As Americans recover from an aggressive round of trick-or-treating, there’s news that the Saudi government has made a move forward in creating new petrochemical infrastructure to use crude oil in new and different ways.
Press releases today show that Saudi Aramco and other stakeholders have selected Yanbu, a coastal site well isolated from big cities like Riyadh and Medina, as a site for what the release calls “an integrated industrial complex” that would make crude oils into chemical feedstocks.
This new information is part of a greater strategy that the Saudis have been pursuing for years, in an attempt to diversify the economy away from transportation fuels. The global economy has seen a slump in demand for gasoline and other products, while the demand for chemical feedstocks rises.
The new industrial complex is projected to utilize 400,000 barrels per day of crude oil to make various chemicals that are in demand on the world market.
What will Saudis be making in with all this oil? Two major chemicals with popular global demand are ethylene and propylene – items that are used to make all sorts of consumer products from packaging and paper to coolants and aerospace applications. Some uses of these petrochemicals are seen as more benign than others – for instance, plans to use ethylene to ripen fruit lead to more fears about “Frankenfoods” and what kinds of chemicals we, as humans, ingest.
Regardless, the new Saudi announcement shows a savvy repositioning of the country’s natural resources and global markets – and it’s something that will have an effect on energy stocks and other equities in the future. By moving away from oil, the Saudis are minimizing the damage from a lack of continuous demand for the things that used to prop up their economy almost single-handedly.
“An innovative technology is being studied by the ministry, in collaboration with SABIC, to set up an integrated industrial complex for the production of petrochemicals from crude oil without the need to build a conventional oil refinery,” Saudi Oil Minister Ali al-Naimi told assembled press people in Yanbu back in 2014, projecting job growth there.
Now, it looks like those plans are becoming a reality, and that leads some trade groups to become enthusiastic about the possibilities for this type of refining.
“Based on its very successful recent history, Saudi Atrabia is continuing to expand hydrocarbon and gas production into the future,” reads a white paper by Leonard Gerlowski and Ahmad Al Othman looking at chosen growth sectors.
The report goes into detail about the production of goods based on materials such as polymers and films, and really hits home for those thinking about the pivot away from 20th-century fuels, and toward 21st-century innovation. Look for the fallout from Saudi’s visions for the future in commodities and equities markets.