GPCA Insight Nov 2017

INSIGHT
November 2017 | Annual Forum Edition
THE CHEMICAL LEADERS OF

INDUSTRY IN TOMORROW ENTERS
SECOND YEAR AT
TRANSFORMATION: ANNUAL FORUM
A NEW JOURNEY The GPCA initiative to
promote STEM education
BEGINS and attract talent to
the chemical industry
The 12th Annual GPCA Forum in Dubai takes continues in Dubai
as its theme how companies will have to keep
pace with a fast-changing world to ensure
future success both locally and globally
GPCA LEGACY AWARD
LEGACY AWARD
HONORS GCC
PIONEERS
The annual award will recognize those
leaders that have made significant
contributions to the foundation of the
chemical industry in the region
INSIDE THIS ISSUE WELCOME
I am pleased to present you

NEWS Connecting the Gulf 4 with a larger than usual issue
INSIGHT of our quarterly newsletter
GPCA revamps members directory
November 2017 | Annual Forum Edition GPCA Insight. My thanks to
THE CHEMICAL PETRO RABIGH all the companies that have
INDUSTRY IN READIES PHASE II NEWS Plastics Excellence Awards 5
COMPLETION supported this publication.
TRANSFORMATION:
A NEW JOURNEY
Manufacture of products
new to Saudi Arabia will
create opportunities for
Entries are now being sought for 2018
BEGINS
As usual, the final issue of the
downstream industry and
aid diversification
The 12th Annual GPCA Forum in Dubai takes
year is timed to coincide with our flagship event,

as its theme how companies will have to keep
pace with a fast-changing world to ensure
future success both locally and globally NEWS Eco-study of polyolefins 7
Study will improve plant operations the Annual GPCA Forum in Dubai, which this year
takes as its theme: ‘The chemical industry in trans-
formation: A new journey begins’.
LEGACY AWARD
NEWS Leaders of Tomorrow continues 8
HONORS GCC
PIONEERS The initiative enters its second year The content reflects this, through interviews with
The annual award will recognize those
industry leaders – both from the GCC region and

leaders that have made significant
contributions to the foundation of the
chemical industry in the region
NEWS Legacy Award launched in Dubai 10 globally – and feature articles on issues that are
Initiative honors GCC industry pioneers driving this transformation, such as M&A, digitiza-
tion and China’s One Belt, One Road strategy.
FEATURE Petro Rabigh expands 14
As Yousef Al-Benyan, CEO of SABIC and Chair-
New complex adds downstream potential man of GPCA notes in his interview (page 17),
“Ready access to competitively priced feedstock
INTERVIEW Yousef Al-Benyan 18 and proximity to the most prosperous markets
SABIC CEO on growth and sustainability make the [GCC] region the world’s first choice for
Page 14 new petrochemical production facilities. However,
INTERVIEW Bob Patel 25 global trends show that cheap raw materials are
becoming available elsewhere.”
LyondellBasell CEO looks to expand
In such an environment, GCC producers need
INTERVIEW Rebecca Liebert 28 to think about consolidation, efficiencies and
Honeywell UOP CEO talks on digitization expansion and investment outside their domestic
markets. The Annual GPCA Forum will address
INTERVIEW Markus Steilemann 31 all these issues and more, with a line up of expert
speakers from all corners of the globe.
Page 25 Covestro focuses on key sustainability goal
Now truly is the time to begin the next stage of the
FEATURE M&A activity continues 33 journey – the first steps of which we celebrate at
GCC is set to play their part the Forum with the launch of our Legacy Award,
designed to recognize and honor the pioneers of
FEATURE Free trade under threat 37 the Arabian Gulf chemical industry.
Increasing protectionism is underway
Yours faithfully,
Dr. Abdulwahab Al-Sadoun
FEATURE China looks outwards 41 Secretary General, GPCA
Page 33 The OBOR strategy has huge implications
ICIS, Quadrant House, The Quadrant, Sutton,
INSIGHT Surrey, SM2 5AS, UK

[email protected]
www.icis.com
GPCA HQ Editor John Baker [email protected]

Tel : +971 4 451 0666 Production Rachel Warner, Terence Burke Presented by:
PO Box: 123055 Designers Christine Zhang, Lucy Xiao,
1601 and 1602, Level 16 Fax : +971 4 451 0777 Shirely Xiao, Lin Ning, Sonja Ye
Vision Tower, Business Bay Advertising [email protected]
Dubai, United Arab Emirates www.gpca.org.ae Printers Atlas Printers, Dubai
© GPCA 2017
www.gpca.org.ae November 2017 | GPCA INSIGHT 3

NEWS
‘Connecting the Gulf’ gets GPCA reports
print and online revamp now available
G
The GPCA members’ listing publication and website will both be available at the time PCA is releasing a number of new
of the Annual GPCA Forum – users will see improvements in ease of use reports during and after its 12th
Annual GPCA Forum in Dubai,
A
n improved product finder search category listings. Easy colour coding and including its statistical 2016 Facts and
function is the main innovation to section dividers make ease of finding Figures Report.
this year’s GPCA ‘Connecting the company details easier than before.
Gulf’ online members directory, which Three co-branded reports are also
can be accessed at www.gpca.org.ae/ The publication has been reformated into a now being launched, entitled: ‘The
congulf from the end of November. convenient A5 fomat, again for easy of use threat of free trade and its impact on
and consultation. Delegates to the Annual chemicals’, with chemicals consultancy
The search engine, sponsored by Forum in Dubai will each receive a copy ICIS; ‘Consolidation as a road to
ExxonMobil Chemical, not only lists all when they register at the event. transformation’, with Boston Consulting
products made by GPCA full members, Group; and ‘Accelerating organizational
but gives a succinct but useful description performance in the petrochemical
of each product and its position in the industry’, with Heidrick and Struggles
petrochemicals chain. Nearly 120 chemicals Consulting.
are listed and described, from acetic acid to
vinyl chloride monomer (VCM). Also out is the 8th GPCA Fertilizer
Convention post-event report, released in
GPCA has also improved the overall look November.
GPCA F
and feel of the web site, which as before HE GUL
ON N ECTING T
gives details of all GPCA members and C If you’d like
2018
y 2017 -
their activities. The site is being sponsored Members
Director to have a free
overall by DP World. copy of all
GPCA post-
The print version has also been revamped event reports,
for 2017, and will be available at the Forum visit the GPCA
in a new concise form, with all members’ stand in the
address and contact details arranged Annual Forum
alphabetically within five separate member exhibition area.
EQUATE celebrates 20 years and new HQ

K
uwait’s EQUATE Group earlier this a critical phase of its journey of success of economic pride.”
month celebrated 20 years since and brilliance – as a global industrial
its formation, at the same time enterprise we are proud of – and a source EQUATE’s President and CEO, Mohammad
as inaugurating its new headquarters in Husain, noted: “This event is not only a
Ahmadi, Kuwait. The celebration, entitled celebration of past achievements… it is part
“The Shape of Things to Come, was attended of EQUATE’s journey towards the future
by Kuwait’s Minister of Oil and Minister of based on trust, innovation, sustainability
Electricity & Water, H.E. Essam Al-Marzouq, and continuous development.”
and the Governor of Ahmadi, H.E. Sheikh
Fawaz Al-Khaled Al-Hamad Al-Sabah. EQUATE’s new headquarters is qualified
to be certified in the Leadership in
Picture - credit style
The Deputy Chairman and CEO of Kuwait Energy and Environmental Design
Petroleum Corporation (KPC), Nizar Al- (LEED) program. It is designed, built and
Adsani, and former and current members of operated as a sustainable building that
EQUATE’s board were also present. Ahmadi EQUATE CEO Mohammad Husain (right) meets the most advanced and eco-
governor Al-Sabah said: “EQUATE begins… celebrates 20 years of the company friendly universal standards.
4 GPCA INSIGHT | November 2017 www.gpca.org.ae

NEWS
Plastics awards entries now open Borouge
files 520
The search is on for the 2018 winners of the GPCA’s annual PlastiCon event, which takes
patents
Plastics Excellence Awards, designed to reward innovation place on 14 March 2018.
Companies and individuals can
B
enter the Plastics Excellence orouge’s Innovation
Awards six different categories. Centre has filed 520
GPCA is looking for outstanding patents on new products
initiatives and achievements in up to the end of September
the field of plastics conversion, 2017 and has so far obtained
plastics process improvement 122 patents. Ahmed Al Shamsi,
and new product development. Senior Vice President at
Borouge, says that 15% of the
A judging panel of leading ex- company’s sales come from
perts from the plastic and down- products developed by the
stream industries in the GCC will Innovation Centre.
pick the winning entries in the
fields of material use, design, Borouge and its Austrian
The Plastics Excellence Award winners from 2017 manufacturing, processes and joint venture parent Borealis
environmental sustainability. have launched Anteo, a new
G
PCA is looking for nomi- across the entire polymer value family of linear low-density
nations for its 8th Plastics chain in the Arabian Gulf region. To apply for GPCA Plastics polyethylene (LLDPE) packaging
Excellence Awards, to Excellence Awards, please visit grades for the global packaging
recognize industry excellence, Winners will be presented with www.gpcaplastics.com/about- market. Anteo delivers easy
best practice and innovation their awards at GPCA’s 9th awards/apply/ processability at lower extruder
pressure, better sealing
integrity and improved puncture
Innovation in action at AkzoNobel resistance in combination with

strong optics for enhanced shelf
appeal, say the companies.
In the run-up to the 5th GPCA Research & Innovation (R&) Summit, GPCA is launching regular
coverage of innovation in each quarterly edition of its GPCA Insight newsletter to facilitate Anteo is produced solely
knowledge sharing and exchange of best practice among its readers at Borouge’s Ruwais, UAE,
plant, using Borealis’s Borstar
D
utch coatings and Wylick, the partner leading the Bimodal Terpolymer (BBT)
specialty chemicals Innovation Consulting Team at technology. The film is intended
company AkzoNobel KPMG in the Netherlands. for use in high performance,
this year launched an initiative multilayer flexible packaging
with consultancy KPMG to In June, 20 start-ups from more applications using. The first
stimulate technology start-ups than 200 submissions were grades in the Anteo product
and academics to work with its invited to attend the final event family, Anteo FK1820 and
AkzoNobel
specialty chemicals business in the Netherlands. Over the FK1828 are now commercially
and find solutions to some of course of two days, more than available in Europe, the Middle
the most urgent chemistry- Winners of this year’s Imagine 90 experts from AkzoNobel and East, Russia, Africa and Asia.
related challenges. Chemistry challenge partner organizations, including
KPMG and Lux Research,
The initiative, known as Imagine it says, to keep meeting worked with the start-ups to
Chemistry, has as its goal the customers’ needs and reach develop their ideas and define a
creation of a more sustainable the company’s goal of being clear route to market.
and live-able world through carbon neutral by 2050.
better chemistry. Innovation GPCA is holding its 5th R&I
through partnerships with “The challenge was open Summit on 11-13 March 2018
Borouge
start-ups is central to Akzo- to everyone who joined and in Dubai under the theme:
Nobel Specialty Chemicals contributed: open innovation in “Capitalizing on innovation: A Anteo PE film is being made
growth strategy. It is critical, its truest form,” says Ank van growth imperative”. solely in the UAE at Ruwais

E)f(onMobil
Our chemistry plays a key role in enabling the manufacture of affordable,

sustainable and safe products that are helping to meet the growing demands
in enabling the manufacture
of an increasing of affordable,
global population. They are moving the world forward by
that are helping toeconomic
supporting meet the growth,
growingenhancing
demands opportunity and improving the
They areofmoving
quality life for the world
people forward by
everywhere.
enhancing opportunity and improving the
Learn how at www.exxonmobilchemical.com
al.com
exxonmobilchemical.com
NEWS
Eco-study will enable polyolefin SABIC
plant improvements to be made names new
GCC producers of HDPE and
PP have relatively low envi-
we will all contribute to reducing
the environmental impact of our
chairman
ronmental impacts, according existing polyolefin plants, as well
D
to a new GPCA eco-profile as making informed decisions r. Abdulaziz Saleh
report for future plants.” Aljarbou has been
chosen as the new
I
n line with its commitment The study was completed by Chairman of SABIC’s board
to advance the sustainability IFEU, an internally recognized of directors, replacing
agenda in the Arabian Gulf independent environmental Prince Saud bin Abdullah
region, GPCA has released a and energy consultancy, and bin Thenayan Al-Saud, who
study entitled ‘Eco-Profile of is based on 2014 data. To was with the company for 15
Polyolefins (HDPE and PP) in guarantee the validity of the years. The move was made at
the GCC’. “We will all study and to allow comparison the company’s Extraordinary
contribute to to European data, the General Assembly in October.
This highlights the sustainability assessment was conducted
efforts of GPCA member
reducing [our] according to Plastics Europe’s During the meeting, Yousef
companies that are producers environmental Eco-Profile methodology and bin Abdullah Al-Benyan, was
of polyethylene (PE) and impact to ISO 14044:2006 for life-cycle confirmed as Vice Chairman
polypropylene (PP), namely assessment (LCA). of the Board of Directors and
SABIC, EQUATE Petrochemicals, Craig Halgreen CEO, while Dr. Fahad Abdullah
Orpic, Saudi Polymers, Tasnee, VP, Corporate The main outcome of the Al-Mubarak, Calum Mclean
NATPET and Borouge. Sustainability, study is that GCC producers’ and Roberto Gualdoni were
Borouge operations have a lower appointed board members.
Leader of the project team, environmental impact in all
Craig Halgreen, VP Corporate categories except for the Global Aljarbou commented that:
Sustainability at Borouge, said: Borouge’s operations and Warming Potential (GWP), “I will contribute with full
“Understanding the average improve where necessary. Primary Energy Demand and commitment to the company’s
environmental impact of the Abiotic Depletion Potential, efforts to fulfil the objectives
production of polyolefins “As we expect other producers compared to European of Saudi Vision 2030.”
allows us to benchmark across the GCC to do the same, operations.
Prior to assuming the new
position, Aljarbou was on the
HSE initiatives accomplished board of several companies,

including Saudi Paper
Manufacturing Company, United
G
PCA has this year in order to deliver a convincing new online system for GPCA Lubricating Oil Company and
completed several argument to regulators. members has been developed Gulf Oil Industrial Company.
initiatives in the field and implemented.
of health, safety and the In a further initiative, GPCA has
environment (HSE). In the area of extended the use of Responsible Finally, the industry association
transport of chemicals, a GPCA Care to logistics providers, held its first workshop during
task force has finalized a position successfully launching its 2017 on the subject of human
paper on Dangerous Goods Road “Responsible Care for Logistic factors and their role in reducing
Transport (DGRT) and circulated Service Providers” in October risk and increasing safety at work.
it to GPCA member company 2017. It has also launched a
CEOs, asking for feedback and Peer Review Program within Ongoing work includes two
support on the initiative. Responsible Care and conducted new position papers under
a first pilot review successful development covering
Technical papers are now in pilot during the year. And, to Environmental Sustainability
production, highlighting the make it easier for members to of Supply Chains and the
requirements and components of submit their annual Responsible Importance and Benefits of Free Dr. Abdulaziz Saleh Aljarbou
the proposed DGRT regulations Care performance metrics, a Trade Agreements. takes the chair at SABIC

NEWS
Leaders of Tomorrow enters ADNOC
second year at Annual Forum unifies
Young students from across the GCC region attended the recent GPCA Fertilizers
Convention in Bahrain as part of its Leaders of Tomorrow program
branding
U
nited Arab Emirates’
energy major ADNOC
G
PCA will begin the sec- has unified its subsid-
ond year of its Leaders iaries under one brand name
of Tomorrow (LOT) to “highlight the scale of its
program on Day 0, 27 November business” and its contribution
at the Annual GPCA Forum in to the UAE’s economy, the
Dubai. company said in mid-October.
It added that the unified
Students from across the GCC entity would have a central-
have been selected to attend ized governance model while

the Forum and undertake a pro- maintaining the autonomy of
gram of events under the theme each company.
“Transformational leadership:
The journey of transformation”. Young students in Bahrain at the GPCA’s Fertilizers Convention “We are confident that bringing
the group together under one
GPCA has held LOT events at fertilizer industry and network Company’s (GPIC) fertilizer brand will significantly enhance
four of its conferences in the with industry leaders. facility. the visibility and positioning
last 12 months, with the most of ADNOC at a local, regional
recent group of students at- The program consisted of a Leaders of Tomorrow is an initi- and international level,” said
tending the 8th GPCA Fertilizer student-only seminar and a ative by GPCA and its stake- CEO Ahmed Al Jaber. ADNOC
Convention on 26 September workshop with tailor-made holders that aims to bridge the added that its new brand was
in the Ritz Carlton, Bahrain. content and hands-on experi- gap between academia and in line with its 2030 growth
Supported by SABIC, this ence delivered by consultancy industry and promote science, strategy, which aims to deliver
provided students an opportu- Nexant. Students also visited technical, engineering and more profitable upstream and
nity to learn about the regional Gulf Petrochemical Industries maths (STEM) education. downstream businesses.
GCC fertilizers have growth opportunities

F
ertilizer producers in the pportunities there are to grow
o
Arabian Gulf region are “[Technology the GCC’s role as a global
uniquely positioned to production hub for high quality
will] benefit
capitalize on future opportuni- fertilizers.
ties for growth and to unlock the industry
more value from their business, significantly” The minister stressed the
according to speakers at the roles of efficiency in improving
recent 8th GPCA Fertilizer H.E. Shaikh performance and cost and of
Convention. Mohamed bin technology as a fundamental
Khalifa bin Ahmed game-changer that will “benefit
They have the opportunity to Al-Khalifa the industry significantly”.
increase resilience and capture Minister of Oil, In his inaugural address at the
more value from existing Bahrain event, held at the Ritz Carlton, He also pointed to the
assets by focusing on opera- Bahrain, on 26-28 Septem- promising opportunities
tional efficiency, supply chain ber, H.E. Shaikh Mohamed presented to the GCC, despite
integration and portfolio di- and services that support bin Khalifa bin Ahmed Al- current market uncertainties,
versification, and by providing crop productivity and improve Khalifa, Bahrain’s Minister oil price volatility and slow
innovative fertilizer products fertilizer use. of Oil, highlighted the major economic growth.

Qatar Fuel Additives Company Limited The OE program focuses on improving performance
and efficiency through three main levers:
(QAFAC) was established in 1991 as a joint venture
between Industries Qatar, OPIC Middle East Corporation, • State-of-the-art operations and equipment
International Octane LLC and LCY Middle East Corp. The
• Continuous and effective performance monitoring and
company started its operational activities in 1999.
management
QAFAC owns & operates facilities at Mesaieed in the state • A culture of innovation, ownership, accountability, and
of Qatar for the production of Methanol and Methyl Tertiary self-improvement at all levels of the organization
Butyl Ether (MTBE) for sale to customers worldwide. Our
plant produces 983,330 TPA of Methanol and 610,000 TPA As a company rooted in Qatar, our Corporate and
of MTBE. Sustainability Strategies are oriented on objectives,
goals and targets established by Qatar National Vision
QAFAC has progressively evolved from a growth-oriented 2030 and National Development Strategy 2011-2016.
strategy to a corporate strategy structured around the core QAFAC’s main principles for following our journey “Toward
principle of Operational Excellence. In late 2013, QAFAC Sustainability Leadership” are outlined in our Sustainability
began Operational Excellence (OE) program to reinforce Policy. It is the roadmap to fulfilling our commitment to
its leadership position in the Industry, and to transform adopt sustainability management practices up to the best
work processes through the introduction of world-class of national and international standards, and developing
tools and practices that increase performance, efficiency internal management systems, policies, procedures and
and reliability. The main goal of the program is to further tools that support the company in achieving its objective of
strengthen QAFAC’s position as a leading producer of Operational Excellence. The sustainability policy expands
methanol and MTBE. on our sustainability framework and describes the high
level approach of addressing, implementing and evaluating
our progress across each pillar of the framework.
QAFAC is an active member of

the following associations: Qatar Fuel Additives Company Limited
• AWMA
The Gate, Bay Tower 2, 13th Floor,
• ROSPA
PO Box 22700, Doha, State of Qatar
• GPCA
• MKOPSC Telephone: (+974) 44766777
• ACS Email: [email protected]
• Methanol Institute www.qafac.com.qa
• Asian Clean Fuels Association
LEGACY AWARD
GPCA honors
chemical pioneers
GPCA is launching an annual Legacy Award at this
year’s Annual Forum to recognize those leaders
that have made significant contributions to the
foundation of the region’s chemical industry
T
hree pioneers of the chemical and Nominations for the GPCA Legacy Initiative Each of the GCC countries is represented
petrochemical industry in the Arabian and the GPCA Legacy Award “Al-Rowad” on the Committee. Nominations can also be
Gulf are being recognized at this are currently made by members of a made by GPCA Board Members who wish
year’s Annual GPCA Forum in Dubai, as Nomination Committee, which is made up to put forward a candidate for consideration
the industry association launches its GPCA of long-time veterans of the petrochemical by the Nomination Committee, provided he/
Legacy Initiative and GPCA Legacy Award industry in the Arabian Gulf region. she meets the nomination guidelines.
“Al Rowad”.
The three leaders being honored are Dr. Dr. Ghazi Al-Gosaibi
Ghazi Al-Gosaibi (1940-2010) of Saudi Saudi Arabia’s Minister of Industry and Electricity (1976-1983)
Arabia; Yousif Al-Shirawi (1927-2012) of
Bahrain; and Abdulbaqi Al-Nouri (1929- The first Chairman of SABIC, he will be cooperation among Arabian Gulf states.
2010) of Kuwait. recognized for his instrumental role in In 1980 SABIC joined the Bahraini
founding SABIC and leading it into a path government and the Petrochemical
Special award ceremony will take place of great development and success. Industry Company (PIC) of Kuwait to
at 5.30pm on 28 November, Day 1 of the form the Gulf Petrochemical Industries
Annual Forum at the Madinat Jumeirah. Widely admired in Saudi Arabia Company (GPIC).
for his many-faceted
The first of its kind in the region, this annual career, his charismatic In 1982 Al-Gosaibi was
program will honor individuals who have character, his frankness, named Saudi Arabia’s
made extraordinary contributions to foster his championing of Minister of Health.
and strengthen the development of the modernization in After stepping down
chemical and petrochemical industry in one Saudi Arabia, his from this position,
or more of the GCC states. contributions as a he served as Saudi
novelist and poet, and Arabia’s ambassador
It will further aim to recognize, preserve and his role in establishing to Bahrain (1984-
make known the achievements of those the Disabled Children 1992), its ambassador
individuals who set the foundations for the Society, Al Gosaibi is to the UK (1992-2002),
regional chemical industry and played a recognized by GPCA for his its Minister of Water and
pivotal role in establishing its position as an pioneering role in establishing Electricity (2002-2004), and its
important global player. a basic chemical industry in Saudi Minister of Labor (from 2004).
Arabia and laying the path that has led
Each year from now on, individuals will to the flowering of a robust private and Dr. Al-Gosaibi also played a prominent
be recognized as Arabian Gulf Chemical state-owned Saudi chemical sector. role in the modernization of many
Pioneers by the GPCA Legacy Initiative. aspects of Saudi life. In many ways,
The GPCA Legacy Award “Al-Rowad” will As SABIC was evolving, Dr. Al-Gosaibi he showed the path that Saudi
be bestowed on one of them or upon one furthered the formation of the chemical entrepreneurs could follow in creating
of the pioneers who was selected in a industry in Bahrain and promoted private Saudi chemical enterprises.
previous year.

LEGACY AWARD
Candidates for the initiative can be of any
Yousif Al-Shirawi nationality but must have been based in
the Arabian Gulf region when realizing the
Minister of Development and Industry, Bahrain (1971-1995)
achievements for which they are being
He will be recognized for the key role he put him in a position to create a chemical recognized.
played in establishing a petrochemical industry in Bahrain. In 1977, Al-Shirawi
industry in Bahrain, in addition to approached his counterparts in the In addition, they must have retired for
the formation of the Gulf Kuwaiti government and three years from all involvement in the
Petrochemical Industries proposed the establishment of petrochemical industry; that is, no longer
Company (GPIC), the first a Kuwait-Bahrain chemical occupying an executive position with a
and only regional GCC joint venture in Bahrain. regional government entity (e.g., a ministry)
joint venture. or any company or agency that is directly
In 1979 his overtures engaged in the manufacture, marketing and/
Yousif Al-Shirawi is led to the formation or distribution of petrochemical products.
remembered and of the Kuwait-Bahrain
honored by GPCA for Chemical Company, The candidate may be deceased and must
the pioneering part he a 50:50 JV of Kuwait’s meet one of the following qualifications:
played in establishing Petrochemical Industries
Bahrain’s vital chemical Company (PIC) and the • Formulated and implemented state policy
industry and in championing Bahrain National Oil Company that successfully initiated or dramatically
regional cooperation in the (Banoco), both state-owned. expanded the chemical industry in a given
chemical sector. A few months later, in 1980, SABIC of Arabian Gulf country.
Saudi Arabia joined the partnership
Al-Shirawi became Bahrain’s Minister of and the enterprise was renamed Gulf • Launched and led a state-owned or
Development and Industry in 1970. This Petrochemical Industries Company (GPIC). privately held GCC-based chemical company
or companies that have become lasting
enterprises and a significant economic force.
Abdulbaqi Al-Nouri • Played a leadership role in fostering the

former Chairman and MD of Petrochemical Industries Company (PIC) development of a successful joint venture in a
GCC country.
He will be recognized for his tireless player in the chemical fertilizer sector,
building of the chemical industry of Kuwait exporting to 42 countries. Dr. Abdulwahab Al-Sadoun, Secretary General
and leading Petrochemical Industries of GPCA, comments, “These prominent
Company (PIC) for nearly two decades. By the time EQUATE was formed, individuals were the first to realize and explore
Al-Nouri had already left PIC. He had the potential of setting up a chemical industry
In 2010 Abdulbaqi Al-Nouri passed away stepped down in 1990 as Managing in the region by challenging the status quo,
having lived a life of service for his Director and Chairman. However, by overcoming any obstacle in the way and
country. He is recognized by during his tenure at PIC he had illuminating the road for the next generations
GPCA for his spearheading set the foundations for the to come.
the development of company’s future success
Kuwait’s chemical and had laid out the “Through this initiative, GPCA seeks to
fertilizer industry and strategy for its evolution pay tribute to their life and achievements,
laying out the strategy into an important foster national pride and inspire current and
that PIC followed to diversified global future generations to emulate outstanding
become an important chemical company. individuals from our industry’s past.”
manufacturer of After retiring from PIC,
aromatics and olefins. Al-Nouri pursued his
interest in education,
Through the 1970s, Al- becoming Chairman of
Nouri successfully continued the Board of the Al-Nouri
the ongoing expansion of PIC’s Educational Corporation.
manufacturing capacity and market
reach. New fertilizer plants were built He was also a member of the Board
in Shuaiba, and by 1980 PIC was the of the International Fertilizer Industry
largest chemical company in the Arabian Association (IFA). He served as its
Gulf region. It also was a major global Chairman from 1985 to 1987.

FEATURE
Creating the opportunity to

shape downstream potential
Petro Rabigh is in the final stages of starting up a major new petrochemicals
expansion that will create jobs and attract downstream converters
Petro Rabigh
Petro Rabigh’s Phase II expansion adds new chemicals to the Saudi Arabian product slate
R
abigh Refining and Petrochemical • low density polyethylene (LDPE), used • paraxylene, which goes into artificial
Company - Petro Rabigh - is in the in extrusion coating food packaging and textiles and fibers as well as food
process of starting up its new Phase injection molding applications packaging and
II units, an expansion and diversification
program the company believes is set • ethylene vinyl acetate (EVA), used in foam • benzene, used in several industrial
to shape the future of the downstream applications such as shoes and protective compounds for the manufacture of
industry in Saudi Arabia by ushering in a food packaging polystyrene and engineering plastics,
new wave of investment and job creation in synthetic rubber, nylon and detergents
innovative industries. • ethylene propylene rubber (EPR), used
to make sealing products, electrical As the first producer in Saudi Arabia of PA6,
According to Petro Rabigh, the new high equipment and automotive parts Petro Rabigh is targeting local consumer
value-added products were selected with markets that prove resilient in the face
local industry in mind, aimed at making • thermoplastic olefin (TPO), used in the of market fluctuations, such as the food
existing industries more competitive locally manufacture of synthetic rubbers for packaging industry. Such markets maintain
and internationally, and at encouraging automotive exterior parts and general high demand while demand for other
innovative converters to establish industries industrial products products falls in response to economic
new to the region. changes.
• polymethyl methacrylate (PMMA), used
“The new products have a very wide in automotive parts, extrusion sheets and As one of the very first producers of PMMA
range of applications,” says Petro Rabigh optical lenses in the Kingdom, Petro Rabigh is targeting
President & CEO Nasser D. Al-Mahasher. PMMA’s potential annual growth in Saudi
“The opportunities they create for new • polyamide 6 (PA6), used in engineering Arabia of an estimated 6%.
industries and investment will have a lasting plastic and food packaging
impact on the regional economy.” The new products and capacities aim to
• acetone and phenol, which have reduce existing industries’ dependence on
The new slate of products and some of applications in adhesives and glues, and expensively imported feedstock to make
their applications include: pesticides and herbicides them more competitive both regionally and

FEATURE
globally, and to allow converters to set up Complex integrated processes such as
new industries. Petro Rabigh’s mean there is always
potential for development as the
With wide and varied applications, Petro company looks to optimize the use of its
Rabigh believes each product offers a facilities and achieve better returns for its
large range of potential opportunities. shareholders.
The company is actively engaging with
investors and companies to provide the In the belief that integrated operations
means by which both Petro Rabigh and require dynamic thinking to meet market
its customers can help each other and the demand and seize opportunities, Petro
region to prosper. Rabigh has a specialist team dedicated to
looking at where markets are heading and
Concentrating advantages at how best the company can exploit its
One way in which Petro Rabigh attracts resources and take advantage. Even small
such investment to the region is by “The opportunities [the new adjustments in the production and use of
arranging conditions that allow all the by-products from integrated processes can
advantages of location, feedstock supply,
products] create for new present significant opportunities.
infrastructure and technical support to industries and investment
come together in one place. will have a lasting impact Unleashing potential
on the regional economy” Making the most of resources and
At Rabigh PlusTech Park and Petro Rabigh unleashing potential is a major theme of
Industrial Complex, private industrial parks Nasser D. Al-Mahasher Saudi Vision 2030, and in that regard Petro
adjacent to the Petro Rabigh complex, President & CEO, Petro Rabigh Rabigh has also invested considerable
innovative downstream manufacturers finances and effort in recruitment and
are offered generous terms related to training for both its current operations and
long-term leasing, feedstock supply, the future.
infrastructure costs, warehouse facilities, Petro Rabigh was established on the
and transportation facilities. Red Sea coast by Saudi Aramco and One of the company’s priorities is to bring
Sumitomo Chemical from Japan as one of through talented young Saudi nationals
Rabigh PlusTech Park also houses the the world’s largest single-phase integrated alongside experienced expertise from
Sumitomo Chemical-run Plastic Technical refining and petrochemicals projects. It around the world, and Petro Rabigh has
Center, which provides technical support came into operation in 2009, producing therefore invested in all stages of the
and training in plastic processing essential refined products like naphtha, process of identifying young Saudi talent,
technology. gasoline, kerosene, diesel and fuel oil, providing in-depth theoretical and on-
while announcing itself as one of the Saudi job training, and offering the incentives,
The facilities have attracted investment Arabia’s largest producers of polypropylene, financial and career-wise, to retain it. The
from the Kingdom, the Arabian Gulf and polyethylene and monoethylene glycol, and idea, the company says, is to “identify
abroad, with the resultant feed-down the sole producer of propylene oxide in the Petro Rabigh’s future leaders and give them
effect on jobs and skills through support Middle East. all the support they need in order to be
and industries and suppliers. This is in ready to take up the reins”.
keeping with Petro Rabigh’s stated aim The Phase II program, meanwhile, was
from its inception, which was to add launched with the first unit start-ups in April The company says it mirrors Saudi Vision
value to the Kingdom’s resources and of this year, and is on schedule to have all 2030, citing “adding value to the nation’s
serve as a catalyst for development in units in operation by the second quarter of natural resources, maximizing capabilities,
the region. 2018. launching promising sectors, expanding
into additional sectors and diversifying the
The company therefore selects the tenants The company says it is currently focused on economy for long-term sustainability”.
at the industrial parks for the contribution ensuring safe and reliable operations as it
they bring to the economy and job creation. starts up the Phase II units gradually, as per “Petro Rabigh’s emphasis on supporting
Phase II is an expansion, diversification and industry standards, and “moves towards national companies, providing opportunities
acceleration of that process. achieving maximum performance”. for growth, and encouraging innovative
industries and the development of new
By working with investors and having a The last two quarterly results have seen skills is a reflection of that,” the company
guiding hand in how its products are used, Petro Rabigh post record results, but with says. “The new Phase II products increase
Petro Rabigh believes it can help shape the gradual start-up and remaining units to the opportunities for investors and open up
the development of industry to best suit come into operation, the company believes numerous possibilities for the conversion
the company, its customers, the regional the best is yet to come and that it is still to industry and for manufacturers further
economy and the Kingdom. see the true value of Phase II’s potential. downstream.”

INTERVIEW
Growth and sustainability

top SABIC and GCC agenda
GPCA Insight asked GPCA Chairman, Yousef Al-Benyan, Vice Chairman
and CEO of SABIC, about a number of issues of importance to the company
and the GCC petrochemicals sector in general
Jonathan Lopez ICIS
S
ABIC’s dominance in the
petrochemical industry in Saudi
Arabia is clear. However, other
parts of the world have risen to be big
petrochemical producers thanks to
cheap natural gas, mainly the US. Are
SABIC, Saudi Arabia and the Middle East
in general risking losing the race on that
front, given more plentiful and cheaper
feedstocks elsewhere?
Ready access to competitively priced
feedstock and proximity to the most
prosperous markets make the [GCC]
region the world’s first choice for new
petrochemical production facilities.
However, global trends show that cheap
raw materials are becoming available
elsewhere.
Our mixed feedstock strategy is to move

production closer to the customers and
make use of advantaged local feedstocks.
Hence, we have embarked on key projects
to diversify our feedstock mix. They include
a coal-to-chemicals project in China, US
SABIC
shale gas for our proposed ExxonMobil
joint venture in Texas, and a possible oil-to- SABIC is the major chemical producer in the GCC and has global expansion plans
chemicals joint venture in the Kingdom with
Saudi Aramco. From its very beginnings, my company of organizational transparency. We are the
has emphasized the importance of doing only Middle Eastern company to make
The chemical and petrochemical business in an open and transparent manner. these rankings.
industries in the Middle East are set to I am proud to say that our efforts have been
grow faster than GDP in coming years. recognized by Transparency International, Earlier this year, SABIC published its
However, is the current environment widely seen as the “gold standard” in first quarterly financial statements
supportive of transparency and assessing an organization’s commitment to under International Financial Reporting
corporate governance? combatting corruption and fraud. Standards (IFRS), the common language of
We support the Kingdom’s recent efforts international accounting. I think most of us
to improve the transparency of its markets We are ranked number four on disclosure know instinctively that organizations that
and economy, in order to encourage practices and anti-corruption programs; are more transparent tend to be among the
increasing overseas investment. and number eight on disclosure practices most profitable and successful.

INTERVIEW
into contact with global players. Synergy of that modernizing programme?
allows us to use existing SABIC assets, Success in this direction requires
such as Home of Innovation, SABIC Plastics innovation, technology and a skilled and
Application Development Center (SPADC), motivated workforce – all of which SABIC
and the SABIC Academy to help Saudi is well-positioned to provide. Driving
entrepreneurs and enterprises expand SABIC’s role in the national initiative
locally and internationally. Support allows to modernize, specifically Saudi Vision
SABIC to provide advice, expertise and 2030 is a dedicated Local Content Unit
products to those seeking to become SABIC (LCU) within our Innovation and Business
suppliers (upstream), and those seeking to Development function.
supply KSA industrial clusters (downstream).
Building on our existing Local Content
What expansion plans does the company strategy, the LCU is aligning SABIC’s efforts
have in Saudi Arabia in the next decade? to promote local content and business
How many jobs they could create? development with the Council of Economic
SABIC has been facilitating domestic and Development. This will enable SABIC
industrial growth and attracting technology to establish key performance indicators
and operating partners, besides its for our strategic business units and other
operational expertise. SABIC’s long- functions. This will allow us to revise
GettyImages
term objective is to increase support for and extend our existing programs and
customers in the key growth industries create new ones in line with our overall
Yousef Al-Benyan: Chairman of GPCA that are the focus of the government’s strategy for contributing to Saudi Arabia’s
and Vice Chairman and CEO of SABIC downstream strategy. modernization program.
Several countries in the Middle East SABIC is a strong supporter of Saudi In general, are Middle East chemical
region are moving to diversify their crude Arabia’s National Industrial Cluster Program, companies willing to modernize? Do they
oil-based economies and enter more which is leading the development of fast- have the know-how and, perhaps more
downstream markets. Saudi Arabia has growing, export-oriented industrial sectors importantly, the investment willingness
itself embarked on an ambitious plan of in Saudi Arabia. We have also joined hands to do so?
reforms aiming to modernize the economy with the Public Investment Fund and Saudi Changes are necessary. For decades, part
and diversify away from crude oil. What Aramco to establish Dussur to advance of our success here in the GCC region was
part can SABIC play in that plan? industrialization and diversification away based on access to advantaged feedstock.
SABIC is a strong supporter of Saudi from oil through the creation of profitable We can no longer rely on that.
Vision 2030 – the most significant shift companies that might not be developed by
in the Kingdom’s economic development the private sector alone. The challenges are everywhere. We are
policy in decades. Vision 2030 opens dealing with lower-for-longer oil. That
up broad vistas of possibilities for These initiatives, along with our Local means that naphtha-based products made
strengthening Saudi Arabia’s local Content program, will be key to creating from oil are becoming more competitive
economy and business capabilities thousands of high-skilled and specialized than they have been in the recent past.
across every sector. jobs for Saudis. That makes our region’s products – which
are mostly ethane and propane-based –
SABIC’s Local Content program will be How prepared is the company to be part less competitive in Europe. That turns the
key to attracting internal investments in situation of 2004 to 2014 on its head.
innovation, technology, manufacturing,
procurement and in creating thousands In North America, Europe and Asia, trade
of high-skilled and specialized jobs for
“With SABIC’s global blocs and trade barriers are increasing. If we
Saudis. It will also help create a culture presence, we are have to pay higher import tariffs on top of
of entrepreneurship and a more vibrant uniquely positioned to already higher costs and other unfavorable
business climate overall. leverage our global role economic conditions, this only makes
to enable Saudi Arabia’s circumstances even more difficult for us.
With SABIC’s global presence, we are
uniquely positioned to leverage our
Vision 2030” Mergers and acquisitions are happening.
global role to enable Saudi Arabia’s ICIS reports that 2017 is likely to be a
Vision 2030 in three key areas: Strategy, Yousef Al-Benyan record year in petrochemical mergers and
Synergy and Support. Vice Chairman and CEO, acquisitions. This is neither good news nor
SABIC, and Chairman, bad news for this region, but it will make
Our global strategy positions SABIC to GPCA the industry more competitive.
bring Saudi-based suppliers and converters
18 GPCA INSIGHT | November 2017r www.gpca.org.ae

@jebelalipo
INTERVIEW
Local feedstock supplies have become depends on demonstrating to our the atmosphere. We see ourselves –
increasingly constrained. Also, some customers and all our stakeholders the along with the rest of the petrochemicals
countries have made announcements highest standards of ethics in all our industry – as part of the solution when it
that they will be linking local feedstock transactions, our communications, and our comes to sustainable development.
prices to generally higher global prices. business practices and processes.
Petrochemicals are an energy-intensive Our products can help reduce CO2
industry. Higher utility costs in the region Sustainability is embedded in the fabric emissions and help our customers meet
are also in play. of SABIC’s business. Our Sustainability their sustainability goals. We are working
Council, which I chair, is responsible for to shift our product portfolio to reduce
Finally, the most basic cost of all, setting our sustainability vision, priorities emissions and support guidelines and
manpower, is likely to rise as well due to and goals, and is accountable for our standards for avoiding emissions across the
wage escalation. All of these factors eat performance. Our annual Sustainability value chain in areas such as light-weighting
away at our profitability. GCC players Report has been recognized by the in mass transportation, down-gauging in
need to take decisive actions to combat World Business Council for Sustainable packaging, and “smart” fertilizers.
these trends. These trends undermine our
region’s competitiveness to deliver growth, SABIC works to provide the materials
profitability and long term sustainability. needed to adapt to climate change, such
“We are investing heavily as piping for water shortages and materials
Would you say the fall in the crude oil in innovative technology to save energy in buildings and transport.
price in 2014 has changed Saudi Arabia to reduce emissions, We have multiple products that avoid more
for good, reinforcing that idea of urgency increase efficiency and total emissions across the lifecycle than
in reforming the economy? build a sustainable required to produce that product.
The oil price is what it is. But the price
volatility the market has experienced in recent
future” Asia, and especially China, has become
years demonstrates the need for a more the center ground for the global
diverse economy. That is why we support Yousef Al-Benyan chemical industry. What operations
Vision 2030 and the Kingdom’s effort to Vice Chairman and CEO, does SABIC have in China, and could
become less dependent on oil exports. SABIC, and Chairman, you see the company expanding those
GPCA in coming years?
For our part, I have already mentioned Asia generally and China in particular have
how we have had to cope with lower-for- long been among our most important
longer oil prices. Ours is a highly cyclical Development as a best practices leader in overseas markets. We have been exporting
business. The environment we experience transparent reporting in sustainability. to China for more than 30 years and set
today is not likely to be sustainable over up an office in Shanghai in 1996. Our early
the long-term. Our strategy was developed We are investing heavily in innovative presence in China clearly indicates our
by taking account of all energy and crude technology to reduce emissions, increase confidence that our business links with that
oil scenarios. We base our investment and efficiency and build a sustainable future - country can only grow stronger.
growth decisions on the long-term. approaching the challenge with a spirit of
ingenuity. We demonstrated that earlier this We estimate that China will be the source of
Therefore, we tend to take a long-term year at the World Economic Forum in Davos much of the global growth in petrochemicals
view of our investments and continue to - where we displayed circular economy in coming decades, which is why we view
focus on the strong-yield opportunities we concepts with the “ICEHouse” (Innovation the Chinese petrochemical market as a very
see – both in the Kingdom and around the for the Circular Economy House). strategic one for SABIC. We are no longer
world. These include the projects I have just a supplier of quality materials to China.
already mentioned in China and North We have also set ambitious targets to SABIC has grown to be an important partner
America, oil-to-chemicals and downstream reduce greenhouse gas, energy and water in this huge market, manufacturing products
development in Saudi Arabia, as well as intensities by 25% and material intensity in the country that contribute to the growth
economic growth in Africa. by 50% from a 2010 baseline by 2025. We of Chinese industry.
monitor these annually and are on track to
How prepared is the chemical industry meet our targets. We have also reduced The long-term challenge will be China’s
in the Middle East to hold to ethical flaring by 49% since 2010. declared intention of satisfying most of
principles regarding regulations as well its rising petrochemical demand from
as voluntary initiatives, and sustainability How can SABIC contribute to a cleaner, domestic sources. That will leave limited
principles on environmental, social and greener production of petrochemicals? room for exports from the GCC region. I
economic matters, and apply them? At SABIC, sustainability is in our DNA. believe we can meet this challenge, but
As I mentioned earlier, we at SABIC take We were founded in 1976 to discover only by increasing customer focus and
ethical integrity seriously. We fully realize valuable uses for the natural gas that through more efficient commercial and
that the very future of our corporation was then being flared off uselessly into operational strategies.

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FEATURE
LyondellBasell to
profitably build on what we have, through
debottlenecking or adding to capacity, or
exploring new projects – perhaps more on
the propylene side,” says Patel.
expand global reach LyondellBasell’s joint ventures in Asia –

particularly in Thailand and South Korea
– are also viewed as growth platforms, he
notes.
CEO Bob Patel sees opportunities to expand in Asia The company owns 28.56% of Thai-
land-based PP producer HMC Polymers
and the Middle East through joint ventures and also with partner PTT Global Chemical and
other investors holding the rest. It has
leverage its suite of polyolefins process technologies capacity of 810,000 tons/year and uses
LyondellBasell’s Spheripol and Spherizone
technologies.
LyondellBasell also has a 50% stake in

South Korea-based PP producer PolyMirae
with joint venture partner Daelim holding
the rest. PolyMirae has 700,000 tons/year
of PP capacity using the Spheripol process.
“We see JVs as a very good route to

expand out to Asia. We are open to
other JVs if both partners can contribute
something beyond just cash,” says Patel.
LyondellBasell In China, LyondellBasell has a 26.65%

stake in Ningbo ZRCC Lyondell Chemical
Company, a joint venture with Sinopec
LyondellBasell’s Hyperzone PE technology is being used for the first time in its latest that produces propylene oxide/styrene
project in the US. The technology is a product of the company’s global R&D teams monomer (POSM).
Joseph Chang ICIS position on the cost curve,” he explains. China’s environmental focus
China’s crackdown on pollution and ban
L
yondellBasell will seek to expand its The company has minority stakes in three on imported waste plastics will create a
global reach, not only by building joint ventures (JVs) in Saudi Arabia – 25% tailwind for the global polyolefins market,
cost-advantaged US capacity and each in Saudi Polyolefins Company (SPC), according to the LyondellBasell CEO.
exporting more product, but also growing with TASNEE owning 75%, and Saudi
through joint ventures in the Middle East Ethylene & Polyethylene Company (SEPC), “Certainly we’re seeing recycling plants
and Asia, as well as leveraging its suite of with TASNEE and Sahara Olefins holding being shut down and demand for recycled
polyolefins process technologies. 75%; and a 20.95% stake in Al-Waha Pet- plastics down significantly, so virgin
rochemicals, with Sahara Olefins holding polymer demand is generally increasing.
“The Middle East is a very important region the remainder. Directionally, it bodes well for the cycle, and
on the global petrochemical stage and we’re seeing prices respond,” says Patel.
will be for many years to come. Its energy SPC produces polypropylene (PP) with
position should not be understated and we a capacity of 720,000 tons/year, while “We think this will play out more
view it as an important strategic region for SEPC is focused on polyethylene (PE) – prominently in the first and second quarter
LyondellBasell,” says Bob Patel, CEO of high density PE (HDPE) and low density of 2018 as regulations go into effect,” he
the company and a speaker at this year’s PE (LDPE) in particular with capacities of adds.
Annual GPCA Forum. 400,000 tons/year for each grade. Al-Waha
Petrochemicals has PP capacity of 450,000 China plans to ban the import of certain
“The impact of US petrochemical capacity tons/year. waste plastics, along with other waste
expansions for Middle East producers materials, by the end of 2017. This includes
should be minimal. They will run at full “We are pleased with our three Saudi waste and scrap of ethylene polymers
capacity because of their competitive joint ventures and want to find ways to (such as PE), styrene polymers, vinyl

FEATURE
chloride polymers (polyvinyl chloride), and technologies for polyolefins. We aim to
polyethylene terephthalate (PET). be a solutions provider for customers by
leveraging our rich history of technologies
China’s crackdown on pollution is also from predecessor companies such as
expected to slow the pace of coal-to- BASF, Montedison, Hoechst and Arco
olefins (CTO) plants, says Patel. These CTO Chemical,” he adds.
plants typically have downstream PE and
PP units. Electric vehicles
On the megatrend of the emergence of
Plans for a number of new naphtha electric vehicles (EVs), PP will continue to
crackers in China, mostly by non-traditional play a significant role in the lightweighting
petrochemical players, is not a source for of vehicles, whether widespread adoption
concern, he notes. of EVs comes sooner or later, says the
CEO. “The drive to make vehicles lighter
“It bears watching, but I don’t think these “We are pleased with is helping PP, and we think PP also has a
will all come at one time. And for PE, it our three Saudi joint lot more technological runway in terms of
won’t change the import needs long term. ventures and want to lightweighting.”
We see China requiring significant imports find ways to profitably
for the foreseeable future,” says Patel. M&A strategy
build on what we have, Amid rumours of LyondellBasell making a
And new crackers being planned in China through debottlenecking takeover approach for Brazil’s Braskem,
to run on imported US ethane are not Patel says the company will continue
economical at today’s oil prices, he adds. Bob Patel its disciplined approach to mergers and
“If a producer in China wanted to build, a CEO, LyondellBasell acquisitions (M&A).
naphtha cracker would be more economical
to build – and also because of the need for “We are thoughtful and patient, and not
the co-products”. this trough should be fairly shallow and anxious that we have to get something
relatively narrow compared to previous done.”
“Most forecasts suggest an oil/natural gas cycles – with Harvey, even more so,”
ratio in the mid-to-upper teens range while argues Patel. As part of this approach first outlined
today we are above 20x. The economics during its Investor Day in April 2017,
become more compelling to import ethane While 2018 is still expected to be a trough LyondellBasell would only take on a
if the ratio rises over 40x, like what we saw year for the ethylene and PE cycle, global deal that would “ensure we will retain
in 2013 and 2014,” he adds. operating rates currently in the mid-90% an investment grade rating through an
range for ethylene may only dip to the low- industrial cycle”, said Patel.
US hurricane harvey impact 90s, he notes.
Meanwhile, US petrochemical producers “What defines our balance sheet capacity
have largely restarted operations impacted In the US, LyondellBasell is building a is our primary goal of maintaining an
by Hurricane Harvey. However, the storm 500,000 ton/year high density PE (HDPE) investment grade credit rating under a
and its after effects depleted inventories project in La Porte, Texas, using its new range of scenarios, including through a
across the chain. Hyperzone technology. The plant is downturn,” he added.
scheduled to start up in mid-2019.
This could lead to continued tightness in As for whether LyondellBasell would be
the fourth quarter of 2017 and help mitigate Hyperzone can produce a wide range open to both large as well as smaller
the impact of significant new US PE of multi-modal HDPE resins, meaning it acquisitions, Patel is “open to the whole
capacity starting up this year and next. combines the benefits of low molecular- continuum – it’s all about value creation
weight and high molecular-weight PE. As a and looking for assets with long-term
“The fourth quarter is normally a slow result, products made with Hyperzone PE competitiveness and fit”.
period, but this year in November can maintain strength and durability while
and December, players may take the still being light weight and easy to process, While the polyolefins sector had already
opportunity to build inventory. We don’t according to the company. consolidated significantly a couple
expect much softness as is traditional in decades ago, and today consists of
Q4,” says Patel. “This is a higher performance PE than what a handful of either large independent
we’ve produced in the past,” says Patel. players, or those owned by large oil and
Depleted inventories from Harvey, along gas companies, there is still scope for
with continued strong PE demand growth “In addition to our focus on safety, combinations, the CEO says. “I think there
of around 4% annually, should help absorb operations and cost competitiveness, is still opportunity – it depends on the
the new capacity. “The conclusion is that we are strong in process and catalyst strategy of the various owners.”

ON THE ROAD TO THE FUTURE.
We produce intermediates and polymers using state of the art
technologies, and engage in research and chemistry from renewable
sources, to keep pace with the evolution of global markets. Together,
we will take your business forward.
INTERVIEW
Digital technologies will

boost plant operations
GCC refiners and petrochemical plant operators can improve operational
reliability and output with use of digital technologies as part of the trend
to digitization of the industry
Al Greenwood ICIS East wants to sell fuel to these markets at

the best margins, its refined products will
H
oneywell UOP’s projects in the have to meet these standards. “Everyone is
Middle East extend from the continuing to look at the demand for clean
first days of the region’s refining fuels,” says Liebert.
industry right up until today, and now also
encompass the future. It is a future that will As the home to the world’s lowest-cost
combine digital and process technology oil, the Middle East has a tremendous
to reduce downtime and increase yields at opportunity to increase margins if it can find
refineries and chemical plants. the best way to add value to its crude oil.
But it is not just focusing all of its energy on
Honeywell UOP pioneered the first refining converting crude oil to refined products.
processes a century ago and is now doing
the same with new digitization technologies In some cases, companies are looking
that are just now being installed in plants. for ways to replace domestic crude
Two current projects illustrate the journey consumption with natural gas, Liebert
that has been taken. “We are seeing a explains. Producers could then upgrade the
lot of interest in oil and sell it for higher margins.
One is a refinery expansion in Jordan adding petrochemical
which will use several of Honeywell complexes to existing Growth in fuel demand reflects a global trend
UOP’s process technologies. The other for the rise of the middle class. As more
is a propane dehydrogenation (PDH)
refineries or putting in people adopt middle-class buying habits,
unit in Saudi Arabia, where operator Al brand-new integrated they are buying automobiles and driving more
Waha recently installed Honeywell UOP’s refinery/petrochemical frequently, increasing global demand for fuel.
Connected Plant digital technology. complexes”
This growing middle class is not just
These projects are by no means the first Rebecca Liebert affecting refiners, but also petrochemical
ones in the Middle East for Honeywell UOP, CEO, Honeywell UOP producers. As more people adopt middle-
which has been in the region since 1963, class lifestyles, they are buying more
says its CEO Rebecca Liebert, who is consumer goods and pre-packaged meals.
speaking at this year’s Annual GPCA Forum include crude and vacuum distillation units That, in turn, increases demand for plastics.
on the topic of digitization. “We understand as well as other downstream plants.
the value of being there and being local.” “It’s a global phenomenon,” says Liebert.
Not only will the expansion increase the “They’re buying more cars, which have a lot
Among its more recent projects is the refinery’s capacity to 120,000 bbl/day, it of plastics. They’re buying more appliances,
expansion project in Jordan. The scope will also allow the refinery to make high- they’re buying homes, they’re eating take-
here is so large, she says, that it is almost quality fuels able to meet Euro V automotive out food, and they’re having babies.”
like building a new refinery. Honeywell UOP emission standards.
has agreed with Jordan Petroleum Refinery Like refined products, petrochemicals
Co (JPRC) to provide the technology and Around the world, countries are adopting provide the Middle East with yet another
equipment for the expansion. The work will similar cleanfuel standards. If the Middle avenue to add value to crude oil, she notes.

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INTERVIEW
“We are seeing a lot of interest in adding technology, giving their operators an Employees are also equipped with sensors,
petrochemical complexes to existing unprecedented amount of data that they so operators know where they are in the
refineries or putting in brand-new integrated can use to avoid shutdowns and run their plant, she explains. In emergencies, this
refinery/petrochemical complexes.” plants at optimal rates. could tell companies if their workers are safe.
Connecting the workers can also help train
Abu Dhabi Oil Refining (Takreer) will soon Liebert sees this as one of the key trends them on a new unit. The analysis created by
start up a PDH unit using Honeywell UOP’s that will affect the petrochemical industry the Honeywell Connected Plant can also help
Oleflex technology, she adds. In Saudi in the future. In five years, plants could the operator improve plant operations.
Arabia, Farabi Petrochemicals will use the risk becoming obsolete if they do not
company’s technology to build a complex adopt digitization. Digitization plays on the For Al Waha’s PDH unit in Jubail, Saudi
in Yanbu to produce detergents. Farabi strengths of UOP’s extensive knowledge Arabia, the system helped the customer
should finish construction in 2020. of process technology and Honeywell’s quickly find ways to improve the operations
expertise on control systems via the sister of the plant to save more money, reduce
A lot of these Middle Eastern petrochemicals company, Honeywell Process Solutions. down time and improve utilities, Liebert
are destined for export markets, notes says. “It’s showing the value of the
Liebert. This could become a growing interest “We can put those two things together and Honeywell Connected Plant.”
among the nations in the region as they deliver the best solutions to the customer,”
seek to diversify their economies beyond oil. Liebert says. The result is the Honeywell The PDH unit will soon be joined by a
The Saudi 2030 Vision is such a program to Connected Plant. complex belonging to Kuwait Paraxylene
achieve that goal. “They are expecting a lot Production Co (KPPC). The company is
to be done by 2030, and companies are really The system relies on outfitting the plant using two services from the Honeywell
responding,” says Liebert. with sensors that collect real-time data on Connected Plant suite.
operating conditions, providing companies
Digitization potential with advanced warning about future The technology will help KPPC improve the
Any new plants – not just in the Middle crashes. Thus, Honeywell Connected Plant performance of its CCR Platforming and
East but in the rest of the world – have the can prevent the downtime that comes aromatics platform at the Shuaiba complex
potential to adopt the latest digitization about from these crashes. in Safat, Kuwait.
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INTERVIEW
Sustainability goal
sectors, and has already made significant
sustainability inroads in many of these key
industries.
is key for Covestro

Providing lightweight components using
polycarbonate in vehicle drivetrains is a
prime example of a sustainable automotive
solution, with weight reduction improving
energy efficiency.
The Germany-based chemical and polymer Lightweight materials are in “greater
producer is a great advocate of sustainability in demand than ever,” explains Steilemann,
who adds that this is not only in the
the chemical sector and is focusing innovation automotive industry, but also in the
electronics sector, where slimming down
on meeting today’s major societal needs products such as laptops, smartphones
and tablets is a key requirement.
Heidi Finch ICIS Covestro has developed an advanced

composite technology that “opens
T
he chemical industry in the Middle the door to a sustainable future for
East and globally can make a lightweight products,” says Steilemann.
difference by pushing the boundaries This technology uses fiber-reinforced
in terms of products and raw materials, and thermoplastics and adopts a highly
thus tap into the world’s growing needs efficient production method.
for innovative sustainable products and
solutions for the sake of the environment The Middle East is a fast growing region with a
and future generations, says Dr. Markus sizeable population, which provides Covestro
Steilemann, Chief Commercial Officer and with opportunities, mainly in the areas of
CEO-designate of Covestro. construction and furniture. Steilemann believes
that the region could tap into the trend towards
Steilemann, a speaker at this year’s Annual sustainability by “further increasing resource
GPCA Forum in Dubai, believes that the “We see tremendous and energy efficiency.”
drive for sustainability in the chemical growth opportunities
industry is at the heart of the chemical through megatrends Use of carbon dioxide as feedstock
industry’s transformation. Covestro is “constantly pushing the
that demand innovative boundaries” and resource conservation
He notes that “the chemical industry sustainable solutions” is a key area of focus, with the ongoing
is a crucial link between scientific drive to replace the chemical industry’s
breakthroughs and societal challenges Dr. Markus Steilemann reliance on traditional fossil fuels and to
for delivering impact,” and adds that the Chief Commercial Officer make production “more environmentally
chemical industry is a key enabler to help and CEO-designate, compatible”, says Steilemann.
“transform our economy and society Covestro
towards a more sustainable future.” Carbon dioxide (CO2) is a “promising
alternative” to traditional fossil fuels and the
Steilemann is a key advocate of sustain- “We see tremendous growth opportunities German chemical producer is already using
ability in the chemical industry and is through megatrends that demand innovative this as a key component in polyurethane
keen to unlock the growth potential in the sustainable solutions,” says Steilemann, foams, thereby saving crude oil resources,
Middle East and across all regions, having referring to the topic he is going to address points out Steilemann.
recently been appointed as the new chair in his presentation at the GPCA Forum.
of the board for SusChem – the European It is also worth noting there is an increasing
Technology Platform for Sustainable Steilemann believes that the drive for demand among the emerging middle class
Chemistry. sustainability is likely to affect many for sustainably produced furniture. To
areas, especially key industries such as meet this need, Covestro has developed
As chair of SusChem, Steilemann will be automotive, construction and furniture. a special coating hardener that has a
instrumental in shaping new strategies for biomass content of 66%.
European research and innovation policy, Germany-based Covestro is a major player
missions and funding beyond 2020. in the polyurethanes and polycarbonate Covestro has worked with coatings supplier

INTERVIEW
Sirca, which has used this special coating Steilemann also notes that Covestro wants adjusted earnings before interest and tax
hardener for developing a two-component to continue to contribute to the SDGs and (EBIT) jumped by 41% year on year and its
biobased waterborne coating. Sirca´s to increase its global SDG-related research stock price more than doubled.
customer RiFRA, a well-renowned Italian and development projects from about 50%
manufacturer of design furniture, has used at present to 80% by 2025. Covestro has also received the German
the new coating on one of its new furniture Chemistry Award 2017 for its sustainable
collections, reports Covestro. More flexible operations HR practices, which shows that the
Covestro has benefited from the company’s sustainability mentality touches
The company has also developed a more independence from its former parent every part of its business.
sustainable technology to produce coated company Bayer, following its spin off in
textiles by using waterborne polyurethane September 2015. According to Steilemann, The German chemical major recently posted
raw materials, which cuts the carbon footprint Covestro has more flexibility to exploit its strong earnings before interest, taxes,
by half compared to conventional technology. potential as an individual company that depreciation and amortization (EBITDA) for
focuses on “sustainability-driven industry Q2017 3, up by 50% year on year. This strong
“Sustainability offers not only business demand” and develops the products and performance was driven by higher prices and
opportunities, but is at the heart of really solutions to meet this demand. volumes, particularly from the polyurethanes
everything we do,” says Steilemann, stating sector, amid tight market conditions.
that “we are fully committed to the UN The German chemical major is certainly
Sustainable Development Goals (SDG), all reaping the benefits of its sustainable However, while market fundamentals
of which are principally relevant to us.” approach to business in the chemical sector, are subject to change, Covestro’s
among other factors, having recently been sustainability approach is a constant,
Steilemann pinpoints one of the SDGs, “zero recognized separately for its stellar financial which is providing benefits for the
hunger”, which looks at the rising world performance and its sustainable HR policies. industry, the environment and future
population and the need to ensure effective generations and it is important that other
refrigeration chains to keep food fresh. Covestro has recently been named ICIS chemical players realize their potential
Covestro offers high performance insulation Company of the Year by ICIS, based on its to make a difference for a better more
materials to meet this requirement. robust 2016 financial metrics – when its sustainable future.
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FEATURE
GCC players set to make

strategic M&A moves
The chemical industry will continue to see lively global merger and
acquisition activity, with GCC producers and investors playing their
part as they seek to expand downstream and regionally
Nigel Davis ICIS
T
he pressure on petrochemical
producers to use mergers and
acquisitions (M&A) to drive growth
shows no signs of abating. Indeed, some
sector consultants expect the pressure to
increase.
Companies are riding on the crest of strong

demand, relatively tight supply, relatively low
feedstock costs and healthy prices. Cash
is flowing and investors, whether they are
public institutions and private individuals or
state-controlled entities, see a world that is
changing fast. They sense the opportunities
and they want a piece of the action.
LANXESS
For industry managers, it is a question of Saudi Aramco has expanded outside the GCC area with the ARLANXEO joint venture
grasping opportunities as they become with LANXESS. Matthias Zachert, Chairman, LANXESS, and Abdulrahman Al-Wuhaib,
available. The bigger companies continue Senior Vice President Downstream, Saudi Aramco, sign the deal in September 2015
to search for higher returns and different
degrees of focus. As they do so, they divest chemical producers vis-a-vis their upstream growth, a feature of the industry over the
operations and spin off businesses that are counterparts. past two years at least.
the fuel for further sector-wide M&A activity.
That does not mean that commodities do Specialties have driven much of the trading
There are a number of underlying trends, not make money for the best-positioned multiple uplift in chemical company share
some of which are strengthening. Where players; they do and can do handsomely prices, Valence says and the difference
possible, companies are tending to when supply/demand balances, between the upstream and the downstream
look for downstream, specialty or niche downstream demand and feedstock and has become quite marked. The suggestion
opportunities that will help cement them energy costs chime together. is that cash flow growth for commodity
among the top five global players in a and diversified chemical companies has
particular business. Seeking refuge downstream been negated by competition from Chinese
But the data shows that more companies producers and lower oil prices.
This is not simply consolidation for the sake have sought refuge downstream. Chemical
of it but the search for stronger and more company trading multiples (enterprise Chinese companies have expanded
stable returns alongside greater market share. value to earnings before interest, tax, in intermediates such as adipic acid,
depreciation and amortization (EBITDA), caprolactam, butanediol and isocyanates,
M&A advisors, the Valence Group, recently have grown strongly and are now higher driving European and US companies away
highlighted research that has shown than before the financial crisis. and into more specialized sectors.
how strongly enterprise value creation
has advanced for the more specialized They have also tracked strong profits These trends provide opportunities for

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FEATURE
In Asia, Saudi Aramco, is taking a 50% short-term shareholder returns.
stake in the Petronas RAPID refinery and
petrochemical complex in Malaysia. It This can have detrimental effects in terms
is also seeking a stake in a PetroChina of industrial strategy for the more diversified
refinery in Yunnan province, China. players that seek to maintain the ability to
compete over the coming decades against
As Shell has divested further assets, Saudi players from China and the Middle East
Arabia’s SABIC has acquired the Anglo/ with largely different corporate goals.
Dutch energy major’s stake in their Sadaf
joint venture. SABIC CEO Yousef Al- The ability to compete particularly in some
Benyan was reported this year as saying of the higher-value intermediates remains
that the petrochemical major was seeking reliant on leading edge technology – and
acquisitions in the USD 3 billion to USD 6 the research needed to maintain that – and
billion range in North America and China on the ability to generate the cash that can
and that an announcement would be be redirected into the significant levels of
forthcoming in the fourth quarter of this year. capital investment needed to maintain or
Abdulaziz Al-Judaimi highlights Saudi grow market share.
Aramco’s inorganic growth strategy Consultancy AT Kearney said in its 2017
during the 2016 Annual GPCA Forum chemicals M&A review that activity in the In late 2016 Saudi Aramco bought a CO2
Middle East was expected to pick up as -to-polyols technology and business
players in the Middle East to push further companies expanded their portfolios. from US-based Novomer which, it said
downstream into intermediates and product It saw the uptake of the direct oil-to- at the time, strengthened its integrated
streams which can be supplemented by chemicals process – Saudi Aramco and
local regional investment. SABIC have plans to jointly construct an
oil-to-chemicals complex in the west of the “The changing product
The shift in the feedstock slate in GCC Kingdom – as a catalyst for joint ventures slate of producers in the
countries as new supplies of gas liquids and partnerships with North American, Middle East does open
feedstocks become more difficult to European or Chinese companies. It could
come by – and more expensive – plays also lead to acquisitions with the acquirers
up the potential for more
into this trend as local producers begin to looking for access to global markets. cross-border deals”
realize investments on a broader range of
chemical intermediates. The changing product slate of producers in
the Middle East does open up the potential downstream expansion strategy. This was
The giant Sadara Chemical project in for more cross-border deals. And whereas a relatively small-scale deal but will allow
Saudi Arabia shows what can be achieved. the driving force for deal-making involving the development of new technological
The only naphtha cracking complex in listed companies from North America and growth areas which, Saudi Aramco
the Kingdom, it produces amines, glycol Europe is to create shareholder value, said, are in line with Saudi Vision 2030
ethers, isocyanates, polyether polyols, largely in the near and medium term, the objectives of economic diversification and
polyethylene, polyolefin elastomers and moves by players from the Middle East are job creation.
propylene glycol. likely to be more strategic in nature.
Indeed, any petrochemicals acquisition that
Growing into petrochemicals via M&A as Publicly held firms have come under meets similar objectives is likely to be sought
opposed to organic investment, Saudi increasing shareholder pressure to use M&A by producers located across the GCC. There
Aramco has established the ARLANXEO more effectively to drive value. The sharp is a clear need to diversify economies away
synthetic rubber joint venture with rise of the influence of activist investors in from oil and gas. The growth area for the oil
LANXESS and has pursued its intention to driving change, for instance, may not be majors is petrochemicals.
push further into petrochemicals with the sector specific but chemical companies
Motiva refinery acquisition in the US. have been targeted by funds keen to drive The expected IPO (initial public offering)
of Saudi Aramco is also likely to provide
Also in the US, NOVA Chemicals, owned further insight into strategic thinking in
by Abu Dhabi sovereign wealth fund “There is a clear need Saudi Arabia. The suggestion in a Reuters
Mubadala, completed a USD 2.1 billion to diversify [GCC] report in October that Chinese companies
deal to acquire a stake in petrochemicals economies away from PetroChina and Sinopec, alongside China’s
operations on the US Gulf Coast, including sovereign wealth fund, might take a 5%
a cracker and undeveloped land in the
oil and gas. The growth stake in Saudi Aramco, illustrates the range
ethylene trading hub in Mont Belvieu, area for the oil majors is of possibilities being discussed in Riyadh
Texas. NOVA’s CEO called it a “game petrochemicals” for providing the funds to push ahead with
changer” for the Canada-based company. economic reform.

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FEATURE
Free trade comes

Sean Milmo ICIS
G
lobal merchandise trade will grow
by 3.6% by volume in 2017,
under attack
double the lacklustre increase of
1.3% in 2016, according to latest forecasts
in September by the Geneva-based World
Trade Organization (WTO). The stronger
growth this year has been attributed by the
WTO to a resurgence in intra-regional trade in
Asia and revived import demand into the US. For GCC producers heavily reliant on access to
It has been achieved, however, despite a global markets, the rise of protectionism and the
rising protectionism and scepticism about
the benefits of trade. There are signs demise of free trade agreements around the globe
that trade liberalization, which started
opening up markets across the world
is a cause for concern
20-30 years ago, may have peaked. Some
economists are even predicting a period of says Rene van Sloten, Executive Director Since the financial crisis of 2008, trade
deglobalization. Industrial Policy at the European Chemical restrictive measures by governments have
Industry Council (Cefic). been substantially outnumbering liberalization
“The improved outlook for trade is welcome initiatives, according to figures both from the
news, but substantial risks that threaten the “What is worrying is the climate of negative WTO and economic research organizations.
world economy remain in place and could opinion on trade which is leading to
easily undermine any trade recovery,” said protectionism. Perhaps we are entering While WTO statistics display a steady net
WTO’s Director General Roberto Azevêdo. an era when trade is no longer seen in rise in protectionism, the research bodies
“These risks include the possibility that a positive light. NGOs and other groups have been recording an even steeper
protectionist rhetoric translates into trade active in civil society trade matters seem increase, mainly because they apply a much
restrictive actions.” to believe that stricter trade rules can help broader definition of what is protection.
resolve environmental and social issues.”
Increased protectionism risk “Using very fine-grained trade data, we
In its report this month on the State of the In the EU, for example, politicians are estimate that 73.5% of the exports (of
Region in 2017-2018, issued for the Asia- proposing imposing taxes on imports the G20 group of nations) face some type
Pacific Economic Co-operation (APEC) based on their carbon footprints. “Sug- of trade distortion in foreign markets, 10
summit in Da Nang, Vietnam, the Pacific gested border taxes for environmental times the trade coverage of protectionism
Economic Co-operation Council (PECC) reasons is one of the biggest concerns at reported by the WTO, which only looks at
placed increased protectionism as the the moment,” says van Sloten. a narrow set of trade restrictions,” says
highest of five top risks to growth.
The study, which was based on a regional

survey of influential people in government,
business and civil society, also concluded
that dealing with “the emergence of anti-
globalization and anti-trade sentiments”
should be among the top priorities for the
APEC meeting.
The rise in protectionism is significant for

chemical producers, particularly those
operating in international markets such
as GCC producers, because being at
the beginning of a range of value-chain
trade restrictions can affect many of their
customer sectors. But the biggest concern
to the industry is changing attitudes to trade.
GettyImages
“Increased protectionism is not yet having a

major impact on overall trade in chemicals,” The US and China have been taking very different approaches to free trade recently

FEATURE
London, UK-based Global Trade Alert “Localization barriers (like local content become such a big issue that regulatory
(GTA), in its latest report in mid2017- on requirements) and non-export subsidies have co-operation and means of achieving more
levels of world protectionism. The G20 (globally) increased their share of the total regulatory convergence are important
countries account for 80% of world trade. number of protectionist measures enacted features in free trade agreements (FTAs).”
globally since 2008,” says a recent report on
The worse offender has been the US which, protectionism by the Swedish National Board The scope of trade restrictiveness has
according to GTA, has between 2009 and of Trade. “Conversely, the share of tariffs and also been extended by introduction of
2016 made 1,142 interventions considered trade defence measures has fallen.” threats to national security. China and the
to be discriminatory or protectionist, US have restricted trade in IT equipment
against 159 liberalizing ones. Since 2009 In general, NTBs are relatively more on the grounds of national security. The
discriminatory and liberalizing measures important in the overall trade-restrictiveness Trump administration has even claimed
by the US have both risen annually but of developed countries, such as the EU, that a rise in aluminum imports endangers
with the numbers of protectionist ones far the US, Japan, Australia and Mexico, which US national security.
outstripping liberalizing initiatives. are all members of the Organization for
Economic Co-operation and Development President Trump effect
Second to the US has been India whose (OECD) for richer countries, according to Since the start of his presidency, Trump has
protectionist measures numbered 704 the Swedish study. been targeting on the basis of his “America
by 2016 against 286 liberalizing ones, First” policy multilateral trade agreements
according to GTA. Both figures have also “NTBs also appear to add considerably which he considers detrimental to US
increased annually since 2009 but the ratio to the overall trade-restrictiveness of non- interests mainly because he believes they
of discriminatory to liberalizing steps has OECD countries, such as China, Brazil threaten jobs of Americans and worsen the
continued to be about 2.3 to 1. and Russia,” says the report “Other large country’s large trade deficit. He has pulled
countries that are particularly restrictive are out of the 12-nation Trans-Pacific Partnership
Among the G20 countries the most active Tanzania, Egypt, Nigeria, and Malaysia.” (TPP) and virtually abandoned negotiations
in bringing in protectionist measures have on a Transatlantic Trade and Investment Part-
tended to be the highly industrialized In chemicals trade, the NTBs which are nership (TTIP) between the EU and US.
countries. Among the top 10, in addition to growing in importance are health, safety
the US, are Russia, Germany, UK, France and environmental rules which are raising His most radical step has been to start
and Italy. the costs and causing customs delays for renegotiating the 23-year-old North American
importers and exporters. Free Trade Agreement (NAFTA) which covers
In GTA’s latest table of the busiest the neighboring countries of the US, Canada
protectionist enacters, Germany has “Obstructions at customs points is and Mexico. Trump has even warned that the
overtaken Brazil because of its use of state becoming an obstacle to trade,” says US may drop out of NAFTA by replacing it
subsidies and Japan has pulled ahead of van Sloten. “Chemicals regulations have with a bilateral FTA with Canada.
China because of its “frequent resort to
financial support for the overseas operations Multilateralism seems to be going out of
of Japanese firms and in financing foreign fashion in some parts of the world. But
purchases of Japanese goods”. the ideas behind it are alive in Asia with a
number of major projects still on the table.
Non-tariff barriers grow These include the Regional Comprehensive
The most frequently used protectionist Economic Partnership (RCEP) which brings
tools by the G20 and other countries are no together the 10 member states of the
longer traditional increases in tariffs or the Association of Southeast Asian Nations
imposition of anti-dumping duties. Instead (ASEAN) and the six nations with which it
countries are erecting an increasing number has FTAs – Australia, China, India, Japan,
of non-tariff barriers (NTBs) to discriminate South Korea and New Zealand.
against their trading partners.
“NGOs... seem to Also, the remaining 11 TTP member
Of the 71,000 trade restricting measures believe stricter trade states are pressing ahead with the
which GTA calculated have now been rules can help resolve completion of the agreement without the
introduced in Asia-Pacific economies since US. With membership including Mexico
2008 around two-thirds are local content
environmental and social and Peru, it is seen as having broader
requirements, mainly for government issues” scope geographically and as well as
procurements, subsidies including financial economically because it deals with both
support for exports and taxes or other Rene Van Sloten tariff and non-tariff barriers. In addition
charges on exports. Import tariffs and anti- Executive Director Industrial there are trade integration schemes, such
dumping restrictions accounted for around Policy, Cefic as China’s One Belt One Road (OBOR)
only 10-15% of all restrictions. initiative (see page 41).

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FEATURE
China’s OBOR has

John Richardson ICIS
E
very chemical company, including
of course those in the Middle East,
huge implications
needs to understand the map
below and its implications for global trade
flows over the next 20 years. Failure to
understand and respond to what this map
is telling us could be a very costly error.
The map illustrates China’s One Belt-One

Huge road, rail and port investments and a free-
Road (OBOR) strategy. The One Belt is,
in fact, improved road and rail links. The
trade policy with 65 countries are being pursued
One Belt will run from the city of Xi’an, the by China, offering openings for GCC producers
capital city of Shaanxi province, all the way
to destinations in Western Europe. This is
about economically developing China’s are members of the OBOR region. of them are either exhausted or have too-
less-developed provinces, which lie in its high labor costs to be economically viable.
west and north. It is also busy investing money overseas, China is also trying to move away from coal
not only in new roads, rail links and ports, as a fuel source, for environmental reasons.
The One Road involves better maritime but also in new overseas industrial zones to
links. Starting in the rich southeast of enable the relocation of factories. These three provinces are also home
China, these better maritime links and ports to depleting oil fields and economically
are about giving China’s more developed Why is OBOR needed? unviable steel mills. In total, China needs to
provinces better access to global markets. Surrounding the route of the One Belt are find 2.3 million new jobs by 2020 to replace
Chinese provinces that lag way behind in the jobs being lost in coal mines.
How important is OBOR to China? Very terms of income levels. Take the provinces
important, as the recently concluded 19th of Jilin, Liaoning and Heilongjiang in In the more developed eastern and
National Party Congress political meeting northeast China as examples. southern provinces of China the issue is
in China underlined. During the congress, very different. Wage costs have risen to
which takes place every five years, OBOR In 2016, their per capita GDPs were the point where low-value manufacturing
was written into the country’s constitution. respectively the 12th, 14th and 21st highest of, say, textiles and garments, is no longer
out of China’s total of 34 provinces and other economically viable.
But OBOR is not just about better infra- administrative regions. Unless China acts
structure. In parallel, China is building a vast quickly, this income gap is going to widen. One option is to move the garment
new free-trade zone through new free-trade factories to northeast China or a partner
deals, involving the some 65 countries that China is closing coal mines because many OBOR country where labor costs are
lower, thus keeping them under Chinese
ONE BELT, ONE ROAD ROUTE MAP ownership. Better infrastructure as a result
of the OBOR policy is key to making these
Moscow
RUSSIA relocations work.
NETHERLANDS POLAND
Rotterdam As described above, a sharp rise in labor
GREECE Land route KAZAKHSTAN MONGOLIA costs in China’s developed provinces
Venice SERBIA “One Belt” Almaty
ITALY Urumqi means that they can no longer compete in
Bishkek
Istanbul
UZBEKISTAN low-value manufacturing.
TURKEY Beijing
Athens
Mediterranean Tehran CHINA Xi’an The great news, though, is that the
Sea
IRAN
PAKISTAN developed provinces are hubs for the
Fuzhou
Kolkata MYANMAR innovative manufacturing and service
Zhanjiang
INDIA LAOS industries that China must continue to
THAILAND South develop if it is going to escape its middle-
Silk Road routes China income trap.
Land Indian Ocean SRILANKA Sea
Sea Colombo MALAYSIA
SOURCES: Digital KENYA Kuala The One Road maritime links will help
Sea route Lumpur
Silk Road Project; Nairobi “One Road” INDONESIA the developed provinces in two ways.
Financial Times Jakarta It will enable them to ship their high-value
manufacturing goods more cost effectively

FEATURE
CHINA’S PROGRAM OF ETHYLENE CAPACITY ADDITIONS
Company Province Region Feedstock Capacity, '000 Start-up Status
tons/year
Zhejiang Petrochemical Zhejiang East China Naphtha and LPG 1,400 2018-2019 C
Zhejiang Petrochemical 2 Zhejiang East China Naphtha and LPG 1,400 2021 (official plan) EA
Shenghong Petrochemical Jiangsu East China Naphtha 1,100 2019-2020 N/A
SP Chemicals Jiangsu East China LPG 350-650 Q3 2019 C
Sinopec Zhenhai Refining and Chemical Ningbo East China Naphtha 1,200 After 2020 P
Co
Yangze Petrochemical Shanghai East China LPG 800 After 2020 P
Wanhua Petrochemical Shandong North China Ethane and LPG 1,000 2019 C
Sinopec-SABIC Tianjin Petrochemical Co Tianjin North China Ethane, LPG, naphtha 300-350 No schedule N/A
Hengli Petrochemical Liaoning Northeast China Naphtha, ethane, butane 1,500 End-2019 C
North Huajin Chemical Industries Group Liaoning Northeast China Naphtha 1,000 2021 EA
Corp
China North Industries & Saudi Aramco Liaoning Northeast China Naphtha 1,000 After 2020 C
Baolai Chemical/Sarh Attaqnia Liaoning Northeast China Naphtha 1,000 H2 2019 EA
Shenhua Ningxia Ningxia Northwest Coal-to-naphtha 450 Trial runs in Sept C
China 2017
CNOOC/CSPC Guangdong South China Naphtha 1,200 Q1 2018 C
Maozhan complex project Guangdong South China Naphtha 800 2020 C
Sinochem Quanzhou Petrochemical Fujian South China Naphtha 1,000 2021 C
Gulei Petrochemical Fujian South China Naphtha 1,000 After 2020 N/A
C, construction, P, planned, EA, environmental assessment, N/A, not available
SOURCE: ICIS
to Western markets, or allow them to transfer Middle East implications East, as already discussed above.
low-margin production overseas. The Greek All of the Middle East is in the OBOR
port of Piraeus is set to play a crucial role region. And of course the Middle East is Another opportunity is for the Middle East
here. COSCO China Shipping has acquired a rich in hydrocarbons, whereas China’s to build more petrochemicals capacity in
two-thirds stake in Piraeus Port Authority as domestic supplies of oil are dwindling and China. There are already three new crackers
part of China’s strategy to make Greece the it has very little natural gas. under planning in China with Saudi Arabian
main gateway for Chinese exports to Europe. joint venture partners, which include Saudi
So, ever closer economic and geopolitical Aramco and SABIC (see table).
However, there are plenty of sceptics who ties between the Middle East and China
doubt whether China will come anywhere can result in more oil and gas flowing to The win/win is obvious here. The Middle
close to achieving its OBOR objectives. China from the Middle East. East supplies crude into new refineries,
Cost overruns and project delays are thereby helping to fill China’s oil deficit. This
obviously going to be major a hurdle given Back in the other direction could come then feeds new petrochemicals capacity,
the scale of what is being attempted – USD Chinese investment in new Middle East which is very cost competitive because of
1 trillion of planned investment. petrochemicals capacity. advantaged crude supply.
But let us assume that the OBOR is only China may also relocate lower-value Another major objective of China’s is to
50% successful. The end-result would finished goods manufacturing to the Middle raise its petrochemicals self-sufficiency,
still be a vast new eco-system of regional both through domestic investments and
and sub-regional, highly integrated investments in fellow OBOR countries.
petrochemicals value chains. “Build win/win
deals with China The Middle East can support China in
How this would work is that oil, gas and and the Middle East realizing this objective. The biggest
petrochemicals feedstocks such as naphtha deficits are polyethylene, monoethylene
would flow much more freely across
petrochemicals industry glycol and paraxylene. Build win/win
borders. So would the petrochemicals can greatly profit from deals with China and the Middle East
themselves, the components of finished the OBOR initiative” petrochemicals industry can greatly profit
products and goods. from the OBOR initiative.

Investing in today's
challenges, for better
tomorrow
www.sipchem.com

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INSIGHT

November 2017 | Annual Forum Edition

THE CHEMICAL LEADERS OF

GPCA LEGACY AWARD

I am pleased to present you

year is timed to coincide with our flagship event,

industry leaders – both from the GCC region and

ICIS, Quadrant House, The Quadrant, Sutton,

INSIGHT Surrey, SM2 5AS, UK

GPCA HQ Editor John Baker [email protected]

www.gpca.org.ae November 2017 | GPCA INSIGHT 3

EQUATE celebrates 20 years and new HQ

4 GPCA INSIGHT | November 2017 www.gpca.org.ae

Companies and individuals can

Innovation in action at AkzoNobel resistance in combination with

www.gpca.org.ae November 2017 | GPCA INSIGHT 5

Our chemistry plays a key role in enabling the manufacture of affordable,

Learn how at www.exxonmobilchemical.com

HSE initiatives accomplished board of several companies,

www.gpca.org.ae November 2017 | GPCA INSIGHT 7

Picture - credit style

GCC fertilizers have growth opportunities

8 GPCA INSIGHT | November 2017 www.gpca.org.ae

QAFAC is an active member of

10 GPCA INSIGHT | November 2017 www.gpca.org.ae

Abdulbaqi Al-Nouri • Played a leadership role in fostering the

www.gpca.org.ae November 2017 | GPCA INSIGHT 11

Creating the opportunity to

14 GPCA INSIGHT | November 2017 www.gpca.org.ae

www.gpca.org.ae November 2017 | GPCA INSIGHT 15

Growth and sustainability

Our mixed feedstock strategy is to move

www.gpca.org.ae November 2017 | GPCA INSIGHT 17

18 GPCA INSIGHT | November 2017r www.gpca.org.ae

www.gpca.org.ae November 2017 | GPCA INSIGHT 21

As a world leader in integrated energy and chemicals, we are committed to

expand global reach LyondellBasell’s joint ventures in Asia –

LyondellBasell also has a 50% stake in

“We see JVs as a very good route to

LyondellBasell In China, LyondellBasell has a 26.65%

www.gpca.org.ae November 2017 | GPCA INSIGHT 25

26 GPCA INSIGHT | November 2017 www.gpca.org.ae

Digital technologies will

Al Greenwood ICIS East wants to sell fuel to these markets at

28 GPCA INSIGHT | November 2017 www.gpca.org.ae

Delivering for you

BTS Tankers Pte Ltd

is key for Covestro

Heidi Finch ICIS Covestro has developed an advanced

www.gpca.org.ae November 2017 | GPCA INSIGHT 31

FEEL THE CHEMISTRY

32 GPCA INSIGHT | November 2017 www.gpca.org.ae

GCC players set to make

Companies are riding on the crest of strong

www.gpca.org.ae November 2017 | GPCA INSIGHT 33

For enquiries, please contact:

With over 85,000m3 of liquid bulk storage in Saudi

www.gpca.org.ae November 2017 | GPCA INSIGHT 35

Free trade comes