Investment in GCC chemicals sector tops $140bn, says GPCA

Earlier this year, Saudi Aramco took a 70 per cent stake in regional chemicals giant Sabic for $69bn

Aramco acquired Anglo-Dutch major Shell's 50 per cent stake in a refining joint venture in the industrial city of Jubail for $631 million. Getty Images

Investment in the GCC chemicals industry is expected to top $140 billion on the back of consolidation as well as merger and acquisition deals, according to the sector's regional industry association.

"The recent series of joint ventures, consolidation deals and acquisitions demonstrate the role of partnerships in the industry’s future strategic direction and continue to build on the region’s reputation as a reliable, long-term partner in the global chemical arena," said Gulf Petrochemicals and Chemicals Association secretary-general Abdulwahab Al Sadoun.

The consolidation and M&A activity will generate "greater competitiveness" in the regional chemicals industry, he added.

The industry has seen large-scale transactions, most notably the acquisition of a 70 per cent stake in regional chemicals giant Sabic by Saudi Aramco for $69bn. The Saudi state oil company plans to increase its refining capacity to 8 to 10 million barrels per day by 2030, of which 2 to 3 million bpd will be converted to chemical products. Currently, capacity stands at 4.9 million bpd.

The capacity addition is part of efforts to generate more value from Saudi Arabia's downstream sector, as the kingdom and other producers look to sell more products to growing demand centres in South and East Asia.

There have been other large transactions in the chemicals sector, notably Aramco's acquisition of Anglo-Dutch major Shell's 50 per cent stake in a refining joint venture in the industrial city of Jubail for $631 million.

The Aramco-Shell transaction is expected to complete later this year, pending regulatory approval. The Sasref refinery at Jubail has a capacity of 305,000 bpd, with liquefied petroleum gas, naphtha, kerosene, diesel, fuel oil, and sulphur being its main products.

The chemicals acquisitions took Saudi Arabia's overall M&A volume to $72.6bn during the first half of the year, spurred largely by the Sabic deal, according to Mergermarket, an M&A data provider.

There is likely to be more activity in the regional chemicals industry, said Mr Al Sadoun, with partners likely to consider combining "resource and feedstock supply, product application know-how, and growth-market access".