Bloomberg News

Sabic Plans to Build $1 Bln China Petrochemical Plant

May 20, 2006

Saudi Basic Industries Corp. (SABIC), the world's biggest chemicals maker by market value, plans to build a $1 billion petrochemicals plant in China in partnership with China Petrochemical Corp., Asia's biggest oil refiner.

``We are talking with China Petrochemical though a deal hasn't materialised yet,'' Mohammed al-Mady, Saudi Basic's chief executive, said today in an interview at an annual Middle East meeting organized by the World Economic Forum. ``It could be in the region of $1 billion.''

Saudi Basic, also known as Sabic, is competing with companies including Dow Chemical Co. (DOW:US), the biggest U.S. chemical maker, for share in emerging markets such as India and China. Chinese consumers' rising consumption of textiles, auto parts and cellular phones is increasing demand for plastics and petrochemicals, making the Asian country Sabic's biggest market.

Sabic is already working on a $5 billion petrochemicals project in Dalian, northeast China, with local building materials maker Dalian Shide Group. The two companies plan to build plants with capacity to produce 1.3 million metric tons a year of ethylene and chemicals, al-Mady said in 2004.

China

The plant with China Petrochemical, also known as Sinopec, will produce ethylene and derivatives, al-Mady said in the Red Sea resort of Sharm el-Sheikh, where about 1,200 mainly Arab political and business leaders are gathering for the annual Middle East meeting.

He declined to comment on how much of the plant Sabic would own or when he expected an agreement to be signed, saying ``an investment in China cannot be measured in days.''

Chinese President Hu Jintao visited Sabic's headquarters last month when on an official visit to Saudi Arabia, China's second largest oil supplier after Angola. China is committed to building a ``strategic partnership'' with Saudi Arabia, he said then.

Sabic is set to become the world's largest producer of ethylene glycol, a raw material for synthetic fiber and plastic water bottles, as it increases total chemical production to 64 million tons a year by 2008 from 43 million tons.

Saudi Basic added 2.75 riyals to 151 riyals at 2.25 p.m. London time. Sabic accounts for about a quarter of the value of the Tadawul. The shares have dropped about 40 percent since the beginning of the year.

-- Editor: Evers.

To contact the reporter on this story: Will McSheehy in Sharm el-Sheikh on at wmcsheehy@bloomberg.net

To contact the editor responsible for this story: Chris Collins in London on at collinsc@bloomberg.net Sean Evers in the Dubai bureau on at evers@bloomberg.net


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