Strategic Macro Perspectives - Meticulous Implementation Jubail

Strategic Macro Perspectives - Meticulous Implementation
Jubail and Yanbu, two cities in the Kingdom of Saudi Arabia,
constitute a unique experiment in development which has
proved outstandingly successful.
These two cities, conceived on the drawing board, were
planned to provide a purpose-built and highly efficient
environment for modern industrial production. These
industrial complexes, built at Jubail on the Arabian Gulf and
Yanbu on the Red Sea by the Royal Commission for Jubail
and Yanbu (RCJY), are the key to the Kingdom’s national
industrialization plans. They provide the basis for the
Kingdom’s program to develop industries which are
hydrocarbon-based and energy intensive. The major
objective of the massive investment in these industrial
cities is to reduce the Kingdom’s dependence on oil revenues by
gaining access to the world’s petrochemical markets. This route
to industrialization exploits the Kingdom’s natural resources,
in terms of advantaged energy and raw materials for
petrochemical manufacture.
On 21 September 1975, the Royal Commission for Jubail and
Yanbu was established as an autonomous organization of the
Saudi Government. The Commission is governed by a Board of
Directors and its Chairman reports to the Council of Ministers.
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The Chairman’s office in Riyadh formulates the policies and
oversees them besides implementing the same through the two
CEOs, one each for the cities of Jubail and Yanbu.
This decision made by the Kingdom of Saudi Arabia in 1975
to develop Jubail and Yanbu into a world class integrated
petrochemical hub changed the course of history for these
obscure coastal towns forever. Together they represent one
of planet earth’s largest civil engineering and construction
projects ever undertaken. Rising out of the salt flats and
sand dunes of Jubail & Yanbu, have emerged some of the
world’s most technologically advanced petrochemical plants,
supported by an infrastructural backbone that is second to
none anywhere in the world. To ensure these plants comply
with the concept of sustainable development, a comprehensive
environmental protection program was purposefully designed
by RCJY in Jubail and Yanbu from the very beginning. Its
commitment to environmental protection has been duly
recognized with its winning numerous international awards.
With such an astute and visionary management approach, RCJY
has successfully developed the twin cities of Jubail and Yanbu
into the ultimate Global Petrochemical Hub of the twenty first
century, attracting the finest and foremost global players in
the industry.
STRATEGIC VISION – MASTER PLAN
How did this vision come about? Who are the architects
behind this amazing foresight? How has this been made
possible? These are some of the compelling questions that have
often been asked. The answer must lie with the two key factors
that ensured its success – leadership and teamwork.
Right from the beginning, RCJY, together with its
partnership with Bechtel & Parsons, was led by a dynamic
leadership marked not only by its outstanding long range
vision, but the commitment, energy, discipline and single
minded sense of purpose of bringing this grand vision to
full realization. Backing the leadership was a team of highly
skilled and dedicated professionals brought in from around
the world, representing a talent pool of the best engineering,
construction and project management personnel. It was this
team that had worked tirelessly over the years to see to the
successful implementation of the different phases of building
this Global Petrochemicals Hub.
Besides the element of manpower, there was the abundance
of natural resources. As associated gas was readily available,
producing petrochemicals, fuels and other feedstock became
the natural downstream industry. The output of this industry
not only increased value-added exports but also provided
critical raw material feedstock for the development of
secondary industries, including agricultural fertilizers, cement,
steel and various consumer products for the domestic and
export markets.
The other key component of the strategy was the substantial
investment of over $25 billion sunk in for the building of
a world class infrastructure to support these industries.
Substantial investments were also made for promoting the
welfare and betterment of the Saudis and residents in the areas
of health care, education, housing, religious and community
life. To support the significant national manpower demands
driven by these massive industrial development projects, a
comprehensive human resource master plan for the country
was put in place. These included the establishment of industrial
colleges and technical institutes to provide advanced technical
and vocational training whose curriculum has been tailored to
match the needs of the industry.
NEW GROWTH – NEW CHALLENGES
Total investments in Jubail and Yanbu have grown to more than
$130 billion (SR500 billion). Evidence of the Royal Commission’s
success in building the integrated Global Petrochemicals Hub
can be seen in the presence of about 300 petrochemicals and
related companies in the region, creating precious jobs. In fact
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Jubail alone is estimated to account for approximately 70%
of Saudi Arabia’s non-petroleum exports, 11.5 per cent of the
country’s Gross Domestic Product and 7 per cent of the world’s
petrochemicals. This success prompted the Royal
Commission to launch Jubail 2 and Yanbu 2 in 2006 to meet
projected demands in the coming decade.
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JUBAIL 2
benzene) per year. In addition to this refinery, a joint venture
of Saudi Aramco & Dow chemicals has also announced an
integrated petrochemical complex in Jubail-2. These two
anchor tenants will form a strong launching base for future
industries in Jubail-2. Several other industrial projects such
as the polysilicon manufacture, industrial gases manufacture
and seamless pipes manufacture have likewise been granted
site approvals.
Jubail 2 involves a massive expansion of the existing Jubail
Industrial City. Under this second phase of expansion, new
residential areas are being greatly enlarged and a university,
bigger port facilities and a rail network will be built. It is
constructed in four stages, with each stage covering roughly 20
square kilometers. The budget allocated for the infrastructure
for the first three stages is estimated at $1.85 billion. Covering an
area of 84 square kilometers, Jubail 2 is located 8 kilometers to
the west of the original industrial zone of Jubail 1, which already
contains a cluster of primary, secondary and support industries,
the majority of which are related to petrochemicals.
The RCJY is working to provide investors in Jubail 2 with all
necessary infrastructures including power, telecommunications,
roads, water and wastewater treatment facilities. In this
regard, the Royal Commission has spared no efforts in providing
investors with the utmost convenience and support, adopting
a turnkey approach where all major utilities and infrastructure
have been set up and laid right up to the intended site, waiting
only to be turned on by the investor. Another crucial element
to Jubail 2’s infrastructure is the construction of a $115 million
pump station to supply the industries with seawater for cooling.
Some projects have already begun construction in Jubail 2. A
400,000 bpd refinery is already being built by Satorp – a joint
venture between Saudi Aramco and France’s Total. The refinery
will have the capacity to process Arabian heavy crude to
produce gasoline, diesel, jet fuel and over 1 million tons of
petrochemicals (paraxylene, polymer-grade propylene and
The RCJY is coordinating with several other infrastructure
agencies such as the Port Authority, Saudi Railway
Organization etc., to confirm that all needed utilities and
provisions are in place at the right time when the
industries start operations. In line with the development of
Jubail 2, major expansion is being undertaken to the city’s
pipeline corridors and the main port facility - King Fahad
Industrial Port (KFIP). An 80 hectare (800,000 square
meter) petrochemical quay with five new berths that can
accommodate tankers for liquid petrochemical products
up to 80,000 tonnes deadweight and with a length of up to
230 meters, has been completed. The next step would be the
construction of the Jubail Rail Network, a 195 kilometer heavy
rail line across Jubail 1 and 2 which will transport products
from the industries to the ports, including the main Jubail
Commercial Port. The rail network will be also linked up with the
northern rail line and the line from Dammam.
As the industrial capacity of Jubail Industrial City grows, so
does its demand for workers and residential units. The city
currently has a permanent night-time population of around
100,000 but this is expected to grow to around 300,000 with the
development of four new residential districts: Jalmudah,
Mutrafiyah, Mardumah and Reggah. Each of these residential
districts has an area of around 10km² and when built up will
have 8,500 dwelling units housing around 45,000 people.
To create a greater sense of an urban buzz and community
spirit, there is also a plan for a city centre covering 3.5 square
kilometers, which will act as a civic hub for all the districts,
overlooking the bay area. Work on the Jubail University College,
a development covering 1.85 square kilometers, is ongoing.
More contracts are expected for new academic buildings and
residential areas for the university. The entire residential area
build up is not expected to be completed until 2023.
Jubail’s success is demonstrated by the fact that it has
successfully weathered the financial crisis and has in fact
continued to grow even when the world is still facing
uncertainty. The city is not only turning out to be an
industrial hub, but a modern and attractive city, livable by world
class standards.
YANBU 2
The expansion program of Yanbu 2 has been planned on a
2-phased approach. Phase 1 comprises expansion in the light
industrial parks, primary and secondary industries, the port
expansions and community expansion. Governmental
investment of $3.2 billion is expected to attract about
$30 billion by way of private investment.
The $5.3 billion (SR20 billion) Yanbu National Petrochemicals
Co. (Yansab) with an annual production capacity of
4 million tons of petrochemicals is already in operation. Several
infrastructure projects such as distribution of power, to
improve infrastructure for light industries, to build
infrastructure for neighborhood etc are already in place.
There are also many educational projects being undertaken
concurrently - the building of 2 universities for boys and
girls, the Yanbu Technical Institute and an enlarged Yanbu
Industrial College.
Yanbu Industrial City is additionally being transformed into
a tourist destination. Efforts are being made to implement
various projects including developing a marina area to
attract tourists. The RCJY is currently implementing new
projects worth $400 million (SR1.4 billion) in Yanbu,
including a seafront project, college buildings for girls,
and infrastructure projects including main and subsidiary
roads. Covering an area of 11 kilometers, the seafront
project will boost tourism in Yanbu and create more jobs for
Saudis. The seafront project will attract at least 500,000 tourists
every year. The project includes recreational centers, resorts,
marine games and cultural projects.
Prince Saud bin Abdullah bin Thunayan, chairman of the RCJY,
personally inspected the projects recently, including the home
ownership program for RCJY employees in Jabiriya District,
where 693 housing units have been completed at a cost of $190
million (SR727 million).
The Huzam Al-Akhdar project, officially opened by Prince Saud,
is spread over an area of 9 kilometers along King Abdul Aziz
Road. As many as 22,000 trees and 200,000 flowering plants have
been planted in the area, which has greenery covering 70,000
square meters. In addition to pathways for joggers, the area has
resting places, recreational facilities for children, a large prayer
area and parking for 600 vehicles.
The first stage of the Yanbu 2 will be completed in 2010 and its
second phase in 2018.
PLASCHEM PARK
The RCJY is planning initiatives to develop a Plastics
conversion industrial park in the cities. With the availability
of abundant feedstock for the conversion industries, this
initiative will help the Kingdom to further diversify its
economy through the downstream plastics processing industry.
The RCJY is currently evaluating various aspects associated with
the park and examining feasibilities.
PRESERVATION OF THE ENVIRONMENT
In order to ensure that the industrial development of the
industrial cities of Jubail & Yanbu were not achieved at the
expense of the natural ecosystem, the Royal Commission
established the Environment Control Department to develop
them into world models of environmental planning and
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sustainable development. In the planning and design of the
infrastructure, the design criteria enforced conformity to the
highest international environmental standards. These included
extensive environmental impact assessment studies
related to construction as well as longer term operation of the
industrial cities; in the development and enforcement of strict
guidelines and regulation relating to domestic and industrial
waste water treatment and discharge and abatement of air
borne pollutants; recycling and reuse of wastewater; waste
composting programs; in environmentally conscious zoning
and building code regulations; and in the development of
extensive environmental monitoring programs. As a result of its
uncompromising commitment to the preservation of the
environment, the RCJY has won international recognition and
several awards:
1988 United Nations’ Sasakawa Award
1988 Kuwait-based Regional Organization for the Protection
of Marine Environmental Award
1995 Arab Cities Award for Environmental Protection
1998 Arab League Award in the field of Environmental Awareness
2002 Arab-European Cooperation Centre at Berlin-Environmental
Protection Award
2003 Arab Cities Organization for Environmental Protection Award
2007 Organization of Arabic Cities- Environmental Awareness Award
LOOKING AHEAD
The key attraction for international firms investing in Jubail
& Yanbu has always been access to low-cost energy supplies.
Ethane, when available, costs about $0.75 a million BTUs,
compared with a much higher cost elsewhere in the world.
There is an increased interest in alternative feedstock such as
propane, butane, natural gasoline and naphtha. The cost of these
products is based on international prices, but with the handling
and shipping costs removed, industries still gain a reduction of
about 30 per cent by being based in Saudi Arabia.
The RCJY is keen for more of the intermediate feedstocks
produced at Jubail and Yanbu to be used on site. The RCJY made
a study on the existing products that are manufactured at Jubail
& Yanbu and concluded that it would be economical to have
more downstream industries that use the output of primary
industries. The Jubail master plan review exercise has been
currently undertaken and a part of this work is to review the
current feedstock profile and make the needed adjustments
in the industrial profile. With mounting interest and increasing
government support for adding as much value as possible to
petroleum products domestically, the cities are set to lead the
country’s industrialization agenda for many years to come, with
their contribution to the national economy growing inexorably.
The impact of Jubail & Yanbu’s influence on the petrochemicals
market will no doubt continue to grow as both the numbers and
diversity of petrochemicals related companies from around the
world begin to establish their presence there when they can
see a clear and sustainable competitive advantage presented
by these world class industrial cities. It is therefore little wonder
that given all that has been done to make Jubail & Yanbu one
of the world’s lowest cost production sites for petrochemicals
and related downstream products that together, they have
grown to be the unsurpassed Global Petrochemicals Hub. Good
intentions alone could not have made such lofty achievements
possible – they are indeed the result of RCJY’s unique ability to
see strategic macro perspectives coupled with its meticulous
implementation of plans.
The RCJY is eager to welcome the investors with open arms with
its world class one stop shop service. When the RCJY is obsessed
to become your partner in success, is there any reason why
anyone should wait?
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RAS AZ ZAWR MINERAL INDUSTRIAL CITY: A NEW RCJY ROLE
In recognition of RCJY’s successful track record of strategic planning, design and project
management of industrial cities, the Kingdom of Saudi Arabia assigned the RCJY with the
expanded role of overseeing the development of Ras Az Zawr Mineral Industrial City with the
goal of replicating the success of Jubail and Yanbu here.
The Kingdom’s drive to create a diversified economy based on the abundant natural
resources to transform its natural and human resources into sustainable wealth entails, in
part, utilizing the oil revenues to engrain globally competitive industries that leverage the
abundant supply of energy and mineral resources. A cornerstone of this drive is the creation of
multi-components industrial cities with a world-class infrastructure to act as a vehicle in the
development of a globally competitive industries and a key to maintaining future growth.
The RCJY has launched initiatives to establish a minerals city in Ras Az Zawr, which is
envisioned to have: Industrial Zones to host minerals processing clusters, mid and
downstream industrial parks, port & logistic center including a minerals handling center,
minerals export zone, minerals exchange center, training facilities, services zone and
common utilities, etc.
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