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Sabic, Saudi Aramco Form Team to Rush Oil-to-Chemicals Project

Source: Bloomberg 10/19/2016, Location: Middle East

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Saudi Basic Industries Corp. and Saudi Arabian Oil Co. have formed a joint management team to speed construction of a plant capable of processing crude oil directly into chemicals.

The team, assisted by a third party, will focus on technological challenges to the project, Sabic Chief Executive Officer Yousef al Benyan said Wednesday in an interview in Riyadh. It would be “premature” to estimate how much investment would be needed for the facility, the first of its kind for the two companies, he said.

Sabic is the Middle East’s biggest petrochemicals company, while state-owned Saudi Arabian Oil, known as Saudi Aramco, is the world’s largest oil business. Al Benyan didn’t identify the third party helping them.

Processing petroleum directly into chemicals will allow Saudi Arabia to cut out a costly intermediate link in the production of plastics. The kingdom is trying to diversify its economy away from crude sales to shield itself against low oil prices and plug a budget deficit that ballooned last year to about 15 percent of gross domestic product. Sabic and Saudi Aramco could “substantially” increase the nation’s petrochemicals output, Aramco’s CEO said in June.

“We have agreed to push this project in an accelerated mode,” Al Benyan told Bloomberg after presenting Sabic’s third-quarter earnings. “We should have the preliminary study in 2017.” Oil companies normally refine crude into fuels such as gasoline and diesel and leave byproducts such as naphtha to be processed separately into chemicals.

Sabic is also working on a joint venture with Exxon Mobil Corp. to build an ethylene plant in the U.S. Construction will “hopefully” start in 2018, Al Benyan said, with the plant becoming operational in 2020 or 2021. He told the Houston Chronicle in September that the construction could begin in mid-2017.

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