(Bloomberg) -- Saudi Aramco has canceled plans to build a refinery and chemicals project in the kingdom and is reviewing three others as it evaluates spending plans with a focus on expanding in Asia.
Aramco and its unit Sabic will not go ahead with the planned 400,000 barrel-a-day facility at Ras Al Khair on Saudi Arabia’s Gulf coast, and a proposal to move the project to Jubail has also been shelved, according to people with knowledge of the situation.
The cancellation is a sign Aramco is recalibrating its spending on chemicals to Asia, where it’s pursuing a series of deals in China that would also guarantee long-term demand for Saudi crude. Aramco sees the use of goods such as plastics outlasting the growth in consumption for gasoline and diesel amid the energy transition, with much of the expansion in chemicals likely coming from Asia.
Uncertainty over the strength of demand in Saudi Arabia — where Aramco is already expanding other chemical sites — is also a factor forcing the company to reconsider spending on mulitbillion-dollar infrastructure projects, according to the people, who asked not the identified because the information isn’t public.
Three planned chemical facilities in Jubail and at Yanbu on the Red Sea are being checked to determine whether the company will go ahead with the investments, the people with knowledge of the plan said.
“Aramco intends to continue to grow its liquids-to-chemicals business, with a goal to increase its throughput in integrated refining and petrochemicals complexes to up to 4 million barrels per day by 2030,” the company said in an emailed response to questions. “We continue to optimize our investments in our global downstream portfolio and updates to specific projects will be made at the appropriate time.”
Saudi Projects
The review is also the latest indication of Saudi Arabia grappling with building vast industrial sites. The kingdom wants to develop manufacturing and technology industries, which could use the chemicals produced locally. But it is reviewing some of the wider investment plans as it tries to cope with the scale of Crown Prince Mohammed Bin Salman’s economic makeover push.
Aramco’s chemical unit Sabic, in which it owns 70% stake, first announced plans for the Ras Al Khair refining and chemical facility in November 2022 and said a year later that the two companies were still working on the project.
Aramco is going ahead with the separate expansion of a refinery that it operates with TotalEnergies SE in Jubail.
The Saudi company is in talks to buy a 10% stake in China’s Hengli Petrochemical Ltd. and is seeking similar deals with two other Chinese companies. It closed a separate $3.4 billion deal for a stake in Rongsheng Petrochemical Co. last year. Chief Executive Officer Amin Nasser has also mentioned South Korea and India as potential investment destinations.
Oil-rich Middle Eastern states have long produced some petrochemicals that go into making products like plastics and packaging as a way to make use of their cheap energy supplies. They’ve been selling energy to chemical makers in Japan, Korea and China for years, but are now trying to get a bigger share of producing those chemicals on their own in the big Asian markets.
(Updates with Aramco comments in sixth paragraph.)
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