Saudi Arabia Wants U.S. Oil and Gas

Brian Hicks

Written By Brian Hicks

Posted November 29, 2012

It’s well known by now that America is undergoing a shale revolution that has resulted in massive production of natural gas and shale oil. So it seems only natural that Saudi Basic Industries Corp. (Sabic), the world’s biggest petrochemical manufacturer (based on market capitalization), is exploring possible investments within the U.S.

From the Financial Times:

“We are evaluating opportunities in the US in this area,” Mohamed al-Mady, Sabic’s chief executive, said in an interview. “We’d like to start with one plant, just to get ourselves in the region.”

Saudi Arabia has been a leader in oil for a long time, of course. Yet increasing domestic demand and consumption is making that country look askance at the long-term prospects for oil and gas availability.

Meanwhile in the U.S., a host of oil companies have shown keen interest in the ongoing shale boom—including Chevron (NYSE: CVX), Royal Dutch Shell (NYSE: RDS.A), LyondellBasell (NYSE: LYB), Dow Chemical (NYSE: DOW), and ConocoPhillips (NYSE: COP).

From $13 per million British thermal units in 2008, natural gas prices in the U.S. have crashed to a mere $3.75, the Financial Times reports. That’s a startling drop over just four years.

Ethane has dropped from $0.90 per gallon in 2011 to $0.30 or thereabouts. Such natural gas liquids are expected to continue selling for dirt-cheap prices as production continues to remain at sky-high levels; indeed, most companies are actually developing more rigs.

Sabic is mulling over the possibilities of either a joint venture with companies in the U.S. or just making an outright investment.

In the interview, Mr. Mady did underscore the fact that Sabic is chiefly interested in downstream petrochemical operations rather than shale gas production.

It’s an interesting shift from the days of near-total American dependency on OPEC’s whims and oil and gas production in the Middle East.

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