MOSCOW (MRC) -- Shutdown of the Abqaiq and Khurais crude oil processing facilities in Saudi Arabia has not only taken 5.7 MMb/d of crude oil production offline - about 7% of global production - but has also cut deeply into the country's supply of petrochemical feedstocks, as per Chemweek.
The ethylene chain, particularly polyethylene (PE) and ethylene glycol (EG), will be most affected, according to analysts at IHS Markit.
The two facilities, owned by Saudi Aramco, were attacked by drones or missiles early on 14 September and subsequently shut down to limit damage.
"Shale has created a sense that there is security - we have too much supply, that there’s abundance, and so on," says Roger Diwan, vice president/financial services at IHS Markit. "We have lost that. It’s back to risk. We need to think of oil in the age of drones and missiles, and that any facility can be hit in the Middle East….We have basically no facilities in the Middle East that are safe now. Abqaiq was a very well-defended piece of infrastructure, and it’s gone."
Multiple Saudi chemical producers have already reported sharp cutbacks in feedstock supply, including Sadara (16%), Yansab (30%), Saudi Kayan (50%), Tasnee (41%), and Sipchem (40%).
"It's a little uncertain on the prioritization of where the feedstocks will go, in terms of how much to chemicals versus meeting other domestic needs," says Dewey Johnson, vice president/base chemicals market research at IHS Markit. “If you pro-rate the production outage at 50%, and said at the moment that 50% of Saudi capacity is hampered, the largest impacts would be in ethylene, polyethylene, and ethylene glycol."
Saudi Arabia has 18 million metric tons/year (MMt/y) of ethylene production capacity, or about 10% of the global total, Johnson noted. "Ethylene is only a few percentage points away from being balanced to tight," notes Johnson. "So how much of that capacity is available or taken off line is critically important."
Saudi Arabia is likewise a major producer of ethylene derivatives, with about 6% of the world's capacity to produce PE, and 16% of the world's capacity to produce EG, key feedstock for polyethylene terephthalate (PET), used to make polyester and PET resin. The country's influence on the global market for these derivatives is further amplified by its export position. In 2018, Saudi Arabia supplied nearly 8% of the world's PE requirements and a whopping 23% of its EG requirements.
The country holds 5% of global propylene production capacity and, downstream, about 9% of the world's polypropylene (PP) capacity. It also accounts for about 5% of global methanol capacity.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,255,800 tonnes in the first seven months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the estimated PP consumption in the Russian market was 796,120 tonnes in January-July 2019, up by 11% year on year. Shipments of PP block copolymer and homopolymer PP increased.
MRC