Saudi Arabia’s preeminent energy companies are negotiating billions of dollars in investments for their Houston-area petrochemicals operations to take advantage of cheap natural gas raw materials produced in West Texas shale fields.
The announcements concluded a three-week U.S. tour by Mohammed bin Salman, Saudi Arabia’s crown prince, culminating in Houston during a boom in U.S. oil and gas production largely driven by West Texas shale drilling. A surge in activity in the Permian Basin and other prolific areas has produced an amplitude of cheap natural gas for petrochemicals manufacturing. Petrochemicals operations have started to replace traditional refining as a driver of crude oil demand. The International Energy Agency anticipates that petrochemicals will account for a quarter of the growth in global oil consumption during the next five years as electric cars and renewables erase the demand for gasoline.
Saudi Basic Industries Corp. (SABIC), the Middle East’s largest petrochemicals maker, has long seen the U.S. Gulf Coast as an area for expansion. The company is working with Exxon Mobil Chemical Co. to build the world’s largest ethane cracker as part of a massive $10 billion petrochemical complex near Corpus Christi. It plans to build a Katy headquarters for its operations in the Western Hemisphere, a project that would increase its Houston-area employees from 400 to 1,000. The company hopes to complete the expansion within two or three years.
Saudi Aramco, the world’s largest oil company, signed two separate agreements with oil-equipment makers TechnipFMC and Honeywell UOP to study their production technologies and potentially build a manufacturing complex on the U.S. Gulf Coast. Saudi Aramco expects to invest between $8 billion and $10 billion dollars in the projects.
Saudi Arabia’s Vision 2030 plan revolves around three main pillars: a vibrant society, a thriving economy, and an ambitious nation. A key part of fulfilling these objectives is to expand investments in the energy sector to shift the country away from an oil-dependent economy. Saudi Arabia’s Public Investment Fund was established with investment in energy modernization as one of its focuses, including a two-way infrastructure to integrate renewable energy sources. The Crown Prince’s visit and these new partnerships with energy companies in Houston underscored that the kingdom is determined to reshape its economy while maintaining a strong Saudi-U.S. business relationship.