Saudi Aramco to boost chem investment in Asia emerging markets

NEW YORK (ICIS)–Saudi Aramco will boost its chemicals investments in emerging economies, especially in Asia, the head of its downstream business told ICIS on Monday.

“We are actively taking steps to create a fully integrated business in Asia, covering everything from oil supply and refining to petrochemicals, specialty chemicals, lubes and base oils, marketing and sales,” said Abdulaziz Gudaimi, senior vice president of downstream at Saudi Aramco, in an interview with ICIS.

“We are pursuing opportunities for partnership in many Asian countries such as India, Malaysia, China and South Korea to build on and grow our business as a crude supplier and a downstream investor,” he added.

Aramco views Asia as the largest growth area for its products and is committed to expansion in the region to further progress energy security and economic development, he noted.

INDIA PROJECT UPDATE

In India, Aramco continues to work with the Abu Dhabi National Oil Co (ADNOC) and a consortium of Indian oil companies – Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum – to build a mega refining and petrochemical complex in Raigad, on the west coast.

The project is estimated to cost around $70bn, according to the UAE state-run news agency in November 2019.

“The proposed 1.2m bbl/day integrated refinery and petrochemicals complex in India is undergoing various stages of planning, including close coordination with our partners ADNOC and the consortium of Indian national oil companies,” said Gudaimi.

“We continue to work closely with our partners for the proposed project and updates will be made as appropriate,” he added.

The massive investment would provide local capacity for the Indian market, and also position the country as a major manufacturing hub, the executive noted.

India today is a major net importer of key polymers such as polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC).

In 2019, the country had net imports of around 2.2m tonnes of PVC, well over 500,000 tonnes of PE and almost 400,000 tonnes of PP, according to the ICIS Supply and Demand Database.

SABIC AND THE PUSH DOWNSTREAM

It’s clear Aramco will make a greater push to compete not only in large scale petrochemicals, but further downstream in specialty chemicals as well – a shift highlighted by the completion of its $69.1bn acquisition of a 70% stake in SABIC on 17 June.

“SABIC is a world-class diversified petrochemicals company with complementary chemicals capabilities to enhance Aramco’s existing downstream portfolio,” said Gudaimi.

“Together with SABIC, we can now accelerate our growth in petrochemicals by integrating world-class production of feedstocks by Aramco with conversion into petrochemicals, increasing existing chemicals volumes and further enhancing our international reach,” he added.

SABIC is a major player in petrochemicals and polymers, as well as specialty engineering plastics, composites, thermosets, additives and surfactants.

SABIC in March 2020 lifted its stake in Switzerland-based specialty chemicals company Clariant from 24.99%, to 31.5%, closer to the one-third level that would trigger a mandatory takeover offer based on Swiss securities law.

Clariant’s portfolio includes catalysts, personal and consumer care chemicals and ingredients, additives, flame retardants, functional minerals, oil and mining chemicals and aviation fluids.

LOWER CRUDE, COVID-19 IMPACTS

Aramco’s ambitions to expand downstream and in Asia comes amid a challenging time of lower crude oil prices and demand destruction from the Covid-19 pandemic.

In March, the company announced 2020 capital spending (capex) would be $25bn-30bn, the midpoint of which is 16% down from 2019 capex of $32.8bn. Plus, 2021 capex plans would also be reviewed, it said.

A number of energy and chemicals companies have taken down their capex plans for 2020 – mostly on the order of 20-30%.

“Recent developments in the chemicals industry, including challenging supply and demand dynamics, are impacting the business today,” said Gudaimi.

“However, over the long term we expect our industry to experience strong demand growth, with the petrochemicals sector in particular expected to record the fastest growth in oil demand to 2040,” he added.

The executive cited per capita demand for polymers ranging from 80-100 kilograms (kg) in the US, Canada and South Korea, but just around 10kg in India and 5kg in Africa, highlighting the long-term growth potential in developing countries.

R&D AND SUSTAINABILITY

Aramco is also banking on major efforts in R&D and sustainability to improve its competitive position going forward.

R&D is not the first thing that comes to mind when thinking about the world’s largest oil producer. However, the company has a global network of 12 R&D centres and employs around 1,300 scientists and engineers.

“We are also increasing our investment in ‘4th Industrial Revolution’ technologies – data analytics, artificial intelligence and robotics – to power our industry to be smarter, greener, faster, safer and more affordable,” said Gudaimi.

In 2019, Aramco was granted an “industry-leading” 524 patents from the US Patent and Trademark Office, he pointed out.

And the company is exploring and technologies to “address the dual challenge of meeting greater energy needs with lower emissions”, said the executive.

“We constantly look for new ways to mitigate emissions. For example, we are investing in carbon capture, utilisation and storage (CCUS) technology that enables us to inject captured CO2 into the ground or convert it into useful industrial products,” said Gudaimi.

“We have seen more and more interest in renewable energy sources like solar and wind power, and we support efforts to develop such sources further,” he added.

Aramco is using solar power and battery technology to power unconventional gas wells and also employing CCUS at a gas plant in Saudi Arabia.

Through its Saudi Aramco Energy Ventures fund (SAEV), it is also investing in energy efficiency technologies, including those related to solar and wind power, and energy storage.

Interview article by Joseph Chang