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GPCA – Connecting the Gulf
Directory
2012-13
CONTENTS
Contents
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GULF PETROCHEMICALS & CHEMICALS ASSOCIATION
WELCOME LETTER
5 GPCA secretary general, Dr Abdulwahab Al-Sadoun discusses the GPCA’s achievements for 2012
This Directory is a publication of the Gulf
Petrochemicals and Chemicals Association
Gulf Petrochemicals and Chemicals Association
PO Box 123055,
705/706 Aspect Tower,
Business Bay, Dubai,
United Arab Emirates
T:+971 4 451 0666
F: +971 4 451 0777
Website: www.gpca.org.ae
DEMOGRAPHIC PRESSURES DRIVE DOWNSTREAM FOCUS
8 A younger population is dictating the direction of petrochemical development
MARGINS TAKE THE STRAIN AS GROWTH SLOWS IN 2012
13 The global slowdown poses many challenges for Middle Eastern producers, as well as opportunities
MIDDLE EAST BY NUMBERS
The Fifth Edition (Volume V) is co-produced by:
16 Planned capacity increases, major downstream projects and the top producing players
ICIS
The Quadrant,
Sutton,
Surrey SM2 5AS
UK
+44 20 8652 3187
www.icis.com
19 The Middle East continues to see huge investment in new production capacity
Editor
John Baker
Global Editor, ICIS Custom Publishing
+44 20 8652 3153
[email protected]
Contributors
Jose Alberich, Louis Besland, Omar Boulos,
Andy Brice, Fabrizio Galle, Jaap Kalkman,
Alexander Keller, Sean Milmo, Stephen Pearce,
John Richardson, Dan Starta, Mark Whitfield
Design and production
Dominic Ray, Louise Murrell
Printing
Atlas Printing Press
Dubai
+971 4 3409895
www.atlasgroupme.com
MIDDLE EAST CAPACITIES CONTINUE TO CLIMB
MAJOR MIDDLE EAST PROJECTS
20 A selection of some of the most significant plants and projects underway in the region
FEEDSTOCK SHIFTS IMPACT DOWNSTREAM
25 Producers in the Gulf are taking measures to offset the effects of the changing feedstock balance
POLYMERS SWELL IN THE MIDDLE EAST
29 Huge growth in polymer output is encouraging producers to commit to significant expansion projects
HYPER SPEED EVOLUTION DRIVES GCC PETROCHEMICALS
33 After years of exceptional growth, the region must take measures to ensure it continues
INVESTING IN A STRONGER SUPPLY CHAIN PAYS OFF
38 Companies can prepare for the future by introducing new management processes and tools
THE CHANGING ROLE OF CHEMICAL CLUSTERS
43 The cluster concept has proven hugely successful in recent decades, yet they still need to evolve
LOGISTICS INVESTMENT NEEDED AS TRADE GROWS
48 DP World highlights the importance of enhancing efficiency throughout the supply chain
FULL MEMBER PROFILES
49 GPCA Members’ Directory: List of full members
SMALL GULF PRODUCERS/INTERNATIONAL PRODUCERS
80 GPCA Members’ Directory: List of Small Gulf Producers and International Petrochemicals Producers
SERVICE COMPANIES
88 GPCA Members’ Directory: List of Service Company members
BUSINESS PARTNERS
99 GPCA Members’ Directory: List of Business Partner members
©2012 by GPCA. All rights reserved. No part of this
publication may be reprinted, or reproduced or utilized in
any form or by electronic, mechanical or other means, now
known or hereafter invented, including photocopying and
recording or in any information storage and retrieval system
without prior permission in writing from the publisher.
www.gpca.org.ae
PRODUCT LISTINGS
109 List of main chemical products manufactured by GPCA members
2012 | GPCA Connecting the Gulf DIRECTORY | 3
WELCOME
Welcome from the
Secretary General
GPCA has worked hard to
enhance its international
image and presence and has
been active regionally with
many initiatives
DR ABDULWAHAB AL-SADOUN
The Gulf Petrochemicals and Chemicals Association (GPCA) is proud to present the fifth
edition of its Gulf petrochemicals directory, entitled for 2012 “Connecting the Gulf”. As a
comprehensive listing of the association’s growing membership, and the leading products and
services they offer, I trust you will find it both useful and informative.
For this edition, GPCA has commissioned leading industry consultants and chemical
industry journalists to provide a comprehensive overview of the state of the global
petrochemicals sector, with specific attention on the position and role of Middle East
producers.
Articles look at demographic trends, feedstocks, plastics, logistics and infrastructure
development, not to mention producers’ moves downstream and their drive to sustainability
and profitability. Again, I hope you find these articles useful and thought-provoking.
GPCA has now been in existence for six years, since it was officially inaugurated in the first
quarter of 2006. Over this time it has grown both in size and stature, earning an international
reputation as an effective trade organization representing 34 full members from across the
Gulf Cooperation Council countries and Iran and well over 165 associate members from the
region and around the world.
GPCA has worked hard to enhance its international image and presence and has been
active regionally with many initiatives, and at international level through the International
Council of Chemical Associations (ICCA), notably through its rapid and successful
development of a Responsible Care program in the Gulf region.
It has also worked successfully to build up a series leading conferences that provide
members the chance to network, communicate and learn of best practices across the sector.
These new annual events cover fertilizers, plastics, the supply chain and talent management.
And, of course, there is the Annual GPCA Forum in Dubai at the end of each year. This has
established itself not only as the leading petrochemical event in the Middle East but also as a
major draw for leading industry executives, consultants and financiers from across the globe.
Once again, I commend this publication to your attention and hope you find it helps your
business. This year, for the first time, we are making the content available electronically on a
dedicated website and as an app for your iPad or tablet.
I would like to express my appreciation for the efforts put in by the ICIS team to compile the
editorial content of this publication.
In closing, I would like to extend my best wishes to fellow members of the Association and
look forward to your continued cooperation and commitment for the year 2013.
Dr Abdulwahab Al-Sadoun
Secretary General
Gulf Petrochemicals and Chemicals Association
www.gpca.org.ae
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End to End
Almajdouie De Rijke Logistics, exclusively provides supply
chain services to the polymer & liquid industry, starting from
silo & bagging management, production planning, warehouse
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SPONSORS
Member support
GPCA is grateful to the following companies for their support of this “Connecting the Gulf”
publication through their advertising presence. Without them this directory, now in its fifth
edition, would not have been possible.
GPCA – Connecting the Gulf
Directory
2012-13
www.gpca.org.ae
FEATURE
Demographic pressures
drive downstream focus
Population demographics in the
Middle East and the rest of the
world are having a profound
effect on petrochemical
planning, as GCC countries
look to create local jobs and
serve maturing markets with
added-value products
JOHN RICHARDSON PERTH, AUSTRALIA
T
he days of approval for what one industry
observer describes as “plain vanilla” petrochemicals projects appears to be at an end
in Saudi Arabia, and elsewhere in the Gulf
Cooperation Council (GCC) region. Adding value downstream is now the key strategy across several GCC
countries; this can be further defined as adding social
as well as economic value.
For instance, in Saudi Arabia, which is the most
significant example of this major shift in the
industry, the population’s median age is only 26,
and more than 90% of workers are employed in the
public sector. With little room to expand the state
sector further to help deal with the challenge of
young people entering the workforce, the objective
is to create private-sector jobs further downstream
of basic petrochemicals.
“The (GCC) region is riding a wave of demographic
changes − high birth rates, declining mortality rates
and a young population,” says global bank HSBC.
“Government estimates place more than half of the
Middle East’s population under the age of 20, which
meaning that they will join the workforce over the
next decade.”
YOUNG POPULATION
The problem is at its most acute in Saudi Arabia,
where, according to HSBC, “over half the population
is under 20 years old and only 3m, or 16% of the
population, are in the workforce.”
The bank adds: “Around 2m Saudis are between
the ages of 20 and 24, and in this age range, only
0.5m are employed, including expats. Of the 1.8m
Saudis between the ages of 15 and 19, few have
jobs. All this suggests that around 1.7m jobs must
be found in the next 10 years − more if women are
to play a greater role in the workforce.”
A cracker complex and first-line derivatives
project, such as polyethylene (PE) and monoethylene
glycol (MEG), creates a substantial number of
temporary jobs in the construction phase, but these
High birth rates and declining mortality rates have resulted in a young population in the Middle East
have traditionally been filled by foreign workers.
Once the plants are operating, few people, whether
local or from overseas, are employed. But, as one
moves further downstream, into more value-added
petrochemicals and plastics processing and other
manufacturing industries, job creation increases.
“Saudi Arabia’s Ministry of Petroleum has said,
‘We want an end to polymer tourism’ – plastic
pellets leaving the Kingdom and returning as
finished goods,” the industry observer adds. “As a
result, the $20bn (€15.4bn) Sadara petrochemicals
project will have adjacent ‘value parks’, where
downstream industries will be located.”
Sadara, a joint-venture petrochemicals project
between Saudi Aramco and US-based Dow
Chemical, will produce a wide range of performance
products such as polyurethanes (PU) – isocyanates,
polyether polyols; propylene oxide (PO); propylene
glycol (PG); elastomers; linear low-density
polyethylene (LLDPE); low-density polyethylene
(LDPE); glycol ethers and amines. All the units are
scheduled to be onstream by 2016.
These performance products will potentially feed
into downstream jobs in the value parks in
industries including transportation (automotive
parts and maintenance fluids), construction (pipes,
adhesives and sealants), packaging and containers
(food and non-food), and consumer goods (flexible
www.gpca.org.ae
FEATURE
“Around 1.7m jobs must be
found in Saudi Arabia in
the next 10 years”
Rex Features
HSBC
PU foam for furniture and bedding and rigid foam
insulation for appliances).
“The first 25 years of the GCC petrochemicals
strategy were about making cash out of gas and the
next 25 years will be about adding value downstream,” says the observer. He adds that the key was
to put the right incentives in place, including low-cost
financing and tax incentives.
“This is a multi-pronged approach by the Saudi
government. It recognizes that it is not just about
incentives for investors – it is also about changing
the education system to encourage people to work
behind hot and sweaty processing plants. There can
only be so many ‘knowledge-based workers’ sitting
www.gpca.org.ae
in nice, air-conditioned offices.”
But, of course, investors have to be confident of decent returns from going further downstream. Viable markets still have to be found for products, regardless of the
level of government support. This means careful
selection of what to build downstream of basic
petrochemicals, according to an HSBC study produced
in late 2010, which the banks says remains valid.
In the study, the bank examined an internal rate of
return of 40 basic and differentiated commodity
chemicals that could be produced across the Middle
East, with a 10% hurdle rate for project viability. Its
conclusion was that intermediate chemicals – but not
all the way downstream into specialties – were where
Saudi Arabia, and the Middle East in general, should
be positioned. These included acrylics, acetyls, epoxy
resins, polyacetals and the polycarbonate (PC) and
nylon chains.
What will not work in the Middle East is production
of water treatment chemicals, plastic additives, construction chemicals, catalysts, oil-field chemicals and
specialty coatings and adhesives, according to the
study. This is the result of low demand for these products in the region and the importance of locating
plants in countries where the consumption is substantial, such as China, the bank adds.
There has to be a shift to liquid cracker feedstocks
so a wider range of petrochemicals can be produced,
hence the entrance of Saudi Aramco, the refiner, into
the petrochemicals sector. But, as HSBC points out:
“Crude-based feeds are not stranded and have alternative liquid markets. Therefore, they cannot be priced
at the same levels as gas-based feedstocks and their
cost to the producers has to reflect market prices.
“It is true that these feedstocks can be priced at a
slight discount to market to take into account logistics
and other marketing costs. The use of heavier feedstocks also tends to result in higher capital costs for
the plants. This is an offshoot of the number of derivative units that need to be built to incorporate the wider
product portfolio available from these feeds.
“The combination of higher capital costs, and a
lower cost-advantage, results in a decline in returns
on capital.”
There is another difficulty: because of their relatively small populations, the GCC countries will still be
highly dependent on export markets, regardless of the
point at which they cease to go downstream towards
manufacturing finished goods.
DEMOGRAPHICS AND DEMAND
“In Saudi Arabia, for example, there are just 28m people compared with the huge populations of China and
India, where the big demand growth opportunities remain,” says Paul Hodges, chairman of the UK-based
chemicals consultancy International e-Chem. “Therefore, whether Saudi Arabia stops at synthetic rubber
production, or continues to tyre manufacturing, export
markets will remain crucial.”
Thus the GCC, along with every other region seeking to take advantage of emerging markets growth,
needs to take into account profound, irreversible
shifts in the global economy, says Hodges.
“The ageing of the Western ‘baby boomers’ (born
between 1946 and 1970) is creating major changes
in demand patterns,” Hodges adds. “The first boomer
became 55 in 2001, an age when people typically
Rex Features
FEATURE
China is raising minimum wages in an effort to narrow the gap between rich and poor
start to save more and spend less, as the kids have
often left home. Today, 29% of the Western world
(272m people), is now in this New Old 55-plus generation. And they are uncomfortably aware that they have
to save more, and spend even less, as they now have
to finance an extra decade or more of life expectancy,
compared with previous generations.”
Hodges says this has major implications for China,
which benefited enormously from strong growth in demand for its exports during what he calls the economic supercycle: 1982−2007. During this period, Western growth was buoyed by the baby boomers, the
wealthiest generation the world has ever known, being
in the middle of their peak earnings years.
Deutsche Bank has also made the link between
ageing populations and the decline in Western growth.
It has warned of repeated recessions over the next 10
years as a result of demographics and other deep
structural problems in the US and Europe. These include big private and public debt liabilities, left over
from the 2008 global financial crisis.
And in a September 2012 study, A Journey into the
Unknown, it provides evidence for this long-term negative outlook. The bank, for example, estimates that
more than half of Western economies have failed to
return to their 2007−2008 economic peak. Despite
trillions of dollars of stimulus, the US is only 1.8%
above its peak during those two years.
“China benefited enormously from the supercycle,
which partly coincided with its admission to the World
Trade Organization in 2001,” says Hodges.
“Strong demand growth in the West, combined with
the lowering of trade barriers, enabled China to hugely
increase the scale of its manufacturing industry. Previously, the model was quite simple. It involved produc-
“Many people have
underestimated the extent of
[China’s] structural changes
and what they will mean over
the medium, and possibly
even the long-term, for
economic growth”
PAUL HODGES
Chairman, International E-Chem
ing as large a quantity as possible of basic synthetic
resins and bulk liquid chemicals, for shipment to
China for processing into finished goods for shipment
mainly to the West.
“All that mattered was that you were either close
enough to the market to benefit from a logistics advantage, as in South Korea, or you had a big feedstock advantage, which, of course, is the case with
the Middle East. You didn’t have to worry about demand growth, because that took care of itself.”
China’s 12th Five-Year Plan (2011−2015) recognizes the need to break away from the investment and
export-focused growth model.
Hodges adds: “The model is not only vulnerable to
the slowdown in export growth, but has also led to
overcapacity in many industries, a dangerous level of
bad debts and environmental problems because of
poor manufacturing standards.”
China is, as a result, undergoing major economic
structural changes at a time of exceptional global economic weakness. These changes include raising environmental standards among manufacturers, and 20%
or more annual increases in minimum wages in an
effort to narrow the gap between rich and poor. The
central government also wants to increase value-added manufacturing to justify these higher wages.
“Many people have underestimated the extent of
these structural changes and what they will mean
over the medium, and possibly even the long term, for
economic growth,” says Hodges. For example, a
hedge fund warned in a September 2012 report that
China’s nominal, or real, GDP growth could be as low
as 4−5% /year from 2013 to 2016.
So, if the old export-processing model has broken
down for petrochemicals, what is the right strategy for
the Middle East? “It is all about segmentation,” says
Hodges. “It is about manufacturing petrochemicals
and downstream products in the Middle East to serve
the long-term needs of emerging markets.”
The megatrends include improving access to food
and to safe drinking water, improving water conservation and reducing carbon footprints. In India, for instance, 40% of food rots before it reaches the people
who need it, hence the country’s alarmingly high levels
of malnutrition and infant mortality.
Here, the Middle East could work with the Indian
government to supply the PU insulation foam for refrigeration, says Hodges. “But the reality is that to
achieve big-volume sales in India, the polyurethane
foam will have to be exceptionally cheap. The reason
is that the majority of people in countries such as
India and China are very poor by Western standards.”
Insulation foam might have to be sold to an Indian
manufacturer making refrigerators that sell for as little
as $50−$100 each.
Another example of a huge volume, but price sensitive, market is PE for manufacturing water pipes for
better irrigation of crops. The GCC has a big opportunity to emerge as a major winner in this economic environment because it understands, from its own experience, that adding value involves social as well as
economic factors. It is, therefore, already in tune with
the objectives of many developing countries.
And, despite an erosion of cost advantages as the
GCC moves downstream, more differentiated petrochemicals production will still yield good returns. This
is thanks to continued access to some competitively
priced feedstock and strong government incentives.
“The GCC has every chance of emerging a major
winner in this new environment,” says Hodges. “This
could well be a tremendous success story.”
John Richardson is director − Asia for
ICIS training and is now based in Perth,
Australia. He has been with ICIS for many
years and was formerly based in
Singapore as editor of Asian Chemical
News. He also writes the ICIS Asia blog
and is writing a book, The New Normal, with Paul Hodges,
chairman of International E-chem. John travels extensively
to the Middle East and has provided training courses for
leading regional producers, as well as chairing industry
events such as last year’s Annual GPCA Forum Chemical
Leadership Dialogue
www.gpca.org.ae
www.sabic.com
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888 35 FEATURE
Margins take the strain
as growth slows in 2012
Middle East petrochemical producers historically have enjoyed
rapid growth and good financial performance. But the slowdown
in global growth, new capacity and pricier feedstocks are having
an impact on margins
Rex Features
The Gulf construction
industry has seen declining
share prices in the past year
SEAN MILMO LONDON
T
he slowdown in the world economy is now
sharply outlined by the longer-term financial
challenges facing Middle East petrochemical
and bulk chemical producers. They are now
confronting the prospect of lengthy sluggish growth in
their mature export markets in Europe and, to a lesser
extent, North America. In the emerging markets, particularly India and China, an easing of fast growth
rates is softening chemicals demand in their main foreign sales outlets.
Also, there is a growing threat of stronger competition from domestic producers and other international
market participants in their major export markets. For
example, US petrochemical companies have been
taking advantage of feedstocks from cheap shale gas
at home to boost exports to Asia.
The big rise in capacity in the Middle East petrochemicals production center in the Gulf is expected to
level out. Since 2008, new ethylene capacity, for example, has been growing at 12%/year to total around
26m tonnes/year. In the rest of the decade, this
growth rate should drop to below 5%/year.
www.gpca.org.ae
The focus will be on the ability of owners of new
and expanded plants to pay off their construction and
other capital debts and make the sort of strong financial returns traditionally expected in the region. Gulf
producers are tackling problems of rising costs, particularly of feedstocks, which in Saudi Arabia and elsewhere can no longer be so dependent on cheap but
scarce ethane. Alternatives such as naphtha will have
to be sold to Gulf producers at world prices.
Some economists are predicting that a combination of weak world demand and rising exports from
countries such as the US will reduce Middle East
sales of crude oil, raising speculation that there will
be a decrease in squeezed supplies of associated
gas for making petrochemicals.
Some leading Gulf petrochemical and bulk chemical producers are so profitable, they can withstand
the financial pressures of fragile global demand and
lower prices. They will still return operating or net profit
margins on a level with those for high-end specialty
chemicals, pharmaceuticals and agrochemicals.
There will be a few whose margins will be even
higher because they will continue to enjoy contract
gas supply prices of around $1 per million British
thermal units (MMBtu). This is about three-times and
10-times lower than the prevailing gas prices in the
US and northern Europe, respectively.
Others will be paying much higher prices – although
still low by international standards – for their feedstocks. Saudi Aramco, Saudi Arabia’s state oil and
gas company, is understood to have raised its charges
for gas feedstocks from $0.75 to $2.00MMBtu for
new petrochemical projects in the country.
However, other Middle Eastern companies, particularly smaller producers with large debts, will be much
more vulnerable to the new harsher conditions in domestic and international chemical markets. Variations
in the fortunes of producers will be most noticeable in
Saudi Arabia, which accounts for much of the production of petrochemical and bulk chemicals in the Gulf.
The profits of petrochemical businesses have been
falling in the country, as well as other Middle East
states, since the end of last year, when commodity
prices were declining across the world.
The slide in petrochemical margins over the past
year has been reflected in share prices on the Saudi
Stock Exchange (Tadawul). While the Tadawul total
share index has gone up by around 6% between the
beginning of 2012 and mid-October, the index for the
country’s 14 listed petrochemical companies has
gone down by 7%.
By contrast, shares in industrial sectors outside of
petrochemicals have gone up by 14% since the beginning of the year and in telecommunications and information technology by 26%. Among other segments
with declining share are energy and utilities, down by
3%, and building and construction, down by 9%.
SABIC SETS THE PACE
The trend of falling profits and narrowing margins has
been highlighted in the financial results of 70% stateowned SABIC, by far the Middle East’s biggest petrochemical and bulk chemicals producer. The company
also has controlling or large minority stakes in other
Saudi petrochemical producers such as Safco, Yanbu
National Petrochemical Co (Yansab) and Saudi Kayan
Petrochemical Co.
SABIC’s results mirrored the decline in demand and
prices a year ago when its fourth-quarter results in
2011 showed that, despite a 15% rise in sales, operating profits slipped by 5%, with the margin declining
from 24.5% to 20%. Also, in the whole of last year,
sales rose by 25% to Saudi riyal (SR) 190bn ($51bn,
€39bn), with operating profits up by 29% to SR49bn,
equivalent to an operating margin of 26%.
For the first half of this year, SABIC’s results revealed a 1% drop in sales, with operating profits falling
by 19% and operating margins down five percentage
points to 22%. Net profit margin slipped four points to
13%. In the third quarter, after an 8% sales decrease,
operating profit declined by 27% and operating margin
by six points to 22%, compared with the same period
in 2011. Net profit fell by 23% to SR6.3bn, equivalent
FEATURE
to a reduction of three points to 14%.
On Tadawul, SABIC shares have been holding up
comparatively well with a price of SR90 in midOctober, only slightly lower than a year ago, although
well below a high of SR110 in July.
The company has taken steps to cut costs to maintain margins, which are so far higher than during the
previous petrochemicals downturn in 2009, when operating and net margins fell to 18% and 9%, respectively. Its finances are helped by the higher margin of
non-bulk chemical operations such as engineering
plastics, a business it acquired from US conglomerate
General Electric five years ago. Above all, its profits
are bolstered by the continuous high margins of its
fertilizer activities. In the first half of the year, their net
profit margin was 59%, against 13% for chemicals.
“We are confident that SABIC, with our global reach,
is ready and capable of facing major global challenges
and trends, and in the process, bring in sound returns
for our shareholders,” said vice chairman and chief
executive officer Mohamed Al-Mady at this year’s announcement of the third-quarter results.
SMALLER PRODUCERS FOLLOW
Some other Saudi petrochemical and bulk chemical
companies are less well positioned financially to deal
with the difficulties of a slowdown in demand and
weak prices in international markets. This is particularly the case with smaller, less diversified producers,
which are already coping with lower margins than
other Saudi petrochemical market participants, and
have large long-term loans for new plant builds.
Alujain Corporation, the 57% majority shareholder
in National Petrochemical Industrial Co (NATPET),
which operates a two-year-old 400,000 tonne/year
propylene and polypropylene (PP) complex in Yanbu
Industrial City in the west of Saudi Arabia, raised sales
by 77% last year to SR1.5bn. But its operating profit
was only SR94.5m, equivalent to a 6.3% operating
margin. After paying financial charges of SR95m, 2.6times higher than in 2010, it returned a net loss of
SR8m. The company blamed the loss on technical
problems which caused it to run at an average 69% of
capacity and, in addition to the higher financial charges, higher feedstocks costs and lower PP prices.
But in the first half of this year, Alujain saw sales
jump by 55% at SR1bn compared with the first half of
2011. Operating profits almost tripled to SR104m
and it returned a net profit of SR24m against an
SR8m loss in last year’s first half. Operating and net
margins were 10% and 2%, respectively. At the end of
June, it had loans outstanding of SR1.8bn.
Sahara Petrochemical Co (SPC), a shareholder in
propylene, PP and polyethylene (PE) producers headed
by Al Waha Petrochemical Co in Saudi Arabia’s
Jubail City, recorded total income of SR240m, equivalent to a 16% margin on sales of SR1.5bn in 2011, its
first full year of operation. In the first nine months of
this year, it made an operating loss of SR78m after
“We are confident that SABIC,
with our global reach, is ready
and capable of facing major
global challenges and trends,
and in the process, bring in
sound returns for our
shareholders”
MOHAMED AL-MADY
Vice chairman and CEO, SABIC
sales fell by 13% to SR950m, compared with the same
period in 2011. But it made a net profit of SR139m,
65% lower than last year, taking into account earnings
from shareholdings in associate companies.
SPC’s share price had fallen by 38% to SR12.55 by
mid-October after hitting a high of SR20.15 in April. It
recently announced a revolving credit agreement with
Saudi Investment Bank for SR400m, which it said
would act as standby support for its financial needs.
Rabigh Refining and Petrochemical Co (Petro
Rabigh), in which Saudi Aramco and Sumitomo Chemical of Japan each have a 37.5% stake and private investors the remainder, and whose petrochemicals complex is centred on a 1.3m tonne/year ethylene cracker,
made a net profit of SR66m last year on SR53bn sales.
In its third year of operation, this was 68% lower than
the net profit in 2010. In the first half of this year, Petro
Rabigh’s sales rose by 40% to SR31bn, but operating
profit plunged 72% to SR89m, equivalent to a margin
of 0.28%. Net profit fell by 96% to SR11m, after financial charges of SR189m, which were partly offset by
SR111m in income from other sources.
The problem faced by Petro Rabigh, which aims to
benefit from refining and petrochemicals integration,
is the poor profitability of refined products. In the first
half of this year, its refining section made a loss of
SR713m on SR26bn sales, while the petrochemicals
business made a SR1.3bn profit from a 26% margin
on SR4.7bn sales. The whole project also had, at the
end of June this year, outstanding loans of SR24bn.
Meanwhile, Petro Rabigh’s share price had slumped
by mid-October from a 52-week high of SR28.8 in
March to SR17.55. It is now below the SR21 level at
its IPO for 25% of shares in early 2008, when 4.5m
Saudi citizens took part in the offering.
Saudi Kayan, which is gradually bringing onstream
a 6m tonne/year petrochemicals complex including
speciality products in Jubail City, has taken out 15-year
loans of SR22.5bn, of which SR21.5bn was outstanding at the end of September. It has recently used additional amounts of SR1.5bn from SABIC, a 35%
shareholder, and SR6.5bn from local banks. In the
first nine months of this year, Saudi Kayan made an
SR111m operating loss and a net SR558m loss on
its first sales of SR6.5bn. Financial charges were
SR393m in the period. Its share price had tumbled to
SR12.3 by mid-October from a high of SR21.6 earlier
in the year and from about SR17 in October 2011.
Over the next few years, the Middle East’s bestperforming petrochemicals and bulk chemical businesses will be those free of heavy debt and still enjoying low feedstock costs, particularly those with output
processes with above-average energy intensity.
SABIC subsidiary Safco, an ammonia and urea
manufacturer, with gas feedstocks costing
$0.75MMBtu, made an operating profit last year of
SR4.2bn on sales of SR5bn, equivalent to an operating margin of 80%. Income from shares in an associate company pushed net profit up to SR4.1bn. In the
first nine months of this year, operating profits slipped
to SR2.5bn on static sales of SR3.6bn, but still provided a margin of 70%. Financial charges in the
21-year-old company were only SR1.8m in the period.
Safco is one of Saudi Arabia’s and the Middle
East’s most profitable companies. Not surprisingly, its
share price in mid-October, at SR186, was 2% higher
than a year ago and 58% up on three years ago.
TOP OF THE TABLE IN QATAR
Qatari companies using Qatar’s gas feedstocks at a
cost of $1.00−1.50/MMBtu are also at the top of the
region’s profitability table. Industries Qatar (IQ), the
holding company with majority shares in Qatar Petrochemical Co, Qatar Fertilizer Co, and Qatar Fuel Additives Co, as well as Qatar Steel Co, last year made a
net profit of Qatari riyal 7.9bn ($2.1bn) with a profit
margin averaging 48%. But with its petrochemical and
fertilizer activities, the margins were around 60%.
The company, 70% owned by state oil and gas company Qatar Petroleum with the remaining shares floated on the Qatari Stock Exchange, is performing well
“even during the turmoil of the international economy”, says Abdulrahman Ahmad Al-Shaibi, IQ chief coordinator. “The company enjoys highly competitive advantages that qualify it to take [on] such challenges
as incentives and not obstacles.”
For IQ and several petrochemical businesses in the
Middle East, their continued international competitiveness should guarantee investors relatively high
returns over the next few years. But for others, the
future could be much tougher.
Sean Milmo is a freelance reporter
working in the UK and covering the
petrochemical and pharmaceuticals
industries. He writes regularly for ICIS
covering the Middle East petrochemical
sector
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FEATURE
Middle East by numbers
GULF PETROCHEMICALS OUTPUT IS SET TO RISE FURTHER BY 2015
2009
Ethylene
Polyethylene
Monoethylene glycol
Propylene
Polypropylene
2015e
Gulf
World
Gulf share %
Gulf
World
Gulf share %
16.8
10.7
6.0
5.1
5.1
133.5
83.0
23.3
87.5
54.4
12.6
12.9
26.0
5.8
10.8
32.0
20.3
10.8
10.1
9.5
156.5
113.0
37.9
105.0
73.0
20.5
18.0
28.5
9.6
13.0
SOURCE: GPCA, SRI, Deutsche Bank (2010)
A NUMBER OF DOWNSTREAM PROJECTS ARE PLANNED IN SAUDI ARABIA
Production, 000s tonnes/year
1,000
900
800
650
600
590
500
460
420
400
400
300
290
240
175 200
100 100 100
VA
M
MD
I
Ace
t
Aci ic
d
SB
R
A
50
B
Ru utyl
bbe
r
SOURCE: GPCA
100
PA
N
C
lac apro
tam
Nyl
on
6
Nyl
on
6,6
SA
P
Acr
nitr ylo
ile
AB
S
PO
Pol
yol
Acr
ylic
Aci
d
PC
nol
BP
A
Phe
0
50
A
140
40
MM
200
PM
M
240
Cum
ene
A huge swathe of investment
is planned in the Middle East
over the coming years. In the
face of a changing feedstock
balance, many producers are
not only building world-scale
cracker projects but are also
focusing on expanding their
portfolios and developing
high-value downstream
projects. Members of The
Gulf Cooperation Council are
facing increased competition
from other regions, as well as
the challenge of a changing
demographic, with a younger
population and the need to
find additional jobs in the
chemical sector. Here is a
collection of data to highlight
some of these issues.
GULF PETROCHEMICAL CAPACITIES ARE PROJECTED TO RISE BY OVER 12%/YEAR
20 years old
More than half the population in
the Middle East is under the age of
20, says HSBC (page 8)
m tonnes/year
Actual
160
Projected
120
CAGR = 12.2%
80
40
0
1985
1990
1995
2000
2005
2010
2015
SOURCE: GPCA analysis of 2010 public data
www.gpca.org.ae
FEATURE
WORLD TOP 10 PRODUCING GROUPS: POLYETHYLENE
12%/year
2011
New ethylene capacity has grown
at 12%/year to 26m tonnes/year
since 2008 (page 13)
2016
m tonnes/year
%
m tonnes/year
%
7.4
7.5
6.7
5.1
5.3
3.4
2.4
3.2
3.4
2.8
7.8
8.0
7.1
5.4
5.6
3.6
2.5
3.4
3.6
3.0
9.0
8.1
7.4
5.7
5.3
4.8
4.4
3.9
3.4
3.2
8.0
7.2
6.6
5.1
4.8
4.3
3.9
3.5
3.0
2.9
ExxonMobil
Dow Chemical
SABIC
Sinopec Corp
LyondellBasell Industries
Petrochina
NPC Iran
Braskem
INEOS Group
Chevron Phillips Chemical
SOURCE: ICIS consulting
WORLD TOP 10 PRODUCING GROUPS: POLYPROPYLENE
2011
2016
m tonnes/year
%
m tonnes/year
%
4.8
6.0
3.2
4.0
2.9
2.7
2.6
2.2
1.9
2.2
8.0
9.9
5.3
6.7
4.7
4.4
4.3
3.7
3.2
3.6
6.0
5.9
4.2
4.0
3.1
2.7
2.6
2.6
2.4
2.2
8.4
8.3
5.8
5.5
4.3
3.7
3.6
3.6
3.3
3.0
Sinopec Corp
LyondellBasell Industries
Petrochina
Braskem
SABIC
Reliance Industries
Total Petrochemicals
Borealis
ExxonMobil
Formosa Plastics Group
SOURCE: ICIS consulting
20% of GDP
Saudi Arabia wants to expand
manufacturing from 11% of GDP to
diversify its economy (page 45)
CAPACITIES IN THE GULF ARE EXPECTED TO GROW SIGNIFICANTLY
m tonnes/year
160
end 2009
2015
120
80
40
0
UAE
Iran
Saudi Arabia
Qatar
Oman
Kuwait
Bahrain
TOTAL
SOURCE: MEED, McKinsey, TechnonOrbichem (2010)
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FEATURE
Middle East capacities
continue to climb
The region, blessed with
low-cost feedstock and access
to growing markets, is still
undergoing huge expansion
ANDY BRICE LONDON
T
PROJECTS PLANNED
There are also various projects planned in Iran,
although many of these are likely to be delayed or
canceled because of ongoing international sanctions.
The first phase of Kavian Petrochemical’s ethanebased Olefins No 11 project – a 1m tonne/year train
– was due for completion in July 2012 but is now
expected in the fourth quarter. The second train, with
the same capacity, is expected to start up by the end
of 2013. About 180,000 tonnes/year of propylene
will also be produced at the site.
Iran’s Bakhtar Petrochemical owns a 56.5% stake
in Kavian, with the remaining shares held by private
Iranian investors, including Kermanshah Polymer Co,
Lorestan Petrochemical, Kordestan Petrochemical
and Mahabad Petrochemical.
Most of the ethylene produced is expected to feed
downstream projects that are scheduled to start up
over the next two years.
In Saudi Arabia, the Sadara Chemical project in
Jubail continues to dominate the headlines. This is
the joint venture agreed between Saudi Aramco and
US major Dow Chemical in July 2011, and comprises
26 manufacturing units. It is said to be the world’s
Middle Eastern producers remain
heavily focused on moving
downstream and enhancing
sustainability
www.gpca.org.ae
Fortune Live Media
he US might be hoping to take up the mantle
of most-advantaged feedstock region, given
its recent shale gas discoveries, but the
development of new crackers and
petrochemical plants in the Middle East continues
with aplomb.
Middle Eastern producers remain heavily focused
on moving downstream and enhancing sustainability.
Part of their strategic growth has led to the
establishment of vast clusters and hubs, sharing
infrastructure and resources to maximise efficiency
and profitability.
In the past year alone, there has been a flurry of
activity in the region, with major projects gathering
pace. Saudi Arabia remains a key area of focus, with
numerous studies, expansions and new facilities
being built.
Khalid Al-Falih of Saudi Aramco and Andrew Liveris of Dow Chemical seal the Sadara Chemical joint venture
largest integrated chemical complex site ever built at
one time.
The $20bn (€15.4bn) petrochemicals project
includes a 1.5m tonne/year ethylene cracker that will
also produce 400,000 tonnes/year of propylene.
This cracker will run on both ethane and naphtha,
and is expected to begin operations in the second half
of 2015. The site – with units producing polyurethane
(PU), propylene oxide (PO), propylene glycol (PG),
elastomers, linear low-density polyethylene (LLDPE),
low-density polyethylene (LDPE), glycol ethers and
amines – is expected to be up and running in 2016.
CRACKER EXPANSION
Saudi Aramco is working on the phase II expansion of
the Petro Rabigh petrochemical project, its joint
venture with Japan’s Sumitomo Chemical. The $7bn
investment will also see the construction of an
aromatics complex using an additional 30m standard
cubic feet/day of ethane and about 3m tonnes/year
of naphtha as feedstock.
The new plants are expected to come on stream in
the first half of 2016. Main products include ethylenepropylene rubber (EPR), thermoplastic polyolefin (TPO),
methyl methacrylate (MMA) monomer, polymethyl
methacrylate (PMMA), LDPE/ethylene vinyl acetate
(EVA), paraxylene (PX)/benzene, cumene and
phenol/acetone.
In October, Saudi Polymers began full commercial
operations at its Al Jubail complex in Saudi Arabia.
The site can produce 1.16m tonnes/year of ethylene,
1.1m tonnes/year of PE – combining high-density
polyethylene (HDPE) and linear low density
polyethylene (LLDPE), 430,000 tonnes/year of
propylene, 400,000 tonnes/year of polypropylene
(PP), 200,000 tonnes/year of polystyrene (PS) and
100,000 tonnes/year of 1-Hexene.
Saudi’s National Petrochemical holds a 65% stake
in Saudi Polymers, with the remaining 35% owned by
Arabian Chevron Phillips Petrochemical.
In the past few years, new facilities in the Middle
East have been beset by technical difficulties and
feedstock shortages, yet there have been huge
capacity expansions in the region. Twelve new cracker
complexes started up between 2008 and 2010, and
another wave came on stream last year.
But with limited availability of natural gas and
greater competition from the US and Asia, the Middle
East’s focus on value-added petrochemicals and
derivatives could be key to its future success.
Andy Brice is custom publishing editor at
ICIS, having previously been markets editor
on ICIS Chemical Business
Additional reporting by: Prema
Viswanathan, Pearl Bantillo and Tomomi
Yokomura in Singapore
FEATURE
Major Middle East projects
SAUDI ARABIA
YANBU
1
QATAR
RAS LAFFAN
6
NATPET
A 50:50 joint venture was established in June between Saudi Arabia’s National
Petrochemical Industrial (NATPET) and A Schulman of the US to build a 100,000
tonnes/year polypropylene (PP) compounding unit in Yanbu, near NATPET’s 400,000
tonnes/year PP plant. They plan to bring it online by the first quarter of 2015. The
compounding unit will be completed in two phases, the first – costing about Saudi
riyal (SR) 266m ($71m/€55m) – is funded via 40% equity and 60% debt.
Qatar Petroleum/QAPCO
Having selected Technip’s technology for the project, targeted completion is 2018
at a cost of $5.5bn (€4.5bn). Plans include a 1.4m tonnes/year cracker, which
will obtain feedstock from natural gas plants at the site. Downstream units will
produce 850,000 tonnes/year of high-density polyethylene (HDPE), 430,000
tonnes/year of linear low density polyethylene (LLDPE), 760,000 tonnes/year of
polypropylene (PP) and 83,000 tonnes/year of butadiene (BD).
SAUDI ARABIA
QATAR
RABIGH
2
RAS LAFFAN
7
Saudi Aramco/Sumitomo Chemical
The $7bn (€5.6bn) expansion of their joint venture Petro Rabigh complex in
Rabigh, Saudi Arabia – dubbed Rabigh II – will see the expansion of the 1.3m
tonnes/year ethane cracker and the construction of an aromatics complex. This
will process some 30m standard cubic feet/day of ethane and 3m tonnes/year
of naphtha, supplying feedstock to downstream plants. Initially expected to come
onstream in 2014–2015, it is scheduled to start up in the first half of 2016.
Qatar Petroleum/Shell Chemicals
The Qatar Petroleum/Shell project is expected to include a steam cracker, a 1.5m
tonnes/year monoethylene glycol (MEG) plant, a 300,000 tonnes/year linear alpha olefins unit and 250,000 tonnes/year oxo alcohols unit. It could come onstream within four years following a final decision to proceed. The complex is
estimated to cost $6.4bn (€5.1bn). Output from the project is expected to cater
primarily to the Asian markets.
SAUDI ARABIA
UNITED ARAB EMIRATES
AL JUBAIL
3
RUWAIS, ABU DHABI
8
Sadara Chemical
The $20bn (€15.4bn) Sadara project – the joint venture between Saudi Aramco
and US producer Dow Chemical – in Jubail Industrial City in Saudi Arabia is the
largest integrated chemical complex ever built in a single phase. The 1.5m
tonnes/year ethylene cracker is scheduled to be operational in the second half of
2015, with all units expected to be up and running by 2016. It will run on both
ethane and naphtha.
Borouge 3
This polyolefins project will see a capacity expansion of 2.5m tonnes/year to a
total of 4.5m tonnes/year by the end of 2013. It is expected to be fully operational by mid-2014. The $4.5bn (€3.4bn) investment includes construction of a
third ethane cracker, two polyethylene (PE) plants, two polypropylene (PP) plants, a
low density polyethylene (LDPE) unit, and an innovation center. Borouge is a jointventure between Abu Dhabi National Oil Company (ADNOC) and Borealis.
SAUDI ARABIA
UNITED ARAB EMIRATES
AL JUBAIL
4
AL GHARBIA, ABU DHABI
9
Saudi Kayan
The start up of the new 300,000 tonnes/year low density polyethylene (LDPE)
unit at Al Jubail, Saudi Arabia, began in September – having been originally scheduled to come online in July. Products from this new unit will be marketed globally,
with the main market targeted at China. Saudi Arabia chemicals major SABIC
owns a 35% stake in Saudi Kayan Petrochemical, while Al-Kayan Petrochemical
holds a 20% stake. The remaining 45% is held by public shareholders.
ChemaWEyaat
Abu Dhabi National Chemicals Company (ChemaWEyaat) is planning an aromatics complex in Al Gharbia, east of the Ruwais industrial complex in Abu Dhabi. The
project will process 3m tonnes/year of heavy naphtha to produce paraxylene (PX),
mixed xylenes (MX) and benzene. The aromatics site marks the first stage of the
country’s Tacaamol chemicals integration project and will be fed by pipeline from
the Takreer Ruwais Refinery.
IRAN
OMAN
ASSALUYEH
5
Kavian Petrochemical
The first phase of its 2m tonnes/year olefins No 11 project is now expected in
the fourth quarter. A second 1m tonnes/year ethylene train should start up by the
end of next year. Iran’s Bakhtar Petrochemical owns a 56.5% stake, with shares
held by investors including Kermanshah Polymer Co, Lorestan Petrochemical,
Kordestan Petrochemical and Mahabad Petrochemical. The latter three should be
starting up polyethylene (PE) units by 2014, after delays by US sanctions.
DUQM
10
OCC/IPIC
In June, it was reported that Oman Oil Company (OCC) and Abu Dhabi’s
International Petroleum Investment Company (IPIC) formed a 50:50 joint venture
to develop a refinery and petrochemical complex in Duqm, Oman. The project will
center on a 230,000 bbl/day refinery, scheduled for completion by 2017, with a
petrochemical complex forming the second phase. Some label it one of the most
important investment projects in the region. The Duqm cracker will be mixed feed.
FEATURE
Caspian Sea
SYRIA
IRAN
IRAQ
JORDAN
KUWAIT
3
5
4
6 7
Arabian Gulf
QATAR
SAUDI ARABIA
1
2
8
9
UAE
OMAN
10
Red Sea
www.gpca.org.ae
YEMEN
www.gpca.org.ae
www.sabic.com
VISION +
PERFORMANCE
POWERING OUR CUSTOMERS’ AMBITIONS
IS NOT JUST A STORY TO TALK ABOUT.
IT’S WHAT SABIC DOES EVERYDAY.
FEATURE
Daniel Foster
Feedstock changes
impact downstream
Middle East producers are looking more to refinery streams to source petrochemical feedstocks
T
he global landscape for petrochemical
feedstocks has been undergoing a major
transition for the past two to three years. In
the US, the development of shale gas has
accelerated and shifted the balance in terms of
access to cost-competitive cracker feeds. At the same
time, in the Middle East there has been a growing shift
away from ethane cracking to liquids, as availability
tightens and state and producer strategies refocus on
moving downstream into high-added-value products.
Figures from the US Energy Information
Administration (EIA) and oil company BP show that the
US now has the second highest recoverable reserves
of natural gas, at 74 trillion m3, split equally between
conventional and unconventional – ie shale gas –
sources. Russia has the greatest reserves at 141
trillion m3, and Saudi Arabia is still placed third, with
39 trillion m3, almost all from conventional sources.
In the Middle East, Qatar and Iran also figure
prominently in the top list of gas-rich countries.
There is still a drive to produce more incremental
gas in the Gulf region, within tight regional markets,
and this will release incremental amounts of natural
gas liquids for petrochemical use. But extra cheap
ethane will only be available to a selected number of
producers. Hence the emphasis on a wider-ranging
and higher-value petrochemical slate, with incremental
use of refinery to petrochemical options. However,
www.gpca.org.ae
Shale gas in North America
and tighter ethane supplies in
the Middle East are changing
the face of global feedstock
balances. Gulf producers are
responding by widening their
feedstock slate and product
portfolios
JOHN BAKER LONDON
natural gas will remain the key competitive element in
the region.
ICIS Consulting believes that shale gas from
unconventional sources will promote many new
projects, as is already being seen in the US, where a
spate of cracker projects has been announced.
Increased future production here, it says, is likely to
challenge the Middle East’s traditional large markets
in China, India and the rest of Asia.
The increased production of natural gas from shale
sources has slashed regional gas prices. Partly as a
result, shale gas producers are looking to maximize
associated liquids extraction. Incremental ethane and
liquefied petroleum gas (LPG) will be targeted at the
new ethylene cracker expansions in North America,
while large amounts of LPGs will be exported to
international markets. The US has already shifted from
a net importer to net exporter of such products.
But Middle Eastern producers are responding by
evolving their product and portfolio slates. Already, the
Gulf Cooperation Council member states, with Iran,
are on the way to becoming a global hub for the
development and processing of high-value and highend downstream derivatives. An analysis of projects
shows a diverse range of products being added by
2015 to the Middle East portfolio, including
polycarbonate (PC), propylene oxide (PO), polyols,
bisphenol A (BPA), cumene, acrylic acid (AA),
FEATURE
The Gulf
Cooperation
Council
member
states, with
Iran, are on
the way to
becoming a
global hub
for the
development
and processing
of high-value
and high-end
downstream
derivatives
ICIS CONSULTING
acrylonitrile (ACN), caprolactam (capro), methyl di-pphenylene isocyanate (MDI), ethylene vinyl acetate
(EVA), vinyl acetate (VAM), acrylonitrile-butadienestyrene (ABS), and elastomers.
ICIS estimates that in the Middle East, the
incremental
feedstocks
for
added
basic
petrochemicals capacity from 2011 to 2020 will be
split in the following proportions: ethane 40%, LPG
20%, naphtha for olefins 20% and naphtha for
aromatics 20%. This is a much more balanced split
than in other regions of the globe – in North America,
for instance, ethane will account for just over 60% of
feedstocks for new capacity, while in Asia, naphtha will
the predominant feedstock, with just a little LPG and
no appreciable ethane used.
Figures from ICIS Consulting suggest the Middle
East will consume an additional 10m tonnes of
naphtha feedstock between 2011-2020, split between
use in olefins, aromatics and other production. While
far behind the figures for northeast Asia (nearly 60m
tonnes) and Asia and the Pacific region (25m tonnes),
the Middle East figure is well ahead of incremental
naphtha demand in all other regions, indicating the
region will remain a keen investor in petrochemicals
capacity. The main areas for development are cited as
Saudi Arabia, Iran and Abu Dhabi.
This incremental naphtha in the Gulf region is
primarily sourced from refineries, but also from natural
gas liquids and, to a lesser extent, from gas-to-liquids
facilities. Heavy condensate processing in dedicated
splitters will be a major factor in the Middle East.
Incremental regional naphtha production between
2011-2020 is estimated at 20m tonnes, twice the
incremental demand into petrochemicals, indicating
the region will likely keep more naphtha in the gasoline
pool or add to its already substantial exports (28.8m
tonnes in 2011, virtually all to Asian customers).
The effects of the shifting landscape in feedstocks
are now becoming clearer. The US will become more
competitive in derivatives close to the ethane cracker,
once the modern, world-scale units come on stream
over the next five years or so. Middle East producers
will see greater competition in their main exports
markets in Asia.
But by this time, they will be well on the way to
widening their product portfolios to higher-value
products. However, by moving to crack liquids and
heavier feedstocks they will see downward pressure
on margins. The net effect of all three factors will be
determined by the efficiency of production and the
competitiveness of the new product ranges. However,
there is now a question over whether the Middle East
will continue to be a major investor in petrochemicals.
John Baker is global editor for custom
publishing at ICIS. He has 30 years’
experience of reporting on the chemical
industry and was for many years editor of
European Chemical News, now ICIS
Chemical Business. Go to www.icis.com
www.gpca.org.ae
A Formula for
Tomorrow
www.saudiaramco.com
© Copyright 2012, Saudi Aramco. All rights reserved.
FEATURE
Polymers boom in
the Middle East
Middle East producers have enjoyed a robust position in polymers
since entering the global market and are still investing, with
significant export growth due through to 2020
JOHN BAKER LONDON/FABRIZIO GALLE MILAN
C
SIGNIFICANT EXPORT GROWTH
Parallel to the continued capacity growth, figures from
ICIS Consulting’s latest analysis show that the Middle
East PE total export volumes could increase from
9.5m tonnes/year in 2011 to as much as 17.3m
tonnes in 2020. Of this figure, 10.4m tonnes will be
destined for Asia, up from 5.5m tonnes in 2011, and
4.2m tonnes will head to Europe, up from 2.6m
“Average PE and PP plant
utilization rates in the Middle
East have been under
pressure in recent years”
Rex Features
ommodity polymers such as polyethylene
(PE), polypropylene (PP), polystyrene (PS)
and polyvinyl chloride (PVC) are essentially
global commodities, produced around the
globe and, in large part, traded around the globe.
As for the major polyolefins, PE and PP, the Middle
East has built up a tremendous position over the
years, largely through exploiting abundant, advantaged feedstocks and positioning itself to serve markets all around the world.
Middle East producers are still committed to huge
growth in polyolefin production. There are massive
projects under way in Saudi Arabia, Iran, Abu Dhabi
and Qatar and this wave of investment will bring them
further huge quantities for both regional markets and
export. Much of this next wave is scheduled to come
onstream between 2012 and 2014, and further
investments are under consideration that may materialize in the following three to five years.
Conversely, the region’s PS industry – generalpurpose PS (GIPS) and high-impact PS (HIPS), but
excluding expandable PS (EPS) – had seen no capacity
increase for many years, until recently. New plants
have now come onstream in Iran – an additional line by
Tabriz Petrochemical in 2011, and Saudi Arabia – with
two 100,000 tonne/year units started up by Saudi
Polymers in 2012. Further future projects will be driven
by demand and possibly by styrene availability.
The Middle East, however, is a net importer of PVC,
widely used in construction and packaging. Interest in
significant investments in the region has historically
been weak, with a limited development of the chloralkali chain. Projects so far are concentrated in Iran,
which has an above-average developed domestic market in terms of per capita consumption.
tonnes. Africa, too, is likely to receive consistent volumes from the Middle East, estimated at 1.8m
tonnes in 2020, up from 1.1m tonnes in 2011.
This continued growth of exports out of the Middle
East and imports into Asia is perhaps the biggest single trend in the PE market. But one of the potentially
interesting developments is growth of exports in this
market out of North America, linked to shale investments. ICIS is currently forecasting an increase of
about 1m tonnes of US exports in the 2012-2020
timeframe, from 2.7m tonnes to 3.7m tonnes, with
material going mainly to Latin America and Asia, in
relatively similar amounts.
As producers in the Middle East ramp up the new
PP capacities, exports will move up sharply from 3.6m
tonnes in 2011 to 6.4m tonnes estimated for 2020.
The main export destinations are the same as for PE:
with Asia taking the main share of 2.9m tonnes in
2020, Europe 2.1m tonnes and Africa 0.8m tonnes.
For PVC, the Middle East will continue to be a net
importer, with net imports into the region decreasing
slightly from 0.5m tonnes in 2011 to 0.4m tonnes in
2020. Material comes mainly from North America and
Northeast Asia, with minor amounts being imported
Large-scale petrochemical complexes have given the Middle East a strong position in the global commodity polymers market
www.gpca.org.ae
from Europe and South Asia.
For PS, the Middle East has capacity in advance of
regional consumption since new capacity went onstream in Saudi Arabia. So the region is predicted to
become a net exporter of 0.2m tonnes in 2020, after
being a net importer of 0.1m tonnes in 2011.
Given the Middle East’s rapid rise in polyolefins
capacity, average PE and PP plant utilization rates in
the region have been under pressure in recent years.
Operations at most of these new plants are expected
to increase gradually in years to come, and are estimated to achieve rates of over 90% within the next
three to five years.
Further pressure on PE operating rates may come
from the US, due to the huge investments that will
drive capacity expansion as a result of shale gas, with
many plants expected to come onstream in the 201618 period. These projects are likely to increase pressure over utilization rates for polyolefins, in Europe as
well. Operating rates for PE in this region are expected
to remain level at just under 80% over the next six to
seven years, following increased competition from
cheaper imported material from the Middle East and
the US, although there will be some progressive pickup from the 2011 trough.
In terms of domestic demand, the Middle East region is reasonably fast-growing when it comes to polyolefins. ICIS Consulting forecasts see total demand for
PE and PP in the region advancing by just under 6%/
year from 2012 to 2020, albeit from a relatively low
level of per capita consumption – around 25kg/head in
2011. This annual growth rate is slightly higher than
that forecast for China and Eastern Europe, and behind
only India (8.0-8.5%/year) and the CIS and Africa, the
latter coming from an even lower base.
DEVELOPED MARKETS
The developed markets can expect growth rates for
polyolefins of only just over 2%/year, as per capita
consumption is already high at 45-55kg/head and
economic growth is sluggish.
The picture in PVC is similar, with the Middle East set
to enjoy demand growth of just over 5.5%/year, similar
to China and behind only India (just under 7%/year).
Per capita consumption in the region is around 6kg/
head, compared with 10-12kg/head in Western Europe
and North America, where again growth rates are expected to be much lower at 1-2%/year between 2012
and 2020. For PS, we forecast growth in the Middle
East at 4.5% to 5.0%/year, again from a small base.
Turning to the global markets for these commodity
polymers, we see PE demand is led by its use in film and
sheet packaging and non-packaging applications, with
other areas, such as pipe and blow-molded items, dominated by HDPE. PP has a much broader range of applications, across packaging, fibers and injected parts for automotive, consumers, electronics and other sectors.
PVC demand is driven substantially by its use in
construction, even with a number of different applica-
Flickr Shell
FEATURE
New plant construction will boost polyolefin exports
tions particularly for flexible PVC, such as flooring,
coating and artificial leather.
And PS, which is the smaller in terms of market
size, finds its major outlets in electronics and other
consumers, packaging (including food packaging), and
a number of other outlets, including toys, refrigerators,
and construction-related applications.
In 2011, the global market size for the main commodity polymers was estimated as follows: PE, 77.1m
tonnes, PP, 52.8m tonnes, PVC, 37.6m tonnes and PS,
11.3m tonnes, making an aggregate of 178.8m
tonnes. In terms of annual growth rates, the aggregated trend was positive until 2007, but in 2008-2009 the
global financial crisis had a substantial effect on polymers demand. This was followed by a general recovery
in 2010 and a positive average growth in 2011, despite
the considerable worsening of consumption since the
second half of the year. On average over the period
2000-2011, annual growth rates for the four polymer
types have been: PE, 4.0%; PP, 5.1%; PVC, 3.4% and
PS, 0.4%.
On a regional level, Europe, North America and Africa
were worst hit by the crisis in 2011. In Europe, the collapse in demand has been due particularly to the economic performance of the Western economies, but a
relatively better trend is expected for Central and Eastern European countries, particularly for Turkey.
Polymers demand in North America looks to have
lost its ability to grow, but much of this is to do with
the contraction of the PVC market following a collapse
of the construction sector, particularly in the US. The
reason for a consumption breakdown in Africa is exclusively linked to the political turmoil in the North, but
the region still remains one of the fastest growing in
terms of polymers demand.
In the coming years, fast demand growth for commodity polymers is also expected in Latin America,
South Asia, China and the Middle East. Despite the
still limited market size, the Middle East represents
the fastest growing supplying region, and of course in
Asia, investments are fed by the efforts to satisfy
growing portions of regional demand.
Given the Middle East’s rapid rise in commodity
polymer production, it is not surprising to see some
regional producers making their way into the top
rankings. In PE, for example, SABIC held a 7.1% share
of the global output in 2011, corresponding to a capacity of 6.7m tonnes/year (capacity “rights” based
on the controlled equity share of the subsidiary operating companies) – putting it at number three in the
world. Iran’s NPC is also in the top 10 rankings, at
seven, with 2.4m tonnes/year of capacity, expected
to rise to 4.4m tonnes/year in 2016.
In PP, two Middle East players feature in the top 10:
SABIC (five) and Borealis (eight), based on 2011 controlled capacities of 2.9m tonnes/year and 2.2m
tonnes/year, respectively. No Middle East players appear in the top 10 PS or PVC producers, which are
largely dominated by US and Asian companies.
MARKET SHARE
The top 10 PE producers hold, and will continue to
hold, about 50% of the market. Similarly, in PP, the top
10 hold more than 50%, a share that will decline
slightly as new projects emerge in joint ventures with
new entrants. The global PVC industry is much more
fragmented, mainly due to several investments in
China by a number of companies. Top producers hold
around one-third of the world total. In PS, the market
is much consolidated (about 56% was held by the top
10 producers in 2011), but there are still a number of
small producers. Because of ongoing and planned investments (in Saudi Arabia, Egypt and China), this
share will decline, but only a little.
In conclusion, the global commodity polymer markets are under pressure, affected by volatility, and this
is expected to persist, at least in the short term. Investments look “long” compared with fluctuating demand. Consumption growth is particularly constrained
in the most mature markets, and is likely to remain
linked to the eurozone debt crisis and the slow economic recovery in other countries, such as the US.
Also, in faster-developing markets, policies will aim to
limit speculation (and inflation), which could affect demand growth in the short and mid-term.
In the future, demand growth will generally trend
closer to GDP growth for all these polymers, while
faster growth perspectives are likely for value-added
products and niche applications, also in the most mature markets. Future investments are likely to be closer to economies with better growth perspectives, or
where cost-advantaged resources are available.
John Baker is global editor for custom
publishing at ICIS. He has 30 years’
experience of reporting on the chemical
industry and was for many years editor of
European Chemical News, now ICIS
Chemical Business. Go to www.icis.com
Fabrizio Galiè joined Parpinelli TECNON
(now part of ICIS Consulting) in 2005. As a
member of the petrochemicals division, he
contributes to the periodical multi-client
reports and publications for plastics, as
well as to single-client activities
www.gpca.org.ae
'!" &" #!+
CHEMANOL is a grass root, second generation petrochemical
complex located in Jubail Industrial City of the Kingdom of Saudi
Arabia, manufacturing premium grade Methanol Derivatives and
encompasses the following products:
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These products have diverse applications including agricultural
fertilizers, pharmaceuticals, solvents, intermediates, laminates, wood
industry, plastics, paper and in the production of various types of
concrete admixtures.
Since its inception in 1989, CHEMANOL has earned the reputation of
being a world class, dependable and quality conscious manufacturer
possessing a very sophisticated marketing and logistical support
systems to which many GCC and overseas customers can testify.
The company is committed to advancing its leading position in the
specialty chemicals by way of continuous investment in R&D work
to tailor-make customer specific product formulations, particularly
in the field of the Amino Resins. In-house research has facilitated
development of several special product grades which reside in the
domain of guarded technology.
After the successful completion of its SR 2.4 billion expansion plans,
CHEMANOL’s annual production capacity has reached to 1 million
metric tons of formaldehyde, derivatives and other downstream
methanol based products. Today, Chemanol is one of the world’s most
integrated formaldehyde & derivatives producer having the largest
production capacity in the Middle East and Africa region.
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, PO Box 2101, Al Jubail 31951, Kingdom Of Saudi Arabia, Tel: +966 3 358 11 11, Fax: +966 3 358 35 92
, Novotel Business Park, Tower 3, 1st Floor, Dammam, Kingdom Of Saudi Arabia., Tel: + 966 3 814 46 85 /94, Fax: +966 3 814 46 78
Brief Overview:
Farabi Petrochemicals Company(FPC) is one of the Global leaders in
Linear Alkyl Benzene (LAB) business and also co-produces Heavy
Alkylates & Specialty Solvents
FPC has its state of art manufacturing facility located in Jubail,
Saudi Arabia and caters to its customers globally and has strategic storage
locations in its markets
Our Mission:
We are committed to being a globally recognized leader in the
Petrochemical business we operate. Towards this we shall continuously
deliver superior Financial and Operating results and strive to exceed our
Stakeholder’s expectation
Our Vision:
By 2014, we will position ourselves in the top quartile in the Global LAB
business and grow our petrochemical product portfolio satisfying
customer needs and achieve sustainable returns from the business
Our Growth:
FPC is pursuing on various growth initiatives as part of its Strategic Vision
www.farabipc.com
FEATURE
Hyper Speed Evolution drives
GCC petrochemical companies
The past few decades have
seen a “Hyper Speed” period of
economic growth and industrial
development in the GCC region.
This also raises challenges for
sustainability for GCC players
DAN STARTA, JOSE ALBERICH AND LOUIS
BESLAND A.T. KEARNEY DUBAI
D
riven by rising oil prices, government
investments and a labor influx, companies in
the Gulf Cooperation Council (GCC) region
moved towards reaching maturity levels
similar to leading global players, but over a significantly
reduced time frame, a phenomenon we at A.T.
Kearney call Hyper Speed Evolution.
Although different GCC markets have accelerated at
different rates, Hyper Speed Evolution typically
consists of three distinct phases: “Launch”, when
catalysts such as favorable natural resources, cheap
labor and the ability to copy and improve from mature
companies trigger rapid expansion; “Rapid growth”,
the levering of an existing eco-system, importing
competencies and exploiting gaps left by established
players to catch up quickly with the global leaders;
then, as companies approach maturity, they enter a
stage known as the “Moment of truth”, where their
strategic response determines the sustainability of
their rapid growth.
After years of investment and global expansion, the
GCC petrochemicals industry has produced its own
worldclass set of growth narratives. An example is the
30-year rise of Saudi Arabia-based SABIC, now the
world’s fifth largest chemical producer, which can be
contrasted with the trajectory of Germany’s BASF, a
company founded in 1865 (see graph, page 36).
BASF is the world’s largest chemicals maker with
nearly $85bn (€66bn) in revenues in 2010. The next
biggest companies, US-based Dow Chemical and
ExxonMobil Chemical, were established in 1897 and
1870, respectively. All took over a century to evolve
into the corporate giants they are today, while SABIC
opened its first chemical plant in 1981.
A convergence of factors fueled the transformation
of these GCC producers to global proportions. Price
shocks in the 1970s through to the mid-2000s
catalyzed GCC oil industry development, producing an
abundance of byproduct that petrochemicals
companies utilized as feedstock. Rising prices also
inflated feedstock costs for Western chemical
producers, who subsequently viewed investments in
GCC chemicals plants optimistically.
Strategic partnerships were quickly formed, typically
by way of joint ventures that facilitated knowledge
transfers of plant operations and market
understanding. GCC governments, motivated to
increase employment opportunities and revenues,
made investments and created regulations. These
factors, combined with a surging global demand for
plastics, set the stage for petrochemical prosperity.
Players must introduce strategic
and operational changes to
counteract mounting pressures
In all, Middle East producers added over 20m
tonnes of annual ethylene capacity from 1999–2012,
growing from 7% to 17% of the global supply, while
growth capacity in Europe and North America
essentially remained flat. Only Asia-Pacific, which is
experiencing its own form of Hyper Speed Evolution,
has kept pace.
GCC petrochemical companies continue to ascend
the Hyper Speed Evolution curve, making big leaps as
large new plants are commissioned, acquisitions
forged and corporate capabilities upgraded.
Rex Features
The region has
really taken off in
recent decades
www.gpca.org.ae
FEATURE
The Middle East has been transformed as a torrent of new capacity has come onstream
Aramco, for instance, has developed an integrated
oil refinery and petrochemical plant at Petro Rabigh,
and is developing an even bigger integrated facility
(Sadara) in partnership with Dow at Jubail. More
expansions are planned by Saudi Arabia’s Tasnee and
UAE’s Borouge and ChemaWEyaat, to name a few.
Expansion projects within the region are expected to
increase capacity by 8m tonnes/year (40% of current
capacity) by 2016.
The industry has created wealth, employment and
expertise, yet there is a pressing number of threats
that will challenge its dependency on the favorable
conditions that drove the Hyper Speed growth.
As the GCC petrochemicals industry looks ahead
and charts its path to maturity, industry players must
introduce strategic and operational changes to
counteract mounting pressures due to a talent
shortage, capital expenditure decisions and a need for
new revenue streams.
THIRST FOR TALENT
Industrial sectors that evolve at Hyper Speed typically
struggle to identify, hire and develop new talent fast
enough, leaving experienced middle managers in short
supply. Apart from temporary expatriate appointments
used to plug holes, positions in technical areas such
as IT and engineering remain vacant, forcing
employees to take on extra responsibilities and
requiring managers to spend more time supervising
rather than focusing on strategic efforts.
Building a winning organization therefore requires a
long-term commitment to developing talent.
Successful companies will encourage development
with specific assistance and intervention throughout
the learning curve.
Successful companies should be able to:
O Create awareness to transform students into
potential recruits – providing scholarships and
sponsorship,
establishing
partnerships
with
educational institutions, and encouraging the next
generation to pursue studies in required fields.
O Create knowledge to transform new employees
into effective contributors and developing leaders –
establishing corporate academies and global rotational
programs, creating structured knowledge transfers (in
alliances and joint ventures), and providing incentives
for continuous learning.
O Drive excellence to develop mid-level managers
into future executives – identifying high-potential talent,
establishing management rotations and leadership
development programs, increasing performance
management capabilities, and creating incentives
for intrapreneurship.
MAXIMIZING VALUE
Reduced operations and feedstock costs have
enabled GCC plants to enjoy relatively high
profitability, even as the industry reaches saturation
and markets for construction contracting, raw
materials and specialized equipment tighten.
However, there are many opportunities for more
cost-effective development of capital projects.
CAPEX challenges are also prevalent outside Hyper
Speed sectors. In a recent multi-industry survey of 62
international firms, including 14 chemical companies,
A.T. Kearney found that 75% of capital projects were
behind schedule and 63% were over-budget. The study
also revealed key practices that distinguish leaders
along the major dimensions of capital excellence.
Successful companies will work quickly to embed
long-term advantages in their organization around the
following factors:
O Capital strategy: Ensure capital investments are
led by and aligned with long-term corporate strategy,
rather than short-term requests from within units. In
addition, leaders should customize financial return
thresholds to reflect the specific risks and strategic
context of each project.
O Execution and operations: Adopt a project
“portfolio” philosophy and standardize designs and
approaches across projects wherever possible. Frontload projects with rigorous analysis to mature the
design and involve procurement and supplier groups
early in the process.
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Investing in Leading Petrochemical Projects
QPIC is the largest private investor in Kuwait’s Petrochemical Industry. We are financially
strong and actively investigating local, regional, and international opportunities along with
well-established global leaders in the Oil & Gas field.
www.qpic-kw.com
FEATURE
O Enablers: Closely align HR with their project funnel
to help plan resource requirements and avoid
shortfalls. They will also employ advanced risk
management, which puts a monetary value on risk and
provides a mechanism for evaluating and challenging
program scope, requirements, and budgets.
EVALUATING AND INTEGRATING
With well-capitalized balance sheets, GCC
petrochemical producers may be tempted to pursue
growth through acquisitions, a strategy than can
provide access to new markets, customers,
technologies and human capital. But international
M&A brings a host of challenges, from the logistics
of working across great distances and time-zones,
to the complexities of integrating different
business cultures.
Globally, over $151bn (€116bn) in chemical
industry M&A deals closed in 2011. Yet evidence
suggests that the majority of these will ultimately be
value destructive.
Forward-thinking companies should manage the
entire life-cycle of the deal rigorously to avoid this
common pitfall:
O Target identification & strategic fit assessment:
Ensure that the acquisition of the target corresponds
with long-term strategic objectives and that the
rationale for the acquisition is clearly understood and
carried forward into subsequent planning and
execution stages.
O Due diligence: Validate the strategic hypothesis of
the venture, identify potential risks and risk mitigation
steps, and confirm that acquisition will be valuegenerating across a range of potential future
scenarios.
O Pre-close integration planning: Use clean room
analysis to develop pre-close integration hypotheses,
understand critical enablers, and plan actions that will
begin integrating systems, leveraging new talent,
realizing synergies, and instilling confidence in target
employees from the outset.
O Post-close integration execution: Drive the
integration forward and rigorously manage critical
activities to ensure objectives are met. Ensure that
key talent in the target firm is identified early and
remains engaged throughout the process.
Over the past 30 years, the region’s petrochemical
firms have developed new plant assets quickly to
capitalize on readily available supplies of low-cost
feedstock, establishing a buoyant commodity
chemicals environment. However, some have turned
downstream towards new applications and more
specialized, higher-value chemicals in order to
enhance value creation as well as drive additional
regional economic development to employ the
growing youth population.
Still, the drive into downstream activities is nascent,
and the ecosystem needed to support these activities
is still developing. However, this drive is crucial, not
SABIC HAS ECHOED BASF’S SUCCESS
$ bn (revenue)
100
BASF
SABIC
80
60
40
20
0
1970
2011
SOURCE: Company data
ETHYLENE CAPACITY BY REGION
1991-2012
m tonnes/year
!
!
! 1991
2012
SOURCE: Oil & Gas Journal
The drive into downstream
activities is nascent, and the
ecosystem needed to support
these activities is still developing
only for capturing new sources of value creation, but
also to cater to the aspirations of the large young
population of the GCC countries.
Chemical companies can contribute to the four “I’s”
that will drive the development of downstream clusters
in their industry:
O Ingredients – The economic enablers that provide
the necessary environment for business activity.
Downstream clusters depend on the combined
involvement of chemical companies, governments,
banks, customers, and support services. Chemical
companies can contribute by establishing regional
market intelligence on downstream opportunities,
assisting with the development of local talent and
supporting companies to drive innovation.
O Initiators – The catalysts that drive return on
investment and activate business. The development
of downstream clusters require strategic
investments
into
pre-existing
downstream
companies or into new companies created to fill a
position in the value stream. Chemical companies
can also incentivize entrepreneurship by acting as
venture capital investors and shouldering the risks
faced by the entrepreneur.
O Incubators – The accelerators that provide business
support services to develop successful entrepreneurial
companies. Chemical companies can help to incubate
new downstream enterprises by maintaining a
committed supply of raw material, sharing operational
best practices, mentoring entrepreneurs, and providing
access to equipment and resources for early-stage
product development.
O Innovators – The groups and individuals who can
drive the development of new technologies and
approaches. Chemical companies can drive cluster
development through their own on-going research
efforts, their active involvement with local academic
institutions, and their engagement with the local
innovation community.
THE ROAD AHEAD
The GCC petrochemicals companies cannot bank on
the continuation of Hyper Speed growth as the
market evolves. Already, shale gas is driving down
the cost of feedstock in North America, while China’s
Sinopec continues to build capacity close to the key
Asian markets.
As market competition intensifies and industries
approach maturity, each company will face its own
version of the “Moment of truth”. From this point, it
is vital to formulate new strategies and defense
mechanisms against the common pitfalls of
fast growth.
In addition, new pressures from the global
developments and requirements around critical issues
such as sustainability have demanded more from local
producers. Being emerging/emerged global players,
they are held to the same standards as any other
company. However, these standards can be
envisioned as an opportunity for these companies to
demonstrate global leadership.
Fundamentally, for these companies, future
success lies in improving their core business
capabilities and strengthening their talent base, while
extending their growth through strategic investments
in assets, partnerships, and new ventures.
As regional dynamics change, corporate growth will
inevitably be found on new terms, but there also exists
a broader opportunity for GCC companies to act as
economic enablers to their countries and the wider
Gulf region.
Dan Starta (left) is partner and managing director at A.T.
Kearney, and Jose Alberich (center) and Louis Besland (right)
are partners. All are based in Dubai, United Arab Emirates
www.gpca.org.ae
© Mazen Abusrour, Christophe Gavelle, e-Motion International
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FEATURE
Investing in a stronger
supply chain pays off
Returns today are important, but so too are the considerations
of future value. Implementing planning tools and ongoing
management processes are critical for companies to enhance
their supply chain
OMAR BOULOS AND STEPHEN PEARCE
ACCENTURE ABU DHABI
F
or chemical businesses in the Gulf, the need to
look to the future has never been more
important. This arises from a number of converging trends. The financial convulsions
sweeping around the global economy are changing
demand patterns, shifting them from west to east.
Also, socio-economic policies are seeking to create
strong and prosperous local businesses within a
diversified economy. Continuing to attract investment is
critical, and stakeholders and investors naturally look
to the future sustainability of a business when weighing
up their investment decisions and allocations.
Accenture’s experience suggests that the future
value analysts ascribe to the bulk chemicals business
is considerably lower than for companies in the
specialty chemicals business, which reinforces the
imperative for chemical producers in the Gulf to move
further down the value chain.
LOCAL TALENT
Addressing all these challenges requires concerted
effort on a number of fronts. The push by many states
in the Gulf to create local businesses that can compete successfully on the global stage demands the
development of local talent to drive greater economic
diversification. And that, in turn, requires working in
new partnerships with existing global players to
acquire knowledge and capabilities that will underpin
future global competitiveness.
One of the major opportunities for chemical businesses in the region is meeting the demand for more
specialized products from high-growth East Asian markets. Fulfilling this would bring greater revenue, and
move businesses further along the value chain. Less
dependence on raw material prices and greater flexibility to introduce value pricing for those specialty
compounds and products would deliver more responsive, agile business models for the future.
But delivering to these new markets requires new
capabilities. The chemicals supply chain is long and
complex, with many “moving parts” and third parties
involved in the journey from raw materials to final product delivery at the end customer.
Production lead times, logistics and customer services requirements all need to take into account considerable variables and respond to shifts in demand
signals. To address that complexity successfully,
businesses need to transform their supply chain planning and management to operate in a new, more
responsive way.
Joint ventures between local companies and multinational chemical businesses illustrate the direction
of the market. Each party to those joint ventures has
clear business logic behind it. For local businesses, it
is the opportunity to contribute to the region’s economic diversification by developing a greater, highervalue product range, generating employment opportunities and developing knowledge exchange. For global
chemical manufacturers, there is a significant advantage play. They acquire cost advantages from input
prices; they improve their access to profitable downstream growth and can grow their innovation-driven
business serving the high margin markets for
specialty products.
As well as clear business opportunities, there are
also any number of major challenges associated with
developing these joint ventures. These range from the
major complexity and scale of investment in capital
projects required to help achieve capacity, to the softer, cultural issues associated with integrating different
businesses. But in this article, we focus on the challenges associated with supply chain planning and
management in the context of Gulf businesses’ move
from bulk to specialty products to address new markets and new customers.
One answer that many businesses will reach for is
the adoption of more sophisticated supply chain planning tools. While these are likely to play a major role in
the development of more agile and responsive planning, they do not, on their own, offer an instant solution. To be effective, they have to be seen as part of a
wider capability development and approach.
PLANNING TOOLS
The broad range of functionality offered by today’s
planning tools is impressive. But in the absence of a
targeted plan, the depth and sophistication on offer
can be a double-edged sword. An effective supply
chain planning transformation therefore needs to
start with the business vision of how the new
approach will help achieve higher performance.
That vision must be translated into a supply chain
planning roadmap and quantified with a business
case. Companies need to document their performance and evaluate the costs and benefits of moving
to a new planning technology. That will require them to
identify current pain points, and the capabilities they
need to address them.
By examining these challenges, companies will be
able to develop an understanding of the business
value and cost of implementing each new capability.
They need to reflect the benefits they expect to
achieve, as well as having a clear idea of the metrics
that will be used to track performance.
For example, Gulf chemical producers’ move from
bulk to specialty chemicals changes the planning
approach and needs to be reflected in the measures
that will track performance. That includes, for
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example, focusing on controlling inventory and optimizing accounts payable and receivable to drive down
levels of working capital.
Implementing a planning tool should take place
within a wider organizational change context. And that
is particularly important in the light of the new direction being taken by companies in the Gulf as they
seek greater value downstream with the development
of new, more specialized products to address demand
from new markets.
ORGANIZATIONAL CHANGE
Many chemical companies fail to see the full benefit
of supply chain planning initiatives because they may
not be fully aware of the importance or magnitude of
the organizational change involved.
For example, new supply chain planning tools often
require closer collaboration and communication, and
higher levels of integration in terms of processes and
information. Perhaps most important, in the context
of Gulf businesses, is the need to prepare people to
succeed with the new tools. In other words, they might
need to have the appropriate people with the appropriate capabilities in place. That would involve considerable investment in training and even acquisitions to
ensure relevant knowledge transfer.
A supply chain planning tool will not deliver fullscale benefits all in one go. A gradualist approach is
therefore critical. Planning is a journey of a number of
steps. Trying to leap ahead all at once is almost a
The chemicals supply chain is
both long and complex, with
many “moving parts”
guaranteed route to failure. Supply chain planning
tools require all the other skill sets to be developed
simultaneously. Although this may be slow, it is a vital
process to secure sustainable improvement. The
adoption of tools needs to be aligned with the development of the skills required to make them work.
Moving from fairly rudimentary supply planning
tools, such as a spreadsheet, to a multifunctional
planning system is too great a transition to make in
one leap. Companies should start with simple planning models using integrated information. As they become more comfortable with the tools, additional
functionality can be introduced, creating a step-by-step
journey to the desired end state and avoiding the confusion and disruption of quickly introducing more complex approaches. This step journey naturally implies
that as companies move forward, they need to continually readdress the business case and focus on clear
benefit realization. The business case process cannot
be seen as a one-off, upfront activity.
However, the introduction of even relatively simple,
integrated new tools would usually bring significant
improvements. They provide more rapid access to better information, and the organization can use one set
of numbers to support alignment and improve
decision-making. In taking this approach, it is important that the business strategy drives supply chain
strategy and, ultimately, planning. Chemical companies with best-in-class supply chain performance often
establish a business-rule framework to monitor that
this link is in place, keeping supply chain execution in
line with business strategy.
SALES AND OPERATIONS
A powerful, but often overlooked, correlation is that
the benefit derived from supply chain management
technology is directly related to the health and efficiency of the organization’s sales and operations planning (S&OP) process.
S&OP is a management process that cuts across
functional boundaries to help ensure that the company’s longer-term business plans are achieved. Accenture research on supply chain planning has identified
several S&OP leading practices used by successful
chemical firms. These practices include operating to
one set of numbers; having common tools, calendar
and terminology; and driving the process across all
business activities.
Having the right information available to the right
people at the right time is critical, too. S&OP can be
seen as a purely process-driven set of activities. Effective information involves the development of data that
has been grouped and correlated into the decisionmaking framework to enable effect execution of S&OP.
If that information is missing, or hard to pull together
CHEMICAL (EX PHARMA) INDUSTRY SHIPMENT GROWTH, 2006-2011 (CAGR %)
Africa
Asia-Pacific
Eastern Europe
Latin America
Middle East
NAFTA
Western Europe
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2006-11
3
180
9
28
9
134
116
3
185
9
28
12
125
115
3
191
8
27
11
132
117
3
201
8
28
14
136
117
3
215
9
31
14
151
121
4
223
9
32
15
154
124
4
239
10
34
17
158
127
4
262
10
35
19
170
129
4
261
11
36
20
150
123
4
266
10
35
21
138
110
4
294
12
37
24
159
120
4
306
13
38
26
161
122
2.80%
5.10%
6.00%
2.40%
8.50%
0.40%
-0.70%
Output (value-added in real LCU) Chemicals (NACE rv2 20) US$. Source: Oxford Economics
www.gpca.org.ae
Rex Features
FEATURE
FEATURE
in one place because of complex organizational structures (which is likely to be the case with many joint
ventures and affiliate structures), effective S&OP
management would be difficult to achieve.
S&OP relies on supply chain management’s ability
to balance demand and supply. S&OP’s primary focus
should be to enhance profit by balancing sales, asset
utilization, inventory and customer service. Supply
chain planning technology plays a key role in this process because it enables companies to create future
projections of each of these four profit drivers. By linking the two activities, companies can enable planners
to make day-to-day decisions that reflect overall
strategic objectives.
SYSTEM GO-LIVE
The efforts to implement a planning system inevitably
take considerable time and resources. Understandably, many companies zero-in on the system go-live as
their objective. Unfortunately, focusing on that target
can soon lead to problems.
The enthusiasm that greets the new solution can
wear off quickly, leading to old habits re-establishing
themselves. Workarounds can creep back in and old
tools such as spreadsheets can re-emerge. If planning tools are not embraced and put to work, no business benefits are achieved and executives begin to
question the value of the solution.
To avoid that, companies need to establish effective post-go-live governance processes. These processes should focus on stabilizing the new approach
and driving its adoption. Companies can monitor uptake and use of the tools, and identify problems that
might indicate a need for communication, training or
other interventions. This phase can also act as a
clean-up period because the monitoring will often
uncover any issues that were not properly addressed in the initial implementation.
SALES AND OPERATIONS PLANNING
(S&OP) PROCESS
S&OP process
Top
management
Functional leadership
Supply chain
planning model
Supply chain planning end users
Supply chain planning tool
Supply chain
planning
techonology
utilization
Effective business planning requires business
engagement at all levels in the organization
and supply chain planning tool utilization
SOURCE: Accenture
www.gpca.org.ae
The business process owners should be a team of
senior executives who operate on a part-time basis,
outside their normal jobs, to sponsor business process excellence for a given functional area. This executive team should be supported by a team of businessprocess and supply chain planning technology
specialists that focus on stabilization and ongoing
process improvement. Accenture research shows that
the companies that were most successful at planning
transformations made the role of process specialist a
full-time position. For many organizations, this will be
a new role requiring new capabilities.
And it is not simply governance of the solution and
process that is important. Ongoing data governance
is also critical. Data needs to reflect the changes taking place in the external environment. Supply chains
are dynamic and so the data that underpins planning
needs to change in line with those developments.
“Supply chain planning is a journey
rather than a destination.
Continuous improvement is critical”
This means the planning system needs to be flexible enough to add new elements when they come online. So, for example, a supply chain planning solution
may not, at the point of implementation, include a new
market. This drives a need for skills that enable the
tool to be re-implemented when new data elements –
customers, products, shipping methods, processes,
and so on – arise. The original model needs to be refreshed to avoid becoming obsolete, or risk no longer
reflecting the reality of the market that is being
planned for.
Companies often believe that once supply chain
planning tools are in place and in use, the effort is
complete, and the expected business benefits will follow more or less automatically. Yet, even with the
most careful planning, real-world conditions and
changes will often require adjustments to planning
processes, and making these adjustments requires
continuing management.
Supply chain planning is a journey rather than a
destination. Continuous improvement is critical. That
means not relying on an original business case. Markets will be subject to frequent change – particularly
in view of addressing new markets and products.
Those changes will impact on the need to refresh an
existing business case as well as tracking the business benefits post-go-live.
A key component of that effort is the effective management of business key performance indicators and
operational indicators. These should be based on the
expected value identified in the business case (and
reflecting changes as they arise), and enable companies to track progress towards their business goals.
As businesses form new partnerships and joint
ventures to address new opportunities, they will
encounter a number of challenges. Growth markets
will demonstrate volatile demand in the early years.
Supply chain planning in such market conditions will
need to reflect and accommodate those fluctuations.
The right capabilities will therefore be critical. The
complexity of planning requires the development of a
new skill set that is largely unfamiliar to businesses
that have grown out of a more traditional engineering
background with associated competencies.
Getting the right products, to the right place at the
right time is not yet seen as a discipline with its own
distinct career path. Planning is often perceived as
something of a career cul-de-sac rather than a route
to the top. That needs to change. But the capability
uplift required is considerable. The challenge for
businesses in the Gulf is compounded by the need
to deliver to a localization agenda. Developing the
capacity and resources to improve supply chain
planning should focus on local content, which will
take time.
However, although this is a major challenge, there
are considerable grounds for optimism. The flow of
high-quality graduates from local universities in the
Gulf region is impressive. Attracting that talent to a
career in planning will require rethinking the function
itself to create a path that offers a varied, rewarding
and challenging career progression.
CENTERS OF EXCELLENCE
And it is an imperative that applies not only to attracting highly-skilled people, but also to their retention
and development. That may require developing
centers of excellence and an internal consulting
model so that planners’ skills are put to use in new
and different contexts and their skills are rightly seen
as highly prized strategic assets.
Supply chain planning offers the promise of significant business benefits for chemical companies, but
the achievement of those benefits relies on the way it
is implemented and managed. It calls for business
transformation, which is not easy, and it requires a
disciplined, systematic approach.
Gulf chemical companies that embrace supply
chain planning, which is business oriented and takes
into account the people, processes, technologies and
strategies involved, will find it worthwhile in the journey to achieving optimum performance.
Omar Boulos is a senior executive in
Accenture’s Resources operating group
and managing director of Accenture in
the Middle East. He is located in Abu
Dhabi, UAE
Stephen Pearce is a senior manager in
Accenture’s Resources operating group
specialising in operations supply chain
and S&OP; he is located in Abu Dhabi
FEATURE
The changing role of
chemical clusters
Chemical clusters and industrial
cities are a well-established
concept in the Gulf region, but
a new approach is needed
ALEXANDER KELLER AND JAAP KALKMAN
ROLAND BERGER LONDON
I
n 1975, Jubail, Saudi Arabia, was announced as
the site of a new industrial city. Since then, the
Gulf has developed numerous industrial clusters.
Today, Jubail supplies over 10% of global demand
for petrochemicals and is home to more than 45
companies and 120 chemical and petrochemical
plants, producing more than 40 products.
Similarly, the Al Ruwais Industrial Complex in Abu
Dhabi, founded by the Abu Dhabi National Oil Company
(ADNOC) in 1982, is the site of several major
petrochemical plants, including the world’s largest
ethane cracker, with 1.5m tonnes/year of ethylene
capacity. Meanwhile, the Mesaieed Industrial Area in
Qatar, through which a large part of the country’s
economy flows, is home, among other things, to an
expanding oil refinery, a fertilizer plant and a
petrochemical complex.
Chemical clusters in the Gulf center around the
region’s national oil companies (NOCs). They benefit
from the synergies arising from locating refining and
petrochemical operations next to each other. Over
three decades, petrochemical companies in the Gulf
have leveraged their favorable access to ethane-based
feedstock, economies of scale, integration and cuttingedge processing technology to build a highly profitable
petrochemical industry, based on the global export of
low-cost petrochemical commodities, in particular to
rapidly growing economies in Asia.
COMPETITIVE ADVANTAGE
Stranded gas has been the key enabler of the Gulf
petrochemical industry. With few alternative uses and
pricing at opportunity cost level, ethane has long
represented the chemical industry’s biggest
competitive advantage. It has also helped diversify the
sources of revenue for regional governments, reducing
their focus on the export of crude oil.
But today the Gulf petrochemicals industry finds
itself at a crossroads. It is increasingly faced with
competing demand for gas from alternative uses, such
as electricity generation and water desalination.
Some ethane crackers in the region are operating
at reduced capacity because of feedstock shortages,
resulting in lower production levels at derivative plants.
The Gulf petrochemicals industry also faces the
challenge of competing with shale gas in the US and
China in the mid-term.
The new producers’ access to shale-gas-based
www.gpca.org.ae
ethane feedstock eats into Gulf producers’ competitive
advantage, while exports of ethylene derivatives to the
European and Chinese markets face new competition.
Finally, the major chemical companies are
increasingly shifting their investments toward shale
gas reserves at the expense of the Gulf region.
With the decreasing availability of advantageous
ethane-based feedstock and the increasing
competitive pressure from new shale gas-based
petrochemical producers, the Gulf needs to prepare to
capitalize on potential opportunities in its own
chemical industry.
GROWING PRESSURES
In addition to developments in the global
petrochemicals landscape, key changes are also
occurring closer to home. Demographic pressure is
growing in the Middle East, and the middle class in
developing countries is expanding fast. These factors
have a major influence on the future of the chemical
industry in the Gulf.
The MENA (Middle East/North Africa) region, in
particular, is experiencing a demographic boom, with
high birth rates, declining mortality and an extremely
young population. Close to half the population is under
20 years old and will enter the labor market over the
next decade. Millions of jobs will be needed in the
coming years.
Also, the rapid rise of the middle class in developing
countries such as China and India will continue to
drive demand for motor vehicles, electronic products,
construction materials, drugs and other goods. All of
these require chemicals for their production. The
increasing demand for downstream chemicals
represents a clear growth opportunity for the Gulf.
Governments in the Gulf have recognized the
importance of diversifying their economies. They know
they need to attract wider industrial investment. After
all, this is the key ingredient in achieving sustainable
growth, improving standards of living, promoting
wealth, creating jobs and developing new technology
and expertise.
To capture the added value currently being exported
in petrochemical products, the Gulf region must
develop its downstream chemical industry. Such a
move would also create valuable employment
opportunities.
Countries in the region face five major challenges:
O Limited availability of feedstock – The production
of a wider range of downstream chemicals requires
more complex feedstock. In response to the shortage
The Gulf petrochemicals industry
finds itself at a crossroads. It is
increasingly faced with competing
demand for gas from alternative
usages, such as electricity
generation and water desalination
of ethane, petrochemical producers in the Gulf have
already started shifting away from gas-based
feedstock towards heavier naphtha-based feedstock.
However, unlike ethane, the price of naphtha is
sensitive to the price of oil. It is a globally traded
product based on world markets. Hence, using
naphtha as feedstock destroys some of the cost
advantages that Gulf producers have enjoyed over the
past three decades.
O Restricted access to technology – To move
downstream, chemical companies have to develop (or
acquire) technology and expertise. The production of
downstream chemicals tends to be fragmented;
technologies are less broadly licensed by their
providers. Companies looking to move downstream
are therefore likely to have to establish partnerships
with firms already active in the relevant areas, that
have their own proprietary technology. Only a few
home-grown companies in the Gulf have sufficient
scale, access to feedstock and adequate financial
resources to attract foreign partners.
O Limited market access – Companies selling
downstream chemicals need an innovative route to
market. Unlike petrochemicals, chemicals with greater
added value cannot be sold using an offtake model
only. Stronger interaction and collaboration with
customers – and even end-use industries – is needed.
Unfortunately, not all chemical companies in the Gulf
currently have the necessary supply chain, distribution
infrastructure, market expertise and presence to make
a successful move downstream.
O Moderate integration along the value chain – To
be competitive, a downstream chemical industry
requires integrated players right along the value chain.
In an environment dominated by high capital costs and
a small feedstock advantage, companies have to
collaborate, even across borders, to achieve advanced
levels of operational and production efficiency.
O Limited demand from end-use industries –
Important end-use industries such as the automotive
industry, electronics, plastics and packaging, and
home appliances are currently developing in the Gulf.
These industries have privileged access to the entire
Middle East – an area with a population half that of the
European Union – and to fast-growing Asian and
African countries. How these chemical-consuming
industries develop over the coming years is critical for
the development of the downstream chemical industry
in the Gulf.
POSSIBLE RESPONSES
To move down the chemical value chain, the Gulf has
to develop a new approach to chemical clusters.
Ideally, this will combine the existing strengths of the
clusters in the Middle East with the principles of more
traditional chemical clusters in Europe – clusters that
have developed organically over time. For each of the
challenges above, a fitting response exists.
By following the five steps below, chemical clusters
Matt Belshaw
FEATURE
A new generation of clusters have a key role to play in shaping the downstream development of the Gulf’s chemical industry
in the Gulf can assume a new role for the future:
O Ensure feedstock availability along the value chain
– Refinery-based integration will remain key for the
Gulf’s chemical industry. However, developing a
downstream chemical industry will require new
naphtha crackers. The Gulf’s chemical clusters need
to ensure a secure, diverse feedstock supply, plus a
high level of integration with commodity chemical
manufacturers. This will give them a broader, less
volatile product portfolio and compensate for the loss
of valuable margin from ethane-based products.
O Develop access to technology – Successfully
developing a downstream chemical industry also
depends on access to cutting-edge process
technologies. Given the limited timeframe, these
technologies can be accessed only with the help of
international companies. Strong research and
development is also required to ensure continuous
product development and improvement, hence
sustainable success. In their new role, the Gulf’s
chemical clusters should aim to provide a competitive
location for small, medium-sized and large companies,
both local and foreign. Only by so doing can they hope
to attract innovation and new technologies.
O Develop market access – To market downstream
chemical products, a competitive route to market is
essential. One element of the new role of chemical
clusters in the Gulf will be to ensure the development
of efficient logistics and infrastructure systems to
meet the growing needs of producers and converters
at home and abroad.
O Ensure integration along the value chain –
Improved cost-competitiveness and synergies from
integration along the value chain are the core
advantage of traditional chemical clusters. The new
generation of chemical clusters needs to build on this
principle. At the same time, they must focus on
facilitating the availability of competitive feedstock and
raw materials for all participants along the value chain.
They should also aim to help integrate small and
medium-sized enterprises and even start-ups. The
clusters require a critical number of actors along the
value chain to ensure competitive fundamental
conditions, the prerequisite for a sustainable and
diversified chemical industry.
O Establish integration with end-use industries –
Perhaps the most important element in chemical
clusters’ new role will be integration with key end-use
industries. The Gulf’s chemical industry will no longer
be primarily standalone and export-oriented. An
integrated chemical industry has to become a pillar
upon which key end-use industries are built and
developed. This new approach to cluster development
requires the close involvement of all stakeholders,
such as other suppliers (for example, the aluminium
industry), policymakers and end-use industries. It also
offers the benefits of economic development that
goes far beyond the chemical industry.
SHAPING THE FUTURE
Throughout the region, governments will continue to
play an important role in shaping the downstream
development of the chemical industry, actively
supporting the new generation of chemical clusters.
To ensure downstream integration, they must
incentivize the production of naphtha-based
petrochemicals and selectively prioritize the allocation
of raw materials along the value chain. Policymakers
must seek to attract foreign investors with leading
technologies by providing special incentives, such as
lower tax rates or duties, favorable conditions for
expatriate employees, the duty-free import of
equipment and attractive flows of goods between
countries. Most importantly, industrial development
programs should ensure that chemical clusters
develop in line with industrial cities and end-use
industries. To exploit the full potential of downstream
integration, policymakers must co-ordinate growth on
both sides.
Over the past decade, governments in the Gulf
have begun to support the downstream expansion of
their chemical industries. So far, results have been
mixed. Initial projects involving plastic processing
centers, such as the Abu Dhabi Polymers Park and
Rabigh Conversion Industrial Park, faced a number of
challenges. They therefore had difficulty attracting
investment and failed to achieve critical mass.
Foreign investors welcomed the low utility costs, but
found it hard to secure favorable agreements on raw
materials with local producers. Also, uncompetitive
supply chain infrastructures and untapped synergies
between different members of the clusters meant
that the projects were less successful than initially
expected. Future chemical clusters can learn from
these mistakes.
Having completed Jubail I in 2005, the Saudi
government decided to further develop its foremost
industrial city with a second large project, Jubail II. The
objective was to expand and upgrade its downstream
chemical industry. Policymakers involved a wide range
of companies along the value chain. Two mixedfeedstock refinery-integrated chemical projects, Satorp
(a joint venture between Saudi Aramco and French oil
and petrochemicals major Total) and Sadara Chemical
Company (a joint venture between Saudi Aramco and
US major Dow Chemical) are to provide the broad
commodity product portfolio required. Already, more
than 40 companies have projects in Jubail II. Initiatives
aimed at developing a one-stop shop for investors will
attract an increasing number of companies and
technologies over the coming years.
www.gpca.org.ae
FEATURE
The major agent behind the move downstream in
Saudi Arabia is the National Industrial Clusters
Development Program (NICDP). This program’s aim is
to diversify the economy by expanding manufacturing
from 11% to 20% of GDP, and doubling the proportion
of technology-based manufactured products from 30%
to 60%. The NICDP supports the formation of small
and medium-sized enterprises in five fast-growing,
export-oriented industrial sectors: automotive,
minerals and metal processing, solar energy products,
plastics and packaging, and home appliances.
DOWNSTREAM INTEGRATION
The Saudi approach is to develop the chemical
industry alongside key end-use industries.
Downstream integration of the chemical industry
provides the products demanded by end-use
industries. In turn, end-use industries generate
demand for specialty and commodity chemicals.
Ultimately, the chemical and end-use industry clusters
create new job opportunities and increase the
country’s level of value creation.
A new age has dawned for the chemical industry in
the Gulf. The changing shape of the global
petrochemical industry, demographic developments in
the Middle East and increasing global demand for
chemicals make a move down the value chain more
necessary – and more attractive – than ever before.
Faced with these challenges, the chemical industry
has to find a new role for their clusters to achieve
successful, sustainable downstream integration.
Crucial factors include competitive feedstock, access
to technology and markets, close integration along the
value chain and the parallel development of chemical
clusters and key end-use industries.
By positioning an integrated chemical industry
alongside key chemical-consuming industries,
governments across the Gulf can reap the benefits
of added value, sustainable growth and new
employment opportunities in an increasingly
knowledge-based economy.
Jaap Kalkman is a senior partner at
Roland Berger’s Middle East office with a
total of 18 years of consulting and private
equity experience. He lives in the GCC
and focuses on clients in oil and gas,
utilities, chemicals, government and
private equity in the Middle East and Asia
Alexander Keller is a partner at Roland
Berger Strategy Consultants with global
responsibility for Practice Group
Chemicals. His role includes evaluating
the chemicals and petrochemicals
markets in western/eastern Europe and
Asia, with a focus on China and India,
assessing appropriate growth/entry strategies. He also
conducts operational excellence programs, including
process optimization, asset footprint optimization and
comprehensive cost reduction programs in all business
areas along the value chain
www.gpca.org.ae
The changing
shape of the
global
petrochemical
industry,
demographic
developments
in the MIddle
East and
increasing
global demand
for chemicals
make a move
down the value
chain more
necessary
More Experienced.
More Dynamic.
More Value.
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(CPCIQ). QP owns 51 percent of Q-Chem and CPCIQ owns 49 percent.
The Q-Chem facility is a world-class integrated petrochemical plant capable of
producing high-density and medium density polyethylene (HDPE & MDPE),
1-hexene and other products, using state-of-the-art technology provided by
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plastics.
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AlphaPlus®
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FEATURE
Logistics investment
needed as trade grows
DP World
Enhancing efficiencies in the supply chain is imperative for port operators in the
Middle East and is a cornerstone of DP World’s strategy for its operations at Jebel Ali
DP World, the world’s third largest marine terminal operator, aims to offer an end-to-end supply chain solution at Jebel Ali in Dubai
MARK WHITFIELD MOJACAR, SPAIN
P
orts are integral to the industrial supply
chain and play an important part in handling
and delivering product in the Middle East
region. In addition to modalities, systems
are required to bring in efficiencies across enablers in
the supply chain, allowing them to remain competitive
in a dynamic market affected by a range of external
factors. This requires partners to share information,
data, transactions, processes, methodology and
systems – to work in unison.
Leading global port operator DP World, the world’s
third largest marine terminal operator, is a significant
contributor to implementing these efficiencies.
Trade influences the evolution of the supply chain,
especially the way in which cargo is handled by
maritime transport, which today accounts for 90% of
all international trade. The industry’s needs have
become increasingly intricate and complex, and to a
large extent customized over the years.
By virtue of the Middle East region’s higher growth
rates and the increasing demand on different
commodities and services, governments in the region
have invested in infrastructure and industrial clusters
in the petrochemical and other downstream industries.
The Gulf region has become a leading producer
of petrochemicals and its global market share will
grow in the next five years. GPCA estimates the Gulf
region’s share in the world petrochemical industry will
grow from 15% now to 20% by 2015, with Saudi Arabia
targeting a 10% share in the global sector.
There is also significant growth in the aluminum and
iron and steel industries. The total production capacity
of aluminum smelters in the Gulf Cooperation Council
(GCC) region is expected to reach almost 5m tonnes/
year by 2015.
The Gulf Aluminium Council (GAC) and GCC share
of global production in 2010 was estimated at 7%.
Growth is also occurring in pharmaceuticals, ceramics,
glass, cement and machinery.
DP World, as a leading port operator, contributes by
bringing its experience and competence in a strategic
level. “And we innovate,” says DP World senior vice
president and managing director, UAE region,
Mohammed Al Muallem. “At Jebel Ali in Dubai, our
focus goes beyond ‘bigger ships, deeper draft and
larger cranes’.”
For example, in polyethylene (PE) exports, DP World
has been converting break bulk to containerized cargo
for several years. This involves discharging bagged
polymer pellets from general cargo vessels, storing it
“Our focus goes beyond
‘bigger ships, deeper draft
and larger cranes’”
MOHAMMED AL MUALLEM
Managing director, UAE region, DP World
in purpose-built sheds, segregating and loading the
material into containers to meet received orders. This
offers an end-to-end supply chain solution.
Al Muallem adds: “Such efficiencies add value to
global supply chain systems, creating synergies
across players in the industry. It is this belief in the
benefits of a seamless supply chain that drives our
business at Jebel Ali and positions us as the gateway
port of choice for the wider Middle East, India and
Africa regions.”
The port operator has begun to expand its Terminal
2 as well as constructing a new third terminal. The
operator will be able to simultaneously handle 10 of
next-generation mega-container vessels, each of which
can carry up to 18,000 containers. With these
expansions, Jebel Ali’s capacity will increase to 19m
TEU (20ft equivalent units) by 2014.
“We will continue to invest where and when our
customers need us,” Al Muallem says. “That has been
our strategy from the beginning, and today we are the
third largest marine terminal operator in the world.
“We continue to remain confident about the longterm outlook for our industry, for Dubai and the UAE.”
Mark Whitfield is a freelance business
journalist based in Mojacar, Almeria,
Spain
www.gpca.org.ae

feature

Transcription

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