Saudis face growth limits over natural gas supplies

A shortage of natural gas could affect future industrial growth in Saudi Arabia, according to the head of Jubail Industrial City, the world's largest petrochemical cluster.

Jubail, with a current annual production capacity of 68 million tonnes, has already embarked on an expansion that will add a further 21 million tonnes, but any further expansion will bump up against limitations in available feedstock.

"When we have finished Jubail 2, we might start with Jubail 3," said Mosleh Hamed Al Otaibi, the chief executive of the government body that oversees and develops the industrial zone. "But we haven't started with a [feasibility] study, because of the shortage of gas. We are really a little bit hesitant to go ahead with Jubail 3."

If it were to go ahead, construction on Jubail 3 is scheduled to begin by 2020.

Having turned Saudi Arabia into one of the biggest producers of petrochemicals, the government is now focused on developing industries that turn basic petrochemicals into more complex products such as plastics.

The downstream industry has assumed great political importance as a tool for creating jobs in a country where about a third of the working-age population is unemployed. The anger among jobless youths that drove the Arab Spring has renewed the government's efforts to create jobs.

"The most important thing for the country is job opportunities," said Mr Al Otaibi, who spoke at a Gulf Petrochemicals and Chemicals Association event in Dubai.

Jubail 2, which is almost complete, will be primarily committed to attracting downstream companies. One of these, the Sadara joint venture between Saudi Aramco and Dow Chemicals, will become the world's largest single-phase integrated chemicals facility.

"Gas that is available now will be given for a specific industry, which will be downstream and supply Saudi Arabia with a finished product," said Mr Al Otaibi.

With gas becoming increasingly precious in the kingdom, speculation over an increase in the gas price, currently highly subsidised, has been rife. The government is reviewing the situation, said Mr Al Otaibi. "If there is a change, it will not be big."

To date, total investments in Jubail's production capacity amount to 417 billion Saudi riyals (Dh408.4bn) , while the commission has sunk 69bn riyals into creating the supporting infrastructure, which includes housing, schools and hospitals.

Additional gas production is expected to come online this summer, alleviating the supply squeeze. The Karan offshore field will start producing 1.5 billion cubic feet per day of gas this year, according to Saudi Aramco, and the first of three gas procession trains is now commissioning.

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