (GPCA) annual meeting in Dubai in November 2018. In October 2018, Aramco and France-based Total signed a joint development agreement for the front-end engineering and design (FEED) of their planned joint venture petrochemicals complex in Jubail, Saudi Arabia. The $5bn project, slated for start-up in 2024, will comprise a mixed-feed (50% ethane, 50% refinery off-gases) cracker with 1.5m tonnes/year of ethylene capacity and downstream units. The petrochemical complex will be downstream of Aramco and