While traveling to college as a young man, Abdulrahman Al-Ubaid could look down from the airplane he was on and see fires from natural gas flaring over the oil fields of Saudi Arabia.
Today, Al-Ubaid is vice president of polyolefins for Saudi Basic Industries Corp. (Sabic), and that same natural gas is being used as raw material to make polyethylene and polypropylene for the business that he oversees. Finding uses for that natural gas has led Sabic officials to predict that the firm will be one of the world's five largest petrochemical makers by 2015.
In PE alone, Sabic plans to add around 3.5 billion pounds of annual capacity by 2008. In PP, the firm - which is based in Riyadh, Saudi Arabia, and is 70 percent government-owned - will add more than 1.5 billion pounds of capacity by that year. Sabic already ranks third in global PE capacity and sixth in PP.
During an interview at K 2004 in Dusseldorf, Al-Ubaid described how Sabic's petrochemical policy has evolved over time.
``At the beginning [in 1979], Sabic was more interested in joint ventures'' like Sadaf, with Shell Oil Co. (USA), and Kemya, with ExxonMobil Chemical Co., he said. ``We learned a lot from our partners, and those ventures were fruitful, but now we're more willing to go on our own, as we're doing with Petrokemya,'' a wholly owned Sabic affiliate.
Petrokemya will operate half of the new 2008 PE capacity and about 40 percent of the new PP capacity. The rest will be operated by various Sabic joint ventures. Additional expansions will boost Sabic's PVC and PET capacity by a total of 180 million pounds annually.
Saudi Arabia's rich oil and natural gas resources give Sabic a supply advantage over competitors. Its average natural gas costs are estimated at less than $1 per million Btu, compared with recent prices of $6 and higher in the United States. And yet, the firm's calls for consolidation among Saudi Arabia's plastics processing industry sound quite similar to comments made by resin makers in North America and Europe.
``There were only a handful of processors in Saudi Arabia when Sabic was launched, and now there are about 600,'' Al-Ubaid said. ``Fifteen percent of those processors consume 65 percent of all the resin sold in the kingdom, but the rest are having difficulties being competitive.
``To compete, they have to come up to international standards, with good management and marketing.''
Sabic became a major player in the European petrochemicals market when it acquired the polymers business of DSM NV for almost $2 billion in 2002. Sabic's European expansions call for a 485 million-pound-capacity high density PE plant, an 840 million-pound low density PE plant and an 880 million-pound PP plant. The facilities could be built at Sabic sites in Germany or the Netherlands.
Now, Sabic has its sights set on China, where it is in ``serious discussion'' with two potential partners, Vice Chairman and Chief Executive Officer Mohammed Al- Mady said at an Oct. 21 news conference at K 2004. One of those potential partners has an oil refinery there, he added.
``China is a major market,'' Al-Mady said. ``We have two sales offices there and plan to open a third. But you can't just rely on getting product long-range from Saudi Arabia all the time.''
And as low-priced oil and natural gas disappear from North America and Western Europe, Sabic is well-aware of the magnified attention being placed on its part of the world.
``If you look at the [petrochemical] industry right now, it's moving to the Middle East,'' Al-Ubaid said.
``Twenty years ago, some companies, like Shell, had the vision to look to the future, so they already have a footprint in the Middle East. Now, latecomers are trying to catch up in places like Oman and United Arab Emirates because of the availability of natural gas.''
Sabic has been active on other fronts. It recently developed a bimodal HDPE pipe grade for Gelsenwasser AG of Gelsenkirchen, Germany, for drinking-water delivery. Sabic's polystyrene unit is doing development work in synthetic wood, while the firm has added impact copolymer PP grades.
Sabic worked with German injection molder Peguform GmbH of BÃ¶tzingen to provide a long-glass-fiber-reinforced PP for front-end modules on the Smart ForFour vehicle. It also is trying to improve the weatherability of its PVC resins to increase PVC use in window profiles throughout the Middle East.
In the first nine months of 2004, Sabic posted profit of $2.5 billion, roughly double its profit in the same period last year. Sabic profit for the third quarter alone was $1.1 billion, more than double its third-quarter showing a year ago.
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Saudi Basic Industries Corp.
Riyadh, Saudi Arabia
70 percent government-owned
2004 nine-month profit: $2.5 billion