Saudi Basic Industries Corporation is planning to set up a plant to convert crude oil into petrochemicals, capitalising on growing demand.
The crude-to-chemicals complex in Ras Al Khair, in the east of Saudi Arabia, is expected to convert 400,000 barrels per day of oil into chemicals, the company said in a statement on Thursday to the Tadawul stock exchange, where its shares are traded.
Sabic is the Middle East's biggest petrochemicals producer.
The latest project, part of its strategic growth plans, will help to expand the manufacturing of petrochemicals in the kingdom, the company said.
Top crude exporter Saudi Aramco, which owns a 70 per cent stake in Sabic, has been investing billions of dollars in downstream projects to extract more value from its crude oil output.
Last week, Aramco said it would build a $7 billion refinery-integrated petrochemical steam cracker in South Korea through its S-Oil unit.
The steam cracker, which will convert crude oil into petrochemical feedstock, is expected to produce up to 3.2 million tonnes of petrochemicals annually and include capacity to produce high-value polymers.
The petrochemicals industry is expected to be a major driver of crude oil demand in the next few decades as consumers increasingly switch to electric vehicles. Globally, the sector is projected to be worth roughly $800 billion by 2030, up from about $475 billion in 2020, according to Precedence Research.
Petrochemicals are set to account for more than a third of the growth in oil demand to 2030, and nearly half to 2050, ahead of lorries, aviation and shipping, according to the International Energy Agency.
Their production is also poised to consume an additional 56 billion cubic metres of natural gas by 2030, equivalent to about half of Canada’s total gas consumption today, the energy agency said.
“Sabic affirms its commitment to continue developing crude oil to chemicals technologies, which contributes to increasing cost efficiencies and value creation opportunities in the energy and chemical industry on a larger scale,” the company said on Thursday.
Sabic reported a 3.8 per cent increase in second-quarter profit as revenue rose on higher average selling prices and volumes.
Net profit after zakat and tax for the three months to the end of June increased to 7.93 billion Saudi riyals ($2.1 billion), from 7.64 billion riyals in the same period last year.
Revenue during the period rose 32 per cent year-on-year to nearly 56 billion riyals.
Looking ahead to the second half of this year, Sabic expects its margins to be under pressure due to a slowdown in global economic growth, lockdowns in China, conflict in Europe and continued supply chain challenges, it said.
Last month, the International Monetary Fund cut its 2023 growth forecast for the global economy and warned of a cost of living crisis as the economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.
The fund, which maintained its global economic estimate for 2022, has downgraded next year's forecast to 2.7 per cent — 0.2 percentage points lower than its previous forecast.
This is the weakest growth profile since 2001, except for the 2008 global financial crisis and the acute phase of the Covid pandemic, and reflects significant slowdowns for the largest economies, the IMF said at the time.