The Chemicals industry is an essential part of the Kingdom’s economic diversification. In line with Vision 2030, we have the ambition to further double its value.
Saudi Arabia has already embarked on a transformational program that will generate a significant industrial growth in various sectors, which will be the main driver for the development of the chemicals sector in all segments – basics, intermediates, and specialties.
Furthermore, companies in the chemicals sector can rely on a solid ecosystem including but not limited to universities, research and development centers, suppliers, infrastructure and logistics.
Facts & Figures
Chemicals Value Proposition
Chemicals value proposition:
Saudi Arabia boasts a healthy and established chemicals sector and is investing heavily to grow this industry. Production capacities are growing as is the percentage of the Kingdom’s share in the global chemicals market. KSA is now the global production leader of several key chemical products and benefits from being one of the most cost favorable environments for chemicals businesses to operate in. Increasing global demand and KSA’s efforts to invest in the chemicals industry are just some of the reasons why this sector is expected to double in size by 2030.
The Kingdom also benefits from having an abundant access to raw materials and a high standard of infrastructure that is continuously being improved upon. KSA companies also enjoy access to a comprehensive and established logistics network, placing the
Kingdom in a prime position to serve the increasing demands of Africa, Europe and Asia.
Large domestic sector to experience a significant growth
Saudi Arabia’s chemical market is the largest in the Middle East & North Africa, housing one of the grandest integrated chemical complexes worldwide. In 2016, investments in the sector were 40% higher than any other global market, amounting to SAR 3.75 billion (US $1 billion) and helping production capacity grow by 5%.
The Kingdom now has the 5th largest chemical production market in the world and takes up a 10% share of total global output, generating operating revenues of SAR 170 billion (US $637.5) in 2016. KSA is also the global production leader of several key products, including Ethylene, Glycol, Polyethylene and Methyl tert –butyl Ether (MYBE). Furthermore, Saudi Arabia is one of the most cost efficient places in the world to produce Ethylene, assisting the Kingdom to take a 10% share of total global production.
The chemicals sector is expected to double in size by 2030 due to the increasing demand for basic, intermediate and specialty chemicals. Furthermore, the undergoing industrial growth led by Ministry of Energy, Industry and Mineral Resources (MoEIM) and the diversification of KSA’s economy represent key components that are driving this market forward.
Cost advantages and abundant access to raw materials and infrastructure
Chemicals companies in KSA operate in an industry friendly environment, benefitting from cost competitive advantages, abundant access to raw materials and a well-developed infrastructure.
Costs are favorable due to low feedstock prices, low utility expenses and customs duty exemptions. KSA has a 10% cost advantage for Naphtha when compared to other countries in Europe and the USA. Electricity prices are almost 50% lower than the global average.
Saudi Arabia also has secure access to an abundance of raw materials, being home to more than 25% of the world’s proven oil reserves. This access is also complimented by the existence of key producers like SABIC for chemicals and Saudi Aramco for energy.
Reliable logistical network providing easy access to relevant international markets
Saudi Arabia is strategically located at the crossroads of several markets with a high demand for chemical products. The Asian market size is currently SAR 6.75 trillion (US $1.8 trillion) per year and is expected to grow at rate of 8% annually. European demand currently sits at SAR 2.8 trillion (US $750 billion per year) and is expected to grow at a rate of 4% annually. Whilst in Africa, the market size is valued at SAR 187.5 billion (US $50 billion) and is also expected to increase at 4% annually.
KSA players enjoy access to a comprehensive and established logistics network containing the largest marine network in the Middle East region and the fastest growing port in the world; King Abdullah Port at KAEC. Furthermore, the Kingdom’s logistics network is being improved in line with Vision 2030 goals through modernizing reforms and the assistance of the Public Investment Fund. KSA's chemicals sector exports represent approximately 60% of non-oil exports and are expected to significantly grow as part of the Saudi Export initiative.
Fully developed ecosystem
Saudi Arabia has established a solid ecosystem for the chemicals sector in the city of Jubail, which is the largest industrial city in the Middle East. The Royal Commission for Jubail and Yanbu is responsible for supporting KSA’s chemicals sector through several initiatives. These include talent sourcing through top local universities like KFUPM and through expats relocating to KSA from more than 40 different countries. Research and Development (R&D) and technological innovation are also high on the Commission’s agenda, with Saudi Aramco recently establishing a state-of-the-art research center at King Abdullah University of Science and Technology. Achievements include the development of cutting-edge technologies that enable the production of high tech products for a variety of market applications, such as Linear Alpha Olefin (LAO). The Commission is also responsible for supporting services (e.g. waste management) and has partnered with more than 50 different companies in the city of Jubail alone.
Furthermore, the Commission oversees the rental of land for industrial use, offering very competitive prices ranging from USD 0.27 – USD 4.40 per m2/ year. In short, there are few places in the world offering the kind of investment environment that Saudi Arabia does for the chemicals industry.
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