Saudi chemical giant stays on task
KATY — The threat of trade war between the United States and China — potentially the world’s fastest growing buyer of liquefied U.S. shale gas and petrochemical products — hasn’t deterred Saudi Arabia’s chemical company from investing in the Gulf Coast and the growing American energy market, the company’s chief executive said in a recent interview at the company’s offices here.
Tariffs proposed by U.S. and Chinese governments have raised concerns for the Middle East’s largest petrochemical producer, acknowledged Yousef Al-Benyan, chief executive of Saudi Basic Industries Corp., or SABIC. As geopolitical tensions rise, Benyan said, the government-owned company’s biggest priority is making sure its customers don’t face supply disruptions.
“We understand from time to time you get those hiccups,” Benyan said. “But longer term, we think this isn’t going to be a challenge for us to execute our strategy.”
The chemical maker, first es-
tablished in Riyadh in 1976, opened its first Houston office in 1990. A decade later, it opened a local research and development center. It bought GE Plastics in 2007, building an international footprint in engineering thermoplastics.
Houston and the Gulf Coast, with its easy access to cheap and plentiful natural gas that is the feedstock for petrochemicals and plastics, has attracted some $60 billion in investment for the construction of new plants and expansions of existing ones. SABIC, Benyan said, believes global demand growth for petrochemical products will remain strong through at least 2025, but the challenges of developing multibilliondollar petrochemical projects will likely weed out some announced U.S. initiatives and leave only serious players.
The outlook became somewhat clouded last week when China said it planned to slap $50 billion worth of tariffs per year on more than 100 U.S. products, including lubricants containing oil and certain chemical products. In an analysis, research firm IHS Markit said increased tariffs “could derail a global economic boom that has benefited the global petrochemical industry
But Benyan said that hasn’t discouraged SABIC and its American partner, Exxon Mobil Corp., which together are building the world’s largest ethane cracker near Corpus Christi in South Texas, a $9 billion project. The Saudi executive said the U.S. shale gas boom has prompted a “complete shift” in the company’s long-term strategy in North America.
Only a few years ago, the United States was largely a buyer of SABIC products, but surging domestic natural gas production has turned the Gulf Coast into a global hub that has become integral to the Saudi company’s strategy for export growth, he said.
“This isn’t going to be the only project we entertain,” Benyan said, adding the company wants to expand its portfolio in the specialty chemicals and agriculture sides of the business in the United States. “There are other projects that are really under evaluation.”
Last year, the company launched two new vessels to transport ethane, a natural gas liquid, from Houston to its processing plant in the United Kingdom. As of this year, the company has some 400 Houston area employees and around 3,000 in the United States.
The Saudi company is in the early stages of designing a new U.S. headquarters in Katy, near Houston, where it hopes to increase employment from about 400 to 1,000. The company expects to open the office in two or three years. On Saturday, Saudi Crown Prince Mohammed bin Salman visited a company event near the spot where SABIC plans to build its headquarters.
China has become crucial for SABIC’s growth strategy. The Chinese government’s initiative to develop higher-end petrochemical products has opened new opportunities for the Saudi company, and Benyan said his company also isn’t dissuaded by China’s goal to become selfsufficient in petrochemical production in coming years.
“It’s a challenge for a company who behaves continuously like an exporter,” he said. “If you look at our strategy in North America and China, even in Europe, we started as a marketer and we converted our strategy to be a local player. We are building plants (in China) and have plans to grow there and become part of the local fabric.”