GPCA ’14: GCC needs to develop SMEs in petrochemical industry: Aramco

DUBAI (ICIS)–The Gulf Cooperation Council (GCC) petrochemicals industry needs to expand small and medium enterprises (SMEs) on the same lines as in the US and Europe because it offers great opportunity for growth, a top Saudi Aramco executive said on Monday.

“We have tended to grow horizontally rather than through vertical integration, and while primary petrochemical capacity has grown admirably, the strengthening of functional capabilities has tended to lag,” said Khalid Al-Falih, President and CEO of Saudi Aramco.

“To date, our advantages have carried us through, but the existing model will not realise our full potential because the global industry landscape is changing rapidly and creating stronger competition around the world,” Al-Falih said in a keynote speech at the 9th Annual GPCA Forum, taking place on 23-25 November, in Dubai.

He cited four growth opportunities for the petrochemicals industry in the region that need to be pursued by the industry players in tandem with each other.

The GCC region consists of the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait

“Collectively, we need to keep in mind that demand for chemicals is growing at a faster rate than nominal economic growth (GDP), and that not all that new demand can be met with gas light feedstocks

“Longer term, I foresee the creation of new, groundbreaking technologies to enhance the competitive position of liquids, such as the direct conversion of oil to chemicals,” Al-Falih said.

He said second opportunity was enhancing region’s existing chemical facilities by restructuring and upgrading the massive petrochemical asset base built in the 1970s and 1980s, to enable them to accept mixed feedstock strategy.

“This retrofit would include changes to the feedstock mix, deployment of more energy efficient technologies and the addition of high value specialty products.  But to succeed in specialties, we will need to leapfrog in knowledge intensity and accelerate our innovation engines,” he added.

The third opportunity Al-Falih highlighted was to multiply the number of industry participants and jobs by establishing SMEs in the region.

“Many of our past efforts have focused on large-scale commodity petrochemical projects, which offered the benefits of scale economies, allowed meaningful penetration into export markets and gained for us a prominent position on the global industrial landscape. 

“But there are tremendous advantages in combining the scale of mega-facilities with the high value addition and job creation potential of small and medium-sized enterprises, including the strengthening of an entrepreneurial ecosystem here in the region,” he added. 

He said rather than being content with just a handful of major players, the industry ought to have thousands of small and mid-size chemicals companies in the Gulf, as there are in the US, Europe, Japan or South Korea. 

“All of this will be more easily accomplished if we can grab our fourth opportunity: greater regional integration,” Al-Falih said. 

“The picture I have in mind of the future GCC is a booming, cross-connected region, buzzing with chemicals-related activity, and while we need to maintain a healthy dose of competition, we should also creatively collaborate at the regional level to create potential synergy and the essential qualitative edge in terms of innovation, education and technical excellence,” he added.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections