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© Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Strategies for Improving Profitability and Competitiveness and PIC’s.

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Presentation on theme: "© Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Strategies for Improving Profitability and Competitiveness and PIC’s."— Presentation transcript:

1 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Strategies for Improving Profitability and Competitiveness and PIC’s initiatives for achieving Growth Yousef Al Ateeqi, Deputy Managing Director (Olefins) Petrochemical Industries Company 14 th Feb 2012

2 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Content  PIC Introduction  PIC Business Portfolio  Introduction to Petrochemicals  Petrochemicals Industries Business within Kuwait Oil Sector  Strategic Growth  Challenges  PIC efforts to implement LTS 2

3 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation KPC’s Strategic Direction for PIC is : Increase petrochemicals contribution in KPC’s turnover PIC is the petrochemical arm of Kuwait Petroleum Corporation PIC Among Kuwait Petroleum Corporation Subsidiaries OSSC KOTC KPCKOCKNPC KGOC KAFCO ODC KPI KUFPEC 3

4 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC Vision We aspire to be a recognized global petrochemical player leveraging Kuwait national resources in value added partnerships to drive growth and being admired by our stakeholders  PIC,as a subsidiary of Kuwait Petroleum Corporation, shall achieve a marked position with downstream extension into high value petrochemical business while ensuring integration with KPC activities both domestically and internationally through: ─ Maximizing value addition of Kuwait hydrocarbons resources ─ Excelling our organizational performance through peoples’ empowerment and infusing industry best practices ─ Creating a challenging and fulfilling environment that will support skills and capabilities development ─ Collaborating closely with our partners towards a sustained and diversified global growth ─ Fostering National economy  PIC,as a subsidiary of Kuwait Petroleum Corporation, shall achieve a marked position with downstream extension into high value petrochemical business while ensuring integration with KPC activities both domestically and internationally through: ─ Maximizing value addition of Kuwait hydrocarbons resources ─ Excelling our organizational performance through peoples’ empowerment and infusing industry best practices ─ Creating a challenging and fulfilling environment that will support skills and capabilities development ─ Collaborating closely with our partners towards a sustained and diversified global growth ─ Fostering National economy PIC Mission 4

5 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation 2030 KPC Downstream Sector Mission & Vision 5

6 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC Business Portfolio

7 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation A Historical perspective for PIC …..  1963 : Started with Fertilizers business  1993 : MOU signed with UCC for setting up a world scale Olefins Complex  1995 : EQUATE Petrochemicals Company formed  1997 : PP Plant and EQUATE Complex successfully commissioned  2008/2009 : Olefins II, Aromatics and Styrene Plants start up Petrochemicals Growth in Kuwait Realizing their long term potential, Kuwait ventured into commodity petrochemicals in 1990s 1997 Polypropylene, Ethylene, Polyethylene and MEG produced for the 1 st time in Kuwait 7

8 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC Business Portfolio PIC has diversified its position as a significant player in Petrochemicals, with local and International investments International Investments Local Investments 8 Fertilizer Business Polypropylene Business EQUATE is the common operator for (PP, TKOC, TKAC and TKSC) MEGlobal markets Ethylene Glycol produced inside and outside Kuwait

9 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC Products  65% of the Petrochemicals products in PIC portfolio are produced in Kuwait  PIC operates the Fertilizer plants  PIC markets ─ Fertilizer product from Kuwait & GPIC plants ─ Polypropylene produced in Kuwait ─ Paraxylene Produced in Kuwait  PIC Joint Ventures ─ Equate produce PE & EG and market Polyethylene & Styrene ─ MEGlobal market Ethylene Glycol produced inside and outside Kuwait ─ Equipolymers produce and markets PET 9

10 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Growth in PIC Profits (1995 – 2011) 10

11 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Introduction to Petrochemicals

12 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation There are three major building blocks in petrochemicals Ethane LPG Ethylene Heavy Naphtha Light Naphth a Polyethylene's EDC/VCM/PVC Ethylene Glycol Polypropylene Acrylonitrile Butadiene Butylenes C5s Styrene Nylon PTA/ Polyester Naphtha Reformi ng Aromatics Propylene C4 and C5 Steam Cracking FCC Vacuum Gas Oil Propylene Naphtha Splitter Whole Naphtha Reformate Raffinate Cat Naphtha etc Pygas Pyrolysis Gasoil Fuel Gas Steam 1 2 3 Ethylene, Propylene, and Aromatics are the essential building blocks for the major petrochemical chains Petrochemic al products Petrochemical building blocks ProcessesFeed stocks 12

13 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Worldwide Trends in Petrochemicals Since the 1990s, key petrochemicals have achieved above GDP growth rates globally. Source Nexant 13

14 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Middle East Trends in Petrochemicals Market share ME started from a small presence & increasingly projected its importance in the petrochemicals sector, registering good growth in market share Source Nexant PIC into petchem 14

15 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Future Outlook  Middle East producers are very competitive and well positioned to supply the fast-growing markets.  Middle East feedstock slate will be heavier with lesser advantages.  New projects will require access to technologies and new approaches to development.  Innovation is a joint effort and requires a strong customer oriented culture.  Higher expectation on Job creation and industry returns  Industry cooperation can benefit all. 15

16 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Maintaining Competitive Advantages  Feedstock allocation & pricing– need to be better than netback basis  Competitive energy cost  Improved product offering, packaging and logistics to target growing end users markets  Government Support and incentives to promote investment  Promote downstream units as small and medium business unlike conventional mega projects  Expectation on returns and job creation objective need to be aligned 16

17 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Shift to Differentiated Products Commodity ProductsDifferentiated/Downstream Products Low ValueHigh Value High VolumeModerate to low volume Capital IntensiveLow Capital Investment Low Labor requirementsLabor intensive High level of integrationUsually non-integrated Proximity to market not criticalLinks to market very critical Supply Chain/Logistics relatively less critical Supply Chain/Logistics very critical 17

18 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Critical Success factors  Scale and level of integration  Access to technology – Differentiated products  Marketing and Distribution ―Customer Focus – Innovation and Customer Support ―Supply Chain / Logistics efficiency  Improved Projects Management and Execution ― CAPEX control and reduce delays  Developing and Retaining best skill 18

19 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Petrochemicals Industries Business within Kuwait Oil Sector

20 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation KPC Strategic Directions - Petrochemicals  Pursue growth in petrochemicals, both inside and outside of Kuwait, with a partner focusing on high growth petrochemical products.  Pursue full and effective integration between the petrochemical operations and KPC’s operations inside and outside Kuwait.  Build and acquire leading petrochemical assets in mature markets outside Kuwait with a proper foreign partner.  Pursue partial or full privatization of the petrochemical activity. 20

21 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC’s previous growth path has resulted in the creation of a successful portfolio Time Frame 2001–2005 2005–2010 2010-2020 n Expand domestic petrochemical capacities n Achieve competitive regional position n Downstream extensions n Further international expansions Extend and defend core businesses Build emerging businesses Create viable options Horizon 1 Horizon 2 Horizon 3 Stage 1Stage 2 Kuwait : Olefins-II, Aromatics, Styrene Overseas : PTA, PET, EG COMPLETED THE FUTURE Growth Parameters  New core extensions  Derivatives  Integration  Value creation thru partnerships In the current Horizon, PIC plans to further strengthen its position inside and outside Kuwait 21 KPC’s vision for PIC : Grow in Petrochemicals Inside and Outside Kuwait

22 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC’s future growth portfolio will target three key growth themes Enhance Core Olefins Derivatives Portfolio Broaden Portfolio through Refinery/PC Integration Financially Attractive/ Diversifying Investments 22

23 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Create scale and enhance the positioning of its core businesses and diversify its portfolio will be measurably enhanced by building scale and share and diversifying feedstock exposure, product mix and asset location PIC’s olefin portfolio will provide the basis for overall advantage and allow PIC to leverage a core strength of KPC (i.e. hydrocarbon advantage) Joint investments with “sister” K companies provide capital cycle diversification and the prospect of higher less cycle earnings component Investments in “linked” downstream specialties and diversified chemicals will provide diversification of asset base outside and also allows for capital optimization and enhancement of channels to market Targeting Asian investments Grow/maintain market share in core businesses Opportunistic M&A 23

24 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Strategic Growth

25 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Opportunities  feedstock allocation to projects with a diversified product slates  Enhance business scale in near term with new olefins facilities  Access high growth international projects and markets through strategic partnerships  Opportunity to develop required local skills through knowledge transfer and support strategic growth  Investments in downstream specialty chemicals & polymers will add value and diversify the overall portfolio  Opportunity to boost private sector industrialization and participation in local economy. 25

26 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Linking our growth plan to KPC downstream businesses  PIC business growth has key linkages with KPC, KNPC, KPI and KOC :  KPC/KOC for Gas feedstocks for EQUATE and TKOC.  KNPC for liquid feedstocks like Propylene/Naphtha for PP and TKAC  KPI for diversified refinery streams as feedstock to proposed China Project This value-adding collaboration within downstream sector of KPC will continue, building upon its integrated approach with new petchem projects, inside and outside Kuwait. 26

27 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Sources of Integration Value Margin Maximization Operating Cost Reduction CAPEX Optimization Portfolio Options Sustainability Benefits 27  Opportunity to create value for both sides “refining & petrochemicals” exists on a large scale ─ Large new petrochemicals facilities ─ Existing and planned refineries optimization ─ Broad product offering to meet Petrochemicals market demand, commodity and specialty products for the integrated complex ─ Flexibility to process a wide variety of feedstocks ─ Cost synergies while maintaining resources allocation ─ Capital optimization through planning to execution

28 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Competiveness in International Markets  Building upon core portfolio positions to expand advantaged business positions in olefins and aromatics both within Kuwait and in selected regional locations  Partnering with sister “K” companies to build downstream cracker projects linked to current portfolio  Investing in selected downstream investments that have connectivity to PIC and Partner business interests  Establishing criteria for and pursue opportunistic, financial investments (i.e. M&A) with key caveats 28

29 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation  Aggressive investment in core portfolio with objective of increasing overall regional/global share  Build shared investment projects with KPI & KNPC to achieve refinery /petrochemicals integration diversifying feedstock base  Develop a linked specialty platform  Major geographic diversification investment  Grow/maintain market share in core businesses Competiveness in International Markets 29

30 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation  Access to advantaged feedstocks (e.g. methane, ethane, naphtha etc.)  Integration with KPC refining sector, inside & outside Kuwait  Access to world class technology and marketing tie-up with partnerships  KPC financial strength and global positioning  Track record in managing world scale petrochemical complex projects and plants  Geographically located close to high growth Asian markets  Well established relationship with financial sector  Continuing the development of local skills through knowledge transfer and support strategic growth  Enhance private sector industrialization and participation in local economy.  Contribute to the local Economy ( GDP ) Key Drivers for Growth 30

31 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Petrochemicals industries are a major player in Kuwait GDP creation  Petrochemicals is a key enabler for industrialization  1$ of direct GDP creation in the chemical sector produces ~1.87 $ of total GDP creation in the Kuwaiti economy  Manufacturing share of GDP approx 6%  Manufacturing share of non Oil GDP approx 10% Contribution of manufacturing sector to GDP lowest in Kuwait among GCC countries 31

32 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Project Opportunities under development 1.China Project with Kuwait Petroleum International to implement an Integrated Refinery/Petrochemicals Complex 2.Olefins III Project – World-scale project opportunity in Kuwait 3.PTA/PET Project in Kuwait. 4.Refinery/Petrochemicals integration Projects in Kuwait 32

33 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Challenges

34 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation Challenges  Limited ethane availability, tightening lighter feedstock availability with less feedstock advantage  Constraints related to land availability, utilities and infrastructural facilities  Limited exposure to specialty petrochemicals business  Increased global competition from low cost high scale operators in Middle East and market regions  Interlinked and highly leveraged global economy  Increasing reliance on emerging markets economic prosperity 34

35 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC efforts to implement LTS

36 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation PIC transition to Product Oriented Organization Chairman & Managing Director Board Secretary Marketing Business Analysis & Planning Business Dev. Marketing Business Analysis & Planning Business Dev. Business Analysis & Planning Marketing Fertilizers (Manufacturi ng) DMD FertilizersDMD AromaticsDMD Olefins Finance Corporate Planning Information Technology Deputy Chairman & DMD Planning Six Sigma DMD Admin & Finance Human Resources Services & Comm. Engineering and HS&E MEGlobal EquipolymersPP Olefins II EQUATE KARO GPIC TKSC ERM The organization is Product Focus Introduced new functions like Corporate ENGHSE Established the basis for Growth focused Team work Introduced best practices and business governance The organization is Product Focus Introduced new functions like Corporate ENGHSE Established the basis for Growth focused Team work Introduced best practices and business governance 36

37 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation  Developing the PIC-PGS : A conceptual Gated System was developed for overall execution of Capital Projects  Continuous improvement – Six sigma program  Competency development  Responsible Care and CSR program  Focus on certified management systems in Quality, Environment, Safety & Health Initiatives supporting PIC LTS implementation 37

38 © Petrochemical Industries Company 2005 A Subsidiary of Kuwait Petroleum Corporation 38


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