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Abqaiq attack: Saudi downstream firms struggle to meet Asian demand
PROJECTS & COMPANIES
VARIOUS Saudi downstream firms reported reduced feedstock availability this week in the wake of attacks at Abqaiq and Khurais over the weekend. With 5.7mn barrels per day of crude and 700,000 bpd of natural gas liquids (NGLs) being stripped from Saudi supply, domestic sup- plies felt the brunt of the impact, while export obligations continue to be met from strategic crude oil reserves.
Meanwhile, concerns were also expressed about feedstock by Asian consumers of various refined products.
New Saudi Energy Minister Prince Abdulaziz bin Salman told a press confer- ence on September 17 that the kingdom had already restored half of the capacity that was knocked out from the attacks. He added that capacity would climb to 11mn bpd by the end of the month and 12mn bpd by the end of November.
Downstream issues
Petrochemicals firms Saudi Basic Industries Corp. (SABIC), affiliate Saudi Kayan Petro- chemical, Advanced Petrochemical, Sadara and Yanbu National Petrochemical were all quoted by S&P Platts as having issues because of a fall in the availability of feedstock.
On September 15, SABIC told Platts that feedstock for it and its products would be reduced and that it had cancelled polymer orders to customers in the Middle East and Asia-Pacific. The disruption is most apparent in the Jubail hub, where numerous petrochemical firms have facilities.
SABIC told Platts that it had insufficient stocks of polymer to fill the void, while Saudi Kayan had seen its allocation of feedstock reduced by 50%.
The parent company, in which Saudi Aramco purchased a controlling 69.1% stake earlier this year, said that it would be unlikely to offer large volumes of polyethylene (PE) or polypropylene (PP) in October.
Meanwhile, Sadara, which is a joint venture between Aramco and Dow Chemical of the US, said that feedstock supply to its plants would be reduced by an average of 16%.
The firm operates a $20bn facility in Jubail, which was the largest single-phase chemical complex ever built, with 26 world-scale manufacturing plants produc- ing more than 3mn tonnes per year (tpy). Output is comprised of polyeurethanes, PO, propylene glycol (PG), elastomers, linear low-density polyethylene (LLDPE), low-density polyethylene (LDPE), glycol ethers and amines.
The National Industrialization Co. (Tasnee) said from September 14 its feedstock supplies had been reduced by an average of 41%, while Saharan International Petrochemical Co. (Sip- chem) said its supplies had been cut by around 40% and Advanced Petrochemical had seen its supplies halved.
It is not just Jubail-based operations that are affected, though, with Red Sea coast-based Yanbu National Petrochemical Co. (Yansab) say- ing that its feedstock supplies would be reduced by around 30%.
Considering the major impact of the attacks, The Saudi
it is little surprise that security at Jubail, Ras Tanura, Yanbu and Jazan has been tightened this week, with Argus reporting that a “shoot on sight” policy had been adopted for drones.
This raises the question: why was such a pol- icy not in place previously?
downstream squeeze is bad news for Asian
Riyadh has invested handsomely in defence and Turkish
and the devastation caused by these attacks reflects poorly on the systems in use.
Asian strain
consumers, which receive the bulk of Saudi
The Saudi downstream squeeze is bad news for
Asian and Turkish consumers, which receive the
bulk of Saudi output; however, it may actually output support Aramco’s efforts to build out its overseas
downstream capabilities.
Aramco aims to raise global refining capacity to 8-10mn bpd by 2030, with expansion focused on major Asian consumers of the kingdom’s crude. Downstream investment projects in China, India, Indonesia, Malaysia and Pakistan are at various stages of execution, while invest- ments in South Korea and the US have long been established.
Most of Aramco’s current 4.9mn bpd capac- ity is produced through JVs, with around 2-3mn bpd of the total is seen being converted to petro- chemicals, to add to the 17mn tpy of petrochem- icals already manufactured.
The narrative will now be that by developing downstream facilities alongside Aramco, sup- plies of its crude can be guaranteed with more certainty than refined products, thereby increas- ing security.
Markets around Asia have tightened for monoethylene glycol (MEG), polymers, liq- uefied petroleum gas (LPG) and gasoline, and alternative sources for imports will be sought while Saudi capabilities remain diminished.
Meanwhile, Reuters quoted a Chinese official as saying that Aramco had informed PetroChina that some light crude loadings for October would be delayed by around 10 days as a result of the outage, while some light September ship- ments would be replaced with heavy crude.™
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w w w . N E W S B A S E . c o m Week 37 18•September•2019