LONDON (ICIS)--SABIC’s joint ventures and acquisitions around the world are set to continue as it seeks to widen its reach, according to the executive vice president for petrochemicals at the Saudi chemicals major.
Abdulrahman Al-Fageeh added that sustainability would be at the core of the company’s business going forward, although he would not disclose how much money SABIC allocates for research and development (R&D) going into circularity.
The executive said he could not give details about the proposed acquisition by Saudi energy major Aramco, which plans to become the majority owner of SABIC by acquiring a 70% stake for $69bn.
The executive spoke to ICIS on the sidelines of the plastics and rubber trade fair K, in Dusseldorf, Germany, where many petrochemicals companies have announced projects to produce greener chemicals.
A sea change from the last K Trade Fair in 2016.
However, higher costs to produce greener products from sustainable feedstocks has so far been a key impediment for intake among end customers.
According to Al-Fageeh, that is not the main reasoning anymore, and it is end consumers the ones demanding more sustainable products as public awareness rises.
On 17 October, SABIC said it was targeting an industry first by launching a polycarbonate (PC) based on certified, renewable feedstocks.
“This is just the start. This has value for us and we want to pursue [this line of work]. As well as achieving a more circular economy, this benefits the environmental and the economy,” said Al-Fageeh.
“We need do make sure we have a very sustainable business for the company – our customers and business partners are requesting this, as well as [end market, consumers products] brand owners.”
The executive said, however, that it would be difficult to quantify how much SABIC assigns to R&D because the issue is looked at as “part of our renovation” and spills over to every project the company starts up.
“Given the way we operate, it would be unfair to give you some numbers. R&D is part of our renovation and we call it an investment to make sure we have operations based on safe assets,” said Al-Fageeh.
“Frankly speaking, R&D is not only the money we spend on R&D [activities] but more in a cross-wise way – in the development of our people or in our assets investments themselves.
“We are spending huge resources [on R&D],” he added.
SABIC’s annual report for 2018 does not specify either spending on R&D. Its Sustainability Report 2018 is also scarce in figures.
However, for a company like SABIC, headquartered in a country sitting above vast amounts of crude oil, hardly circular products based on fossil fuels are destined to continue being its main offering.
SABIC’s ways of producing really matter. The company has become a key, major petrochemicals, with operations spanning globally.
Al-Fageeh diagnosis on crude oil may indicate that there is still a long way to achieve a non-fossil fuels petrochemicals industry.
“Crude oil will continue to be our focus for cracking and for production of petrochemicals,” he said.
Those operations spanning the globe include projects from China to the US, from Europe to the Middle East.
However, Al-Fageeh did not give any update about the projects, which among others include a 50:50 joint venture in the US with energy and petrochemicals major ExxonMobil due to start up in 2022.
The petrochemicals complex would include a 1.8m tonne/year ethane cracker, two polyethylene (PE) units, and a monoethylene glycol (MEG) plant.
In China, the company is mulling a “world-scale” petrochemicals complex in the Chinese province of Fujian, south of Shanghai, although no definitive timelines have been set out.
While Al-Fageeh said he was “wrong guy” to ask about Aramco’s acquisition at SABIC, he also said he could not comment on SABIC’s 24.99% stake at Swiss chemicals producer Clariant, and whether the company intends to keep that stake.
SABIC's participation in Clariant's capital structure came to be more turbulent than expected.
After the Saudi major came to the rescue of Clariant's management, under siege by activist investors who kept increasing their stake at the company to force a change of course, the SABIC-appointed CEO Ernesto Ochiello resigned only a few months later.
He is now an executive at SABIC again.
The former CEO Hariolf Kottmann returned to Clariant’s help in an interim basis.
At the time of Ochiello’s resignation, both companies also cancelled one of the tie-up's stars: an enterprise for production of high performance materials.
Al Fageeh only said that, despite the enterprise's negotiations sudden suspension, “high performance polymers is still one of the core businesses” at SABIC, adding that growth will continue to come from acquisitions when the right opportunities arise.
"As usual, SABIC is open to any opportunity. Growth cannot only be organic: it needs to be both [organic and acquisitions]."
There are growing signs that the US-China trade war is reducing business for US polyolefins producers in Asia, who were hoping the increasing capacities in their home market could be exported, mostly to China.
The reduction in business would give other low-cost producers, like those in the Middle East, a chance to maintain or increase market share in China.
But Al-Fageeh would not give concrete figures to back that up, and limited himself to call for freer trade and for tariff and non-tariff trade barriers to diminish.
“We don’t like difficulties. We are encouraging decision makers to make sure there are no barriers [to trade],” he said.
According to the executive, the September attacks on Aramco’s crude oil facilities, which overnight wiped out 5% of global crude oil supply, is by now an old memory.
The attack carried out by Yemeni Houti rebels – although the US and Saudi Arabia said Iran could have been behind the attack – revealed how vulnerable Aramco’s facilities had become after Saudi Arabia’s inconclusive war in Yemen.
“Since the attacks, 50% of supply to our KSA [Kingdom of Saudi Arabia] facilities was affected, but in less than a week Aramco was able to reduce that gap to 30% [of supply affected]. Within 10 days, we also got back to normal operations,” said Al-Fageeh.
“The impact was very negligible. SABIC has robust operations around the world that cater for such cases and we managed this [crisis] very well – we didn’t see any complaints from our customers.”
Picture source: SABIC
Interview article by Jonathan Lopez