SABIC adds to domestic petchems flurry, bolsters China ties
Thursday, Jan 25, 2018
Plans were revealed in late December for a major expansion at a Jubail-based subsidiary of state-owned petrochemicals behemoth Saudi Basic Industries Corp. (SABIC). The Saudi firm awarded the main contract to South Korean stalwart Samsung Engineering.

Such project activity by both public and private sector players has picked up in the kingdom over the past six months after a spell in the doldrums since the oil price crash three and a half years ago.

SABIC has been largely in consolidation mode at home – bar a flagship joint venture (JV) with upstream counterpart Saudi Aramco – while focusing attention on major greenfield schemes in the US and China.

Aramco’s tightening ties to the latter were signalled in a pledge last month to boost investment in the country’s most populous province.

On December 28, Samsung announced the award of an engineering, procurement and construction (EPC) contract worth around US$690 million for the so-called Ethylene Oxide/Ethylene Glycol II project planned by Jubail United Petrochemical Co. (JUPC) at the east coast industrial city.

JUPC is owned 75% by SABIC and was created in 2000 for the development of the original complex. This was completed in 2004 at a cost of US$2 billion and comprised a 1 million tpy ethane cracker and downstream units producing 575,000 tpy of ethylene glycol (EG), 400,000 tpy of high-density polyethylene and 150,000 tpy of linear alpha olefins (LAO).

A consortium of the US’ KBR and Japanese firms Chiyoda and Mitsubishi carried out the EPC contract for the cracker, while Japan’s Toyo Engineering was responsible for the EG unit.

A second, 630,000 bpd EO/EG line, also built by Toyo, was added in the middle of last decade but since then new ethane allocations from the government have become increasingly scarce – as the kingdom’s growing shortage of the resource has become clear.

A landmark for further downstream development at Jubail was reached in August last year with the commissioning of the US$20 billion Sadara Chemical complex, a JV between Aramco and the US’ Dow Chemical that includes the country’s first liquids-based cracker.

A tentative revival in the global oil market and a corollary upturn in the petrochemicals sector have helped give rise to several new local projects in recent months. Locally listed Advanced Petrochemical and newer compatriot Global Company for Downstream signed a heads of agreement (HoA) in November to develop a 300,000 tpy pygas and pyoil plant at Jubail at a cost of US$580 million. This will be sited adjacent to the former’s 10-year-old propylene and polypropylene facility at the downstream hub.

Eight months previously, Pan Asia PET Resin (Guangzhou), a China-based manufacturer of polyethylene terephthalate (PET) resin, was granted a land allocation by Riyadh in the nascent new economic city at Jazan, in the kingdom’s far south-west. The company plans to develop an estimated US$3.8 billion complex producing 2.5 million tpy of purified terephthalic acid (PTA) and 1 million tpy of PET, and ground is due to be broken this quarter.

Further petrochemicals projects are envisaged at Jazan – sourcing liquid feedstock from Aramco’s long-delayed greenfield refinery finally approaching completion at the putative new downstream hub. Visiting the site in early December, CEO Amin Nasser confirmed that commissioning was now scheduled to commence in mid-2018, with the 400,000 bpd facility due to become fully operational next year.

Meanwhile, SABIC moved to strengthen ties with China and in particular with Guangdong Province – the country’s largest by economy and population – in December by signing a memorandum of understanding (MoU) with the Administrative Committee of Guangzhou Nansha Development Zone to examine further co-operation.

The area, located in the Pearl River Delta, was asserted in the company’s announcement to be “SABIC’s top choice for further potential investment in China”. Wholly owned subsidiary SABIC Innovative Plastics operates a plant in the southern district of Nansha dating back to the 1990s for the manufacture of engineering plastics and other products – the firm’s largest compounding plant in Asia.

One of SABIC’s two landmark project announcements in 2016 was of plans to develop the company’s maiden coal-to-chemicals complex in the coal-rich Ningxia Hui Autonomous Region of north-central China in JV with the local Shenhua Ningxia Coal Industry Group. The Saudi firm’s largest existing Chinese production facility is the 3.2 million tpy Sinopec SABIC Tianjin Petrochemical plant on the northeast coast – a JV with Beijing-owned downstream giant Sinopec.

Attending the MoU signing, SABIC CEO Yousef al-Benyan placed the investment pledge in the context of broader alignment between the two countries’ long-term economic development strategies. “Saudi Arabia and China arrived at a comprehensive strategic partnership at the beginning of last year, and the Saudi ‘Vision 2030’ is actively complementing [China’s] ‘Belt and Road’ initiative,” he said.

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