Saudi Aramco and SABIC have signed a memorandum of understanding (MoU) to develop a fully integrated crude oil to chemicals (COTC) complex in the Kingdom of Saudi Arabia, which governs the execution of the Front End Engineering Design (FEED) before a final investment decision is made.
The COTC complex is expected to process 400,000 barrels per day of crude oil, which will produce approximately 9 million tons of chemicals and base oils annually and is expected to start operations in 2025.
SABIC has been a driving force in the industrialization of Saudi Arabia since 1976 when it was established by royal decree. Before then, natural gas was flared off at the wellhead but the creation of the company meant that such gas was captured for the first time and converted into ethylene - a building block chemical from which many different kinds of plastic are derived.
It has also been a key part of Saudization efforts dating back to the 1970s with many of its early executives studying chemical engineering in the US before returning to the Kingdom.
Saudi Aramco and SABIC struck an initial agreement to develop a $20 billion industrial complex that will bring 30,000 jobs to the Kingdom.
The pair signed a memorandum of understanding on Sunday for what would be the world’s biggest crude-to-chemicals plant.
It represents the latest move by the country to diversify its industrial base by moving away from crude oil sales towards developing higher value exporting industries.
It also joins the country’s two industrial titans into a partnership that aims to develop pioneering technology.
Saudi Aramco President and CEO Amin H. Nasser said, “This project converges the commercial and strategic interests of both Saudi Aramco and SABIC, while reinforcing Saudi Aramco’s efforts to optimize the investment of our petroleum resources. COTC will also help expand our downstream portfolio, reducing our focus on the transportation sector and securing new and promising commercial opportunities.”
SABIC Vice Chairman and CEO Yousef Abdullah Al-Benyan said: "This venture will contribute to the realization of one of the major aspirations of Saudi Vision 2030, namely achieving economic prosperity by boosting our investment capacity, diversifying the economy and creating jobs for Saudi nationals. It will help strengthen our economic growth and attract world-class quality investments thanks to our unique and strategic geographic location."
Al-Benyan added: "Today is a historic day, marking the complementary nature of the relationship between SABIC and Saudi Aramco because it is the first time the two largest economic entities in Saudi Arabia jointly enter into a strategic partnership to achieve a pioneering and innovative new technology. Once completed, this project will not only be the largest crude oil to chemicals complex in the world, it will also set a new competitive threshold thanks to the project's mass scale and the benefits derived from our joint collaboration. The project will, therefore, help achieve the respective growth ambitions of Sabic and Saudi Aramco and further establishes the Kingdom as one of the pioneers in the petrochemicals industry."
This announcement marks a historic alliance between the two largest Saudi global entities, in addition to solidifying the Kingdom’s position as a global leader in chemicals by substantially increasing production and further maximizing value across the entire hydrocarbons chain through integration. The COTC complex will be constructed based on an innovative configuration that achieves crude oil to chemicals conversion that is unprecedented in the industry.
This MoU follows the Heads of Agreement (HoA) signed in June 2016 between the two companies, which governed the feasibility study for the development of a fully integrated petrochemicals complex in the Kingdom. A Saudi team developed innovative COTC configurations derived from best-in-class refining and chemical technologies.
The complex is expected to create an estimated 30,000 direct and indirect jobs, further stimulating the Kingdom’s economic diversification. By 2030 the COTC complex is expected to have 1.5% impact on the Kingdom’s Gross Domestic Product (GDP), with investments being shared equally by both companies.
Consistent with the Kingdom’s Vision 2030 economic transformation program, this project will support the creation of a world-leading downstream sector in Saudi Arabia, built on four key drivers: maximizing value from the Kingdom’s crude oil production via integration across the hydrocarbon chain; enabling the creation of conversion industries to produce semi-finished and finished goods to help diversify the economy; developing advanced technologies and innovation; and enabling sustainable development in alignment with the Kingdom’s National Transformation Program
The MoU follows the signing of heads of agreement in June 2016 between the two companies for a feasibility study for the complex.
Aramco and SABIC expect the project to create an estimated 30,000 direct and indirect jobs and make a 1.5 percent contribution to Saudi GDP by 2030.
Investment will shared equally by both companies.
Source : Saudi Aramco, SABIC & Arabnews.
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