Chinese to invest in Saudi petrochem expansion?

07-Nov-06

As part of its policy to attain the position of one of the top three countries in the world in the petrochem sector, Saudi Arabia hopes to attract US$50 billion of foreign cash into the petrochemical industry over the next 15 to 20 years. Saudi plans to capture a 15% share of the global market in plastics by 2020 and boost ethylene output to 14 million tons by 2010 from under 7 million tons at present. Easy availability of cheap feedstock is also coupled with the advantage of Saudi Arabia's accession to the World Trade Organisation (WTO), as a result of which the kingdom seems poised to boost its access to markets including the neighbouring European Union. To avoid becoming a victim of Saudi Arabia's aggressive bid to use its energy reserves to become an industry leader, it seems prudent for China to invest in Saudi Arabia's and partner it in the petrochemical sector, particularly in view of cheap energy and feedstocks offered by the kingdom that will benefit China's vast market and export-oriented manufacturing industries. It seems economically more viable for China to process petrochemicals in Saudi Arabia instead of shipping energy and raw materials home to do it there. As Saudi has planned an aggressive expansion drive, if China does not take advantage of the opportunity, it could probably experience its global market share shrinking.