Saudi goes downstream for petchem jobs

Saudi Arabia is investing tens of billions of dollars in an effort to boost petrochemicals production in its core industrial zones by 50 per cent.

The kingdom is also shifting its emphasis to more specialised downstream products to create jobs in a country marred by high levels of unemployment.

"Commodities and refining - they are not very labour intensive. Where you get the jobs is in the downstream, and that's what is now evolving in Saudi Arabia," said Mubarak Abdullah Al Mubarak, the general manager for strategic planning and investment at the Royal Commission for Jubail& Yanbu.

The industrial zones of Jubail and Yanbu, situated on the Gulf and the Red Sea coast, respectively, have so far attracted investment to the tune of US$100 billion (Dh367.3bn). An additional $50bn is flowing into a projects pipeline to increase production of petrochemicals products in Jubail and Yanbu to 100 million tonnes a year by 2016, said Mr Mubarak. Currently, the zones' production capacity is 65 million tonnes.

Projects such as Sadara Chemical Company, a $20bn joint venture between Saudi Aramco and the US chemical giant Dow that will add a further 10 million tones of capacity, are under way.

Saudi Arabia has emerged as a dominant player in the petrochemicals industry. Determined to capture the margin that arises when crude oil and gas are refined into basic chemicals such as polymers, the government has promoted the growth of the industry, enticing foreign partners into joint ventures with low-cost gas, a common feedstock and source of power needed in the energy intensive production process.

Profits of GCC petrochemicals companies rose 62 per cent in the third quarter of last year, compared with the same period a year earlier, to reach $3.57bn, according to Global Investment House. Saudi companies rode this wave of profitability, with Saudi Basic Industries Corporation (Sabic), Yansab, Safco, Sipchem and Tasnee all beating earnings expectations. In the fourth quarter, GCC petrochemicals earnings fell on average 12 per cent year on year.

Nevertheless, this year will be a bumper year, predicted Mohamed Al Mady, the chief executive of Sabic, one of the world's biggest petrochemicals companies, at the Gulf Petrochemicals and Chemicals Association annual conference in December. The bulk of the Saudi Arabia's chemicals are exported and converted into downstream products such as plastics. The kingdom is now aiming to extend its success in the petrochemicals industry further downstream, and has established a national clusters development programme to promote the conversion industry. Jubail and Yanbu have both already attracted plastics producers.

Job creation has moved up the political agenda after the Arab Spring, which was prompted in no small part by mass unemployment among the young.

Saudi Arabia's official unemployment rate is 10.5 per cent, but recent government figures show that the labour force participation rate - people in work or looking for work - is only 36.4 per cent, half the global average.

The government is even viewing solar power through the prism of job creation, and is considering a large-scale entry into renewable energy to alleviate shortages both in power and in jobs.

Joint venture agreements with German and South Korean polysilicon companies to produce the material used in photovoltaic panels have already been signed, as the kingdom is mulling the large-scale adoption of solar power.

fneuhof@thenational.ae