(MENAFN- Gulf Times) I started my career in the late 1980s as a young engineer wanting to learn, improve and immerse into the new world of the "engineered jungle" widely spread in the industrial cities.
It was amazing to see the whole facilities being well-managed and operated by a pool of skilled dedicated resources and controlled on a 24x7 basis from a small area called a 'control room'.
I consider as very fortunate to witness and to be a part of such great industrial development in our region, starting from my beloved country Qatar, and spreading and growing in the GCC.
Retrospectively, I believe that the decision-makers made some bold and timely decisions in the last two decades, which enabled these countries with diverse source of sustained revenues, social enlightenment, entrepreneurial success, economic growth and global positioning.
Also, some of the other leading factors for successful market leadership in the region's petrochemical industry are given below:
1- Advantageous feedstock: The privileged access to natural resources and advantaged feedstock, which forms the basis for success of our petrochemical business.
2- Mega, integrated and diverse world class project configuration: The mega projects geographically spread out but closely integrated with feedstock sources, wise and prudent project configurations and successive value additions through horizontal or vertical integrations in our entire region to produce an intermediate product and/or the semi and final finished products. Such products are required in all our daily routines for all ages and these include plastics or plastic products, fertilisers, pharmaceutical, chemicals, medicines, cosmetics, furniture, etc.
3- An excellent result as far as the cost, revenue growth, rapid corporate expansion, and margin advantages, as well as the export is concerned, which nearly represents almost 45% of the non-oil export. Most of these exports (representing about 80%) go outside the region.
Also, the total regional production account for 15% of the world production, which is equivalent to the capacity of 140.5mn tonnes in 2013. Last but not the least, the profitable revenues that hit $89.4bn in the same year.
However, following two decades of successful growth and expansions of chemicals and petrochemical industry in the GCC, I am now observing a greater conservative approach by national oil companies (NOCs) and international oil companies (IOCs) with regard to any new investments in greenfield petrochemical projects in the GCC region. These behavioural changes may be due to multiple challenges, which the investors or NOCs are facing because of the following reasons:
1- Shale gas development in North America: Shale gas success story, which further has huge growth potential presented new opportunities for the US petrochemical players due to plentiful supply availability of advantageous feedstock at lower and competitive prices. Additionally, there is potential for shale gas developments in the EU and China in future.
2-China's continued support for coal-based developments: China has ambitious plans to convert coal to olefins and are expeditiously working on innovating the best technologies including for capturing the carbon dioxide (CO2) emissions.
3-Market volatility and lower price of crude oil and gas resources are creating greater pressure on the NOCs or IOCs expenditure plans.
4- Low availability of advantageous feedstock in the GCC: The big players in our region established the industry due to gas-based crackers or based on advantageous feedstock like ethane. However, the region has reached its peak for supply of such advantageous feedstock and now the new ventures or projects are facing growing gas shortage. Further, the natural gas availability is also tightened due to the increasing demand of power as an offshoot of fast urban economic growth.
Nevertheless, the GCC petrochemical players have some clear choices on how to respond to these competitive challenges and threats as well as to keep the petrochemical industries robust and sustainably competitive through a number of strategic options, both upstream and downstream in the industry's business value chain.
These are:
1. Strength and weakness analysis: Conduct an honest assessment of where their current strengths lie along with areas in which they can make the most immediate and dramatic improvements, and then select the strategic response that provides the best match.
2.On order to avoid facing high break even prices, the petrochemical industries have to go through the continuous organisation restructuring assessments.
3.Shifting the focus from fixed costs (such as labour) to variable costs, the much larger portion of the cost base throughout the improvements achieved in energy efficiency, yield improvement, especially because in petrochemicals, these not only reduce cost but also increase production volumes without consuming more feedstock.
4.To increase the margin, by developing and optimising the existing industries to cope with a friendly environment foot prints, production cost and in operating efficiently. Now is the time for the producers to ask a different question: "How much margin could we make if we optimised all our costs and operations?"
5.Optimised growth through synergies, integrations and competitive developments or expansions including vertical integration with the domestic refineries if the strategy to go for a mixed feed or an aromatic options,
Also, extend downstream into performance and specialities chemicals and products, as this option entails expanding the current product portfolio away from basic chemicals.
To succeed, petrochemical players will need to diversify their business models to reflect on different market positions and value propositions for each customer segments.
6. Focus on international growth: Explore opportunities in the US to take advantage of cheap shale gas and in negotiating on few greenfield projects. Also, penetrate through new joint venture opportunities in big markets such as China or other emerging economies.
7. While most olefins (e.g., ethylene and propylene) are currently produced through steam cracking routes, they can also possibly be produced from natural gas (i.e., methane) via methanol and oxidative coupling routes. Although the natural gas is one that consists primarily methane, most of the methane is used as a fuel in most of the industries.
8.Self-reliance through social skill development: Focus on workforce development and talent management. The companies must cope meeting qualified graduates and experienced candidates in the workforce.
This can be achieved by developing and expanding technical or corporate oriented schools, the technical and vocational training centres in the new university complexes that can create more local talent and assets.
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