Increasing chemical production is crucial to Saudi Arabia’s Vision 2030 blueprint, company CEO says
Sabic eyes 70% output boost by 2025 and operational base in Houston
Saudi Basic Industries Corporation plans to boost its 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 of the company known as Sabic, said in an interview.
The kingdom has hired longtime Dow Chemical chief executive Andrew Liveris to act as an adviser after he departs the Dow DuPont unit on July 1, Mr Al Benyan 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 on Saturday. The announcement coincided with the final stop by Saudi Crown Price Mohammed Bin Salman on his three-week US tour.
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 tons 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 Exxon Mobil 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 tons 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.
Acquisitions could supplement the company’s organic growth, Mr Al Benyan. 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, Mr Al Benyan said.
Sabic in January acquired a 25 per cent stake in Swiss chemical maker Clariant for about $2.5bn, its biggest deal since acquiring General Electric’s plastics business for $11.6bn in 2007. It’s premature to comment on whether Sabic might increase its stake until regulators approve the transaction, likely in the third quarter, Mr Al Benyan said.