PETROCHEMICALS

COMMODITY RALLY RAISES PROSPECTS FOR SAUDI PETROCHEMICALS

Saudi Arabian Basic Industries (SABIC), a subsidiary of Saudi Aramco, enjoyed a stellar first quarter this year.

The company’s revenues in the first three months of 2022 reached SAR 52.64 billion, a 3% increase compared to the previous quarter and a 40% rise versus Q1 2021. Net income during the period totalled SAR 6.47 billion, which was higher than the SAR 4.97 billion recorded a quarter ago and the SAR 4.86 billion posted the year before.

“SABIC’s Q1 financial performance was robust, building further on last quarter’s good results. Our financial performance this quarter was driven by several factors, including higher product prices, our diversified portfolio, and our strong, global presence,” said Yousef Al-Benyan, SABIC vice chairman and CEO. “As we move forward, we will realise our global growth strategy by capturing competitive feedstock resources and expanding our global presence. In doing so, we will also commit to strengthening our financial position, maintaining our operational resilience, and meeting our ESG requirements.”

A key landmark during the quarter was SABIC’s successful launch of Gulf Coast Growth Ventures, a “world-scale manufacturing facility” in San Patricio County, Texas, in collaboration with Exxon Mobil Corp in January.

The new facility will produce materials used in packaging, agricultural film, construction materials, clothing, and automotive coolants. The operation includes a 1.8-million-metric-tonne-per-year ethane steam cracker, two polyethylene units capable of producing up to 1.3 million metric tonnes per year, and a monoethylene glycol unit with a 1.1-million-metric-tonne-per-year capacity.

“We built this state-of-the-art chemical plant ahead of schedule and below budget, by leveraging our global projects expertise in execution planning and delivery, while keeping everyone safe and healthy,” said Karen McKee, president of ExxonMobil Chemical Company. “This is a remarkable achievement that positions us well to help meet growing global demand for performance products, while providing meaningful investment in the US Gulf Coast.”

 

In April, Fitch Ratings revised its outlook on SABIC to positive from stable, following a similar rating action on its parent company Aramco.

The ratings agency said SABIC's standalone credit profile of 'a+' reflects the company's cost leadership and conservative financial profile. “In 2021 SABIC's gross debt, excluding leases, reduced by around SAR 8 billion. EBITDA margins recovered towards 24% in 2021, and we now forecast them to average at least 20% in 2022-2025,” Fitch said.

The ratings agency added that SABIC's subsidised methane and ethane prices in the kingdom gives it a cost advantage over its competitors.

“This advantage will, however, resume in 2022-2023 as oil prices increase due to the ongoing war in Ukraine. We therefore expect SABIC's cost advantage and profitability to remain solid until oil prices drop materially from 2022 levels,” Fitch said.

  

Decarbonisation would have an impact on the region’s petrochemicals sector and the industry must adapt, according to Al Benyan.

“For GCC chemical companies, achieving the decarbonisation objective is even more critical than for other manufacturing sectors of the economy, as the chemical industry itself is a decarbonisation tool for national oil companies. We have to think about this challenge much more strategically with a laser-sharp focus,” Benyan told industry delegates at the Gulf Petrochemicals and Chemicals Association (GPCA) in March.

Technology will create a greater divide between technology developers and technology users as the resource advantage erodes, Benyan noted.

 

The Organization of the Petroleum Exporting Countries (OPEC) expects diesel and gasoline to be the main drivers of demand for petroleum products year on year as economic activity, mobility, and industrial activities recover globally.

A recovery in mobility, coupled with decreasing COVID-19 restrictions and an easing of trade-related bottlenecks in major consuming countries, will support gasoline and diesel demand; while light distillates will be largely supported by strong petrochemical demand, notably in China, the US, and India. Finally, the recovery in global air travel amid the relaxation of travel restrictions will back jet kerosene demand.

With global economy rebounding after COVID-19, despite some challenges in the Chinese economy, the outlook for petrochemicals looks robust.

Fortune Business Insights, expects the global petrochemicals market to double to USD 888.3 billion by 2028, compared to USD 371.9 billion in 2020, growing at an annual rate of 6.2%.

“Increasing demand for the product in automotive, medical, packaging, construction, and consumer goods sectors will likely boost the market,” Fortune said.