RIYADH: Two Saudi Arabian industrial giants said on Tuesday they will jointly study a project to make chemicals from oil, as the world's largest crude exporter seeks to diversify its economy.
Saudi Aramco, the state oil company, said it has signed an agreement with Saudi Basic Industries Corp (SABIC), one of the largest global manufacturers of petrochemicals, fertilisers, plastics and metals.
They will conduct "a feasibility study on the development of a fully integrated crude oil-to-chemicals complex to be located in Saudi Arabia," Aramco said in a statement.
The agreement contains principles of cooperation that will form the basis of a joint venture if the study reaches a positive conclusion, the company said.
It added that the project is consistent with the kingdom's wide-ranging Vision 2030 plan announced by Deputy Crown Prince Mohammed bin Salman in April.
The plan aims to wean the kingdom off oil, which remains its main revenue source even though global prices have fallen by around half since 2014.
At its heart is a plan to float less than five percent of Saudi Aramco on the stock market. The proceeds would help form what will become the world's biggest state investment fund, with around $2 trillion in assets.
Petrochemical production, some of it derived from natural gas byproducts, is already a focus of Saudi Aramco's move away from simple oil extraction.
But Aramco president Amin Nasser said the agreement with SABIC reflects a goal of substantially increasing the production of oil-based petrochemicals.
"This agreement will help spur a new era of industrial diversification, job creation and technology development in Saudi Arabia," Nasser said in the statement.
SABIC's chief executive officer Yousef al-Benyan said that by working together the two firms can drive advances that will make oil a viable petrochemical "feedstock", or raw material.
He expressed hope that the agreement with Saudi Aramco "will ultimately lead to a new era for the kingdom, driving strong economic growth, creating many new opportunities for aspiring young Saudis, and playing a significant role in the kingdom's economic transformation."
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