Saudi's SABIC sees chemical prices improving in 2016 if oil at $50-60

Petrochemicals giant says demand for products this year look healthy, will remain stable next year
Saudi's SABIC sees chemical prices improving in 2016 if oil at $50-60
(Bloomberg Images)
By Reuters
Wed 04 Nov 2015 03:09 PM

Saudi Basic Industries Corp (SABIC) expects chemical prices to remain stable or rise in 2016 if oil trades in a range of $50-60 per barrel, a senior executive said on Wednesday.

Demand for petrochemicals is expected to remain healthy, Awadh al-Maker, executive vice president of technology and innovation, said in an interview, noting economic growth in China was expected to improve in 2016.

China is one of SABIC's biggest markets but has suffered this year from fears about the state of the Chinese economy.

Saudi petrochemical producers have struggled this year as lower oil prices have lowered product prices and many have reported significantly lower profits or quarterly losses.

While reporting reduced profits, SABIC has managed to beat analysts' forecasts helped by cost-cutting and improved efficiencies.

Maker said despite the challenge posed by low oil prices SABIC would boost investment in research and development (R&D) given the future returns such investment generated.

"SABIC has no intention to reduce spending in the R&D initiatives and, as per directions of the CEO, we are going to increase our spending in R&D despite the challenges of the market," Maker said without elaborating.

One area the firm is looking at is carbon capture. Its first commercial plant, which captures 1,500 tonnes of carbon dioxide per day from ethylene plants and purifies it for use in SABIC-owned petrochemical plants in Jubail, started operations last month.

The carbon capture and utilisation (CCU) plant also generates around 200 tonnes a day of liquid carbon dioxide. This is used in the food and drink industry and helps improve the economics of operating such plants.

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