Notes Dow/Aramco’s Massive Saudi Project
Jul26

Notes Dow/Aramco’s Massive Saudi Project

As you may have heard, Dow and Saudi Aramco are moving forward with their new, $20 billion project for the Kingdom of Saudi Arabia. If you haven’t heard, the news story I wrote yesterday has all the relevant details. Here are a few more observations: 1) The joint venture will be called Sadara Chemical: “SA” stands for “Saudi Aramco”, “D” stands for “Dow”, “ARA” stands for “Arabia”. Dow CEO Andrew N. Liveris says “the word Sadara stands for progressive leadership, enhanced performance, and a status derived from quantifiable talent and proven mastery”. Um, OK. 2) The joint venture, ironically, is a major step forward in Dow’s transformation to more value-added chemicals. The idea here is similar to the one behind its major petrochemical investments in the U.S.: To back-integrate performance chemicals, such propylene derivatives and “solution polyethylene”. Also, there is a strong developing word orientation to the project. Dow projects that 70% of the output of this project will be marketed in Asia (~45%) and the Middle East (~25%). Dow operations downstream, such as a polyurethane systems house,  at a newly established industrial park will be a large customer of the joint venture. 3) I don’t expect much creep upward in the cost of this project. The $20 billion figure is being billed as an upper limit. Engineering, procurement, and construction comprise $12 billion of the cost. Another $8 billion is financing, startup, and stuff. Liveris noted that about half of the costs of the major elements of the project, such as the ethylene cracker, are already locked in. That said, other projects in the Middle East over the last business cycle busted budgets considerably. My suspicion, however, is that Dow built that into the number it is putting out. 4) The venture is really ready to roll. “We have bulldozers moving to the site in two weeks,” Liveris said during a conference call. That said, I have heard chemical engineers chuckle at the notion of site preparation being a sign of progress. 5) This is one of Dow’s last major loose strategic ends. Dow has been kicking this project around since 2007. Originally it was supposed to go up in Ras Tanura, but the partners changed venue last year. Considering all Dow went through during the financial crisis, that is a very minor hiccup in such a major project. Many other companies might have just walked away. 6) Another Dow loose end involves PIC of Kuwait. Dow is seeking $2.5 billion in arbitration hearings from PIC because of the failure of the proposed K-Dow petrochemical joint venture back during the financial crisis. It was the government of Kuwait...

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SABIC Eyes Polyurethanes, More Polycarbonate
Oct27

SABIC Eyes Polyurethanes, More Polycarbonate

Saudi Basic Industries held the first official press conference at the K 2010 plastics show in Düsseldorf earlier today, and there, CEO Mohamed Al Mady disclosed his company‘s designs on getting into the polyurethanes industry. Al Mady said that SABIC was in the process of „finalizing discussions with technolgy providers and systems houses“, presumably on a large integrated complex. When asked I asked him whether that would mean getting into the production of polyols, isocyanates, or both, he wouldn´t give a precise answer. „We are working to see how it fits with existing projects in the kingdom,“ he said, emphasizing access to aromatics, and therefore hinting at SABIC production of isocyanates. He also stressed that a possible project is only in the early stages of planning. At the show, Al Mady also said that the company is still considering the construction of a polycarbonate plant in China. The company is in the final stages of negotiation with Sinopec and the plant would be an add on to its newly completed joint venture with Sinopec in Tianjin. The company is completing a polycarbonate joint venture in Saudi Arabia using licensed technology. It will use its own, former GE, technology for the Chinese plant. I dimly recall that General Electric was planning a polycarbonate plant in China with PetroChina and that SABIC nixed that plan when it purchased GE in 2007. (Funny quotation marks due to German...

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