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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Odds And Ends From Dow’s Dog And Pony Show
Nov16

Odds And Ends From Dow’s Dog And Pony Show

Dow’s investor day during the first week of November yielded a wealth of C&EN stories for me. I wrote a Latest News and News of the Week on the company possibly splitting up its polyolefins enterprise. I alluded to its timing on its Chinese coal to chemicals project in another News of the Week piece. And the next issue of C&EN will have a feature story on its Rohm and Haas progress. Here are some impressions and tidbits that won’t make it into the magazine but I still think are worth noting. 1)     Dow CEO Andrew N. Liveris is not without his talents. CEOs of chemical companies often bring unique skills to their jobs. Jon M. Huntsman, for instance, is one of the industry’s best negotiators. Liveris is at his best when he is moving his lips. He is a salesman of first rank. When you ask him a tough question, he acts as if he woke up that morning hoping someone would ask him that. 2)     Even Andrew Liveris can be stumped. A reporter from Michigan Public Radio asked him about hypocrisy of investing in solar cells and lithium batteries in the U.S. while pursuing coal-to-chemicals in China. Liveris wobbled to his feet muttering things about best practices, Responsible Care, and planting lots of elm trees. 3)     Liveris isn’t excited about the pace of U.S. recovery. Coming as it did one the eve of election day, Liveris fielded questions about the economy and what he thought about policy. “I have done 22 overseas trips this year and I gotta tell you, including Europe, I’m excited when I go,” he said. “When I come back here, I feel depressed. The U.S. does feel very different. The U.S. is mired in uncertainty. The lack of clarity out of our political agenda is causing business to stay on the sideline.” 4)     Liveris has been right about the polyethylene market cycle. “Industry pundit forecasts for 2011 are too barish,” he said. Supposedly, an onslaught of capacity in the Middle East was to bring a blow from the supply side to the ethylene chain. As it turns out, a strong global rebound in demand and problems bringing on the new capacity for various reasons—inability to coordinate with feedstocks, high construction costs, renewed embargo emphasis on Iran—are dampening the impact. Not to mention that North America is one of the cheaper marginal producers because of shale-based gas. 5)     No word on costs for the Aramco project. I tried to get this out of him. Back when the massive complex was planned for Ras Tanura, pundit estimates were as high as $20 billion. The partners...

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