Boston, MA -- (SBWIRE) -- 02/17/2014 -- Saudi Arabia's petrochemicals sector is the country's fastest growing and most significant industrial sector after crude oil production and is set to become ever more important as producers diversify and add value to the product slate, according to BMI's Saudi Arabia Petrochemicals Report for Q214. However, the exportorientated sector's vulnerability to the external market, a situation made worse by an overwhelming focus on basic chemicals, is beginning to erode margins as Asian demand growth weakens.

The Saudi petrochemicals industry is not expected to see a massive rise in overall petrochemicals capacities until 2016, when the Sadara petrochemicals complex is due to come onstream; this facility is to comprise a cracker with capacity for 1.5mn tonnes per annum (tpa) of ethylene and 400,000tpa of propylene as well as major downstream capacities, including 350,000tpa of low-density polyethylene (LDPE). In addition, the second phase of PetroRabigh is set to add 1.2mn tpa of ethylene capacity with significant downstream polymer and aromatics facilities, including 600,000tpa polyethylene (PE), 400,000tpa benzene and 850,000tpa paraxylene (PX). In 2014, the most notable development will be Arabian Industrial Fibre Company's (Ibn Rushd) new 420,000tpa polyethylene terephthalate (PET) plant, which is expected to start up in Q114.

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- By 2018, BMI forecasts ethylene and propylene capacities will rise to 19.5mntpa and 7.0mntpa respectively, with Saudi Kayan's commercial operations set to contribute the bulk of the increase. Total PE capacity will rise to 10.23mntpa by 2018, PP will increase to 5.6mntpa, PS will reach 375,000tpa and PVC will remain unchanged at 855,000tpa. Jubail and Yanbu are the focus of petrochemicals developments. Our projections for petrochemicals capacity are based on planned projects, but it is possible that some may not come to fruition due to the restriction on ethane feedstock and the possibility of a lacklustre recovery in the Chinese market.
- Consolidation will be vital to downstream diversification, with high-value products linked to basic chemicals production further up the chain. In January 2014, Sipchem and Sahara Petrochemicals signed a memorandum of understanding (MoU) to consider the feasibility ofmeger. The two companies anticipate being in a position to sign a merger agreement in the first half of 2014. A tie-up between the two would give the combined entity a greater product range, as Sahara produces basic petrochemicals and Sipchem focuses more on high-value products. Sipchem makes methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride and vinyl acetate monomer, as well as carbon monoxide. Sahara makes propylene, PP, ethylene and PE. If the merger were to be completed, Sahara would become a subsidiary of Sipchem.

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