Aramco— A chemicals giant in waiting
Aiming for top-three aromatics slot globally
10:25 AM MDT | March 19, 2013 | —Natasha Alperowicz
Saudi Aramco (Dhahran, Saudi Arabia), already an upstream oil and gas powerhouse and a major oil refiner in Saudi Arabia and around the globe, is on a mission to extend its leadership position to chemicals. Aramco president and CEO Khalid Al Falih launched a major strategic initiative in 2011 called the Accelerated Transformation Program (ATP), which foresees Aramco as the world’s leading integrated energy and chemicals company by 2020.
The ATP aims to leverage Aramco’s upstream position by exploring frontier areas such as the deep-offshore Red Sea and by assessing the resource potential of unconventional petroleum resources, including shale. It includes major investments in refining, which should double Aramco’s refining capacity, including its share of joint ventures, to about 8 million bbl/day. That would make it the largest refiner globally. The ATP also calls on Aramco to build a top-tier chemicals business by moving down the value chain and to become more involved in power generation. This includes investments in renewables, with a focus on solar.
Aramco’s chemicals strategy is built mainly around exploiting refinery liquid feedstocks. It aims to leverage its competitive advantages of scale, integration, and a differentiated commodity portfolio. Associated industrial parks processing first-line petrochemicals and derivatives also represent a cornerstone of the program. Aramco’s current petrochemicals business includes Petro Rabigh (Rabigh, Saudi Arabia), a jv with Sumitomo Chemical. The partners are currently building Rabigh II at a cost of about $7 billion to double capacity in the next 3 years and expand into specialty chemicals. In addition, Aramco and Total are nearing completion of their refinery and aromatics jv, Saudi Aramco Total Refining and Petrochemical (Satorp; Al Jubail), owned 62.5% by Aramco and 37.5% by Total. Satorp’s 400,000-bbl/day full-conversion refinery will maximize production of diesel and jet fuels, and will also produce 700,000 m.t./year of para-xylene (p-xylene), 140,000 m.t./year of benzene, and 200,000 m.t./year of polymer-grade propylene.
Overseas, Aramco is a jv partner in the Fujian Refining & Petrochemical Co., at Quanzhou, China, a jv in which Fujian Petrochemical owns 50% and ExxonMobil and Aramco each hold 25%. The partners are planning to expand capacity of the complex by adding 200,000 m.t./year ethylene and 100,000 m.t./year propylene capacity, and to debottleneck downstream polyolefin units. The project will take the cracker capacity to just more than 1 million m.t./year of ethylene.
Aramco also has a 35% stake in S-Oil (Seoul), which currently operates the world’s largest p-xylene complex at a single site.
Aramco’s biggest chemical project, and a game changer for its chemical ambitions, is Sadara, a $20-billion jv with Dow Chemical. Sadara will operate the world’s largest single-phase integrated petrochemical facility at Jubail, Saudi Arabia, when it comes onstream in 2016.
Aramco’s chemicals operations have been headed by Abdulaziz Al Judaimi, v.p./chemicals, since 2010. Al Judaimi, previously v.p./new business development and a 30-year Aramco veteran, sits on the boards of several affiliates, including Sadara, Petro Rabigh, Fujian Refining & Petrochemical Co., and Sinopec SenMei (Fujian) Petroleum Co. He is also the Aramco representative in Satorp.
“By 2020, Saudi Aramco will have evolved from being the leading oil and gas company that it is today into a fully integrated, truly global energy and chemicals enterprise with extensive operations across the world,” Al Judaimi tells CW.
A key part of this plan is to establish an integrated value-chain approach in the Saudi crude oil mix, as well as developing the country’s unconventional energy resources, he says. “This means that we will diversify our business by growing downstream. We have a number of downstream projects in the implementation phase that will help meet our strategic intent to expand our downstream portfolio,” he adds.
Chemicals are expected to grow significantly under the ATP initiative, based on the development of Aramco’s refineries in Saudi Arabia, including several that are not currently integrated with downstream operations. Aramco plans to invest heavily to expand its aromatics capacity exponentially. By 2017–18, it aims to be among the top-three aromatics players globally. “In the second half of 2013, Saudi Aramco will begin selling para-xylene from our Satorp joint venture in conjunction with our jv partner Total. Subsequently, projects over the next 5 years will see Saudi Aramco grow to supply over 4 million m.t./year of para-xylene to world markets. Add to this volume our equity share in Petro Rabigh, S-Oil in South Korea, and the Fujian Refining & Petrochemical joint ventures; and by 2018 Saudi Aramco will be one of the largest para-xylene producers in the world,” Al Judaimi says.
Aramco and its partners’ p-xylene capacity in Saudi Arabia includes 700,000 m.t./year at Satorp; 1.2 million m.t./year at the 400,000 bbl/day refinery that Aramco is building at Jazan, in the south of the country, close to the border with Yemen; 1.4 million m.t./year at Ras Tanura; and 1.3 million m.t./year at Rabigh, part of Rabigh II. In addition, the S-Oil jv has 1.7 million m.t./year capacity at its Onsan, South Korea, complex, which S-Oil markets.
Satorp will market output locally, while Aramco will sell Satorp’s output outside Saudi Arabia. Aramco’s ambitions to be among the top-three p-xylene players supplying the growing polyester industry means that the company will leapfrog at least one and possibly two of the current market leaders—Sinopec, ExxonMobil, and BP Chemicals. Reliance Industries (Mumbai) is also building up its p-xylene capacity.
Aramco will begin marketing benzene in the second half of 2013. Initial volumes of approximately 10,000 m.t./month will increase to more than 1 million m.t./year by 2018. “This growth will enable Saudi Aramco to supply local requirements and reach markets across the globe,” Al Judaimi says.
“Last year, we announced the final investment decision on Rabigh II, which will complement Saudi Aramco’s existing petrochemical investment portfolio,” Al Judaimi says. Petro Rabigh, initially wholly owned by Aramco and Sumitomo Chemical, was partially floated on the Saudi stock exchange in 2008. Rabigh II, utilizing leading-edge technologies from Sumitomo and other companies, will explore existing synergies, the use of Saudi manpower, and aid development of Saudi Arabia’s conversion industries, Al Judaimi says.
Rabigh II will include an aromatics complex and an expanded facility to process 30 million standard cu feet/day of ethane and approximately 3 million m.t./year of naphtha to produce a variety of value-added petrochemicals. It is expected to begin operations in first-half 2016. The main products include ethylene-propylene rubber, thermoplastic polyolefin, methyl methacrylate, low-density polyethylene (LDPE)/ethylene vinyl acetate, p-xylene, benzene, cumene, and phenol/acetone. “Additionally, Saudi Aramco and Sumitomo Chemical will continue to implement other product lines to realize further project optimization,” Al Judaimi says.
Sadara, with 26 process units, is the most significant component of Aramco’s diversification strategy and will make a large contribution to its downstream portfolio. “Sadara is expected to generate thousands of direct and indirect job opportunities for the kingdom and deliver annual revenues of about $10 billion within a few years of operation,” Al Judaimi says. Sadara’s first production units are expected online in the second half of 2015, with all units operational in 2016.
Sadara’s cracker will use both gas and liquid feedstocks. Gas feedstocks will be fed by a number of plants in Aramco’s Master Gas System, including the nearby Ju’aymah, Berri, Khursaniyah, and Wasit gas plants. Liquid feedstocks, meanwhile, will come from Sasref and Satorp, Aramco’s two jv refineries at Al Jubail, and from Aramco’s flagship Ras Tanura refinery. Sadara’s product slate will include amines, glycol ethers, propylene glycol, isocyanates, solution-phase polyethylene, LDPE, and elastomers.
The Sadara complex will include a number of third-party jv’s, including a three-way partnership among Sadara; Saudi Kayan, a Sabic affiliate; and an affiliate of National Industrialization Co. and Sahara Petrochemical. The partners have formed Saudi Butanol Co. to produce butanol, primarily for the paints and coatings industry in Saudi Arabia. The 3 partners will have equal stakes in the $500-million project, which will produce 330,000 m.t./year of n-butanol and 11,000 m.t./year isobutanol. The partners will have equal drawing rights to the production volumes for downstream use and for sale. Completion of the complex is slated for 2015.
A separate, equally owned, jv between Sadara with Solvay is building a world-scale hydrogen peroxide plant at Al Jubail. The facility will supply raw material for the manufacture of propylene oxide (PO) by Sadara, based on hydrogen peroxide–to-PO technology developed jointly by Dow and BASF.
Dow will market most of the output from Sadara, with nearly half being destined for markets in Asia. Most of the remainder will be marketed in central Europe, Eastern Europe, Africa, and India. Sadara itself will be responsible for marketing in certain Mideast countries, including Saudi Arabia.
Meanwhile, the Jazan Refinery and Terminal Project, located in the coastal part of the city of Bish, is scheduled to be completed in late 2016. The refinery will process 400,000 bbl/day of Arabian heavy and medium crudes to produce gasoline, ultra-low sulfur diesel, benzene, and p-xylene.
Aramco and Sinopec are also building a refinery at Yanbu’, Saudi Arabia. The project, Yanbu Aramco Sinopec Refining (Yasref), in which Aramco owns 62.5% and Sinopec the rest, will have a capacity of 400,000 bbl/day and could be integrated downstream into chemicals in the future. “Yasref is our in-kingdom refinery jv with Sinopec, which offers scope for further integration within our network,” Al Judaimi says. The refinery’s product slate will include a benzene extraction unit designed to produce 140,000 m.t./year with possible future additions of p-xylene and toluene units.
Employment creation in Saudi Arabia is top of Aramco’s agenda. The diversification program, along with the establishment of conversion parks at Rabigh and Al Jubail, will help toward that end. “The parks will enable the growth of small- and medium-size enterprises and, ultimately, have a multiplier growth effect on various sectors of the economy,” Al Judaimi says.
The conversion parks at both Rabigh and Al Jubail are “progressing extremely well … and are precisely the kind of projects Saudi Aramco pursues both for their commercial attractiveness and for their positive impact on the Saudi national agenda,” Al Judaimi adds.
Part of the Rabigh development is to establish the Rabigh PlusTech Park, which will convert petrochemical products generated by Petro Rabigh into downstream products via an integrated network of feedstock suppliers, infrastructure, and service providers. “Currently, 23 investors have signed the land-lease, feedstock, and utility supply agreements,” Al Judaimi says.
The PlasChem Park, meanwhile, is a collaborative effort between Sadara and the Royal Commission for Jubail and Yanbu to establish a world-class industrial park for chemical and conversion industries at Al Jubail. “As of today, we have identified around 30 investors, some of whom bring very different concepts to the local market,” Al Judaimi says. Investors do not have to source material from Sadara to be in PlasChem but they do have to bring high-added-value to the kingdom to benefit from PlasChem services, he says.
“These diversified and differentiated products will target many market segments, some of which are new to Saudi Arabia, while some others are currently served by imports, examples being water treatment membranes and chemicals; oil and gas chemicals; home- and personal-care products; construction materials such as concrete additives, pipes, insulation, sealants, and adhesives; coatings applications; and packaging materials.”
Saudi Aramco, despite a relatively recent entry into chemicals, is catching up on lost time. The company took over from Sabic the marketing of Aramco’s share of polyolefins from the Fujian jv in China in January this year. “We are off to an excellent start in Asia and are currently marketing product in China,” Al Judaimi says. Aramco Asia, a wholly owned subsidiary, was officially inaugurated on 12 November 2012 at Beijing, with supporting offices at Xiamen, China; and Shanghai. The Xiamen unit will market 200,000 m.t. of polyethylene and 130,000 m.t. of polypropylene—Aramco’s share from the Fujian jv—in 2013. In addition to polyolefins, Aramco Asia plans to market a variety of petrochemicals in Asia, with aromatics marketing being coordinated through Shanghai. “Marketing activities in both cities represent major growth businesses for Aramco Asia,” Al Judaimi says.
In addition to chemicals marketing, Aramco Asia provides a wide array of services, including crude oil marketing, jv coordination, R&D, and project management.
It is not clear at this stage whether there will be a separate chemicals entity within Saudi Aramco with its own CEO. “Our immediate plans and targets are to expand and grow our chemicals portfolio to yield the desired returns for us, not only in terms of profits but also in the development of value-adding industries, such as the conversion parks at Rabigh and Al Jubail,” Al Judaimi says.
He declines to comment on whether the ATP program will involve acquisitions of chemical or related companies, saying only that “Aramco continues to seek and develop downstream and petrochemical partnerships with companies that can yield mutual benefits. In Saudi Arabia and overseas, we have long-standing partnerships with leading energy companies that meet our corporate strategic objectives and those of our partners.”
Aramco’s transformation poses many challenges, but Al Judaimi says, “[W]e view challenges as opportunities, and with this attitude we look at chemicals as an opportunity for leveraging our hydrocarbon position. Through the synergies of our highly integrated refining system, we maximize value to Saudi Aramco.”
Chemicals for Aramco is a relatively new business that comes with its own risks and rewards. “To mitigate risk, we need good people and systems to be implemented in the most effective manner possible. Hiring experienced professionals and training young Saudis is our current focus. This will allow us to implement the changes swiftly and smoothly,” Al Judaimi says.