Industrial promise: New projects look set to bolster the province’s status as a centre for heavy industry

The Eastern Province is Saudi Arabia’s largest province by size and is responsible for much of the Kingdom’s oil production, as well as housing the world’s largest oil field. It is the most important centre for heavy industry in the country and home to the world’s biggest petrochemicals cluster at Jubail, which is currently in the midst of a major expansion project, as are many other industrial clusters and sectors in the region.

GEOGRAPHY: At 778,500 sq km in size, the Eastern Province is the largest of Saudi Arabia’s 13 administrative regions, accounting for more than one-third (36%) of the Kingdom’s territory. Much of the province is taken up by the largely uninhabited Rub Al Khali (Empty Quarter), which is located to the south of its major cities and which spills over into Yemen, the UAE and Qatar. Around 600,000 sq km in size, the Empty Quarter is the largest sand desert in the world.

The province hosts Saudi Arabia’s entire Gulf coastline and borders six of the Kingdom’s eight immediate neighbours: Yemen, Oman, Qatar, the UAE, Kuwait and Iraq. It is also connected to the island of Bahrain via the King Fahd Causeway, a 25-km-long series of bridges. The authorities are working to integrate the province’s economy with those of neighbouring countries; for example, Al Ahsa Second Industrial City, which is currently under development, is intended to attract investment from Qatar, as well as local sources.

POPULATION: According to the Central Department of Statistics and Information, in 2013 the population of the Eastern Province was an estimated 4.53m, or around 15% of the nation’s total. It therefore ranked as the third-largest province by population, after Riyadh and Medina. Saudi nationals accounted for an estimated 69% of this total, or 3.13m.

The Eastern Province is made up of 11 governorates; the largest of these by population size is Al Ahsa, with 1.14m residents, according to the 2010 census, followed by Dammam with 976,000. The province’s main cities and economic centres are mostly concentrated in a relatively small area on the Gulf coast in its north; these include Jubail, the Dammam metropolitan area (which also includes the cities of Dhahran and Al Khobar) and Al Qatif. Inland cities include Hafar Al Batin in the far north near the Kingdom’s borders with Kuwait and Iraq, and Al Hofuf, south of Dhahran.

OIL GIANT: The Eastern Province is integral to Saudi Arabia’s oil sector, making it one of the most important contributors to the economy, given that oil and gas accounted for 47.9% of GDP in 2013. The national oil company, Saudi Aramco, is headquartered in the city of Dhahran in Dammam governorate.

The Kingdom is home to some of the world’s largest conventional oil fields, including Ghawar, which has estimated reserves of 70bn barrels. The field accounts for more than half of national oil output and approximately 7% of the entire world’s production; most of the Kingdom’s natural gas output is also associated gas from Ghawar. Other major onshore fields in the province include Khurais, whose output Saudi Aramco is currently working to boost from 1.2m barrels per day (bpd) to 1.5m bpd by 2016-17, and Shaybah, which produces around 0.75m bpd. Saudi Aramco, in conjunction with several international partners, is currently searching for non-associated gas reserves in the Empty Quarter. While some of these efforts appear to have stalled (see Energy chapter), the region is also crucial to the company’s new focus on unconventional gas exploration and production, and in March 2014 Lukoil said it was in negotiations regarding the production of tight gas in the region.

In addition, the region is responsible for handling the bulk of Saudi oil exports; Saudi Aramco operates a 6m-bpd oil export terminal complex at Ras Tanura, which is the world’s largest offshore oil loading facility, according to the US Energy Information Administration, and is responsible for around three-quarters of Saudi oil exports. Another major export facility at Ras Al Juaymah has an export capacity of 3.6m bpd.

REFINING: The Eastern Province is also a key national refining hub; it hosts three of the country’s eight refineries, which have a combined throughput capacity of around 1.25m bpd, accounting for about half of the national total. The largest of the three is Ras Tanura – which is also the nation’s largest refinery – with 550,000 bpd of capacity; in 2012 Saudi Aramco said it planned to further expand the facility within the coming decade. September 2013 saw the inauguration of the Kingdom’s newest refinery, Saudi Arabia Total Refinery and Petrochemicals Company (SATORP), a $14bn joint venture between Saudi Aramco and Total located in Jubail with 400,000 bpd of throughput capacity. The last of the province’s three refineries is Saudi Aramco Shell Refinery Company (SASREF), which is also located in Jubail and which has throughput capacity of 305,000 bpd.

INDUSTRY: The Eastern Province is at the heart of the Saudi industrial sector and of the petrochemicals industry in particular. According to figures from the Ministry of Industry and Commerce, there were 1502 factories in the province at the end of 2013, more than any other region and accounting for close to one-quarter (23%) of all factories in the Kingdom. The largest category by line of industrial activity was non-metallic mineral products, with 248 factories, followed by fabricated metal products (excluding machinery and equipment) with 226 facilities, and rubber and plastic products with 183 factories.

Industrial investment in the region stood at SR540bn ($143.95bn) as of the end of 2013, accounting for 61% of total industrial investment in the Kingdom to date. Chemicals production represented more than half of this, or a total of SR362.8bn ($96.72bn); this amounted to 85% of all investment in Saudi chemicals production. Other major industrial activities in the province include production of basic metals, with total investment of SR51bn ($13.6bn), or 77% of investment in the segment in the Kingdom.

Over the last five years projects in the province attracted more funding than any other in the country from the Kingdom’s state-backed industrial financing body, the Saudi Industrial Development Fund (SIDF), at SR14.7bn ($3.92bn), or 40% of all SIDF loans issued during the period. The number of people employed by industry in the province stood at around 221,000 at the end of 2013, amounting to just over one-quarter (26%) of the total industrial workforce. The largest industrial sector by employment was the chemicals industry, with a total of 37,872 workers.

JUBAIL: The province is also home to Jubail Industrial City, the Kingdom’s largest industrial city in terms of the value of both investment and output. Affiliates of national petrochemicals firm Saudi Basic Industries Corporation (SABIC) dominate the city; these include Arabian Petrochemicals (known as Petrokemya), which produces ethylene, polyethylene (PE) and polystyrene among other products; United Jubail Petrochemical Company, which manufactures ethylene, PE, ethylene glycol and liner alpha olefins; Saudi Kayan, which produces ethylene, low and high density PE, ethylene glycol, benzene and butanol, and has been SABIC’s newest petrochemicals complex since coming on-stream in 2011; and Kemya, a joint venture with ExxonMobil that turns out ethylene and PE. Several SABIC affiliates in the city also produce methanol and fertilisers (see Industry chapter). Other non-SABIC petrochemicals firms with a local presence include Saudi Chevron Phillips Company and the Tasnee Petrochemicals Complex. Outside of the chemicals and fertilisers segment, the city also hosts the largest steelmaker in the country, Hadeed Saudi Iron and Steel Company, a wholly owned affiliate of SABIC.

In 2006 the Royal Commission for Jubail and Yanbu (RCJY), which oversees the city, launched a major expansion project known as Jubail II, which is due to be completed by 2024. Total investment in the expansion of the city and new industrial facilities will stand at around $88bn. Jubail II already hosts the 400, 000-bpd SATORP refinery, which was inaugurated in September 2013, and will also be home to the Sadara petrochemicals complex, which is currently under construction. When completed in 2015, it will be the largest petrochemicals complex in the world to have been built in one continuous phase.

The project, a joint venture between Saudi Aramco and Dow Chemicals, will have a total production capacity of around 3m tonnes per annum (tpa) of petrochemicals, including 1.5m tpa of capacity to produce basic petrochemicals and plastics precursor ethylene. It will employ a cracker that can use both ethane and naphtha for feedstock, the first such multi-feed cracker in the region. Jubail II will also see the expansion of Jubail industrial port and the installation of other new infrastructure, such as desalination plants.

RAS AL KHAIR: Another major heavy industrial city is being built further north along the province’s coast at Ras Al Khair (formerly known as Ras Al Zour), with a focus on metals and minerals. The centrepiece of the city is a joint venture aluminium complex being constructed by Saudi Metals Company (known as Ma’aden, which is an affiliate of SABIC) and Alcoa that will produce aluminium products from bauxite mined in Al Baitha, around 600 km away. The project’s 740,000-tpa smelter has come on-line, while its bauxite refinery and metal sheet facilities are due to begin production by end-2014 (see Industry chapter).

With regards to infrastructural investments, Ras Al Khair benefits from a bulk cargo port, whose first phase includes three 785-metre berths and began to receive vessels in February 2011. In January 2014 a 31-month contract for the fourth phase of the port’s expansion, including the construction of four additional berths, was awarded to Harbour Contracting and Engineering Co of China. By the scheduled completion of construction in 2030, it will have 50 berths, making it the largest port in the Kingdom.

February 2014 also saw the start of electricity production at a new power and desalination complex in Ras Al Khair. The complex has generation capacity of over 400 MW and desalination capacity of 1m cu metres of water a day at its hybrid multi-stage flashing and reverse osmosis water desalination plant, the largest of its kind anywhere in the world. The desalination plant began pumping water in April 2014. The total investment cost of the project and associated transmission lines stands at around SR23bn ($6.13bn).

OTHER CITIES: The Saudi Industrial Property Authority (known as MODON) also supervises five major industrial cities in the province, which generally focus on smaller-scale and lighter industries than those in Jubail and Ras Al Khair. The largest of these to be currently in operation is Dammam Second Industrial City, which is 25 sq km in size. The city was established in 1978 and specialises in sectors such as food and beverages, metals and machinery, and chemicals and plastics. In August 2013 the Ministry of Commerce and Industry signed an SR550m ($146.63m) agreement for the development of the second stage of the first phase of Dammam Third Industrial City, which is scheduled to take two years to complete. The city, which is located around 60 km to the south of Dammam, will be 48 sq km in size when all phases have been completed. Industries to be hosted in the city will include food, plastics, automotives and building materials. In February 2014 the regional government decided to relocate factories currently based at Dammam First Industrial City, which is one of the Kingdom’s smaller industrial cities, to Dammam Third Industrial City by the end of the year.

MODON is also working on another new industrial city in the province, Al Ahsa Second Industrial City; construction began in January 2014. The city will measure 300 sq km when all planned phases are completed, making it the largest industrial city in the Kingdom by area and dwarfing other MODON cities in the province. The first phase of the project is due to be completed by the end of 2014. MODON is also developing an industrial city for women, MODON Oasis (also known as Ahsa Third Industrial City), in the province that will be 500,000 sq metres in size.

TRANSPORT: Major ports on the province’s coastline include, from north to south, Ras Al Khair Port, Jubail Industrial Port, Jubail Commercial Port and Dammam Port. Combined throughput at the province’s ports stood at 85.87m tonnes (not including oil exports, which are handled via oil export terminals controlled by Saudi Aramco), or around 44% of the total ( nonoil) exports shipped via the Kingdom’s ports, according to figures from the Saudi Ports Authority.

Jubail Industrial Port is the largest of the province’s ports by throughput and saw 44.63m tonnes in 2013 (8.03m tonnes discharged and 36.60m tonnes loaded), or around 52% of total exports from the province’s ports; the bulk of its exports consisted of refined products (16.98m tonnes) and petrochemicals (19.62m tonnes). Jubail Industrial Port and Ras Al Khair Port are primarily bulk cargo ports, while Jubail Commercial Port and Dammam Port are largely container ports. Dammam is the larger of the two by capacity, with throughput equivalent to 1.66m twenty-foot equivalent units (956,346 discharged and 702,934 loaded) in 2013. The province also hosts major oil export terminals at Ras Tanura and Ras Al Juayma.

As for land transport, Dammam is connected to the capital, Riyadh, by rail, via Hofuf. The North-South railway project (also known as the SAR project) connects Ras Al Khair to the Al Jalamid phosphate mine in Northern Province, having begun operations in May 2011. Under the $7bn Landbridge Project, which will link the Kingdom’s Red Sea and Gulf coasts, the Riyadh-Dammam line is being upgraded and a new railway link is also being built from Dammam up the coast to Jubail and then to Ras Al Khair. In July 2012 the Saudi Binladin Group won a $177m contract to build the 85-km section between Ras Al Khair and Jubail, and in September 2013, a Saudi-Greek consortium was awarded an SR827m ($220.48m) contract to build 115 km of track between Jubail and Dammam. The latter is due to take nearly three years to complete.

A 220-km rail network within Jubail Industrial City to transport (principally petrochemicals) products from factories to the city’s two ports is also being planned. In early 2013, media reported that tenders would be issued by the third quarter of the year, but as of April 2014 none had been finalised. Five firms have also reportedly been examining the potential construction of a $10bn railway bridge connecting the province to Bahrain, to be built parallel to the King Fahd Causeway as part of the GCC rail project.

The province’s largest airport is King Fahd International Airport at Dammam, which accounted for around 12% of total passenger traffic through the Kingdom’s four international airports in 2010, with 4.84m passengers in total; other airports in the province include Dhahran and Al Ahsa airports.

AGRICULTURE: Although the Eastern Province is best known as Saudi Arabia’s oil and industrial centre, and although much of the province’s geographical area is taken up by the Empty Quarter, it is also a significant contributor to domestic agriculture. Regional cereal output in 2011 stood at 150,564 tonnes, or 10.6% of national production, according to data from the CDSI; this ranked it as the fourth-largest cereals producer in the Kingdom. The total land area dedicated to crop growing in the province in 2011 was 56,167 ha, making it the sixth-largest growing area in this category.

MEDICAL CITY: In addition to the many industrial cities being built or expanded in the province, the Ministry of Health is building a new medical city in Dammam, King Khalid Medical City, which is one of several planned around the Kingdom. The 1500-bed, 700,000-sq-metre project is being built at a cost of $1.2bn and is due to be completed in 2017. It will specialise in a number of areas including cancer treatment, cardiology, neurology and transplants.

OUTLOOK: Major expansion projects such Jubail II, Ras Al Khair Industrial City, Al Ahsa Second Industrial City, Dammam Third Industrial City and the Sadara petrochemicals complex, as well as the recently inaugurated SATORP refinery, are set to bolster the Eastern Province’s status as the centre for heavy industry in Saudi Arabia. Efforts to boost oil production at the Khurais field as well as new initiatives to explore for and produce unconventional natural gas reserves in the Empty Quarter (amongst other parts of the Kingdom) should also further cement its status as one of the – if not the – most important energy-producing regions in the world, in addition to helping the province to maintain its outsized contribution to the country’s GDP.