Saudi Aramco to Revolutionize Petrochemical Industry With World's Largest COTC Plant
06.13.2024 By Tank Terminals - NEWS

June 13, 2024 [Business Korea]- Saudi Aramco is on the verge of revolutionizing the petrochemical industry with the construction of the world’s largest integrated refining and petrochemical complex (COTC) in Medina Province, Saudi Arabia, according to the industry on June 12.

Set to commence operations next year, this state-of-the-art facility will produce basic petrochemical products directly from crude oil, bypassing the traditional naphtha extraction process. This innovative approach is expected to slash production costs to one-third of those in South Korea.

The COTC plant in Medina Province is part of a broader trend in the Middle East, where eight such plants are currently under construction with a total investment of $910 billion. The first of these, operated by Kuwait’s KIPIC, began partial operations last month, and all eight are projected to be fully operational by 2027. These plants boast a combined ethylene production capacity of 11.23 million tons, surpassing the combined capacity of South Korea’s six major petrochemical companies.

The shift towards petrochemical production in the Middle East began about a decade ago, driven by the push for decarbonization in developed countries. As the future of oil seemed uncertain, Middle Eastern nations sought new revenue streams, finding an optimal solution in producing general-purpose petrochemical products directly at oil extraction sites. This strategy not only saves on transportation costs but also leverages the new COTC technology, which significantly reduces production steps and costs.

Industry sources reported on June 12 that the ethylene production cost at some of these Middle Eastern plants is below $200 per ton, significantly cheaper than the $300 per ton cost in China. The production cost at Aramco’s COTC plant, set to begin operations next year, is estimated to be below $100 per ton. This cost efficiency is expected to flood the market with petrochemical products, further reducing the profitability of South Korean companies.

The ethylene spread, a key profitability indicator for the petrochemical industry, has already fallen to $153 as of the 12, an 18.8% drop from the April average of $188.56. This decline in profitability is a significant concern for South Korea’s six major petrochemical companies, including LG Chem and Lotte Chemical, which are expected to see their operating losses increase from last year’s 566.8 billion won.

An industry insider commented, “Considering production costs, there seems to be no way for South Korea to win in the general-purpose petrochemical market.” Another expert emphasized the need for restructuring, stating, “We must quickly focus on high-value-added products that China and the Middle East have not yet caught up with.” The looming competition from the Middle East is seen as a major threat, with one industry source noting, “In five years, a petrochemical powerhouse larger than South Korea will emerge.”

The Al-Zour plant in Kuwait, partially operational since last month, will have an investment of $37 billion by 2030 and will produce 2.76 million tons of aromatics annually. Meanwhile, the Yanbu petrochemical complex, being built by Aramco, will start operations next year with an annual ethylene production capacity of 3 million tons, comparable to South Korea’s largest producer, LG Chem, which produces 3.3 million tons annually.

The domestic petrochemical industry in South Korea is increasingly concerned as Middle Eastern countries, which previously only sold crude oil, are now entering the petrochemical sector. This adds a new formidable competitor to an industry already struggling with low-cost competition from China. Industry experts suggest that South Korean companies need to restructure and focus on high-value-added products that Middle Eastern and Chinese companies have not yet caught up with.

As the global petrochemical market braces for this influx of low-cost products from the Middle East, the future landscape of the industry remains uncertain. The developments in the Middle East could potentially reshape the competitive dynamics, challenging established players and prompting a strategic shift towards innovation and high-value products. is a market research platform with operational, infrastructural and contact details of more than +8,500 tank terminals and +5,000 production facilities.

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