SABIC eyes expansion in China with proposed new plant
LONDON: Saudi Basic Industries Corporation (SABIC) is considering plans to build a petrochemical complex in the Chinese province of Fujian as part of wider efforts to diversify its business internationally.
The petrochemical producer has signed an initial agreement with the Fujian provincial government which sets out a framework of cooperation for the “world scale” project, according to a statement posted on the Tadawul stock exchange in Saudi Arabia.
SABIC said the MoU was part of a strategy to “diversify its operations, seek new investment opportunities and strengthen its position in the Chinese market.”
"It brings SABIC closer to its Asian customer base and provides direct access to the world’s largest and fastest growing market for petrochemicals." said Tommy Trask, director, corporate & infrastructure ratings, Middle East at ratings agency S&P Global.
The agreement did not contain any ‘definitive’ timeframes for the development, the company said.
“A core strategy underlying SABIC’s expansion plans has been to organically enhance its international footprint, both in terms of its ongoing diversification of its product range, as well as in terms of global customer reach, by strengthening its position in strategic markets,” said Ehsan Khoman, the Dubai-based head of Mena research and strategy at MUFG Bank.
The expansion of the petrochemicals giant in China is also part of efforts to secure future demand for the Kingdom’s crude oil supply, he added.
“SABIC acts as a central conduit of Saudi Arabia’s international diversification efforts in the petrochemicals sector, and by organically expanding into Asian markets – where the bulk of the Kingdom’s crude oil is shipped – the country is increasing its Asian market share, whilst in conjunction locking-in future appetite for its hydrocarbon product offering,” said Khoman.
SABIC has already established a foothold in China through its existing 50:50 joint venture with the Chinese state-owned oil company Sinopec in an ethylene plant in the Tianjin Province.
The Saudi company is far from the only global company eyeing opportunities in Asia, with the US oil and gas firm ExxonMobil also securing a preliminary deal with China this month.
ExxonMobil signed a cooperation framework with the Guangdong provincial government to discuss a possible new chemical complex in the province. The project would include a 1.2 million-tons-per-year ethylene flexible feed steam cracker. If the development goes ahead, operations could begin in 2023.
The US company said in a statement it was considering other potential chemical manufacturing projects in Asia in order to capitalize on the expected rise in demand for chemical products across the region.
It aims to increase its chemical manufacturing capacity in Asia Pacific and North America by 40 percent, according to the company release.
Earlier this year, Germany’s BASF also announced it was considering building a chemical production facility in Guangdong. The company signed a non-binding MoU with the provincial government in July, with the potential investment in the project estimated to reach up to $10 billion.
The project is anticipated to be completed by 2030 and will include a steam cracker with a capacity of 1 million metric tons of ethylene per year.
The plant would become the company’s third-largest site globally after the Ludwigshafen plant in Germany and the Antwerp site in Belgium. BASF currently has another site in Nanjing in China, which is a joint-venture with Sinopec.