Dr Sadoun, general secretary, GPCA

Dr Abdulwahab Al-Sadoun, Secretary General of the Gulf Petrochemicals & Chemicals Association, explains the region is coping with the lower oil price and outlines plans to improve infrastructure in the region.

GPCA, Dr Sadoun

How is the chemical and petrochemicals industry coping with the slumping oil price? In particular, how has it affected the supply chain and logistics?

The petrochemical industry in the GCC continued its growth trajectory unabated and the production rose by 4.5 percent in 2014, making the GCC the second-highest growth region in the world. However, the slumping oil prices have had a direct negative impact on petrochemicals prices in global markets, which declined on average by 25 percent to 35 percent between 2014 and 2015, and thus the profits of the GCC players have declined by a similar ratio.

The health of the global economy since the decline in oil prices also contributed to weak petrochemicals prices and created a difficult near-term outlook for the global petrochemicals and chemicals sector. Given that the GCC producers are not price-setters, it means they will have to embark on a cost-cutting campaign. This obviously puts pressure on the supply chains in the GCC and reinforces the need to optimise the value chain.

Looking ahead, the long term scenario is more positive. The industry is forecasted to grow at 6 percent per annum over the next five years, with the region producing over 190 million tons of petrochemicals annually by 2020. The drive into higher value products, such as speciality and performance chemicals, is gaining momentum and is expected to act as a catalyst for an even stronger growth of the GCC petrochemical industry in the years to come.

How has the rise of fracking in the US affected the chemical and petrochemical industry?

The fracking frenzy in the US and the subsequent lower US gas prices have been a boon to the US chemical industry, making the competitive landscape for the producers in the GCC tougher. Because of the export oriented nature of the industry in the GCC, petrochemical producers from the region have to excel throughout the entire value chain not to lose ground in important export markets.

You have spoken in the past about the need to finance the development of hard and soft supply chain infrastructure in the region. What plans are in place to improve hard infrastructure? For example, are there any plans to increase the number of tank cleaning and repair stations?

If you look around the petrochemical hubs in the GCC, it is clear that the hard infrastructure is in the process of a transformational change. Railway developments are taking centre stage in this change and very much act as a catalyst notably in Saudi Arabia, the UAE and Oman, where a rail network will connect the petrochemical facilities with the port of Sohar.

At the same time, we see that new industrial parks, such as the Saudi Plastics Park currently being built around the Sadara facilities in Jubail, in Saudi Arabia, are forging a more integrated trade network. An increase in the number of tank cleaning and repair stations obviously forms part of that more integrated network.

Can you also highlight some improvements in soft infrastructure such as training, education and customer service?

Investment in soft infrastructure is as important as the investment in hard infrastructure. That’s why we always make a point of inviting students to our conferences. To highlight the importance of education in our drive towards supply chain excellence, we have just launched the GPCA Supply Chain Excellence Awards. The awards ceremony will take place during the 8th GPCA Supply Chain Conference on 3rd May. We have dedicated a special category to academic institutions who have contributed to advancing the supply chain function in the region and are also introducing a special category for students.

Can you give our readers an update on the GPCA’s implementation of the Responsible Care programme and the Sustainability Quality Assessment Scheme? How is the GPCA helping to build up the relevant industry framework?

In 2014, GPCA launched SQAS, the Gulf Sustainability & Quality Assessment System, as an extension of our Responsible Care program. SQAS, first implemented in Europe, is a system to evaluate the quality, safety, security and environmental performance of Logistics Service Providers in a uniform manner by single standardised assessments carried out by independent assessors using a standard questionnaire.

Since its launch, GPCA member companies are increasingly mandating Gulf SQAS in their future logistics contracts. Several logistics companies have led the industry by taking their first SQAS Transport Services assessment, the first out of four modules. We will be launching the second module on warehousing shortly and have organized six outreach campaign across the region to date, raising awareness about the programme.

What are the most common mistakes that you see logistics service providers making in the region and how can they rectify them?

I’ve noticed that some of the logistics service providers that enter the GCC market overlook how their established business model needs to adapt to this market. Instead of relying on an imported expat workforce, for long term success training local talent is much more beneficial.

A GCC customs union could make a huge difference to the supply chain in the region. How close is this to becoming a reality?

As an industry association, we are doing our part in highlighting the importance to our government stakeholders and we have made progress. It is hard to say though when and if a GCC customs union will become a reality. In the meanwhile, customs and clearance reforms are absolutely key because of the limited domestic market sizes of the GCC countries. Easing access to our products destined for export markets will help enhance the competitiveness of the region.

The 10th Annual GPCA Forum is coming up in November. What do you think will be the highlights of that event?

The 10th GPCA Forum will be held on 17th to 19th November and will be particularly important as the event will be celebrating its 10th anniversary – marking a major milestone. H.E Eng. Suhail Al Mazrouei, the UAE Minister of Energy, will be delivering the inaugural address at the conference, which falls under the theme of “Building on Achievements: Enabling Continued Success in the Changing Chemical Landscape”.

In addition, the conference will feature a masterclass facilitated by Chemical Industry Roundtables under the title “Leading the chemical industry in volatile teams” where delegates will hear from industry experts on real live accounts of what it takes to steer and inspire their businesses in our fast-moving technological, economic and social times.

The conference also contains a line-up of highly influential individuals including H.E Abdullatif Al-Othman, Governor & Chairman of the Board of Directors, Saudi Arabian General Investment Authority (SAGIA) who will deliver this year’s opening address. Other notable industry leaders that have confirmed participation include Rashed Saud Al Shamsi, Chairman GPCA and Petrochemicals Director, ADNOC; Yousef Al-Benyan, Vice Chairman, GPCA and Acting Vice-Chairman and Chief Executive Officer, SABIC; Nizar. M. Al-Adsani, Deputy Chairman & Chief Executive Officer, Kuwait Petroleum Corporation and Neil Chapman, President, ExxonMobil Chemical.

How do you relax in your spare time?

I enjoy travelling when I can get time off from our busy schedule at GPCA. I have just returned from a road trip with my family around the USA for the Eid break and was very impressed with the cities we’ve visited in the West coast. I am also working on a book that documents the history of the petrochemical industry in the Arabian Gulf region, so writing and editing also takes up quite a lot of my evenings.