Sabic Review

Sabic ... scouting for acquisitions abroad

Sabic ... scouting for acquisitions abroad

Sabic looking out for acquisitions

There are proposals for the chemical giant to acquire some of the US-based petrochemical firms in order to improve its position as a global player

 

Sabic has since early 2012 been on the look-out for further acquisitions abroad. It still lacks the technology to dominate the market. Acquiring established firms would reverse this situation. Sabic is still relatively a new company, formed just 41 years ago compared with the 147 and 210 years of heritage of its two rivals BASF of Germany and Dupont of the US. This means Sabic is at a disadvantage when it comes to R&D of its own technology against firms with long-established innovation units.

Acquisition of companies with in-house technology, mainly in speciality plastics, makes a lot of sense for the chemicals giant. And Sabic has to cope with the new reality of the US petrochemical business now enjoying low feedstock prices thanks to the big rise of shale gas output. There are proposals for Sabic to acquire some of the US-based petrochemical firms in order to improve its position as a global player.

Sabic can produce intermediate chemicals quite cheaply. But up to now the kingdom’s under-developed conversion industries sector means most of the value chain is lost to exports. Using in-house technology to manufacture products will ensure profits from lengthening the chemicals value chain in Saudi Arabia. In its quest to become the leading chemicals firm, Sabic has one weak link: technology. An acquisition to fix that problem makes a lot of sense. This is Saudi Aramco’s goal as well.

Sabic has been one of the Middle East’s major success stories since it was formed in 1976. Unlike its competitors, however, Sabic has an added responsibility to back Riyadh’s bid to heavily industrialise the Saudi economy. So it is as committed as Saudi Aramco to keep advancing in R&D. Sabic and Saudi Aramco can juggle their commitment, while driving global expansions with the aim to become among the largest players in the world in the next decades. This means a decision taken at home will not be the same as one taken overseas. The same is true in Saudi Aramco’s case.

Sabic has a number of projects planned or under way. A $2 billion elastomer project is a JV of Sabic and ExxonMobil Chemical being built at al-Jubail Petrochemical Co. (Kemya). The project will produce about 400,000 tpy of carbon black, rubber and thermoplastic speciality polymers. ExxonMobil is providing the technology and the products will be sold locally and globally.

Another project is Sabic’s methyl methacrylate (MMA) venture with Mitsubishi Rayon unit Lucite. The Alpha-2 JV has a 250,000-tpy MMA plant in the kingdom on stream since 2014. About 80 per cent of the MMA is used in construction and automotive industries.

Riyadh hopes that building downstream facilities will attract global car-makers like Toyota and GM to set up vehicle assembly plants in Saudi Arabia. Many Saudi private chemical firms are expanding.

Sabic affiliates have raised polyolefin and polymer production, including a propane dehydrogenation (PDH) plant at Ibn Zahr, and a polyethylene terephthalate (PET) plant at Sharq. In parallel, Sabic has a 50-50 JV with Sinopec in China, which has raised the firm’s output by about 3.2 mtpy. Their JV’s $3 billion complex at Tianjin, in north-eastern China, was completed in early October 2009. This produces basic plastics, including PE and PP.




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