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Sabic: boosting production

Sabic: boosting production



Sabic to boost output capacity

The firm has formed a partnership with ExxonMobil to develop a chemicals complex in Texas and is also proposing to build its regional headquarters in Houston

May 2018

Saudi Basic Industries Corp (Sabic) plans to boost production capacity 70 per cent by 2025 as the Middle East’s dominant chemical maker works with new joint-venture partners and expands its footprint in the heart of the US shale boom.

Increasing chemical production is crucial to Saudi Arabia’s “Vision 2030” blueprint, which envisions creating higher-value products and jobs, Yousef Al Benyan, chief executive officer of the company known as Sabic, said in an interview to Bloomberg.

The kingdom has hired longtime Dow Chemical CEO Andrew N Liveris to act as an advisor after he departs the Dow DuPont unit on July 1, Al banyan said. Sabic is also proposing to build a Houston headquarters for its Western Hemisphere operations as the company capitalises on the surge in cheap natural gas supplies from North American shale fields.

A final decision on the Houston project will be contingent on receiving local and environmental permits, according to a Sabic statement. The announcement coincided with the final stop by Saudi Crown Price Mohammed Bin Salman on his three-week US tour, last month.

The company’s new regional headquarters comes in line with the growth of its operations in the US and the expansion of its operations in the region as it has witnessed 20 per cent growth in US manufacturing operations between 2013 and 2017.

The proposed building is expected to take three to four years to complete and will include an innovation center and management offices with a capacity for 1,000 workers.

 

ABUNDANT SHALE

Sabic “has designated the US as a focus of its future growth plans, capitalising on the abundance of shale gas,” according to the statement.

At home in Saudi Arabia, a plant being designed with Saudi Aramco would turn crude directly into chemicals, yielding about 9 million metric tonnes of products a year. The $20 billion project would turn 45 per cent of each barrel of oil directly into chemicals, a record-high conversion rate, Al Benyan said in the interview outside Houston.

Sabic has formed a joint venture with ExxonMobil Corp to build an ethylene plant near Corpus Christi, Texas, with a final investment decision expected this year. The heart of the project features what would be the world’s largest ethane cracker, capable of producing 1.8 million metric tonnes of ethylene.

Fracking and horizontal drilling in shale formations have unleashed torrents of low-cost US natural gas that made the country among the most profitable places to produce chemicals, beating the Middle East in attracting projects. The company is also pursuing a project with Shenhua Ningxia Coal Industry Group to convert coal to chemicals in China.

 

STRATEGIC MARKETS

Acquisitions could supplement the company’s organic growth, Al Benyan said. Saudi Arabia is increasing chemical production with demand for motor fuels expected to slow amid tightening fuel efficiency standards and the rise of electric vehicles.

In addition, Sabic is considering potential projects in Latin America and Africa, he said. North Africa could develop into a strategic market for the company, Al Benyan said.

Sabic in January acquired a 25 per cent stake in Swiss chemical maker Clariant AG for about $2.5 billion, its biggest deal since acquiring General Electric Co’s plastics business for $11.6 billion in 2007. It’s premature to comment on whether Sabic might increase its stake until regulators approve the transaction, likely in the third quarter, Al Benyan said.




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