Shell Chemicals Arabia is a 50 per cent shareholder in the Saudi Petrochemical Company (Sadaf), which has grown from strength to strength to become one of the world's largest petrochemicals complexes. Situated on the east coast of the Kingdom of Saudi Arabia in the Al Jubail Industrial City, Sadaf produces a wide range of petrochemical products, in a world-class complex, which are sold around the globe. Shell's share of these products is sold through Shell Chemicals Arabia's Dubai-based sales and marketing arm, known as the Sadaf Business Unit, whilst the balance is sold by SABIC (Saudi Basic Industries Company), the other 50 per cent shareholder in Sadaf. 'Shell in the Middle East' talks to Aman Amanpour, President of Shell Chemicals Arabia and a Member of Sadaf's Board of Directors, who explains how it all works, "as the Middle East becomes ever more the centre for the production and export of base chemicals for the rest of the world"...
Aman Amanpour, President of Shell Chemicals Arabia and a Board Member of Sadaf, says, "Shell generates its return on investment in Sadaf in the form of finished products which are marketed and sold by Shell and SABIC, the proceeds passed to Sadaf and the profit shared among the shareholders."
Sadaf's range of products includes ethylene (total output 1.2 million tonnes per annum), styrene monomer (1.1 mtpa), ethylene dichloride or EDC (840,000 tonnes per annum), caustic soda (670,000 tpa), ethanol (330,000 tpa), and MTBE or methyl tertiary butyl ether (700,000 tpa).
"I head up the Sadaf Busines Unit and Hemant Samant, Marketing Director, leads a team of Sales, Marketing and Logistics staff," explains Aman. "We also have a Business Support Team with a Finance Manager, Business Development Manager and Analyst, as well as administrative staff. In addition, there is a marketing and support team based in Singapore which handles the sales and marketing of styrene monomer."
The Sadaf Business Unit markets Shell's share of Sadaf products all over the world. The Logistics and Supply operations are managed from Dubai, whilst the products are distributed directly from Sadaf's dedicated terminal at the King Fahd International Port on the east coast of Saudi Arabia near Al Jubail.
"The products we sell are used in a wide range of applications which impact on all our day-to-day lives," says Aman.
"Ethylene is one of the most important building blocks in the petrochemical industry. It is from ethylene that many of the other petrochemicals are produced, and the ethylene unit at Sadaf is the world's largest single-train cracker using ethane as a feedstock.
"The ethane feedstock is supplied to Sadaf via a dedicated pipeline from Saudi Aramco and is a co-product of Aramco's crude oil production. Prior to the development of the Al Jubail Industrial City, the ethane used to be flared.
"Within Sadaf, ethylene is the raw material used for the production of styrene monomer, EDC and ethanol. Any excess ethylene is sold to other industrial consumers for their own production purposes.
"Styrene monomer is used for the manufacture of styrenic polymers, including polystyrene, which is used in a wide range of industrial applications. End-user products include such items as automotive accessories and fittings and an extensive range of consumer and household products.
"EDC is the raw material used for the production of vinyl chloride monomer [VCM] which is, in turn, converted into poly vinyl chloride [PVC]. This is a very versatile plastic which is used to make a diverse range of products for many industries, from construction to aerospace, from agricultural to household.
"Caustic soda is an inorganic chemical with a variety of applications used in different manufacturing processes, including detergents, paper and the alumina extraction process.
"Industrial ethanol is used mainly as a solvent in the production of cleaners, personal care products, paint, adhesives, and as an ingredient in the pharmaceutical industry. It is also a component in the production of intermediate chemicals, such as acetic acid and ethyl acetate.
"Finally, there is MTBE, which is mainly used as a fuel additive to replace lead which is harmful to people and to the environment. MTBE is an oxygenate which helps to reduce pollutants in the atmosphere by encouraging fuel to burn more cleanly."
Aman then goes on to explain, "The main customers for Sadaf's products are in Asia, Australia, Europe and the USA so, basically, the Sadaf Business Unit markets its products in four continents.
"The main market for caustic soda is in Australia, where it is an important ingredient in the bauxite refining process to produce alumina, which is the raw material used to make aluminum. Caustic soda is also being sold in other markets in Asia and the Americas.
"MTBE is mainly sold to the USA but new markets are being developed elsewhere. The main markets for styrene monomer are across Asia, with some customers in Europe. Ethanol is sold into the USA, Asia and Europe, whilst EDC is supplied to major customers in Asia who manufacture VCM and PVC, mainly in Taiwan, Japan, Malaysia and China.
"One of the biggest customers for Shell chemicals from the Sadaf complex is the USI Group [see opposite page] and its affiliates, TaiwanVCM Corporation and Taita Chemical Co Ltd. The Sadaf Business Unit supplies them with a major part of their EDC and styrene monomer requirements.
"Furthermore, Shell Chemicals is currently developing other business initiatives with the USI Group which will lead to even more business in China, helping us to further strengthen our business relationship with this all-important customer."
Aman concludes, "Whilst Shell is very proud of its partnership with SABIC, Sadaf is not resting on its laurels. Development plans for the Sadaf complex include the construction of a co-generation unit, due to come on stream by the middle of 2005, to provide both power and steam to fuel the Sadaf complex's operations. This will take the form of a private IPP [Independent Power Producer] which will be the first such project not only in the Kingdom of Saudi Arabia but in the region.
"Plans are also being developed for the construction of a third world-scale styrene plant which will increase current production by more than 60 per cent. This will then give Sadaf the highest production of styrene of any single site in the world.
"Today, helped by economic recovery and high oil prices, business is going very well. This is due to the fact that Sadaf uses mainly advantaged gas as its feedstock which, when combined with top technologies, efficient processes and economies of scale, makes Sadaf's operations very competitive.
"I look forward to growing Sadaf's business and our customer base throughout the world - as well as to further enhancing existing relationships with customers and SABIC - as the Middle East becomes ever more the centre for the production and export of base chemicals for the rest of the world."
A highly valued customer in focus
The USI Group is one of the biggest customers for Shell Trading (M. E.) Pvt Ltd (STME), the Dubai-based marketing arm of Shell Chemicals Arabia, for moving Sadaf products.
The Group consists of seven companies operating in the core petrochemical industry. Five of these, USI Corporation, Asia Polymer Corporation, Taiwan VCM Corporation, China General Plastics Corporation (CGPC), and Taita Chemical Co Ltd, are positioned in the upstream and midstream of the petrochemical industry. One, Swanson Plastics Corporation, is in the downstream, and one, China General Terminal & Distribution Corporation, is in the distribution and storage business.
Whilst the USI Group's Head Office is located in Taipei in Taiwan, the Group has established manufacturing plants in Guangdong, Jianhsu, Beijing and Tianjin in China to provide more direct and comprehensive services to the mainland Chinese market.
"Taiwan VCM Corporation was the first petrochemical company in Taiwan to adopt the ethylene oxychlorination process to manufacture vinyl chloride monomer [VCM]," says P. Y. Wang, President of Taiwan VCM Corporation. "Its VCM plant is located in Kaohsiung and has a total annual production capacity of 300,000 tonnes.
"In addition to servicing the requirements of its associate company, CGPC, the customer base of Taiwan VCM Corporation spans Taiwan, China and Southeast Asia.
"As Chinese demand for PVC increases significantly, and since the country remains short of ethylene, China's dependence on imported VCM increases. This fact gives Taiwan VCM Corporation the opportunity to build further business in China, and since ethylene dichloride [EDC] is the key raw material in the production of VCM, the cost-effective and reliable sourcing of EDC has become a vital element in formulating Taiwan VCM Corporation's business plans for the future."
Charles Feng, VP Procurement, USI Group, goes on to say, "North America was, traditionally, the major EDC exporting region to Asia. However, in the last few years the Middle East, and particularly Sadaf, has emerged as one of the main suppliers of EDC, due to its advantaged gas feedstock and its proximity to Asian customers.
"In full recognition of this shift in supply capability, the Management team of Taiwan VCM Corporation has entered into a long-term contractual relationship with STME for the supply of EDC from the Sadaf plant in Saudi Arabia. This long-term supply commitment from STME, at a competitive price, has supported Taiwan VCM Corporation not only in sustaining its existing business operations but also in exploring new business opportunities in China over the last few years. Furthermore, Sadaf Business Unit's reliable and efficient supply chain and logistics arrangement, coupled with flexibility in forward shipment plans, has helped Taiwan VCM Corporation to streamline and optimise the production planning of VCM.
"The relationship between Taiwan VCM Corporation and the Sadaf Business Unit of Shell Chemicals Arabia has been built on a strong and enduring 15-year business relationship between the Styrene Business Unit and Taita Chemical Co Ltd, one of the USI Group companies, for the supply of styrene from the Sadaf plant. As a result, Shell Chemicals has emerged as a major supplier of two key products, styrene and EDC, out of the Sadaf complex."
Shell Chemicals is exploring further business opportunities with the USI Group in China, which will further enhance this strong relationship between the two organisations.
© Shell in the Middle East 2004
