Saudi, Petrochem in $2.5bn venture

Saudi Basic Industries Corp. 2010.SE and China's Sinopec Corp will spend $2.5 billion on an expanded petrochemicals project in northern China, the state-owned Saudi firm said at the weekend.

The original plan for the 50/50 joint venture, released in January, had given its cost as $1.7 billion.

The project's cracker capacity was planned at 1.2 million tons of ethylene a year, SABIC said in a release, larger than the figure of 1 million tons given in January. The project would also be expanded to include polycarbonate among its downstream plastics slate.

A pact for the project in north China's Tianjin was signed during Chinese Vice President Xi Jinping's visit to Saudi Arabia recently.

The agreement, which follows a deal announced in January, also called for cooperation in future projects in China and joint works in engineering services and product marketing.

The Tianjin plant, due to be completed in September 2009, will produce 4 million tons of petrochemical products including the 1.2 million tons of ethylene, said SABIC, the world's largest petrochemical firm by market value.

"SABIC plans to set up a manufacturing center in China to boost its presence in Asia where China represents the biggest market in the Asian continent," SABIC said.

An industry executive close to the deal told Reuters last week that the companies planned to expand the joint venture to cover all derivative products from the ethylene plant, versus an earlier plan for SABIC to be involved in only a few product lines.

Sinopec, Asia's top refiner, has started building the complex in the port city near Beijing. It is also expanding a refinery to 240,000 barrels per day at the same site, which industry executives said SABIC will not be involved in.