SAUDI ARABIA - The Private Saudi Petrochemical Sector.

The Saudi private sector has a rapidly growing role in the petrochemicals business, taking on intermediate and specialty projects. Within a few years, the share of private petrochemical industries in the Saudi GDP will become significant and exports from them will be a key source of income.

A big number of private petrochemical and chemical factories have emerged in recent years as satellites for the major plants of the state-controlled Saudi Arabian Basic Industries Corp. (SABIC). The plants, producing basic petrochemicals, are joint ventures between SABIC and major foreign firms (surveyed in DT No. 18 of last week).

(SABIC ventures not mentioned in DT 18 include: National Industrial Gases Co., known as GAS and share by SABIC and private Saudi interests, whose additional air separation plant at Yanbu' built by Linde went on stream in late 1999 to produce 30,000 normal cubic metres/hour of oxygen, about 50,000 ncm/h of nitrogen, 2,200 ncm/h of liquid oxygen and 3,200 ncm/h of liquid nitrogen; Saudi Iron & Steel Co. - Hadeed - a joint venture with Deutsche Entwicklung Gesellschaft, and Jeddah Steel Rolling Mill Co., which is wholly owned by Hadeed. Hadeed has expanded under a big project completed in 2000, with a new 850,000t/y rolling mill for flat products and a second unit raised its long product output to 3m t/y.

Petroline, the kingdom's east-west crude oil pipeline, is being converted to pump gas to the Red Sea industrial zone of Yanbu' and other western areas. This will be completed in early 2003 and will raise feedstock supplies to Yanbu' considerably.

The following private Saudi business groups are the most active in the petrochemicals sector.

Saudi Venture Capital Group: Comprising 47 key Saudi businessmen, SVCG is in a 50-50 venture with Chevron which has a world-scale aromatics complex built in Jubail. It is the first big private Saudi venture in the aromatics business. It was completed for test operations in April 1999 and inaugurated in Feb. 2000. It can turn 480,000 t/y of benzene which is partly being used to produce 220,000 t/y of cyclohexane, a feedstock to make plastics, and 70,000 t/y of gasoline.

The $650m complex uses Chevron's Aromax technology to produce benzene. The cyclohexane is based on process licenced by Institut Francais du Petrole. Called Saudi Chevron Petrochemical Co, it is Chevron's first direct investment in Saudi Arabia since the kingdom's oil sector was nationalised in 1980. The complex uses gas feedstock supplied by Saudi Aramco.

With preparations for the JV having started in 1993, the complex was built by Chiyoda Corp of Japan under a turnkey contract signed in Feb. 1997. Basic engineering was done by Fluor Daniel. Utilities and offsite facilities were subcontracted to local companies.

SVCG was the first group of its kind to be formed in 1986 to invest in downstream projects promoted by SABIC and the Offset Investment Programme. In 1987 SVCG was granted industrial licences for three plants representing a total investment of SR1.33 bn to produce specialty chemicals, with each to be launched and run by a separate subsidiary.

Arabian Shield Development Co. (ASDC): This private venture is having a plant built in Jubail to process pentane byproducts from the aromatics complex of the Saudi Chevron Petrochemical Co. (see above).

The plant will cost $40m, with ASDC owning 25% and the rest held by other investors. Philip Townsend and Associates has done the marketing.