DUSSELDORF, GERMANY — Saudi Basic Industries Corp.'s profit has taken a hammering so far in 1998, but the Riyadh, Saudi Arabia-based petrochemicals giant is forging ahead with massive investments to boost its capacities, including its entry into the low density polyethylene field.
Abdullah S. Nojaidi, recently promoted to executive vice president for planning and investment at Sabic, told journalists at the K'98 show in Dusseldorf that Sabic's profit for the first nine months of 1998 plunged 51 percent, to 3.58 billion Saudi riyals ($954.1 million). The drop came despite steps last year to curb costs sharply.
Sales in the period dropped 26 percent to 13.6 billion riyals ($3.64 billion), even though volume output of products rose 5 percent to 14.5 million tons. Sales in its polymers unit slipped 21 percent.
The 14,000-employee firm blamed weaker international prices and the higher cost of feedstocks. It also cited fallout from the economic crisis in Asia, where it predicts that polymer consumption by 2000 will be as much as 25 percent lower than generally assumed by pre-crisis forecasts.
Even so, it is proceeding with billions of dollars in investments to boost capacity for making olefin feedstocks, polypropylene and LDPE.
Sabic in September secured $720 million in financing to expand production at the Al-Jubail Petrochemical Co., a 50-50 joint venture with Exxon Chemical Arabia Inc. that Sabic refers to as its Kemya affiliate. The firm plans to add LDPE to its Ladene-brand portfolio by building a 480 million-pound-per-year plant to make the product at Al-Jubail Industrial City. Start-up is planned for the second quarter of 2000.
The same project also involves streamlining Kemya's linear LDPE plant to boost output by 40 percent, to 1.87 billion pounds, and adding a new olefins cracker that will produce 1.54 billion of ethylene and 441 million pounds of propylene.
``The obvious question is: Why is Sabic getting into LDPE now?'' Nojaidi said. ``Simply put ... it will fill the needs that our [Ladene] grades of [high density] PE and LLDPE have not met, such as for clarity films and agricultural films, and for some injection grades and possibly blow molding grades. We expect to have wide application in our domestic and Gulf region markets especially, but an export market is also foreseen.''
Kemya will use Exxon's high-pressure process technology.
In May, Sabic secured a $400 million loan that is allowing it to build a second PP resin plant at the site of its Saudi European Petrochemical Co. affiliate. Known as Ibn Zahr, the joint venture will begin operating the new plant in 2000's second quarter with an annual capacity of 705 million pounds. That will double Ibn Zahr's PP production capabilities, once it finishes streamlining its existing PP plant.
That same month, it also announced that its Eastern Petrochemical Co. affiliate, known as Sharq, had signed a turnkey contract with Japan's Mitsubishi Heavy Industries Ltd. to upgrade its two LLDPE resin plants.
That work, due for completion by early June, will increase Sharq's LLDPE capacity 75 percent to 1.54 billion pounds per year.
And late last year, Sabic obtained a $2.2 billion loan to finance a huge expansion project it calls Yanpet II. It is applying the money to its Saudi Yanbu Petrochemical Co. (Yanpet) affiliate in Yanbu, Saudi Arabia, where it will add the following annual capacities by the year 2000:
573 million pounds of PP. (It has no PP capability at that site now.)
1.18 billion pounds of HDPE, which more than doubles the site's current HDPE capacity of 1.06 billion pounds.
The project also will double its upstream olefins capacity, by adding a 1.76 billion-pound-per-year ethylene cracker and 551 million pounds of propylene, Sabic said.
Sabic, which was founded in 1976 and began operating its first industrial complex seven years later, said that in 1986 it produced slightly more than 1.87 billion pounds of its polymer products. By 2000, its output will exceed 8.82 billion pounds.
It said that in Saudi Arabia alone, where annual consumption of thermoplastics has reached 84 pounds per person, it now sells about 1.17 billion pounds of TP resins to more than 400 downstream processors. In the Middle East region as a whole, per-capita plastics consumption is just 33 pounds.
The company also said it has reorganized into more than 30 business units that it has grouped into five core sectors — polymers, basic chemicals, intermediates, fertilizers and metals. Each unit will be responsible for the planning, production, logistics, marketing, sales, customer satisfaction, technology development and research for all its products. Nojaidi said the new polymer unit should be fully operational early next year.
Separately, the company is stepping up its research activities by establishing overseas Sabic Technology Centers. The first opened in Houston last year and is concentrating on catalyst work — though Nojaidi declined to comment on whether Sabic is developing its own metallocene catalyst technology.
Another technology center is due to open in Mumbai, India, by 2000, with a third planned for an undetermined site in Europe.