Strong regional multi-stakeholder partnerships will be the key for a dynamic, flexible and growth-driven petrochemicals industry, said industry experts at the sixth Supply Chain conference, organized by the Gulf Petrochemicals and Chemicals Association (GPCA).
“The industry needs advanced national and regional infrastructure if we are to succeed,” said Mohammad Husain, Chairman of the GPCA Supply Chain Committee and Chief Executive Officer of Equate.
Husain highlighted that the expansion and introduction of new land and sea transport infrastructure would make the Gulf’s petrochemicals industry more flexible, a trait that is necessary for this export oriented sector. “If you look at Kuwait, for example, 95% of the products, be it petrochemicals or oil and gas, are exported.”
The GCC exported approximately 79% of its total product portfolio to 177 countries last year, amounting to 63.4 million tons of chemicals, according to GPCA estimates. Petrochemical exports for the year were valued at US$55.5 billion.
Husain recommended that the only way to overcome logistics bottlenecks in the petrochemical industry is to strengthen partnerships between GCC government entities, border and customs regulators, logistics service providers and educational institutions. “The supply chain is made up of many links, and we will only be as strong as the links that make up the entire chain.”
Meanwhile, ambitious railway developments in the Gulf region will become a critical enabler for industry growth by facilitating intra-regional chemicals trade. The growing capabilities of the petrochemicals industry will likewise benefit the emerging railway network.
“For rail to succeed, petrochemicals need to be transported on trains,” said Dr. Rumaih Al- Rumaih, Chief Executive Officer, Saudi Railway Company (SAR). “Railways will make a return on investment only if it transports high- value freight, like petrochemicals, across long- distances.”
A well-connected railway network will result in capacity and fuel savings, as well as environmental benefits. “One train is the equivalent of 600 trucks, which can result in savings of 70% for fuel and greenhouse gas emissions,” explained Dr. Al-Rumaih.
“The GCC petrochemicals industry has seen astonishing growth over the last few years,” said Dr. Abdulwahab Al-Sadoun, Secretary-General of GPCA. “Rapid expansion may pose many challenges to the sector and its partners in the transport, customs and logistics industries. And, in terms of human capital, we are dependent on educational institutions for our human resources.”
While the challenges are clear, the industry is set to see consistent growth in the near future. The GPCA estimates that petrochemical producers in the Arabian Gulf will increase their capacity by 45% over the next four years, reaching 199.5 million tons by 2018.
“The emergence of the petrochemical industry is a positive development that strenghtens the economic diversification of the region,” said Dr. Al-Sadoun. “We predict the growing influence of this sector, as we work in conjunction with our partners across different industries related to infrastructure, construction and transportation. Together, we are ready to face the challenges of the future.”
Over 350 delegates from 23 countries attended the sixth annual Supply Chain conference. The event was marked by the release “Chemicals Supply Chains in the Arabian Gulf: Chokepoints and Opportunities”, a joint report by the GPCA and Accenture, the management consulting firm.
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