Sabic, the Middle East’s largest chemicals company signed a preliminary agreement to develop a large-scale petrochemicals complex in the Chinese province of Fujian as the firm looks to expand its footprint in one of the world's biggest markets for products.
The announcement posted on the Saudi bourse Tadawul provided no indication of timeline, capacity or the product mix for the proposed complex. Shares in Sabic, the region's largest listed company rose 0.3 per cent after news of the agreement.
The pact was “part of Sabic’s strategy to diversify its operations, seek new investment opportunities and strengthen its position in the Chinese market,” the company said in the statement.
The move comes amid an increasing shift in the world’s top oil exporting country towards selling more higher-margin products in Asia. China, the world’s top importer of oil is said to account for nearly half of all growth in the petrochemicals industry, which generated $2.27 trillion in revenues in 2017 alone, according to the China Petroleum and Chemical Industry Federation.
Sabic, which is currently in the process of being acquired by state-owned Saudi Aramco has looked to increase its market share in China, investing around $1.8 billion in the country, primarily in compounding facilities and joint ventures with local firms.
Aramco owns and operates facilities in the Chinese province of Fujian in a joint venture with US major Exxon Mobil. Both Aramco and Exxon have 25 per cent interest each in the venture, with the remainder owned by the state-owned Fujian Petrochemical Company.
The facility has expanded from being a refinery with an output capacity of 80,000 to 280,000 barrels per day to producing chemicals. The integrated complex today has a 1.1 million-tonne ethylene steam cracker, a 960,000 tonne-per-year polyethylene unit, a 550,000 tonne-per-year polypropylene unit as well as an aromatics cracker. The facilities currently produce among other products, benzene, industrial butadiene and ethylene as well as polymer grade propylene, which find uses in the paint, rubber, resin and synthetic fibre industries.
Regional national oil companies as well as chemical firms have increasingly looked to make inroads into the fast-growing Chinese and Indian markets. Aramco and Abu Dhabi National Oil Company formed a joint venture to invest in a $44bn refining and chemicals complex on the western coast of India. Borouge, the UAE's biggest chemicals producer has also indicated possible role in the the downstream developments in India as well as expansion into China.