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Saudi petchem producers expect increases in production costs

by ChemOrbis Editorial Team - content@chemorbis.com
  • 30/12/2015 (14:41)
According to media reports, Saudi Arabia’s petrochemical producers expect to see some increases in production costs after the Saudi government announced increases in fuel, water, electricity and gas feedstocks prices in their newly adjusted budget. Saudi Arabia posted a record $98 billion budget deficit this year due to persistently lower oil prices and is looking to stabilize its financial situation in the face of lower earnings from oil sales.

Higher feedstocks and fuel prices are expected to result in higher production costs in Saudi Arabia’s largely gas-based petrochemical industry, which enjoys having lower costs compared with its rivals in Europe and Asia. As a result of the latest increases, prices for methane and ethane increased to $1.75 and $1.25/MMBtu, respectively, both from a previous level of $0.75/MMBtu. Gas feedstocks costs in Saudi had been among the lowest in the world prior to the recent revision in subsidies.

Saudi Aramco’s chairman Khalid al-Falih commented that Saudi petrochemical producers’ costs may rise to levels closer to those in the US, adding that the Saudi petrochemical sector will adjust to the rise in domestic energy prices and remain competitive. Petrochemical producer PetroRabigh, meanwhile, reportedly said that the government’s recent decision to raise energy and feedstocks costs may cost the company around 300 million riyals ($80 million) in the coming year.

In addition, Saudi Arabia’s leading petrochemical producer SABIC and its affiliates reportedly commented that they expect to see increases of around 5-8.5% in their production costs in the first quarter of next year.
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