Over the past 40 years, the industrial cities of Jubail and Yanbu in Saudi Arabia – run by the Royal Commission for Jubail and Yanbu (RCJY) – have grown into one of the world’s largest refining hubs and one of the kingdom’s favoured locations for new industrial development.

The cities contain Saudi Arabia’s leading petrochemical and minerals clusters and are a main contributor to the country’s economic growth. Jubail is home to Sadara Chemical Company (Sadara), the world’s largest chemical complex ever built in a single phase, while Ras Al Khair is building the world’s largest aluminium smelter – and Saudi Arabia’s first. The smelter is the cornerstone of Ras Al Khair Industrial City, which is fast becoming the country’s aluminium and phosphate centre, 90 km north of Jubail.

It is estimated that the RCJY accounts for 65 per cent of industrial investment in the entire Gulf region and has a 20.2 per cent average annual growth rate in terms of foreign direct investment (FDI).

According to Yanbu Industrial City Economic Review, Jubail and Yanbu currently produce approximately 10 per cent of the world’s petrochemicals production. RCJY, which is also now developing Ras Al Khair Industrial City, together contributes SR144.7 billion or around 12 per cent to the kingdom’s GDP and to 65 per cent of the domestic industrial output.

The cities’ combined output of petrochemical and refining products, among other items, feed the needs of local industries, leaving large volumes for export. They are responsible for more than 71 per cent of total Saudi exports, while the non-oil  exports of the commission cities  amount to 85 per cent of  all kingdom exports in that category.

The two cities are also home to some 630 manufacturing enterprises of which some 98 products have been deemed to be “essential” and the kingdom has benefited from the transfer of technology.  Jubail and Ras Al Khair currently employ an estimated 140,000 people, which is predicted to rise to 190,000 by 2021.

RENEWED THRUST VIA NTP

The cities’ development story got a further push in June this year, when the Saudi government set the second highest budget for RCJY at SR41.5 billion ($11.06 billion) along with tough targets, as it rolled out the National Transformation Program 2020 (NTP) across 24 Saudi governmental bodies.

Among the targets that has been set under the NTP for the RCJY, the most important ones include: increasing the number of value-added manufacturing products by 19 per cent from 432 to 516 different products; increasing RCJY’s cities industrial production by 23 per cent from 252 million tonnes to 309 million tonnes; and increasing the private sector’s new investments in industrial cities by 55 per cent from SR681 billion to SR1.07 trillion.

In order to achieve these targets the government is considering many initiatives that are aimed to improve work efficiency and life conditions in the industrial cities, including building new residential, educational, entertainment, logistic and commercial complexes, which explain the large allocation of the NTP budget.

Saudi Arabia is determined more than ever to improve its value-added manufacturing base by depending on the industrial cities and the competitive advantage that it has on the petrochemical downstream activities, said Al Tamimi & Company in a report.

Significant initiatives include the development of new infrastructure in Yanbu Industrial City (including localising the renewable energy and rubber industries and establishing industrial gas and steam networks), Jubail Industrial City and Ras Al Khair Industrial City.

Downstream speciality chemicals: critically important

To continue the development work of Jubail and Ras Al Khair industrial cities, the RCJY recently awarded a five year contract extension to Bechtel, which has worked on the Jubail project since it began in the mid-1970s.

“Bechtel is a key part of our team and they have played a major role in helping us to plan and implement the growth of Jubail and Ras Al Khair,” said Dr Mosleh Al Otaibi, CEO, Royal Commission for Jubail. “With their help and partnership we will continue to develop these cities which support Saudi Arabia’s economy.”

Over the next five years, Bechtel’s work will focus on providing residential accommodation and education facilities such as an 18,000-student ‘greenfield’ university as well as roads, bridges, medical centers, and power, water and waste facilities.

SPECIALITY CHEMICALS

One of the biggest elements of the RCJY’s budget under the NTP is for developing value-added manufacturing and transformation products. Currently the limited chemical conversion industrial base in the Eastern Province means that most relevant petrochemical output is used for basic chemicals and polymers and only relatively small amounts of speciality chemicals and end use products are produced. The establishment of a downstream speciality chemicals and end use product sector is seen as critically important in establishing a higher added-value manufacturing industry, the report observed.

Towards that, projects of the Sadara petrochemical complex in Jubail, a $20 billion joint initiative between Saudi Aramco and The Dow Chemical Company, are nearly complete and will begin supplying to global markets including China where there is a particular appetite for plastic products which Sadara will help satisfy.

The Sadara complex, located in Jubail Industrial City II, launched its first production plant in December last year.  Its first product – linear low density polyethylene (LLDPE) – was produced in the company’s polyethylene plant using proprietary technology from The Dow Chemical Company. In August this year, it started operating its mixed feed cracker (MFC) at the venture’s petrochemical complex in Jubail. The MFC is the only one of its kind in Saudi Arabia and will allow Sadara to produce a diversified range of plastics and chemical products.

It is one of 26 manufacturing units located in the $20 billion Sadara chemical complex in Jubail Industrial City II. Of these units, 14 will deliver products that are completely new to being produced in the kingdom.

“The state-of-the-art MFC allows us to produce our own basic chemicals on-site, and subsequently to convert these basic chemicals into a wide range of value-added plastics and speciality chemicals through our other manufacturing units,” Ziad Al Labban, chief executive officer of Sadara said.

“Sadara’s products will help fill a significant gap in a regional chemical industry dominated by commodity products, with less than 1 per cent of petrochemical production currently defined as speciality chemicals,” he added.

“The introduction of the speciality petrochemicals and chemicals will help support the drive to broaden the secondary and tertiary petrochemical manufacturing landscape in Saudi Arabia, thus making the kingdom a leading cornerstone to meet the growing demand for speciality products locally and regionally,” he concluded.

In addition to supplying international markets, Sadara’s products will be utilised for downstream applications by investors located in the adjacent PlasChem Park, a collaborative effort between Sadara and the RCJY, generating unprecedented investment, innovation, economic growth and thousands of jobs.

NEW OPPORTUNITIES

The massive projected budget of the RCJY under the NTP and the targets of diversifying into transformation industries with the support services required for greater infrastructure and more workers should result in many opportunities throughout Eastern Province.

In August 2016,  in line with Vision 2030 the RCJY signed 24 contracts with up to 16 private sector investors for the development of commercial centres, hotels, housing, clinics and other projects in Jubail and Ras Al Khair Industrial Cities with a total value of over SR1.26 million.

Investments are taking the form of joint ventures and/or public private partnerships and many opportunities can be expected particularly in the energy, education, housing and municipal services, transportation and oil and gas sectors.

It is also expected that there will be a number of privatisations with related opportunities for foreign and local investors, lenders and advisers.

Earlier, in May, the RCJ signed five new contracts for projects in Jubail Industrial City  worth SR735 million, occupying a total area of 364.509 sq m.

Abdulaziz Attragi, RCJ general manager of strategic planning, signed the deals, which will create nearly 308 job opportunities. One of the deals is for Sipolet Saudi Arabian Co Ltd, which is related to the establishment of a facility to carry out the works of examination, observation and inspection of crude oil and chemicals.

As per the other deals, Al-Mubdee Company for Chemical and Industrial Services will establish a factory for the production of speciality chemicals and providing industrial services.

Zai Gulf Co Ltd will open a factory for the production of speciality chemicals, while Rafako Middle East Ltd’s operations will recycle rubber ethylene and produce main polymers compounds.

Yet another contract was signed with the aim of establishing a factory for the production of chemical analysis devices.

Commenting on the new deals, Attragi said: “These projects reflect the new strategy of the RCJ in promoting industries, industrial services and modern electronic devices, with a view to meeting the needs of citizens and residents in Jubail.”

On June 1, Veolia and OGE announced signing of MOU to build own and operate a hazardous waste landfill, recycling and incineration plant in Jubail. The agreement will reach a total investment of $100 million and the construction is expected to start by Q1 2017.

Veolia will operate the integrated hazardous waste treatment plant that will serve Jubail. Its expertise in this area will support the RCJY to comply with their regulations, standards and guidelines to control substances  discharged, and deposited within the industrial cities.

According to the estimates of the RCY, Yanbu Industrial City has achieved investments of SR309 billion ($82.64 billion) which includes aggregate investment SR59.63 billion and private sector aggregate investment of SR249.408 billion. 

King Abdullah City for Atomic and Renewable Energy is working with the RCJY on a solar energy project with 50MW capacity.  Yasref –a joint venture of Saudi Aramco and Sinopec–has implemented technology licensed by Chevron Lummus Global (CLG)–a joint venture of CB&I and Chevron–in the hydrocracker of its 400,000-bpd refinery along the Red Sea in Yanbu Industrial City.