New book documents history of GCC petrochemical industry
New book documents history of GCC petrochemical industry
In his book ‘Molecules, Mind and Matter: How the Arabian Gulf Became a Global Petrochemical Hub’, Dr. Abdulwahab Al-Sadoun who began his career as a senior researcher at SABIC Research and Development Center in Saudi Arabia gives a firsthand account of the establishment and growth of this petrochemical industry.
“Knowing that the story of this success is as yet unrecorded, I decided to write this volume…The purpose of this book is to describe the key milestones in the journey that led to the development of a globally competitive industry in the desert of Arabia”.
The title “Molecules, Mind and Matter” is not fortuitous; it strongly highlights the role played by outstanding individuals who not only had a vision for the region but also the resolve to make it happen.
It is difficult to believe how in less than fifty years desert dwellers left their tents and mud brick houses for an urban lifestyle which few had ever imagined. However, the author rightly points out that it would be wrong to think the GCC countries succeeded primarily because of the presence of oil and gas reserves. A number of oil producing countries have failed to develop their countries and improve the lives of their citizens at the scale of those of the GCC.
Oil was discovered in the Arabian Gulf countries during 1930s but until the 1950s the production was largely dominated by foreign companies. However, in the 1960s, governments in the GCC recognized the strategic need to diversify their national economies, to reduce direct dependence on oil, and to make use of the gases linked to the production of oil.
Kuwait was the first country in the Arabian Gulf to establish in 1964 a chemical plant, Kuwait Chemical Fertilizer Company followed by Saudi Arabia with the creation of SAFCO (Saudi Arabian Fertilizer Company) in 1969. But from 1975 onwards, Saudi Arabia would lead the way under the impulse of Crown Prince Fahd whose primary goal was to modernize the Kingdom.
Petromin a state owned equivalent of the private, foreign-owned Aramco was set up in 1962 by Crown Prince Faisal with the task to develop a petrochemical industry. Crown Prince Fahd took the bold decision in 1975 to hand over the development of the petrochemical industry from Petromin to the Ministry of Industry and Electricity headed by the visionary and charismatic Ghazi Al-Gosaibi.
Saudi Arabian Basic Industries Corporation better known as SABIC was created by royal decree in 1976 and Abdulaziz Al-Zamil, an outstanding entrepreneur, became its first managing director.
“It is significant that Al-Gosaibi established SABIC as a corporation rather than as a government entity. It signaled the intent to involve the private sector in the new enterprise. In his memoirs, “Yes, (Saudi) Minister: A life in Administration”, Al-Gosaibi refers to SABIC as his favorite daughter. He personally wrote its bylaws, and the company reflected his philosophy of management. Even the company’s acronym name was his invention, conveying in Arabic the notion of “molding” or “manufacturing”.
Furthermore, two key principles were behind SABIC’s remarkable success: empowering young Saudi employees and ensuring that SABIC would operate as a commercial company thus avoiding the red tape associated with governmental bodies.
The government of Saudi Arabia also took three major decisions to boost the development of its petrochemical industry, namely building two industrial cities in Jubail and Yanbu, setting up a master gas system to reuse efficiently the gas flared during petroleum production and finally, providing easy financing for industrial ventures.
Flouting western skepticism regarding its marketing capacity, SABIC showed that its desire to be a global marketer was build in its very DNA. By 1990, the company had proved that it achieved within ten years what the petrochemical industry in the Houston area took eighty years to build.
“It was plain that Saudi Arabia, the largest of the six GCC states, was enjoying one of history’s greatest stories of industrial success. SABIC, a government majority-owned enterprise created to reduce reliance on volatile oil revenues was becoming a major global petrochemical producer”.
At the onset of the new millennium, the market witnessed a shift with the emergence of new trading partners in Asia such as Malaysia, South Korea and Thailand and a fall in prices affecting the profitability of Saudi producers. It became imperative for SABIC to search for technological innovation to be more competitive without jeopardizing the quality of its products and to secure new markets.
After 2000, SABIC focused on managing key assets abroad. One of its most important acquisitions was the purchase of Scientific Design in 2003 and General Electric’s Advanced Materials division in 2007. This move helped SABIC increase its ethylene glycol production, enrich its portfolio of products and also strengthen its know-how in polymer technology.
The establishment of overseas operations has played a key role in SABIC’s exemplary growth since 2000. Between 2000 and 2014, despite the 2008 global financial crisis, the petrochemical industry has showed an annual 9 percent growth compared to the 2.9 percent growth of the global chemical industry.
Presently, the chemical industry of the GCC can boast of a 20 percent share of the global production capacity of key commodity petrochemicals:
“This is indeed an impressive global position, one in which the regional industry can take great pride, especially since as recently as the 1980s the GCC was a net importer of chemicals. Today it is a net exporter serving markets in 180 countries…In the last decade alone, both production and exports have grown more than six fold in value terms, driven upward by growth in volume and an increase in prices. As direct contributor to the regional economy but also as an enabling industry that is driving broad economic development”.
Molecules, Mind and Matter recounts the birth and the meteoric development of the petrochemical industry in the Arabian Gulf. Behind the facts and figures, the author highlights the outstanding role played by a few remarkable individuals, which provide the reader with some fascinating insight into this epic story. At the end of the book, we long to know more about these exceptional entrepreneurs and statesmen who had the vision, the resolve and the capacity to develop a petrochemical industry in the Arabian Gulf.
Faced with a decline in oil prices, the slowdown of the Chinese economy and the nuclear deal with Iran, the GCC countries need to make the right choices to increase their global market share. Moreover, they must keep on investing in new technologies and developing innovative capabilities to retain their competitive edge. Maintaining the focus on higher value products is a priority which also raises the hope of generating a further growth of the GCC petrochemical industries in the years to come.