Saudi Basic Industries Corporation (Sabic) is set to play an important role in the future growth of the Middle East petrochemical industry.

It has launched major expansion projects which will reaffirm its position as a top global and regional player.
Sabic’s current and planned investment in capacity expansions are expected to reach approximately $25 billion in the next five years, Sabic Vice-Chairman and CEO Mohamed Al-Mady said.
“With these expansions, the annual production will grow from 47 million tonnes in 2005 to 130 million tonnes by 2020, while its manpower employment will increase to more than 25,000,” he said.
“The petrochemical development in the Middle East, particularly the GCC countries is clearly accelerating. If we look at ethylene as a proxy for the industry, half of the growth in new ethylene capacity in the next five years will be in the Middle East.
“By 2010, ethylene production in Iran and the GCC countries is estimated to account for about 20 per cent of the global capacity,” he said.
Sabic, one of the world’s 10 largest petrochemicals manufacturers, is planning to increase its market share among global producers.
“Sabic will be playing an important role in the future growth of Middle East petrochemical industry with major expansions in ethylene, propylene, ethylene glycol, polyethylene, polypropylene, styrene monomer, steel, methanol and urea,” Al Mady said.
“We employ over 17,000 people worldwide. This means that we have deep roots in the communities in which we operate. We support the community involvement of our people and are committed to developing their social well-being through employee benefits and external support programmes,” he added.
Sabic also said it intends to form a joint venture in China with possible investment of up to $5 billion.
The company is keen on building a manufacturing base in China, a market where it has been selling products for the past 28 years, Chief Financial Officer Mutlaq Al Morished said.
“We are looking at building facilities in China when the time is right,” he said.
He said Sabic was in talks with a number of private and government groups for a joint venture and was eyeing eastern China as a possible location for the unit.
Morished said it could be a $3 billion to five billion ethylene cracker with facilities to manufacture downstream products like polyethelyne and glycol, but there were no concrete plans as yet.
Sabic officials were in Asia where they made presentations to potential investors for a debut, benchmark-sized eurobond issue, depending on the market response.
Benchmark-sized euro bonds usually total at least €500 million ($636 million).
Netherlands-based plastics and commodity chemicals producer Sabic Europe, Sabic’s fully owned unit, held roadshows in Asia and Europe for selling the bond whose tenor would be between seven and 10 years.
HSBC and JP Morgan Securities Ltd are joint bookrunners for the deal.
The proceeds will be used for general corporate purposes including Sabic’s recent acquisition of Huntsman Petrochemicals (UK) Ltd.
Meanwhile, Sabic reported a record third-quarter net profit with surging prices for steel and chemicals powering growth.
Sabic’s quarterly profit of SR5.4 billion ($1.44 billion), a rise of 12 per cent from the year-earlier period, topped the forecasts of all four analysts surveyed by Reuters. The average forecast was for an increase of 2.1 per cent.
“We are still in the positive cycle (of growth) in the chemicals sector,” Morished said.
Sabic agreed to buy the European bulk chemicals unit of US-based Huntsman Corp for $700 million, saying the assets fit well with its other European operations and would allow it to gain scale on the continent.
The company is looking raise a €1.25 billion loan and issue a debut euro-denominated bond of at least €500 million to help pay for acquisition.
Investors outside the Gulf Arab region cannot buy Sabic’s shares.
In another development, Sabic and ExxonMobil Chemical announced that they had begun work on a feasibility study to define a potential project that would grow their two joint petrochemical ventures at Yanbu and Jubail.
The project would target a domestic supply of carbon black and rubber and thermoplastic specialty polymers (EPDM, TPO, Butyl, SBR/PBR) to serve emerging local and international markets. Expected project start-up is 2011.
Sabic also reached a final settlement in a legal dispute with US oil major ExxonMobil Corp.
A financing package worth SR13.1 billion ($3.5 billion) for subsidiary Yansab is also being secured by Sabic.
The package comprises loans and financing facilities from 19 regional and international banks as well as European export guarantee agencies and the Saudi state-owned Public Investment Fund (PIF).
The banks include HSBC, Citigroup, ABN Amro, BNP-Paribas, Gulf Investment Bank and Arab Banking Corporation, Morished said.
“The package includes $847 million Islamic financing, which is the biggest ever of a single project,” Morished, also Yansab’s CEO, said.
The funds will be used for the construction of Yansab petrochemical complex, expected to start production by the second quarter of 2008.
European export guarantee agencies provided SR2.6 billion of the total package and SR4 billion was from PIF.
Sabic and Taiwan Fertilizer’s joint-venture 2-ethyl hexanol and dioctyl phthalate plant in Al-Jubail, Saudi Arabia, was running at full capacity following the successful restart of the facility, a source from Taiwan Fertilizer said.
The complex, called Al-Bayroni, had been idled due to an unexpected power outage.
Meanwhile, Sabic Europe BV, a 100 per cent indirectly owned Dutch subsidiary of Sabic, is planning a euro-denominated, bechmark-sized bond as its debut issue.
The company is lining up a two billion euro ($2.6 billion) debt package to fund its European expansion, Morished said.
He said the loan and bond combination would be used to refinance Sabic Europe’s existing €1.1 billion debt, to pay for Sabic’s $700 million acquisition of Huntsman’s UK operations and to fund Sabic Europe’s projects in the Netherlands and Germany.
“The total will be two billion euros,” he said.
Sabic is raising a five-year, €1.25 billion  revolving credit facility.
Morished said Sabic had met with 40 international banks at a meeting in London to market the loan. JP Morgan and HSBC will lead a bond issuance of €750 million.
Sabic Europe also opened its head office in Sittard, The Netherlands.
Sabic also postpone building a naphtha cracker in Geleen in the south of the Netherlands as investment costs and financial risks are too high, it said.
Sabic Europe is to further expand its polymer supply network in Central Eastern Europe by opening a logistic hub in Poland.
A contract was signed recently with Nijhof Wassink to provide the logistic services.
The hub is expected to be operational from January 1, 2007.
Sabic will bid to develop chemical plants in Algeria in ventures with state-owned Sonatrach, Al-Hayat reported, Morished said.
Meanwhile, Saudi Fertilisers Co (Safco) posted a third-quarter net profit of 271.4 million riyals ($72.37 million), down 21 per cent from a year ago.
Sabic has also decided against bidding for the Egyptian government’s 82 per cent stake in Suez Steel.
Sabic had sought information about the plant which produces 600,000 tonnes of steel a year.
“However, Sabic has decided against bidding in this project. Sabic has strategic plans in place to expand its iron and steel capabilities and will continue to explore other opportunities,” the company said.
Saudi European Petrochemical Company, Ibn Zahr, a Sabic affiliate, signed a Letter of Intent (LOI) with Daelim Industrial Company, South Korea, for the engineering, procurement and construction management services of utilities and off-site facilities for its Polypropylene 3 Plant (under construction) in Al Jubail. 
The new facilities are planned to be completed in conjunction with the main Polypropylene 3 Plant, by second quarter of 2008.
Sabic affiliate National Industrial Gases Company (GAS) has signed a SR1.2 billion ($320.6 billion) Islamic loan agreement with Banque Saudi Fransi (BSF).
Sabic has also entered into agreement with BNP Paribas, Arab Banking Corporation (ABC) and Samba as financial advisors and lead arrangers for a loan of around $4.8 billion for Saudi Kayan. 
The Saudi Kayan Company, a Sabic affiliate and currently under formation, plans to construct a world-class giant petrochemical complex in Al Jubail, Saudi Arabia, with an annual capacity exceeding four million metric tonnes of chemical products, some of which will be manufactured for the first time in Saudi Arabia.
Eastern Petrochemical Company (Sharq) has entered into loan agreements with Japan Bank for International Co-operation (JBIC), Public Investment Fund (PIF) and Local and International Banks, amounting to SR9.11 billion ($2.43 billion), for the construction of its third expansion project in Al Jubail Industrial City.