Saudi Aramco and Dow will press on with $20bn petrochemicals project

The project, known as Sadara Chemical, will be the first project in the Gulf to use naphtha as feedstock.

Saudi Aramco’s US$20 billion petrochemicals joint venture with Dow Chemical is still on track to start production in the second half of this year..

The project, known as Sadara Chemical, will be the first project in the Arabian Gulf to use naphtha as feedstock, said Khalid Al Hamid, the manager of engineering and technology at Sadara.

The Sadara project, which will produce 3 million tonnes of petrochemicals a year, is the world’s largest such facility to be built in a single phase.

Saudi Arabia is going ahead with petrochemical projects despite the crude oil price slump, in which Brent prices have almost halved since June.

The drop has affected petrochemical prices and earnings at most companies in the sector.

Saudi Basic Industries Corp (Sabic), one of the world’s biggest petrochemical companies, last month posted a 29 per cent drop in fourth quarter net profit to 4.36 billion Saudi riyals (Dh4.26bn) from 6.16bn riyals a year earlier.

Qatar, on the other hand has cancelled two petrochemical projects.

The state-run Qatar Petroleum and Royal Dutch Shell pulled the plug last month on the $6.4bn Al Karaana project in Qatar.

In September, the country halted work on the $6bn Al Sejeel petrochemicals project.

“Middle East projects are facing stiff reviews,” said Sanjay Sharma, the vice president for the Middle East and India at IHS, a US-based analytical company.

Another problem facing the Middle East is the rising domestic consumption of energy products and the deficit of gas production, which could impact projects further, said Raheel Shafi, a senior consultant for the Middle East at Nexant, a consultancy firm.

“In the GCC, most countries are faced with the challenges when it comes to gas feedstock,” said Mr Shafi.

Follow The National's Business section on Twitter