Abdulwahab Al Sadoun, Secretary-General, Gulf Petrochemicals and Chemicals Association (GPCA)

Text size +-
Share

On the industry’s role in the GCC’s economic diversification

How has the GCC petrochemical industry been affected by the Covid-19 pandemic?
    
ABDULWAHAB AL SADOUN:
The health crisis had a significant effect on the petrochemical 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 pandemic. These 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. 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. In terms of revenue, the industry already entered the crisis with very narrow margins after recording two years of revenue declines; a -18.7% drop to $68.4bn and between -20% and -24% in 2020 to $52bn. Still, despite the challenges, over the course of 2020 the GCC’s chemical output expanded by 1.5% compared to a global decline of 2.6%.

To what extent has the project pipeline been reconfigured?

AL SADOUN: The value of petrochemical projects due to be commissioned between 2020 and 2024 is at $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 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 Kingdom’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.

Where do you see opportunities for innovation in terms of product development, particularly in the area of sustainability?

AL SADOUN: The chemicals segment has the opportunity to put innovation at the core of its business strategy. It is well positioned for the development of processes and products in the areas of sustainability, the circular economy, recycling, decarbonisation, feedstock evolution and digitalisation. Specific to feedstock evolution, the production of chemicals from electricity, hydrogen and CO2 is of increasing importance as producers leverage sources of renewable energy to manufacture synthetic raw materials and reduce their carbon footprint. 

Moreover, petrochemical companies 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 member companies have prioritised sustainability and climate change, resulting in a 23% drop in CO2 emissions since 2013. 

Which challenges need to be overcome in order to boost the contribution of the industry 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 (R&D), joint ventures with other companies, mergers, industrial cluster developments and an emphasis on service, with greater support from regional governments. While countries are making significant strides towards diversifying away from oil, the limited size of the regional consumer market, technological entry barriers, limited R&D capability and high logistics costs have hampered progress and remain the key hurdles to overcome. 

Share

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Saudi Arabia

Privatisation in the Gulf: the key to both recovery and...

With Saudi Arabia announcing plans to raise $55bn through its privatisation programme, Gulf countries are stepping up efforts to stimulate private investment in public assets and projects, with a...

In Industry

Report: How can West Africa boost its textile and garment industry in...

While West Africa is one of the largest producers of cotton, it has the ability to process less than 2% of the crop locally; around 90% is exported to markets in Asia, where value is added through...

Latest

Is Nigeria’s start-up ecosystem the key to the country’s coronavirus...

A recent report has highlighted the significant potential of Nigeria’s burgeoning tech start-up scene, but also outlined a series of limitations that need to be addressed for the segment to emerge...