Increased downstream activity in the region has created major business opportunities for service companies, says Jacques de Thezy, CEO of Air Liquide in the Middle East.
Processing feedstock requires an array of specialised reactors, which include catalysts, oxidants and different industrial gases to break the links between the hydrocarbon molecules of the feed.
Air Liquide is one of the major providers of industrial gases to downstream producers.
“We serve many industries including the petrochemical and refining sectors,” says Jacques de Thezy, chief executive officer of Air Liquide in the Middle East and North Africa.
“Most of the time industrial gases are used as process gases, for example, carbon monoxide is one of the molecules that we use, along with oxygen which is used to oxidise ethylene, hydrogen is used in the process of refining,” he says. “These industrial gases are at the heart of the process,” he adds.
The company supplies its products to different petrochemical companies in the region. “We supply oxygen to Equate Petrochemical in Kuwait, carbon monoxide to Sipchem’s acetic acid plant in Saudi Arabia and nitrogen to the Sohar refinery in Oman,” Thezy explains.
The company has a presence in much of the GCC region. “Within three years, we have established a presence in Qatar, Kuwait, Oman, UAE and KSA,” says the CEO. The company has established a production facility in each country. “Because our product can’t be transported, we have a production facility in every country,” he adds.
While feedstock cost advantage is the main motive of investment for international petrochemical producers in the region, Air Liquide’s business model doesn’t rely solely on this as it uses air as the feedstock.
“We process the air to different gases through a distillation process and then separate the different molecules before supplying it. For hydrogen or carbon monoxide, we need a feedstock which is natural gas, naphtha or LPG, as it should be hydrocarbon based.”
De Thezy says that the products are sold locally due to difficulty in transportation. Commenting on this, de Thezy says: “We don’t make money out of the difference between the feedstock and the end product.”
Though it is a newcomer to the region, Air Liquide has scooped several contracts with major downstream players in the regions.
“In Kuwait we invested US$80 million to build an oxygen plant as we have signed a 20 year contract with Equate Petrochemical to supply the company with oxygen,” says the CEO.
In Qatar, the company won a contract to build the world’s largest helium unit. “It is a double award contract, one related to the technology and the second is about the product off take,” says de Thezy.
“You need very specific know-how to liquefy the helium, which naturally comes with natural gas.”
The new helium facility will have a production capacity of 83 million cubic metres of helium per year. “The technology used to purify and liquefy helium at very low temperature (-269o C) is a propriety Air Liquide advanced technology,” he adds.
Air Liquide was awarded the EPC segment for the $500 million contract, and is expected to award the subcontract soon. Air Liquide also signed an off-take agreement with RasGas and QatarGas. “We signed a 50% off-take agreement with the project owners,” says de Thezy.
“Helium is one of the rare products that we ship to consumers in India, Japan and China, for different industrial purposes including in electronics or hospitals,” he explains. “The project is on track and expected to go on stream by 2013 in Ras Laffan,” he adds.
To sell the product to the international market, the company will transport the product from Qatar to the UAE ready for global transhipment. “We will ship the helium from Jebel Ali port, using a fleet of containers,” he adds.
The company’s business model is based on creating a production facility in the industrial zones of each country, and then set up pipelines for different clients.
“In every country, we set up our plants in the industrial zones, like in Sohar, Oman; Shuaiba, Kuwait; Mesaieed, Ras Laffan in Qatar or Jubail in Saudi Arabia, we set up a production facility and then we lay down a pipeline to supply all our customers in the same area,” he explains.
Air Liquide has 100% ownership of the majority of its projects in the region, and rarely goes into joint venture with locals as is the case with major global petrochemical companies. “In most of the cases, we entirely own our projects,” says de Thezy.
Most advanced chemicals and petrochemicals firms looking to grow their business in the Middle East are faced with the stark reality of having to mine a select pool of qualified, able and talented recruits, as well as enticing new blood into the industry.
“It is true, the main challenge we face here in the Middle East is the shortage of skilled people,” says de Thezy. “We are still growing here in the region mainly thanks to the petrochemicals industry, and our related CO2 business is also expanding too,” he colncludes.
