SABIC eyes expansion in China with proposed new plant

A joint venture project between SABIC and Sinopec in Tianjin, China (Supplied)
Updated 11 September 2018
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SABIC eyes expansion in China with proposed new plant

  • Initial agreement signed with Fujian provincial government
  • Part of wider Asian petrochemicals push

LONDON: Saudi Basic Industries Corporation (SABIC) is considering plans to build a petrochemical complex in the Chinese province of Fujian as part of wider efforts to diversify its business internationally.
The petrochemical producer has signed an initial agreement with the Fujian provincial government which sets out a framework of cooperation for the “world scale” project, according to a statement posted on the Tadawul stock exchange in Saudi Arabia.
SABIC said the MoU was part of a strategy to “diversify its operations, seek new investment opportunities and strengthen its position in the Chinese market.”
"It brings SABIC closer to its Asian customer base and provides direct access to the world’s largest and fastest growing market for petrochemicals." said Tommy Trask, director, corporate & infrastructure ratings, Middle East at ratings agency S&P Global.
The agreement did not contain any ‘definitive’ timeframes for the development, the company said.
“A core strategy underlying SABIC’s expansion plans has been to organically enhance its international footprint, both in terms of its ongoing diversification of its product range, as well as in terms of global customer reach, by strengthening its position in strategic markets,” said Ehsan Khoman, the Dubai-based head of Mena research and strategy at MUFG Bank.
The expansion of the petrochemicals giant in China is also part of efforts to secure future demand for the Kingdom’s crude oil supply, he added.
“SABIC acts as a central conduit of Saudi Arabia’s international diversification efforts in the petrochemicals sector, and by organically expanding into Asian markets – where the bulk of the Kingdom’s crude oil is shipped – the country is increasing its Asian market share, whilst in conjunction locking-in future appetite for its hydrocarbon product offering,” said Khoman.
SABIC has already established a foothold in China through its existing 50:50 joint venture with the Chinese state-owned oil company Sinopec in an ethylene plant in the Tianjin Province.
The Saudi company is far from the only global company eyeing opportunities in Asia, with the US oil and gas firm ExxonMobil also securing a preliminary deal with China this month.
ExxonMobil signed a cooperation framework with the Guangdong provincial government to discuss a possible new chemical complex in the province. The project would include a 1.2 million-tons-per-year ethylene flexible feed steam cracker. If the development goes ahead, operations could begin in 2023.
The US company said in a statement it was considering other potential chemical manufacturing projects in Asia in order to capitalize on the expected rise in demand for chemical products across the region. 

It aims to increase its chemical manufacturing capacity in Asia Pacific and North America by 40 percent, according to the company release.
Earlier this year, Germany’s BASF also announced it was considering building a chemical production facility in Guangdong. The company signed a non-binding MoU with the provincial government in July, with the potential investment in the project estimated to reach up to $10 billion.
The project is anticipated to be completed by 2030 and will include a steam cracker with a capacity of 1 million metric tons of ethylene per year.
The plant would become the company’s third-largest site globally after the Ludwigshafen plant in Germany and the Antwerp site in Belgium. BASF currently has another site in Nanjing in China, which is a joint-venture with Sinopec.


French state-owned bank drops plan to aid trade with Iran

Updated 24 September 2018
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French state-owned bank drops plan to aid trade with Iran

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.
The United States is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.