SAUDI ARABIA - The Saudi Petrochemical Sectors; Big Expansions Ahead.

The Saudi Arabian Basic Industries Corp. (SABIC), owned 70% by the state and 30% by private Saudi and other GCC shareholders, is the 11th largest global producer of petrochemicals and the most profitable firm of its kind in the world. Before it bought the Dutch firm DSM Petrochemicals in 2002 it was the world's No. 22. The acquisition raised its ethylene output by 1.2m tons to 6.9m t/y and gave it a key to the EU. While expanding at home, it is on the lookout for other major acquisitions or joint ventures (JVs) on both sides of Suez.

Saudi officials were in London recently to promote involvement in the kingdom's petrochemical industries and to push the message that "no major player can afford not to invest in the region". While this might sound over-confident, given that the Saudi kingdom suffers a steadily rising rate of unemployment, opportunities for investment in the Saudi petrochemicals sector are among the best in the world.

This year Saudi Arabia is to have a budget surplus of at least $30 bn and an oil income in excess of $112 bn. With a sustained high oil price having been a boon to the kingdom, which until 2002 struggled with years of budget deficits and political discontent in the region, the impact of the bonanza on the Saudis extends beyond cash flow. It offers them a rare opportunity for diversification of their economy.

The kingdom needs more foreign investment of achieve its ambition of increasing its share of the global petrochemicals output from 7% to 13% over the next five years. With GDP growth targeted to be strong through to 2020, SABIC is to spend up to $70 bn over the next 15 years to become the dominant player in the sector. Fahd al-She'aibi, the company's vice-president for PVC/polyester, told IBC's Middle East petrochemicals conference in Dubai on Sept. 18 SABIC investments for production expansion will amount to more than $20 bn over the next three years alone.

SABIC is to raise its petrochemicals production capacity by 21m t/y from 43m t/y now to 64m t/y by 2008, through expansion of its current plants and new ventures.