Sharjah-based Gulf Petrochem is working hard to hit its $1bn company valuation target by 2014
The reputation of the region as a hub of energy-related industries has attracted investors from all across the globe to look for opportunities and to start businesses related to the refined products sector. That was the case with the UAE-based, Gulf Petrochem, which was established in Sharjah by two Indian businessmen.
Within a decade, the company has grown from a total capital value of US$1 million to more than $500 million. “The owners of the company, Ashok Goel and Sudhir Goyel, came to the UAE from India in early 1998 to look for opportunities related to petroleum-based oils and lubricants, and ended up by establishing the first refinery in Hamriyah free zone in Sharjah,” says Sanjeev Sisaudia, Gulf Petrochem group chief executive.
The company is currently active in petroleum products refining and trading. “We operate through six business units including oil refining, oil trading & bunkering, grease manufacture, Bitumen manufacture, oil storage terminals and shipping & logistics,” he explains.
In early 1998, the company commissioned its first refinery, followed by its condensate splitter in Hamriyah freezone in Sharjah. The state-of-the-art refinery with its distillation columns is capable of handling a large spectrum of petroleum-based feedstock.
The two refining units have a joint processing capacity of 500 tonnes per day of light crude. “We have a distillation unit. Anything which has a light end we can process it and extract value out of it,” he says.
Though the refinery has a processing capacity of 500 tonnes per day equal to 15 000 tonne a month, it can process only 6000 metric tonnes a month. “The problem we have now is the draft limitation at the inner harbour which is only 4.5 metres deep, so we can bring only 3000 metric tonnes of parcels to our refining unit,” reveals Sisaudia.
An expansion in projects involving connectivity to the main harbour will allow the company to handle bigger parcels, and can optimise the refinery to much larger volumes. “With the new 13 metre draft connecting the main harbour, Gulf Petrochem is ready to see another jump in tank turnarounds and refining capacities,” he says.
The group chief executive officer claims that his refinery is unique in what it does, as it can easily change off –spec product to on-spec whilst extracting value in the chain.
“We don’t need to run the full crude slate; we just refine the products that are giving best value to us. This itself is a niche for Gulf Petrochem which helps to bring off-spec product to the on-spec which other companies can do only by blending,” explains Sisaudia.
Gulf Petrochem produces a wide range of products. “Our end products include mainly naphtha, gas oil on light end and fuel oil,” he says. The company’s products target mainly the local and the regional markets.
“For the gas oil, the demand from domestic market is good enough driven by industrial sectors as well as the transport companies. For other products like fuel oil and naphtha, they are traded in mainstream at Fujairah market, where there is huge demand for these products,” he adds.
The company’s port storage terminal has been the spearhead of growth for Gulf Petrochem, through supporting the storage of vessel-loads of feedstock, and paving way for new dimensions like blending products to create customer-specific grades. It also goes a long way in supporting trading and offers storage to its customers and potential customers as a business proposition.
Currently, the company has a storage capacity of 60 000 cubic metres of oil storage for clean and dirty products in Hamriyah. “About 25 000 cubic metres of the storage capacity is designed to support the refinery, while the 35 000 cubic metres is used by the company, and sometimes leased out to oil companies or other traders,” he says. “Leasing storage tanks also represents a major source of revenue for us,” he notes.
When the refinery started processing there were urgent needs to build more storage tanks. “As it takes between 15 to 20 days to process one cargo, we needed to increase our storage capacity, that’s why we launched our expansion projects,” explains Sisaudia.
Gulf Petrochem is now in the process of expanding its oil terminals both in the UAE and beyond. An oil terminal with a phase I capacity of 412 000 cubic metres is currently under construction at Fujairah on the other side of the UAE peninsula, an investment of over $130 million.
Strategically, Fujairah’s importance cannot be underestimated. The only major UAE port outside the Arabian Gulf, it is also the second largest bunkering port in the world after Singapore.
Mott MacDonald is the engineering, procurement, construction management (EPCM) consultant of the expansion project, while the mechanical contract was awarded to Topaz Engineering. The first phase of expansion, which includes 17 tanks with a total capacity of 412 000 cubic metres will be commissioned in 2012.
“Completion of this stage is scheduled for the third quarter of 2012, while the master plan for the development envisages a far greater ultimate capacity of 1.2 million cubic metres, will be completed soon after,” says Sisaudia.
Gulf Petrochem is also boosting its bunkering operation (ship refueling) in the UAE. In addition to Fujairah operations, the company has started bunkering with several locations across the country including Port Khalid, Hamriyah, Jebel Ali, Ras al-Khaimah in order to extend its customer base to supply larger volumes.
“In Khor Fakkan and Khor Kalba, we are also planning to supply bunkers by barges, in addition to industrial supply for extent of 15 000 metric tonnes,” Sisaudia notes.
“Our bunkering pool in the UAE goes to 40 000 metric tonnes, and we operate the same model in India with a capacity of 20 000 metric tonnes,” he reveals.
Gulf Petrochem is also looking to expand into the Asian market by setting up a trading and bunkering desk in Singapore. “We are in the early stage, as it will take time to get the licenses, however, the office will help in selling physical locations outside Singapore,” Sisaudia reveals.
The company has already commissioned the construction of its 300 000 cubic metre facility at Pipavav (India), and set the ball rolling for a refinery in East Africa, in addition a multi-product storage facility in Malaysia at Port Klang.
“We have already made substantial headway to set up a state-of-the-art 1000 metric tonnes per day condensate Splitter near Dar es Salaam, Tanzania, thereby completing the network in three continents,” he explains.
Shipping and logistics business, meanwhile, is essentially a support division; but the company has acquired two vessels and there is talk of expanding this in the near future. “Broadly speaking, our growth in the future will be two-pronged: growing our trading and bunkering globally, and adding oil infrastructure—oil storage terminals, vessels and barges,” Sisaudia states.
Another significant string to Gulf Petrochem’s bow is the business of oil trading. The company presently trades in petroleum products including fuel oil, gas oil, base oil and bitumen.
A team of experienced traders is presently based across the UAE, India and recently Singapore, bringing with them over 100 years of trading experience with major global oil traders, claims the CEO. “Our people are our fundamental strength,” says Sisaudia. “Satisfied employees give satisfactory results; charged employees give superlative results.”
With all its expansion plans in progress, Gulf Petrochem is targeting a $1 billion valuation by 2014. “This will need a year-on- year growth rate of about 30% over the next three years,” says Sisaudia. Gulf Petrochem Group is fast surging towards new horizons and we are committed to achieve our growth targets,” he concludes.
