Saudi Aramco and Saudi Arabian Basic Industries Corporation (SABIC) are looking into the possibility of developing a crude oil-to-chemicals plant in Saudi Arabia.
The companies have signed a heads of agreement to conduct a feasibility study on the development of such a facility.
The agreement also contains key principles of cooperation that will form the basis of a joint venture (JV) between the firms, should the joint study reach a positive conclusion.
The programme that could cost up to $30bn would allow petrochemical products to be produced directly from crude oil instead of refining it into intermediate feedstocks such as naphtha.
Amin H Nasser, president and chief executive officer of Saudi Aramco, said: “Our agreement with SABIC reflects our vision to build on Saudi Arabia’s global leadership in crude oil production and commodities export by substantially increasing the production of oil-based petrochemicals and further optimising value across the entire hydrocarbons chain.
“This agreement will help spur a new era of industrial diversification, job creation, and technology development in Saudi Arabia, particularly through downstream conversion of speciality chemicals by small- and medium-sized enterprises (SMEs).”
The stakeholders plan to create a fully integrated petrochemical complex, which maximises chemical yield, transforms and recycles by-products, drives efficiencies and scale and resource optimisation, and diversifies the petrochemical feedstock mix in Saudi Arabia.
Commenting on the aims of the partnership, Yousef Abdullah Al-Benyan, vice chairman and CEO of SABIC, said: “We are hopeful that our agreement to conduct a joint feasibility study on the development of an integrated crude oil-to-chemicals complex in Saudi Arabia will ultimately lead to a new era for the kingdom, driving strong economic growth, creating many new opportunities for aspiring young Saudis, and playing a significant role in the kingdom’s economic transformation.”
One industry source familiar with the project told Reuters the scheme could create as many as 100,000 direct and indirect jobs.
"It makes absolute sense as Aramco is specialised in oil and refining, and SABIC in petrochemicals," the source said.
The announcement comes after Saudi Arabia’s Deputy Crown Prince Mohammed Bin Salman called for more industry collaboration and the creation of new jobs in the Kingdom as part of Vision 2030.
According to recent media reports, the Kingdom’s two main industrial giants were studying a plan to build a crude-to-chemicals refinery in Yanbu.
The move was described by one analyst as “long overdue” given that both companies are competing in the same markets. The expert said that cooperation between the two would eliminate the duplication of projects.
Aramco's participation could benefit SABIC by giving it better access to funding as well as assistance in marketing products, Mazen al-Sudairi, head of research at Al-Istithmar Capital, was quoted as saying by Reuters.