Petrochem Supplement

Petrochem & energy

23

Wednesday, May 30, 2012

Petrochemicals: A success story Jeddah: Khalil Hanware arab news staff

The petrochemicals sector has since its inception in the 1970s emerged as a key plank of Saudi Arabia’s economic diversification agenda. As much as the sector does not constitute a direct alternative to the historically dominant oil sector, it allows the Kingdom to capitalize on its competitive advantage of cheap energy while ensuring a far higher degree of value-added to its oil wealth. This in turn is boosting the level of economic activity and employment in the Kingdom, trends that are set to further intensify in the coming years.

The presence of 14 petrochemicals companies listed on the national stock exchange stands as testimony to the great and growing importance of this sector. Their annual revenues in 2011 reached SR 295.2 billion.

These include national champions, most notably SABIC (Saudi Basic Industries Corp.), which are establishing an increasingly important international footprint.

Petrochemical has an important position in Saudi Arabia’s economic diversification strategy with the national producers on track to supply more than 10 percent of all ethylene globally. Following a lull in response to the onset of the global crisis, investment activity has rebounded. For instance, total ethylene capacity of the sector is expected to more than double from 8 million metric tons in 2008 to 16.5 metric tons by 2015.

SABIC alone intends to triple its output by 2020. Meeting this ambition is greatly facilitated by Saudi Arabia’s geographic location within easy access of some of the

The Karan gas field.

largest, and especially the most rapidly growing markets globally.

A steadily growing proportion of the Kingdom’s hydrocarbons — whether unprocessed or processed — is destined for the dynamic emerging markets of Asia. At the same time, the industry is seeking to develop new downstream products, such as polyurethanes and polyamides while substantially boosting its research and development budget.

Further expansion will be supported by various initiatives including governmentsupported project finance. But the sector has also successfully tapped the equity and bond/sukuk markets.

With the global oil markets looking increasingly tight with the marginal cost of extraction climbing relentlessly while demand keeps growing, the Saudi petrochemicals sector should benefit from a significantly competitive advantage globally

thanks to its low feedstock prices even if we allow for a progressive increase in their ethane input costs going forward. The limited availability of domestic natural gas is a concern, albeit one that new development

by Saudi Aramco is trying to alleviate. Antidumping cases remain a potential challenge, but have diminished in importance in recent months.

According to the Saudi Ports Authority, petrochemical exports from Saudi Arabia

rose by 16.1 percent y-o-y to 2.51mt in January 2012. Al-Rajhi Capita said in its latest report that growth in exports will be driven by routine plant shutdowns in Asia and not necessarily because of growing demand. In fact, China, the main importer of petrochemicals globally, has been slowing down in the past few quarters. The Chinese PMI remained weak since the start of the year and stood at 49.3 in April 2012.

In January 2012, the Saudi government

postponed its plans to raise the prices of ethane and methane (currently $0.75/ mmbtu, which was set in 1998).

However, given the significantly low levels of global gas prices, Al-Rajhi Bank said the Saudi government will not increase ethane prices in 2013, as it is keen to preserve the feedstock advantage for the local petrochemical producers. Fertilizers are key inputs for agricultural growth as they improve soil life as well as productivity.

They are also used in industrial applications such as rubber, leather, paper & pulp industries, refrigeration systems, etc.

With an ever-increasing global population, arable land per person is declining while demand for agricultural products is rising. This indicates a growing need to maximize production from farmland.

Moreover, rising income level and demand for higher quality diet have resulted in higher demand for fruits, vegetables and protein from crop-fed livestock. Thus, there is a pressing need to improve efficiency of fertilizer manufacturing plants to develop agricultural products of high performance and to meet the deficit between production and consumption. Recently, use of agricultural products like corn and oil fruits as bio-energy sources has further stimulated demand for fertilizers, the Al-Rajhi Capital report said.

After a sharp rise in basic petrochemical prices like ethylene and propylene due to plant shutdowns and higher feedstock costs (in line with crude prices), product prices are expected to witness a marginal correction for the remainder of 2012 on weak global demand and escalating euro zone concerns, Al-Rajhi Capital said.

Wednesday, May 30, 2012

24

Sipchem plans for future growth Jubail: Siraj Wahab

The Saudi International Petrochemical Company (Sipchem), one of the Saudi shareholding public companies listed on the Saudi stock exchange (Tadawul), has drawn up strategic plans for its ongoing and future growth.

Established in late 1999, Sipchem with its current fully paid-up capital of SR 3.6 billion is actively investing in basic and intermediary petrochemical and chemical materials that can be utilized as a feedstock for manufacturing varieties of products that can bring prosperity and comforts to people around the world.

Sipchem is committed to the highest quality standards in all its activities whether in its products or maintaining the integrity of the surrounding environment or the safety of its employees.

Sipchem occupies an area of over one million square meters in the basic industries part of Jubail Industrial City. Sipchem’s strategy aims at integrating present and future petrochemical and chemical products to form a series of final added value products in order to contribute to increasing the national production, developing the industry under the comprehensive development plans adopted by the Kingdom and multiplying shareholders’ profits and yields. Despite it being established only twelve years ago, Sipchem became a pioneer manufacturer of petrochemicals locally, regionally and even worldwide. Such success came with hard work, dedication and a commitment of its managerial, professional and technical capabilities that helped the company be ranked as one of the top international petrochemical companies.

Operating Affiliates

Under Phase-I, Sipchem developed two operating affiliates - (i) International Methanol Company (IMC) that produces 967,000 metric tons Methanol and (ii) International Diol Company (IDC) that produces 75,000 metric tons of Maleic Anhydride, Butanediol and derivatives, per annum. Under Phase-II, three more affiliates were developed - (i) International Gases Company (IGC) that produces 345,000 metric tons of Carbon Monoxide, (ii) International Acetyl Company (IAC) that produces 460,000 metric tons of Acetic Acid and Acetic Anhydride, and (iii) International Vinyl Acetate Company (IVC) that produces 330,000 metric tons of Vinyl Acetate Monomer, per annum. Bringing on stream and increasing outputs of the new Acetyls Complex (the first in the region) is a reflection of the exemplary courage, determination and ingenuity demonstrated by Sipchem’s operations team.

New Projects Under Construction

The International Polymers Company (IPC) established in 2009, is scheduled to start-up during the second quarter of 2013. The company, being built at a total cost of SR 3 billion, will produce Ethylene Vinyl Acetate (EVA) and Low Density Polyethylene (LDPE) polymers with a capacity of 200,000 tons per year.

This plant is considered the first of its kind in the region to produce Ethylene Vinyl Acetate (EVA). The total estimated value is around SR 3 billion. The feedstock ethylene will be provided by one of Sabic affiliates while Vinyl Acetate Monomer (VAM), as a second feedstock will be made available from the International Vinyl Acetate Company, a Sipchem affiliate.Sipchem Chemicals Company, established in 2011, is scheduled to start-up during the second quarter of 2013. The company, being built at total cost of SR 350 million, will produce ethyl acetate and butyl acetate with a capacity of (100) thousand metric tons per year.

Sipchem Chemicals Company will participate through its different proj-

Signing ceremony picture at Joint Venture Agreement between Sipchem and Hanwha for polymers projects.

Honorary reception of outstanding orphan students by Sipchem CEO.

ects in the support of downstream industries and industrial diversity, which will represent significant added values to the chemical and petrochemicals materials. Feedstock for the production of ethyl acetate such as Acetic Acid will be obtained from the International Acetyl Company, one of Sipchem affiliates, and ethanol will be imported from international markets. Gulf Advanced Cable Insulation Company, established in 2011, is scheduled to start-up during the second quarter of 2013. The company, being built at a total cost of SR 230 million, will produce cross-linkable polyethylene with a capacity of 20,000 tons per year and semi-conductive compound with a capacitechnical sty of 5,000 tons per year. The major feedstock for the plant will be sourced from the International Polymers Company, one of Sipchem’s affiliates.

Sipchem Technology Creativity Exchange

Sipchem is currently building a corporate R&D center called Sipchem Technology & Creativity Exchange (STCE) at Dhahran Techno Valley of King Fahd University of Petroleum and Minerals (KFUPM).

The STCE will have the latest Instruments and equipment for

polymerization, compounding, molding, testing, analysis, processing, and application development.

Construction phase activities of STCE are well under way and it is expected to be operational in mid 2012. STCE will be operating on the basis of coordination among many departments in KFUPM so as to make science and technology, particularly chemistry, accessible for all, especially scholars. This extraordinary facility will help them to perceive the importance of polymers, downstream industries and job opportunities that can be availed through such industries; it participates in the building of Economy Knowledge the Kingdom aspires to achieve. Sipchem is keen to see STCE playing an effective role.

Plans and Future Growth

Sipchem exerts unremitting efforts to sustain its remarkable position during the coming years. It

The Sipchem headquarters in Alkhobar.

continuously strives to invest in an active manner in high quality petrochemical and chemical industries, basic and intermediate, in accordance with the highest international standards and criteria. It is always keen to supply its customers with high quality services and competitive prices to ensure the satisfaction of their requirements and expectations.

Sipchem’s strategy is mainly based on the following elements: • Expansion and diversity of the company’s downstream industries; • Continuous enhancement of its products’ quality with the application of the best international quality criteria; • Exerting efforts to decrease production costs to enhance the company’s competitiveness.

Working Environment

Sipchem believes that its human resources play the basic role in the development of its operations and investments. The company has a clearcut strategy to attract, develop and improve human skills and capabilities and motivate its human resources. Sipchem and its affiliates strive to raise the leadership, administrative and technical skills and capabilities of all levels of employees.

This is achieved through internal and external training plans and programs. This is in addition to on-thejob training which is considered as the basic company and its affiliates.

The Saudization programs are of particular importance to Sipchem and its affiliates.

Sipchem’s employees demonstrate sincere and hardworking calibers qualified Sipchem during the 2010 survey to win the first place as the Best Saudi Work Environment Company.

The company is currently implementing a Home Ownership Program to build 354 housing units for its employees in the district of Jalmoudah, Jubail Industrial City.

The program is aimed at granting the chance to the company’s Saudi employees who are on the job at the time of completion of the project.

The company is currently proceeding with the program as per the set schedule.

Responsible Care certification on Dec. 16, 2011 after a successful external audit by Det NorskeVeritas Co. (DNV), an international licenser for such certification. The Responsible Care program is viewed as a key strategic initiative aimed at supporting company purpose and values that will have a positive reflection on the stakeholders, employees, clients, business partners and the community.

Moreover, Sipchem is always keen to enhance its management systems through the application of the best practices. It also adopts new initiatives that may attain good benefits for the environment and society alike. Responsible Care program serves as a significant element in the

Corporate Social Responsibility (CSR)

At Sipchem, caring for the underprivileged and not-so fortunate individuals is a responsibility and not an obligation. In its quest to create a positive impact on its neighborhood, Sipchem has undertaken the responsibility of reaching out to sections of society that look up to us for inspiration, assistance and most importantly, hope. Sipchem has taken its social responsibilities so seriously that it has allotted 1 percent of its total annual net profit to the noble cause of community outreach activities. These contributions and participations are supervised by Sipchem Community Services Committee

Responsible Care

Sipchem’s strategy and efforts to continually enhance its performance in the fields of health, safety, environment and security were crowned by a major milestone; Sipchem became the first petrochemical manufacturing company in Saudi Arabia to achieve

process of performance development through the determination and application of the best effective management practices. In addition, it motivates the mutual support between companies and institutions through expertise exchange.

Sipchem Technology & Creativity Exchange at Dhahran Techno-Valley.

composed of representatives from various departments.

Sipchem has participated successfully, since its inception, in a lot of the charitable and community outreach activities in the Eastern Province in general and Jubail in particular. Also, Sipchem believes strongly in youth effective role in serving our beloved country and the importance of enhancing the science and knowledge base, so it sponsored the Career Day and its associated exhibition in various universities and colleges. Sipchem also sponsored the monthly Youth Tawasul Forum held in Jubail Industrial City during the year 2011. The activities of the forum focus on the social issues presenting them for mutual dialogue between citizens and the governorate’s officials to consider finding out the appropriate solutions, create a friendly link among supporters of social issues and participate in enhancing belief and thought. Sipchem organized blood donation campaigns twice during the last 4 years in which more than 400 employees took part to donate their blood.

Wednesday, May 30, 2012

26

Abahsain Group’s success is a dream come true

Flowserve Corp. President and CEO Mark Blinn speaks at the recent opening of the Flowserve-Abahsain industrial and training facilities in Dammam. Seated from left to right are Abahsain Group Director Shaukat R. Sheikh; Abahsain Group CEO Abdullah Abahsain; Saudi Aramco’s Motassim Maashouq; Flowserve COO Tom Pajonas and Flowserve Flow Control Division GM John Lenander. (AN photos) Alkhobar: Siraj Wahab arab news staff

Group Director Shaukat R. Sheikh.

Brothers Saleh & Abdul Aziz Abahsain founded the S&A Abahsain Co. in 1947 and since then it has been a story of success.

It all started when the Kingdom’s oil discovery was made. Abdul Aziz Abahsain, who worked for Saudi Aramco from 1933, saw the discovery of black gold in Saudi Arabia in 1938 and took early retirement to begin an enterprise, geared to servicing the emerging needs of the then Arabian American Oil Company (now Saudi Aramco).

The company began operations as an electrical contractor, growing into road construction, pipe-laying, and eventually into trading and stocking

for oil and gas equipment in 1961.

As one of the earliest entrepreneurs in the Kingdom, both brothers worked tirelessly, during exceptionally hard times and steered the company to extraordinary growth and strength. Its trading activities were particularly successful and, by 1994, the company was listed among the Top 10 vendors for Saudi Aramco.

Sensing the need for adding local content to its enterprises, which were focused on trading and contracting, Abahsain moved into manufacturing of cable support systems in partnership with Tyco, USA, and into the manufacture of mechanical seals using technology from Flowserve Corporation, USA. A galvanizing facility was added in November 1997.

Abdul Aziz Abahsain saw the group

Saudi Aramco's Munir Rafie, second right, with Abahsain Group CEO Abdullah S. Abahsain, first right, Abahsain Group Director Shaukat R. Sheikh, first left, Chart Industries Chairman Samuel F. Thomas, center, and SME President Jeff Diaz, second left, at the launch of Abahsain's new company in Dammam.

transform itself into one of the Top 100 companies of Saudi Arabia before he passed on the mantle of leadership to his nephew Abdullah Abahsain, the current group chief executive officer.

Abdullah Abahsain brought the vigor of youth and forward thinking to the group and immediately began the steady implementation of a strategy to convert Abahsain’s focus away from trading and contracting to manufacturing, support and service.

Veteran executive and current Group Director Shaukat R. Sheikh led this strategy of change and equity partners and helped Abahsain’s Oil & Gas Group to create six medium-sized industrial units in quick succession.

All these added great value to the Kingdom’s rising industrial might.

An existing cable support systems plant, in venture with Tyco, USA, was revamped to become an electrical industry focused on the oil and gas, petrochemical and power sectors. A valve manufacturing plant was set up with Chinese collaboration and technology, a mechanical seal and a control valve plant, were set up in joint venture with Flowserve Corporation of USA. And then a heat exchanger plant was set up with technology from Chart, USA. An industrial engineering facility is currently under construction.

On the service side, a fully software driven, 24-hour warehousing facility has been set up to add value to the trading arm of the group, focused on the oil and gas industry’s needs.

A Communication Support

Services and a Software Solutions Company are part of the nine existing units of the Oil & Gas Group within Abahsain.

The Abahsain Group now ranks as one of the Top 50 companies of Saudi Arabia, and its oil and gas operations continue to grow year after year.

“Currently, Saudi Arabia has more than 140 upstream oil and gas projects in the pipeline; their total value is estimated at $215 billion … Most important, Saudi Aramco, the world’s most integrated oil company, is evolving and adding value to crude by converting it into refined products … All these represent long-term opportunities for its committed vendors and contractors,” Sheikh, the architect of the group’s oil and gas division, told Arab News recently.