Saudi Aramco said on Nov. 17 it plans to invest in a $7 billion project to produce petrochemicals from crude oil at its South Korean affiliate S-Oil Corp.'s refining complex in the port city of Ulsan.

The project, named Shaheen, is the Saudi company's biggest investment in South Korea and will mark the first commercial use of Aramco and Lummus technology to produce chemicals from crude, Aramco said in a statement.

The construction of the complex, to produce up to 3.2 million tonnes per annum (mtpa) of petrochemicals, will begin in 2023 and be completed by 2026, Aramco said. The chemicals-to-crude unit will have a capacity of 46,000 bbl/d while the capacity of the cracker unit is 1.8 mtpa.

Saudi Aramco owns more than 60% of S-Oil.

On completion of the project, S-Oil's chemical yield, by volume, could almost double to 25%, Aramco said.

Global petrochemical demand growth is "anticipated to accelerate, driven in part by rising consumption from Asia’s emerging economies," CEO Amin Nasser said in the statement, which coincided with Saudi Arabian Crown Prince Mohammed bin Salman's visit to South Korea on Nov. 17.

Asia's petrochemical sector has faced headwinds this year as slower demand from China forced cracker operators to cut output.

"Eventually demand continues to will at some point need a wave of petchems to meet that demand," Armaan Ashraf, global head of NGL at consultancy FGE, said.

The project provides an outlet for Saudi oil while improving S-Oil's long-term competitiveness as gasoline demand is expected to decline as electric vehicle use increases, analysts said.

"The Shaheen project will increase chemical yields while reducing operating costs, thus making it more competitive especially in a low-margin environment," Refinitiv analyst Chua Sok Peng said.

The companies first signed a memorandum of understanding in 2019 for the Ulsan project, which was then valued at $6 billion.