The petrochemical and chemical industries are a cornerstone in the GCC’s economic diversification drive and the stage is set for the next phase of growth for the downstream sector. GCC countries are rapidly investing in solid and liquid bulk chemical transport, port and other related supply chain infrastructure, as the region adds yet more capacity and newer products to its petrochemicals production base.
With the GCC tripling its production capacity between 2004 and 2015, petrochemical producers in the region must focus on supply chain efficiencies in order to retain export market share.
Regional chemical output in plastics, fertilizers and other products are chiefly destined for overseas markets. In 2015, 80%, or 70.6mn tonnes, of petrochemicals were exported abroad. Polymer and liquid product categories form the core supply chain requirements for the GCC region. From a logistics perspective, polymers are viewed as commodities.
They are usually exported in sacks and loaded in general purpose box containers. With 19mn tonnes per year of polymers being exported, the supply chain challenge is in managing the volume.
Due to their more hazardous nature, liquids have fundamentally different supply chain requirements. The high volume liquid commodities such as methyl tert-butyl ether (MTBE), ethylene glycol (MEG) and methanol rely on plant-to-jetty pipelines which are linked to large bulk liquid storage tanks. Commodity liquids are exported in chemical product tankers.
Specialty chemical liquids, however, have their own discrete set of needs and depend on smaller lot-sized assets. These may include stainless steel storage tanks, intermodal tank containers and highly segregated chemical parcel tankers.
Bulk liquid exports from the GCC region are now over 32mn tonnes per year. The rapid growth in the intermodal movement of hazardous specialty chemical liquids has attracted all the major deep sea ISO tank container operators to the GCC. Chemical producers are now evaluating the more widespread use of leased ISO tank containers for temporary storage and the dedicated movement of petrochemicals. The leased tank container market is relatively underdeveloped at the moment, hampered by the lack of ISO tank depots with the required competency to inspect and complete major structural work or shell polishing that may be required at off-hire.
Despite the global nervousness, GCC petrochemical growth remains a certainty due to compelling economics. That growth depends on the supply chain infrastructure, which features new capacities and capabilities for producers and new opportunities for logistics service providers.
The geography and infrastructure in the Gulf region create a number of challenges that can hinder supply chain performance for a number of industries but this needs to be addressed if chemicals companies want to elevate their supply chain performance.
The lack of extensive rail infrastructure creates challenges, although the situation is in the midst of change, with several GCC countries planning rail lines within their borders and the under-construction GCC railway network connecting all six states.
Slated for completion in 2018, companies will have the benefit from more options for transporting chemicals across the region.
It will be worthwhile to watch how players in the value chain are able to adapt and evolve in the short to mid- term to address these challenges.
Vinod is an independent consulting professional with 13+ years of experience working in the energy, power, mining and other sectors.Throughout his career, Vinod has advised companies in the US, Brazil, Europe, the Middle East and Asia Pacific.
