Monday, Jan 09, 2012

-- No need to raise prices, official says

-- They may change next year

-- Sabic benefits from low cost of feedstock

(Updates with analyst's comment in seventh and eighth paragraphs.)

RIYADH (Zawya Dow Jones)--Saudi Arabia, home to the world's largest biggest chemical maker, will keep its prices for natural gas feedstock unchanged this year for local petrochemical producers, officials from the kingdom's oil ministry and industry executives said Monday.

"There is no need this year to up the prices. They are at good levels," an official at the Ministry of Petroleum and Mineral Resources, who declined to be named, told Zawya Dow Jones. "They may change next year," he added.

Saudi Arabia's oil minister Ali al-Naimi told al-Watan newspaper last week that the feedstock prices won't be raised for the time being, but didn't elaborate.

Saudi Arabia set prices for ethane, a form of natural gas widely used in the production of chemicals in the Gulf region, at $0.75 per million British thermal units in 1998, below international prices.

The country's petrochemical giant Saudi Basic Industries Corp. (2010.SA), or Sabic, the Middle East's largest listed company, is benefiting from the low cost of feedstock at home, giving the company a competitive edge over many producers elsewhere that use naphtha, a crude derivative whose price has risen in line with oil prices.

If Saudi Arabia had raised prices, which was widely anticipated by analysts, a few Saudi firms would have been affected due to their dependency on natural gas as their single feedstock.

"We believe ethane costs account for 7% of SABIC's total production cost for the petrochemical segment. The company's efforts to venture growth opportunities outside the kingdom have already diluted its cost advantage," said said Tariq Al Alaiwat of NCB Capital in Riyadh.

"Sabic, however, is benefiting from its diversified feedstock and product mix," he said.

-By Summer Said, Dow Jones Newswires; +966-546-842373; summer.said@dowjones.com

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

09-01-12 1825GMT