+ All Categories
Transcript
Page 1: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Opportunities and Challenges in Developing

Sustainable Downstream Industry in the Region

Sanjay Sharma, Vice President, Middle East and India

Page 2: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Opportunities and Advantages

• Critical Factors – Development of

Downstream Industry

• Structural Challenges –

Development of Downstream

Industry

• Lessons Learned

Agenda

Page 3: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Opportunities and Advantages

• Critical Factors – Development of

Downstream Industry

• Structural Challenges –

Development of Downstream

Industry

• Lessons Learned

Agenda

Page 4: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

0

5000

10000

15000

20000

25000

30000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Th

ou

san

d M

etr

ic T

on

s

GCC PE Demand GCC Ethylene Capacity

GCC PE Production GCC PE Net Exports

GCC Polyethylene Demand Vs Production • Major production of building blocks and

intermediates in the region driven by

advantaged feedstock

• Majority of the production currently exported

• Domestic demand less that 15 percent of the

total production for majority of products

• Opportunity to build competitive local

downstream/converter industry in the region

to cater to domestic demand as well as

target exports

• Challenges exist but not surmountable with

the right enablers and policies

Opportunity to develop local downstream industry

driven by raw material availability

Source: IHS Markit © 2019 IHS Markit

Page 5: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Basic Chemicals (Building

Blocks)

• Intermediates

• Commodity Products

• Specialty Products

• Performance Materials

Downstream Converter

Industry (Intermediate goods)

Final Products – Sector

Specific Applications

Examples:

• Ethylene

• Propylene

• Butadiene

• Crude C4s

• Benzene

• Paraxylene

• Methanol

• Ammonia

Examples:

• Polyethylene

• EVA

• EO/MEG/Ethoxylates

• EDC/VCM/PVC

• Polypropylene

• Propylene Oxide

• Polyols

• Acrylic Acid (GAA)

• SAP

• Oxo Alcohols/Butanols

• Acrylonitrile

• Cumene/Phenol/Acetone

• Styrene/PS

• Polycarbonate

• SBR/PBR

• MDI/TDI

• PTA/PET

• EPDM

• MTBE

• Urea

Examples:

• PE Films

• PE Blow model products (bottles, caps

etc.)

• Geotextile sheets/films

• PE/PVC pipes

• BOPP Films

• Non-woven PP

• Woven PP

• Garden Furniture (molded products)

• Compounding

• PET sheets

• PET bottles

• PC 5 gallon water bottles

• PC sheets

Examples:

• Automotive sector applications

• Food and Beverage Industry

• Textile Industry

• Computers/Electronics sector

• Defence/Aerospace sectors

• Furniture/Fixtures

• Medical Equipment & Supplies

• Pharma sector applications

• Construction sector applications

GCC Producers

Competitiveness

None

Sophistication and Job Multiplier

Critical to define downstream industry

boundaries

Page 6: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Downstream industry potentially a major GDP

and job multiplier

Direct Effects First-order responses of`

economy to changes in the demand

of petrochemical industry output

only

Indirect EffectsImpact on domestic supply

chain supporting the Chemical

industry (e.g., distribution and

logistics)

Induced Effects Impact on downstream industries dependent on petrochemicals

(e.g., automotive, construction, aerospace) and purchases induced by

wages of those in and supporting the industry

JOBSGDP

Multiplier Effects• Chemical industry directly employs a predominately

skilled/highly educated workforce, with less than

15% identified as un-skilled labor in advanced

economies

• Major multiplier effect reported in countries with

extensive downstream industries

o Indirect Effect:

▪ 2.1x of direct contribution on GDP

▪ 4.1x of direct contribution on jobs

o Induced Effect:

▪ In excess of 10x of direct contribution

• While an aspiration for Middle East countries, their

current multiplier is significantly lower

Page 7: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Opportunities and Advantages

• Critical Factors – Development of

Downstream Industry

• Structural Challenges –

Development of Downstream

Industry

• Lessons Learned

Agenda

Page 8: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Investment

Drivers

Proximity

to Market

Capex

Advantage

Feedstock

Advantage

Lower delivered costs

Customer Intimacy

Access to low cost

feedstock

Cost to build

Low cost regions (China & India)

US WEP MDE India China

Capex

AdvantageX X X

Proximity to

Markets

Feedstock

Advantage

X

X X

US, India and China are preferred investment destinations as they have major

advantage on at least two of the three major attributes important for an

investment decision

Chemical Industry Investment Drivers

Page 9: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Investment Decision

Project Returns

Country Risk

Cost To Deliver

Cash Cost

Long Term Project Returns

• Business case IRR

• Country risk acceptable

• Total capital cost

Surviving the down cycle

• Competitive ex-works cash

cost

• Competitive delivered cost

Typical Investment Hurdles

Page 10: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Cluster Management Responsiveness

One Stop Shop Offering

Competitive Raw Materials

Rapid Decision Making and Issue …

Cluster Organization and Role Clarity

Adequate Infrastructure

Small/Mid-Size Company Support

Clear Key Processes

Shared Services

Marketing of ClustersCustoms Management

Regulation Clarity/ConsistencySufficient Capability/Skill Availability

Supply Chain and Logistics Facilities/Support

Service Culture Orientation

Operational Efficiency

Integration Synergy Potential

Comprehensive Product Portfolio

Market Proximity

Imp

ort

an

ce

Timeliness to Address

Importance vs Timeliness

High

Medium

High

Medium

High Priority Factors

Critical factors for the development of

downstream industry

Page 11: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Opportunities and Advantages

• Critical Factors – Development of

Downstream Industry

• Structural Challenges –

Development of Downstream

Industry

• Lessons Learned

Agenda

Page 12: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

US and China are ahead of other regions when compared on a five point scale, Middle East has a

feedstock advantage but realizing it down the value chain is a big question

• India

• West Europe

• China

• Southeast Asia

• Middle East

Technological

Advancements

Proximity to Key

Demand Centres

Access to Low

Cost FeedstockCapex Advantage Level of Integration

Hig

hM

ediu

mLow

Access to Low

Cost FeedstockProximity to Key

Demand CentresCapex Advantage

Technological

AdvancementsLevel of Integration

• US• India

• China

• Southeast Asia

• US

• West Europe

• China

• India

• Middle East

• Southeast Asia

• US

• West Europe

• China

• US

• West Europe

• China

• Middle East

• Southeast Asia

• India• US

• West Europe

• Middle East

Regional Downstream Industry Competitiveness

Scale

• Middle East

• Southeast Asia

Page 13: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

While Middle East lags in downstream industry competitiveness,

region is among the leaders in chemical industry competitiveness

A healthy Middle East Industry in combination with appropriate

mechanism and policies can enable downstream industry to flourish.

ImpactLow High

High

Low

Domestic or Export

Market

Chemical

Industry

Downstream

Industries

Advantaged

Feedstock

Specialized

Talent

Tailored

Infrastructure

Access to

Capital

Specialized

Talent

Tailored

Infrastructure

Domestic

Market

Research &

Innovation

Advantaged

Feedstock

Page 14: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Factor GCC Position Asia Position

Attract Investors

Key Challenge

• Feedstock commitment

Ease of Doing Business• Consistent and clear policy framework

• One Stop Shop offering

Services• Low cost plug and play operating model

• “Capital-Intensive” shared services (power, ETP,

Warehousing, Logistics etc.)

Infrastructure • World class ports

• Efficient port operations

Serve Markets • Demand from domestic market

• Skilled workforce availability

Incentives• Enhanced incentives like tax holidays, Cash aid,

bonded warehouse facility, etc. based on industry

type and strategic fit

Partially Meets Meets Exceeds World Class

Key Challenges for Downstream Sector in GCC

Page 15: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Opportunities and Advantages

• Critical Factors – Development of

Downstream Industry

• Structural Challenges –

Development of Downstream

Industry

• Lessons Learned

Agenda

Page 16: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

• Nations with leading downstream industries, leverage one or more competitive advantages i.e.,

typically home market demand or a key factor condition

• Region has advantaged feedstock but no mechanism to pass such advantage to the downstream

industry

• Government policies, incentives and agreements that reduce trade barriers, encourage human

capital development, and attract foreign investment help domestic industries thrive

• Government has a wide variety of levers that can influence the success or failure of the industry at a

national level

• Downstream OEM and converter markets arise from innovation and market forces or are identified,

developed and nurtured through the actions of government

• Downstream industry has major multiplier effect on GDP and jobs

• a continual interaction between the industry and the government is vital in developing in a competitive

downstream industry and higher multiplier effect.

Understanding the development of downstream industries

in other countries, provides valuable lessons for the region

Page 17: Opportunities and Challenges in Developing Sustainable ...Opportunities and Challenges in Developing Sustainable Downstream Industry in the Region Sanjay Sharma, Vice President, Middle

Thank youwww.gpca.org.ae


Top Related