Q1 2019

MEAMARKETS / Q1 2019 17 Total’s joint venture SATORP refinery and the companies expect an additional $4bn in investments in petrochemicals and specialty chemicals capacity from third-party investors. Aramco is also in the process of merging with Saudi Arabia-based petrochemicals and polymers giant SABIC. MEGA PROJECTS WORLDWIDE Aramco and Abu Dhabi’s ADNOC are not only plowing investment dollars in their backyards but setting up mega complexes around the world. The most ambitious among these is the memorandum of understanding (MoU) signed in June 2018 between Aramco, ADNOC and a consortium of Indian oil companies (Indian Oil, Hindustan Petroleum, Bharat Petroleum) to build a $44bn refining and petrochemicals complex in India with 18m tonnes/year of petrochemicals capacity. Aramco and ADNOC would jointly own 50% of the project, with the Indian consortium owning the other half. The Indian government expects construction to start in 2020 in Raigad, India with completion of the project by 2025. Alembic Global Advisors’ Ahmed cautions on raising expectations from MoUs. “The Crown Prince of Saudi Arabia went on a tour across Asia and many MoUs were signed. But MoUs sometimes don’t materialise. Until we see steel in the ground, we typically don’t take them too seriously,” said Ahmed. China is another target for Middle East oil companies. In February 2019, Aramco signed an agreement with China’s NORINCO Group and Panjin Sincen to develop a $10bn- plus fully integrated refining and petrochemical complex in Liaoning, China with start-up expected in 2024. The partners will create a new company, Huajin Aramco Petrochemical (Aramco 35%, NORINCO 36%, Panjin Sincen 29%), as part of a project that will include a 300,000 bbl/day refinery with a 1.5m tonne/year cracker and a 1.3 tonne/year paraxylene (PX) unit. Aramco will supply up to 70% of the crude oil feedstock for the complex. SABIC MERGER TO BRING PROJECTS And Aramco would inherit two additional mega projects if its planned merger with SABIC goes through. SABIC and China’s Fuhaichuang Petrochemical are planning to jointly build a petrochemical complex in Fujian, China, a source from Fuhaichuang said in late February. The project to be located at Gulei in Zhangzhou would include a 1.8m tonne/year cracker, a 600,000 tonne/year propane dehydrogenation (PDH) unit and derivatives units, according to the Fuhaichuang source. An official deal has yet to be finalised. However, one SABIC mega project is already underway. On the US Gulf Coast, SABIC and ExxonMobil are building a 1.8m tonne/year ethane cracker in San Patricio County, Texas, with a monoethylene glycol (MEG) plant and two PE units downstream. Project completion is expected by the fourth quarter of 2021 and start-up in the first half of 2022. Beyond the potential merger between Aramco and SABIC, Middle East oil companies could seek to acquire Western petrochemical assets. Aramco acquired Germany- based LANXESS’ synthetic rubber business by buying out the latter’s 50% stake in their ARLANXEO joint venture in December 2018, while SABIC took a nearly 25% stake in Switzerland-based specialty chemicals and catalysts company Clariant in September 2018. Earlier major deals included SABIC’s acquisition of US-based GE Plastics in 2007 and Abu Dhabi’s IPIC (now Mubadala) buying Canada’s NOVA Chemicals in 2009. “They would be still be interested but we would not expect them to go too far from their comfort zone in olefins and polyolefins, and possibly in polyurethanes. We think they would look to the US rather than Europe,” said Ahmed from Alembic Global Advisors. It’s clear Middle East oil companies have giant ambitions in petrochemicals with plans to bring on massive amounts of capacity in 2025. However, it remains to be seen what projects actually start up and in what timeframe. “The devil’s in the details in terms of what gets built, delayed and cancelled. We all know the game of companies throwing down big numbers to prevent competitors from overbuilding,” said Ahmed. Additional contribution by ICIS editors Nigel Davis, Nurluqman Suratman, Niall Swan and Fanny Zhang. Middle East ‘Big Oil’ to Boost Global Petrochemicals Footprint