July 19, 2021 [Bloomberg] – Company withdraws documents seeking school district tax breaks for projects.
Construction originally targeted to begin in 2020 never started.
Saudi Aramco’s Motiva Enterprises subsidiary has withdrawn documents seeking tax breaks for a new ethane-fed cracker and downstream derivative units adjacent to its refinery in Port Arthur, Texas, indicating the projects have been put on hold, according to sources familiar with company operations.
The latest inactive agreement and project list published in mid-June by the Texas Comptroller’s Office showed Motiva had withdrawn applications for tax breaks from school districts for a $4.7 billion steam cracker to make ethylene, a $1.7 billion aromatics unit that would manufacture benzene and paraxylene, and a $2.72 billion project to build multiple polyethylene units.
The original applications for tax breaks from school districts submitted in November 2018 for the cracker and aromatics unit said that if the company approved the projects, cracker construction would begin in Q1 2020 with completion in Q4 2024, and construction on the aromatics unit would begin in Q2 2020, followed by completion in Q4 2022. A later update on the aromatics unit said that if approved, construction on the aromatics unit would begin in Q4 2020 and wrap up in Q4 2024.
Documents submitted in August 2019 seeking tax breaks for the PE units also said that if the company approved, construction would start in Q4 2020 and wrap up in Q4 2024.
Construction has not begun on any of the projects.
Motiva did not comment on the withdrawals of documents seeking tax breaks, saying only that the company does not comment on “market rumors or speculation.” Saudi Aramco declined comment.
However, sources familiar with company operations said Motiva put the cracker project on hold in 2019 and reassigned staff dedicated to its planning to other projects after the company bought Flint Hills Resources’ 634,000 mt/year mixed-feed cracker in Port Arthur.
The downstream PE units and aromatics facility remained as possibilities, but became less important as oil prices plunged amid the height of COVID-19 shutdowns in 2020, market sources said.
“They could have made this announcement a year ago,” a source said.
In addition, Saudi Aramco in 2020 finalized its $69 billion acquisition of a 70% stake in global petrochemical producer Saudi Basic Industries Corporation, or SABIC. That move substantially increased Saudi Aramco’s petrochemical footprint, sources noted.
In April 2021, SABIC said it would take over sales and marketing of about 5.4 million mt/year of Saudi Aramco’s chemicals and resin products, centering SABIC’s commercial focus on petrochemicals while Aramco’s trading arm focuses on fuel products.
Saudi Aramco had been bullish on adding petrochemical facilities
In 2018, Saudi Aramco repeatedly stated its intention to grow its petrochemical operations in Texas and elsewhere. In April that year the company signed memoranda of understanding with Honeywell UOP and Technip FMC to evaluate technologies for a chemical complex adjacent to the Port Arthur refinery.
Then in November 2018 Saudi Aramco CEO Amin Nasser said at the annual GPCA forum in Dubai that the company aimed to ultimately use 70% of the crude it produces for petrochemical production as a long-term strategy.
However, the Wall Street Journal reported July 19 that Motiva had halted its plans to build petrochemical units at the Port Arthur refinery site to focus on core oil and gas production businesses. The newspaper had previously reported that Aramco slowed the petrochemical projects during a 2020 review of investments when oil prices plunged.
The newspaper cited anonymous sources who said the petrochemical projects were on hold for at least a year, but could be reconsidered.
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