Saudi Arabia’s petroleum giant, Saudi Aramco, has canceled plans for a major chemical project while reviewing other investments as it pivots to Asia.
Project Cancellation in Saudi Arabia
Saudi Aramco, along with its chemical manufacturing unit SABIC, has shelved plans to build a 400,000-barrel-per-day refinery and chemical project at Ras Al Khair on Saudi Arabia’s Gulf Coast.
The company has also withdrawn a proposal to move the project to Jubail.
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This decision comes as Aramco reassesses its future spending on domestic chemical infrastructure in light of uncertain domestic demand.
Shifting Focus to Asia
The cancellation shows Aramco’s shift toward expanding its chemicals business in Asia, where the company is pursuing deals in China.
These agreements would secure long-term demand for Saudi crude while leveraging Asia’s growing demand for petrochemical products.
According to insiders, Aramco sees greater potential for products like plastics, which are expected to outlast the growth in consumption for gasoline and diesel amid the global energy transition.
Reevaluating Domestic Investments
Aramco’s reassessment of domestic projects is partly driven by uncertainty over demand in Saudi Arabia, where the company is already expanding other chemical sites.
The company is currently reviewing three planned chemical facilities in Jubail and Yanbu on the Red Sea.
This review is part of a broader effort to optimize its investments, with a goal of increasing throughput in integrated refining and petrochemical complexes to 4 million barrels per day by 2030.
Aramco’s Expansion into Asia
While domestic projects are being scaled back, Aramco is ramping up its presence in Asia.
The company is in talks to acquire a 10% stake in China’s Hengli Petrochemical and is negotiating similar deals with two other Chinese firms.
Last year, Aramco closed a $3.4 billion deal for a stake in Rongsheng Petrochemical.
Chief Executive Officer Amin Nasser has also identified South Korea and India as potential areas for investment.
Saudi Arabia’s Broader Economic Ambitions
The decision to scale back the Ras Al Khair project is the latest indication of Saudi Arabia’s plans to reassess its industrial strategy.
The kingdom, under Crown Prince Mohammed Bin Salman’s leadership, aims to develop its manufacturing and technology sectors, with locally produced chemicals playing a significant role.
However, the government is reviewing the broader investment plans to manage the scope of its ambitious economic reforms.
What do you need to know?
As Aramco shifts its focus to Asia, the company continues to optimize its global downstream portfolio, balancing domestic and international investments.
This move reflects both Saudi Arabia’s changing industrial priorities and the evolving global energy landscape.
Oil-rich Gulf states have long produced petrochemicals for products like plastics and packaging, benefiting from their cheap energy supplies.
While they’ve been selling energy to chemical makers in Japan, South Korea, and China for years, these states are now aiming for a bigger share of producing chemicals directly for the Asian markets.