Saudi Basic Industries Corporation’s (Sabic) announcement that it had made third-quarter net profits of $2.18bn indicates that the kingdom’s growing petrochemicals industry is beginning to realise its massive potential.

The figures are a 54 per cent increase on the corresponding period of 2010, when the chemical giant announced net profits of $1.4bn. Net profits for the whole of 2010 were $5.6bn.

These are record results for Sabic that reflect the base it has built in Saudi Arabia, as well as its diversified portfolio of products that are produced across the world.

Within the kingdom, Sabic and its affiliate companies continue to perform well, as well as look to increase capacity at the respective plants.

The Middle East projects tracker MEED Projects states that Sabic and its joint ventures or affiliates have domestic projects worth about $19bn either being executed or at the planning stages.

The product mix of the projects is extremely diversified and includes basic chemical products such as olefins, as well as more complex products such as elastomers and carbon fibre, along with other commodities like steel and fertilisers.

When Sabic released its results, chief executive officer Mohamed al-Mady said that speciality chemicals will dominate the company’s expansion up until 2015.  

This statement backs up Riyadh’s plans to have a two-tier chemicals industry that makes large volumes of base chemicals such as propylene and ethylene, as well as speciality chemicals that can be used to create downstream industries.

In a recent report, the local National Commercial Bank (NCB) said that the kingdom’s cheap feedstock coupled with proximity to the Asian markets has allowed the domestic petrochemicals industry to gain a competitive advantage. The industry has taken this opportunity as Sabic’s recent result show.

NCB also forecasted that between now and 2015 the kingdom’s petrochemical production will expand by 32 per cent as new capacity comes on stream. This equates to an increase in production to 70.2 million tonnes a year (t/y) from the current figure of 53.2 million t/y.

Production of ethylene, which is used as a feedstock for the petrochemicals industry, is expected to grow by 45.6 per cent to 17.38 million t/y by 2015. Propylene is expected grow by 44.6 per cent to 5.09 million t/y.

Sabic’s mid-term growth prospects to 2015 look robust despite the threat of further anti-dumping levies or the prospect of a double dip recession in Europe.

Other challenges may include an increase in the kingdom’s gas price, which could double or even triple in the near future.

However, the current price for ethane in the kingdom is $0.75 a million BTU, which makes it the lowest in the world. Even an increase of 100 per cent would still give Sabic and other domestic producers a competitive edge over global competitors.