Evaluating the Middle Easts influence on the Asian Chemical and Petrochemical Industry

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Evaluating the Middle Easts influence on the
Asian Chemical and Petrochemical Industry
Presented by Mr. Ali Alshamrani General
Manager, SABIC Asia Pacific 5 September 2006
Conference on Cost Effective Strategies for
Chemicals and Petrochemicals Asia
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Overview

• Trends and developments in the Middle East
• The Middle East and Asia
• Expansion plans in the Middle East
• SABIC

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Bilateral trade between GCC and Asia

• Gulf Cooperation Council (GCC) Members
• Kuwait
• Kingdom of Saudi Arabia
• Kingdom of Bahrain
• Qatar
• United Arab Emirates
• Sultanate of Oman
• Increasing trade with Asia

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Chinas bilateral trade with the GCC

• FTA between China and GCC by end 2006
• Chinas bilateral trade with the GCC hit 21
  billion
• Trade between GCC and China to triple to US100
  billion in the next 5 years

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Petrochemical exports from GCC

• Annual exports of all petrochemical products from
  the GCC have exceeded 30 million tons last year
• 50 million tons in 2008
• 48 million tons of liquid chemicals exports from
  the Middle East in 2008 projected

Bahrain
Kuwait
Saudi Arabia
Qatar
Oman
United Arab Emirates
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WTO

• Benefits of trading
• More balanced economy
• Tariffs and subsidies will be lowered
• Gain cost advantage and access to foreign markets
• Shape the future of the world trade system

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Ethylene capacity in The Middle East
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McKinsey Company
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Ethylene Capacity Growth in the Middle East
Source CMAI
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Upcoming New Capacities in the GCC
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Upcoming Mega Energy Projects in Saudi Arabia

• The US10 billion Aramco-Total export refinery
• The US6 billion Aramco-ConocoPhillips export
  refinery
• SABIC's Saudi Kayan Petrochemicals Company (Saudi
  Kayan)
• SABIC - YANSAB

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Upcoming Mega Energy Projects in Saudi Arabia

• US10 billion Petro-Rabigh Project
• US24 billion King Abdullah Economic City
• New plant of ChevronPhillips exports of 750,
  000 tons
• National Petrochemical Industrialization Company
  and Saudi International Petrochemical Company -
  New complex with annual exports of around 2
  million tons
• Project Management and Development - 1.3 million
  ton cracker complex and amines plant production
  of 3 million tons

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Petrochemical Expansions in the Gulf region

• Joint venture between Kuwaits Equate
  Petrochemicals Company and Dow
• PIC-BTX complex in Kuwait

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Petrochemical Expansions in the Gulf region

• Qatar
• UAE
• Oman
• GCC cumulative total investments of US37
  billion at end 2002, with additional US40
  billion expected by 2010

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What makes the Middle East so successful?
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Reasons for the Middle Easts Success

• Abundant competitively-priced natural gas
  feedstock
• Ideal central location between the Americas and
  Asia

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Reasons for the Middle Easts Success

• Other Factors
• Strong political support
• Liquidity for project finance
• Reasonable production and construction costs
• Tax incentives - foreign
• partners
• State-of-the-art production facilities

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Formation of Gulf Petrochemicals and Chemicals
Association (GPCA)

• Framework for regional cooperation and strategic
  alliances
• GPCA is first voluntary, non-profit association
  of its kind in the Middle East to address
  members concerns and exchange information

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Growing Alliance between The Middle East and Asia

• Booming demand for petrochemicals in Asia
  especially China
• The Middle East supply will meet half the demand
  for chemical imports from China

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New Trends in Financing

• SABICs pledge of US15 billion
• Sukuk issuance of US800 million
• Diversification in SABICs sources of finance

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SABICs Success Story
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SABICs Ranking
GLOBAL TOP 50
Source Chemical Engineering News
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SABICs MEG Expansion Plans

KMT
Source SABIC PCI
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SABIC globally and in Asia Pacific

• 26 subsidiaries and sales offices in
  international markets
• 29 distribution and storage facilities worldwide
• Setting up new offices and warehouses

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What are the challenges in the future, and can
the Middle East maintain its leadership position?
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Security and Safety in the Middle East

• Prompt delivery even in times of unrest
• No disruption to supply regardless of the
  situation
• Well protected sites
• Security is paramount

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Competition The Rise of China, Russia and India

• Rapid growth
• Forecast for production capacity for
  petrochemicals in China annual average increase
  of 22 until 2001
• Chinas local petchem production cannot meet
  domestic demand

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Challenges Ahead

• Lacking behind the Middle East in infrastructure,
  resources, feedstock, research and technology
• Common factor among China, India and Russia
  potential to huge consumer market but far behind
  in other areas

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Threats and Opportunities

• Alternative Sources of Energy
• Renewables
• IT
• Unforeseen threats and impacts

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Volatile Issues

• Geopolitical issues and impacts
• Major current concerns
• Lack of credible solutions

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Whats Ahead?

• Remain updated on threats
• Future success
• Ability to steer a clear path

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Boom or Bust?

• Will world economy grow?
• Will demand for petrochemicals be fulfilled?
• Will profits be extended?

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Shift of Gravity

• Shift of the petrochemical industrys
  centre-of-gravity
• Economics will decide future of the industry
• Downturn or an Extended peak?

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