JEDDAH: The lingering global financial crisis has created tremendous opportunities for home grown companies in the Gulf region. “We have technology, capital, know-how, and human resources which make the region most attractive for investment,” Prince Faysal Al-Sudairy, Saudi Arabian co-founder of Octal Petrochemicals, the first integrated PET (polyethylene teephthalate) resin and PET (polyethylene terephthalate) sheet plant in the world, has said.
Built on a greenfield site in Salalah Free Zone in Oman in 2006, Octal started operations of its second PET plant in Salalah recently. The new facility has a capacity of 300,000 metric tons per annum, making it the largest PET resin plant of its type in the Middle East and the largest clear rigid PET sheet plant in the world. It uses proprietary technology which has been developed by the company.
“The new plant marks the company’s emergence as a global player in PET resin and clear rigid sheet packaging. Our investment delivers a dramatically enhanced scale, breakthrough technology, and crucial cost and quality advantages at a time when customers need them most,” Al-Sudairy said addressing a gathering of media persons here last week.
“The global PET clear rigid sheet packaging market is growing at between 10-12 percent rate per year, the fastest growing segment in food and consumer goods packaging worldwide,” he said.
Octal was set up in Oman to establish a foothold in the lucrative plastic packaging market, the third largest in the world after armaments and automobiles. Oman can source the raw materials in great quantity and will now have a plant capable of producing quality material for the world market, particularly China, US, India and Europe, he said.
“Salalah, in the southeast of Oman, provides access to US, European and Asian markets via East/West shipping lanes,” the prince said.
With an initial investment of around $350 million, total investments in the plant are expected to rise to as much as $1.4 billion upon completion with two more phases of expansion scheduled for 2009 and 2011. “With a 55/45 debt-equity split, Octal has the financial resources for further growth”, Al-Sudairy said.
“The present global financial crisis has created more opportunities than risks. Though the cost of raw material is low, everybody has not taken the advantage of it,” Nicholas P. Barakat, managing director of Octal Holding & Co., said. “It is time for the Gulf companies to make use of this crisis for their benefit and for the better interest of investors,” he added.
Funding for the Octal plants has come from investors in Saudi Arabia, Oman, Kuwait and the US. Suhail Bahwan Group, BankMuscat, Muscat Overseas, Malatan trading, DIDIC, Oman and Emirate Investment Company, Oman Investment Company, HSBC MENA fund and National Investment Fund Company were Octal’s founders.
“Saudi companies are playing a major role in the expansion of Octal, and we’re excited about the level of trade we’ve already established between the Kingdom and Oman. We have strategically sourced a large amount of raw materials and packaging systems from Saudi Arabia, and we intend to strengthen relationships with Saudi and Gulf suppliers in 2009,” Al-Sudairy said.
Saudi Basic Industries Corp. (SABIC) is the major source for raw material from Saudi Arabia. Octal will import $15 million worth of raw material from SABIC. Other raw materials and equipment orders placed in the region include a contract for monethylene glycol (MEG) worth $60 million with MEG Global of Kuwait, and steel contracts with a combined value of $30 million with Mammut Industries of the UAE and Kuwait’s Kirby International.
“The level of support from the Port of Salalah and the Salalah Free Zone has been first class, and thanks to their management team we are hitting our targets for expanding production capacity and becoming the largest PET manufacturer in the Middle East,” Barakat said.
Octal announced the launch of its second plant, a 300,000 metric-ton integrated PET resin and sheet facility in January this year. “Octal expects per annum sales to reach $400 million by the end of 2009,” Barakat added.
Al-Sudairy said “Phase one is nearing completion and we remain on track with phase two which will add an additional 500,000 tons of capacity. Despite global economic challenges, regional investor interest remains strong and the capital is in place to deliver on our stated growth plans.” He added: “The Octal is the GCC company which is truly a multinational. This company was created to serve the economy of this region.”
Octal, which employs over 250 employees at present, plans to recruit more locals during the various stages of its development. Octal has received the first group of graduates from the technical training course it developed in partnership with the Salalah College of Technology, Barakat said.
Octal’s high-speed manufacturing process produces larger volumes and products with enhanced clarity and durability. Through its investment in scale, Octal is producing PET sheet in sufficient quantities to convert wholesale packaging needs of large consumer product companies, William J. Barenberg, Jr., chief operating officer of Octal Inc., said.
Worldwide sales of clear rigid PET sheet packaging and PET resins were more than $2.5 billion and $15 billion respectively in 2006.