The sixth edition of the Gulf Petrochemicals and Chemicals Association (GPCA) forum has attracted more than 1,600 delegates from all over the world. This year’s event was held at the Atlantis Hotel on the Palm, Dubai, under the theme of “Moving Downstream – Creating Added Value and Sustainable Growth.”
Prince Faisal Bin Turki al-Saud, Advisor, Ministry of Petroleum & Mineral Resources, delivered the opening key note speech where he lauded this year’s theme and called it the defining challenge of the regional petrochemicals industry.
“Exporting the vast majority of the petrochemical production means jobs are being created elsewhere and this is a growing concern. With a fast growing, well-educated population who want jobs, successful economic diversification and downstream expansion have become a necessity.
This is needed to attract wider industrial investment to create the sustainable growth necessary to meet the aspirations of the next, and future, generations. Much of this will be focused on creating and capturing the value that is currently captured by the region’s export customers,” he said.
He went on to focus on Saudi Arabia, calling this the ‘golden era’ for the Kingdom, with production expected to grow to 100 million tonnes by 2016, 250% growth since 2006. The future is looking bright, he said, with 120 new chemical and petrochemical products coming onto the market.
Prince Turki said that Saudi Arabia is aiming to double its gas production capacity by 2016 as it aggressively explores its gas resources converting them into reserves by utilising and developing advanced technologies.
“The new measure will enable the country to grow its gas production capacity to about 15 billion cubic feet (bcf) a day by 2016 from 7.7 bcf a day in 2002,” Prince Faisal bin Turki said during his keynote speech.
Saudi Arabia has created the largest refining network in the Middle East. “It is expected to reach 3.5 million bbl/day of capacity by 2016,” Prince Faisal bin Turki noted.
“In undertaking all of these developments, the government encouraged the Saudization of jobs and the localization of industries needed for oil and gas basic industries,” he said. “This will help retain and increase benefit of these activities to the local economy, which will continue in the future,” Prince Faisal said.
“Sustainable value-creating opportunities lie downstream, and are linked to the development of industrial clusters across the region, particularly those being established to provide materials for the automotive, flexible packaging and appliances sectors,” he added.
Dr Abdulwahab Al-Sadoun, secretary general, GPCA, said that the Gulf’s petrochemical and chemical industry stands at a historic crossroads.
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“Behind it lies three decades of exceptionally successful growth; leveraging advantaged feedstocks, economies of scale, integration and world-leading process technology to build a vibrant, influential and highly profitable petrochemical industry that is the envy of many others,” said Dr Al-Sadoun.
“Times are, however, changing. Feedstock is less accessible, refinery/petrochemical integration more essential and prevalent, added value more essential and markets less certain.
This year’s forum program has been conceptualized as a platform for industry leaders to showcase opportunities that exist to capture much of the added-value that is currently exported, and to create the building blocks for major downstream conversion industries offering rewarding and sustainable employment opportunities for the local youth,” he added.
Mohamed Al-Mady, CEO vice chairman and CEO of Saudi Arabia Basic Industries Corporation (SABIC), said that he is predicting a slow start to 2012, but is keeping his focus on ambitions medium term production hikes as Saudi Arabia presses ahead with its downstream expansion programme.
“Weak demand from the fourth quarter this year will weigh on the world’s largest petrochemicals producer through the first half of 2012,” Al Mady said. “I believe demand will recover later in the year as the Eurozone shows some growth, Asia continues to grow, and the US avoids a return to recession.”
“If that growth forecast prevails, it should be a good year for the industry. Financial results should receive an additional boost due to the improving industry operating rate and new capacity coming on stream,” he adds.
Sustainability awareness is on the rise, ExxonMobil Chemical president Stephen Pryor said, calling on the industry to focus on improving the carbon footprint of its products. “Sustainability may sound like a buzzword, but it is a driving force of the chemical industry,” Pryor said.
Energy sources will become less carbon intensive in the coming years, he said, adding that by 2040 fuel economy in new cars will be 75% better than it is today.
Pryor said the petrochemical industry can remain competitive while improving sustainability, but added that investments in technology would be needed. “We have focused on the sustainability of our entire portfolio,” said Pryor.
“The improvement of polyethylene allowed the production of lighter and thinner bags downstream. This is a sustainability story…the lighter bags have helped reduced shipping cost.
The improvement of polyethylene bags have helped allowed the production of bags thinner by 2% per year for 20 years, he said.
Pryor warned that the failure to pursue a more sustainable path would invite increased regulation that could affect the petrochemicals industry negatively.
Jim Gallogly, CEO of LyondellBasell, in his presentation entitled “next phase of Middle East petrochemical development: adapting to changing reality”, urged regional producers to adapt to the changing reality in order to remain competitive.
“Regional producers should improve cooperation in areas such as pipeline infrastructure, shared storage, shipping and logistics optimization and support services. “We should also bring world class research to the GCC region.”
“We should also bring niche players from around the world and the smart people to the region,” he added. “Such moves are important to manage the changing market,” he noted.
Hassan Ahmed, Partner, head of research at Alembic Global Advisor, in his presentation entitled “upstream and downstream- a question of shareholder value creation”, posed the question upstream or downstream and highlighted the importance of shareholder value.
According to Ahmed, it would be difficult to break away from declining industry trends on the back of maturation.
“Simply moving downstream is not the solution. Corporate strategy should be cognizant of feedstock position, geographic location, portfolio positioning, cutting edge innovation and most importantly returns on capital,” he said.
Peter Cella, CEO of Chevron Phillips Chemical Company, presented a paper entitled “shale gas: a new feedstock reality”. He highlighted the situation of feedstock in the United States. “Ethane in the US is expected to re-emerge as globally competitive cracker feedstock,” noted Cella.
Cella said that ethylene demand growth is forecast to require 50-75 world scale crackers by 2025. “The Middle East and China will continue to see development,” said Cella.
“Development of global shale resources will also drive new petrochemical investment.”
The event concluded amid ambiguity between Saudi Arabian producers, who were hoping to get a clear answer from the Prince Faisal bin Turki about the cost of the feedstock, but with all hope in vain. However, the overall consensus, was that the event was excellent, and has set itself apart as one of the leading petrochemical industry gatherings in the world.
