Ahmed Al-Ohali, Sipchem CEO tells Jyotsna Ravishankar that he is not letting feedstock shortage dampen any future plans for the company
From being the country that makes its riches from its vast oil resources, Saudi Arabia today wants to be a thriving economy that depends on its wider-array of industries.
The era of manufacturing has finally arrived in the Kingdom and the resource, i.e. the gas, that makes it all possible is becoming more sought after.
But the companies in the Kingdom are not backing down; they are committed to their projects and are willing to go the extra mile to see the conversion industry prosper. One such company that is taking a calculated risk and steadily moving down the conversion chain is Sipchem.
Established in 1999, Saudi International Petrochemical Company (Sipchem) manufactures and markets methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride, vinyl acetate monomer, as well as carbon monoxide through its various affiliates. It has been listed on Saudi Stock Market since 2006.
“We cannot be content with manufacturing basic chemicals anymore. The time has come to make something out of the chemicals and move towards more complex end-products,” says Ahmad Al-Ohali, CEO, Sipchem talking exclusively to Refining and Petrochemicals Middle East.
Is he not worried about feedstock allocation in the Kingdom and the possible price rise of gas?
I am very concerned about the shortage of gas. But I am confident; there will be some gas finds in the Kingdom as Saudi Aramco is now actively scouting for new gas, he adds.
When that happens and there is additional gas, I am aware that the price points maybe higher than the existing $0.75/MMBtu, but that is something we as an industry need to reconcile to, says the CEO.
Moving down the value chain – is almost a ‘tag-line’ for the downstream industry of the Kingdom.
“We need to understand that embracing the conversion industry will protect our companies against price fluctuations. I will give you an example from our product portfolio; we have a challenge in terms of off-take with the acetyl acid range. But that variation can be absorbed by us, as we produce Vinyl acetate monomer and acetic acid.”
We need to find a market for our own commodities and make end–products that serve a larger market and maybe even a greater purpose, he adds.
Sipchem seems to be doing that just fine. End of November, the company announced the launch of the ethylene vinyl acetate (EVA) films project.
Built on an area of 40,000 square meters, the $32 million project will manufacture 4,000 metric tonnes per annum of EVA films. Sipchem has the first of its kind plant for production of EVA in the region.
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EVA copolymer film is an essential sealant of photo voltaic solar modules. “The whole world is now focused on alternate energy. Saudi Arabia is no different.
The region is looking at solar energy as the next big source of power, but of course there are certain challenges at this stage that need to be addressed. But in a few years, our product will have a huge market in Saudi Arabia,” he explains.
So, until that happens, the market for Sipchem’s EVA Films for the next couple of years will be Asia and Europe.
“We will be marketing the films to the Asian sub-continent through our new offices in Singapore, and in Europe, through our office in Switzerland.
By the time, the solar energy business becomes viable in Saudi Arabia; we will have already been in it and ready to supply our products,” he notes. The EVA Films will be marketed as films in containers across the globe.
Al-Ohali hopes to capitalise on the logistics and marketing of EVA films to other solid compounds the company is earmarked to produce. Apart from EVA films, Sipchem is also moving into the manufacturing of other solids like Low-density polyethylene (LDPE) and Wire and Cable compounding.
Al-Ohali stresses constantly on the need to add value to the company and the country through the production of these products.
Sipchem was one of the first companies to be allotted land in Jubail 2 and is progressing on track with its projects on Jubail 3 cluster as well. With the petrochemical plants and utilities fighting for the feedstock allocation, it is important for project to stay on track and prove its worth to the country’s growing economy, Al-Ohali says.
So will he be open to exploring gas from outside the country to feed his projects?
Absolutely, he says. “I will look anywhere – North, South, East, West – we will not limit ourselves to any particular location.” Saudi companies today are even trying to take part in the US Shale gas rush.
With millions of dollars invested in the conversion facilities, the companies are today keen to secure their share of the feedstock. Industry veterans like Dr. Moayyed Al-Qurtas of Tasnee have told RPME that gas will be allocated in the kingdom purely on the merit of a project.
But Sipchem’s Al-Ohali says there is no need yet to press the panic button. “To strike the balance between price margins and feedstock margins would be a challenge.
But if you capitalise on a competitive feedstock from the upstream and economically pass some of that benefit down the value chain, you can do business comfortably and profitably,” he says.
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Al-Ohali also believes that doing business with an international partner is the ‘smart way’ forward. “If you look at Sipchem’s current portfolio, we all have joint ventures.
We have the JVs with the Japanese and Koreans for some products and with the Europeans for some other products. We also have JVs with the Americans,” he says.
In 2010, the high-profile announcement that came from Sipchem was that the French chemical group, Rhodia will help Sipchem set up the first ethyl-acetate plant in the region to rival major commodity producers, such as BP.
The plant, wholly-owned by Sipchem will have a 100,000-tonne annual production capacity. Rhodia is providing the plant with ethanol feedstock and technology and will also market the product, Sipchem said at that time.
“We look for JV partners that bring us state-of-the art technology, as the product finally needs to stand out in the market,” says Al-Ohali.
But Sipchem is not solely dependant on its international partners for technology. The company has invested over $40 million to construct its corporate research and product and application centre at the Dhahran Techno Valley (DTV) of King Fahd University of Petroleum and Minerals (KFUPM).
Investing in the right technology is an integral part of our business, Al Ohali says. The CEO believes that it is actually a two-pronged approach.
“One, we employ state-of the art technologies and employ solid operation excellence in our plants with continuous support from our licensors and process engineering division, and the other is investing in our technology centre to focus more on polymers and product applications, and improve process efficiencies. We are doing both,” he says.
“And it is evident in our bottom lines, as well as in the quality and reliability of our products, that what we are doing is working well for our business,” he adds.
Of the entire product range produced by the company, Al-Ohali is bullish about the growing demand for methanol and butanediol.
He is confident the year 2013 will be a promising year for Sipchem and the Saudi Petrochemical industry.
“We are planning for our products well in advance and making our plants one of the best with reliable operational efficiency and robust sales plans, so the year ahead may well be challenging, but I also sense that those challenges will be rewarding,” he concludes.
