BMI's Executive Summary

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BMI's latest Saudi Arabia Petrochemicals Report warns that a lack in ethane feedstock and a possible downturn in Chinese demand could hinder plans to raise ethylene and polymer production capacities to 19.67mn tpa and 11.57mn tpa respectively by 2012. A number of polymer plants are due to come onstream in 2008, raising polyethylene (PE) capacity by 3.28mn tpa and polypropylene (PP) capacity by 1.65mn tpa. Also in 2008, ethylene and propylene production capacity will be increased by 2.6mn tpa and 400,000tpa respectively at the Yanbu and Sharq complexes. Our projections for petrochemical capacity after 2008 are based on currently planned projects, but it is possible that some may not come to fruition due to the restriction on ethane feedstock and a possible downturn in the Chinese market at a time of rising Chinese capacities.

Analysts fear that the availability of the sector's preferred feedstock, ethane, could decline. The requirements of planned projects in the Kingdom exceeds the level of feedstock available over the forecast period, unless the gas production capacity is substantially increased, which is unlikely in the next five years. Other sources of feedstock will have to be used, pushing up plant costs and threatening to make some projects unviable. With the government preferring joint ventures between foreign and local firms and placing an emphasis on captive use of olefins for derivative production and diversification, it is probable that some projects could be delayed or scrapped altogether. The Ineos-Delta project at Jubail, which plans to add 1.2mn tpa of ethylene capacity from 2011, is in imminent danger of being shelved if the government continues to delay a decision on ethane allocation. Meanwhile, an economic downturn in China could have a severe effect on the global petrochemicals environment. This is a particular threat to Middle Eastern exporters such as Saudi Arabia that are building up capacity in order to target the country.

Despite the concerns over feedstock and export markets, Saudi Arabia leads BMI's revised Petrochemicals Business Environment Rankings, with a composite score of 74 points, well ahead of the Middle East and Africa average of 56 points. Saudi Arabia constitutes a lucrative investment destination with the world's lowest energy prices for investment projects. Significant investment barriers remain: prominent among these is the Saudisation policy that restricts companies' ability to recruit non-Saudi staff. Visa processing for expatriate employees can also be unnecessarily slow, while many investors report tardy payment when engaged in government contracts. The legal framework for the resolution of commercial disputes is also questionable, with a lack of transparency prevalent. In terms of the regulatory environment of the petrochemical sector, while Saudi Arabia is open to foreign investment in the petrochemicals sector, the government has imposed some conditions on investment which it is able to enforce through ethane feedstock allocations. The country's investment guidelines in the petrochemical sector emphasise diversification, value-addition and Saudisation of the workforce. The government wants to encourage greater captive use of olefins in petrochemicals mega-complexes in order to increase the exportable value of petrochemicals products and to boost local employment.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Saudi Arabia Petrochemicals Industry SWOT

Saudi Arabia Economic SWOT

Saudi Arabia Business Environment SWOT

Chapter 3 - Market Overview

Table: Saudi Arabia - Cracker Capacity 000 tpa

Chapter 4 - Business Environment

Petrochemicals Business Environment Rankings

Business Environment Rankings

Country Composite Risk Rating

Domestic Feedstock Availability

Petrochemicals Production

Petrochemicals Competitive Environment

Chapter 5 - Industry Trends and Developments

Projects and Expansions

SABIC

Other Projects

Finance

WTO Accession

Saudi-China Links

Industry Developments – Related Industries

Chapter 6 - Industry Forecast Scenario

Table: Saudi Arabia Petrochemicals Sector – Historical Data & Forecasts

Key Risks To Forecast Scenario

Chapter 7 - Economic Outlook

Bullish on Saudi Growth

Table: Economic Activity

Foreign Direct Investment

Chapter 8 - Company Monitor

Sabic

Royal Dutch Shell

ExxonMobil

Sipchem

ChevronPhillips

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Chemicals & Petrochemicals Industry

Cross checks

Competitive Landscape for Middle East & Africa Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.