Sector News

Saudi's SABIC eyes U.S. shale as top gas source for petrochemicals

May 5, 2016

Saudi Basic Industries Corp (SABIC) is targeting North America for the shale gas needed to fuel growth at one of the world’s largest petrochemicals groups, its chief financial officer said on Tuesday.

The company has said previously that a shortage of natural gas was stifling its domestic growth and forcing it to look at foreign investment opportunities.

The U.S. shale gas industry has increased output in recent years and SABIC signed its first deal for U.S. shale gas last year for use at its Teesside petrochemical plant in Britain.

“In terms of industry growth, we see growth chasing where feedstock is competitive, and the U.S. is top of the list,” Mosaed al-Ohali told Reuters.

Saudi petrochemicals businesses have benefited in the past from feedstock subsidies that are being phased out as the government looks to bridge a substantial budget deficit after oil’s two-year downturn.

The Saudi government raised gas prices for petrochemicals feedstock from $0.75 per million British thermal units (BTUs) to $1.75 for ethane and $1.25 for methane, which some industry watchers say is not far from U.S. natural gas prices.

U.S. natural gas prices for April at the Henry Hub benchmark in Louisiana fell to their lowest level for the month since 1995, averaging $1.90 per million BTUs.

SABIC is also focusing on oil-to-chemicals operations, with Ohali saying that the company views its planned $30 billion Yanbu project as a “fertile opportunity”.

He added that SABIC is also looking at technologies such as coal-to-chemicals in China but gave no further detail.

SABIC will stick to its main chemicals products, Ohali said, but it will support small and medium enterprises (SME) to move further downstream through Saudi Arabian Industrial Investments Company (SAIIC), its joint venture with Saudi Aramco and the Public Investment Fund.

By Reem Shamseddine and David French

Source: Reuters

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