Apr 05 2011 |
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Gulf companies strive for role as global supply hub
Tuesday, Apr 05, 2011Dubai: According to recent statistics, Gulf-based petrochemical production is expected to jump 46 per cent this year. As the sector sees a boost in production and investment, industry players urge more focus in developing technology and production facilities.
"The future success of the Gulf region's rapidly expanding downstream sector depends on collaborative efforts by those in the sector," said Ziad Al Labban, President and CEO of Petro Rabigh .
The Gulf region is located between current and future large plastics demand centres of the world. However, while an estimated 50 per cent of global oil reserves and 40 per cent of the world's gas reserves come from within the region and the neighbouring countries, only 15 per cent of the global petrochemical production comes from this region.
Main challenges
More partnerships and technology licensing arrangements are being pursued in order to enhance production capabilities. Al Labban cited the partnership between Saudi Aramco and Dow Chemical Company, Qatofin, a joint venture between Qatar and Total and the joint venture between Qatar Petroleum and ExxonMobil Chemical Qatar Limited in Ras Laffan Industrial City as examples.
According to Rashed Al Shamsi, vice-president of polymer conversion at Abu Dhabi Basic Industries Corporation (ADBIC), the main challenges in the regional petrochemical industry include trade barriers when serving the European markets and logistics costs which must be offset by competitive raw materials. Raw materials make up 65 per cent to 80 per cent of the total processing. While prices here enjoy the advantage of being 30 per cent lower than in Europe, prices in Asia are more than 5 per cent less than here.
"All the ingredients are there for this region to be a hub for plastics industry, yet we are facing a lot of challenges. These include cost competitiveness, sustainability and customer service levels," said Osama Al Awadi, the procurement manager of Africa and Middle East at Unilever, which is one of the biggest polymers consumers among Fast Moving Consumer Goods (FMCG's) globally.
Competitive pricing
According to Al Awadi, expansion of the plastic conversion industry is vital in enabling more competitive pricing to supply globally.
"There are some products which can be exported from this region globally and we think this opportunity is not happening from a pricing point of view. Sourcing from the region is limited because of the cost. For example, Saudi Arabia is more expensive than Turkey," said Al Awadi.
Unilever produces 400,000 tonnes of petrochemical products globally.
Companies such as Petro Rabigh and ADBIC are building up the facilities to encourage this growth.
"What we're trying to do is attract a conversion industry to our park. The whole intent is to bring in conversion industry that will create jobs for Saudis," said Al Laban. Their park has so far attracted 16 companies taking up 75 per cent of the land.
According to Al Shamsi, their industrial cluster dedicated to the plastic conversion industry at ADBIC is close to 30 per cent reserved.
Within the GCC there are 500 to 600 significant primary converters. By comparison there are 25,000 significant primary converters in Europe.
"Investment in plants and equipment in the GCC grew very strongly in the years up to 2008. It then weakened in both 2009 and 2010 and a recovery in investment is now expected," said Joe Nash, director of AMI consulting, a research and consultancy company specialising in the petrochemicals industry. These issues will be discussed at the second GPCA Plastics Summit which takes place this week.
By Aya Lowe
Staff Reporter
© Gulf News 2011. All rights reserved.
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