Saudi Aramco halts expansion plans for chemical projects

Saudi Aramco has halted expansion plans for three chemical projects due to weaker oil prices holding back local spending, according to Bloomberg on October 10.

The state-owned oil company is delaying the start of major engineering and design work on the facilities, including two joint venture projects at Yanbu on Saudi Arabia’s western Red Sea coast and Jubail on the Persian Gulf coast.​

Previously, the company shelved plans with Saudi Basic Industries Corp, a chemicals producer, to build a new crude conversion project at Ras Al Khair on the Persian Gulf.​

This marks the latest example of delays to Saudi Arabia’s long-term projects as softer oil prices squeeze the country’s finances.

​The government and Aramco have been forced to increase borrowings due to pressure, with the company falling into a net debt position last year.

​The delayed projects are part of Aramco’s push to convert crude oil into chemical projects.

The Saudi-listed oil producer is holding back two joint venture projects at Yanbu on Saudi Arabia’s western Red Sea coast and another facility at Jubail on the Persian Gulf coast.​

Meanwhile, Aramco has prioritised investment in international refining and chemical facilities. Chemicals used to make plastic products are in demand and are expected to expand for decades even as the energy transition is expected to slow the growth in transport fuels.

The overseas investments mean the Saudi company is making progress towards its goal to turn 4 million barrels a day of crude into petrochemicals. Deferring local expansions will help spread our spending.​

Meanwhile, Aramco is continuing to spend on oil and gas production projects like the Jafurah natural gas field, which is set to begin output later this year.

The company expects to spend over $50 billion (£38 billion) this year, with the majority going to projects in gas and for maintaining oil production capacity.

Bloomberg, Maghrebi.org