Petrochemicals

Gulf oil companies turn up petrochemicals investment

March 18, 2025, 3:36 PM

Borouge chairman Sultan Al Jaber visits the Borouge 4 project, which will increase the company's petrochemicals production by almost one third

Petrochemicals add value
Demand for crude slows
Sector to add 20 mtpa capacity

Gulf national oil companies (NOCs) are increasingly focusing their investment attention on petrochemicals as they seek to move up the value chain and as global demand growth for crude slows, experts say.

The Paris-based International Energy Agency (IEA) expects the petrochemical industry to account for one third of global oil demand growth by 2030 and nearly half by 2050.

For the moment, global demand for petrochemicals is only expected to grow annually by around 3 percent through 2035.

“[Gulf producers] want to add value to their molecules; petrochemicals is one of the ways to do that,” says Ali Al Riyami, a former director of marketing at Oman’s ministry of energy and minerals.

“This is the future of energy,” he said, to squeeze profit margins from every drop of oil the NOCs pump.

Despite relatively low petrochemical margins, Gulf NOCs are focused on the outlook for petrochemicals where they can provide relatively cheap feedstock to the industry, says Stuart Turl, vice president of decarbonisation and consulting at British engineering and consulting company Wood.

Saudi Aramco and Adnoc are among NOCs leading the trend internationally, while other NOCs are concentrating on regional opportunities.

Aramco, the world’s largest oil producer, is expanding in Asia, CEO Amin Nasser said during the company’s 2024 earnings earlier this month. He said that China would represent 40 percent of the liquid-to-chemicals market in the coming years.

Aramco aims to increase petrochemical production capacity by up to four million barrels per day (bpd) by 2030 in complexes where it has an equity stake.

The company owns shares in projects in China, Malaysia and South Korea.

Adnoc has launched XRG, an $80 billion investment arm, focusing on lower-carbon energy and chemicals, and created Borouge Group International, a $60 billion global plastics giant, with access to European and North American markets.

Mukesh Sahdev, global head of commodity markets at consultancy Rystad, said Gulf producers also use refined products as well as petrochemicals to manage the impact of revenue loss from cuts in crude oil production imposed by Opec+.

“This is mostly to provide a twin handle of crude and product exports to manage the prices in a stable range,” he told AGBI.

The petrochemical industry in the six-member Gulf Cooperation Council is poised to add around 20 million tonnes per year of capacity over the next five years, according to the Gulf Petrochemicals and Chemical Association 2024 annual report.

Petrochemical investments

International: Aramco owns a 10 percent stake in China’s Rongsheng petrochemical, securing an off-take deal for 480,000 bpd of crude to feed refining complexes in Zhejiang in China. A second project in Liaoning province set for 2027 will process 300,000 bpd of Saudi oil into chemicals, directly linking Saudi oilfields to China’s factories.

Simultaneously, Aramco’s $7 billion Shaheen petrochemical complex in Ulsan in South Korea aims to produce 3.2 million tonnes per year of petrochemicals by 2026, targeting Asia’s polymer-hungry manufacturing hubs.

Aramco also holds stakes in a $10 billion refinery and petrochemical complex in southeast China’s Fujian province (where it has a 25 percent stake) and in a $7 billion Pengerang petrochemical complex developed with Petronas in Malaysia.

UAE’s Adnoc purchased Germany’s Covestro for $16.4 billion last year and transferred its stake to XRG.

This month, it created Borouge International, the world’s fourth-largest polyolefin company by nameplate production capacity. This new entity, formed through the combination of Borouge, Borealis and Nova Chemicals, will have a proforma polyolefins capacity of 12.2 million tonnes per annum (mtpa) and an olefin capacity of 11.4 mtpa.

Regional: While Saudi Aramco reduced its petrochemical domestic plans to focus on Asia, the UAE’s $45 billion Ruwais complex is set to triple Adnoc’s capacity to 14 million tonnes of chemicals annually by 2026 – enough to supply 40 percent of Asia-Pacific’s polyethylene demand.

The Al Zour complex in Kuwait, meanwhile, has a 615,000 bpd refining capacity and 1.4 million tonnes/year of ethylene output.

In Oman, OQ’s Liwa plastics project supplies 1.6 million tonnes of polypropylene annually to Southeast Asia.

Aramco, SABIC and KPI also partnered to develop a petrochemical complex adjoining the OQ’s Duqm refinery.

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