Saudi petchems company Sabic eyes up acquisitions in 2016

One of the world’s largest petrochemical manufacturers, Saudi Basic Industries Corporation, or Sabic, will make “at least one acquisition” next year, according to its chief executive.

Yousef Al Benyan, acting vice chairman and chief executive of the Riyadh-based company, said on Thursday that Sabic was planning to announce the potential additions to its core market early in 2016.

“I can tell you that [we are evaluating] between two to four companies in North America and China,” he said on the sidelines of the GPCA petrochemicals conference in Dubai, declining to expand on the types of companies being looked at.

“All options are open as long as those potential targets fit with the strategy either in our core products – specifically technology – we are willing to go after it,” said Mr Al Benyan.

Sabic’s goal is to take advantage of the current market volatility, triggered by the drop in oil prices, which has threatened the industry as margins tighten.

Mr Al Benyan said that the GCC petrochemical industry had to improve its competitiveness with the rising threat of US producers and increasing self-sufficiency of China.

The lower oil price has led to the Middle East downstream sector, which includes refining and petrochemicals, becoming even more vital to regional economic growth.

The impact from the lull in crude prices began to be felt in the petrochemical sector this year as producers, including Sabic, joined oil majors in reporting diminished profits and implementing cost-saving solutions.

Arabian Gulf petrochemical producers are expected to see further declines in profits this year. Yet the countries have invested billions of dollars in downstream projects to help diversify their energy earnings and job creation.

Mr Al Benyan said that oil prices should not continue to drive the industry’s investment. “If we keep focusing on [the] crude oil price, we are running after a mirage – it’s out of our control,” he said, adding that it was pivotal not to let investment fall but rather seek out opportunities, especially in acquiring technology.

Kuwait Petroleum Corporation (KPC) continues to focus more on its downstream investment strategy over the next five years as its seeks to “maximise value”, its chief executive said on Thursday.

“We are moving from investment in upstream to increase value chain optimisation,” said Nizar Al Adsani, deputy chairman and chief executive of KPC.

He said the company’s plan in the upcoming five years was to spend about US$120 billion with $50bn already committed.

“The idea is to move a step forward to secure our markets in the future. That’s why we’re looking to increase assets in Asia,” he said.

Stephen Halliday, chief executive of energy consultancy Wood Mackenzie, said that budget constraints among oil majors would likely delay future investment decisions, but warned the petrochemical industry of the risk of over-saturation from too much investment.

“Despite the rise in ethane pricing, the environment is still positive for chemical investment but beware of contracting margins due to the risk of over-investment,” said Mr Halliday.

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