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Tue 23 Oct 2007 03:58 PM

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Sabic $5.2bn China venture stalls

No progress so far on petrochemical project Chinese firm Shide in Dalian area, chief executive says.

Saudi Basic Industries (Sabic) said talks had stalled on a $5.2 billion petrochemical project in China's Dalian area, although it was making progress on another venture with Sinopec.

Sabic has been in talks for three years with private Chinese firm Shide to build a complex - including an oil refinery, and an ethylene plant in northeastern Dalian.

"On Dalian, there is no progress so far," Chief Executive Officer Mohamed Al-Mady told Reuters by telephone on Tuesday.

"We are in talks with other Chinese partners apart from Dalian, including Sinopec, and there is positive progress in the talks with Sinopec," he said.

A industry source close to the deal told Reuters in China in May that Sabic may invest just over $1 billion in building a one million tonne a year naphtha cracker with Sinopec to produce ethylene, a key building block for petrochemicals, in the northern city of Tianjin. Mady declined to give details of the deal.

China imports nearly half of Sabic's petrochemicals to feed its economy.

Sabic expects chemical prices to hold steady next year despite slowing growth in the US.

"There is a decline in growth from the United States, the impact of this decline on other markets remains to be seen," Al-Mady said.

"But China and India still represent the main areas of growth for our type of products. We expect growth in these two markets to continue [in 2008]," he said. "Global growth will not be affected greatly."

Delays in new projects will keep prices relatively stable, Al-Mady said.

"This will help demand and with the increase in the price of oil, prices should stay at their levels," he said. - Reuters

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