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Sabic investigates shale gas-based opportunities in USA

Sabic to expand petrochemical capacities in USA

The Ryadh-based Saudi Basic Industries Corporation (Sabic), may join BASF, ChevronPhillips, Dow Chemical (Dow), Enterprise Products Partners (Enterprise), ExxonMobil, Evonik, Occidental Petroleum, Sasol, Shell, to increase its petrochemical foot print in USA to benefit from the low costs feedstock provided by the shale gas.

Speaking at the Gulf Petrochemicals and Chemicals Association (GPCA) Forum in Dubai on November 28th, 2012, Mohamed Al-Mady, Sabic CEO and Chairman of the GPCA, recognized the shale gas as a game changer for the global petrochemical industry.

Until then, the main competitive advantage of the petrochemical companies home-based in the Gulf was relying on the lowest costs of the feedstock.

With direct access to the oil and gas based on local prices disconnected from the global markets, they can benefit from this market leadership all the way downstream their integrated business model.

But the shale gas emerged in the USA in the same time as most of the Gulf countries, except Qatar, are running short of natural gas.

Most of it is directed to the electrical power generation while the actual ethylene cracker are converted back to naphtha.

In parallel in USA, the petrochemicals projects planned by ChevronPhillips, Dow, Enterprise, ExxonMobil, Evonik, Sasol and Shell represent $33 billion capital expenditure (source: Project Smart explorer)

In the Gulf, Sabic success will rely on innovation

Sabic is already active in USA through its business unit Innovative Plastics (ex GE Plastics) but wants also to be part of this economical revolution in increasing its foot print either by acquisition, either by joint venture.

Sabic is not considering to buy stake directly on the upstream side of the shale gas, but is focusing on the direct access to the natural gas at market price below $4 per million btu.

In addition to the gas price, Mohamed Al-Mady highlighted also the fact that in USA, the producer and the consumer are on the same market with good infrastructures in between, while the Middle East is mainly exporting to Asia.

In practice it means that sooner or later the low gas market price in USA may impact the global export of the Gulf petrochemical industry.

In this context, the success of this sector in the Middle-East passes by technology and innovation to increase the added value with new products and improve the manufacturing processes.

Sabic signed an agreement with Shell to expand the Sadaf petrochemical complex in Al Jubail, Saudi Arabia.

Through this agreement Sabic and Shell are planning further cooperation overseas, USA might be the next location.

The shale gas is turning the petrochemical world upside down but opening opportunities on both sides of the Atlantic for bulk chemicals in USA and high performances products in Middle East.

Sabic intends to consolidate its market leadership in taking advantage of both sides in the same way as ChevronPhillips, Dow, Enterprise, ExxonMobil, Evonik, Oxy, Sasol or Shell.

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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