NPRA '04: Sabic rules out US cracker jv in favour of Mexico

29 March 2004 19:19  [Source: ICIS news]

SAN ANTONIO, Texas (CNI)--High natural gas prices have obliged Saudi Basic Industries Corp (Sabic) to drop plans for major investment in US petrochemicals production in favour of a joint venture cracker complex in Mexico, it was disclosed here on Monday.

Mohamed Al-Mady, Sabic's vice chairman and chief executive officer, said in response to questions from CNI at the International Petrochemical Conference (IPC)* that unrealistically high feedstock costs had deterred the company from pursuing a possible joint venture project in the US.

Sabic is still keen to develop production closer to its key customers, said Al-Mady, "so we are looking for opportunities in the neighbouring area and one option for us is Mexico".

Al-Mady confirmed that Sabic had begun discussions with Mexican state energy and petrochemicals giant Pemex over investment in a worldscale cracker with associated polyethylene (PE), polypropylene (PP), ethylene glycol (EG), methanol and methyl tertiary butyl ether (MTBE) facilities.

He said the discussions were at an early stage and he was unable to say when a firm investment decision might be taken. Al-Mady added, however, that Sabic was "not going to be driven by time". 

Sabic does not market its polymer products in North America, partly because of high transport costs from its current production plants. However, Al-Mady said Sabic might export product to Mexico and the US to seed N American markets ahead of local production.

Sabic, which began its global expansion two years ago with the acquisition of DSM's European petrochemicals business, is also in discussions over possible joint venture projects in China. Al-Mady confirmed that Sabic is in early stage talks with two potential partners he declined to identify.

Earlier this year, however, sources close to Sabic said the company favoured northeastern (NE) China for its potential cracker investments. Besides Panjin in Liaoning province as a possible location, Sabic is considering alternative investments in other cities such as Shenyang and Dalian, also in Liaoning.

Sabic is also in the early stages of talks with Iran over possible cooperation in the country's ambitious petrochemicals expansion programmes.

*Organised by the National Petrochemical and Refiners Association (NPRA), the IPC continues through Tuesday.

By: Neil Sinclair
+44 20 8652 3214

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