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The Saudi Energy and Petrochemical Industry

1. Energy and petrochemical industry in Saudi Arabia

Saudi Arabia is one of the world's major oil and gas producing countries. The country's oil reserves are estimated to be the second largest in the world, and its natural gas reserves are ranked fourth globally. The country's energy sector is managed by the state-owned Saudi Aramco.
In recent years, the Saudi government has been investing heavily in the energy and petrochemical industry. The country has set up several special economic zones (SEZs) to attract foreign investment in this sector.

The Tadawul All-Shares Index (TASI), which is the main stock index of the Saudi Stock Exchange, includes companies from the energy and petrochemical sector. As of March 2020, TASI had a market capitalization of SAR 2.96 trillion (US$ 790 billion).

The Saudi petrochemical industry is one of the most vibrant in the world, with several companies listed on the Tadawul. The biggest of these are Saudi Basic Industries Corporation (SABIC) and Saudi Arabian Oil Company (Aramco). Other major companies in this sector include Saudi Kayan, Petro Rabigh, Yansab, and Sadara Chemical Company.

1. 1 Oil production

Saudi Arabia is the world's largest oil producer, with an production capacity of 12 million barrels per day (bpd). The majority of the country's oil reserves are located in the Eastern Province.

The country's oil exports are primarily shipped through the Red Sea port of Yanbu and the Persian Gulf port of Ras Tanura. In 2019, Saudi Aramco exported about 7 million bpd of crude oil through these two ports.

1. 2 Natural gas production

Saudi Arabia has the fifth largest reserves of natural gas in the world. The country's current production capacity is about 2.5 billion cubic feet per day (bcfd).

Most of Saudi Arabia's natural gas reserves are located in non-associated gas fields in the Eastern Province, with smaller reserves in other parts of the country.

The majority of natural gas production is used for power generation, with a small amount used for industrial purposes and domestic consumption.

1. 3 Electricity generation

Saudi Arabia has a total installed electricity generation capacity of about 77 gigawatts (GW). The majority of this capacity is thermal power, with a smaller amount coming from hydropower and renewables.

Most of Saudi Arabia's electricity is generated by natural gas-fired power plants. In 2019, about 62% of electricity was generated from natural gas, with the remaining coming from oil (36%), renewables (1%), and other sources (1%).

The Saudi government has set a target to increase renewable energy's share of electricity generation to 9% by 2023.

1. 4 Refining capacity

Saudi Arabia's refining capacity is currently the fourth largest in the world, at about 4.9 million bpd.

The majority of Saudi Arabia's refining capacity is located in the Eastern Province, with the rest in the central and western regions of the country.

most of Saudi Arabia's refined products are consumed domestically, with a small amount exported to other countries in the region.

1. 5 Petrochemical production

Saudi Arabia is one of the world's leading producers of petrochemicals. The country's petrochemical industry is dominated by Saudi Basic Industries Corporation (SABIC).

As of 2019, Saudi Arabia had a total installed capacity of about 62 million metric tons per year (MMt/y) of ethylene, which is the building block for most petrochemicals.

The majority of Saudi Arabia's ethylene capacity is located in the Eastern Province, with smaller plants in other parts of the country.

In addition to ethylene, Saudi Arabia also has significant capacity for the production of propylene (19 MMt/y), benzene (8 MMt/y), and toluene (6 MMt/y).

2. Saudi Basic Industries Corporation (SABIC)

SABIC is a leading global producer of chemicals, plastics, and fertilizers. The company is headquartered in Riyadh, Saudi Arabia, and has operations in over 50 countries around the world.
SABIC was founded in 1976 as a result of a government initiative to diversify the Saudi economy away from its reliance on oil exports. The company is majority owned by the Saudi Arabian government, with minority stakes held by private investors.
SABIC is listed on the Tadawul All-Shares Index (TASI) and has a market capitalization of SAR 168 billion (US$ 45 billion).
The company's major shareholders are the Public Investment Fund (PIF) (70%), Social Security Organization (5%), and other institutional investors (25%).
SABIC's product portfolio includes chemicals, plastics, fertilizers, metals, and industrial gases. The company's products are used in a wide range of applications, including packaging, agriculture, automotive, construction, electronics, and healthcare.
In 2019, SABIC posted sales of SAR 139 billion (US$ 37 billion) and net income of SAR 11 billion (US$ 3 billion).
SABIC has a workforce of about 60,000 employees worldwide.

2. 1 Company history

SABIC was founded in 1976 as a result of a government initiative to diversify the Saudi economy away from its reliance on oil exports. The company was established as a joint venture between the Saudi Arabian government and Royal Dutch Shell.
The company's first production facility was built in Jubail Industrial City in the Eastern Province of Saudi Arabia.
In the 1980s, SABIC expanded its operations to other countries in the Middle East and Asia. The company also started to vertically integrate by acquiring downstream businesses.
In the 1990s, SABIC began to expand its operations globally, with a focus on Europe and North America. The company also started to diversify its product portfolio by moving into new business areas such as metals and industrial gases.
In 2000, SABIC acquired Saudi Petrochemical Company (SADAF), which gave the company a leading position in the Saudi petrochemical industry.
In 2005, SABIC acquired Netherlands-based DSM NV, which strengthened the company's position in the European market.
In 2011, SABIC acquired Huntsman Corporation's global polyurethanes business. This acquisition strengthened the company's position in the global plastics industry.

2. 2 Business segments

SABIC has four business segments: chemicals, plastics, fertilizers, and metals.

The chemicals segment is the largest, accounting for about 60% of sales. The segment's products are used in a wide range of applications, including packaging, agriculture, automotive, construction, electronics, and healthcare.
The plastics segment is the second largest, accounting for about 20% of sales. The segment's products are used in applications such as packaging, construction, automotive, and electronics.
The fertilizers segment is the third largest, accounting for about 10% of sales. The segment's products are used in agriculture and horticulture.
The metals segment is the smallest, accounting for about 10% of sales. The segment's products are used in a wide range of applications, including construction, automotive, and electronics.

2. 3 SABIC's Saudi Kayan project

SABIC is currently developing the Saudi Kayan project, which is a joint venture with Saudi Aramco. The project's aim is to produce ethylene, propylene, and other chemicals from natural gas. The project is located in Jubail Industrial City in the Eastern Province of Saudi Arabia.
The project's total investment cost is estimated to be SAR 45 billion (US$ 12 billion). The project is expected to be completed in 2025.

3. Saudi Arabian Oil Company (Aramco)

Aramco is a leading global oil and gas company. The company is headquartered in Dhahran, Saudi Arabia, and has operations in over 50 countries around the world.
Aramco was founded in 1933 as the Arabian American Oil Company. The company's name was changed to Saudi Arabian Oil Company in 1988.
Aramco is majority owned by the Saudi Arabian government, with minority stakes held by public investors.
Aramco is listed on the Tadawul All-Shares Index (TASI) and has a market capitalization of SAR 2.4 trillion (US$ 640 billion).
The company's major shareholders are the Public Investment Fund (PIF) (70%), Social Security Organization (5%), and other institutional investors (25%).
Aramco's business segments include upstream, downstream, trading, and shipping.
In 2019, Aramco posted sales of SAR 1.23 trillion (US$ 327 billion) and net income of SAR 256 billion (US$ 68 billion).
Aramco has a workforce of about 76,000 employees worldwide.

3. 1 Company history

Aramco was founded in 1933 as the Arabian American Oil Company. The company was established as a joint venture between Standard Oil Company of California (now Chevron) and Texaco (now ExxonMobil).
The company's first production facility was built in Dhahran, Saudi Arabia.
In 1948, the Saudi Arabian government acquired a 30% stake in the company. In 1960, the government increased its stake to 60%. In 1973, the government acquired a 100% stake in the company.
In 1988, the company's name was changed to Saudi Arabian Oil Company.
In 2017, Aramco announced its intention to list on the stock exchange. However, the IPO was postponed indefinitely due to concerns about market conditions and valuation.

3. 2 Business segments

Aramco's business segments include upstream, downstream, trading, and shipping.

The upstream segment is the largest, accounting for about 60% of sales. The segment's activities include exploration, production, transportation, and storage of crude oil and natural gas.
The downstream segment is the second largest, accounting for about 30% of sales. The segment's activities include refining, marketing, and shipping of crude oil and refined products.
The trading segment is the third largest, accounting for about 5% of sales. The segment trades crude oil, refined products, and petrochemicals

FAQ

The two companies' core businesses are energy and petrochemical production.

They chose to invest in the energy and petrochemical industry because it is a growing industry with high potential profits.

Their investments have affected their respective business operations by increasing their production capacity and efficiency.

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