Saudi Arabia’s downstream expansion strategy

Saudi Arabia

Moosa Al Moosa, president of Dow, Middle East and Turkey, talks to The Energy Year about recent developments in the global petrochemicals market and the main drivers of Saudi Arabia’s downstream expansion strategy. Dow is a material science enterprise with an extensive portfolio of plastics, industrial intermediates, coatings and silicones.

How would you assess the global petrochemicals market in 2022?
Undoubtedly, 2022 proved to be an interesting year for the global chemicals market. The first half saw robust demand for chemical products, resulting in many companies announcing record earnings.
However, starting in August 2022, the industry faced new hurdles brought on by high energy prices, inflation, rising interest rates and geopolitical events. Europe was particularly hit hard by these challenges, as demand for chemicals plummeted significantly, causing industry operating rates to decline.
As the year progressed into the fourth quarter, de-stocking trends emerged, with the obstacles facing the chemical industry anticipated to persist into the first half of 2023. It remains too early to determine if the rising energy prices in Europe have caused a structural shift in production costs.
Simultaneously, the elevated and volatile energy prices in Europe present an opportunity for the Middle East, particularly the GCC, to capitalise on their lower energy costs.

What are the main drivers of Saudi Arabia’s downstream expansion strategy?
The kingdom’s commitment to investing over USD 100 billion in liquid-to-chemical projects, which aim to expand downstream capacity over the next decade, is truly significant. This expansion is driven by two primary factors.
First, it is projected that by 2030, a third of the world’s oil demand will stem from petrochemicals, ultimately reaching approximately 50% by 2050. The kingdom is well-equipped to fulfil this growing demand.
Second, as the global community shifts towards renewable energy for electricity generation, Saudi Arabia recognised the importance of prioritising energy security alongside the energy transition. Despite this shift, oil companies within the kingdom remain among the lowest carbon emitters. Ongoing efforts to further reduce their carbon footprints will, in turn, lead to an inevitably larger downstream market share.

What is the impact of Saudi Arabia’s downstream expansion strategy on its carbon footprint?
It is important to highlight that the majority of carbon emissions stem from burning oil, as opposed to oil production. In the kingdom, liquids-to-chemicals projects help manage and mitigate Scope 3 carbon emissions by avoiding oil combustion.
The introduction of advanced technologies for decarbonising chemical production further decreases the carbon footprint. A cornerstone of the kingdom’s downstream strategy is to use mixed-feed crackers to produce petrochemicals. The ground-breaking Sadara project, a USD 20-billion joint venture between Dow and Saudi Aramco, was the region’s first mixed-feed cracker. Traditionally, all crackers in Saudi Arabia were fuelled by ethane or propane.
To complement the Sadara project, the PlasChem Value Park was established in close proximity and is a unique opportunity to enhance the value of petrochemical production and further reduce carbon emissions.

How does Dow plan to play a central role in the region’s gas-purification demand?
We recently announced a joint venture with our local partner, Al Hejailan Group, to design, build and operate a methyl diethanolamine (MDEA) plant in Jubail’s PlasChem Park.
By locally producing MDEA, which is currently imported from outside Saudi Arabia, we aim to address the growing demand for natural gas purification within the country and the broader Middle East region. Construction is slated to commence in 2024, with MDEA production expected to be operational by 2025.
This joint venture will support a future facility wholly owned and operated by Dow, producing high-performance gas-treating derivatives in turn. Essentially, our facility will enhance the MDEA into a premium, differentiated Dow UCARSOL product, which will facilitate gas purification by removing carbon.
Dow is dedicated to maximising the value of the MDEA molecule locally and is committed to supporting the country’s decarbonisation efforts.

What is Dow’s strategy for reducing carbon emissions?
Dow intends to be carbon neutral by 2050. In line with this commitment, we have taken several concrete steps to lower our carbon footprint. Between 2005 and 2020, we reduced our global carbon intensity by 15%. We aim to continue this progress by cutting another 15% between 2020 and 2030 by lowering our carbon emissions by about 5 million tonnes.
This will be achieved by optimising our assets, which includes the construction of a net-zero (Scopes 1 and 2 emissions) ethylene cracker and derivatives facility in Canada while retrofitting the existing site to net-zero. Additionally, Dow is increasing its use of clean energy and developing lower carbon emissions manufacturing technologies.

What are the challenges for Saudi Arabia with respect to increasing its attractiveness to foreign investors?
Public policy holds a crucial position in attracting foreign direct investment and promoting economic growth. An investor-friendly tax policy and government incentives, such as the USA’s Inflation Reduction Act, can serve as a catalyst for companies to consider investing in a particular market.
In Saudi Arabia, the implementation of a free zone model, similar to those in other GCC countries, can greatly improve the supply chain and logistics, leading to logistical and economic benefits and increased competitiveness.
Additionally, fair trade policies can protect local investments and domestic production, as seen with the increase in exports to Europe, Africa and the Middle East from Asia during China’s lockdown, which led to products being sold at much lower prices in our region. Currently, anti-dumping legislation is coordinated at the GCC level, and there is a need for a quicker reaction time to address such issues in a timely manner.
In terms of financing, Saudi Arabia has made significant progress, with the SIDF (Saudi Industrial Development Fund) providing support to companies such as Dow.

How will your R&D centre in Saudi Arabia impact your business operations?
Our Middle East Innovation Centre, which serves the entire Middle East and Africa region, boasts unparalleled R&D and digital capabilities. The centre is poised to play a significant role in our investment strategy.
Investment, however, extends beyond merely allocating assets on the ground; it necessitates the provision of technical services, cooperating with partners and the deployment of people to ensure the qualification and optimisation of products. Our business revolves around providing solutions rather than simply selling products.

What is Dow’s stance on promoting a diverse and inclusive workplace, and how have these efforts contributed to the company’s success?
Dow’s stance on promoting a diverse and inclusive workplace is deeply rooted in our commitment to putting people first. We understand the value of having employees with different perspectives and backgrounds, and we actively strive to cultivate an environment that fosters inclusion, diversity and equity.
We believe creating a sense of belonging and mutual respect empowers our team to tackle challenges and exceed customer expectations more effectively.
Our commitment to diversity and inclusion is reiterated by our efforts to empower women within the company. At Dow, we work diligently to create a supportive atmosphere where women can thrive professionally.
We are proud that our efforts have resulted in numerous recognitions, including being named a Great Place to Work in Saudi Arabia for four consecutive years (2020-2023) and being acknowledged as one of the GCC’s best workplaces for women in 2022.

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