dubai • Saudi Basic Industries Corp (Sabic) is in talks to build a chemical plant in India as part of plans to boost capacity by almost 50 per cent between 2009 and 2015, the company’s CEO said yesterday.
The state-controlled firm, the world’s largest chemical company by market value, expects to reach agreement with a partner to build the ethylene and other chemicals-products plant by the end of next year, Mohammed Al Mady said in an interview in Dubai. He declined to give further details.
Sabic, which expects to produce about 51 million tonnes of chemicals and steel this year, plans to boost total capacity to 100 million tonnes by 2015, building plants in China, India and Saudi Arabia, and acquiring companies in Europe and the United States, Mady said.
Sabic has already committed to development plans worth at least $25bn to boost capacity by a third to 68 million tonnes in 2009, Mady said. In September, it agreed to buy the European operations of US chemical maker Huntsman Corp for $700m.
“It is a huge market,” Mady said of India, the world’s second-most populous country. The planned plant would supply the local market where a surging economy is spurring demand, he said.
Sabic is also in talks with China’s Dalian Shide and China Petroleum and Petrochemical Corp (Sinopec) about building a plant in China. The discussions started three years ago, he said. “Doing business in China takes patience,” Mady said, declining to predict when he might reach agreement on a China plant.
Sabic makes chemicals such as ethylene, used for plastics for goods including toys and textiles. It almost makes fertilisers for agriculture, and about 4 million tonnes a year of steel.
Sabic, set up in 1976 to help diversify the Saudi economy away from crude oil, plans to acquire companies that make “speciality” chemicals such as rubber and plastics for vehicles, so that they account for 25 per cent of revenue within 15 years, compared with “very little” now, Mady said.
Sabic last month agreed with ExxonMobil Corp to study setting up a rubber plant in Saudi Arabia, the world’s fourth-largest holder of natural gas reserves. The company capitalises on the kingdom’s fixed and relatively cheap supplies of ethane gas to make chemicals, while rivals such as Dow Chemical and BASF depend more on inputs such as naphtha, that are linked to oil prices. Oil prices have tripled since 2001.
“Sabic is looking to diversify its portfolio into specialities,” Mady said. “We want to build this portfolio for cyclicality. Also, it will give us a step up in our technological knowhow,” he said. Saudi Arabia is considering developing an automotive industry, which needs inputs such as rubber and plastics, as well as steel and aluminium, Mady said.
The kingdom is trying to reduce its dependence on oil exports to cushion against a decline in prices and create more jobs. Unemployment among Saudi males is about 9 per cent. “We are building the building blocks for an automotive industry”, either to makes parts for export or to supply local assembly plants, Mady said. Sabic will probably go ahead with the ExxonMobil rubber venture, Mady said.
Sabic expects profit this year to be “very close” to what it made in 2005 as a rise in output offsets a decline in chemical prices. Output of chemicals and steel will rise 9 per cent to 51 million tonnes this year from 46.8 million tonnes in 2005, Mady said. Steel production is about 4 million tonnes, he said. Sabic generated net income last year of SR19.2bn ($5.12bn). Mady said he expects chemical prices next year to hold steady on delays in boosting global supplies.
