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Interview: Sabic sees firm petrochemical demand from China

Guangzhou, China β€” Saudi Basic Industries Corp. expects China's dual megatrends of urbanization and its push for environmental sustainability will strengthen its long-term polymer demand, according to the company's executive vice president for petrochemicals, Abdulrahman Al-Fageeh, speaking on the sidelines of the ChinaPlas 2019 conference in Guangzhou.

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"China is one of our important strategic regions. Demand of petrochemicals is probably the fastest growing [markets] in China, and we believe that demand will continue to grow more than the GDP of China," Al-Fageeh said.

Urbanization drives demand for polymer application such as pipe-grade high density polyethylene, fiberglass reinforced polypropylene material for construction, and weather-resistant polycarbonate used to house telecommunication equipment such as the emerging 5G networks, according to the company, known as Sabic.

Sabic expects to tap into China's demand by enlarging its local footprint, its existing joint venture with Sinopec -- the Sinopec Sabic Tianjin Petrochemical Company Ltd (SSTPC) -- in the Tianjin province, and its recent proposal for a petrochemical complex in the Fujian province of China.

SSTPC produces a wide array of petrochemicals including butadiene, phenol, polyethylene and polypropylene. The venture is on track to start a new polycarbonate plant in 2020, with a planned capacity of 260,000 mt/year, according to Sabic.

The new proposed Fujian complex is not a refinery, Al-Fageeh said, without providing additional details on its configuration and timeline.

SUSTAINABILITY

Environmental sustainability and the concept of a circular economy are areas of development central to the current Sabic strategy, Al-Fageeh said.

"We have started programs [to ensure] recycled plastic can be consumed as a [feedstock] for the petrochemical complexes that we have around the world. We started in Europe, with some pilot [programs] and once we are sure of its success and we will be able to demonstrate this to all of our assets around the world," Al-Fageeh added.

This chemical recycling concept, converts plastic waste into feedstock for virgin PE and PP resin production and these materials are in high demand from FMCGs like Unilever, according to SABIC.

ARAMCO ACQUISITION

The twin advantages of Saudi Aramco's recent decision to acquire Sabic are an economy of scale and the synergies from upstream to downstream integration, said Al-Fageeh.

"We think that this deal by Aramco to acquire 70% of Sabic's shares [will] combine two strong, global companies -- Aramco the largest oil producer as well as marketer, Sabic is the third-largest diversified petrochemical companies, and by combining the two, this will strengthen our position," he said.

"We established a team from both Aramco and Sabic, to study the planning for such [an] acquisition and we are progressing very well in the planning phase," he said.

One area of cooperation includes a crude-to-chemicals complex under development between the two companies at Yanbu, according to Sabic.

The complex is expected to consume 400,000 b/d and produce approximately 9 million mt/year of chemicals and base oils. It is expected to start operations in 2025, according to Sabic.

"We already started together [a project to convert] crude oil to chemicals, and I think that will give both companies the ability to convert oil to a very competitive petrochemical product that could be offered to our customers," said Al-Fageeh.

Saudi Aramco announced on March 27 that it has signed a deal to acquire 70% majority stake in Sabic from the Public Investment Fund of Saudi Arabia, estimated at $69.1 billion, in one of the largest deal in the global petrochemical business.

-- Yi-Jeng Huang, yi.jeng.huang@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com