13 December 2011 09:44 [Source: ICIS news]
DUBAI (ICIS)--Access to technology will be the main issue for Middle East petrochemical producers as they shift strategy to push downstream into value-added chemicals, Paul Harnick, chief operating officer of KPMG’s chemicals and performance technologies practice, said on Tuesday.
The Arabian Gulf region “can sort out most things”, he said, “such as infrastructure, logistics and raw materials, but it needs to acquire the technology.”
KPMG, a global management consultancy, is launching a special report at this year’s Annual GPCA Forum, entitled “The GCC in 2020: Downstream expansion of the Middle East chemical industry”. The report, which forms the latest issue of KPMG’s Reaction chemical magazine, has been developed with the Gulf Petrochemicals & Chemical Association (GPCA) and is co-branded as a KPMG/GPCA publication.
Said Harnick: “The report is very timely as the move downstream is getting much more important for Gulf producers. This is being driven by two things: regional demographics that are seeing growing populations and an increasing need to create jobs, and the desire to add yet more value to the region’s oil and gas production.”
Looking at the four main petrochemical producing regions, Harnick said that the Middle East continues to have an advantage with feedstock provision, while Asia has rapidly growing markets, and Europe and North America have an advantage in technology. This presents a ‘win-win’ situation for Western technology holders willing and able to create joint ventures with Middle East partners.
Harnick pointed to the Saudi Aramco/Dow Chemical mega-complex being planned for Al-Jubail in Saudi Arabia as a case in point. “They have agreed things so both partners are going to win, with a trade off between technology advantage and feedstock access.”
But equally, added Harnick, Middle East players have a cash advantage that will allow them simply to buy-in technology in some cases, under licence or through acquisition. However, there is a risk here that political issues may prevent transactions if governments decide technology ownership is sensitive.
Also, he noted, the Middle East is not operating in a vacuum and will have to compete for technology and with areas such as China and Brazil, which are seeking to build downstream petrochemical activity at the same time. “There is evidently a limited number of Western and Japanese partners so Middle East players need to make sure their proposition is more attractive.”
Other challenges for Middle East producers, he added, is to gain marketing expertise, increase innovation capacity and investment, and improve logistics provision, notably in terms of port infrastructure and rail links, as much production will continue to be exported in the medium term.
In the latter respect, and in the move to create downstream customers in the Gulf region, in industries such as automotive, packaging, electronics, metals and so on, the governments in the region have an important role to play, said Harnick. “Development can’t just be left to companies – there needs to be a regional framework.”
The 6th GPCA Forum is being held in Dubai on 13-15 December, with the theme “Moving Downstream – Creating Value and Sustainable Growth”.
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