SAUDI BASIC INDUSTRIES CORPORATION (Sabic) has laid out ambitious plans for local and global expansion as it boosts its position as one of the leading petrochemical companies in the world.
Sabic is in discussions over two joint ventures in China and is holding talks for a 50 per cent stake in the petrochemicals business of Mexico’s Pemex.
Sabic Vice-Chairman and Chief Executive Officer Mohamed Al Mady said the company was also looking to set up by 2010 a big cracking facility and downstream petrochemicals unit at its existing European sites.
He also said the company was evaluating prospects for an integrated refinery in north eastern China which would involve a total investment of $2 billion-$5 billion including the share of its Chinese partner. He hoped for approval to conduct a feasibility study by the end of the year.
Sabic has held talks with China’s Dalian Shide to build an integrated refinery and naphtha cracker complex in Dalian, China, a source close to Sabic said.
Al Mady said Sabic was also hunting for investment opportunities in India, either through setting up an integrated refinery and petrochemical plant or by acquiring assets.
On the local front, Al Mady said expansion plans also include a new project at Jubail by Saudi European Petrochemical Company (Ibn Zahr).
A new 350,000-tonnes per year (tpy) polypropylene (PP) unit, scheduled for completion in 2008, will be added to the existing PP capacity of 640,000 tpy. Ibn Zahr is 70 per cent owned by Sabic.
Sabic also expects the recent upswing in the petrochemicals sector to continue into 2006, Al Mady said.
“I expect 2005 and 2006 to be good for petrochemicals,” Al Mady said.
“China is demanding a lot of projects and Europe is showing healthy growth,” he said.
Al-Mady said Sabic did not plan any major acquisition in Europe, and ruled out any interest in buying Basell, a joint venture between BASF and Shell.
“We may add a plant here and there to complement our existing facilities,” he said.
He said fourth quarter net profit was likely to match the level of 4.21 billion riyals ($1.1 billion) in the third quarter, and that the firm’s full-year petrochemical, steel and fertiliser volumes would match last year’s level of 42 million tonnes.
Sabic is among the leading petrochemical companies in the world in terms of sales and product diversity.
It was established in 1976 to add value to Saudi Arabia’s natural hydrocarbon resources.
Headquartered in Riyadh, Sabic’s businesses are grouped into six strategic business units (SBU), supported by corporate departments and a shared services organisation.
The SBUs are basic chemicals; intermediates; polyolefins; PVC and Polyester; fertilisers and metals.
Sabic’s manufacturing network in Saudi Arabia consists of 17 affiliates. Most of these are based in the Al-Jubail Industrial City on the Arabian Gulf.
Two are located in Yanbu Industrial City on the Red Sea and one in eastern province city of Dammam.
Sabic is also partners in three regional ventures based in Bahrain.
In July 2002, Sabic Europe was born after the acquisition of the petrochemicals business of Dutch group DSM. (SEP).
Sabic Europe employs 2,300 people and has two major manufacturing locations in Geleen in the Netherlands and Gelsenkirchen in Germany.
The vision that led to the creation of Sabic was closely associated with the aspirations of Saudi Arabia as a developing nation.
Sabic continues to play an important role in achieving some of those aspirations, including the development of the country’s human resources.
It is also committed to Saudi social and cultural values and international business and environmental standards.
Sabic is owned by the Saudi Government (70 per cent) and the private sector (30 per cent).
Speaking at a technical meeting recently, Prince Saud bin Abdullah bin Thunayan Al-Saud, Sabic Chairman and Royal Commission for Jubail and Yanbu Chairman said, “Sabic will face many challenges on its way to success. By overcoming them, the company will continue to play a key role in the nation’s economy.
“In light of the fluctuating global conditions, changing economic conditions, there is a wave of change in the liberalised world.
“Companies also face stiff competition from mergers and acquisitions and the impact following new members joining the World Trade Organisation,” he added.
“The best way to overcome these challenges is by adopting rational scientific procedures, and by working out innovative and creative solutions.
“The meeting substantiates Sabic’s ambition to become one of the world’s leading companies. Sabic will realise this objective by making use of scientific and technological research and by synchronising its marketing, administrative and service activities.”
Al Mady added,”Last year Sabic made great achievements not only in production, marketing and profits, but also in the fields of safety and environment.
“For example, Sabic Affiliates have achieved 93 million man-hours without any lost-time injury. This is a remarkable safety performance in the petrochemical industry.
“The globalisation of Sabic Research & Technology has generated numerous international patents for the company. The company led the invention of several important process technologies and catalyst-related technologies and products.
“I expect that Sabic will become the world’s largest producer of ethylene glycol by 2006 with the acquisition of scientific design with a 50:50 partnership with Süd-Chemie of Germany, a world leader in ethylene glycol.”
Sabic’s profits for the full year in 2003 was SR6.696 billion ($1.78 billion), a around 135 per cent increase over the 2002 profits.
Total sales for the year were SR47.1 billion ($12.56 billion) compared with SR34 billion ($9.06 billion) in 2002, an increase of 39 per cent.
Production in the year rose to 42.3 million tonnes compared with 40.6 million tonnes in 2002, an increase of four per cent.
On the 2003 profits, Al Mady said,”I am delighted to announce Sabic’s highest ever profit. The year 2003 saw continued expansions at our plants, and new production programmes.”
Meanwhile, Sabic EuroPetrochemical is expected to reach a decision, by the first half of 2005, on whether or not it will proceed with its plans to expansion its cracker and polymer capacities in Europe, the company says.
The company said that plans are being evaluated to expand the company’s cracker capacity by 400,000 tonnes per year (tpy) of ethylene and 650,000 tpy of propylene.
The cracker expansion would also include the construction of a 380,000 tpy low density polyethylene plant, a 220,000 tpy high density PE plant, and a 400,000 tpy polypropylene plant.
Sabic EPC’s CEO Frans Noteborn earlier said that the expansion would be located next to Sabic’s existing NAK 4 cracker at Geleen, the Netherlands and would involve the addition of four new furnaces.
Sabic currently operates two naphtha crackers at Geleen - NAK 3 with capacity to produce 674,000 tpy ethylene and 325,000 tpy propylene, and NAK 4 with capacity to produce 675,000 tpy ethylene and 350,000 tpy propylene.
The opening of the Lebanon office comes as an additional reflection of Sabic’s development policy, which materialises through the establishment and acquisition of offices and factories in Europe, the United States, China, India and others. The Lebanon office acts as centre of operations for the Sabic Levant markets - mainly Syria and Jordan.
Sabic also says that consolidation within the Saudi plastics industry would greatly benefit that sector.
“There are more than 580 downstream plastics manufacturers in Saudi Arabia. Of those, 20 per cent consume nearly 60 per cent of plastic feedstocks sold in the Kingdom.
Consolidation and mergers of the smaller manufacturers would help those companies achieve optimum utilisation of facilities, capacities, reduce expenses and minimise the cost of finished products,” said Dr Abdulrahman Al Ubaid, Sabic vice president of Polyolefins said.
