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Sun 19 Jul 2009 04:00 AM

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Business review

Dr Abdulwahab Al Saadon, secretary general of the Gulf Petrochemical and Chemical Association discusses the challenges facing the industry.

Business review
Business review

Dr Abdulwahab Al Saadon, secretary general of the Gulf Petrochemical and Chemical Association discusses the challenges facing the industry.

How do you evaluate the current market situation?

The current downturn is affecting everybody; nobody is immune from the impact of the credit crunch. It hits the industry as demand has shrunk in Asia and some segments of the US market, mainly the auto industry, which is one of the major end users of chemical plastic. Everybody has been affected, but we believe the competitiveness of regional players puts them in a better position compared to other players around the world.

There is a limited allocation of ethane due to the competition between industries.

What is the agenda of GPCA?

GPCA was established in 2006, by eight petrochemical producers. During this time, GPCA has evolved to be a regional platform for sharing knowledge and best practices among industry players. GPCA functions through working committees that are made up of members. So far, we have four committees: for human resources, supply chain, HSE and plastics.

What are the challenges?

GPCA is a platform representing industry players, so whatever challenges face the industry are challenges facing the organisation. During downturns, there are moves toward protectionism and this is a key challenge we want to address through the collective efforts of all the members. This is going to be handled by GPCA as a platform that serves the interests of regional companies.

What do you think about the M&A deals in the region?

M&A deals are part of the growth process. Companies expand through organic growth or acquisitions and this is the right approach for reaching new markets and gaining access to appropriate technology.

What has been the impact of the financial crisis?

The local players are in a better position relatively speaking. The impact is felt by all players around the globe, but we do believe GCC producers are the least affected by the current crisis.

How can GPCA help companies facing human resource problems?

HR is one of the key ways of maintaining competitiveness in the industry and all the major players have invested significantly in developing local human resources. Most current players do now have a national pool of labour; several companies now have a local work force exceeding 80% as a result of significant investment.

GPCA has established a working committee dedicated to human resource related issues, whereby best practices are shared and programmes are tailored for major companies. Our training programmes are, of course, also open to non members.

How do you view the growth of the industry in the region?

The industry has been consistently growing since the early 80s when the first petrochemical plants were commissioned. Since then, industry growth has been consistent and in the last two or three decades, the accumulative production capacity growth has been in double digits, at around 11 or 12% on an annual basis. This is phenomenal compared to the global growth rate, which will be sustainable in the future subject to the availability of feedstock, which is the key factor that determines the rate of project's expansion. How about the availability of feedstock in the region?

It's a challenge, as there is a limited allocation of ethane due to competition between industries to get enough gas for power generation, water desalination and metal processing.

To overcome this problem, there is a trend that started in Saudi where the feedstock allocated is a mixed feedstock: Ethane plus propane and ethane plus butane. Also, we see a trend in refinery integration where naphtha will be cracked, such as PetroRabigh, Ras Tanura and Chemaweeyat in Abu Dhabi. Feedstock has been a critical factor in determining growth and expansion. If we are able to overcome limitations on ethane, we can open up new opportunities.

These will generate new products and stimulate the downstream industry. The industry has developed more of the ethane chain, now we are seeing more development of the C3 value chain, with naphtha cracking starting in the region.

What is the GPCA presence outside the region?

We are a Gulf association that represents the interests of GCC companies. We are the voice of the GCC industry on the global level.

Abu Dhabihas launched several projects, what do you think about this move?

It is excellent. This is the right way forward. We now have all the foundations for success in terms of feedstock availability, in terms of infrastructure and in terms of proximity to the market. This industry is strategic for the region, especially for the diversification of economies.

All moves to expand this industry in the region are welcome and we see this as entirely logical. The centre of the petrochemical industry is moving to the region and we have all the components to develop a globally competitive industry in the region.

Do you think that there will be establishment of associated industries, as SEEN in Canada?

I think in the past the focus was on developing infrastructure and the production facilities. As we expand the industrial base in the Gulf, there are opportunities in the service sector. This sector has great potential, since the more you expand the more you require services. We would therefore like to see more services companies established and for them to provide services to local producers.

This will enhance their competitiveness in the long term. The ultimate goal is to see this region emerge as a centre of excellence for technology and technology services, human resource development and training. This is our aspiration and this is logical, as this region is becoming the new global petrochemical hub.

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