RATIONAL

Leveraging its existing capabilities in upstream chemicals, KSA is well positioned to develop and build capacity in Conversion Chemicals to become a regional and global leader. Conversion Chemicals represents an attractive opportunity for the Kingdom for three main reasons; First, the industry is witnessing increased global and regional demand that the Kingdom can leverage to capture volumes bringing scale to grow to a relevant regional and global market share. Second, conversion Chemicals can contribute to increasing localization in the supply chains of adjacent industries (e.g., Automotive, Food Processing, Pharmaceuticals). Third, the cluster has a stronger value-adding potential than upstream chemicals (Basics and Intermediates), which KSA could leverage to attract different profiles of international players to bring knowledge and technologies to the Kingdom.

Value Proposition

• The global Chemicals market is expected to grow at a 3.7% CAGR, doubling production volumes from 1,870 million ton/year in 2020 to 3,867 milionn ton/year by 2040.

• KSA’s Conversion Chemicals industry is expected to grow to 11.5 million ton/year by 2035

• Access to competitive utility prices.

• The global chemicals market is expected to grow at 3.7% CAGR, doubling production volumes from 1,870 Mn Ton/year to 3,867 Mn Ton/year by 2040.

• Chemical sector is also expected to be a driver of demand for oil & gas, gaining share from all other segments, from ~13% in 2020 to ~31% in 2040.

• As oil demand continues to grow but is expected to peak by 2040, chemicals is becoming a most relevant area of focus for O&G countries and companies.

The Kingdom is home to the Ghawar field, the world’s biggest conventional onshore oil field in terms of reserves and daily output. The oil field has been producing since 1951, and it is estimated to continue pumping oil at its current highest production capacity of 3.8 million barrels a day beyond 2050. Therefore, the country is likely to have a high demand for drilling rigs in the onshore oil and gas operations.

In 2021, Saudi Arabia’s crude oil reserves experienced a slight increase of 0.04%, reaching a total of 37,065 million tons of oil equivalent (TOE) or 267,192 million barrels. However, during the same year, both crude oil production and exports declined. Production dropped by 1.23%, amounting to 462.01 million TOE or 3,331 million barrels, while exports fell by 6.11%, totaling 315.31 million TOE or 2,273 million barrels. This decline was attributed to the economic downturn caused by the global COVID-19 pandemic.

To stabilize crude oil prices, reduce record-high oil inventory levels, and restore global market balance, Saudi Arabia, in collaboration with other OPEC+ members, implemented voluntary production cuts starting in October 2022.

• Growth is driven by Asia, with China alone owning almost half of the market size of global chemical sales by 2030.

• Market growth in value is higher than global production expansion (in value estimated at CAGR of 5.4%) given that portfolio is steering towards more innovative and higher value-added products.

• Global players must prepare to defend their home markets in downstream, but also to develop export platforms for intermediates and integrated downstream portfolios to better value capture and maintain market positions.

The global chemicals market is expected to grow at 3.7% CAGR, doubling production volumes from 1,870 Mn Ton/year to 3,867 Mn Ton/year by 2040

• Regional market is mostly dominated by imports, presenting a good opportunity for KSA to substitute a share of these imports.

• Elastomers and Polyurethanes represents a localization and growth opportunity. Currently imports dominate KSA’s market, but technology and raw materials are available to localize most of the production.

• KSA’s chemicals sector already has a mature Plastics and Non-metallics segment, but there are still growing categories that can be further developed to cover the demand gap (i.e., Engineering plastics for medical equipment parts, electrical components, automotive parts, FRP, etc.).

Proposed growth in conversion chemicals will bring total capacity up to over 8.8 MTPA, with a CAGR of 15.5%.

• KSA’s conversion chemicals capacity will grow by 8.8 Mtpa through 2035.

• By 2035 KSA’s conversion chemicals sector will have gained 15.2% of regional market share.

Demand for selected plastics (reinforced & engineered) is growing at twice the rate metal.

The polyurethane market size in the Middle East and Africa is estimated at US$2.55 billion in 2024, and is expected to reach US$3.28 billion by 2029, at a CAGR of 5.10% during the forecast period (2024- 2029).