CONCLUSION: THE CLIMATE HEDGE161Sadara, completed in 2017 as a $20 billion joint venture between
Aramco and Dow Chemical, is the largest single- phase chemical plant
ever built. Its four thousand employees convert Saudi oil and gas into a
multitude of products, from polyolefin elastomers for car interiors to
propylene glycol for toothpaste. For now, Sadara exports most of those
precursors before conversion, in the form of resin or pellets that get
shipped from Jubail’s deepwater port. Soon, Sadara will deliver its
polymers and pellets to a neighboring plastics- manufacturing district,
where thousands of workers will convert the oil derivatives into fin-
ished goods, which will be exported instead. Sadara is but one bet on
the future of oil. Another wager built of pipes, tanks, and valves sits
just across the road. With the 400,000- barrel- per- day Satorp refinery,
Aramco has teamed up with the French oil company Total to turn Saudi
crude into high- value fuels, especially diesel, that meet stringent Euro-
pean emission standards.
Jubail and its environs are evidence of Saudi Arabia’s shift away
from simple exports of crude oil and into more complex “downstream”
industries that transform oil and gas into usable products. Fixing the
domestic demand problem plays directly into the kingdom’s down-
stream strategy. Saudi Arabia and its neighbors aren’t just confront-
ing domestic consumption because they want to export more crude
oil but because oil has more valuable— and more environmentally
sustainable— uses than burning it in the region’s cars and power plants.
These regimes are looking to transform the composition of oil demand
from simple to complex: converting raw oil and gas into high- value
plastic merchandise and sophisticated refined products.
In Saudi Arabia, the campaign to beat back demand is moving along-
side continuous investment to maintain or even increase Saudi Aramco’s
maximum sustainable production capacity at or above its longstanding
12.5m b/d threshold.^1 Saudi oil production hit an all- time record, 10.6m
b/d, in June 2016 (see figure 10.1). Since the accession of King Salman
and the rise of his son Muhammad, diversification into the down-
stream part of the oil business— refining and chemicals— has also
accelerated. Similar efforts are underway in the UAE, Qatar, Kuwait, and
Oman.