Total Energies to Invest $11 Billion in Saudi’s Petrochemicals

The French Energy giant Total Energies has taken a Final Investment decision(FID) to build the largest petrochemical facility in Saudi Arabia. 

According to a statement issued on Thursday, the deal worth $ 11 billion will be funded by Total Energies and Saudi Aramco. The statement said $4 billion of the planned investment will be funded through Equity by Aramco (62.5%) and Total Energies (37.5%). 

Total Energies’ investment in the petrochemical industry has widely been viewed as another response to the increasing pressure on Oil Companies and refinery giants to adopt environmentally sustainable solutions. 

If approved, the “Amiral” complex will be owned, operated, and integrated with the existing SATORP refinery located in Jubail on Saudi Arabia’s eastern coast.

Refineries like SATORP are trying to find ways of turning crude oil into petrol chemicals amidst shifting demand for fossil fuels. 

According to Total Energies and Saudi Aramco the petrochemical facility will enable SATORP to convert internally produced refinery off-gases and naphtha, as well as ethane and natural gasoline supplied by Aramco, into higher-value chemicals.

Saudi Aramco Chief Executive Officer Amin H. Nasser said the investment provides an opportunity for us to showcase cutting-edgel for cutting-edge liquids to chemicals technologies that support the circular economy. 

“With this collaboration we aim to expand the value chain by producing advanced chemicals more efficiently than ever before, accelerating industrial progress in the Kingdom,” said Amin H. Nasser.

While Patrick Pouyanné, Chairman and Chief Executive Officer of Total Energies said “We are delighted to write a new page of our joint history by launching this expansion project, building on the successful development of SATORP, our biggest and most efficient refining & petrochemicals platform in the world,” 

He said the planned petrochemical world-class complex also fits with the company’s strategy to expand sustainably in petrochemicals by maximizing the synergies within its major platforms.

The SATORP refinery plant owners can profit from the valuable high-quality product known as naphtha. Naptha is expected to replace the common dilutants like natural-gas condensate and light crude which were key in the transportation of heavy crude oil.

It is predicted that the energy transition will reduce demand for oil products but increase opportunities to capture the growing demand for petrochemicals like Naptha.

According to the June 2022 analysis by a global management consultancy- McKinsey & Company, the transportation sector is likely to be affected as countries focus on electric vehicles.

Consumption of petrol or gasoline is expected to decline because it is primarily used for light-duty passenger vehicles at a time when the market for those vehicles is shifting to electric ones.

On the other hand, demand for petrochemical feedstocks will continue to grow according to McKinsey & Company demand for the major oil-derived petrochemical feedstocks are ethane, liquid petroleum gas (LPG), and naphtha is likely to go up. 

These are primarily used in the production of polymers for plastics, synthetic fibers, and other petrochemical intermediates. Demand for these products will continue to grow with rising global wealth. 

These two developments pose a dual challenge for the world’s more than 600 refiners.

According to McKinsey and Company, lower overall demand for gasoline means less need for refining capacity.  

Total Energies FID with Saudi Arabian Oil Company (“Aramco”) comes as major players in oil refining are seek for new technologies to move directly from crude oil to petrochemicals without using traditional refining technologies.

Saudi Aramco is aiming for a target of 70 to 80 percent chemicals for each barrel of crude.

The complex will comprise of a mixed feed cracker capable of producing 1.65 million tons per annum of ethylene, the first in the region to be integrated with a refinery. It will also include two state-of-the-art polyethylene units using Advanced Dual Loop technology.

Its construction is scheduled to begin during the first quarter of 2023 with commercial operation targeted to start in 2027. Uganda is one of the countries that are planning to construct a refinery to process part of the crude oil to be extracted from the Tilenga and Kingfisher projects.

There have been fears that with the energy transition debate, the planned refinery could turn into a stranded asset. Technology similar to what will be applied by Saudi Aramco in the SATORP refinery could reignite debate in Uganda on whether to invest $4 billion for the Kabaale refinery.   

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