Aramco May Lead Saudi Chemicals Boom, Alix Partners’ Fabri Says

Saudi Arabian Oil Co., the world’s largest crude exporter, may be the country’s vehicle of choice to expand its chemicals industry to produce more valuable products for export, Alix Partners’ Joerg Fabri said.

The state-run company has “changed its strategy fundamentally” by declaring it aims to be a leader in chemicals production, Fabri, a director with the advisory company, told reporters at a briefing in Dubai yesterday. The oil producer, known as Saudi Aramco, will increasingly compete in chemicals markets with Saudi Basic Industries Corp., he said.

“Aramco is now the vehicle of the Kingdom” for expanding in that industry, Fabri said. The oil producer may take the lead role in advancing the country’s goal of building up a chemicals industry and creating jobs through related services and manufacturing, he said.

Saudi Arabia holds the world’s largest oil reserves and the fifth-largest gas deposits, according to BP Plc’s Statistical Review of World Energy. The country is seeking to produce more gas to run power plants and save more valuable crude for export. The government will allocate limited gas resources to whichever industries create the most jobs, Prince Faisal bin Turki, who advises the oil ministry on such matters, said at a petrochemical conference in Dubai today.

Saudi Basic, known as Sabic, is the country’s majority government-owned chemicals maker. It’s investing about $50 billion in developing new production capacity through 2019, Fabri said.

‘Top-Tier Producer’

The kingdom will spend about $150 billion on petrochemical projects through 2016 to boost productions, Prince Faisal said. Saudi Aramco is shifting its focus from exploring oil fields to developing natural gas deposits and refining and petrochemical plants, Chief Executive Officer Khalid Al-Falih said last week.

The company will spend $90 billion expanding its refining and petrochemical assets and aims to become a “top-tier” producer of petrochemicals within the next decade, al-Falih said during a speech in Doha, Qatar Dec. 6.

“It is a very good idea to add value to hydrocarbons through petrochemicals rather than just using it as an energy resource,” Alix Partners’ Fabri said in an interview with Bloomberg Television yesterday.

Middle East chemicals producers may see some unused production capacity through 2015 as they build plants at the same time as demand in Asia slows, due to slackening demand for consumer products in industrialized economies in Europe and North America, Fabri said. Long-term demand will rise, making the investments in new capacity profitable, he said.

Aramco, building a $20 billion joint venture plant with Dow Chemical Co., is seeking “to participate in the fast-growing Asian market” where demand for petrochemicals has been very high, Fabri said.

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