Saudi Arabian companies could acquire companies such as LyondellBasell, Westlake Chemical and the materials company of DowDuPont to meet their goals to expand capacity, an analyst said on Monday.
State energy producer Saudi Aramco plans to nearly triple its petrochemical capacity by 2030, said Hassan Ahmed, head of research at Alembic Global Advisors. He made his comments in a research note.
If the company plans to build those plants in Saudi Arabia, it could have trouble finding low-cost feedstock.
Already, Saudi Arabia is consuming nearly all of the ethane that it produces, Ahmed said.
In addition, much of the gas being discovered in the country is dry, so it has only small amounts of ethane and other natural-gas liquids (NGLs).
Any new capacity in Saudi Arabia will likely rely on heavier feedstock, which costs more than ethane, Ahmed said.
In fact, the new Sadara petrochemical complex relies on a mix of heavy and light feedstocks.
The alternative to building new plants in Saudi Arabia is pursuing mergers and acquisitions (M&A) in parts of the world with cost advantages, Ahmed said.
“This inorganic growth route, in our view, would make much more sense than greenfield build-outs, particularly in light of the extreme capital cost inflation the global chemical industry has faced in recent years,” he said.
“We believe overseas petrochemical companies looking to access advantaged shale gas in the US via M&A may become one of the key themes in the near-to-medium term with commodity chemical companies like LyondellBasell, the soon-to-be spun-off Materials Co at DowDuPont and Westlake Chemical as particularly ripe targets,” Ahmed said.
LyondellBasell, DowDuPont and Westlake did not immediately respond to requests for comments.
In general, companies typically decline to comment about speculation about M&A.
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