Heading downstream: producers are looking to diversify their product portfolios in a joint effort to create more jobs and distinguish themselves.(PETROCHEMICALS)

Polycarbonates, phenols, engineering plastics and thermoplastic olefins are not words that easily trip off the tongue, but they are becoming increasingly talked about in Saudi Arabia, where petrochemicals producers are continuously looking to move into new products. As the kingdom consolidates its position as the leading bulk petrochemicals commodities producer of the 21st century, a new wave of hitherto untouched speciality products is being developed.

Until now, the kingdom's petrochemicals drive has focused primarily on the production of basic chemicals, such as ammonia and methanol, and differentiated and forward commodities including polyethylene, polypropylene and ethylene glycol.

For producers, the production and export of these chemicals made natural sense. The kingdom enjoys such a massive feedstock cost advantage on upstream petrochemicals production--as much as 70 per cent over non-regional competition--that it was not considered necessary to go down the value chain.

However, while the profit margins for in-kingdom upstream chemical production are considerable, they do little to maximise the value of the kingdom's gas production through job creation. For example, base petrochemicals production will employ about 0.5 people per $1 million investment. Plastic resin and plastic component manufacturing, on the other hand, will employ 1.4 and 13.8 people respectively for the same amount.

In an effort to develop these more labour-intensive industries, the government has adopted a policy of encouraging investment in downstream chemical production. It has linked gas feedstock allocations with commitments from project companies to diversify their product portfolios and oversee the development of associated conversion parks and research and development (R&D) centres.

Full slate

This downstream drive is already well under way. According to the Royal Commission for Jubail & Yanbu, 49 unique petrochemicals products are currently produced in the kingdom. Sixteen more are planned or under production, while a further 128, ranging from acetophenone and anthraquinone to chloroprene and indigo, are likely to be produced in the coming years.