Saudi Basic Industries Inc. (Sabic), Saudi Arabia's state petrochemical company, has emerged as a major player in that industry.
Sabic was created in 1976 mainly to add value to Saudi hydrocarbon resources by using associated gas, formerly mostly flared, as feedstock for basic petrochemical products. Its role expanded to include downstream petrochemical products, fertilizer, and metals, essentially creating an industrial base in Saudi Arabia.
Since then, Sabic has developed with joint venture partners 15 companies, each representing a world scale industrial plant. The first 12 of those were on stream by yearend 1985. Total industrial output, mainly petrochemicals, has increased to more than 11 million metric tons in 1989 from almost 3 million tons in 1984.
Sabic and its partners now have a 2% share of the world market for olefins and aromatics. Their products are exported to about 70 countries in addition to meeting most domestic demand for plastics, fertilizers, and steel rebars. Saudi demand for plastics grew by about 104% during 1984-89.
Sabic is stepping up its efforts at marketing worldwide. In addition, the company seeks to develop new product lines, notably by venturing further downstream. It also is pressing new profit centers in such ancillary operations as shipping and other services.
Despite its impressive growth, Sabic has run into stumbling blocks along the way. One is the collapse in oil prices in 1986, which eroded some of the feedstock cost advantage Sabic has over competitors. It has largely weathered that but faces a bigger challenge on the political side: European resistance to imports of petrochemicals from the Persian Gulf, notably from Saudi Arabia.
The Saudis still are fighting European efforts to set up tariff and nontariff barriers to Persian Gulf commodity petrochemical exports to Europe.
Those barriers have been a major sticking point in trade negotiations between the Common Market and the Gulf Cooperation Council.
SABIC STRATEGY
Sabic's strategy for competing in the world petrochemical market has been to trade off a relative advantage on feedstock cost against established petrochemical producers' advantage on marketing expertise, captive needs, and technological resources, said Abdulaziz 1. Alaudah, president of Sabic affiliate Saudi Methanol Co. Alaudah made the comments at a Financial Times conference on petrochemicals in Europe late last year.
With Europe's petrochemical feedstock costs pegged to naphtha, Sabic's competitive advantage seemingly would strengthen further when oil prices are high.
However, oil demand eventually declines with higher prices, leading eventually to oil production cuts, which in turn reduces volumes of associated gas feedstock (OGJ, Apr. 9, 1990, p. 24).
In 1986, naphtha prices fell by more than half at a time when Sabic's first generation of plants was going on stream and the company was beginning to penetrate international markets, Alaudah noted.
Sabic managed to continue tallying marketing successes in the interim, largely maintaining its competitive edge on feedstocks.
Ethylene production by one affiliate, Saudi Petrochemical Co. (Sadaf), has surpassed nameplate capacity of 656,000 metric tons/year at its Jubail complex each year since 1986. With addition of two new trains in 1990, Sadaf ethylene production was projected to top 800,000 tons in 1991, compared with about 760,000 tons in 1990.
Sabic had net income of $522.4 million on revenues of $2.348 billion for the 9 months ending Sept. 30, 1990. In 1989, Sabic posted profits of $898-66 million on revenues of $3.634 billion.
EUROPEAN TRADE CONCERNS
Sabic's success has fueled European fears that it would translate to Saudi domination of the petrochemical market in Europe by expanding market share at the expense of established European producers.
The Association of Petrochemical Producers in Europe last year claimed a proposed European Community-Gulf Cooperation Council free trade agreement is a medium and long term threat to its industry and would distort competition in world petrochemical markets (OGJ, Apr. 2, 1990, p. 18).
"The evidence clearly indicates that Sabic has behaved very responsibly toward world petrochemical markets, " Alaudah said, noting Sabic emphasizes profits over sales volume to the same extent as European producers do.
"Traditional production of basic petrochemicals in Europe is becoming increasingly less viable since it has to compete with gas based production from energy rich countries.
"In light of this, producers in Europe would do well to maintain their competitiveness within Europe and in world markets by participating in the obvious advantages offered by production of commodity petrochemicals in energy rich areas. This will enable the entire downstream sector and all of the other industries that are dependent on petrochemicals to prosper.
"We do not foresee production from energy rich areas ever capturing more than a modest percentage of the European market. In fact, we see the need for continued healthy expansion of the European petrochemical industry, including new facilities for production of ethylene and other basic materials.
"However, the output from these facilities will be targeted increasingly toward areas where the competitive advantage in downstream products has been created by the ingenuity of the European petrochemical industry."
STRATEGIC APPROACH
In planning worldscale petrochemical facilities 10 years ago, Sabic managers were determined to avoid the most common pitfall of nations bent on industrialization: declining efficiency and advancing obsolescence of its plants.
That's why Sabic focused on establishing joint venture partnerships with petrochemical industry leaders and selecting advanced process technologies.
Those selections were based on:
- Getting the most modern and advanced technology available to ensure safe and efficient operations through the 1990s.
- Attaining economies of scale through worldscale capacities.
- Having a broad range of plastics grades.
- Maintaining quality control to ensure product consistency.
- Being adaptable for expansion and upgrades.
ETHYLENE
Sabic chose CF Braun and CE Lummus processes to produce ethylene from ethane feedstock, focusing on the contractors' experience and research and development backup.
Current ethylene production is 1.41 million metric tons/year with Braun's process at Sadaf and Petrokemya and 672,000 tons/year with Lummus technology at Yanpet. Ethylene yield and selectivity are high with few byproducts.
In 1993, Sabic plans to bring a new cracking unit on stream at Petrokemya using M.W. Kellogg's Millisecond flexible feedstock technology, giving it the option to use naphtha, liquefied natural gas, propane, or ethane. Design capacity will be 500,000 tons/year of ethylene, 300,000 tons/year of propylene-converted to polypropylene by Sabic affiliate lbn Zahr-100,000 tons/year of butadiene, and 70,000 tons/year of benzene.
Millisecond technology was also selected because its short contact time-0.010.015 sec-at temperatures of 390-455 C. yields 1015% more ethylene and butadiene than conventional processes. Using propane as a feedstock nets an optimum propylene production.
POLYETHYLENE
Sabic chose Union Carbide's Unipol polyethylene process for its PE plants operated by Kemya, Sharq, and Yanpet with a combined capacity of more than 900,000 tons/year.
By using the Unipol fluidized bed process with its swing capability, Sabic's three plants can produce linear low density polyethylene and high density polyethylene in ratios according to market demand.
The process has higher yields and provides consistently high quality resins compared with other processes, Sabic said.
In addition, Sabic Lldpe can be downgraded by as much as 50% vs. LDPE, allowing processors to increase their yield per kilogram.
Currently, Sabic markets about 40 PE grades, featuring the widest potential range of melt indices and minimal offgrade resins.
Further, the absence of liquid hydrocarbon solvents and diluents and low temperature/pressure operating range make Unipol attractive for environmental and safety concerns, Sabic noted, adding that Unipol plants also cost less to build than other PE plants.
ETHYLENE OXIDE/ETHYLENE GLYCOL
Sabic licensed technology for producing ethylene oxide/ethylene glycol from Shell Chemical Co. and Scientific Design mainly for economic and safety reasons.
Production of EG is 350,000 tons/year at Yanpet and 390,000 tons/year at Sharq. Sabic said the Shell process emphasizes the safety advantage of its cooling technology during the ethylene oxide phase. The liquid nitrogen coolant is at its boiling point, thus maintaining a constant temperature and reducing the risk of overheating.
The safety advantage of SD's process is that it keeps EO dissolved in solution until conversion into EG, eliminating the risk of fire, Sabic said.
The Shell and SD processes also obtain oxygen feedstock directly from air. With other technologies it is necessary to incorporate a pure oxygen plant in the EO train. Although other processes ultimately have a higher EG yield, using the Shell/SD processes is more economical for Sabic because of its lower ethylene feedstock costs.
PVC, POLYSTYRENE
Sabic's choice for vinyl chloride monomer/polyvinyl chloride technology was B.F. Goodrich, one of the world's largest PVC producers, because of its industry leadership role and experience in producing suspension PVC, Sabic said.
The Goodrich technology provides high yield, low residual VCM in the end product and little off grade PVC during transition to a new grade.
lbn Hayyan, using its own VCM feedstock, produces 200,000 tons/year of PVC and will add 80,000-100,000 tons/year of capacity by 1991. When Sabic entered the polystyrene market in 1988, it introduced 12 grades. It chose Cdf Chemie (now Fina) technology for general purpose and high impact grades. These technologies gave Sabic's Petrokemya plant flexibility to produce additional grades. Sabic now produces 18 grades.
With these processes, production parameters can be changed quickly, reducing the amount of offgrade product and increasing efficiency.
METHANOL
Imperial Chemical Industries plc and Mitsubishi Gas Chemical Co. license similar methanol production processes with a large number of plants operating worldwide. Sabic chose ICI for its 770,000 ton/year affiliate Ibn Sina and Mitsubishi for its 640,000 ton/year Ar-Razi affiliate.
Advantages of their methanol technology, Sabic contends, include higher one pass conversion of methane to methanol, effective catalyst cooling, higher recovery of reaction heat, easy operation/temperature control, and easy maintenance.
Sabic sees added advantages with Mitsubishi catalyst technology, including high activity at lower pressures and temperatures, high selectivity for methanol synthesis resulting in few byproducts, and high catalyst strength to enable steady operation and greater flexibility for a wide range of synthesis gas composition.
ICI and Mitsubishi have demonstrated a willingness to share technological developments with Sabic to continue to improve the processes as well as provide R&D support and training.
MTBE
Because methyl tertiary butyl ether is made by reacting crude industrial methanol with isobutylene feedstock-from crude refining or naphtha cracking-which is unavailable in Saudi Arabia, Sabic was forced to produce its own feedstock.
Sabic's 500,000 ton/year MTBE plant at lbn Zahr separates isobutane from raw butane-abundant in Saudi Arabia-using UOP Processes International Inc.'s isomerization process. Through Air Products & Chemicals Inc.'s dehydrogenation technology, isobutane is dehydrogenated through Hordy Technology reactors to make isobutylene. The isobutylene is then reacted with methanol-supplied by two Sabic affiliates-using Snamprogetti's technology to make MTBE.
With this process, Sabic has an assured isobutylene and methanol feedstock supply, giving it a competitive advantage. Many analysts believe MTBE producers worldwide, except those using a process similar to Sabic's, have reached the limit of their isobutylene feedstock, Sabic said.
FERTILIZERS
Sabic's Ibn Al-Baytar affiliate recently started production of granular urea using Snamprogetti licensed technology and compound fertilizers using processes licensed by SA Cros and Jacobs.
Cros technology uses a pipe shaped reactor that Sabic said is more efficient than standard compound reactors.
It converts more feedstock into mono-ammonium, di-ammonium, and tri-ammonium phosphates, nitrogen-phosphate-potassium, and triple super phosphate.
The Cros process also provides a wider variety of grades than other standard processes, Sabic noted.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
