Riyadh skyline at night, Capital of Saudi Arabia
Editors note: This article is for everyone who is an expatriate or who wants to make some targeted investments outside of the United States.
If you like to invest, Saudi Arabia is the place for you!
Saudi Arabia has been a great investment destination since its discovery in the 18th century. It was discovered by an Englishman who named it after his wife’s father – King Abdul Aziz Al-Saud. Different dynasties and kingdoms have ruled the country over the years. Nowadays, it is governed by the House of Saud.
The Kingdom of Saudi Arabia is one of the wealthiest countries in the world. In 2010, the GDP growth rate was at 12%. Today, Saudi Arabia ranks second worldwide as a petrochemical producer. The Petrochemical industry accounts for nearly 10% of Saudi Arabia’s total economy and has seen double-digit percentage gains each year over the last decade. In addition the US State Deparment indicates the Kingdom of Saudi Arabia has recently strenghtened its internal laws regarding intellectial property theft – increasing its attractiveness for foreign investment (US DOS).
Saudi Growth Has Been Healthy – Driven By Oil & Petrochemicals
Within five years, we expect this figure to grow to well above 20% or even 30%.
There are two main reasons for this growth. Firstly, Saudi Arabia is the third-largest oil exporter in the world, with proven reserves exceeding one trillion barrels. Secondly, Saudi Arabia is home to three “Big Five” integrated chemical companies (ICI Paints, Dow Chemical, and Huntsman).
These companies collectively produce about 500 million tons of chemicals yearly, or around 40% of the world’s production. And all these chemicals have been used up to now. However, this means there is enough raw material for future industries and consumption.
To meet the growing demands of their industries, these companies need to expand their capacity, increase their productivity and seek new sources of supply. Therefore, they should consider investing in petrochemical projects.
The petrochemical industry is expected to multiply from USD 400 billion to more than USD 1.2 trillion per annum within the next ten years. This comes from the USD 3 trillion already invested in the sector. In fact, the petrochemical market grew at a compound annual growth rate (CAGR) of over 7% between 2011 and 2015. This represents a significant opportunity for investors.
We also know that the global demand for petrochemicals is forecast to grow by 3.5% annually over the next five years. So, if we look at the long term, we see huge potential for the petrochemical industry.
We believe that the best way to play this trend is through the following four sectors:
- Ethylene/Propylene – which produces polyethylene and propylene;
- Styrene monomer – which produces styrene;
- Polypropylene produces plastic bags, bottles, food packaging, etc.
- Olefins – which produces ethylene and propylene.
Let us take a closer look at them individually.
Ethylene/Propylene Sector
The ethylene/propylene sector is the largest segment of the petrochemical industry, producing more than 50% of the world output of basic petrochemicals.
The demand for ethylene and propylene is driven by the use of plastics in consumer products, building materials, and transportation. As a result, these markets are projected to grow significantly over the coming decades.
According to estimates, the global demand for ethylene and propylene will grow by 6.4% annually. This represents a significant opportunity for investors.
Styrene Monomer Sector
The styrene monomer sector is the second-largest segment of the petrochemical industry. It produces styrene, which is used as a raw material for many plastic products.
Demand for styrene is driven by its wide range of applications, including automotive parts, electrical appliances, furniture, and construction materials.
Additionally, the global demand for styrene grew by 4.8% between 2012 and 2017. This represented an attractive investment opportunity.
Polypropylene Sector
Polypropylene is one of the most important chemical compounds in the world. It is used to make household items such as clothing, carpets, flooring, toys, car interiors, pipes, wire, cable insulation, medical equipment, and other goods.
Global demand for polypropylene grew by 2.6% annually between 2012 and 2016. Another excellent opportunity for investors.
Olefin Sector
The olefin sector is the third-largest segment of the patches’ industry. It produces ethylene and propylene, which are used to create numerous chemicals and polymers.
Demand for ethylene and propylene is driven by their wide range of applications, including pharmaceuticals, paints, textiles, adhesives, rubber, detergents, cosmetics, solvents, fuels, lubricants, resins, fibers, and plastics.
The global demand for ethane and propylene increased by 1.3% annually between 2012 and 2016. An exceptional opportunity for investors.
Wikipedia has a good overview of the petrochemical industry if you’re curious about some of the background issues on this topic.
Do You Want To Invest In Saudi Arabia?
Most nationalities need a visa to enter Saudi Arabia. You can get your [e-visa for Saudi Arabia here] and start looking for a business to invest in.
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