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Abu Dhabi, UAESaturday 15 December 2018

Sabic chief calls for Saudi petchems firms to merge

Al Benyan says companies that cannot compete globally and market their own product will suffer

Yousef Al Benyan, the vice chairman and chief executive of Sabic says Increasing chemical production is crucial to Saudi Arabia’s Vision 2030 blueprint, which envisions creating higher-value products and jobs. Faisal Al Nasser / Reuters
Yousef Al Benyan, the vice chairman and chief executive of Sabic says Increasing chemical production is crucial to Saudi Arabia’s Vision 2030 blueprint, which envisions creating higher-value products and jobs. Faisal Al Nasser / Reuters

Saudi petrochemicals firms should merge to boost their competitiveness and look to expand abroad, the head of the major industry player Sabic said on Monday.

The firms have enjoyed decades of cheap feedstock prices. But Saudi authorities began slashing subsidies in 2016, as a collapse in oil prices cut into state finances, prompting a search for efficiencies in the industry.

"This programme is clearly defined to push companies for more efficiencies and bring them into a mode where they become more competitive with the global players," Sabic's chief executive Yousef Al Benyan said.

Other Saudi petrochemicals firms should "look at ways and means to consolidate", he said.

"If 2020 comes and you are not really a player with a global footprint ... and you don't market your own product, I think it will be very difficult for you to maintain competitive positions."

Sabic, the world's fourth-biggest petrochemicals company and which reported a 10.7 per cent rise in third-quarter net profit on Sunday, has already begun this process, completing an acquisition of the remaining 50 per cent stake in its Sadaf project from Shell Arabia in August.

It is also considering integrating three affiliates, Safco, Ibn Al Baytar and Al Bayroni, which are located next to each other in Jubail, eastern Saudi Arabia. The companies can share feedstock, maintenance and leadership costs, said Mr Al Benyan.

Sabic is looking at possible acquisitions in North America, China and Africa in both the speciality and commodities portfolios, he said, but declined to elaborate.

He said in May Sabic was evaluating opportunities in the range of US$3 billion to $6bn.

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Sabic posted its biggest profit since the second quarter of 2015 this quarter, as a recovery in crude prices buoyed earnings.

Sales prices for core products were up an average of 5 per cent and expenses were reduced, while losses at its restructured Hadeed division dropped by more than half, said Mr Al Benyan.

The company's outlook for the rest of the year and into 2018 was stable, he added.

"We have stability in crude oil prices, we have stability in GDP growth. I think this is very positive now, looking at 2018. I think 2018 will be more or less like 2017 for us," he said.

Sabic is also looking to expand globally to diversify feedstock inputs and shield itself from oil price fluctuations.

Plans to build a polycarbonate plant with the Chinese state oil firm Sinopec are moving ahead in China, where 70 per cent of demand for the product is expected to be, said Mr Al Benyan.

He plans to travel to China by the end of this year to finalise arrangements for both that project and a coal-to-chemicals venture with Shenhua Ningxia Coal Industry Group.

Mr Al Benyan said initial plans for an oil to chemicals project with state oil juggernaut Aramco were to build it in Yanbu, on the west coast of Saudi Arabia.

"I think this is a very strategic location. You can strengthen your position to Africa, to Europe. Jubail still has an option to grow, but I think the west coast is going to enable us not to concentrate all our assets in one location," he said.