Al Jubail Petrochemical Plant, Saudi Arabia

The Al-Jubail Petrochemical Company (Kemya) owns the plant complex. The company is a joint venture between Saudi Arabian Basic Industries (Sabic), owned by the Saudi Arabian Government, and ExxonMobil. Saudi Arabia has traditionally only involved the private sector through large multi-nationals, such as Chevron, ExxonMobil and BP. Sabic holds half the joint venture and Exxon Chemical Arabia (a subsidiary of the ExxonMobil group) the other half.

The plant is being financed with a loan of about $720 million from a consortium of 16 banks, arranged for a term of eight and a half years. The rest of the project is likely to be paid for through equity.

ETHYLENE, PROPYLENE AND POLYETHYLENE PRODUCTION

The project is an ethylene and polyethylene plant in Al Jubail, Saudi Arabia. The expansion project involves the construction of a 218,000t/yr low-density polyethylene plant and an olefin cracker that will produce 700,000t/yr of ethylene and 200,000t/yr of propylene. The project also includes the de-bottlenecking of the company's linear low-density polyethylene to raise capacity by nearly 40% to 850,000t/yr, which was completed in November 1999. The Olefin III project, started in last quarter 2001, includes 800,000t/yr feedstock ethylene, 160,000t/yr propylene and 25,000t/yr benzene.

Thus, the project is a major commitment by Kemya. The new plant is expected to cost approximately $1 billion. There is a suggestion that the plant should have two more ethylene crackers, that will be constructed by the Saudi Arabian division of ABB Lummus via a turnkey contract, which will use both hot ends and recovery technology. Construction should take about two-and-a-half years, meaning that commercial production should begin in the first half of 2003.

ETHANE AND PROPANE FEEDSTOCK

The de-bottlenecking engineering, procurement and construction services for the LDPE plant has been awarded to Saudi Arabian Parsons (part of the UK construction group). The plant will get half of its feedstock from ethane and half from propane. The source of this feedstock is in question. Saudi Aramco is thought to have committed much of its potential feedstock already. Whilst it would be possible to increase oil output to provide more natural gas, this might have implications for OPEC's agreed cuts in production. It might also be necessary to add to the present transport infrastructure with new pumping stations and possibly a new pipeline.

INCREASED ETHYLENE CAPACITY

Saudi Arabia is seeing a substantial rise in its ethylene capacity as several major projects come on stream. Both the Yanpet 2 project and the Al Jubail project are linked to the company's efforts to have more value-added products. This is also linked to the company's greater investment in R&D. The projects have also been made possible by the rising price of crude oil. Saudi Arabian petrochemical production has cheap supplies of feedstock, but high transport costs to the main markets in Asia and Europe. The higher oil price shifts the competitive advantage by increasing European and Asian producers' costs, making the high Middle East transport costs less important as a proportion of the total cost.

SABIC has announced the creation of the Jubail United Petrochemical Company. The integrated complex is expected to come on stream in the second half of 2004 and will have production capacities of over one million tonnes per year of ethylene and 460,000t/yr of ethylene glycol. SABIC already accounts for nearly 20 percent of the world’s ethylene glycol production. In January 2001, Petrokemya awarded a contract for a new plant adding 800,000 mt/y of HDPE and LLDPE to current capacity. The contract was placed with Toyo Engineering Corporation of Japan. Petrokemya currently produces 2.5 million tonnes per year of various petrochemical and polymer products, including ethylene, benzene, propylene, butadiene, butene-1 and polystyrene. Total capacities for SABIC as a whole stand at 36 million tonnes per year in 2001 and the target is for 48 million tonnes per year by 2010.

SABIC

Sabic is the biggest petrochemical producer in the Middle East and has been concentrated mainly in Saudi Arabia since its foundation in 1976. The company is committed to continuing a major petrochemical expansion despite its recent fall in profits, which was brought on by the double whammy of rising feedstock prices and falling petrochemical prices.

EXXONMOBIL

ExxonMobil was formed by the merger of Exxon and Mobil in 1999. It is the second largest ethylene manufacturer in the world. In polyethylene, the company is the leading world supplier. It is also a major producer of oil and gas, as well as many other petrochemical products.