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Thu 9 Apr 2009 04:00 AM

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Business review

In April's hotseat is Abdullah Bin Zaid Al Hagbani, secretary general of the Gulf Petrochemicals and Chemicals Association.

Business review
Abdulah Al Hagbani will be succeeded by Dr Abdulwahab Al-Saadon starting from March 26th.

In April's hotseat is Abdullah Bin Zaid Al Hagbani, secretary general of the Gulf Petrochemicals and Chemicals Association.

What has the GPCA achieved?

I believe that the number speaks about itself; we can notice the difference of the gulf petrochemical scene before and after the existence of the GPCA. The GPCA established a kind of harmony, a stage to exchange ideas between the different companies. The association created an understanding of the industry in the region, it became a means to communicate with government, and to inform companies about the new rules applied in export markets.

What is your assessment of the impact the credit crunch has had?

I am optimistic about the industry. It is a hundred-year old sector, not just five or ten years, and the industry has always been characterised by its price cyclicality. When our members plan their investments and their strategies they didn't use the record $1800 and $2000 per tonne prices anyway. The surge in oil prices led the petrochemical prices to these levels.

Of course, no organisation is immune to the current financial turmoil. There will be an impact on company revenues and there won't be billion dollar profits for a while, it will be millions instead. Some projects will post loses and others delayed while the idle projects will be cancelled. Even with all these challenges I believe that the crisis will present opportunities to buy and to reschedule plants.

The current scenario will no doubt force dated plants which are not competitive economically - as is the case for some plants in Europe and Asia - to close. That said, I am optimistic about the future, and I believe that the year 2012 will be a golden one for the petrochemical industry.

What are the main issues facing the petrochemical producers in the region?

The region is facing a shortage of ethane feedstock, but, as the region is an oil exporter, there are other alternatives. The presence of refineries in Saudi Arabia, UAE, Qatar and Kuwait and Oman will help surpassing this issue as there will be a necessity to increase the refining capacity and to produce more liquid fuels. To encourage the industry, regional governments need to create new pricing for the liquid feedstock to enhance the local petrochemical sector.

Do you expect much M&A activity from regional companies?

I say that the companies in the region are still in the process of growth. Some investments haven't even started yet like PetroRabigh, Yansab and Kayan in Saudi Arabia, as well as other investments in Kuwait, Qatar and Oman. Companies in the region are still under expansion plans. As such, I don't think that the current situation is adequate for any merger, and in the short term it is not suitable for any acquisitions.

What's the GPCA presence outside the GCC network?

The GPCA includes all the companies of the Arab gulf region including Iran and Iraq, and Iranian companies are among the main partners. Companies like National Petrochemical Company Of Iran (NPC)are among the producers and they are more than welcomed to the GPCA, but Iranian companies have some issues we hope will vanish.

What's your take on the recently cancelled K-Dow venture in Kuwait?

I don't agree with the brothers in Kuwait about the cancellation of the transaction. It sounds like a political decision. Investments in this industry need huge capital, and a long time to get back that investment. This industry is very strong. The issue remains that in the short-term the $2bn or $3bn is a huge amount, but I say that perspective forgets that this industry will create job opportunities for future generations.

There were many opportunities to review the deal which would have been better than canceling it. I think that Kuwait is the only loser from exiting the deal. People are waiting for the new partner of Dow, and I expect that the new partner of Dow will be from this region.

What do you think about clusters such as Abu Dhabi's Polymers Park?

I think it is a good idea which helps diversify portfolios. With the presence of Borouge and Chemawiyat, it will back the petrochemical industry in Abu Dhabi, and this, in turn will drive new sector-growth in that Emirate through the bulk of products that will be produced in the park.

Human resources became a major challenge facing regional producers in 2008, what can you do to help?

We've been successful as a facilitator and a platform. Wherever we think we can provide guidance or leadership on challenging issues, we have. The GPCA has set up round tables and conferences where we've brought universities, companies and governments together to discuss the requirements of the industry, and provided guidance on how educational establishments can cope with our requirements.

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