Interview: Abdulwahab Al Sadoun
How has the GCC petrochemicals industry been affected by the Covid-19 pandemic?
ABDULWAHAB AL SADOUN: The health crisis had a significant effect on the petrochemicals industry. In the first half of 2020 demand collapsed and prices plunged, a challenge compounded by supply chain disruptions related to the closure of ports in China and increases in freight rates to as much as three times the market price prior to the Covid-19 pandemic, eroding the profits of producers in the GCC. Business activity bounced back in the third quarter of 2020, although it has yet to make a full recovery. The increase in demand for raw materials used in products such as medical equipment, sanitisers, and health testing and treatment tools enabled companies to maintain stable operational rates of 93%. While regional companies’ trade volume for 2020 was down by 9.2%, they outperformed the global average of a 20% contraction. Furthermore, over the course of 2020 the GCC’s chemical output expanded by 1.5% despite the challenges, compared to a global decline of 2.6%.
Where do you see opportunities for innovation in terms of product development?
AL SADOUN: The chemicals segment has the opportunity to put innovation at the core of its business strategy. It is well positioned to develop processes and products in the areas of sustainability, the circular economy, recycling, decarbonisation, feedstock technology evolution and digitalisation. Specific to feedstock, the production of chemicals, hydrogen and ammonia from CO and renewable energy sources is of increasing importance as producers seek to reduce their carbon footprint. Moreover, petrochemical firms can help their clients pursue sustainable and circular economy goals with innovative products and inputs. The GCC market has been developing programmes to reduce carbon emissions, with efforts mainly focused on processes, energy optimisation, renewables and technology development. GPCA members have prioritised sustainability and climate change, resulting in a 23% drop in CO sions since 2013, despite an expansion of the industry’s production capacity by 4.36% between 2013 and 2020.
To what extent has the industry’s project pipeline for the short to medium term been reconfigured?
AL SADOUN: The value of petrochemical projects due to be commissioned between 2020 and 2024 is $71bn, but companies in the Gulf may postpone bringing additional capacity on-line until demand recovers. Projects such as the crude-to-chemicals deal between SABIC – Saudi Arabia’s state petrochemicals company – and Saudi Aramco may be downsized, and others such as the North Field expansion in Qatar, the Duqm refinery in Oman and the Al Zour refinery in Kuwait have been delayed. Nevertheless, other projects like the Farabi Petrochemicals facility in Yanbu, Saudi Arabia came on-line in 2020, while the country’s Amiral petrochemical and Phosphate-3 complexes – as well as the Borouge-4 plant in the UAE – are on track for completion. Moreover, the pandemic accelerated the sustainability agenda, and industry players are focused on renewable technologies and circular economy initiatives.
Which challenges need to be overcome in order to boost the industry’s contribution to economic diversification in the region?
AL SADOUN: The GCC chemical industry contributed about 2.9% to regional GDP and provided 149,500 jobs in 2019. The focus from commodity chemicals production to speciality and added-value chemicals will further increase its contribution and create more employment. Advancing regional economic diversification will require the industry to focus on technology acquisition, investing in research and development, forming joint ventures with the right partners, and building critical mass through mergers and acquisitions. The development of industrial clusters is another important enabler for economic diversification.