Saudi Arabia is the largest chemicals producer in the GCC region. Although chemicals sector in the country is growing fast, it is referred as begin “big but not diversified enough yet”.
Saudi Arabia’s chemical sector expanded it production capacity from a low base in 1970s reaching current 84.2 million tons per annum in 2012.
But Saudi Arabia still imports a large amount of specialty chemicals and produces only limited amount of value-added chemicals such as specialty resins and rubbers, engineering plastics and other fine chemicals.
In the next decade, the focus of the country’s chemicals industry will shift from commodity chemicals to more value added chemicals.
Saudi Arabia’s push to the development of more value-added chemicals market is part of a consistent drive by the chemicals producers to move down the chemicals value chain, with higher margin areas.
The global specialty chemicals industry includes a number of niche segments, such as coatings and adhesives, pigments, additives, flavors and fragrances.
As per estimations of American Chemistry Council, global output of specialty chemicals reached $856.1bln in 2012, a growth of 10.7% per annum since 2005.
Specialty chemicals producers have to demonstrate their ability to adjust to more sophisticated requirements by the end-user industries.
Before the region is able to develop a presence in the specialty chemicals sector, producers must first develop their capability to produce higher value added fine chemicals.
For specialty chemical producers, raw materials availability is an important factor. Saudi Arabia has a competitive position in a number of fine chemical segments used in production of specialty chemicals.
There is a large variety of fine chemicals and each individual chemicals company tends to produce only a small quantity. Production capacity of high value added fine chemicals in Saudi Arabia reached 12mt in 2012, which accounted for 14% of the country’s total production capacity. With higher margins, fine and specialty chemicals should be an attractive option for the Saudi chemicals producer.
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But this diverse sector faces a number of challenges as well. The most important challenge is related to innovation and absence of local markets.
With pressure for more rapid development of fine chemicals production, many of the needed chemical products require interdisciplinary expertise, much of which falls outside of industry’s main capabilities.
World practice shows that collaboration between industry, governments, academia and professional organization helps the development and commercialization of fine and specialty chemicals.
One of the examples of academia and industry collaboration in Saudi Arabia is King Abdullah University of Science and Technology’s Industry Collaboration Program which links industry and economic development programs such as the Research Park and Innovation Cluster, Seed Fund Program, New Ventures, and the Entrepreneurship Center.
Meanwhile, several flagship chemicals projects are currently under construction in Saudi Arabia which will produce high value chemicals. One of the most important among them is Sadara integrated complex.
This world-scale complex is expected to produce over 3mtpa of performance, value-adding chemical and plastics products including polyethylene, elastomers, amines, and glycol ethers as well as propylene oxide, propylene glycol, polyols, TDI, and MDI.
Many of Sadara’s products will enable significant development of the manufacturing industry, supporting Saudi Arabia’s ambition to be a manufacturing hub for downstream industries.
Technological and business collaborations across industries will not be easy and will require different mindsets.
However, one single company or industry will not be able to address future challenges and therefore collaboration becomes a key in overcoming them.
In turn, industry collaboration will ultimately lead to innovative products and processes and will provide the basis for the sustainable development.
