JEDDAH, 13 June 2005 — Saudi Arabia announced yesterday that it would float shares worth SR22.5 billion in petrochemical and mining companies as part of its efforts to increase the participation of citizens in such firms.
Petroleum and Mineral Resources Minister Ali Al-Naimi said his ministry had already reached an agreement with companies implementing petrochemical projects to float part of their shares for public subscription.
In the first such move, he said, shares worth SR10 billion will be offered to Saudi investors. He said the stock offerings would be made after receiving approval from the Capital Markets Authority and after completing official procedures.
Naimi’s statement comes as efforts are under way to establish a number of new petrochemical projects to manufacture polyethylene, propylene polypropylene, polystyrene, glycol ethylene, methanol, butane and other products.
The ministry has been studying additional petrochemical and mineral projects that could lead to the flotation of shares worth SR12.5 billion, the Saudi Press Agency quoted Naimi as saying.
Naimi’s announcement coincided with the Petroleum and Mineral Resources Ministry’s decision to allocate more natural gas feedstock to petrochemical projects, the agency added.
Businessmen have said tight feedstock supplies could constrain Saudi Arabia’s rapidly expanding petrochemical sector unless more gas is made available in the next few years. Naimi did not name the projects that would issue shares to the public, but state-owned oil giant Aramco announced last month that it would offer stock in its planned joint venture export refinery in Yanbu. The Yanbu plant is one of three major Aramco projects to expand Saudi Arabia’s refining network. Aramco and Japan’s Sumitomo Chemical Co Ltd. will invest $6-7 billion to upgrade the Rabigh refinery and build a petrochemical plant.
Saudi Basic Industries Corp (SABIC) also plans domestic expansion projects worth more than SR30 billion in the petrochemical sector. The petrochemical giant said recently that it would float 35 percent of shares of the National Petrochemicals Company (Yansab) in Yanbu for public subscription. Yansab, a new joint stock company established by SABIC, will supply four million tons of petrochemicals, including ethylene, propylene, polyethylene and ethylene glycol. SABIC is now in the process of establishing the company with a fully paid-up capital of SR5.625 billion.
According to the corporation’s latest annual report, a record production volume in 2004 has pushed SABIC to its position as the world’s second largest producer of ethylene glycol, methanol and MTBE; third largest producer of polyethylene; sixth largest producer of polypropylene; and overall the fourth largest producer of polymers.
Recent public share offerings have been heavily over-subscribed in the Kingdom, where a surge in state oil revenues and bank lending has helped fuel strong demand for shares from local investors. “The time has come for more IPOs like this in lieu of huge liquidity available in the Kingdom,” said Riyad Bank Chief Economist Khan H. Zahid.
