Saudi petchem producers expect increases in production costs
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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