Saudi Basic Industries Corporation, the Middle East’s biggest petrochemicals company that is set to be taken over by Saudi Aramco, welcomes new competition planned from China to India and the UAE as petrochemicals demand is “healthy,” according to Abdulrahman al-Fageeh, executive vice president of Sabic’s petrochemicals business.
“There is good demand for petrochemicals even though there is some slowdown in the economy,” Fageeh told S&P Global Platts in Dubai on Tuesday. “But I still believe there is healthy demand.”
Petrochemicals are attracting new investors as feedstocks become more available in the US from shale gas and China from coal, despite weak demand for some products such as ethylene and oversupply of others such as polypropylene. Sabic recently reported third-quarter net income plunged 86% from a year earlier. Abu Dhabi National Oil Co., which wants to invest $45 billion in its downstream sector with partners, is looking to more than triple petrochemicals production by 2025, a company executive said in November.
“Now the healthy competition is going to appear,” Fageeh said. “Who’s going to stay are those companies similar to Sabic in that they are doing investment based on sustainability, based on a vision that any investment that you do has to be sustainable.”
Asked about his outlook for next year, Fageeh said: “The future is sometimes hard to predict. What we do at Sabic is look at four or five years into the future. So always our plans are for a longer period. So we see the longer period as healthy.”
The Saudi government through the Public Investment Fund has proposed to sell the PIF’s 70% stake in Sabic to Aramco. A team is currently looking into potential synergies that may benefit both Aramco and Sabic, Fageeh said.
Petrochemicals demand in Saudi Arabia is growing about the global average, with the pace “high” in China and Southeast Asia, stable in Europe and growing in the US, Fageeh said. Over the past 50 years or more, petrochemicals demand has tended to grow faster than GDP, he said.
Fageeh joined Sabic in the mid 1980s, when there were no more than six factories for conversion of products into plastics and now there are more than 800 such plants, he said. Saudi Arabia consumes about 3 million mt of plastics a year and “this is really contributing into the economy,” he said.
Sabic itself is expanding, with investments in the US and China. It recently marked ground-breaking for its petrochemicals joint venture project with ExxonMobil in the US Gulf Coast. The company expects to tap into China’s demand by enlarging its existing joint venture with Sinopec in the Tianjin province.
“We have observed in the past 10 years that China is moving into self-sufficiency and that is why we decided we want to act as a local in China,” he said. “So we started our joint venture with Sinopec in Tianjin to be a local and then we expanded this. We already expanded this into a bigger portfolio. And also we have our own compounding business there and also we established our own innovation and application centers in China.”
Sabic is expanding its efforts into plastics recycling with a pilot project in Galeen, in the Netherlands, for chemical recycling of mixed plastic waste back to the original polymer for commercial application.
“Our focus at this point of time is to make the technology available,” Fageeh said. “The recycling developed in past decades cannot give you the material that you can take it to the high end of use. It’s always to the low end. Now with the technology that Sabic is doing in the chemical recycling this will enable use at the high end.”
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