Analytical Instrumentation

  • Why Has Aramco Halted Its $20 Billion Petrochemical Plant?

Why Has Aramco Halted Its $20 Billion Petrochemical Plant?

Sep 26 2020 Read 369 Times

The COVID-19 pandemic has sent shockwaves through the energy industry and Saudi Aramco hasn’t escaped the wrath. Following the global oil price crash, the multinational petroleum and natural gas company has shelved plans to launch a series of petrochemical and gas projects worth a cool US$20 billion.

Cutting back on major investments is a key part of the company’s plans to safeguard its dividend. Over the coming years Saudi Aramco has pledged to continue paying its US$$75 billion dividend, despite the turbulent state of the energy industry. While the multi-billion dollar projects would have significantly boosted capacity to transform crude into chemicals, paying out stakeholders and protecting the company from future oil price crashes has been deemed more important.

All Saudi Aramco investments under review

In addition to abandoning the major project set to be constructed on the Red Sea coast, Saudi Aramco is reviewing the purchase of a 25% share in a Texas liquefied natural gas terminal owned by Sempra Energy. Inside sources reveal the company has already withdrawn several staff, with warnings additional cuts could be on the way. Other suspended projects include a refining and petrochemicals complex in China worth an estimated US$10 billion.

“There is excess supply in the oil market, and full recovery may not happen until 2022,” says Mazen Al Sudairi, head of research at financial services company, Al Rajhi Capital. “It makes sense to cut capital expenditure.”

Postponing the petrochemical and gas projects will be a major setback for the company, which planned to double refining capacity and heavily invest in its downstream unit. “It was part of their future plan to protect oil demand and their downstream business,” explains Robin Mills, founder of energy consulting and advisory service, Qamar Energy.

Saudi Aramco commits to protecting dividend

The decision to slash investment and commit to the US$75 billion dividend is a stark contrast to action taken by rivals such as Royal Dutch Shell and BP. In response to COVID-19 both oil majors have drastically reduced shareholder payouts.

Want to know more about how the energy industry is adapting to the post-COVID landscape? Featuring insight from Stephen B Harrison on behalf of ABB Measurement & Analytics, ‘Digitalisation Transforms Refinery Emissions Monitoring and Combustion Control Gas Analysis’ spotlights the innovative digital solutions being used to cut costs in refineries and gas processing terminals.

Reader comments

Do you like or dislike what you have read? Why not post a comment to tell others / the manufacturer and our Editor what you think. To leave comments please complete the form below. Providing the content is approved, your comment will be on screen in less than 24 hours. Leaving comments on product information and articles can assist with future editorial and article content. Post questions, thoughts or simply whether you like the content.

Post a Comment





Digital Edition

Petro Industry News September 2020

September 2020

In This Edition Fuel For Thought - DKSH extends partnership with Bruker in China - Will insurers mandate digital ecosystems for energy assets by 2025? - XOS heads to Mars Analytical Inst...

View all digital editions

Events

Offshore Energy 2020

Oct 27 2020 Virtual & Amsterdam, Netherlands

OGT EXPO 2020

Oct 28 2020 Ashgabad, Turkmenistan

Thailand Lab 2020 - NEW DATES

Oct 28 2020 Bitec Hall, Bangkok, Thailand

View all events