SABIC kept afloat by domestic economy - Prince Saud

Saudi Basic Industries Corp (SABIC) is coping better than other petrochemical companies with the global recession because Saudi Arabia will not be as badly hit, its chairman said on Saturday.

Prince Saud bin Abdullah bin Thenayan also reiterated that an oil price at $70-$75 was necessary to help the kingdom sustain investments in petrochemicals.

"The impact of the crisis is very clear: while SABIC has been affected like others it's better placed than other petrochemical firms to weather the crisis due to the economics of the industry in Saudi Arabia and our business model," Prince Saud said.

He made the comments on the sidelines of the World Economic Forum at the Dead Sea, Jordan.

SABIC is the Arab world's largest company and a yardstick for the performance of global petrochemical firms.

It swung to a worse-than-expected loss in the first quarter as it took a hit from a downturn in prices for petrochemicals and metals.

The world's largest oil exporter has said oil at $75 was a fair price that would enable the kingdom to fund a $400 billion public spending spree for the next five years.

"Economists are divided over whether we have hit the bottom and we hope we have," Prince Saud said.

SABIC benefits from lower feedstock prices than its global peers, which analysts said would help offset the downturn.

Oil prices slumped to the mid-$30 range earlier this year, a quarter of peak levels last July. Prices have rallied in recent weeks but fell nearly 4 percent on Friday toward $56 a barrel.

Saudi Arabia, which relies on oil exports for more than 80 percent of total state revenues, is expecting its first budget deficit in years in 2009 as it keeps spending high.

The IMF said last week the economy faced a contraction of 0.9 percent as growth in non-oil sectors partly offset a decline in oil output.

SABIC is currently executing projects in the kingdom worth SR12bn ($3.20bn) that aim to add 623,000 tonnes per year to its overall capacity. (Reuters)

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