InterviewSaudi’s NatPet plans to make plastic goods by H2 2012

10 January 2011 02:42  [Source: ICIS news]

By Chow Bee Lin

Malaikah wants propane prices to be tied to LPG prices and at similar discount level as for ethane feedstockDUBAI (ICIS)--National Petrochemical Industrial Co (Natpet) plans to make plastic finished goods by the second half of 2012 and wants the Saudi Arabian government to offer a more competitive pricing scheme for propane feedstock, the company's top executive said late on Sunday.

Its venture into plastic finished product manufacturing was in response to the Saudi government's call for local companies to create employment, add value and transfer technology by investing in downstream production, NatPet president and chief operating officer Jamal Malaikah told ICIS in an interview.

He was speaking at the sidelines of the Arabplast exhibition in Dubai. The four-day 10th Arab International Plastics and Rubber Industry Trade Show and Conference ends on Tuesday,

"Investment downstream is a very wise decision and we applaud the government for that," said Malaikah.

Plastic finish products from the new manufacturing facility would cater mainly to the export market, as the local market is relatively small, said Malaikah. He declined to give details of the new business.

But Malaikah sees the government's plan to increase local propane prices as a major challenge for local polypropylene (PP) producers, believing it will deter new investments in propane derivative products.

The Saudi government was expected to announce a new formula in the next few months for pricing local feedstocks, including ethane and propane, said Malaikah.

The current formula prices propane at a 29% discount to Japan naphtha prices less freight costs. The ethane gas price in Saudi Arabia is fixed by the government at 0.75 cents/MMBtu.

Malaikah did not know how the new formula would be changed but he strongly believed that propane prices should be tied to liquefied petroleum gas (LPG) prices and at a discount level similar to the discount for ethane feedstock.

“Propane prices should not be tied to naphtha prices as the current pricing formula puts propane and butane derivatives at a disadvantage. Maybe 30 years ago tying propane to naphtha was acceptable, but with today’s oil prices, this policy is no longer realistic,” he said.

Saudi Arabia enjoyed very low costs of oil and gas production and the country should make use of the cost advantage to encourage investments in new petrochemical plants, which in turn would drive investments in the downstream plastic finished goods manufacturing sector, he said.

NatPet planned to double the capacity of its 400,000 tonne/year PP plant and its propane dehydrogenation (PDH) unit of the same capacity at Yanbu and was awaiting approval from the government for the expansion, he added.

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By: Chow Bee Lin
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