Downstream has finally joined the mainstream but challenges remain that will require innovation, closer partnerships and diversification for the oil and gas industry to remain competitive. Delegates at ADIPEC 2018 heard how petrochemical refiners and those further down the value chain will have a pivotal role to play in the decades to come in meeting demand for new products as the global population increases. The Global Business Leaders panel debate entitled:
“Rethinking and accelerating petrochemicals: expanding capabilities, trading leverage and specialty products,” on day 3 of the exhibition heard that partnerships in downstream were essential moving forward. “It was a dream of mine that downstream would go further into higher horizons and today I’m glad that downstream has become the mainstream in the UAE,” said Ahmed Abdulla, CEO of BOROUGE during the discussion at ADIPEC.
“We want to push the industry further and onto higher horizons.” He said BOROUGE took the value chain concept very seriously at every step. “The backbone is innovation and it’s not just a case of feedstock being delivered to the client, it involves the process all the way to the final customer,” said Abdulla.
“Today we have one of the most advanced centres for innovation in Abu Dhabi and so far have had 200 patents approved by international IP [Intellectual Property] experts and fi led a further 600 patents. I’m pleased to say that 19 per cent of our sales have come from our innovation and approved patents.” The most valuable resource the company has is its human capital and it is something it invests in heavily, said Abdulla. Alfred Stern, CEO of Borealis, stressed that innovation was the “lifeblood” of the downstream model where partnerships had to be leveraged for greater success.
“We are in a very interesting industry and one in which we have to add plants every month to meet demand,” he said. “We need to look at what drives growth rates and global population increases will see more need for products that need to be developed in a sustainable way.” Downstream products like plastics were vital in that regard and had helped to give 2 billion people access to fresh water, he said.
“This would be unthinkable without materials like plastic,” said Stern. He highlighted that the demand for downstream products and services would grow as there are still 800 million people around the world without access to clean water and 2 billion who do not have safe sanitation. Khalifa Al Suwaidi, Executive Director Refining and Petrochemicals at Mubadala Investment Company, said the industry faced challenges but they also saw opportunities. The company’s portfolio has seen $226 billion invested across various sectors with an emphasis on diversification. The last 18 months had seen growing demand for specialised products in Europe and North America with China, India, Asia and the Middle East requiring base chemicals.
“Every investment has risks but we manage that risk in an integrated way,” said Al Suwaidi. “I see fluctuations in commodity markets and environmental issues as the challenges but also opportunities.” As an example the expected growth in electric-powered vehicles may hit fossil fuelled cars but there will be a requirement for lighter materials for electrified vehicles, he said. Todd Karran, President and CEO of Nova Chemicals, said better technology has been used to access difficult to reach petrochemicals in the US with four crackers opening last year and four more expected in 2018. “The tipping point is sustainability and we need to do things in a smarter way,” he said. “For example 40 per cent of food along the supply chain in the US is wasted and every piece of plastic in the oceans has been touched by a human hand. These are issue we must address and downstream products can do that.”
Francois Good, Senior Vice President Refining and Petrochemicals Orient TOTAL, said although downstream refining margins were volatile and growth was slow, demand for petrochemicals was high. “At Total we see three main drivers which are access to feedstocks, importance of being in markets like the US and Asia and leveraging world class assets,” he said. Pedro Miro, CEO of CEPSA, said greater integration was the key for downstream success.
“Companies that integrate closely in an industry which experiences volatile and difficult markets have proved more resilient than competitors who have not,” he said. “This has to be done from the well to the final customer.”