Saudi Arabia's SABIC Expands Petrochemical Portfolio with Aramco Deal
05.10.2021 - NEWS

May 6, 2021 [S&P Global] – Dubai — Saudi petrochemical company SABIC is to take over the sales and marketing of about 5.4 million mt/year of Saudi Aramco’s chemicals and polymer products.

 
The move will center SABIC’s commercial focus on petrochemical products, while Aramco’s trading arm will center on fuel products, SABIC said April in its Q1 earnings report.

As a result, SABIC said it will end up with about 900,000 mt/y of new products available for sale.

“The new capacities include polyurethane, propylene oxide and butyl glycol ethers, which will expand our product portfolio. We expect our global market share to increase in polymers and chemicals, which will reinforce SABIC as the chemicals arm of Saudi Aramco.”

SABIC will also sell benzene and MTBE to Aramco, which will be responsible for sourcing European cracker feedstock and benzene for SABIC operations.

Saudi Aramco in 2020 finalized its acquisition of a 70% stake in SABIC for $69 million. Since then, Aramco has been working to integrate SABIC into its downstream business.

The two companies are focusing on selective integration synergies, including in manufacturing, information technology, project management and sales, SABIC said.

So far, overlaps identified between the two companies are worth $3 billion-$4 billion annually, and a committee has been assembled to oversee the integration of these, Aramco has said previously.

The realignment of marketing responsibilities relates to a number of products in several phases, which include a range of chemicals, polyethylene and functional chemicals. From the deal’s close last June to the end of Q1, SABIC and Aramco have seen a synergy value of $156 million, the company said.

Rising oil prices boosted SABIC’s Q1 revenue by 25% year on year to Riyals 30.2 billion ($8.1 billion).

“The financial performance of SABIC improved in the first quarter of 2021 compared with the previous quarter due to increased margins driven by higher product prices, supported by a rise in oil price, healthy demand and tightness in the supply for most of the key products,” the company said.

Brent crude oil prices rose 39% in the first quarter of 2021 compared to the same period the previous year. Therefore, Japanese and European naphtha prices increased by more than 37% in the first quarter of 2021 quarter on quarter, broadly in line with an increase in oil price, the company said.

Additionally, Japanese propane and butane prices increased by more than 20% in the first quarter compared with the previous quarter.

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