Saudi Review

Great opportunity

More petrochemical investments urged

The Middle East has a great opportunity for economic growth through increasing its downstream activities in both petroleum refining and petrochemicals, a Saudi Aramco senior executive recently told industry leaders gathered at the Middle East Petrotech 2006 conference in Bahrain.

Abdulaziz F Al-Khayyal, Saudi Aramco senior vice president of Refining, Marketing and International, said that despite having large percentages of the world's petroleum and gas reserves, the region accounts for less than five per cent of the global chemical output – a combination of factors that creates amazing potential for economic growth.
"Major capital investments in the refining sector will be required to handle the expected demand growth for transportation fuels," Al-Khayyal said.
"According to the International Energy Agency (IEA), about nine million barrels per day of additional refining capacity over current levels will be required globally by the year 2010, rising to 23 million barrels per day of incremental capacity by 2030."
Refining products domestically also creates the opportunity to capitalise on lower cost sour crudes.
"New capacity must be configured to process the heavier sour crudes, which will account for a growing proportion of crude oil production in the decades to come, even as the product slate grows lighter and whiter," Al-Khayyal said.
And more refining capacity means more marine export activity.
"Naturally, to take advantage of the future opportunities presented by growing oil and refined products demand, our industry will have to expand tanker tonnage to export more crude and products from the region," Al-Khayyal said.
"Despite the challenges facing the refining and shipping sectors, the Middle East's fuels and feedstock advantages clearly point in our favor when it comes to the Middle East region's ability to capitalise on the vast opportunities in chemicals."
He said Saudi Aramco was seeking partnerships to capitalise on these opportunities.
"In our case, most of the petrochemical and refining investments will be joint ventures between Saudi Aramco and third-party investors," Al-Khayyal said.
"Such partnerships," he said, "enable us to develop tremendous synergies between our capabilities and expertise and those of our partners. We are ensuring that our downstream projects are mutually beneficial, generate competitive returns for investors, and concurrently meet our own business, economic and strategic objectives."
Al-Khayyal explained how Saudi Arabia is helping to pave the way for such economic expansion by promoting free markets, privatising major state enterprises and establishing regulatory authorities.
For Saudi Aramco, Al-Khayyal said it means looking at business from a different perspective, what he calls a "triple bottom line."
"We operate on a commercial basis," he said, "but our Strategic Direction embraces environmental and social values in addition to maximising profitability.
"This is because our operations have a significant impact on our society and our communities, while we also recognise our obligation to protect and preserve the natural environment wherever we operate. In other words, we must take into account the context of our projects, not simply their profitability."
He urged suppliers and contractors to develop a long view for their activities, as well. "Together, we can accomplish great things, but only if we are all committed to rising to the challenge."
More than 134 companies from 21 countries took part in Middle East Petrotech 2006 at the Bahrain International Exhibition Centre.