This week has seen Saudi Basic Industries Corp (SABIC) sign its first deal to purchase U.S. shale gas for use at its Teesside petrochemical plant in Britain.
“In terms of industry growth, we see growth chasing where feedstock is competitive, and the U.S. is top of the list,” Mosaed al-Ohali told Reuters.
Mr Ohali explained that the company was forced to look at foreign investment opportunities due to shortages of natural gas. According to the U.S. Energy Information Agency (EIA) rapid reserve development is necessary for Saudi Arabia’s plans to fuel the growth of the petrochemical sector, as well as for power generation and for water desalination.
All current and future gas supplies (except NGLs) reportedly remain earmarked for domestic use, in part to minimize the use of crude oil for power generation. However, natural gas production remains limited, as soaring costs of production, exploration, processing, and distribution of natural gas have squeezed supply. The country also loses a lot of dry gas to flaring. The National Oceanic and Atmospheric Administration (NOAA) and the World Bank Global Gas Flaring Reduction partnership estimate that in 2011, Saudi Arabia lost 131 Bcf of gas production to flaring.
All this means that Saudi petrochemicals have to look abroad to buy feedstocks. Until recently, the industry benefited from feedstock subsidies but with these being now phased out the prices have risen to levels close to those at the Louisiana Henry Hub benchmark.
Another avenue for sourcing feedstocks is oil-to-gas operations. Mr Ohali told Reuters that the company views its planned $30 billion Yanbu project as a “fertile opportunity”.
SABIC will stick to its main chemicals products, Ohali said, but it will support small and medium enterprises (SME) to move further downstream through Saudi Arabian Industrial Investments Company (SAIIC), its joint venture with Saudi Aramco and the Public Investment Fund
Article continues below this message
Have your opinion heard with Shale Gas International
We accept interesting, well-written opinion and analysis articles of up to 1,500 words, that offer unique insights into the shale industry. The articles cannot be overtly promotional in nature and need to fit into at least one of our content categories.
If accepted, the article must be exclusive to Shale Gas International website and cannot appear on any other websites, publications, etc. Each article may contain up to three links to external websites relevant to the content discussed in the piece.
If you would like to contribute to Shale Gas International website, please contact us at: editor[at]mw-ep.com