Saudi Petrochemical giant SABIC is weighing up a billion dollar investment in the European petrochemical business it bought from Dutch DSM that will make it into one of the region's leading integrated production hubs.

Officials at Sabic EuroPetrochemicals said the company has dusted off plans that DSM rejected when it decided not to upgrade its petrochemical business and opted to sell the unit to Sabic last summer for 2.5 billion euros ($2.81 billion) and focus on life sciences and performance materials instead.

'DSM did not want to do it. We are not in a hurry to do it but have the capability to do it. It's there for board approval,' Sabic EuroPetrochemicals CEO Frans Noteborn told reporters at the company's production facilities at Geleen, the Netherlands.

DSM first announced in 2000 it planned to shed its petchems, among the most efficient in the sector, rather than spend an estimated $1 billion to add capacity to compete against growing competition.

Sabic's investment plans include building a third ethylene plant at Geleen, at a cost of around 500 million euros, that will tag on to an existing plant - a plan that was conceived several years ago by DSM but put on the backburner because of the costs.

The ethane cracker will produce 550,000 tonnes per year of ethylene and will take at least three years to build, Company sources say they are hoping for approval from the Sabic board by the end of the year, giving a target startup date of 2007.

The company is also considering plans to build world scale derivative polyethylene and polypropylene plants at its Geelen and Gelsenkirchen, Germany, sites.

Sabic Euro produces annually 1.25 million tonnes of ethylene, 675,000 tonnes of propylene at Geleen site and 1.48 million tonnes of polyethylene and 1.09 million tonnes of polypropylene at the Geleen and Gelsenkirchen sites.

Polyethylene and polypropylene are the basic building blocks that are used to produce a slew of plastic products ranging from car bumpers to syringes.

In 2001, the DSM 's petchems business had sales of 2.4 billion euros, giving it about a 12 per cent share of the European market for polypropylene and polyethylene.

Sabic Euro officials declined to comment on the company's latest financial performance.
The company has so far committed to a 180 million euros project to build a propylene pipeline grid in northwest Europe that mirrors an existing 32-year old ethylene pipeline, which has given producers plugged into the grid a competitive edge.

'Ethylene plant operating rates in the ARG (pipeline grid) area are on average two-three percent higher than the rest of Europe,' said Sebastiaan Kosterning, a director at Sabic Hydrocarbons, one of the key players behind the project.

The pipeline will be co-owned by eight leading propylene and polypropylene players including Sabic, DSM, Shell, BASF and Sasol.

The project has been given state grants totalling 46 million euros from Germany, Belgium and the Netherlands and as a result is now in Brussels awaiting the green light from the EC for the subsidy.

Kostering said he hoped to get the first part of the pipeline, which links producers around the Gelsenkirchen area, operational in mid-2005 and the remainder, which includes connection through Geleen and Wesseling and running up to Rotterdam, by end 2006.
Currently producers receive imported propylene via barges or rail cars.