The top Petochemicals ME interviews of 2009

By bringing you exclusive interviews from the most important industry experts across the region, Petrochemicals Middle East provides an exclusive insight into the mindsets of the sector’s top professionals. These interviews unlock many aspects of the industry, including the feedstock situation, financing, project progress and much, much more. All over the region, high-profile players agree that that the downstream sector is moving here in force.

April Issue:

Dr Mohammed Yousef Al-Mulla, Qapco GM

Despite the downturn, the general manager of Qapco was in a buoyant mood during March, and took the opportunity to share his thoughts with PME.

The April issue of Petrochemicals Middle East magazine carried an exclusive interview with Dr Mohammed Yousef Al-Mulla, managing director of Qatar Petrochemicals Company (Qapco). The interview tackled several aspects of the industry in Qatar. “Qatar Petroleum has the responsibility for distributing feed gas to various consumers in Qatar, of which we are one,” said Dr Al-Mulla. “The ethane feedstock for Qapco is currently sourced from onshore oil fields, offshore fields and also from the giant north gas field through three NGL plants, NGL-1,2 and NGL4,” he added.

The availability of the ethane feedstock in the region is the main driver for local ethylene producers. “The Middle East industry is still the most economical producer of ethylene and polyethylene in the world, due to the huge benefits available to it as a result of our feed gas cost advantage. However, this massive advantage is shrinking day by day as a result of declining naphtha prices,” Al-Mulla explained.

“However, ethane-based producers will continue to have the upper hand over naphtha producers due to the independence from crude oil prices. Even in the worst case scenario, they have the capacity to survive,” Dr Al-Mulla observed.

The company has no intention of diversifying its product portfolio to focus on ethylene derivative products. “We are a producer of ethylene and polyethylene, and will start the production of linear low-density polyethylene (LLDPE) via a joint venture with Qatofin,” he says. “Polystyrene and polypropylene is not on our agenda for the time being,” he added.

The financial crisis hit the company in the same way as other firms around the globe. “Nobody was immune from it, but when it hit the petrochemical sector we were already planning for it,” said Dr Al-Mulla. “We have a five-year strategy plan for the company, and we know how to manage and adapt to the situation,” he indicated.

While reviving companies in Saudi Arabia and the UAE are busy acquiring firms in the Americas and Europe, Qapco clearly remains committed to the local market. “We are a subsidiary of Qatar Petroleum (QP), and, as such, all major investments decisions are based on the guidance from QP,” he reveals.

“For the time being, Qapco has no investments abroad, and is mostly focused on local development. We are also encouraging and supporting the private sector to invest in small, and medium-sized downstream petrochemical projects,” the Qapco managing director explained.

May Issue:

Abdulaziz Alhajri, CEO of Borouge

Abdulaziz Alhajri, CEO of Borouge, says that now is the time for his company to grow

Our May issue included an interview with the chief executive of Abu Dhabi Polymers Company (Borouge) – the petrochemical arm of ADNOC – Abdulaziz Alhajri. The company is emerging as one the major players in the local market especially due to the revamping of its production capacity to 4.5m t/y by the end of 2013. “Borouge aims to be the clear market leader in the Middle East and Asia in the infrastructure market sector, specifically in pipe systems and wire and cable applications, and a strong player in the automotive and advanced packaging plastics businesses,” Alhajri explained.

Besides the Borouge 2 expansion, which will increase capacity to 2 million t/y and includes the production of polypropylene, the company has started its third expansion project, Borouge 3.

“Recently, we announced the successful completion of a feasibility study and the decision to enter the FEED (front-end engineering and design) stage of the Borouge 3 project, a further commitment to our customers and evidence of the expansion of our operations to meet their growing demands in the next decade,” the Borouge CEO indicated.

Though the majority of gas in Abu Dhabi has a high sour content, making extraction and processing an expensive business, Alhajri is confident that his company will have sufficient gas allocations for its projects. “Of course, we would not be considering a further expansion without a long term feedstock supply,” he said.

February Issue:

Abdul Rahman Jawahery, CEO of GPIC

Abdul Rahman Jawahery, CEO of Bahrain-based GPIC, stated that his company has strong aims to increase its production capacity

PME’s interview with GPIC – one of the region’s most symbolic companies, due to the fact that its owners are Saudi Arabia’s SABIC, PIC from Kuwait and the Bahrain government – took place in February issue. GPIC focuses on the production of fertiliser, mainly urea, ammonia and methanol, and is aiming to increase its production capacity. “We certainly have an expansion plan; any organisation with our success record is going to want to build on that, and our shareholders remain ambitious about the company,” said CEO Abdul Rahman Jawahery. “We have a strong capability to finance ourselves, or if it exceeds that, then GPIC is a very strong proposition for banks looking for low risk financing,” he observed.

“We are debt-free and cash-rich, so it’s a tough period, but we are very well placed to deal with the current situation,” said Jawahery.

The fertiliser business makes the GPIC CEO confident that harvests that have been depleted because of accessibility to credit will prompt a coordinated action to remedy the situation, and that finance will shortly be forthcoming.

“The fertiliser sector has a different cycle to the other petrochemical products. People can, and will, reduce their consumption of consumer goods for a period without suffering. Furniture, clothing and packaging, all of which rely on petrochemical products, can from time to time suffer from abstention or reduced consumption, but food is constant necessity,” explained the senior executive.

Despite the much-discussed turmoil in the global financial markets, GPIC managed to sustain its investment plans throughout the course of 2008, and Jawahery indicated his belief the firm is in the best condition in its 27-year history. “Looking to the future, GPIC will be concentrating on the products we already have in our production family,” he added. “But the fertiliser and methanol sectors will certainly remain our core.”

July Issue:

Mohammed Meziane, CEO of Sonatrach

The Sonatrach CEO and president takes a look at low feedstock prices, the location, and upcoming investment in the key Algerian market

In July, PME spoke with the CEO and president of the Algerian state energy firm Sonatrach, Mohammed Meziane. In a recent statement, Algerian energy minister Chakib Khalil said that his country is planning an investment of US$28 billion in its petrochemicals industry over the next five years. The number is higher for the entire energy sector.

“We aim to invest US$65bn in the energy sector including petrochemicals in the next five years,” indicated Meziane.

The country benefits from different advantages, such as its geographical location, along with the abundance of ethane feedstock at competitive prices of around one dollar per million btu. “I don’t have the exact figure as it is calculated according to the internal market, but the price is around one dollar. There is a specific formula we use to calculate the prices,” said Meziane. But sources close to the methanol project told PME that the cost of the ethane is less than one dollar. “It is an incredible price,” said the source on the sidelines of Petchem Arabia conference held in Abu Dhabi.

While others are struggling to secure loans to finance their projects, Sonatrach uses its own cash and rarely resorts to local banks. “The decision on projects is taken according to our financial situation. On the national level, we finance our projects using our cashflow or through Algerian banks, whereas for international projects, we also use our cashflow or banks, but generally we look case by case and we mainly use our own resources to finance our projects,” explained the Sonatrach CEO.

Though the majority of companies around the world felt the pinch of the credit crunch, and some of them were obliged to review their projects, Sonatrach is determined not to delay or freeze any of its plans. “We are making every effort to maintain the progress of our investments. I have said many times that our budgets, projections and plans are on track and still in place; but execution has been impacted by difficulties with the availability of engineers and the capability of equipment production,” Meziane stated.

August Issue:

Henry Roth, president and CEO of MEGlobal

Roth says public-private joint ventures can flourish in the Middle East environment

A lot of talk and hype erupted after the cancellation of the JV between Kuwait’s PIC and US giant Dow. But few are aware of the existence of a successful JV between the two partners, MEGlobal, which celebrated its fifth anniversary in August. “MEGlobal is an interesting firm as it brings together some contradictory trends. If you look at our owners, you have PIC, which is the petrochemical arm of the state-owned Kuwait Petroleum Company (KPC) and then you have the Dow Chemical Company which obviously is a symbolic as it can get for a Western global private company,” explained Roth.

MEGlobal produces a range of intermediate products. “We produce one million metric tonnes of Mono Ethylene Glycol (MEG) and Diethyl Glycol and short Ethylene Glycol. These products are generally not very well known, but they are the most important building blocks for other products,” Roth stated.

As the feedstock is the key factor of the industry, the firm sees that countries offering cheap feedstock prices are targets of MEGlobal. “The North African market, particularly Libya and Algeria, has an abundance of natural gas. Wherever a petrochemical sector forms, glycol will be part of the product mix,” Roth said.

Cost of production is a key factor for producers; for MEG producers, the cost is around US$200 per tonne where feedstock naturally determines the cost of production. “Whether you are sitting above the hydrocarbon well or whether you import part of your hydrocarbon molecules, one of the reasons of the rapid expansion of the downstream sector here is the tremendous cost advantage,” Roth explained.

October Issue:

Saleh Al-Nazha, president of Tasnee

The Tasnee chief says KSA business is poised to boom again

In October, we spoke to the president of the petrochemical complex of Saudi National Industrialisation Company (Tasnee), the first Saudi joint-stock company wholly owned by the private sector. Tasnee receives feedstock from Aramco, but the Saudi government is set to increase the price of allocations by 2011, which would be a blow for competitiveness and a particular concern to private operators. “This would certainly have an impact, but we have to remember that this is a very strategic move for the Kingdom. Creating heavy industries is something the government is really working on,” explained Al-Nazha. “It was proven to the European Commission that this is not a subsidy but a discount, due to the local usage of the material. That has really put us ahead of other producers and we hope that nothing will happen to that discount.”

Recently, the company achieved a major operational milestone when it started cracking ethylene from its subsidiary, Saudi Ethylene and Polyethylene Co. (SEPC). “Starting up a cracker in less than 36 months has never happened here, and we did it in 34 months,” he explained. And with regard to its US$1bn joint venture with Dow, Tasnee expects to award the contracts early next year. “We anticipate awarding the contracts between January and February 2010,” he added.

Tasnee also wants to invest in refineries, and has shown interest in KSA’s Jizan site.

November Issue:

Shokri Ghanem, Libya’s oil minister

Dr Shokri Ghanem, the Libyan oil minister, opposes giving subsidies to companies

In the November issue, PME conducted a world-exclusive interview with Dr Shokri Ghanem, the Libyan oil minister. For the first time, Ghanem discussed the downstream scene in Libya, including feedstock, financing and projects.

Though feedstock is available, as Libya produces 1.5 million barrels per day of oil and 14bn cubic metres of gas per year, Libya’s oil minister is against providing discounted feedstock for petrochemical producers. “I am a man who is against subsidies, but unfortunately in Libya and most of the oil-producing countries, the market is distorted because of subsidies and the low price of oil products. That is why our consumption is going to be very high, but the fall-out means that member countries will suffer real income losses,” Ghanem explained.

Speaking about the investment budget for the energy sector, Ghanem revealed that his country allocated $42bn for investment in the next five years by taking the JV route. “We decided to go for JVs with foreign firms, and are revamping Ras Lanuf and Zaway,” Ghanem said.

Due to government control, it’s not hard to finance projects in Libya. “We have a large investment fund that offers project financing. Since the projects [in Libya] are really attractive and economical, I think many banks and financial institutions will be very willing to finance them,” Ghanem indicated.

The Libyan oil chief also referred to the Ras Lanuf project. “We are in the final stages and we haven’t signed it yet, but we have agreed on almost everything almost 95%. Our main market is Europe and we also export to America and to the Far East,” he added.