Presentation on theme: "Deputy Managing Director (Olefins) Petrochemical Industries Company"— Presentation transcript:
1 Deputy Managing Director (Olefins) Petrochemical Industries Company Strategies for Improving Profitability and Competitiveness and PIC’s initiatives for achieving Growth Yousef Al Ateeqi,Deputy Managing Director (Olefins)Petrochemical Industries Company14th Feb 2012
2 Content PIC Introduction PIC Business Portfolio Introduction to PetrochemicalsPetrochemicals Industries Business within Kuwait Oil SectorStrategic GrowthChallengesPIC efforts to implement LTS
3 PIC Among Kuwait Petroleum Corporation Subsidiaries OSSCKOTCKPCKOCKNPCKGOCKAFCOODCKPIKUFPECPICis the petrochemical arm ofKuwait Petroleum CorporationPIC is the Petrochemical arm of KPC ……………..KPC’s strategic direction for PIC is to :Pursue growth in petrochemicals inside and outside Kuwait,Focus on high growth Olefins, Aromatics and downstream products.Pursue full and effective integration.Leverage the technical and marketing skills of mature markets into new petrochemical projects in growth markets.Pursue partial or full privatization of the petrochemical activities.KPC’s Strategic Direction for PIC is :Increase petrochemicals contribution in KPC’s turnover
4 PIC VisionWe aspire to be a recognized global petrochemical player leveraging Kuwait national resources in value added partnerships to drive growth and being admired by our stakeholdersPIC MissionPIC ,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 resourcesExcelling our organizational performance through peoples’ empowerment and infusing industry best practicesCreating a challenging and fulfilling environment that will support skills and capabilities developmentCollaborating closely with our partners towards a sustained and diversified global growthFostering National economy
7 Petrochemicals Growth in Kuwait Realizing their long term potential, Kuwait ventured into commodity petrochemicals in 1990sA Historical perspective for PIC …..1963 : Started with Fertilizers business1993 : MOU signed with UCC for setting up a world scale Olefins Complex1995 : EQUATE Petrochemicals Company formed1997 : PP Plant and EQUATE Complex successfully commissioned2008/2009 : Olefins II, Aromatics and Styrene Plants start up1997Polypropylene, Ethylene, Polyethylene and MEG produced for the 1st time in Kuwait
8 PIC Business Portfolio PIC has diversified its position as a significant player in Petrochemicals, with local and International investmentsInternational InvestmentsLocal InvestmentsFertilizer BusinessPolypropylene BusinessMEGlobal markets Ethylene Glycol produced inside and outside KuwaitEQUATE is the common operator for (PP, TKOC, TKAC and TKSC)
9 PIC Products65% of the Petrochemicals products in PIC portfolio are produced in KuwaitPIC operates the Fertilizer plantsPIC marketsFertilizer product from Kuwait & GPIC plantsPolypropylene produced in KuwaitParaxylene Produced in KuwaitPIC Joint VenturesEquate produce PE & EG and market Polyethylene & StyreneMEGlobal market Ethylene Glycol produced inside and outside KuwaitEquipolymers produce and markets PETOur primary motive to grow and diversify in petrochemicals has translated into implementation of three major Projects within KuwaitThe Olefins Complex is an extension of EQUATE Complex and a joint venture between the EQUATE PartnersFeedstock Ethane will be supplied by KNPC from their new Ethane Recovery Plant, which is now under construction in Mina Al-Ahmadi.The product slate is also similar to EQUATE with a new MEG Plant of 600 KTA capacityPE will be produced through expansion of existing EQUATE facilities.The Project is scheduled for commissioning ………..
12 There are three major building blocks in petrochemicals Ethylene, Propylene, and Aromatics are the essential building blocks for the major petrochemical chainsFeed stocksProcessesPetrochemical building blocksPetrochemical productsEthaneLPGSteam Cracking1EthylenePolyethylene'sEDC/VCM/PVCEthylene GlycolPygasPyrolysis GasoilFuel GasSteamPropylenePolypropyleneAcrylonitrileLight NaphthaButadieneButylenesC5sC4 and C5Naphtha SplitterWhole NaphthaWhen we consider petrochemicals, there are four main streams of building block or “basic chemicals”. Ethylene, Propylene, C3s and C5s and finally the Aromatics (mainly benzene and paraxylene from a chemical market viewpoint).There are three main processes to produce these. All processes are mature and with the possible exception of “Methanol to Olefins” there seems little likelihood of a significant technology driven change in the next 20 years. Of the three processes two are very well know to refiners, the Continuous Catalytic Reformer (CCR) and the Fluid Catalytic Cracker (FCC).Both of these illustrate the symbiosis of refining and petrochemicals. While originally designed for the needs of the growing mogas pools, as the growth rates of the fuels demand reached plateau, the opportunity to extract propylene from the FCC and aromatics for chemicals from the CCR became economically compelling. In fact the paraxylene demand has been such that a string of dedicated CCRs have been built in Asia in the past 15 years. The yield of propylene from FCCs can be very significant, however the fundamentals of VGO conversion make it unlikely the FCC will ever become exclusively a propylene machine.The steam cracker is the best known dedicated basic chemicals process. Steam crackers can take a range of different feedstock all the way from ethane at the light end through to VGO and Resid at the heavy end, although the heavy feed know-how is currently on in the domain of two or three integrated refining/chemical companies.CLICK FOR REFINERY ANIMATION. One very interesting feature of all of these processes with the exception of ethane cracking as that they all exhibit significant levels of refinery integration. At one side is the sharing and optimisation of yields through tailoring naphtha to the very different needs of steam cracking (which likes high paraffin content, generally light naphtha) and reforming (where high N+A, generally heavy naphtha gives the most economic yields). At the other end the ability to push by-product feeds to their maximum fuel value is a discipline which makes EMCC stand alone as a the top integrated refining/petrochemical performer.Lets look a little closer at yield from different olefin feedstock as we build the thinking of the areas where Aramco may be able to develop competitive differentiation.Heavy NaphthaNaphtha Reforming2StyreneNylonPTA/ PolyesterRaffinateAromaticsReformateVacuum Gas OilFCC3PropyleneCat Naphtha etc
13 Worldwide Trends in Petrochemicals Source NexantSince the 1990s, key petrochemicals have achieved above GDP growth rates globally.
14 Middle East Trends in Petrochemicals Market share Source NexantPIC into petchemME started from a small presence & increasingly projected its importance in the petrochemicals sector, registering good growth in market share
15 Future OutlookMiddle 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 returnsIndustry cooperation can benefit all.
16 Maintaining Competitive Advantages Feedstock allocation & pricing– need to be better than netback basisCompetitive energy costImproved product offering, packaging and logistics to target growing end users marketsGovernment Support and incentives to promote investmentPromote downstream units as small and medium business unlike conventional mega projectsExpectation on returns and job creation objective need to be aligned
17 Shift to Differentiated Products Commodity ProductsDifferentiated/Downstream ProductsLow ValueHigh ValueHigh VolumeModerate to low volumeCapital IntensiveLow Capital InvestmentLow Labor requirementsLabor intensiveHigh level of integrationUsually non-integratedProximity to market not criticalLinks to market very criticalSupply Chain/Logistics relatively less criticalSupply Chain/Logistics very critical
18 Critical Success factors Scale and level of integrationAccess to technology – Differentiated productsMarketing and DistributionCustomer Focus – Innovation and Customer SupportSupply Chain / Logistics efficiencyImproved Projects Management and ExecutionCAPEX control and reduce delaysDeveloping and Retaining best skill
19 Petrochemicals Industries Business within Kuwait Oil Sector
20 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.
21 PIC’s previous growth path has resulted in the creation of a successful portfolio KPC’s vision for PIC : Grow in Petrochemicals Inside and Outside KuwaitTime Frame2001–20052005–2010Expand domestic petrochemical capacitiesAchieve competitive regional positionDownstream extensionsFurther international expansionsExtend and defend core businessesBuild emerging businessesCreate viable optionsHorizon 1Horizon 2Horizon 3Stage 1Stage 2Kuwait : Olefins-II, Aromatics, StyreneOverseas : PTA, PET, EGCOMPLETEDTHEFUTUREGrowth ParametersNew core extensionsDerivativesIntegrationValue creation thru partnershipsIn the current Horizon, PIC plans to further strengthen its position inside and outside Kuwait
22 PIC’s future growth portfolio will target three key growth themes Enhance Core Olefins Derivatives PortfolioBroaden Portfolio through Refinery/PC IntegrationFinancially Attractive/ Diversifying Investments
23 Create scale and enhance the positioning of its core businesses and diversify its portfolio PIC’s olefin portfoliowill be measurably enhanced by building scale and share and diversifying feedstock exposure, product mix and asset locationJoint investments with “sister” K companieswill provide the basis for overall advantage and allow PIC to leverage a core strength of KPC (i.e. hydrocarbon advantage)Investments in “linked” downstream specialties and diversified chemicalsprovide capital cycle diversification and the prospect of higher less cycle earnings componentTargeting Asian investmentswill provide diversification of asset base outside and also allows for capital optimization and enhancement of channels to marketOpportunistic M&AGrow/maintain market share in core businesses
25 Opportunitiesfeedstock allocation to projects with a diversified product slatesEnhance business scale in near term with new olefins facilitiesAccess high growth international projects and markets through strategic partnershipsOpportunity to develop required local skills through knowledge transfer and support strategic growthInvestments in downstream specialty chemicals & polymers will add value and diversify the overall portfolioOpportunity to boost private sector industrialization and participation in local economy.
26 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 TKACKPI for diversified refinery streams as feedstock to proposed China ProjectThis value-adding collaboration within downstream sector of KPC will continue, building upon its integrated approach with new petchem projects, inside and outside Kuwait.
27 Sources of Integration Value Margin MaximizationOperating Cost ReductionCAPEX OptimizationPortfolio OptionsSustainability BenefitsOpportunity to create value for both sides “refining & petrochemicals” exists on a large scaleLarge new petrochemicals facilitiesExisting and planned refineries optimizationBroad product offering to meet Petrochemicals market demand, commodity and specialty products for the integrated complexFlexibility to process a wide variety of feedstocksCost synergies while maintaining resources allocationCapital optimization through planning to execution
28 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 locationsPartnering with sister “K” companies to build downstream cracker projects linked to current portfolioInvesting in selected downstream investments that have connectivity to PIC and Partner business interestsEstablishing criteria for and pursue opportunistic, financial investments (i.e. M&A) with key caveats
29 Competiveness in International Markets Aggressive investment in core portfolio with objective of increasing overall regional/global shareBuild shared investment projects with KPI & KNPC to achieve refinery /petrochemicals integration diversifying feedstock baseDevelop a linked specialty platformMajor geographic diversification investmentGrow/maintain market share in core businesses
30 Key Drivers for GrowthAccess to advantaged feedstocks (e.g. methane, ethane, naphtha etc.)Integration with KPC refining sector, inside & outside KuwaitAccess to world class technology and marketing tie-up with partnershipsKPC financial strength and global positioningTrack record in managing world scale petrochemical complex projects and plantsGeographically located close to high growth Asian marketsWell established relationship with financial sectorContinuing the development of local skills through knowledge transfer and support strategic growthEnhance private sector industrialization and participation in local economy.Contribute to the local Economy ( GDP )
31 Petrochemicals industries are a major player in Kuwait GDP creation Petrochemicals is a key enabler for industrialization1$ of direct GDP creation in the chemical sector produces ~1.87 $ of total GDP creation in the Kuwaiti economyManufacturing 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
32 Project Opportunities under development China Project with Kuwait Petroleum International to implement an Integrated Refinery/Petrochemicals ComplexOlefins III Project – World-scale project opportunity in KuwaitPTA/PET Project in Kuwait.Refinery/Petrochemicals integration Projects in Kuwait
34 ChallengesLimited ethane availability, tightening lighter feedstock availability with less feedstock advantageConstraints related to land availability, utilities and infrastructural facilitiesLimited exposure to specialty petrochemicals businessIncreased global competition from low cost high scale operators in Middle East and market regionsInterlinked and highly leveraged global economyIncreasing reliance on emerging markets economic prosperity
36 PIC transition to Product Oriented Organization The organization is Product FocusIntroduced new functions like Corporate ENGHSEEstablished the basis for Growth focused Team workIntroduced best practices and business governanceChairman & Managing DirectorBoard SecretaryMarketingBusiness Analysis & PlanningBusiness Dev.Fertilizers (Manufacturing)DMD FertilizersDMD AromaticsDMD OlefinsFinanceCorporate PlanningInformation TechnologyDeputy Chairman & DMD PlanningSix SigmaDMD Admin & FinanceHuman ResourcesServices & Comm.Engineering and HS&EMEGlobalEquipolymersPPOlefins IIEQUATEKAROGPICTKSCERM
37 Initiatives supporting PIC LTS implementation Developing the PIC-PGS : A conceptual Gated System was developed for overall execution of Capital ProjectsContinuous improvement – Six sigma programCompetency developmentResponsible Care and CSR programFocus on certified management systems in Quality, Environment, Safety & Health