The Middle East’s petrochemical companies must be flexible, sustainable and prepare to enter new, dynamic markets as the region is tipped to dominate the global industry by 2020, said industry experts on day one of the Fifth Annual GPCA Supply Chain conference in Dubai.
Organised by the Gulf Petrochemical and Chemical Association (GPCA), the fifth Supply Chain Conference was opened by Saleh Al-Shabnan, Vice Chairman of GPCA Supply Chain Committee and Vice President of Global Supply Chain Centre of Excellence, SABIC. Al-Shabnan said that sustainability will be one key area to focus on going forward as the industry continues to develop.
“Supply chain management in the Gulf is evolving and now is the time to look at important opportunities and close any gaps. One [such issue] is the sustainability of the supply chain in the Gulf. The perception is that the region is blessed with energy resources and therefore is not cautious about this. The supply chain industry here is as cautious as other regions, if not more so,” said Al-Shabnan.
To address the issue, SABIC is rolling out five initiatives that will improve fuel efficiency, reduce CO₂ emissions and energy consumption.
These five initiatives are: reduce transportation time between plants and consumers; replace 200,000 trucks with 2,700 trains to run on Saudi Arabia’s railway network with the support of SAR; implementing a fuel savings programme which will also reduce CO₂; use larger and more sophisticated ships to transport products more efficiently to distant markets, such as the US and Asia; and to use pipelines more for the transport of liquid products.
By implementing these initiatives, SABIC aims to reduce its energy consumption by 0.7 MMBOE (million barrels of oil equivalent) by 2016. Reducing energy consumption will be crucial as the industry continues to develop at a rapid rate. In his keynote address, Puneet Madan, Head of Supply Chain Management (Polymers), Reliance Industries, India, said that the Middle East will have 386 production plants by 2015, producing 172 mMT of finished petrochemical products in that time.
The Middle East, therefore, will continue to dominate the sector, despite facing challenges such as economic and political volatility, piracy, maritime restraints and environmental restraints.
In fact, the region comprises part of the new hub for the global chemicals industry – China, India, Middle East and Africa (CHIMEA) region, said Michael McCool, Partner and General Manager, A.T Kearney, Hong Kong.
“Over 25 years, three of the top 10 chemical firms will be in that region. We need to be eastwards looking, not westward looking, and looking to produce in China and Asia because of this shift. By 2020, the Middle East will become the central hub for the global petrochemical supply,” McCool said.
To ensure the Middle East stays ahead of its competitors, the GCC petrochemical industry will need to develop in a more sustainable way and be more flexible to better respond to the changing market dynamics.
Africa is one region which offers many new opportunities for firms in the Middle East, with two of the top three fastest growing economies on the African continent- Guinea and Ghana, McCool added.
“Africa should be seen as a natural backyard for you [petrochemicals industry in the Middle East] and where the Middle East should succeed better than its competitors,” McCool said.
