Joint venture between Dow and Saudi Aramco will target added value plastics and speciality chemicals
A mixed feed cracker has started up in Saudi Arabia to process oil into higher value chemicals. It will allow the Sadara Chemical Company to generate a diverse range of plastics and chemicals and follows a regional trend of firms moving to producing higher value petrochemicals.
The cracker consists of 12 furnaces. Seven will crack ethane and the other five liquid naphtha, but they will also be capable of switching to a gas feedstock. Ethylene and propylene – key building blocks for petrochemicals – will be produced and converted into a range of speciality chemicals.
Sadara is a joint venture of Saudi Aramco and Dow Chemical formed to construct an integrated $20 billion (£15 billion) chemical complex in Jubail industrial city II. The site will deliver 14 products completely new to Saudi Arabia, and could put price pressures on European and Asian petrochemical plants.
‘This is a trend in most Middle East countries which have been relying solely on petroleum production for their revenue stream. We are seeing quite a bit of development in downstream activities to take advantage of higher value products,’ explains Hal Miller, chairman of the energy consultancy Galway Group.
The crackers will produce around 1.5 million tonnes of ethylene a year. This is the equivalent of 1% of global market share.
Ethane feedstock will give the plant a cost advantage over those that use naphtha. ‘Ethane is typically sold in Saudi at a local pricing level and is what really gives the cracker a significant cost advantage,’ says Matthew Thoelke, senior director at IHS Markit. ‘It translates into an ethylene cost of around $200 per tonne, which currently compares to around $400 per tonne for naphtha crackers in Asia or Europe.’
As a higher cost producer, Europe has been in a difficult position for years yet continued to operate, with some assistance from protective import tariffs, says James Ray, senior consultant at chemical market intelligence firm ICIS. However, recent falls in the price of oil also levelled the playing field for Europe.
The naphtha feed will be more expensive for Sadara, but generates a host of other products, such as propylene, aromatics and four carbon hydrocarbons. Other products include amines, isocyanates and polyolefin elastomers.
The venture gives the Saudis a platform to supply the Asian market, where they have a light footprint. ‘This is a way for Dow to support their desire to grow in Asia and get access to low-cost feedstocks,’ Thoelke adds.