The petrochemical industry experienced numerous challenges throughout 2015 and many of these challenges will be a reality for some time.
Despite the difficult business environment, overall production levels jumped to 2.2mn metric tonnes (mt) in 2015 from 2.1mn mt the year before thanks to new production lines coming on stream.
The investments made over the course of 2015 will serve as the foundation to withstand headwinds from a lower oil price environment and higher levels of competition. Sipchem’s leadership remains focused and committed to developing and delivering new products to high growth sectors and geographies; enhancing its capabilities; optimising the company costs; and looking for growth opportunities globally.
“This strategy will enable Sipchem to differentiate itself from our competitors in the industry,” CEO Ahmad Al Ohali said.
“We believe our strategy to invest along the value chain and diversify our product suite puts us in a good position to take advantage of future growth opportunities.”
In June 2015, Sipchem commenced the commercial operation of the cable insulation polymers plant owned by Gulf Advanced Cables Insulation Company (GACI), a Sipchem affiliate. Located in Jubail Industrial City, the plant will use feedstock produced by Sipchem to meet local and global demand for electric cable insulators.
The Saudi petrochemical giant also signed an agreement for acquiring shares of Kuwait-based Ikarus Petroleum Industries Company in two Sipchem affiliates – International Acetyl Company (11%) and International Vinyl Acetate Company (11%). Both companies operate a plant for a production of acetic acid and acetic anhydride and vinyl acetate monomer. After the completion of this transaction, Sipchem paid $100.2mn to raise its existing ownership in the firms from 76% to 87%.
The polybutylene terephthalate (PBT)plant of Sipchem Chemical Company, a fully owned Sipchem affiliate, witnessed its initial start-up at its complex in Jubail Industrial City last year. The plant, considered the first of its kind in the Middle East, will produce 63,000 mt of PBT. It is an important step forward in Sipchem’s growth programme aimed at bringing more specialised, value-added products to its portfolio by leveraging its existing capabilities and implementing new downstream projects.
In other developments, Sipchem announced commercial operations of its ethylene vinyl acetate (EVA) and low-density polyethylene (LDPE) units, as well as the initial start-up of EVA film plant, one of the conversion projects of Saudi Specialized Products Company (SSPC) located in Hail city, Saudi Arabia. Overall, Sipchem’s investment in conversion projects totalled $60mn.
To further improve its competitiveness and transform into a fully integrated petrochemical and chemical organisation, Sipchem undertook a special restructuring programme aimed at increasing focus on manufacturing; maximising value from marketing and creating more succession opportunities for its employees.
The company is also stepping up its marketing and sales activities in Europe and Asia. In even launched a dedicated Marketing Services function with in-house market intelligence, planning and logistics aimed at maximising Sipchem’s realised prices and margins by overseeing and monitoring all marketers of Sipchem products.
Seeking to prepare the next generation of leaders, Sipchem launched a series of talent development and succession planning initiatives creating new opportunities for career growth and progression.
“We will continue to invest in the heart and soul of our business and the real assets — our employees,” said Al Ohali.
Sipchem’s commitment to social responsibility continued to benefit employees and the communities in which Sipchem operates. Furthermore, a relentless and uncompromising focus on safety, allowed no fatalities and a commendable safety record for 2015.
To be successful, every organisation needs an operational excellence strategy and even more so during these challenging times. In June 2015, Sipchem kicked-off SMARTO (Sipchem Maintenance and Reliability Transformation for Operations), a three-year programme which aims to instil a ‘defect elimination culture’ across the whole company and support sustainable asset optimisation over the course of the project.
The project’s main objectives are to reduce the frequency and severity of reliability incidents and their impact on HSE and productivity. The company is also looking to enhanced leadership capabilities and instil a ‘can do’ mentality amongst staff in order to ensure a sustainable transformation.
Closely linked to its journey for excellence is Sipchem’s Innovation Programme ‘Eureka’. As the name suggests – the word Eureka is normally used when a revolutionary idea is formed – the programme was designed to encourage and welcome innovative ideas from people working within the company. It also promotes collaboration between departments to explore new ways to solve problems. Since Eureka started, Sipchem has approved more than 1700 ideas, 10% of which were translated into capital projects. The company estimates that the value created from the implemented ideas was worth more than $70mn at the end of 2015.
Water is an integral part of operations at any refiner or petrochemical producer, and Sipchem is no exception. With waste water a common by-product at many of its facilities, Sipchem has invested heavily in treatment programmes. It recently implemented a scheme to recycle one of the process waste streams that was being sent for waste water treatment. Recycling of the stream has enabled the firm to reduce waste water generation by 37m3 per hour and reduce fresh water intake by the same amount.
Workforce diversity and employee satisfaction are often seen as crucial elements to running a sustainable business. A recent survey conducted within the company showed overall satisfaction at 78% and a number of programmes and initiatives have been put in place to raise this number even further. One example is the Employee Home Ownership programme, providing 353 ready constructed interest free homes to its national employees on an installment basis.
The project is in full swing and progressing well. Additionally, over 1.8mn shares are held within the shares incentives program, with all eligible employees encouraged to participate. Sipchem also increased its in-house training budget by 43% year on year, a move the company says reflects its belief that people are its most cherished asset. Various training initiatives throughout the organisation include the Individual Development Plan, where employees come up with their personal career progression plan. A second training initiative dedicated to Saudisation takes in Saudi fresh graduates who hold a bachelor degree and above, and prepares them for leadership positions in the long run. Existing company employees can also take advantage of the Sipchem Successful Succession Program which helps them develop their leadership skills to compete for top management roles inside the company.
“Undoubtedly, it is a challenging task, however, we sit here today facing challenges that are enormous in magnitude. If we work together and through our collective actions, passion for higher efficiency, courage, and momentum, we can make a sustainable difference for our communities, our families, and for the future generations to come,” Al Ohali concluded.
