Rising costs and lack of feedstock slow down expansion in Saudi Arabia

11-Sep-06

Lack of natural gas and rising construction costs have slowed down the planned expansion of Saudi Basic Industries Corp's chemicals plant in Saudi Arabia. Cheap gas has made Saudi Arabia attractive for international companies seeking to invest in petrochemicals. Saudi Arabia's gas consumption continues to rise as new industries that use gas, develop. However, production of gas is not sufficient to meet demand. As per plans, Saudi Arabia Petrochemical Co. (Sadaf) is to add a second plant for the production of ethylene, but the project is suffering from a shortage of natural gas in the country. A Shell-led venture could provide a boost and help ease the situation if it finds gas in Saudi Arabia's Rub al-Khali. Shell and partners, Total SA and Saudi Aramco, started drilling for gas in July and will drill a total of seven wells by 2009. Construction costs are also rising amid shortages of equipment, labor and raw materials.