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SABIC sees higher petchem prices, ethane a worry - ASHARQ AL-AWSAT English Archive
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YANBU, Saudi Arabia, (Reuters) – Saudi Basic Industries Corp (SABIC) said growth in global demand for petrochemicals this year should match 2010 levels, led by Asia and the Middle East, despite higher oil prices.

Last year, demand grew about 2 percent in Europe about 3 percent in the U.S. and 4-5 percent in the Middle East and other emerging markets.

The kingdom’s basic industrial giant, whose products range from petrochemicals to metals, expects petrochemicals prices to rise in line with oil prices, which have traded at two and a half year highs close to $120 a barrel.

“Of course Asia continues to be the strongest market for us, the Middle East is doing very well, also India,” Sabic chief executive Mohamed al-Mady told Reuters.

“I can see change (in prices) because of what is happening to crude oil — prices of petrochemicals will increase also accordingly,” Mady said.

In January, Mady said SABIC expected higher sales and profits this year and next as petrochemical prices return to pre-crisis levels and the company increases its output capacity.

SABIC may consider switching some of its feedstocks away from ethane, a natural gas, to liquids, in the event Saudi Arabia faces a supply shortage of ethane, Mady said.

Petrochemical companies in the Gulf rely heavily on ethane feedstock to expand capacity, but while the region sits atop 40 percent of world natural gas supplies, the only regional player with a surplus is Qatar.

SABIC can often turn a larger profit than rivals abroad since it pays a government-subsidised 75 cents per million BTU (British Thermal Unit) for gas feedstock, a fraction of the cost on international markets.

But should ethane availability become an issue, Mady said his firm could look into liquids for feedstock, or consider new investments outside of Saudi Arabia, or future acquisitions.

“SABIC is a company that has to look at various feeds. If we don’t have any ethane available then we have to look at liquids that are available,” Mady said.

The company has no plans this year to build ethane or naphtha crackers, he added.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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