Abu Dhabi Bets Big on Greener Chemicals

XRG’s Covestro deal signals the Gulf’s push into high value, low carbon materials

16 May 2025

In an industry long driven by bulk production, Abu Dhabi is plotting a different course. XRG, a state-owned energy firm, has agreed to buy Covestro, a German maker of advanced plastics, for over €14bn. The deal, among the largest in chemicals in recent years, aims to pivot the Middle East away from commodity products towards high value, low emission materials.

The move is part of XRG’s broader push to become a global chemicals leader within five years. By combining Covestro’s technical expertise with its own petrochemical resources, XRG hopes to create an integrated supply chain that offers both feedstock security and greater resilience to market swings. Industry analysts expect this approach to challenge the traditional model of the Gulf as a producer of cheap, basic chemicals.

“This is about building a smarter, greener chemicals industry,” said the head of XRG’s Energy Solutions division at a recent conference. The company says it is targeting both faster growth and lower carbon emissions.

Technology sits at the heart of XRG’s strategy. The company plans to modernise its plants with artificial intelligence, aiming to optimise production based on access to cheap, low emission energy. Such upgrades are intended to cut costs while easing environmental pressures at a time when Gulf producers face growing scrutiny over their carbon footprint.

XRG’s purchase may spark wider change. Saudi Arabia and other regional players are reportedly exploring similar acquisitions. Though challenges remain, including price volatility and ageing infrastructure, the direction of travel is clear.

For XRG, the deal is not just a financial wager but an attempt to recast the region’s industrial profile. If successful, it could signal the Middle East’s arrival in the high tech, sustainable chemicals business.