Saudi Arabia's Rabigh Refining and Petrochemical Company or Petro Rabigh's second phase expansion project has turned it into one of the strongest "volume growth stories" in the country's chemical industry, UK-based bank HSBC said in a report published Tuesday.
In February 2012, HSBC had said in a report that the Rabigh 2 project may be placed on the back burner, or even shelved with one partner facing financial constraints and the other focusing on other ambitious projects.
Saudi Aramco and Japan's Sumitomo Chemical hold 37.5% each in Petro Rabigh, located at Rabigh on Saudi Arabia's western coast, with the remaining 20% held by the public. While Rabigh 1 is currently operational, Rabigh 2 is under construction.
Petro Rabigh has faced numerous operational challenges since commissioning the plant in 2009. The plant has "struggled with consistently operating the cracker and has had recurring utility problems that have contributed to weak financial performance raised question marks over the viability of Phase 2 and resulted in a delay in implementing the project," HSBC said in the Tuesday report.
"Aramco and Sumitomo Chemical finally decided to move ahead with the project in May 2012. Rabigh 2 has already been allocated 30 mmscfd [million standard cubic feet/day] of ethane, in addition to the 95 mmscfd of ethane already available to Petro Rabigh, taking the total ethane content of the combined entity to 125 mmscfd, the highest single ethane allocation to any chemical project in the Kingdom."
Using 3 million mt/year of naphtha produced at the integrated refinery and petrochemicals complex to produce aromatics at Rabigh 2 will enhance the company's profit margins, HSBC said. "To the extent there is a margin to be made in converting that naphtha into chemical products, the economics for that naphtha production -- currently 18% of the refining slate -- will be impacted positively," it said.
Rabigh 2, being built at Rabigh, is expected come online in 2016 and will have a capacity to produce 1.34 million mt/year of paraxylene and 424,000 mt/year of benzene. The complex will also produce several other products like polyethylene terephthalate, polyether polyols, MTBE, acetone, phenol, acetic acid and nylon-6.
In a statement on the Saudi stock exchange Tadawul last Wednesday, Petro Rabigh said that the project is expected to cost Riyals 32 billion ($8.5 billion).
Petro Rabigh's Phase 1 project has faced continuous financial stress and its quarterly net profits have oscillated widely since being commissioned in 2009.
The company reported a net profit of Riyals 413.1 million ($113 million) for the first quarter of 2014. In the first quarter of 2013, it posted a loss of Riyals 658.1 million. In the fourth quarter of 2013, the Rabigh-based company reported a net profit of Riyals 1.240 billion.
The Phase 1 complex, also at Rabigh on Saudi Arabia's western coast, currently houses a 400,000 b/d refinery, a 1.3 million mt/year ethane cracker, a 300,000 mt/year high density polyethylene plant, a 600,000 mt/year linear low density polyethylene plant, a 600,000 mt/year polypropylene plant and a 700,000 mt/year monoethylene glycol plant.
