The boom in the downstream sector in the Kingdom of Saudi Arabia has resulted in a shortage of gas feedstock.
This is leading to stiff competition between petrochemical companies to secure subsidies gas allocation, as well as putting more pressure on Saudi Aramco to provide higher volumes of ethane gas not only for the petrochemical industry but also for power generation and other industrial sectors.
To meet the soaring industrial demand for gas, Saudi Aramco has launched several investments projects to keep the ethane gas supply balanced.
“We are developing many projects including Shaybah NGL project as we speak to balance ethane gas, in addition to the new mixed feedstock strategy that consists of the allocation of ethane and liquid cracking to petrochemical producers,” says Abdulaziz al-Judaimi, vice president of chemicals at Saudi Aramco.
The Shaybah NGL project programme will construct a grassroots NGL recovery plant at the Shaybah field.
But, despite the shortage of the ethane gas supplies for future projects, Prince Faisal bin Turki, adviser at the Petroleum and Mineral Resources Ministry, told the first Saudi Downstream conference, in March this year, that Saudi Arabia has enough natural gas to supply planned petrochemical projects.
“All projects under development and all the existing plants producing today are fully supplied with feedstock,” he said.
Due to the importance of the downstream sector in the Kingdom ‘s diversification programme, the Saudi government provides all facilities to companies operating in the petrochemical and the refining sectors, as these sectors attract huge workforces and create much-needed job opportunities.
In addition, under the pressure of increased unemployment among local population, the Saudi government launched several investment programmes in the hope of creating job opportunities.
In this regard, the government of Saudi Arabia recently initiated the National Industrial Cluster Development Programme (NICDP), which aims to develop and provide support to a range of new industries. The objective of the programme is to spur economic diversification by catalysing the development of several industrial commercial sectors which are either new to Saudi Arabia or currently underdeveloped.
The NICDP includes five clusters which have been selected carefully including consumer goods, automotives, construction materials, packaging and metals processing. All these clusters use petrochemical products as a raw material.
Saudi’s NICDP programme relies mainly on the utilisation of the petrochemical products produced by local manufacturers, mainly based in the Jubail and Yanbu Industrial cities.
This gives convertors in the Kingdom a competitive advantage compared to competitors in other places in the world, due to their access to cheap raw materials. Also, convertors in these clusters will benefit from being adjacent to raw material suppliers, which means a saving from the transportation side.
These initiatives have led to the increase of direct foreign investments in the country, and the improvement of doing business in the Kingdom compared to just five years ago.
“In the recent report of the world bank about the easiness of doing business around the world, Saudi Arabia ranked in the 11th position, compared to the 67th place five years back,” says Amr bin Abdullah al-Dabbagh, governor and chairman of the board of directors at Saudi Arabian General Investment Authority “SAGIA”.
One of the government’s pricipal ambitions for Saudi Arabia is to develop the automotive industry, which seems could be done, though it will be difficult.
“We have many pluses, nothing will be simple and nothing can be done without suffering or meeting the challenges, as it won’t be that easy to establish the automotive industry or a certain part of it in our region. But if we have the determination and the good planning, it can be done,” says Dr Moayyed bin Issa al-Qurtas, CEO of the
board of Tasnee.
“Of course, the automotive industry is a very large industry, and has many niches. If we pick the right niche and focus on it, and also build the infrastructure including the supply chain or even substantial proportions of the supply chain where you can get a reasonable competitive advantage,why not?” al-Qurtas adds.
Doing business in Saudi Arabia has completely changed in the last five years. “The outlook and business strategy of many companies in Saudi Arabia has changed substantially during the last couple of years; from a market characterised by point solutions and short engagements, to a market based on holistic systems coverage and long-term relationships,” says Ad Vos, executive vice president of Operations at Hyperion Systems Engineering (HSE) Group.
“Service providers have to adapt their strategy in order to survive or grow,” he adds. Hyperion Systems Engineering (HSE) Group has been active in Saudi Arabia for more than 15 years in various process industries including oil and gas, petrochemicals and metals.
Compared to other regional markets, the Saudi Arabian market is characterised by a large number of joint ventures. Saudi Aramco has entered into a series of joint ventures with companies from Europe (Total, Shell, and Borealis), the USA (Exxon Mobil, Dow Chemical) and Asia (Sinopec).
“The different regional and company cultures in those joint ventures require specific attention in programmes targeted to design the support structures for the business: systems, processes, training and education,” suggests Vos.
In addition, the Saudi Arabian market is following of the North American and European tendency to move from point solutions to holistic company-wide initiatives for systems support.
“Both from a horizontal business process perspective (wall-to-wall supply chain) and from a vertical business process perspective (planning, scheduling and optimisation structures), companies define complete and consistent programmes to design process and systems coverage,” explains Nile al-Rushaid, general manager of Hyperion Systems Engineering in Saudi Arabia.
Competition between service providers and companies in the Saudi market is stiff. This offers customers wide range of choices. “Saudi Arabia is a clear example of a market where companies do not favor single-vendor policies.
The diversity of fields of knowledge and experience calls for an independent services provider, capable of understanding unique customer requirements, designing best-fit solutions and implementing those with optimal integration,” explains Vos.
In the Saudi Arabian market the value of long term relationships and continuous responsibility is very well recognised. “The number of strategy-roadmap-implementation programs is increasing really fast.
That demand has a very specific impact on the staffing of programmes and projects: a combination of technical expertise, functional expertise, business process experience, business management experience and reliable project management is a real requirement,” says al-Rushaid.
“In order to survive or grow in this market, services companies need to adjust their approach towards employee recruitment and development,” notes Vos.
