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Saudi Arabia’s SIIG and Petrochem in merger talks

September 22, 2020
Chemical Value Chain

Saudi Industrial Investment Group (SIIG; Riyadh) and National Petrochemical Co. (Petrochem; Jubail, Saudi Arabia) say they have started talks over a potential merger of the two companies.

SIIG and Petrochem have issued statements saying their boards have approved initial discussions between the companies to study the “economic feasibility” of a possible merger. No agreement has been reached on the final structure of any merged business, they note. SIIG currently owns 50% of Petrochem. The two companies are listed on the Saudi stock exchange.

Entering into the talks “does not necessarily mean that the deal will take place between the two parties,” they state separately. If a deal is agreed on, it will be subject to the conditions and approvals of the competent authorities, and the approval of the extraordinary general assembly of each company, they say. Any developments in the talks will be announced later, they say.

The two companies previously held merger discussions in 2011, with those talks eventually postponed to allow Petrochem’s petchems facility at Jubail to reach production capacity and provide better valuations of the companies, SIIG said at the time.

SIIG was established in 1996 and Petrochem was formed in 2008. SIIG had total assets of 19.2 billion Saudi riyals ($5.1 billion) at the end of June, and Petrochem had SR16.4 billion in total assets.

Petrochem owns 65% of Saudi Polymer Co. at Jubail, which produces more than 1.7 million metric tons/year (MMt/y) of polymers, it says. The complex at Jubail is designed to produce 1.22 MMt/y of ethylene, 440,000 metric tons/year of propylene, a combined 1.1 MMt/y of high-density polyethylene (HDPE) and low-density polyethylene (LDPE), 400,000 metric tons/year of polypropylene (PP), and 100,000 metric tons/year of hexene-1. The units are fed by a steam cracker using ethane and propane as feedstock.

Petrochem confirmed in July that Saudi Polymers Co. would permanently close its 200,000-metric tons/year polystyrene (PS) manufacturing plant at the Jubail petchems complex and write down its value. It said the move reflected difficulties in achieving profits in the market. Arabian Chevron Phillips Petrochemical, wholly owned by CPChem, owns the rest of Saudi Polymers Co. The closure of the PS complex was estimated to have an impact of up to SR277 million on Petrochem’s second-quarter results, it said at the time.

Saudi Chevron Phillips (SCP), an equally owned joint venture (JV) between SIIG and Arabian Chevron Phillips Petrochemical, operates a complex at Jubail designed to produce 835,000 metric tons/year of benzene, 355,000 metric tons/year of cyclohexane, and 804,000 metric tons/year of gasoline. SCP is Saudi Arabia’s sole producer of cyclohexane, a feedstock used in the production of nylon. It is also the largest single producer of benzene in Saudi Arabia. Another equally owned manufacturing JV between the two companies, Jubail Chevron Phillips (JCP), produces dilute ethylene, propylene, and pyrolysis gasoline. The 230,000 metric tons/year of ethylene produced is fed into a 730,000-metric tons/year styrene unit. The propylene plant is designed to produce 150,000 metric tons/year. The two JVs use light naphtha feedstock supplied by Saudi Aramco.

Any deal between SIIG and Petrochem would mark further consolidation in the Saudi petrochemicals sector, following Aramco’s acquisition of a 70% stake in Sabic earlier this year and Saudi International Petrochemical Co.’s (Sipchem) acquisition last year of Sahara Petrochemical Co.

By: Mark Thomas

Source: Chemical Week

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