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Calling all processors: PetroRabigh wants you

Awash in oil, gas, and increasingly, resin, Saudi Arabia is aggressively pushing to become a hub of plastics converting, which was obvious in the discussion of one particular project during the midst of a four-city global tour to attract foreign processors as investors.


Potential investors gathered in June in New York to hear the pitch from representatives of the Sumitomo/Saudi Aramco resin production and converting joint venture, PetroRabigh.

Addressing potential partners at a one-day conference on June 13 in New York, representatives from the project and the Saudi government laid out potential opportunities at the PetroRabigh Conversion Industrial Park (CIP)—a joint venture between oil and gas refiner/explorer Saudi Aramco, and Japanese chemicals giant Sumitomo.
Located on the Red Sea coast, the project, in addition to a worldscale refinery and petrochemical production operation, will include a processors’ park that will hold 40 to 60 tenants once fully occupied, according to Teruhiko Tsumara, managing director of London Research International, a consulting firm assisting PetroRabigh with the marketing of the project. Construction is ongoing, with the site scheduled for completion by the fourth quarter of 2008, although processors could begin moving in by Q1 2008.
Not far from a planned “Plastics Valley,” Rabigh is one of the Kingdom’s new economic cities, four of which are already under construction, with two more planned in 2008, according to Talah Tamimi, U.S. country director for the Saudi Arabian General Investment Authority (SAGIA). SAGIA was formed in 2000 to encourage foreign investment, and it has identified 400-plus projects, including Rabigh, related to manufacturing and petrochemicals. To encourage foreign investment, Saudi Arabia has changed several laws and is offering multiple incentives. The foreign investment law was changed to grant overseas firms Saudi status, and in May, the government eliminated the minimal capital investment requirement to form a limited liability corporation in the Kingdom. In addition, there will be no customs duties for machinery imports and no personal income tax for foreign investors. The maximum corporate income tax rate will be 20%, and it will not kick in until a profit is made.
Striving for 10 by 10
Tamimi said such projects are part of SAGIA and Saudi Arabia’s far-reaching “10 by 10” program to achieve 10 primary goals relating to the country’s economy by 2010. Specific to plastics, as of now, Saudi Arabia accounts for 1% of the global plastics market, but the goal is to reach 15% by 2010. An emphasis has been placed on exports, given the Kingdom’s position between Europe, Asia, and Africa, and in the King Abdullah economic city, up the coast from Rabigh, construction is already under way on what Tamimi says will be the third-largest container port in the world.
PetroRabigh officials cite competitive resin costs and a fixed electricity rate at CIP of roughly $0.03 kW/hr, as additional incentives. In its first phase, the petrochemical portion of PetroRabigh will manufacture high-density polyethylene (PE), linear low-density PE, PE, random copolymer polypropylene (PP), homopolymer PP, impact copolymer PP, and some chemical monomers. A second phase would include engineering thermoplastics and possibly be online by 2012.
In part to broaden the country’s economy away from oil, which still accounts for 75% of budget revenue, and to address booming population and high unemployment, projects like Rabigh are popping up throughout the country. “We’re interested in the transfer of knowledge and know-how,” Tamimi said. “Saudi Arabia has plenty of liquidity—that’s not the issue.”
The New York event attracted Wall Street analysts and U.S./Saudi chambers of commerce representatives, plus a number of compounders and processors, from end markets as diverse as medical, automotive, and flexible packaging. The event was the second of four, with the first held May 28 in Riyadh. Next up will be London on Sept. 7, with an event during the K show on October 25 in Düsseldorf at the Hilton Hotel. In December, the project will hold a business matching/networking seminar in Jeddah, with Japanese investors being organized to potentially attend that event.
TAGS: Business
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