Interview: Abdulwahab Al Sadoun
How was the GCC petrochemical industry affected by the Covid-19 pandemic?
ABDULWAHAB AL SADOUN: The health crisis had a significant effect: in the first half of 2020 demand collapsed and prices plunged, compounded by supply chain disruptions related to port closures in China and freight rates as much as three times higher than before the pandemic. These factors eroded the profits of producers in the GCC that were already paying high supply chain costs.
Business activity bounced back in the third quarter of the year, although it has yet to make a full recovery. Increased demand for raw materials for 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 9.2%, they outperformed the global average, which saw a 20% contraction.
In terms of revenue, the industry saw two years of revenue declines: a 18.7% drop in 2019 to $68.4bn and a 24% decline in 2020 to $52bn. Still, despite the challenges, GCC chemical output grew by 1.5% in 2020, compared to the global industry’s decline of 2.6%.
To what extent has the project pipeline changed?
AL SADOUN: The value of petrochemicals projects due to be commissioned in 2020-24 is $71bn, but companies in the Gulf may postpone bringing additional capacity on-line until demand recovers. Projects like the crude-to-chemicals deal between SABIC – Saudi Arabia’s state petrochemicals company – and 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 Kingdom’s Amiral petrochemicals 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.
Where do you see opportunities for innovation in terms of product development?
AL SADOUN: There is an opportunity to put innovation at the core of the chemical industry’s strategy. The industry is well positioned for the development of sustainable processes and products, circular economy initiatives, recycling, decarbonisation efforts, feedstock evolution and digitalisation. The production of chemicals from electricity, hydrogen and CO is of increasing importance as producers leverage renewable energy to manufacture synthetic raw materials and reduce their overall carbon footprint.
Petrochemicals firms can help their clients pursue sustainable and circular economy goals with innovative products and inputs. The GCC has been developing programmes to reduce emissions, with efforts mainly focused on processes, energy optimisation, renewables and technology development. GPCA member companies have prioritised sustainability amid climate change, resulting in a 23% drop in CO emissions since 2013.
Which challenges need to be overcome to boost the industry’s contribution to economic diversification?
AL SADOUN: We are at a turning point, shifting from commodity suppliers to speciality chemical producers. We can increase our contribution to economic diversification through technology acquisition, research and development, joint ventures with other companies, mergers, industrial cluster developments and an emphasis on service, with greater support from regional governments. While many countries are making significant strides towards diversifying away from oil, the limited size of the regional consumer market, technological entry barriers, limited research and development capability, and high logistics costs have hampered progress and remain the key hurdles to overcome.
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