Saudi Arabia’s petrochemicals sector needs a greater focus on specialty chemicals production to drive long-term growth in non-oil exports, Jadwa Investment said in a report Sunday.
The industry sector is not highly integrated into the wider Saudi economy currently, as petrochemical output mainly focuses on basic (or commodity) chemicals with very little specialty chemicals.
“The creation of a downstream specialty and end product sector is vital in establishing a higher value adding manufacturing base,” analysts as Jadwa said.
Nevertheless, several initiatives and projects are being implemented under the kingdom’s National Transformation Plan 2020 and Vision 2030 initiatives, in order to push the sector towards increased downstream specialty and end product capacity.
One example is an industrial clusters program that aims to build up expertise in plastic processing, technology and conversion.
Another is the Petrochemical Technology Strategic Plan (PTSP), which aims to develop the sector’s indigenous technological capability, research and invention.
However, these targets come at a time when the sector is already facing several challenges, such as a steep drop in international chemical prices since mid-2014, higher domestic feedstock prices, and tougher global competition.
The petrochemical industry also has to contend with lower profitability and slower growth forecasted for China’s economy between 2017 and 2021, Jadwa said.
Moreover, while a large number of job opportunities for Saudis are likely to be created by several projects coming on-line, the insufficient number of qualified Saudi workers will also remain a challenge for the sector, the advisory firm added.
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