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Innovation and Technological Investment Vital for Sustainable Petrochemical Growth: An interview with GPCA's Dr. Abdulwahab Al-Sadoun



At a point in time when the shale gas revolution has begun making an impact, when petrochemical producers have begun using non-conventional feedstock and when the downstream converting industry is becoming increasingly crucial, Dr. Abdulwahab Al-Sadoun, Secretary-General of Gulf Petrochemicals & Chemicals Association (GPCA), discusses with POLYMERUPDATE issues pertinent to the petrochemical and the plastics conversion industries.
Technological advancements made the North American shale gas boom possible and it is technology that will help the Middle East push aside any challenges thrown by the shale-rich US, said Dr. Al-Sadoun in an exclusive interview. Dr. Al-Sadoun is a deeply respected and well-recognized individual who has immense expertise and knowledge on the subject of petrochemicals. A PhD graduate in Industrial Chemistry and a graduate in General Management, Dr. Al-Sadoun is an expert on both technical and economic aspects of the petrochemical value chain and its downstream industries.
GPCA is the premier and most respected body representing the downstream petrochemicals sector in the Middle East. With 232 members from more than 30 countries, GPCA is often considered to be the voice of the industry in the Gulf Cooperation Council (GCC) region. Its core members presently account for 95% of the petrochemicals and chemicals production by volume in the Arabian Gulf region.
GPCA organizes several world-class conferences and meets every year, which include the International Conference for Plastics Conversion (PlastiCon), the Supply Chain Conference, the Annual Forum, the Fertilizers Convention and the Sustainably Conference. Over the years, POLYMERUPDATE has been an active supporter of GPCA events and was the official media partner for the 5th edition of PlastiCon held at the Expo Centre, Sharjah, from April 7–9, 2014. It was during PlastiCon 2014, when POLYMERUPDATE had the golden opportunity to ask Dr. Al-Sadoun to share some of his insights.

Dr. Abdulwahab Al-Sadoun

In an interview with Lekhraj Ghai of POLYMERUPDATE, Dr. Al-Sadoun provides technical and economic perspectives on topics such as:

  • Sustainable development in the petrochemicals industry
  • Growth prospects in the GCC region
  • GPCA's contributions to the petrochemicals industry in the Middle East
  • Interdependence among the GCC countries
  • Clean initiatives advocated by GPCA
  • Impact of shale gas developments
  • Global issues such as the stagnancy in Europe and the restructuring of China's economy
  • Africa's oil and gas potential
  • Role of GPCA in promoting international trade and business ties
  • Future prospects of the converting industry in the Middle East
  • Equipment involved in the plastics processing industry
  • Upcoming GPCA events
Dignitaries and delegates attending GPCA PlastiCon 2014

Q: Without doubt, this year's GPCA PlastiCon succeeded in highlighting the growth and development potential of the petrochemicals and plastics industry in the Gulf and brought together brilliant minds from across the world under one roof. How successful was the event in terms of numbers?

A: During this year's PlastiCon, we have welcomed nearly 400 industry leaders, subject matter experts and other representatives from 22 countries.Since the first edition of PlastiCon in 2009, event attendance has grown by over 15% on a year-on-year basis. I am also very pleased that this year we have managed to attract a large number of plastics converters, which grew from 59 to 95 attendees — about 60% more than that in 2013. This highlights the emergence of GPCA PlastiCon as the premier event for all players in the plastics value chain.

Q: There is a strong demand for high-quality petrochemical products from the Middle East in India; does GPCA provide any assistance such that plastics converters from India or other countries can tie up with domestic producers for the supply of raw material?

A: Absolutely. GPCA events such as PlastiCon provide a platform where regional and international plastics resins producers meet with their customers from the GCC region and overseas to explore and develop tie-ups not only for the supply of their products but also to collaborate for the development of new products. In order to reinforce and complement the networking opportunities that PlastiCon offers, we teamed up with Plastivision Arabia — organized by the All India Plastics Manufacturers' Association (AIPMA) and the Expo Center Sharjah — for the first time this year, bringing all major players with an interest in plastics conversion at one location.

PlastiCon 2014 — Dr. Abdulwahab Al-Sadoun on extreme left

Q: What role does GPCA play in the growth of the regional petrochemicals industry?

A: GPCA advocates sustainable growth of the petrochemicals and chemicals industry in the region, and allied industries in the entire Arabian Gulf region and globally at various platforms. We endorse the creation of innovation culture within the industry to enhance the competitiveness of regional producers in an increasingly competitive marketplace. With this in mind, we have launched "Innovation" and "Excellence" awards to recognize those who invest in innovation. In 2010, GPCA launched its "Plastics Innovation Awards" to recognize best performers throughout the plastics value chain.
GPCA's initiatives focus on three strategic pillars — Networking, Thought Leadership and Advocacy — helping its members connect, share and advance knowledge, contribute to international dialogue and to become prime influencers in shaping the future of the petrochemicals industry.

Q: Could you enlist some of the innovative measures that GPCA has advocated for sustainable development?

A: As the regional industry's "think-thank," GPCA has always emphasized the importance of the sustainability agenda. The petrochemicals industry here has taken positive steps towards achieving environmental sustainability; while we have added capacity to our facilities, we have also reduced greenhouse gas and carbon dioxide emissions.
In December 2013, we organized the first GPCA Sustainability Conference. The Conference was themed "Planning a long-term future of responsible growth." Twenty speakers discussed topics ranging from water management and energy efficiency and recovery to renewable chemicals, plastics recycling, responsible care and even communications and innovation. The second edition of the GPCA Sustainability Conference will take place from October 21 to 23, 2014. In addition, we have taken considerable strides in championing the industry's Responsible Care initiatives, driving continuous improvement in health, safety and environmental performance.
And to promote sustainability throughout the entire supply chain, we recently launched the Gulf Sustainability and Quality Assessment System (SQAS) — a uniform, independent and standardized program for petrochemical logistical service providers, which enables companies to track and monitor progress in their environmental, health, safety, security and quality processes.

Q: How strong is the converting/processing industry in the GCC countries? What is your perception regarding the future growth and development potential of the plastics converting industry in the Middle East? Could you enlist some of its strengths and weaknesses?

A:The GCC is experiencing a healthy growth in the plastics conversion industry; the industry is forecast to grow at a compound annual growth rate (CAGR) of 8% over the next 6 years, bringing the total regional conversion capacity to 7.5 million MT in 2020.
The plastics conversion industry in the region is highly fragmented, which has resulted in a lack of scale and innovative strength in the industry. There is therefore a huge development potential for the plastics conversion industry in the region.
The GCC imports a large volume of the plastics processing industry's products either for final or intermediate consumption. GPCA would like to see these products replaced by products "made in the GCC" as the GCC conversion industry has the advantage of low energy costs, good local sources of polymers and a significant product portfolio. We also have full support of our stakeholders in the GCC governments as developing new industrial plastics for conversion will stimulate investments and create jobs.
At the same time, we need to develop cohesive and efficient logistics infrastructure to connect polymers producers and converters. The GCC railway network is expanding and will connect industrial cities in different countries. This should allow easy flow of goods and commodities within the region.

Q: What is the total number of plastics processors in the Middle East? What is their raw material consumption? How many are GPCA members? What are the parameters that GPCA considers before incorporating a particular company as its member?

A: There are more than 1,200 plastics converters in the GCC. Consumption of polymers in the GCC region reached 4 million MT in 2013 with PP and PE accounting for 60%. The breakdown of the polymers consumed in the region in 2013 is:

At present, there are 14 plastics converters among GPCA's members. GPCA membership is broadly classified into two categories: full members and associate members. Full members are GCC-based petrochemicals and chemicals producers having a production capacity of over 100,000 MT/year. Associated members are GCC-based producers having a capacity of less than 100,000 MT/year; these include international producers, service companies (EPC contractors, logistics providers) and business partners (converters, consultancy firms, chemicals traders, academia). To join GPCA, an organization should fall into one of these categories.

Q: How does GPCA encourage small and medium enterprises (SMEs)?

A: Through GPCA, SMEs can connect and share knowledge with industry executives and decision makers throughout the Arabian Gulf region and the world. GPCA membership also gives SMEs access to a wide range of organized workshops and seminars as well as to the GPCA database, which covers 167 products, enabling them develop thoughtful and well-informed plans for the future.

Q: Does the GCC petrochemicals industry regard the shale gas revolution in North America and the coal-to-olefins developments in China as a threat?

A: The feedstock developments in the US do not present dramatic changes for the current capacity of GCC petrochemicals producers – the region's capacity remains competitive. However, innovation and investment in technology and talent are now even more important to maintain growth.
GCC petrochemical players have many options that involve looking upstream within the value chain to more effectively leverage feedstock developments. They can also expand into performance or specialty products, or consolidate the industry and build scale.

Q: It is anticipated that manufacturing businesses in China will start looking towards other countries because of the involved high costs and the economic slowdown caused by the country's restructuring strategy. Does GPCA advocate any measures for attracting these exported businesses to the GCC countries?

A: Given our trade history, geographic location, abundant supply of feedstock and world-class infrastructure, the six GCC countries are well placed as a major hub for petrochemicals manufacturing. As an industry association, we work closely with regional government entities and other key stakeholders to optimize trade relations, by advocating free trade and an open market policy, and enhance supply chain efficiency.
For instance, the ambitious road and rail infrastructure projects in the region will give the industry an additional boost.
So I wouldn't say that we are specifically focusing on GCC manufacturers taking up business from China, but rather on strengthening the overall competitive advantage that this region already has.

Q: Could you throw some light on the equipment and machinery involved in the Gulf plastics processing industry? Is the machinery imported or is procured from domestic markets?

A: Extrusion is the dominant process, for both films and pipe. This is a reflection of the fact that packaging is the main end-user market segment and construction is a booming sector in the region. PE blown and cast films are by far the largest production processes, with blown film production currently much higher than that of cast film. Blown film extruders mostly are mono-layers; however, all large converters are currently operating production facilities with multi-layer extrusion processes. Cast films mainly produce stretch films for the local and export markets. The constant substitution of shrink pelletizing by stretch hood is ongoing and propelling more local demand for stretch films.
In blow moulding, HDPE is mainly used for bottles and containers. The market in blow moulding is steady albeit at a moderate growth level since it has suffered in the past few years from heavy competition from PET.
Injection moulding applications range from caps and closures to crates to white goods items. Mainly HDPE is used in these applications. Although converters still rely on foreign suppliers for moulds and designs, there has been good growth in these applications in the past few years.
Pipe and conduit is another growth area for polyethylene. Although the market in Saudi Arabia has focused on PVC pipes, in 2008 the government started to specify PE-100 pipes for many potable applications. This has spurred stronger growth for pipes and fittings in HDPE, which will require bi-modal resins. Extrusion coating is still very small in the GCC and only used by few converters to coat on paper or aluminum.

Q: How soon are other countries in the Middle East expected to catch up with the development achieved by Saudi Arabia and UAE with regards to plastics processing?

A: The largest polymers consumers in the region are Saudi Arabia and the UAE, which account for 61.5% and 22.2% of the regional consumption, respectively. Regional consumption is driven mostly by consumer packaging (43%) and construction (25%) end markets. In addition, due to the size of their population and construction markets, Saudi Arabia and the UAE have been dominating in plastics consumption. Therefore, the regional plastics processing industry is geographically concentrated: major centers are located in Jeddah, Riyadh and Damman/Al Khobar in Saudi Arabia and Dubai/Sharjah in the UAE.
However, there is scope for improvement in other countries, particularly Qatar. There is room for other GCC markets to develop plastics processing clusters around resin producers.

Q: How threatening is the stagnancy in the European economy, considering that Europe is one the main markets for petrochemical products from the GCC?

A: The business environment the industry faces this year will be similar to 2013, with China's economy growing steadily and Europe stagnant or growing at a rate of about 1%. So, if this continues, the GCC petrochemicals industry will probably see 2014 similar to 2013. Note that Europe accounts for only 12.9% of GCC chemicals exports.

Q: What is GPCA's perception of the oil and gas developments in African countries, such as the recent offshore gas finds in Mozambique and Tanzania and onshore oil finds in Uganda, and the substantial amounts of oil held in countries such as Nigeria and Libya?

A: Oil and gas developments coming on stream in Africa offer potential avenues for growth for the larger players in the region. They can become attractive new markets, particularly for gas supply.

Q: How has the response been for the "Clean up the Gulf" initiative announced at GPCA's inaugural Sustainability Conference held last year? Which companies have endorsed the "clean" measures promoted by GPCA?

A: We can already look back at a very successful second edition of Clean up the Gulf, now called the "Waste Free Environment" initiative and are gearing up for a third!
During the second edition in February 2014, there were 5,512 participants who joined forces in nine different cities across the GCC region to clean up the coast lines and the desert areas of their cities: in Abu Dhabi and Dubai in the UAE; Jubail, Jeddah and Riyadh in Saudi Arabia; Sohar in Oman; Wakrah in Qatar and Manama in Bahrain. A total of 189 divers supported the event as part of the 2011 Declaration of the Global Plastics Associations for Solution on Marine Litter, of which GPCA is a signatory partner, reinforcing the efforts of the community.
I am incredibly proud to say that a total of over 511 MT of waste was collected of which a large part has been recycled by our local recycling partners.

Q: Which issues will be addressed in the GPCA Annual Forum this year?

A: The 2014 edition of the Annual Forum will take place on November 23–25, 2014. This year's edition will be themed "The Strategic Direction of the Chemicals Industry – What's Next?"
The 9th edition of the Forum will have 2 seminars; the first is a "Market Seminar" facilitated by IHS consultants and the second is a seminar focused on "China–GCC Partnership" organized in collaboration with China Petroleum & Chemical Industry Federation (CPCIF).
The Forum will continue providing extensive networking opportunities, including an exhibition of leading companies and suppliers running alongside the conference sessions, and gala dinners and lunches sponsored by major international and GCC companies. Delegates have already registered for the event, with attendees representing regional and global players such as ExxonMobil, Shell, Dow Chemicals, LyondellBasell, Reliance, Bayer, BASF and Lanxess among others.

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