Million Ton Cracker in Saudis Look at North American Petrochems Base in Mexico

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Following the news that Saudi Arabia is pursuing plans to build two 500,000 barrel per day (bpd) oil refineries in the U.S. (see related story, April 25, archive: Joint Venture Season Between Saudi Arabia and North America - Pathfinders in Both Directions comes the news that Sabic (Saudi Basic Industrial Corporation, Riyadh) is exploring the possibility of setting up a petrochemical production base in Mexico to serve the North American market. "North America is a strategic and important market for us," said Sabic CEO, Mohamed Al-Mady.

The company is reported to be in discussions with Petroleos Mexicanos (Pemex) concerning a potential joint venture partnership in the Phoenix petrochems project, Al-Mady says. The project would include a cracker to produce one million metric tons a year of ethylene, and several derivative units.

Al Mady said that talks are in the early stages, but are motivated by the fact that supplying the North American market from a production base in Mexico would be more cost-effective than shipping product from Saudi Arabia. Setting up production in Mexico is more attractive than making an acquisition in the U.S. or Canada, which is a policy Sabic has pursued in the past, he said.

The Sabic CEO also said that natural gas prices are "unbearable for any producer". The company would still be open to acquisition opportunities, but has not indentified any attractive assets. Sabic currently supplies North America with ethylene glycol, fertilizers, methanol and methyl tert-butyl from its plants in Saudi Arabia and Europe.

Al-Mady also said that Sabic is evaluating construction of a cracker site at Geleen in the Netherlands, reports Chemweekly. Sabic announced last year that it was considering building a cracker with capacity of 550,000 to 650,000 metric tons a year and adding polyethylene and polypropylene capacity in Europe. The company is also planning separate one million metric tons per year ethylene plants at Al Jubail (PEC 82000021) and Yanbu (PEC 97000090) in Saudi Arabia, for start-up in 2007/8.

The Sabic European head office is located in Sittard (Netherlands) and integrated world scale production facilities are based in Geleen (Netherlands) and Gelsenkirken (Germany) with an annual production of 2.5 million tons of polyolefins. Sabic also produces benzene, acetylene. and MBTE in Europe. Geleen also has Sabic's state of the art R&D center and a highly qualified technical marketing team.

Sabic currently exports about 70% of its output from Saudi Arabia with the majority of this total going to Asia. China and India will be major markets for the company, said Al-Mady. "We believe two out of three crackers in the future will be based in the Mideast and in China because of the abundance of raw materials there and the growing demand in China" he said.

Sabic claims number one company position in the Middle East ranked by market capitalization at $23.4 billion. The company is now the 11th largest petrochemical manufacturer in the world, 3rd in polyethylene production, and 6th in polypropylene. It has leading market positions in glycols, methanol, MTBE and fertilizers.