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Building the twin cities of Yanbu and Jubailby Jyotsna Ravishankar on Oct 24, 2012
While Riyadh is the administrative and political capital of Saudi Arabia, and the vast desert provinces of the east and southeast are home to its oil wealth, it is the two coastal cities of Jubail and Yanbu that form the country’s industrial heart.
Jubail, on the Arabian Gulf and Yanbu, on the Red Sea have driven the industrialisation of the Kingdom since 1975, and it is here where the current surge in local and foreign investment in the non-oil economy is most evident.
Jubail and Yanbu, which contribute 11.5 per cent of Saudi Arabia’s nonoil GDP, is an example of Gulf countries trying to diversify their economies away from oil production.
The Kingdom of Saudi Arabia established the Royal Commission for Jubail and Yanbu (RCJY) about 35 years ago for the purpose of creating major industrial hubs. During the initial stage, these two industrial cities’ developments were oil-based.
Today, investment and development sector priorities have been diverted to petrochemical, gas, and downstream areas and the results are staggering. Total investments in Jubail and Yanbu have grown to more than $130 billion.
“Evidence of the Royal Commission’s success in building the integrated Global Petrochemicals Hub can be seen in the presence of about 300 petrochemicals and related companies in the region, creating precious jobs,” says Dr.Alaa Nassif, H.E Executive President of Royal Commission for Jubail and Yanbu speaking exclusively to Refining and Petrochemicals Middle East.
In Yanbu, the $5.3 billion Yanbu National Petrochemicals Co. (Yansab) with an annual production capacity of 4 million tonnes of petrochemicals is already in operation. Two new refineries are in the pipeline too, one each at Jubail and Yanbu.
A new joint venture chemical complex, Sadara Chemical Company is being constructed in Jubail Industrial City 2 and Saudi Kayan Petrochemical Company has moved into its commercial phase and has commenced production.
However, much of the petrochemicals and refined crude products produced in Jubail and Yanbu is primarily destined for export. Dr. Alaa says he is keen to see more value add industries move closer to the production hubs.
“The RCJY is indeed keen for more of the intermediate feedstock’s produced at Jubail and Yanbu to be used on site. The RCJY made a study on the existing products and decided that it would be economical to have more downstream industries that use the output of primary industry.
Both Jubail and Yanbu master plan review exercise has been currently undertaken and a part of this work is to review the current feedstock profile and make the needed adjustments in the industrial profile.”
He also said there was mounting interest and increasing government support for adding as much value as possible to petroleum products domestically. “The cities are set to lead the country’s industrialisation agenda for many years to come.”
“In fact, this success prompted the Royal Commission to launch Jubail 2 and Yanbu 2 in 2006 to meet projected demands in the coming decade, “ Dr. Alaa said.
But Saudi Arabia much like the entire Gulf region has a booming petrochemical industry owing to cheap feedstock. Ethane, when available, costs about $0.75 a million BTUs, compared with a much higher cost elsewhere in the world.
There is an increased interest in alternative feedstock such as propane, butane, natural gasoline and naphtha. The cost of these products is based on international prices, but with the handling and shipping costs removed, industries still gain a reduction of about 30 per cent by being based in Saudi Arabia.
With all of these advantages, Yanbu and Jubail are unsurprisingly at the heart of petrochemical production.
“The impact of Jubail and Yanbu’s influence on the petrochemicals market will no doubt continue to grow.” Dr. Alaa says. He further explains that Jubail and Yanbu being one of the world’s lowest cost production sites doesn’t hurt.
However the RCJY is not sitting complacently with the cheap feedstock, they have developed the cities infrastructure exponentially to keep the competitive edge.
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