GPCA - Connecting the Gulf, Membership Directory 2013-2014

GPCA – Connecting the Gulf Members Directory 2013-14

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CONTENTS

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GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

WELCOME LETTER 5 GPCA Secretary General, Dr Abdulwahab Al-Sadoun discusses the GPCA’s achievements for 2013 This Directory is a publication of the Gulf Petrochemicals and Chemicals Association Gulf Petrochemicals and Chemicals Association PO Box 123055, 705/706 Aspect Tower, Business Bay, Dubai, United Arab Emirates T:+971 4 451 0666 F: +971 4 451 0777 Website: www.gpca.org.ae

SPONSOR LISTING 7 The GPCA members helping to support this year’s Directory

MEMBER GROWTH 9 GPCA membership continues its upward trajectory with 15% growth in 2013

GPCA MEMBER PRIVILEGES 10 Networking, profiling and best practice sharing are among the many benefits of GPCA membership

The Sixth Edition (Volume VI) is co-produced by: ICIS The Quadrant, Sutton, Surrey SM2 5AS UK +44 20 8652 3187 www.icis.com Editor John Baker Global Editor, ICIS Custom Publishing +44 20 8652 3153 john.baker@icis.com Contributors Jim Aslaksen, John Baker, Will Beacham, Andy Brice, Jane Gibson, Tahir Ikram, Sheau Ling Ong, Sean Milmo, Prema Viswanathan, Samuel Wong, Stefano Zehnder and Becky Zhang, Design and production Louise Murrell, Lauren Mills and Tim Norman

MIDDLE EAST FIRMS STRIVE TO OVERCOME ECONOMIC HURDLES 12 Petrochemical producers in the region get to grips with global challenges and increased competition

INVESTMENT AND NEW PROJECTS 14 The region prepares for a new wave of petrochemicals projects as producers look downstream

MIDDLE EAST BY NUMBERS 18 The leading producers in the region, export growth, capacity expansions

FREE TRADE TALKS POSE NUMEROUS OPPORTUNITIES 21 GCC continues discussions with trading partners and may reap the rewards

GCC LOOKING TO DIVERSIFY FEEDSTOCKS TO SECURE FUTURE 26 The region is looking longer term and exploring new sources of feedstock

PRODUCERS FOCUSING ON DOWNSTREAM EXPANSION 31 Middle East producers are making steady progress in their move downstream

Printing Atlas Printing Press Dubai United Arab Emirates +971 4 3409895 www.atlasgroupme.com

AROMATICS PRODUCTION GAINS PREVALENCE 35 As the feedstock slate widens, producers are working aromatics into their expanding portfolios

GCC IS INCREASING INFRASTRUCTURE DEVELOPMENT 39 The petrochemical supply chain in the region is experiencing a siginificant overhaul

SOURCING TOP TALENT BECOMING MORE OF A PRIORITY 44 Attracting young people to the petrochemical industry and keeping them is imperative

LOGISTICS INVESTMENT NEEDED AS TRADE GROWS 49 DP World highlights the importance of enhancing efficiency throughout the supply chain

FULL MEMBER PROFILES 51 GPCA Members’ Directory: List of full members

SMALL GULF PRODUCERS/INTERNATIONAL PRODUCERS PROFILES 85 GPCA Members’ Directory: List of Small Gulf Producers and International Petrochemicals Producers

SERVICE COMPANIES PROFILES 94 GPCA Members’ Directory: List of Service Company members

BUSINESS PARTNERS PROFILES ©2013 by GPCA. All rights reserved. No part of this publication may be reprinted, or reproduced or utilized in any form or by electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording or in any information storage and retrieval system without prior permission in writing from the publisher.

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107 GPCA Members’ Directory: List of Business Partner members

PRODUCT LISTINGS 122 List of main chemical products manufactured by GPCA members 2013 | GPCA Connecting the Gulf DIRECTORY | 3

WELCOME

Welcome from the Secretary General The Gulf Petrochemicals and Chemicals Association (GPCA) is proud to present the sixth edition of its Gulf petrochemicals directory, entitled “GPCA – Connecting the Gulf 2013-14”. This year, the number of entries in the directory has been expanded significantly, thanks to the association’s membership base expansion over the past 12 months.

In 2013, two companies have become full members of the association – Astra Polymers Compounding and Salalah Methanol - taking the overall number of full members, all from GCC countries, to 34. Meanwhile, the number of associate members from the region and around the world, has risen from 165 to 198. This expansion is recognition of the success of GPCA and the continuing importance of the Arabian Gulf as a key global hub for the production of petrochemicals and chemicals.

The listings in this directory by member type give full contact details, key personnel names, a brief description and list the main products and services provided by each member. We have also again included a” product finder” listing at the end of the directory, to allow users to identify sources for the over-350 chemicals supplied by GPCA members.

But the directory is more than a mere listing. To add value we have included 26 pages of feature articles on a range of topics that are at the forefront of petrochemical debate at the present moment. Thus we have several articles on new capital investments in the Gulf, from refinery projects to boost petrochemical feedstocks, to mainstream investments in basic petrochemicals and to downstream products designed to move producers into areas of added value.

We also take an overall look at the aromatics to polyester value chain and at global and regional feedstock developments as they are impacting Gulf producers.

On more intangible, but no less important topics, we review recent international trade developments, particularly GCC/EU discussions; the vital need in the region to recruit and nurture talented employees; and the much required developments in logistics infrastructure, as inter- and extra-regional trade continues to grow apace.

As with last year’s directory, GPCA is also making the content available electronically in the form of a dedicated website.

I would like to thank ICIS for its efforts in compiling the editorial content of this publication.

I would also like to extend my best wishes to members of the GPCA. I look forward to your continuing support and cooperation for the year 2014 and beyond.

Dr Abdulwahab Al-Sadoun Secretary General Gulf Petrochemicals and Chemicals Association

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2013 | GPCA Connecting the Gulf DIRECTORY | 5

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Farabi Petrochemicals Company is a Global leader in Linear Alkyl Benzene (LAB) business, having its state of art manufacturing facility in Jubail Industrial City, Saudi Arabia.

Always committed to growth. We cater to our customers globally and have strategic storage locations.

Our Products:

Linear Alkyl Benzene Heavy Alkyl Benzene Specialty Solvents

Farabi Petrochemicals Company: P.O.Box 11763, Jubail Industrial City 31961, Kingdom of Saudi Arabia Tel: +966 13 356 5112 Fax: +966 13 356 5009 ǁǁǁ͘ĨĂƌĂďŝƉĐ͘ĐŽŵ

SPONSORS

Member support GPCA is grateful to the following companies for their support of this “Connecting the Gulf” publication through their advertising presence. Without them this directory, now in its sixth edition, would not have been possible.

www.gpca.org.ae

2013 | GPCA Connecting the Gulf DIRECTORY | 7

MEMBER GROWTH

GPCA membership continues to grow

GPCA has consistently expanded the membership of the association since it was launched in 2006. Besides its 34 full members – companies that have a significant manufacturing footprint in the GCC states - it has a wide range of associate members, covering smaller Gulf producers, international producers, service providers and business partners.

As of 2013, total membership stands at 232, with two-thirds of these companies based in the GCC region.

This represents a tremendous growth over the years, from 62 in the first year to 201 in 2012, putting the growth in 2013 alone at 15%, building on a 13% increase in 2012.

All this has been achieved at a time when markets and economies have been sluggish, indicating that GPCA membership is seen as an attractive and useful proposition. It indicates that producers within and outside the region see it as an important market in which to do business, and one where belonging to an effective association can pay dividends.

The growth and geographic spread of members in shown in the two charts.

GPCA MEMBERS COME FROM ACROSS THE GLOBE

GPCA MEMBERSHIP HAS GROWN CONSISTENTLY FOR EIGHT YEARS

Qatar 13 Kuwait 9

Number of members 250

Oman 6

Bahrain 4 Iran 4 Lebanon 3

Saudi Arabia 47

200 Asia 18

150

Total 232

100

Europe 35

50

0 2006 SOURCE: GPCA

www.gpca.org.ae

2007

2008

2009

2010

2011

2012

2013

UAE 71

North America Africa 17 5

SOURCE: GPCA

2013 | GPCA Connecting the Gulf DIRECTORY | 9

MEMBER BENEFITS

GPCA offers attractive membership benefits The steady rise of GPCA membership (see page 9) is due to the attractive benefits on offer for member companies. GPCA has built a package of offerings for members, all of which are firmly related to the Association’s three strategic pillars: Networking, Thought Leadership and Advocacy.

Some of the benefits of being a GPCA member include: Networking platform: GPCA enables its members enables to establish contact with industry executives, potential customers and influential decision makers in various parts of the Arabian Gulf region and throughout the world.

Best practice sharing: Membership of GPCA gives your company access to a wide range of organized workshops and seminars that address key issues in the petrochemicals and chemicals industry.

Global access: As a member of GPCA, your company has the unique opportunity to participate in events and programs sponsored by international organizations.

Profiling: Member companies are able to reach a global industry audience through listings on the GPCA website, the quarterly GPCA Insight newsletter and through the GPCA Members Directory.

Resource center: GPCA members have access to the GPCA database and the many studies and publications which it contains. Valuable white papers, detailed case studies and in-depth special reports are but a few of the types of documents contained in the GPCA database.

Operational excellence through Responsible Care: GPCA can help member companies improve and sustain regulatory compliance in the area of health, safety, security and environment.

Special member-only rates: GPCA member companies are able to take advantage of preferential rates when attending GPCA events, seminars and workshops.

BillyPix

GPCA membership has numerous benefits, providing you and your company with key tools and insight

10 | GPCA Connecting the Gulf DIRECTORY | 2013

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www.sabic.com

FEATURE The skyline of Doha, capital city of the state of Qatar.

Demand for power across the Gulf region is competing with demand for feedstocks for petrochemical production

Rex Features

12 | GPCA Connecting the Gulf DIRECTORY | 2013

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FEATURE

Profitability impacted by lower output and prices The sluggish global economy as well as the tightening of feedstock supplies has adversely affected the Gulf region’s petrochemical producers in the short term PREMA VISWANATHAN AND TAHIR IKRAM SINGAPORE

T

he European debt crisis and slowing demand growth in China have been key in pulling down petrochemical prices in the first half of 2013, impacting the profit margins of several major producers in the Gulf Cooperation Council (GCC) region.

Even as the US economy makes a slow recovery, four years of poor economic news from Europe has dampened demand for consumer goods, meaning lower margins for downstream players and lower prices for upstream petrochemical products.

The June 2013 ICIS Petrochemical Index (IPEX) is a good indicator of the trend the global petrochemical industry. The index, which tracks the prices of 12 major petrochemical products including olefins, aromatics and polymers, fell for the third successive month in June to the lowest level since September 2012. The index declined by 0.6% in June compared with the May figure of 320.06. The June US and Asian sub-indices of the IPEX rose, but a steep decline of the Europe component impacted heavily on global performance.

CAUSES FOR CONCERN Also causing concern to petrochemical exporters in the GCC – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – is the slowing GDP growth in China, a key market for petrochemical exports from the Middle East. For the first nine months of 2013, China’s economy grew at 7.7% – the worst performance for China in 23 years. This has forced companies in the GCC to diversify their export markets and lessen the dependence on China for their exports, as petrochemical demand growth is closely linked to GDP growth.

Another factor weighing on petrochemical companies in the GCC is the high proportion of production losses, caused by both feedstock shortage as well as technical issues. The gas-rich region has been in the forefront of petrochemical production in recent years, but shortages are beginning to loom as the governments in the GCC countries begin to re-prioritise gas usage to meet their local populations’ needs.

Qatar, Abu Dhabi and Oman are currently gasexporting members of the GCC states, but many GCC

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countries, excluding Qatar, may soon be importing the fuel, according to global consultancy firm Booz & Company in a report issued in August 2013.

The petrochemical industries in the GCC countries face the challenge of competing with other energyintensive industries, including power generation, water desalination, and metals processing. Saudi Arabian consumption of energy is growing at 8-10% annually.

INCREASING CONSUMPTION Though slipping from the supply to demand side, analysts say the Gulf petrochemicals industry will continue to be the largest producer and exporter in the world, accounting for 11% of the global market as of last year.

The petrochemical industries in the GCC countries face the challenge of competing with other energyintensive industries, including power, water and metals “Days of plentiful low-cost feedstock may be over for the region but capacity growth in downstream in the medium term is still promising,” said an analyst at a Riyadh-based brokerage house. In the next five years, the GCC’s share in the global market will jump to over 17%, according to Al Fajer Information and Services, a Dubai-based research firm.

The GCC countries face the challenge of competing needs of power generation and feedstock for petrochemicals production. Demand for Saudi Arabian and Gulf products will likely stay strong in the medium term as a result of Asian growth, despite increasing challenges posed by growing selfsufficiency within China, the largest consumer of petrochemical exports from the GCC. According to the American Chemistry Council, chemicals output in the Middle East and Africa will increase by 40% between 2012 and 2020, second only to the Asia-Pacific, where it will jump by 46%.

Around 5m tonnes/year of polymer capacity is expected to be added in the GCC in the next three or four years, bringing the total polymer capacity in the region to 29.4m tonnes/year by 2017, according to the Gulf Petrochemicals & Chemicals Association.

With world-class petrochemical complexes in the works, combined with specific structural advantages, the GCC holds high hopes to remain exciting for investors. However, fears of eroding margins are beginning to cast a shadow over these plans.

According to industry estimates the second quarter 2013 earnings of the petrochemical companies in the GCC went up by nearly 4% year on year. However, this is a decline of nearly 9% over the first quarter of 2013.

Industry players attribute this to a fall in petrochemical prices and a spate of plant turnarounds.

SHALE GAS REVOLUTION Petrochemical companies in the GCC are likely to remain profitable in the foreseeable future. However, shale gas from North America is likely to have an effect in terms of increased competition.

“Downstream investors have a nose for feedstock,” said a Dubai-based analyst of a foreign bank. “Shale gas will soon attract big US players, which in return could hurt future investment in the GCC,” he said.

In July, the International Monetary Fund warned Saudi Arabia that the “shale gas revolution in North America could reduce demand for their products”.

The US sits on 665 trillion cubic feet (18.8 trillion cubic metres) of technically recoverable shale gas, according to the US Energy Information Administration.

This gives the US the fourth-largest shale gas reserve in the world, after China, Argentina and Algeria.

Petrochemical players in the GCC are facing up to these challenges through strategies such as product diversification, downstream expansions and an increasing focus on speciality chemicals, all of which are expected to reduce their exposure to price volatility and increasing completion from the US and Asian players.

Prema Viswanathan was until recently managing editor Middle East for ICIS. She has many years’ experience in covering Gulf petrochemicals and worked on Asian Chemical News for many years

Tahir Ikram is the Asian news editor for ICIS news, a 24-hour online news service covering the global chemicals industry.

He is based in the company’s Singapore editorial office

2013 | GPCA Connecting the Gulf DIRECTORY | 13

FEATURE

Refinery drive adds to feedstock supply The GCC countries are making a huge investment in new refinery capacity, which will help provide feedstocks for a wave of planned petrochemical projects as producers look to move downstream SEAN MILMO LONDON

T

he pace of new petrochemical projects in the Middle East Gulf region has been slowing after a recent big increase in production capacity. This rise – providing a platform for a share of the global petrochemicals market of around 20% – was thought to be sufficient to meet the present ambitions of Gulf petrochemical producers.

Saudi Arabia, for example, seemed to be content merely consolidating its position as both the Gulf’s and the world’s leading petrochemicals producer after allocating expenditure of around $40bn on domestic petrochemical projects between 2008-2011.

But now the region is gearing up for another major expansion in petrochemicals capacity, because of changes in the global hydrocarbons market as well as the socio-economic needs of individual Gulf countries.

A major change has been the production of shale gas and oil in the US. Soon the US could be the world’s leading oil producer and a net exporter of oil. Another factor is the threat of overproduction of oil, triggering a big drop in oil prices. This could stem not only from US shale oil output but also production increases in Iraq, as it upgrades its oil infrastructure, and Iran, following a détente lifting sanctions against the country.

Consequently the Arab Gulf countries – all members of the Gulf Cooperation Council (GCC) comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) – are rethinking their economic strategies. The goal of economic diversification away from a dependence on oil and gas exports has become even more urgent.

Except in Qatar, the gas reserves of the Gulf states are under pressure. This means more feedstocks will have to come from liquid – requiring greater integration between refineries and petrochemical plants.

ALTERNATIVE SOURCES Much of the GCC’s petrochemicals production capacity, amounting to around 192m tonnes in 2012, about 65% of it in Saudi Arabia, is derived from ethane.

Refineries, which in the GCC currently have a capacity of around 4.5m bbl/day, nearly half of it in Saudi Arabia, are an alternative source of feedstocks such as natural gas liquids and naphtha. They also offer the opportunity to make a broader range of petrochemical products.

The typical yield of an ethane cracker is 78% ethylene, 2% propylene and 20% other hydrocarbons.

With naphtha feedstocks the ethylene share of the output is only around 35%, while that of propylene is an average 16% with heavier hydrocarbons, usually 1015% aromatics, accounting for nearly half. The switch to local liquid feedstocks, particularly naphtha, should enable the Gulf petrochemicals sector to boost the creation of new downstream businesses.

In the GCC petrochemicals capacity rose between 2008 and 2012 at a 12.2% compound annual growth rate to 192m tonnes/year, according to the Gulf Petrochemicals & Chemicals Association (GPCA). But despite this strong increase, employees in the petrochemicals sector in 2011 accounted for only

The GCC region is gearing up for a major expansion in petrochemicals capacity

14 | GPCA Connecting the Gulf DIRECTORY | 2013

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FEATURE

8% of the total GCC manufacturing workforce.

The sector will be hoping that the proportion will be much higher by 2020, when the GPCA is forecasting that total capacity will have reached over 190m tonnes/year, close to a 60% increase since 2011.

Nonetheless, despite the relatively large expansion in petrochemicals capacity being built or planned over the next few years, it represents a slowing down in the rate of increase. In 2008-2012, ethylene capacity increased at an annual rate of 14.4% in the GCC countries (and so not including Iran) to 21.7m tonnes/year, according to GPCA. ETHYLENE CAPACITY By 2020, GCC ethylene capacity will rise to 28m tonnes/year, according to GPCA, at an annual rate of 3.3% between the years 2012 and 2020.

The pace of enlarging petrochemical capacity is scheduled to pick up again in the last few years of this decade, from integration projects that will link refineries closer to petrochemical production.

Saudi Arabia has increased its ethylene capacity by around half to 14.5m tonnes/year in the three years to 2012. However in 2012-2016 ethylene capacity will be expanded by just 1.6m tonnes/year, or 11%, with increases at PetroRabigh II, a refinery and petrochemicals joint venture between Saudi Aramco and Sumitomo of Japan, and at Sadara Chemicals, a petrochemicals joint venture between Aramco and Dow Chemical.

Saudi Arabia seems now to be preparing for another major surge of expenditure on petrochemicals later in the decade

Saudi Aramco Total Refining and Petrochemicals Company (SATORP), whose new 400,000 bbl/day refinery has just started being commissioned in Jubail Industrial City II, will be a third source of liquid feedstocks. This $9.6bn joint venture between Aramco and Total of France will be processing heavy crude from the newly-opened Manifa offshore oil field.

The refinery will produce diesel, some of which will be exported to Europe, and jet fuel and petrochemical feedstocks such as paraxylene, benzene and propylene. It will directly employ 1,200 workers and create around 6,000 indirect jobs, according to Samir Al-Tubbayyeb, SATORP’s chairman. More jobs will be generated once the phase 2 of the project, to include petrochemicals capacity, is completed.

Saudi Arabia seems now to be preparing for another surge of expenditure, on refinery/petrochemicals integration schemes, later in the decade. The primary objective will be more jobs, particularly on the western coastal strip along the Red Sea. The Saudi unemployment rate is around 12%. To

prevent it rising higher the country needs to create at least 1.0m-1.5m extra jobs by 2020, which would be equivalent to the level of new jobs generated in 200712, according to government statistics.

Another major challenge for Saudi Arabia is its scarcity of gas. With rising demand for electricity, the country’s power stations have become increasingly reliant on oil and its derivatives for fuel. Half the country’s electricity consumption, which at peak times is rising by an average 8% annually, comes from processed oil. Citigroup recently warned that if this rate of oil consumption for electricity generation continues, the country would become a net oil importer by 2030.

Saudi Aramco could be close to at least partly resolving the problems with gas supplies and employment. It has discovered what is thought to be large quantities of non-associated gas, as well as oil, in deep and shallow waters in the Red Sea. The Saudi government has also revealed Aramco is drilling for shale gas of which it estimates there are 600 trillion cubic feet (tcf) (17 trillion cubic metres) of reserves in the country.

The Red Sea and any shale gas production will enable gas to replace oil fuels for power generation.

More crude oil could then be channelled into expanding refinery capacity for making more petrochemicals for an enlarged manufacturing sector.

Initially the first gas to be extracted from the Red Sea will be located offshore of the northwestern city of Duba. “Aramco is hopeful that any Red Sea gas fields with commercial potential could be fast-tracked and brought online within three years,” said a recent report by the London international bank HSBC. INTEGRATION IMPERATIVE In the wake of the successful Red Sea exploration, Saudi Arabia is in the early stages of planning three new integrated refinery and petrochemical projects – at Jazan and Yanbu on the western coast and Ras Tanura in the east.

Jazan, in the southwest close to the Yemeni border, is the site of one Saudi Arabia’s five new economic cities with a focus on manufacturing. Several engineering, procurement and construction (EPC) contracts for the building of a 400,000 bbl/day refinery were awarded last year. Now an adjacent petrochemicals complex involving Saudi Aramco and the privately owned Farabi Petrochemicals Co, a

Rex Features

THE SADARA PROJECT Located at Jubail Industrial City II in the Eastern Province, Sadara is by far the largest of Saudi Arabia’s current petrochemicals projects. It will have a 1.3m tonne/year ethylene cracker.

Altogether 23 petrochemical units will be producing 3m tonnes/year of a wide range of performance, valueadding chemical and plastic products including polyethylene, elastomers, amines, glycol ethers, propylene oxide, propylene glycol, polyols, TDI and MDI. Due to come on stream in 2015, it will account for around half the country’s $40bn current expenditure on petrochemical schemes. It will have an adjoining industrial park for the conversion of Sadara’s output into value-added, mainly plastic, products for emerging export markets.

Initially its feedstocks will include ethane and liquid feedstocks from Sasref, a Saudi Aramco/Shell joint venture refinery at Jubail, and from Saudi Aramco’s fully owned refinery at Ras Tanura.

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2013 | GPCA Connecting the Gulf DIRECTORY | 15

FEATURE SELECTED MAJOR GULF EXPANSION PROJECTS ANNOUNCED OVER THE PAST 18 MONTHS Company Oman Oil Company (OCC)/IPIC Oman Oil Company (OCC)/IPIC Qatar Petroleum/Qatar Petrochemical Company Qatar Petroleum/Qatar Petrochemical Company Qatar Petroleum/Qatar Petrochemical Company Qatar Petroelum/Qatar Petrochemical Company P/Qapco Qatar Petroleum/Qatar Petrochemical Company Shell Chemicals/Qatar Petroleum Company Shell Chemicals/Qatar Petroleum Company Shell Chemicals/Qatar Petroleum Company Shell Chemicals/Qatar Petroleum Company Kemya Gulf Packaging Industries IDEA Soda Ash and Calcium Chloride Co Linde Group Linde Group National Methanol Company (IBN SINA) National Petrochemical Industrial (NATPET)/ A Schulman

Location Duqm, Oman Duqm, Oman Ras Laffan, Qatar Ras Laffan, Qatar Ras Laffan, Qatar Ras Laffan Ras Laffan, Qatar Ras Laffan, Qatar Ras Laffan, Qatar Ras Laffan, Qatar Ras Laffan, Qatar Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Yanbu, Saudi Arabia

Product refinery petrochemicals high density polyethylene (HDPE) linear low density polyethylene polypropylene (PP) Ethylene butadiene oxo-alcohols ethylene oxo-alcohols ethylene elastomers polypropylene (PP) soda ash and calcium chloride hydrogen/carbon monoxide (HyCO) ammonia polyacetal polypropylene (PP) compounds

Petrokemya Riyadh Oil Factory Arabian Industrial Fibre Company (IBN RUSHD) Saudi Arabian Mining (Ma'aden) Sipchem Sumitomo Chemical/Saudi Aramco Tasnee Sahara Olefins Co (TSOC) Polysys Additives Technologies WR Grace

Al Jubail, Saudi Arabia Al Jubail, Saudi Arabia Yanbu, Saudi Arabia Ras Al Khair, Saudi Arabia Al Jubail, Saudi Arabia Rabigh, Saudi Arabia Al Jubail, Saudi Arabia Abu Dhabi, UAE Abu Dhabi, UAE

acrylonitrile-butadiene-styrene (ABS) linear alkylbenzene polyethylene terephthalate ammonia polybutylene terephthalate (PBT) Phase II, ethylene and derivatives butyl acrylate (butyl-A) polymer additive packages catalysts and additives

specialist in surfactants and detergent materials, will be established there as well.

Yanbu, already a manufacturing hub, is seen as having the most scope for expansion. Saudi Aramco has an existing joint venture 400,000 bbl/day refinery there with ExxonMobil, called Samref. It is also building with China Petrochemical Corp (Sinopec) another 400,000 bbl/day refinery (Yasref), due to come on stream late next year.

At Ras Tanura, a 500,000 bbl/day refinery – Saudi Arabia’s largest – is at present being expanded to provide petrochemicals feedstocks like paraxylene and naphtha to plants planned by both Aramco and the state-controlled Saudi Basic Industries Corp (SABIC).

Saudi Arabia is thought to be considering spending as much, possibly more, on its new refinerypetrochemical projects as it did in the last investment surge in the five years to 2012. The total could be as much as $70bn, mostly on schemes at Yanbu.

Similar increases in petrochemical capacity based on integrations with refineries are being planned elsewhere in the Gulf. In Abu Dhabi in the UAE, the refinery of Abu Dhabi Oil Refining Co (Tahreer) at Ruwais will be providing propylene for raising polypropylene capacity at the adjoining Borouge petrochemicals joint venture of the Abu Dhabi National Oil Co (ADNOC) and Borealis.

Abu Dhabi National Chemicals Company (ChemaWEyaat) is reported to have revived a project at Al-Gharbia for an aromatics complex using naphtha from the Takreer refinery. The scheme, costing possibly over $10bn, would have a 3m tonnes/year capacity.

In the UAE emirate of Fujairah, Abu Dhabi’s

International Petroleum Investment Co (IPIC), majority owner of Borealis and also a shareholder in ChemaWEyaat, has just tendered the EPC contracts for the building of a $3bn, 200,000 bbl/day refinery. In a two-phase scheme the refinery would later be integrated with a petrochemicals project.

In Oman, IPIC has entered into a joint venture with the state Oman Oil Company (OOC) to build a 200,000 bbl/day refinery in Duqm, due to be completed in 2017 after which, in a second phase, an integrated petrochemicals complex will be added.

The goal of economic diversification away from a dependence on oil and gas exports has become even more urgent

Kuwait, which has awarded few EPC contracts on refinery or chemical projects over the last five years, has started preparatory work on a new clean-fuels 615,000 bbl/day refinery at Al-Zour. The objective is that the refinery will provide liquid feedstocks for a petrochemicals complex planned by Kuwait’s Petrochemical Industries Co (PIC).

In Qatar, where little money has also been allocated to EPC contracts for chemicals over the past few years, a condensates refinery at Ras Laffan is being expanded in a joint venture in which the state-owned Qatar Petroleum (QP) has an 84% stake with the remainder being shared

by Total and a Japanese consortium.

The $1.5bn, 146,000 bbl/day scheme will have

16 | GPCA Connecting the Gulf DIRECTORY | 2013

Capacity, tonnes/year 230,000 bbl/day

Startup

850,000 430,000 760,000 1.4m 83,000 250,000 1.3m 250,000 1.3m 400,000 (x)35,000; 100,000T 800,000

2018 2018 2018

50,000 100,000 (two phases) 140,000 120,000 420,000 1.1m 63,000 160,000 7,500

2017

2018 2017 2017 2015 Q4 2013 Q1 2015 2015 2015 Q2 2016

Q4 2014 2017 H2 2013 end 2016 end 2014 H2 2016 mid-2013 mid-2015 late 2015

capacity for 69,000 bbl/day of naphtha and liquefied petroleum gases, which will supply the new $7.4bn AlSejeel petrochemicals joint venture between QP and Qatar Petrochemicals Co (Qapco). This will have a 1.4m tonnes/year ethylene cracker with polyolefin and butadiene plants.

The Al-Sejeel complex is likely to come on stream in 2018 around the same time as the Al-Karaana petrochemicals scheme, a joint venture between QP and Shell, which will have an ethylene cracker with a monoethylene glycol unit with total capacity of 1.5m tonnes/year. The project also includes units for linear alpha-olefins and oxo-alcohols.

Despite being currently the second-largest petrochemical producer among Gulf Arab states, Qatar was considered to be content to be predominantly a massive exporter of liquefied natural gas (LNG). Now it has been stepping up its economic diversification with its latest two petrochemical projects, which could be followed by other large schemes aimed at raising annual petrochemicals capacity by as much as 3-4 times to around, or even over, 20m tonnes/year.

Even gas-rich Qatar has opted for a proportion of its petrochemicals output to come from refinery-supplied liquid feedstocks. Without these, the Gulf Middle East will not get the balanced manufacturing sector it wants.

Sean Milmo is a freelance writer based in the UK with wide expertise of covering the chemicals and pharmaceutical sectors, in particular petrochemicals and the Middle East. He is a regular contributor to ICIS Chemical Business magazine.

www.gpca.org.ae

FEATURE

Middle East by numbers GCC GLOBAL RANKING IN CHEMICALS* EXPORTS BASED ON EXPORT VALUE

The Arabian Gulf petrochemical industry remains the world’s largest producer and exporter. Amid all the projects, partnerships and plans in the region, Middle East producers are facing a period of change and opportunity. Business strategies continue to focus on sustainability, efficiency, recruitment, innovation and the changing feedstock slate – in a bid to boost performance in the coming years. Here is a collection of data to highlight some of these issues.

2007

2008

2009

2010

2011

Year-on-year change

Saudi Arabia

19

20

20

18

13

5

Qatar

41

57

47

43

39

4

United Arab Emirates

47

48

44

47

45

2

Oman

67

62

57

54

52

2

Kuwait

54

55

43

46

56

-10

70 161

76 161

79 163

96 163

95 164

1

Bahrain Total no. of exporters worldwide

*Non-pharmaceutical chemicals SOURCE: WTO

46% Accenture’s estimated share for Middle East non-ethylene base chemical capacity by 2023 – up from 42% in 2013 (page 31)

3m Benzene production capacity in the Middle East by 2017 (tonnes/ year) (page 35)

MIDDLE EAST AND AFRICA TOP 10 LEADERS, $M Rank

Company

Sales 2012

1 2 3 4 5 6 7 8 9 10

SABIC Sasol NPC (Iran) ICL (Israel Chemicals Ltd) Tasnee Industries Qatar Makhteshim-Agan Industries Petro Rabigh Petrochemical Industries Co (PIC) AECI

50,390 11,588 9,017 6,672 4,778 3,445 2,835 2,524 2,494 1,445

SOURCE: Company reports

18 | GPCA Connecting the Gulf DIRECTORY | 2013

Operating profit

% change (reporting currency)

-0.5 14.4 -13.1 -5.6 -8.8 16.1 5.3 16.7 16.5 11

2012

2011

10,915.7 794.9 1,563 1,577 1,096 281.6 488.3 130

13,022.7 1,289.4 1,381 1,926 1,441.8 243.1 372.7 127

40% Increase in chemicals output in the Middle East and Africa from 2012-2020, according to the American Chemistry Council (page 13)

www.gpca.org.ae

FEATURE

WORLD NON-PHARMACEUTICAL CHEMICALS EXPORT GROWTH

5m

% CAGR 2007-2011 25

Anticipated increase in polymer capacity (tonnes/year) in GCC in the next three years (page 13)

World export CAGR (2007-2011) = 8%

20 15 10 5 0 GGC SOURCE: WTO

Middle Africa East (excl GCC)

CIS

Asia

Central North and South Amerca America

Europe

191.2m GCC petrochemicals and chemicals capacity by 2020, according to GPCA (page 39)

6 Percentage of the total GCC

$40bn

manufacturing workforce in the petrochemicals sector (2011) (page 14)

Expenditure allocated by Saudi Arabia for domestic petrochemical projects 2008-2011 (page 14)

GROWTH OF EU IMPORTS FROM THE GCC, 2008-2012

GROWTH OF EU EXPORTS TO THE GCC, 2008-2012

€bn

€bn

70

10

60 8

50 6

40 30

4

20 2

10 0

2008

SOURCE: Eurostat

www.gpca.org.ae

2009

2010

2011

0

2012

2008

2010

2012

SOURCE: Eurostat

2013 | GPCA Connecting the Gulf DIRECTORY | 19

FEATURE

GCC-EU free trade talks hold promise As a huge exporting region, the GCC is advancing free trade discussions with its trading partners – especially the EU, now that it has removed the GCC from its special tariff preference system SEAN MILMO LONDON

T

GCC/EU FREE TRADE TALKS Indeed, it appears the GCC and the EU are once again on the brink of reaching a free-trade agreement (FTA) after 20 years of on-and-off negotiations. Previously the talks have broken down because of the disputes over trade in petrochemicals as well as political differences. This time the major sticking point is also linked to petrochemicals.

If the two sides fail to clinch a deal yet again, the GCC will go into 2014 without any preferential trading arrangement with the EU at all. On 1 January 2014 the EU starts implementing a new Generalised Scheme of Preferences (GSP), under which the GCC and other developing countries are no longer given preferential access to the EU market with reduced tariffs.

The GCC states will be excluded from the new scheme because they are all categorised as high income countries with levels of per capita gross domestic product (GDP) higher than many of the EU member states. With some individual countries – Qatar, UAE and Kuwait – the level is higher than any EU country.

From next year, the EU will apply normal customs duties to all products from GCC countries. “The impact of this… is limited,” the trade directorate-general

European Union, 2013

he Middle East is a large and growing exporter of chemicals, making the issues of duties and tariffs and free trade agreements paramount for producers and governments across the region.

Recent figures from the World Trade Organization (WTO) reveal that the six Gulf Cooperation Council (GCC) states saw exports grow by 25% between 2007 and 2011, the fastest rate of any global region.

The GCC in 2012 accounted for 4% of worldwide chemical exports.

In 2011, these exports were valued at $55bn (excluding pharmaceuticals), an increase from the $34bn recorded in 2010, due both to increased volumes and prices. The upwards export trend is set to continue, as new plants and capacities come onstream in the GCC states. While Asia, and especially China, has been the primary destination for Middle East petrochemicals and polymers, Europe – while slow growing economi-

cally – is still a large market and has proved an attractive one for Middle East producers.

During 2012, they exported €5.2bn worth of chemicals to the EU, with polymers making up the majority of the trade. The figure has been rising steadily, at over 10%/year since 2008, reveal recent figures from Eurostat. Chemical trade the other way was worth €9.9bn, although €3.4bn of this was in the form of pharmaceuticals.

To maintain this strong global trading position, Gulf producers, represented by the GPCA, are firm believers in free trade and have been taking a closer interest in all matters trade-related, through the GPCA’s new International Trade Committee.

Besides taking an active interest in developing free trade talks across Asia and between the US and EU, it has recently been concerned about developments in the EU position, with the latter’s withdrawal of special tariff terms under its Generalised Scheme of Preferences (GSP), from the beginning of next year.

But the good news is that bilateral talks that have

been on hold for many years look as if they are starting up again.

Catherine Ashton, vice president of the EC, at the 23rd GCC/EU joint council meeting in June. The GCC delegation was headed by Khalid bin Ahmed Al Khalifa of Bahrain www.gpca.org.ae

2013 | GPCA Connecting the Gulf DIRECTORY | 21

of the European Commission, the EU’s executive, said in a statement. “The duties on products that the EU imports from GCC countries – minerals, oil and plastics – are low or non-existent. Overall, GCC countries will pay average duties of 1.0-1.5% instead of 0%.”

GPCA points out, however, that the GSP tariff on petrochemicals averages between 2.2% and 3.5% and it will be increased to 6.5% effective January 2014.

An FTA, however, will not just cover tariffs, ensuring that GCC products enter the EU duty-free, but also will deal with non-tariff issues.

Nonetheless, reaching a final agreement may not be easy. The remaining differences between the two sides centre on the GCC’s system for pricing petrochemical feedstocks, mainly natural gas liquids.

Also, from the point of view of some GCC states, the dispute about petrochemical feedstock pricing is linked to the issue of how far the FTA should be able to limit their freedom to take decisions on future trade measures. In line with its policy against export restrictions, the EU is insisting that in any FTA or other trade deals made with non-EU countries there should be an undertaking by the prospective partners not to introduce export duties.

In the trade negotiations with the GCC, the EU has apparently softened its stance on export duties by agreeing to allow them to used on a certain proportion of products. But Saudi Arabia is reported to be opposing any prohibition in the free-trade agreement of export duties, particularly for petrochemicals.

“The WTO allows export duties for circumstances like the protection of the environment and scarce resources,” explains a European trade specialist. “For Saudi Arabia they may become a future way of preventing scarcities of domestic petrochemicals supplies for their expanding downstream industries.”

TRADE REGIME PRAISED In a trade policy review (TPR) of Saudi Arabia last year by the WTO the country was praised for “its outwardlooking trade regime”, which had enabled the country to “successfully weather the (post-2008) crisis without backsliding on trade liberalisation”.

The policy review emphasised the importance of the country’s open trading system in meeting its own goals of economic diversification away from dependence on crude oil exports. Although it was only about Saudi Arabia, much of it could be applied to the other GCC states.

The GCC at present records a massive positive annual trade balance. In 2011 it amounted to $520bn, by far the largest in the world. Around half the trade surplus came from Saudi Arabia, which also accounts for close to half of the GDP of the GCC. The Saudi trade balance, the largest of a single country globally, was slightly larger than that of China.

Much of the GCC’s exports comprise crude oil and gas, with petrochemicals and other manufactured products accounting for only a relatively small propor-

Rex Features

FEATURE

A free trade agreement with the EU would help trade between the two major exporting blocs tion. The bulk of the GCC’s petrochemical exports (53% in 2011) go to Asia, with China, at 14%, being the major destination). Only around 14% are sold in Europe, with North America at 7%, according to the GPCA Petrochemicals database.

Among individual countries, India was the main source of GCC imports, with a 12.1% share in 2010, followed by China with 11.6%, according to trade statistics from the International Monetary Fund (IMF).

The EU’s share amounted to close to 25%, while that of the US was around 10% and Japan 6.5%.

An EU-GCC free-trade agreement could provide a platform for the Gulf Arab states to enter a new era of international trade

GCC intra-trade was equivalent to 8.7% of imports while the Middle East and North Africa (MENA) region outside the GCC accounted for only 3.1%. Among imports, Western countries including Japan supply higher-end manufactured products, such as machinery and transport equipment.

An FTA pact with the EU is important to the GCC because of the big change in its trading patterns required to reduce its dependence on crude oil and gas exports. It needs to ensure access to markets like the EU for the downstream products for which it has plans to manufacture, like automobile components, textiles, pharmaceuticals and construction materials.

22 | GPCA Connecting the Gulf DIRECTORY | 2013

FREE TRADE AGREEMENTS ELSEWHERE Furthermore an EU-GCC free-trade agreement should for the Gulf states lead to trade deals with other countries. At present it has FTAs with Singapore and the non-EU states within the European Free Trade Association (EFTA). But it has been involved in trade agreement talks with several countries and regional blocs including Australia, China, Mercosur, Japan, South Korea, India, ASEAN and New Zealand.

Also, a deal with the EU could open the way to a new type of FTA which goes beyond tariff issues to matters like intellectual properties, public procurement, competition, transparency of regulation and sustainable development. The EU has recently signed such an extended FTA with South Korea.

The EU is currently negotiating an even wider trade agreement with the US which covers a uniform approach to regulations on the safety of products. This prospective TransAtlantic Trade and Investment Partnership (TIPP) agreement will cover areas of relevance to the GCC countries as they widen their exports into downstream and knowledge-based products.

An EU-GCC free-trade agreement could provide a platform for the Gulf Arab states to enter a new era of international trade driven by a range of manufacturing industries based on petrochemical derivatives.

Sean Milmo is a freelance writer based in the UK with wide expertise of covering the chemicals and pharmaceutical sectors, in particular petrochemicals and the Middle East. He is a regular contributor to ICIS Chemical Business magazine

www.gpca.org.ae

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FEATURE

Middle East feedstocks: are they still there?

Feedstocks to supply future petrochemical expansions in the Middle East are getting harder to come by – but investment in refinery integration will help STEFANO ZEHNDER MILAN

TÂ

he Middle East is heavily reliant on natural gas-derived liquids (NGLs) for petrochemical production. Ethane, LPG and naphtha (in the form of natural gasoline) are the light NGLs available from fractionation of liquids harnessed from natural gas processing.

The amount of NGLs recoverable from natural gas is primarily a function of how natural gas production occurs. Associated gas (gas produced in association with crude oil, from crude oil reservoirs) typically includes larger amounts of NGLs than non-associated gas (gas produced from gas and gas/condensate reservoirs). Major differences exist between Middle East producers of light NGLs. Large crude oil production combined with extensive recovery, processing and fractionation in

Saudi Arabia and the UAE allow the most important regional output of NGLs. These two producers account for a combined 57% of regional NGLs, with another 30% from Iran and Qatar. Despite a larger gas output, Iran and Qatar are producing primarily non-associated gas, and yield a proportionally lower volume of NGLs. The remainder of the region is primarily based on associated gas.

All Middle East ethane is destined for petrochemicals, via ethylene production. By contrast only a third of LPG and a quarter of naphtha from NGLs are currently used for petrochemicals, and this includes dedicated propylene plants, aromatics and MTBE. This contributes to a large exportable surplus of naphtha and LPG, primarily exported to Asia.

Ethylene, via steam-cracking, is the key building block of the regional petrochemical industry. Based on what was a surplus gas, mainly produced in

26 | GPCA Connecting the Gulf DIRECTORY | 2013

association with crude oil output, the Middle East ethylene industry grew rapidly on competitively priced ethane. A rapid demand growth and a tight gas market have recently generated concern about ethane availability.

ETHYLENE VOLUMES Ethylene capacity has expanded threefold in the last 10 years, and is expected to average 29m tonnes/ year in 2013. Two-thirds of ethylene production this year will be based on ethane, with ethane demand growing at same pace of ethylene.

Natural gas output has been growing much faster than that of crude oil in the last 10 years, suggesting a larger exploitation of non-associated gas fields, hence a trend for relatively lower NGLs yields. Still, while natural gas production doubled, ethane extraction increased three-fold. The implication is that all available www.gpca.org.ae

FEATURE

INCREMENTAL FEEDSTOCK TO PETROCHEMICALS, 2012-2030 MIDDLE EAST vs NORTH AMERICA Middle East

North America

20 Ethane LPG ex NGLs

Refinery gas Refinery naphtha

15

10

5

0

-5

Ethylene

Propylene

Aromatics

Ethylene

Propylene

Aromatics

SOURCE: ICIS Consulting

MIDDLE EAST ETHYLENE PRODUCTION BY FEEDSTOCK m tonnes 40

www.gpca.org.ae

LPG

Ethane

30 25 20 15 10 5 0

9

20 2

8

20 1

7

20 1

6

20 1

5

20 1

4

20 1

3

20 1

2

20 1

1

20 1

0

20 1

9

20 1

8

20 0

7

20 0

6

20 0

5

20 0

4

20 0

20 0

2

20 03

1

20 0

20 0

0

0 20 0

ethane in the regional gas has been harnessed.

Beyond announced projects in the shorter term, incremental ethane will require incremental gas production. As the cost of producing incremental gas is poised to increase, the availability of ethane at “legacy prices” is questioned. This trend is reflected in the new ethylene projects expected on stream by 2020.

The upcoming Borouge cracker and the two larger Iranian plants are planned on ethane, but their effective full operation will depend on critical upstream developments and timely access to incremental natural gas production. The next projects in Saudi Arabia and Qatar will also depend on new gas plants, with ethane only a portion of the feedstock slate. The main gas projects required to fulfil this ethane scenario include Barzan in Qatar, Wasid in Saudi Arabia and the Integrated Gas Project (IGD) in Abu Dhabi.

A heavier feedstock slate is synergistic with the desire to diversify from ethylene derivatives into a more sophisticated and higher value chain of downstream products, and also supports more labour intensive associated chemical parks. As naphtha and LPG are primarily addressed to export, they tend to be priced at market values. This implies that in mixed feed steam-crackers a valuable portion of the feedstock advantage provided by lower cost ethane is not available.

Looking at ethylene only, the role of ethane does not appear to change until 2020. Despite growing amounts of LPG and naphtha addressed to ethylene, the dominant share of production from ethane is basically

Naphtha 35 Rex Features

Iran shares the North Dome field, the largest natural gas condensate field in the Persian Gulf, with Qatar

SOURCE: ICIS Consulting

unchanged from the last decade, and this share is forecast to remain almost the same until 2020.

The long-term picture is less clear, but some projects under consideration call for naphtha feedstock from integrated refinery operations. While access to incremental ethane is an issue, these trends indicate producers moving to substituting crude exports with higher value products. To fully appreciate the changing structure of regional petrochemical feedstocks, the discussion needs to expand beyond ethylene.

TIME TO DIVERSIFY In terms of light NGLs, Middle East producers have started diversification from ethane. Whilst a cheap ethane feedstock allows highly competitive production of ethylene and its derivatives, it limits the ability to diversify to a wider petrochemical portfolio, preventing large production along fast growing propylene and aromatics chains.

Middle East producers have accordingly developed a number of projects to capture the opportunities beyond ethylene production, broadening the use of light NGLs

beyond ethane. To date, this trend is concentrated on Saudi Arabia, as domestic NGLs are provided at advantageous pricing conditions, reflecting the cost saving associated with shipping and storage.

Once the use of LPG for propylene (in propane dehydrogenation units), MTBE and aromatics is added to the one for ethylene, the growing contribution of this feedstock is more apparent.

Also, more LPG than ethane is necessary for the same amount of ethylene production. Accordingly, the LPG share of light NGLs to petrochemicals has grown to 40% and is expected to remain at that level in the future. Whilst LPG to propylene has increased, consumption by steam-crackers accounts for 85% of total uses to petrochemicals.

The use of NGLs and naphtha for petrochemical productions has increased but remains of relative importance. It includes aromatics production, via Aromax technology to benzene, a route that accounts for a third of NGLs naphtha demand for petrochemicals.

The remainder is used for ethylene production.

Middle East petrochemical producers are

2013 | GPCA Connecting the Gulf DIRECTORY | 27

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increasingly looking at refining complexes for product diversification (see page 14). All new refineries built in the region have important integrations with petrochemicals. Propylene from cat-cracking gases and aromatics (primarily benzene and paraxylene) from naphtha are the main routes. A notable exception is Iran, where condensate splitters are providing naphtha to integrated ethylene and aromatics operations. This naphtha is considered as a refinery product.

Overall, the Middle East is diversifying its petrochemical feedstock sourcing, with the role of refineries increasing. By 2020, about 35% of the incremental feedstock for petrochemical production will be derived from refining operations. Within refinery streams, naphtha will account for the largest feedstock demand, in the form of naphtha.

PRODUCTION INCREASES IN MIDDLE EAST RESOURCES 2002-2012, % CHANGE) 375%

300%

225%

150%

75%

0% Crude oil

ETHANE FOCUS Natural gas via NGLs, however, will continue to provide the majority of incremental feedstock to 2020, with ethane remaining at centre stage. The regional ethylene feed slate will not change substantially, but the call on incremental LPG from NGLs and naphtha from refineries will be significant.

If Middle East feedstock developments are compared with those in North America, major differences are evident. In North America, the natural gas balance is shifting to surplus. In 2012, gas from shale formations ensured that US production remained above that of the total Middle East. Exports via LNG are expected to take place in the next few years, against a tight Middle East market.

Large NGLs yields from shale derived gas and oil have resulted into a surplus of both ethane and LPG, with a large amount of new ethylene and propylene capacity announced to exploit and advantaged feedstock pricing. By 2020, ICIS estimate that 11m tonnes/year of incremental ethane will be addressed to a rapidly expanding North American ethylene industry. This volume exceeds the 10m tonnes/year of incremental ethane to Middle East crackers, despite a similar amount of incremental ethylene production.

Incremental LPG volumes from NGLs operations in the Middle East are primarily addressed to ethylene, whilst propylene via propane de-hydro is the main North American target.

The Middle East is exploiting new refining capacity

Natural gas

Ethane

LIGHT NGLS PRODUCTION IN THE MIDDLE EAST (87M TONNES IN 2012)

By Product

By Producer Qatar

LPG

UAE

www.gpca.org.ae

Project Borouge Gachsaran Ilam Kavian Sadara Al Sajeel

Iran

Naphtha ex NGLs

Kuwait Saudi Rest Of ME

Ethane SOURCE: ICIS Consulting

feed slate will be incrementally heavier than in North America. The Middle East will also leverage its refineries for a much larger aromatics production.

While the Middle East ethylene industry is not expected to remain short of feedstock in the near future, the region will face growing competition from North America. Diversifying feedstock sourcing towards refineries will allow higher value addition to crude oil production, and access to a larger product portfolio. This in turn will require exploitation of technological advantages to move to a more sophisticated and higher value petrochemical industry.

to support incremental propylene and aromatics production. The role of refinery streams in incremental petrochemical production is negligible in North America, as an increase in naphtha to aromatics is compensated by declining demand for ethylene. By contrast, 2.6m tonnes/year of incremental naphtha is forecast in Middle East ethylene plants. Under this scenario, the Middle East

Capacity 1,500 1,100 490 1,000 1,500 1,400

Feedstock Ethane Ethane Ethane/LPG/naphtha Ethane Ethane/naphtha Ethane/LPG

Source: ICSI

Country Abu Dhabi Iran Iran Iran Saudi Arabia Qatar

Naphtha ex NGLs

NGLs

SOURCE: ICIS Consulting

ETHYLENE PROJECTS IN THE MIDDLE EAST, ‘000 TONNES/YEAR Start-up 2014 2014 2014 2014 2016 2018

LPG

Stefano Zehnder is a consultant with ICIS Consulting based in Milan, Italy.

He worked with Parpinelli Tecnon for many years and moved to ICIS when it acquired the business to expand its consulting activities

2013 | GPCA Connecting the Gulf DIRECTORY | 29

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Downstream drive brings added value and jobs

Jaguar Land Rover

A Middle East car industry would stimulate local downstream chemicals demand Jaguar Land Rover is building a presence in the region and looking to manufacture in Saudi Arabia

For a number of reasons, petrochemical producers in the Middle East are beginning to expand production to value-added downstream products, such as engineering polymers JANE GIBSON LONDON

T

he Middle East petrochemical industry is continuing its march downstream from commodity products. Whether the overall aim is building a value-added portfolio, supporting job and wealth creation, or simply taking a broader view of production opportunities in the light of rising gas prices, countries across the region are making sometimes slow but steady progress in their plans.

From a global perspective, the expanding middle classes in Asia and the Middle East mean demand for value-added products such as engineering plastics is increasing, to produce consumer goods. There is also a wider macro-economic trend towards more sustainable and energy-efficient products, which can only be followed by moving further downstream and diversifying production away from traditional polymer commodities.

Engineering plastics have become a focal point for many downstream projects, notably in Saudi Arabia (see box).

Paul Harnick, chief operating officer of KPMG’s global chemicals and performance technologies practice, says: “Saudi Arabia’s strategy is to create a number of downstream industries, including packaging and automotives. You can’t do this with just commodities – you need high-value products, and the chemical industry www.gpca.org.ae

needs to be an enabler of other industries. There is a big push to bring ‘step two’ back into the country. Previously the country produced the bulk product and then exported it. Now they want to create manufacturing ‘clusters’ where the converting is done on site.�

DRIVE TO DIVERSIFY An important driver for the diversification of production is a shortage of gas in the Middle East, which has led to rising gas prices. According to Accenture, ethane prices are expected to rise from $0.75MMBtu into the $1-2/MMBtu range. As a result countries in the Middle East are turning away from gas and towards liquids, building large-scale refineries with associated chemical complexes. Accenture’s figures show that non-ethylene base chemicals are likely to rise from a 42% share of Middle East base chemical capacity in 2013 to 46% by 2023.

The geopolitical reasons for downstream development differ from country to country. In Saudi Arabia, rising birth rates and high levels of unemployment among the young are being addressed through job creation and industrialisation of the country.

Andrew Horncastle, vice president at Booz & Company, says: “You need to have a market to sell the products into. Ideally you produce the product near to the customer. A good example of this in the Middle

East is the Sadara project, where polyurethanes are being sold into the local construction market.�

But while the Saudi government tries to pass wealth down, the middle class is not yet of a significant size.

This means that as the Middle East moves into valueadded products, a large amount needs to be exported.

“Before Saudi Arabia produced the bulk product and then exported it – now they want to create manufacturing ‘clusters’ where converting is done on site�

PAUL HARNICK

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The automotive industry, a key end-use market for several engineering plastics, is one of the downstream sectors targeted for development in Saudi Arabia, with sights set on both local and international consumers.

Jaguar Land Rover has recently announced it is considering building a car manufacturing plant in Yanbu.

Saudi Arabia is leading the way in downstream engineering plastics projects, and other Middle East countries have not yet travelled so far down the valueadded chain.

2013 | GPCA Connecting the Gulf DIRECTORY | 31

FEATURE

At 6.1m tonnes/year, petrochemicals production in the United Arab Emirates (UAE) accounts for 4.8% of total regional capacity, according to GPCA figures. “The UAE is reviewing its chemical strategy and has different motives to move downstream,” says Horncastle.

“While job creation may be important, diversification and value maximisation is a stronger driver – they have the resources, and moving downstream provides a multiplier effect to the economy.”

Projects planned by ChemaWEyaat, a joint venture between Abu Dhabi Investment Council, Abu Dhabi’s International Petroleum Investment Co (IPIC) and Abu Dhabi National Oil Co (ADNOC) remain further upstream at present, as is IPIC’s venture with Oman Oil. However, there are plans to move into more specialized products at a later date.

LNG SUPPLY Meanwhile, Qatar, which has the greatest GDP per capita in the world, is seeking to become the largest liquefied natural gas LNG supplier on the planet. However, it is increasingly focusing on moving downstream from oil into chemicals. “So far it hasn’t been their approach to create an integrated chemical company, but they are looking at diversification of the Qatari economy through downstream joint ventures,” says Horncastle.

Qatar expects to more than double its current production of chemicals and petrochemicals to 23m tonnes/year by 2020, according to Qatar Petroleum (QP), the Persian Gulf country’s state-run energy company. In 2014, QP plans to finance $10bn-13bn (€7bn-10bn) worth of petrochemical projects, and expects to invest up to $25bn over the next five years.

Qapco’s Al Sejeel project is a part of Qatar’s huge expansion plans, and is expected to offer more diverse downstream opportunities as a result of its mixed-feed steam cracker.

Iran has also set itself ambitious targets for petrochemical expansions, with US-led sanctions forcing the country to become more self-sufficient.

According to the National Petrochemical Co (NPC), Iran is expected to account for 41% of Middle East production capacity by the end of the country’s sixth Five-Year Plan in 2020. In terms of value-added plastics, Tabriz Petrochemical Co (TPC) runs a 55,000 tonne/year acrylonitrile-butadiene-styrene (ABS) facility and Shahid Tondgooyan Petrochemical Co (STPC) operates a 130,000 tonne/year polyethylene terephthalate (PET) plant.

LOW-COST ADVANTAGE In Oman, Octal has added two more PET lines at Salalah with a total nameplate capacity of 527,000 tonnes/year, to reach an overall nameplate capacity of 927,000 tonnes/year.

“One way that the region could move downstream and gain a competitive advantage is by using a product where it has a low-cost advantage and adding another component,” says Accenture’s head of global

chemical research, Paul Bjacek. “This could be taking ethylene and paraxylene to produce PET, which has an outlet in nearby markets surrounding the Arab Sea, such as Pakistan and India.”

He adds there are still opportunities in the lowvolume commodity area such as polybutylene terephthalate (PBT), but says for the Middle East to be successful in its downstream plans it needs worldscale plants and the latest technology to compete.

This brings major challenges as countries such as Saudi Arabia seek to develop huge industrial hubs.

“The UAE is reviewing its chemical strategy... [it has] the resources and moving downstream provides a multiplier effect to the economy” ANDREW HORNCASTLE

Vice president, Booz & Company

“The Middle East will need to have more effective systems; for example, they will need to develop a central talent location to do off-site tasks, which then has connections with several construction projects,” says Bjacek. Digitalization becomes more and more important, he adds.

Logistics and the supply chain also remain a key area for investment. While the Middle East is highly experienced in moving materials out of the country to key markets such as Asia, internal logistical structures need to be improved, although there has been investment in the supply chain across the region, for example in ports and the Cross Saudi Railway.

Other areas for improvement remain. Harnick says: “Middle East countries have got the feedstock and the government investment to support the downstream industry, but technology and intellectual property (IP) is lacking as well as product know-how. They can acquire

a licence and contract an EPC [engineering and procurement contractor] to build the plant, but that approach fails to recognize the importance of process know-how – this is where joint ventures with existing producers can be advantageous over licensing.”

Joint ventures with Western and Asian companies, have been the most common route taken so far, with the Dow Chemical/Saudi Aramco Sadara Chemicals complex benefitting from Dow’s experience. The project means 3,000 young Saudis are being trained with help from Dow, but there are few other examples of this in the region.

Andy Talkington, vice chairman and co-head of global industrial practice at CTPartners, says: “There are a fairly large number of graduates starting to come out of universities, but are they educated in the right fields or disciplines, and how applicable are their skillsets to those required by the industry?”

Companies with a large global footprint, such as SABIC, are at an advantage here. However, competition for top offshore talent is only likely to increase over the next years, especially with the US looking for talented engineers and scientists.

Is downstream development in the Middle East gathering enough speed? While R&D spending has grown and investment in human capital is gaining pace, technical acquisitions to move downstream remain limited. In some cases it has been suggested that too many government organisations are involved in the production and industrialisation strategies.

Horncastle says: “Countries need to focus on building capabilities and innovating business models.

They need to consider how they can evolve their market if they are serious about moving downstream.”

Jane Gibson is a freelance journalist with long experience of reporting on European petrochemical markets. She has worked as an editor on both on ICIS Chemical Business and the ICIS pricing service

SAUDI ARABIAN DOWNSTREAM PROJECTS ARE MULTIPLYING ■ Saudi Kayan Petrochemical started up its Al-

■ Sumitomo Chemical and Saudi Aramco’s joint ven-

Jubail-based 260,000 tonne/year polycarbonate (PC) plant, the first polycarbonate plant in the Middle East, in 2011.

■ SABIC subsidiary Petrokemya has signed a deal with Spanish oil engineering firm Tecnicas Reunidas to build a 140,000 tonne/year ABS plant at Al-Jubail, with start-up expected in 2014.

■ Ibn Sina – a joint venture between SABIC and Celanese of the US and affiliate of Duke Energy Corp – is constructing a 50,000 tonne/year polyacetal (POM) unit in Al-Jubail.

■ Mitsubishi Rayon Co (MRC) and SABIC are planning a 40,000 tonne/year polymethyl methacrylate (PMMA) plant in Al-Jubail, to start-up in 2014.

ture in Saudi Arabia, Petro Rabigh, will start up its Rabigh II project in the first half of 2016. This includes ethylene-propylene rubber (EPR), thermoplastic olefins (TPOs) and PMMA. Petro Rabigh is still looking at opportunities in other engineering plastics such as nylon 6, with a study currently underway.

■ Saudi Industrial Investment Group (SIIG) and Arabian Chevron Phillips Petrochemical are planning a polyamide (PA) 6,6 and several polymer conversion projects such as high-performance polyethylene (PE) pipe and PA 6,6 compounding.

■ SABIC affiliate Arabian Industrial Fibers Co (Ibn Rushd) is expanding PET by 420,000 tonnes/year at Yanbu. PTA and aromatics will be onstream this year.

32 | GPCA Connecting the Gulf DIRECTORY | 2013

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FEATURE

Downstream expansions drive aromatics demand The Gulf region looks set to maintain its position as a net exporter of paraxylene, but imports of PTA look likely to increase as more PET capacity comes onstream. Benzene too looks set to remain short, as polyurethane projects materialise BECKY ZHANG, SAMUEL WONG AND SHEAU LING ONG SINGAPORE

T

he Gulf petrochemical industry has grown up predominantly around ethane cracking and the subsequent production of polyolefins and monoethylene glycol. But as the feedstock slate widens, producers are exploiting liquid and refinery streams and looking to add value to their portfolio by moving downstream into products such as polyurethanes, polyester and engineering plastics.

This is driving investment in and demands for aromatics – benzene, toluene and xylenes – and close derivatives such as purified terephthalic acid (PTA) and paraxylene. However, it also means the region will be a net importer of some aromatics for some time to come.

There are a number of expansions in benzene derivatives in the Gulf region planned over the next five years, as companies align with local governments to provide job opportunities for young people in the region. However, demand will be such that the region will have to continue to look for benzene feedstock from overseas, primarily from South Korea, Japan and India, going forward.

New capacities in benzene and its derivatives are dominated by Saudi Arabia. About 850,000 tonnes/

year of benzene is estimated to be added by 2017, of which 96% will be made in Saudi Aramco’s new facilities (see table). This will bring the benzene production capacity in the Middle East up to more than 3m tonnes/year by 2017.

EXPANDING CAPACITY Other companies, such as Saudi Kayan, also have plans to expand benzene capacity in the coming years. At the same time, a new phenol unit and the country’s and region’s first methylene di-phenylene isocyanate (MDI) plant will come on stream. Plans for expansions in styrene monomer (SM) are underway at Sadaf, a joint venture between SABIC and Shell. This further adds to the existing downstream portfolio of nitrobenzene, SM, phenol, cyclohexane and linear alkylbenzene (LAB) in the Middle East.

The Sadara Chemical project – a joint venture between Dow Chemical and Saudi Aramco – will start up a new 400,000 tonne/year MDI unit in the second half of 2016. This will expand the existing polyurethanes sector, which will bring about growth potential going further downstream, into such sectors as building and construction, automotive and transportation,

Rex Features

The Middle East imported around 500,000 tonnes of PTA in 2012, and the import volumes are expected to double in 2014

www.gpca.org.ae

2013 | GPCA Connecting the Gulf DIRECTORY | 35

FEATURE The Sadara complex under construction. It will require aromatics for polyurethane production

sports goods, food packaging, cold chain and refrigeration, and home appliances, contributing to energy savings for the region. Besides this, SABIC is also on track to start up its new MDI plant in 2016, but the capacity has yet to be finalised.

For phenol, Petro Rabigh will start up its new 275,000 tonne/year unit at the same time as its new benzene unit, in the first half of 2016. There will be new LAB capacity as well, of 120,000 tonnes/year, at the Riyadh Oil refinery in 2017.

The Gulf region is currently a net benzene importer (despite recent technical hiccups and outages at downstream facilities) and the forthcoming flurry of benzene expansions in the region will not be able to cover the expected increase in consumption with new derivatives start-ups and higher operating rates at existing downstream units.

TOLUENE IN DEMAND Toluene is also being affected by the move into polyurethanes, as it will expand its usage from the existing solvent sector to the PU segment. Toluene is now primarily used in the Gulf for solvent usage, with the UAE having an average monthly intake of 1,0002,000 tonnes of toluene as a centralised trading centre for end-users to pick up cargoes.

However, the new toluene di-isocyanate (TDI) facilities starting up will multiply the toluene consumption in the coming years. The region’s first TDI unit is expected to be on stream in second half of June 2016.

This has a 200,000 tonne/year nameplate capacity and is part of the Sadara project. A second TDI plant is expected in the same year, owned by SABIC. PARAXYLENE AND PTA Global demand in the paraxylene (PX) market is predominantly driven by growth in the downstream purified terephthalic acid (PTA) sector, and hence the

polyester chain. China is the world’s key market for the PTA and polyester sector, and it imports the bulk of its feedstock PX mainly from surrounding countries in Asia and the Middle East.

In 2012, the Middle East exported a total of around 705,100 tonnes of PX to China, representing a 1.9% year-on-year growth, largely attributed to additional PTA capacities being added into China. Around onethird of PX production in the Middle East is exported, with the remaining two-thirds used in local production of PTA in the region. The Middle East will continue to be a net exporter of PX as China’s PTA sector continues to grow in 2014-2015.

The deficit in PTA supply in the Middle East is set to increase shortly, as a spate of new polyethylene terephthalate (PET) projects is materialising

By the end of 2013, total PX capacity in the Middle East will rise to around 3.55m tonnes/year following the start-up of SATORP’s new 650,000 tonne/year PX unit.

SATORP is a joint venture between Saudi Aramco and France’s Total, which hold 62.5% and 37.5% of shares respectively. Construction works started in early April 2010, with the associated SATORP refinery and petrochemical complex recently being commissioned. All units are scheduled to be up and running by the end of 2013.

In addition, Ibn Rashd in Saudi Arabia is expected to de-bottleneck its PX facility by the end of 2013, in line with its downstream PTA expansion.

The bulk of the PTA facilities in the Middle East are partially integrated with the feedstock PX plants, so

36 | GPCA Connecting the Gulf DIRECTORY | 2013

decisions for expansions generally go hand-in-hand.

However, due to logistics, location and water supply barriers, expansions of PTA facilities have faced difficulties, which have in turn hindered PX expansion in the region.

The deficit in PTA supply in the Middle East is set to increase imminently, as a spate of new polyethylene terephthalate (PET) projects are expected to come online in the fourth quarter of 2013 – most of which have suffered delays. This will shift the supply and demand scenario in the Middle East.

GROWING PET INVESTMENT In Saudi Arabia, Ibn Rushd – a subsidiary of SABIC – is constructing a pair of integrated PTA/PET units at Yanbu. The new 350,000 tonne/year PTA unit and the 420,000 tonne/year PET line are due to be put into operation by the end of this year.

India’s Polyplex Resins was scheduled to start up a new bottle-grade PET plant in Corlu, Turkey, in midOctober, delayed from its initial target of the end of August or beginning of September. The 210,000 tonne/year plant can be expanded up to 300,000 tonnes/year.

Also in Turkey, Koksan was looking to start up its new 216,000 tonne/year PET line in Gaziantep, in early October. The start-up date was originally set for April 2013.

Egyptian company Egyptian Indian Polyester Co (EIPET) was due to have commercial PET available to the market from August this year from its new plant in Sokhna, Egypt, but political instability in the country has resulted in this project also being delayed until the end of November. The facility has two lines of 210,000 tonnes/year each and was originally due online in March or April this year.

With these new facilities, the total PET capacity in the Middle East is set to expand to just over 4m www.gpca.org.ae

FEATURE

GULF BENZENE EXPANSION PROJECTS Company Ibn Rushd Saudi Kayan Yanbu Aramco Sinopec Refining Co (Yasref)* Saudi Aramco Total Refining and Petrochemical (SATORP)**

Location Yanbu, Saudi Arabia Al Jubail, Saudi Arabia Yanbu, Saudi Arabia Al Jubail, Saudi Arabia

Capacity (‘000 tonnes/year) 30 N/A 140 140

Scheduled start-up date 2012-2013 No date 2014 2012-2013

Saudi Aramco Saudi Aramco Petro Rabigh II*** ChemaWEyatt

Ras Tanura, Saudi Arabia Jazan, Saudi Arabia Rabigh, Saudi Arabia UAE

100 220 420 860

2016 2017 H1 2016 No date

*Saudi Aramco has a 62.5% stake in Yasref, China’s Sinopec holds the remaining 37.5% **Saudi Aramco holds a 62.5% stake in SATORP, France’s Total holds 37.5%

tonnes/year by the end of 2013, up by 50% from the current capacity of 2.66m tonne/year. As a result, PET producers in the Middle East may be forced to reduce operating rates to stave off margin pressures from rising feedstock costs amid a glut in global supply. The average operating rate is expected to drop sharply from 2014 onwards from a current high of 90-95% capacity.

Producers in the GCC region will face fierce competition from these new Turkish and Egyptian plants, which enjoy greater proximity to Europe, as well as European plants.

India’s JBF is also set to start up a very large 470,000 tonne/year PET unit in Belgium in the first quarter of 2014. PET producers in the GCC region export a significant portion of their output to destinations such as the US, Africa and South America where they can get better netbacks.

In the fourth quarter of 2012, an influx of competitively-priced PET cargoes from China had created a stand-off between Middle East suppliers and buyers that had weighed down on prices. PET bottle-grade conwww.gpca.org.ae

verters fear this trend will persist in the near future.

The new PET makers are being prompted to seek additional PTA supply, mostly from the Asian region.

The Middle East imported around 500,000 tonnes of PTA in 2012, and the import volumes are expected to double in 2014.

The forthcoming flurry of benzene expansions… will not be able to cover the expected increase in consumption [from] new derivatives start-ups

South Korean PTA producers will benefit from PET expansions, particularly in Turkey and Europe, because of existing free trade agreements. PTA exports from South Korea to Turkey started to enjoy zero import duties from 1 May 2013, and from July 2014 onwards South Korean PTA will be exempt from import duties to Europe.

SOURCE: ICIS/GPCA

The UAE, Oman and Turkey imported one-fifth of their total PTA requirements from South Korea in 2012, and the proportion of Korea-made PTA is likely to exceed 40% in 2013. Indian PTA producers, with new expansion projects, are also looking at the Middle East market although it will take another two-tothree years for them to make inroads in this direction, given a supply short in the country.

Some Turkish PET producers have been seeking to sign supply contracts with Chinese suppliers as they believe that the Chinese will offer the most competitive prices compared with other Asian producers given its huge PTA capacities.

Nevertheless, Chinese sellers are currently focusing more on the domestic market, viewing export business as a balance to domestic sales.

Becky Zhang (far left), Sheau Ling Ong (left) and Samuel Wong are senior pricing editors based in the ICIS editorial in Singapore. They cover a range of commodity chemicals

2013 | GPCA Connecting the Gulf DIRECTORY | 37

Photo courtesy of Sadara Chemical Company

***Saudi Aramco and Sumitomo each own a 37.5% stake in Petro Rabigh. The rest of shares are listed on Saudi stock exchange Tadawul

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FEATURE

GCC accelerates port and rail investment Investment in GCC petrochemical supply chain infrastructure is prioritising capacity expansion, new export routes and an integrated intermodal future

DPWorld’s Jebel Ali terminal, the region’s largest and most efficient port, is being expanded to boost total capacity to 19m TEU a year in 2014 LESLIE MCCUNE LONDON

L

ook around the petrochemical hubs and arteries of the Gulf Cooperation Council (GCC) countries and it is clear that the supply chain infrastructure is in the process of transformational change. New ports, terminals, storage facilities, industrial zones, rail networks and intermodal capabilities are forging new and more integrated trade networks within the Arabian peninsula and developing flexible import/export trade lane alternatives with the key markets of Asia and Europe.

Governments throughout the region are prioritising economic diversification as they seek to reduce their dependence on the “twin pillars” of oil and gas as a source of funds for their massive social, health, education and industrial projects.

Oil revenues account for 50% of the region’s gross domestic product (GDP) and 80% of fiscal export revenues. With the certainty of long-term and substantial expenditure on national development, www.gpca.org.ae

the uncertainty of inherently volatile oil prices has long been recognised as a key vulnerability.

Greater economic diversification initiatives and further industrial integration under the auspices of the GCC’s United Industrial Development Strategy are seen as essential to mitigate this vulnerability.

Development of the petrochemical sector, and its downstream plastics conversion sector, is seen by GCC governments as important to the diversification of their economies.

CAPTURING ADDED VALUE Petrochemical activity leverages the natural cost advantage of the region, creates new job opportunities and captures the added value that is currently exported. After all, why export polymer granules only to re-import them as higher-value semifinished and finished plastics products?

The need for new employment opportunities is particularly acute in Saudi Arabia, where the average age of its population of 27m is 26. As in several

other GCC member states, the large majority of jobs are in the public sector, which is unable to offer enough employment for the demographic bulge of younger people entering the workforce. Private sector job creation, especially in the petrochemical sector and its downstream plastics conversion activity, is therefore being prioritised and stimulated.

And petrochemical production is booming.

According to the GPCA, GCC petrochemicals and chemicals capacity is forecast to reach 191.2m tonnes by 2020, a 50% increase from the 129.2m tonnes produced in 2012. In 2012 itself, GCC petrochemical production capacity increased by 6%, despite the slowdown in global markets caused by the recession in Europe, weaker growth in China and a fragile US recovery.

The complexity of supply chains is also increasing, with polymers and liquids requiring fundamentally different supply chain assets, knowledge and skills.

The challenge of transporting polymers is managing the high tonnages produced. However, for the rapidly-

2013 | GPCA Connecting the Gulf DIRECTORY | 39

FEATURE Rail freight investments in the Middle East will exceed $50bn over the next five years and help inprove intra-regional freight as well as access to export ports

increasing tonnage of higher value-added downstream specialty products being produced – many of which are liquids – the challenge is managing the hazardous characteristics of these products. Saudi Arabia, for example, produced 62 petrochemicals and chemicals in 2012 – in 2017, 170 will be produced.

SUSTAINABLE GROWTH But will the petrochemical supply chain infrastructure be able to meet this growth? A seminal study commissioned by the GPCA in 2010 matched the forecasted production capacity increase against the GCC’s supply chain infrastructure capability. The study concluded that GCC petrochemical growth – 85% of which is exported using long supply chains – was both substantial and sustainable.

Critical to its sustainability was the easing of current supply chain constraints by planned investments in new infrastructure. These are expanding capacity, creating new export/import routes and building an integrated intermodal future.

The GCC’s petrochemical supply chain will benefit from more than $100bn of infrastructure investment in the next five years. Rail freight investments will be over $50bn and more than $25bn is being invested in the region’s ports.

There are currently $97bn of passenger and freight rail schemes planned, or in the process of being executed, in the GCC. In time, they will fuse together to form a 2,117km GCC-wide network that will provide intermodal transport capabilities throughout the region. The largest is the Saudi Landbridge, due for completion in 2018. This will

connect Jeddah with the petrochemical centres of Yanbu and Al-Jubail, offering a strategic alternative to shipping petrochemicals out of the Gulf via the Strait of Hormuz. Similarly, the rail network will create a link from Saudi Arabia though the UAE to the Indian Ocean ports of Oman. The border crossings will be at Al Ghuwaifat on the Saudi Arabian/UAE border and at Al Ain on the UAE/Omani border.

“The complexity of supply chains is also increasing with polymers and liquids requiring fundamentally different supply chain assets, knowledge and skills”

Port expansions feature across the region, partly to enable the key hubs to accommodate larger ships, which have doubled in size in the last decade.

New industrial zones such as the $7.2bn Khalifa Industrial Zone Abu Dhabi and the $4bn Sohar Industrial Zone are creating the critical mass for the development of new hubs. In addition, ports are adding multimodal capability to leverage the new opportunities of the rail network.

In Saudi Arabia, Dammam’s King Abdulaziz Port will gain a much-needed $750m second terminal in 2015. This will ease the chronic congestion that is often associated with the port and others in the region. Al-Jubail’s King Fahd Industrial Port is building two additional terminals at a cost of $40m.

Meanwhile, Jubail Commercial Port will soon open its massive Portside Logistics Facility.

40 | GPCA Connecting the Gulf DIRECTORY | 2013

In Qatar, the new $7bn mega-port near the Mesaieed Industrial Zone will be ready in 2016.

The UAE handles half the containers in the GCC. DP World’s new terminal in Jebel Ali, the region’s largest and most efficient port (and one of the world leaders in productivity) is under construction, and will boost its total capacity to 19m TEU a year in 2014.

The region is the world’s sixth-largest in terms of container port throughput, with 25m TEU handled in 2012 and 10% per year growth forecast to continue on the key Middle East to Asia trade lane.

ACCESS TO THE OCEAN Elsewhere in the UAE, Abu Dhabi’s Khalifa Port will have its new $5bn terminal open in 2015 and could become a significant import/export hub for chemicals. The terminal should address the currently limited amount of waterfront capacity for bulk liquid terminals in the UAE. The UAE’s second-largest port, Khor Fakkan, increased throughput by nearly 30% to 3.3m TEU in 2012. Its capability is world-scale – the 16,020 TEU Marco Polo, the world’s largest container ship, has already docked at the port.

In Oman, Salalah, a strong rival to Khor Fakkan, is expanding its sea-air hub at a cost of $143m.

Further north, the port of Sohar will have a new Hutchinson Port Holdings terminal and will be connected by rail to Al Misfah near Muscat, and on to Duqm port in the south. The port of Sohar will also be connected to the UAE rail network at Al Ain. Both Khor Fakkan and the Omani ports have access to the Indian Ocean, avoiding the Strait of Hormuz.

At the head of the Gulf, Kuwait is rapidly developing the 60-berth $1bn Mubarak Al-Kabir www.gpca.org.ae

Rex Features

FEATURE

seaport, also known as Boubyan Seaport. The port development will have to overcome the local soft estuary conditions to create the deepwater port infrastructure. This will serve Kuwait’s petrochemical exports and provide a platform for the future reconstruction of Iraq. The major petrochemical cracker projects being planned for the Basrah area of Iraq will depend on access through Kuwait or through Umm Qasr or Al Faw ports in Iraq. The Iraqi ports would need major construction work and continuous dredging of the shallow waterways.

COMPETITIVE ADVANTAGE As port capabilities increase to more than 65m TEU in 2016, so too does sea and land access to the ports. Shipping patterns are changing – direct calls at Al-Jubail, Dammam and Abu Dhabi have been added to some container shipping strings – and piracy in the Indian Ocean is being contained.

The demand for containers, driven by the increasing polymer production in the region, will help balance the current surplus of containers: empty containers are predominantly located in the west, on Saudi Arabia’s Red Sea coast, while availability is needed by the polymer producers on Saudi Arabia’s east coast.

Empty positioning of containers is costly, so the lowcost repositioning of empty containers from Jeddah to Dammam and Al-Jubail via the Saudi Landbridge may be an attractive alternative to the sea route. However, overall supply chain costs are rarely optimised by simply adding together minimum cost components.

According to the quarterly Middle East Tank Container Market Review, the specialist tank container industry is also flourishing as the GCC’s www.gpca.org.ae

petrochemical industry moves downstream to capture the value of derivative products, many of which are hazardous liquids requiring shipment in 20-tonne lots. The local tank container depot network is being upgraded and expanded to service the increased demand and cleaning requirements of the more complex products now being produced.

In the hinterland, new road networks are being planned or built. These include the Friendship Bridge between Bahrain and Qatar, an upgrade to the Abu Hadriya highway linking Al-Jubail and Al-Khobar in Eastern Province, Saudi Arabia and a 2015 expressway between Muscat and the UAE. Funding

“The GCC’s petrochemical supply chain will benefit from more than $100bn of infrastructure investment over the next five years”

has also been approved for the Mafraq, Abu Dhabi to Ghuwaifat, Saudi Arabia motorway, which will provide good access to the UAE industrial centre of Ruwais.

Ruwais will be the site of largest integrated polyolefins plant in the world following completion of Borouge 3 in mid-2014. Polyethylene exports to Europe from the site will then increase from today’s 100,000 tonnes/year to 1m tonnes/year.

The growth in GCC petrochemical activity is now sufficient to make large-scale infrastructure that specifically services the petrochemical sector viable.

Third-party bulk liquid chemical storage, for example,

is currently limited and will be developed. Rail terminal and network expertise is being developed through joint ventures with world-leading specialists, with Etihad Rail in the UAE having memoranda of understanding (MoUs) with Switzerland-based Bertschi and Germany-based Hoyer. Construction contracts for stage two of the Etihad Rail project – connecting the railway to Mussafah, the Gulf ports of Khalifa and Jebel Ali, and the Saudi and Omani borders – will be awarded by year-end.

STREAMLINING SYSTEMS But challenges still abound. For the massive spend on petrochemical supply chain infrastructure to be truly leveraged, a customs union within the GCC will be essential. This was planned for 2015.

Documentation and inspection procedures need to be streamlined and globally-accepted IT systems more widely deployed.

Genuine global efficiencies come from effective management of the interfaces along the physical supply chain, such as the simultaneous loading and discharge of multi-product chemical parcel tankers. These efficiencies will rapidly develop as the GCC puts the massive building blocks of its petrochemical supply chain capability into place while harnessing the talent of supply chain specialists.

Leslie McCune is an independent petrochemical and petrochemical supply chain consultant, focused on the GCC. He can be reached at lm@chemicalmanagement.co.uk or + 44 7783 042 664. For information, go to www.chemicalmanagement.co.uk

2013 | GPCA Connecting the Gulf DIRECTORY | 41

Qatar Chemical Company Ltd (Q-Chem) Qatar Chemical Company Ltd. (Q-Chem) is a Qatari company owned by Qatar Petroleum (QP) and Chevron Phillips Chemical International Qatar Holdings LLC (CPCIQ). QP owns 51 percent of Q-Chem and CPCIQ owns 49 percent.

The Q-Chem facility is a world-class integrated petrochemical plant capable of producing high-density and medium density polyethylene (HDPE & MDPE), 1-hexene and other products, using state-of-the-art technology provided by Chevron Phillips Chemical, a major integrated producer of chemicals and plastics.

(CPCIQ).

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FEATURE

Gulf talent search becomes ever more pressing Changing talent dynamics are having an impact on the Middle East petrochemicals industry – and regional producers need to adapt accordingly

The target talent profile of desirable employees will likewise continue to evolve, as international expansion helps to drive the Middle East’s petrochemical industry to implement global management best practices, including but not limited to strategic human resources (HR) and talent management.

With a fierce demand for skilled and experienced professionals within the region, talent recruitment, development and retention are among the most complicated and pressing challenges that GCC petrochemical corporations face. This situation is unlikely to abate anytime soon, given the sector’s rapid growth, global expansion, and transformation.

SHIFTING TALENT CONDITIONS As two professionals with a combined 70 years of involvement in the global petrochemical industry, we have watched a number of trends develop that we believe are game-changers, from a strategic HR and talent perspective. Now, with ageing workforces and expanding requirements for talent, many of the region’s organisations must bring in younger professionals whose skillsets will be somewhat different from the previous norm for this regional sector.

That is an opportunity as well as a challenge, since the regional educational systems are producing a good supply of graduates, well qualified for a wide range of industry positions, along with a growing number of technology-oriented graduates. However, along with this development, there is also more competition for top-quality, younger workers and managers. Simply put, there are many potential employers in the region who are seeking, quite aggressively, to hire a target talent

Rex Features

JIM ASLAKSEN & ANDY TALKINGTON CTPARTNERS

D

uring an era of robust growth and transformation for the petrochemicals industry in the Gulf Cooperation Council (GCC) region, sophisticated talent management will play an essential role in enabling leading organisations to fulfil their key priorities.

Given the wealth of opportunity, as well as the complexity of challenges inevitably associated with major expansion and diversification initiatives, the most promising corporate approaches to developing and retaining valuable human capital within this regional sector will be those that are strategic, comprehensive and based upon a longer-term perspective.

Certain objectives are paramount to help to define any organisation’s talent strategies. While pursuing profitable and sustainable growth trajectories, organisations will continue efforts to nationalise their workforces and management teams, providing rewarding opportunities for educated local populations.

Throughout the region, petrochemical corporations have done well in building local workforces, with the sector consistently – and significantly – outperforming the regional manufacturing sector in this regard. Yet talent supply and demand imbalances remain a continuing reality for the petrochemical producers – a situation that is more pronounced for certain positions and localities than others.

Meanwhile, as the GCC’s petrochemical producers place more emphasis on innovation, value-added products, and the move downstream and into various diversification activities, a wider range of expertise and business experience will become increasingly important in skilled professionals and executives alike.

Regional corporations seeking employees will need to reach out to graduates early in their educational careers 44 | GPCA Connecting the Gulf DIRECTORY | 2013

www.gpca.org.ae

FEATURE

Iam_chihang

Universities in the region are ramping-up their programmes to prepare students for work in the new economic environment

profile whose “DNA,” one might say, will be more innovative, commercially aware and attuned to the industry’s expansion and evolution.

Meanwhile, the target profile continues to evolve.

CTPartners views it as a priority to help Middle East petrochemicals clients recognise the difference between those skills and backgrounds that previously delivered value, and those that we believe will be most impactful moving forward.

This is not to minimise past corporate practices and achievements, of course. But an increased focus on innovation, for example, will make organisations more reliant upon the involvement of employees who are critical thinkers, with entrepreneurial, intellectually flexible mindsets.

Along with the kind of managers who will know how to encourage and reward innovative performance, such professionals will be much more impactful than those employees who have tended to be more passive, risk-adverse, and bureaucratic by nature.

Similarly, during this era of international expansion and growing adoption of global best practices, the most valuable professionals will be those who can combine a local and regional perspective with a global view. Those who are internationally mobile will have a distinct advantage when it comes to career development, since this will enable their employers to rotate them through a greater range of assignments, enhancing their functional and cultural exposure.

GCC organisations are increasingly pursuing the strategy of moving downstream into more value-added, application-oriented products, while also expanding into new geographies. As a result, we expect to see a growing emphasis on recruiting professionals and managers with a broader range of skills and experiences than may previously have been the case, when corporations were basically focused on making the same product and selling it in large quantities again www.gpca.org.ae

and again. This new breed of talent can be expected to offer a more strategic, creative, and innovative skillset in support of the expanded GCC business vision.

In practical terms, it will be critically important for corporations to understand what talent is needed in order to become more innovative, develop these new applications and move downstream, and continue to expand geographically. It will be a key priority to recruit leaders who can contribute a proven record of innovation or the demonstrated ability to engage with a diverse customer base.

Commercial expertise, especially in the areas of marketing and sales, will be increasingly valuable. And, on the whole, workforces will tend to include more professionals with multicultural business experiences, who can contribute a global perspective and greater understanding of the commercial marketplace.

COMPETING FOR TALENT It is not surprising that a complex and rapidly evolving regional business sector requires strategic focus and sustained effort to recruit the most desirable professionals and managers. Making matters more difficult for private sector employers is the reality that the public sector has typically dominated employment for skilled professionals in the Gulf. In this region, the public sector has traditionally been viewed as an attractive, “safe”, and highly sought-after employer, and it will continue to be a formidable competitor for talent.

Yet, within this talent dynamic, petrochemical corporations will need to find ways to successfully recruit and

Many of the region’s organisations face a critical imperative to bring in younger professionals whose skillsets will be somewhat different from the previous norm

retain the target young employees. Indeed, as the corporate workforce needs continue to grow, the competition between the private and public sector for the “best” local talent will only intensify.

But efforts to “poach” desirable professionals can only go so far, given the reality that demand here will keep rising, along with the GCC’s market opportunities.

Within this framework, it is critical for regional corporations to actively engage in developing a broader talent pipeline, by reaching out to young people earlier in their educational careers and finding ways to produce graduates who possess the required familiarity with innovation and commercialisation.

As another noteworthy development, certain types of expansion activities are so new and different in this regional sector that they virtually require reliance upon external talent, at least for now. One good example, which relates to the innovation imperative, is a growing movement to establish liaisons and collaborative ventures with leading universities from around the world, or to establish technical or research-based centres or converter parks in corporate complexes. While local universities are ramping-up their own programmes to prepare graduates to work in this new environment, we can expect to see heavier leadership recruitment from outside the region for these positions.

These programmes offer great opportunity over the moderate to long term as a way of boosting the local talent that is so essential to the Middle East’s petrochemicals industry. As industry insiders recognise, academic programmes alone cannot train the new breed of petrochemical professional – the prerequisite skills depend too heavily upon an understanding of commercialisation and innovation priorities: the kind of understanding that will only come from a closer relationship between the business world and the classroom. By getting involved in innovation centres, academic-industry collaborations and the like, petrochemical producers

2013 | GPCA Connecting the Gulf DIRECTORY | 45

FEATURE

Rex Features

employers will need to appreciate that younger talent – the target professionals who are innovative, critical thinkers – will prefer workplaces where they can expect that their voices will be heard. They will be less comfortable in organisations that appear more hierarchical, with control centred in the hands of older and more senior professionals. We have seen this kind of evolution elsewhere, for example, in Asia. Organisations need to adapt to these expectations if they want to recruit and retain younger talent.

Recruiting and retaining young, well-educated and talented personnel are essential for the future of the industry can take steps to broaden their talent pipeline.

As of now – and in the near term – there seems no way around a reliance on non-Gulf talent to bridge the gap between growth- and diversification-fuelled demand for talent and the local supply – which is growing, but not yet fast enough to keep up. So, expatriats who fit the target talent profile are being recruited to satisfy the managerial and workforce needs of petrochemical corporations throughout the region.

One might assume that it would be relatively simple to recruit talent to the region’s top employers, given their brand-name status and ability to provide desired employees with extremely competitive compensation.

But the hiring dynamic can be more complicated, especially when non-locals are being recruited and they may fear that they would have less opportunity for significant advancement than local talent.

In such cases, petrochemical producers can find it helpful to partner with a search firm that is adept at identifying a broad range of skilled and culturally appropriate candidates; helping those candidates understand the way that their personal and professional goals align with an employer’s strategic objectives; and then onboard candidates through a process that encourages long-term retention.

DEVELOPING AND RETAINING TALENT Within any industry and region, recruiting the right talent is only half the battle. That’s especially the case for the GCC’s petrochemical organisations, since they themselves will be viewed as hunting grounds by both private and public sector employers in search of skilled and experienced professionals.

Given the pace of growth and the intensity of the recruitment demand, it may seem next-to-impossible to

Successful retention is a challenge, yet it is achievable when petrochemical corporations commit to improving their HR capabilities retain top talent in the long run. But, from CTPartners’ perspective, this is not the case. Successful retention is a challenge, yet it is achievable when petrochemical corporations commit to improving their HR capabilities, preferably under the guidance of seasoned HR leaders who are prepared to implement global best practices relating to training, development, and retention.

In a trend that already has gained significant momentum in the US and Europe, corporations are increasingly relying upon HR to enable strategy execution. In such cases, HR leaders partner directly with the corporate leadership team to make certain that the company’s talent development and retention, as well as recruitment, activities are fully aligned with the organisation’s short and longer-term business model.

With such an approach which recognises the importance of an organisation’s “people” assets, HR will develop and implement strategic plans aimed at not only acquiring talent assets, but also developing them (which allows the asset to gain in value), and retaining each asset for as long as possible.

Many elements are involved in this process, including the company’s compensation and communication strategies. The goal is to motivate employees to perform at a high level of excellence and to remain committed to the organisation, by helping them to understand, respect, and share its goals.

As one important element of this process, GCC

46 | GPCA Connecting the Gulf DIRECTORY | 2013

CAREER DEVELOPMENT Meanwhile, world-class HR departments will want to make sure that there are programmes in place that can support a promising employee’s career development – and that employees understand the path to these programmes. For GCC petrochemical employers, this can be a tremendous advantage – so long as managers use it to inspire subordinates to keep performing at their best, taking on new roles and responsibilities just as quickly as possible.

At CTPartners, we strongly recommend petrochemical employers keep the regional sector’s key talent trends in mind as they seek to improve the HR function, including training, career development, and retention programmes.

There will be many benefits, for example, to providing smaller, yet meaningful leadership roles for rising employees. These will enhance their commercial skills, intellectual flexibility, and ability to innovate, while also providing them with multicultural experiences. By rotating professionals through these roles rapidly, these valued employees will become that much more adept in their critical thinking and capacity for innovation, while gaining greater exposure to different functions and cultures.

When it comes to talent development and retention, being proactive is key. At all levels of the organisation, management must take ownership of the team, including its professional development, through methods that include two-way communication to help encourage employee engagement and performance. HR must create a transparent development and success programme that continues to evolve along with the corporation’s growth-oriented objectives and activities.

And it goes without saying that compensation strategies must be competitive within the region.

Accomplishing all of this will take commitment and effort. Yet during an era of transformative growth and development for the Middle East’s petrochemicals industry, transformation will increasingly relate to HR and talent management as well.

Andy Talkington (pictured) is vice chairman and co-head of Global Industrial Practice at CTPartners. Jim Aslaksen is also vice chairman and co-head of the consultancy’s Global Industrial Practice.

Andy can be reached at atalkington@ ctnet.com; Jim can be reached at jaslaksen@ctnet.com

www.gpca.org.ae

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FEATURE

Taking a lead in Responsible Care

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GPCA members have rapidly adopted Responsible Care and are moving forward to third-party validation to give even more credence to metrics reporting

GPCA members have made impressive progress with Responsible Care, gaining full International Council of Chemical Associations (ICCA) membership in three years

WILL BEACHAM LONDON

S

ince its inception in 2006, the Gulf Petrochemicals & Chemicals Association (GPCA) has pushed ahead with great speed in adopting and implementing the global Responsible Care initiative.

Outside observers say the GPCA has swiftly become a global leader in Responsible Care, outpacing other regions and countries that are still struggling to commit to its standards.

GPCA members are now preparing for the next phase of the programme, scheduled for 2014, when environmental performance data, health and safety metrics and other factors will be independently verified for the first time.

GPCA now has 34 full members (representing more than 100,000 tonnes/year of production).

Around 10 of these have Responsible Care 14000 certification, which covers management systems for implementing Responsible Care standards and data gathering. Twenty-eight CEOs from these companies have signed the declaration of support for Responsible Care. These full members represent more than 90% of chemical production in the region.

Qatar’s Q-Chem is the most recent member to be certified for Responsible Care. www.gpca.org.ae

Tahir Jamal Qadir, director of Responsible Care at GPCA, says: “We are not yet ready for full third-party validation and verification of our data, but our members have got the management systems in place so they will be ready to go to the next stage.”

GPCA is organising a lot of capacity-building workshops with experts on specific topics related to data requirements in order to prepare for this. “I’m quite confident they won’t hesitate to go for third-party verification,” Qadir says.

Measurement of performance metrics has progressed in four phases, beginning in 2010, with more metrics added each year. Phase four will focus on 2013 data (reported in 2014) and will include greenhouse gas emissions and carbon dioxide intensity. In occupational safety there are around six metrics; there are three in process safety, eight for emissions and discharges to the environment, three for resource utilisation and one for product distribution.

“We can see progress from 2010 to 2011 but we’d like to have independent verification so the data cannot be questioned,” says Qadir. “At the moment the data is published anonymously on the GPCA Responsible Care website (gpca.org.ae/rc), but company names will be added from 2014. Independent verification will also start in 2014 using external auditors.”

BEYOND THE FENCE LINE Apart from data gathering and reporting requirements, a major focus of Responsible Care for GPCA members is the activities of their external suppliers and contractors, as well as the distribution and supply chain.

During 2013, GPCA has developed seven codes of management practice that cover aspects beyond a manufacturing facility’s fence line, as well as within it. These include Community Awareness and Emergency Response, Distribution, and Product Stewardship and Security. Within the fence line there is Health and Safety, Process Safety and Environmental Protection.

Members will be undertaking self-assessment against these codes by the end of this year. The codes will then be fully implemented between 2014 and 2016, with independent verification coming in at the end of 2016.

GPCA placed a lot of emphasis on the supply chain in 2013, and held a two-day workshop in September with 201 participants. This was entirely focused on contractors and logistics service providers and their compliance with Responsible Care for the environment and health and safety across their business operations. Examples of best practice were presented at the workshop.

2013 | GPCA Connecting the Gulf DIRECTORY | 49

FEATURE

“It has been the sheer commitment by the CEOs plus the leadership of [the] GPCA chairman and secretary general which has brought us this far” TAHIR JAMAL QADIR

Director of Responsible Care, GPCA

“The GPCA is now an active leader in the global Responsible Care movement; it’s been quite remarkable” DEBRA PHILLIPS

Managing director, Responsible Care, ACC

ACTION FOR ASSOCIATE MEMBERS GPCA has 198 smaller associate members that are smaller producers or business or service partners. A plan is being developed to provide support for these members, which can include supply chain companies, service providers and distributors.

“We are helping with technical expertise when they are reviewing their systems, and helping them implement elements of Responsible Care,” says Qadir.

GPCA is also planning to implement the International Council of Chemical Associations’ (ICCA’s) Global Product Strategy, which aims to harmonise availability of product safety data information globally.

All GPCA members will be required to carry out product risk assessments, a process which started in 2012. This year the group is planning a workshop which will go more deeply into how to carry out these risk assessments.

Qadir is proud of the progress GPCA has made with Responsible Care and ICCS membership. “Any associations which want to go for full ICCA membership have to adopt and implement Responsible Care,” he says. “They judge you against eight aspects of Responsible Care. We progressed well and achieved ICCA membership within two years, in early 2013.

They rated us the top performing association globally.”

He adds: “Gaining full membership of the ICCA usually takes five to seven years, but our achievements in Responsible Care were impressive so we were given full membership and a board position within three years.”

There are no national associations in the Gulf region, meaning the GPCA has a big responsibility to represent its members at the national, regional and global level. “It has been the sheer commitment by the CEOs, plus the leadership of GPCA chairman [Mohamed] Al-Mady and secretary general Dr [Abdulwahab] Al-Sadoun, which has brought us this far,” Qadir says.

“They conveyed a message to their companies across the whole association.”

OUTSIDE VIEW ON GPCA Debra Phillips, managing director of Responsible Care at the American Chemistry Council [ACC] and point person for the ICCA leadership group, says the GPCA has been very impressive in terms of the speed of progress it has made since signing up for Responsible Care and ICCA membership.

“Al-Mady brought home to the Gulf the message that Responsible Care needs to be established in the region. He provided the leadership. As they started forming and hiring staff they brought in external expertise. They reached out to [Europe’s trade group] Cefic and the ACC, and we started talking.”

At the time the GPCA joined, the ICCA thought it presented a very aggressive timeframe for an association coming into the ICCA and then submitting its application for membership in Responsible Care.

“It was probably the most comprehensive applica-

50 | GPCA Connecting the Gulf DIRECTORY | 2013

tion that we’d ever seen,” says Phillips. “The GPCA is now an active leader in the global Responsible Care movement; it’s been quite remarkable. They’re taking on this initiative and showing how it can happen with the right corporate leadership and organisation.”

At the last Strategic Approach to International Chemicals Management (SAICM) event in Nairobi, GPCA sent a representative from SABIC to talk about their Responsible Care experiences and associationto-association partnership. “So they’ve even got involved at the very strategic international policy development level,” says Phillips. “It’s remarkable how they’ve gone from start-up to leader within five to six years.”

She believes the Arabian Gulf region can be held up as an example of what the industry can do to contribute to safe chemicals management, and admires GPCA’s progress in developing methods of collecting performance indicators from member companies.

“This is difficult for them as there are many different countries with different reporting requirements,” she says. “This is one of the most difficult parts of Responsible Care – getting a system for collecting this voluntary data from companies. They’re also trying to expand membership to SMEs, getting support in place for them as they embark on the journey.”

She also highlights work the GPCA is doing on contract labour. “There is a lot of contract labour in the region and so they have developed some guidelines.

This is an example of how they have tailored Responsible Care to their own region.”

CHINA BEGINS TO MAKE PROGRESS It is interesting to compare the GPCA to other emerging economies with large chemical businesses such as China, a country that the ICCA is very keen to bring into Responsible Care. The multinationals in China have voluntarily implemented Responsible Care in China for a long time through the Association of International Chemical Manufacturers (AICM). This group does outreach to domestic companies, but they represent a very small percentage of the manufacturing footprint in China, around 8-10%. The rest of the industry is local, and many of these are SMEs. The ICCA’s challenge has been finding a way to build relationships with them, partly through quasigovernmental trade associations such as the China Petroleum and Chemical Industry Association (CPCIA). National companies are members and it has recently opened up to multinationals.

“I feel like just now things are really starting to take shape,” says Phillips. “There is much more active dialogue and open and frank discussions [but] it’s a very different picture compared with the Arabian Gulf.”

Will Beacham is deputy editor of ICIS Chemical Business, based in ICIS’s London offices. He has been covering the chemical industry for over 10 years, and has a particular focus on environment and regulatory affairs, and eastern Europe

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