Saudi petrochemical producers to be impacted by gas price revisions, NCB Capital said. NCB Capital has analyzed changes in the price from a current USD0.75/mmbtu to a possible $1/mmbtu to $2/mmbtu. NCBC finds the greatest impact would be on Sipchem, SAFCO and SABIC, with Tasnee and Sahara facing the least impact. “KSA petrochemical firms procure natural gas at one of the lowest prices globally,” said Tariq Al-Alaiwat, Equity Research Analyst at NCB Capital, said on the new report. “However they are facing difficulty in gaining new allocations of ethane at the current subsidized price of $0.75/mmbtu for their capacity expansion plans, due to increasing domestic consumption of gas.” The current price of $0.75/mmbtu for natural gas was set in 1998 when the average price of oil was $13/bbl. Saudi Aramco is undertaking aggressive capex in the Kingdom and is aiming to increase natural gas output to 15.5bn scf (billion standard cubic feet) per day by 2015 from 9.4bn scf per day in 2010. However, consumption is expected to outpace supply growth and expand at a CAGR of 8.7% during 2009-2020, according to Economist Intelligence Unit, hence, limiting the scale of the subsidy may be a measure to contain domestic demand.
