UPDATE 3-Saudi SABIC, Sipchem tap synergies during crisis

*Saudi's SABIC and SIPCHEM to cooperate on projects

*SABIC, Sipchem shares soar

(Adds stock reaction, earnings background)

By Souhail Karam

RIYADH, May 9 (Reuters) - Two of Saudi Arabia's biggest petrochemical firms said on Saturday they have agreed to cooperate on the execution of projects to create synergies after the global economic slowdown hit their profitability.

Shares in the SABIC and Sipchem both soared by almost the 10 percent limit to close at their highest levels since November after the announcement was made.

Under a memorandum of understanding, Saudi Basic Industries Corp 2010.SE (SABIC) will crack ethane feedstock to provide Saudi International Petrochemical Co 2310.SE (Sipchem) with ethylene olefin and in exchange Sipchem will provide SABIC with carbon monoxide, the two firms said in a statement.

"We will crack ethane to get ethylene to capitalise on synergies between the two companies ... This is being done for the (ethane) gas allocation," SABIC's Chief Financial Officer Mutlaq al-Morished told Reuters.

Asked on the potential implications of the agreement in terms of further rapprochement between the two firms, Morished said: "Let's not read too much into this".