NEWS & VIEWS
Iran’s state of Petrochemicals: Observations, Obstacles, Options
Aman Amanpour - 22 February 2019
As the JCPOA (Iran nuclear deal) came into the force in January 2016 and before that in its anticipation, Iranian and their foreign stakeholders scrambled to push for a new start in petrochemicals sector.
Two long lists of “incomplete projects” of 46 and “new projects” of 25 were put on the table for domestic and foreign investors, technology providers, engineering companies and financiers to take on. An NPC’s (National Petrochemicals Company) initial estimate put the total required capex at USD 72bln. Assuming “good weather conditions”, it was targeted to raise the installed capacities from 65mtpa in 2016 to 130mtpa in 2020 and then to 180mtpa in 2025: an average annual growth rate of 12%. Such targets would have commensurated with the country’s 6th Five-year-development plan (2017-2021) and the goal of growing the national GDP by 8% annually during the period. Now in February 2019, none of these goals have started at pace nor could be achieved in the remaining time. US president Trump withdrew May last year from the JCPOA and re-imposed harsh unilateral sanctions against Iran, despite the protest of the remaining parties to the Agreement (China, Russia, EU, France, Germany, UK) and Iran’s IAEA-certified full compliance with the Deal.
But, US sanctions apart, did Iran embraced the full opportunity between 2015-2018 to jump-start the stalled projects and transform country’s petrochemicals business landscape? Most probably “no” is the answer, at least as to: full. Moving projects ahead effectively requires sound policies, good management and effective leadership. Sufficient funding, technology access, investors’ interests and fit-for-purpose partnering are key requirements too. Yet the formers are to be the enablers for the latters.
The unjustified, sub-optimal and premature “privatization” of the National Petrochemical Company (NPC) assets a decade ago was the beginning of a troubling time for the industry. It disrupted the organizational integration, broke down the required critical mass, reduced NPC’s stature to not-a-well-defined “regulator”, robbing from it the abilities for authoritative planning , (international) partnering, project financing and implementation, technology and operational excellence and effective business and market management. Most of the successor owners have not been known players in this industry, rather an opaque mix of some institutions, pension funds, wealthy individuals and some public shareholders. The latest episode being a fire selling of a multi-billion-dollar Petrochemicals holding (Bakhtar) created by public funds, including the 2500 Km ethylene pipeline and the associated derivative assets along it, for a fraction of value to a wealthy and “well connected” family.
It is interesting to observe that the reverse of such policies have been happening elsewhere in the countries comparable to Iran with petrochemicals footprint. For example Saudi Arabia’s SABIC, already world’s 5th largest chemical company, stayed under the public ownership and control (70% of shareholding) while growing and expanding organically and inorganically in the country and world-wide. It also transformed itself in the last two-and-a-half decades to a world-class company in terms of operations (manufacturing, commercial, supply chain), technology, management and leadership. Just recently, plans have been put in place by the government for oil giant Aramco to take over SABIC and its remaining public shares, creating a full integration across the whole oil, gas, petrochemicals and even other energy value chains.
The new Iranian constellation couldn’t deliver on the full potential during the breathing years of 2015-2018 and till today and has failed clearly as a development model.
Before and since opening of this short window I’ve been providing experience-based opinions, assessments and proposed solutions for Iran’s petrochemicals industries: speaking at public events, on my website www.amanpourconsult.com and at dedicated sessions. As an example I just paste below the “Abstract” of my comprehensive presentation, followed by a dedicated workshop, in Tehran (High-level Symposium on industrial and trade policies 10-11 October 2015). Title of the presentation was:
Developing downstream petrochemicals industries: opportunities, challenges, the way forward. A cluster, value chain and integrative approach, Requirements for tailored model(s) based on local specifics and international best practices
“”Looking at drivers in different countries and regions, two main tendencies in developing (petro)chemicals industries are recognized: “Resource Push” and “Market Pull”. The former relates to the intention of adding value to (raw) resources destined for export or being used domestically –e.g. oil and gas and their initial products-. The latter has been the approach taken by nations with large consuming markets and to create value chains for their economic development and industrialization. Iran, fulfilling to different extends both aspects, requires a dedicated approach, yet utilizing the existing best practices and experiences.
Integration –an important factor to create synergy and efficiency- will be discussed with examples of configurations and as related to chemicals value chains.
Clusters: after introducing the cluster concept and drivers, examples of industrial clusters will be given and their characteristics, followed by mapping some successful clusters across the world.
Then we’ll discuss the high-level cost structures of different element of chemicals value chain and the impact of these differences on investment planning / decision and overall competitiveness of such chemicals.
Considering then (chemicals, plastics) consumption curves, behavior of consumptions per capita and the intensity of chemicals consumptions in each consuming industry are other important aspects which in turn impact on optimal development of the downstream chemicals industries.
At this stage we’ll turn to presenting some detailed facts and discussing some International best practices in world’s different regions. Europe, Asia, Middle East and some countries there will be focused on with special attentions to the paths which two renowned organizations took – with different philosophies and historical backgrounds- for developing their chemicals assets and value chains.
Then we approach the different groups of chemicals value chains from the angle of investment, ownership and governance.
Turning to Iran’s current petrochemicals scene a “SWOT” (Strengths, Weaknesses, Opportunities and Challenges) picture will be presented and discussed.
Thereafter and based on aforementioned facts, backgrounds, best practices and SWOT, some key elements and links for a development frameworks in Iran will be presented and the possible development models will be put forward and discussed.
This would then bring us to drawing some conclusions and offering some key success factors.””
The organizers, audience and most of the attending managers were in agreement with the proposed analysis and the way forward. In the ensuing time and in practice though, my observation has been one of carrying on with business-as-usual, a very high turnover in the ministry or petroleum, NPC, as well as some of the key Holdings’ top leaderships, a pure “engineering approach” to the complex aspect of (foreign) partnership, asset development and business management, focusing on just completing some of the incomplete projects.
I’m confident –with or without sanctions- the county needs a fresh look leading to a completely different strategy for the whole hydrocarbon industry including petrochemicals and its rigorous, disciplined and professional implementation. A strong support and mandate from the very top of course is a key requisite.
As a simple but wise proverb has it: ”If you go along the same way, you’ll reach the same place” [or: if you want to reach a new place, you must take a new way!]
Aman Amanpour's next
"Masterclass and Strategic Management in Petrochemicals"
will be held in Dubai 18-20 November 2018. For more details about the course and registration please visit the Link
Some latest trends in and possible prospects of the global and regional petrochemicals.
Interview with Aman Amanpour, President AmanpourConsult - August 2018
What changes do you see at the highest level setting new scenes for the (petro)Chemicals investment and business? The changes we observe in the last couple of years are in a plethora of geopolitical, policy areas and factors impacting the global and regional macro-economies and hence the dynamics of various industries including petrochemicals. New power plays (e.g. USA vs. Eurasia), Trumpism and related phenomena elsewhere: nationalism, protectionism, trade war, de-globalization are among these changed factors. Also in play are parameters such as heightened climate challenge, aging population, changing hydrocarbons dynamics (supply / demand, price and fate), alternative resources and technologies, e-mobility and circular economy to name some key ones.
Which overall new responses do you see to those changes? Responses are taking shape accordingly for a new equilibrium in world politics and economy, as well as in various industrial sectors. In our industry we observe change of strategy by governments, investors, companies, operators, customers and other stakeholders. Legislative and executive orders, shareholders’ actions, new project strategies, deeper restructurings and M&A, disruptive technologies and asset configurations, digitization, changed consumers’ behaviors and demands - all are transforming the (petro)chemicals sector.
Do you expect any shift in the gravity centers and among major players – now and going forward? A clear shift has been happening Eastwards. China goes beyond mere self-sufficiency and by creating the OBOR/BRI, it will have a pronounced impact on chemicals investment and trade. US shale-based projects are at competitive risk due to president Trump’s declared trade war. The industry there (ACC) is deeply concerned and issues frequent warnings and pleas. Asian (e.g. Chinese, Indonesian, Malaysian) and Middle Eastern (e.g. Aramco, SABIC, ADNOC) players are –individually and by joining hands- buying companies, creating mega integrated assets with new technologies and configurations. The Western established players go through ever larger and more complex M&As (e.g. DowDupont).
How different are the new investments from the conventional ones? Let’s take investment in production of olefins as key building blocks in the value chain. Since 2010 the C(M)TO(P) have evolved in China as a credible route besides thermal cracking – and growing. Same could be said for PDH in all key regions. And recently some routes such as oxidative conversion of methane (OCM) are on the verge of commercialization. Recent novelty, however, are some game-changing integrative approaches such as crude-oil-to-chemicals (COTC) –so far in project stages in China and KSA. This is targeting at maximizing the oil-to-chemicals conversion rates compared to conventional refinery-petrochemicals integration. The current global average is about 8–10% conversion to chemicals per barrel of oil. For a very well-integrated complex such as Petro Rabigh or Sadara in Saudi Arabia, each complex can achieve 17–20% conversion to chemicals. All announced COTC projects produce at least 40% of chemicals per barrel of oil which could go as high as 80% for more complex and optimized schemes —a quantum leap from a state-of-the-art integrated complex. Besides, more and more conventional refinery-petrochemicals projects, in mega scales and with multiple of partners, are planned, especially in Asia and Middle East such as projects in China, India, Indonesia, Malaysia, KSA, UAE, Oman, between state-owned Asian and Middle Eastern partners.
How will the oil / gas prices and supply-demand be impacted and in turn impact (petro)chemicals? As ever, no one can predict or even credibly forecast the prices. Consensus is though that before middle of this century the demand for fossil energies for fuel purposes will plateau and then decline. This, plus the steady growth of petrochemicals demand at or above the global GDP growth, is making petrochemicals an even more prominent outlet for oil and gas, from currently less than 15% to around 20-25% of oil demand by 2050.
What are the major new challenges and opportunities for the producers and consumers of chemicals? From breath-taking competitive scene and the strive for profit and shareholder value in all of its facets to technological advances, to digitization, from enabling role of chemicals value chain for development of various industries, including traditional and hi-tech manufacturing and services, from contributing to prosperity of people in emerging and developed economies and lifting their health, longevity, well being and living standards. From contributions to greenhouse gas reductions via light-weighting and insulation to invention and creation of novel products and processes to mitigate environmental risks, the list of vital examples of chemicals industry is long.
If I’d be pressed though to mention just one aspect and expand a little on it which entails both challenges and opportunities for chemicals, that is: environmental realities and the emergence of “circular economy” (CE)! The Ellen MacArthur Foundation in a 2015 study wrote: “A staggering 32% of plastic packaging escapes collection systems, generating significant economic costs by reducing the productivity of vital natural systems such as the ocean and clogging urban infrastructure. The cost of such after-use externalities for plastic packaging, plus the cost associated with greenhouse gas emissions from its production, is conservatively estimated at USD 40 billion annually.” Or in the words of James Quincey, CEO of Coca-Cola: ““If left unchecked, plastic waste will slowly choke our oceans and waterways. We’re using up our earth as if there’s another one on the shelf just waiting to be opened. Companies have to do their part by making sure their packaging is actually recyclable.
Circular Economy is much more than waste management. Several of implemented product and/or applicationlal solutions by key Chemicals players already address the CE model. They bring opportunities for new business models, new solutions and, consequently, new customers. A pre-condition is a deep understanding of the value chain and customers’ needs. CE supports value generation of high performance products. However, holistic evaluation of the sustainability of each CE business model is necessary.
For how long will the current prosperous chemicals business continue? To start with: the reminder that the business of chemistry is and will remain cyclical. The degree of cyclicality decreases as we move along the value chain from base chemicals to intermediates to performance products to specialties, fabricated/formulated packages and then consumer goods. One factor, besides the macro-economic cycles, which drives (petro)chemicals cycle is the fact that the demand growth is linear (e.g. as a function of GDP growth rate) but the supply comes in step-wise capacity additions which become ever larger as the technology and economics both enable and require larger scales. In other words, new large investments addressing the previous tightness need to be absorbed over some years, before which the prices, operating rates and hence margins decline before they start to rise in a new cycle. Currently and as mentioned earlier, we observe massive capacity additions in base chemicals, polyolefins and some intermediates in US, Asia, Middle East and even (upcoming) Russia/CIS which could lead to overcapacities in the coming 3-5 years, eroding margins and profitabilities before those volumes could be absorbed by demand growth. The looming trade war and protectionism, reduced demand in the developed world due demographic challenge and possible slow-down in the emerging economies could add to the burden. Some less competitive projects may be canceled or delayed which would mitigate the down-cycle. However and as experience shows, pride and personal (career) stakes after having spent much time and money to develop a mega project, as well as an unjustified hope that “this time is different” and losing sight by new executives of the “cycle determinism” may lead to less cancelations or delays than required to maintain a mitigated cycle.
What would be the new strategies of the Middle Eastern petrochemicals producers and their new standing worldwide? As already mentioned, GCC producers are leaving the home ground, continue with ‘shopping’ assets abroad and entering into mega-projects in and outside of their countries with integrated asset configurations, based on liquid feedstock and new partnerships. Drivers are: lack of ample and low cost gaseous (ethane) feed, going down the value chain for industrialization and job creation and reducing the economic dependencies on crude oil export. By doing so, their rank among global players have been increasing. SABIC is currently among the top 5 of chemical companies and Aramco is catching up fast with mega projects and inorganic (incl. plans to buy shares in SABIC). Also UAE’s ADNOC, Kuwait’s PIC Qatar’s QP and Oman’s ORPIC have grand plans and ambitions. Some large projects are reviving and taking shape in Egypt and Algeria as well. Iran though tells us a different story: they’ve had big ambitions to complete huge number of projects and add new ones, have achieved some in the last few years, but are stalled again due to US exit from JCPOA (nuclear deal) and reinstatement of their sanctions, as well as serious domestic challenges, policy issues and inefficiencies. They may though be able to proceed, if capable of mastering the domestic issues and albeit with slower speed, with completing some projects, taking the petrochemicals capacities from now 65mtpa (second in the region to KSA with currently 90mtpa) to 100mtpa by middle or late of next decade.
Politics, Power, Profit, People, Planet, Trump, Nationalism, Protectionism, Trade War, De-globalization, Climate, Aging Population, Oil Price, Global Economy, Technology, Feedstock, Renewable, e-Mobility, Circular Economy (CE), Supply, Demand, Cycle, Concentration, Integration, Differentiation, Future Chemicals share in Oil, China, OBR/BRI, CTOC, OCM, , mega JVs & M&As, Asia, Middle East, US, Iran
Aman Amanpour spoke at Platts 5th European Petrochemicals Conference in Rotterdam, 5&6 Feb/2018. The event was very well attended with prominent co-speakers, excellent content and lively debates. Subject of Aman's presntation was "Midde East Petrochemicals Overview : continued Investment and Export capabilities: past, present, prospects" . See the "conclusions slide" in the following Tweeter link
The 12th GPCA, 27-29 Nov 2017 in Dubai under the theme: "The Chemical Industry in Transformation: A New Journey Begins"
As promised last year (see below), here's my take of this year's GPCA: On a positive note: contrary to last year, the overall mood on profitability (especially within Western players) was rather bullish. First some keywords captured by GPCA's SG in his summary: from Cost leadership to Value leadership, nurturing an Innovative Ecosystem, Chemical industry growing above global GDP. Transformation is key for the region to enhance its global competitive position. Industry's key role in protecting the environment. Must invest through the cycles for the long term. Mega trends and changing world require urgent actions and bold answers. The future is the "connected plant" and Digitization offers many solutions for the industry and its Transformation.
Aman Amanpour's next "Masterclass and Strategic Management in Petrochemicals" will be held in Dubai 19-21 November 2017.
For more details on the program's content, target audiences, locations, further details and for registration, here's the link to the : "Course Brochure" . These programs are organized and supported by the Euro Petroleum Consultants - a reputable consulting, training and event management company ("EPC")
Aman Amanpour delivered a keynote presentation at the 5th CIS Petrochemicals Conference on 5&6 April 2017
in Moscow/Russia .
The title of his speech was: "Middle East Petrochemicals: Growth Pathways, Old and New Models, Challenges & Impacts, possible ME/CIS Synergies. The event was well attended, his speech well received and debated. The outline included: Middle East and Petrochemicals, Impressive Growth History; Pathways, GCC & KSA: Initial & Current Busienss Models, GCC and Iran Petrochemicals: SWOT, MENA: Key Projects in pipeline, Challenges: Competitive, Domestic, Outside, State of Russian Petrochemicals, CIS & ME Petrochemicals: Possible Synergies? Conclusions.
Aman Amanpour's next "Masterclass in Petrochemicals" and "Strategic Management in Petrochemicals" will be in Dubai 30 April - 4 May 2017.
The programs are separate modules, yet complementary and could be combined as the dates are back-to-back. Please click on ["Masterclass"] and ["Mini-MBA"] for more details on the programs’ content, target audiences, locations, further details and for registration. These programs are organized and supported by the Euro Petroleum Consultants - a reputable consulting, training and event management company ("EPC")
Aman Amanpour spoke at the 4th Platts European Petrochemicals Conference on 14&15March 2017 in Dusseldorf/Germany.
The title of his presentation was: "Middle East and Iran Petrochemicals: New wave of Investments in the context of Domestic needs and Global landscape" which was well received and lively debated. The outline included: Middle East & Petrochemicals: General, Impressive Growth History; Pathways, GCC: Current and Emerging Business Models, GCC and Iran Petrochemicals: SWOT, MENA: Key Projects in Pipeline, Some Challenges: Domestic and Outside, Conclusions.
Middle-East Petrochemicals 2017 in the Global Context
Last year I provided the analysis: Global Petrochemicals: How the Scene has Changed? Why? What to come Next? While the depicted forces and trends are still at work, I’d like today to provide some specific remarks, focusing on the Middle East Petrochemicals in the global context. The region as a whole has moved on within the tension filed of socio-political forces, economic challenges, conflicts, alliances and competition. Our industry has been impacted by continued level of subdued oil prices, flatter cost curves hence more fierce global competition, threat of global oversupply (US shale) and self-sufficiency (China), change in trade patterns, scarcity of gaseous feedstock (except Iran) and the resultant urge for new business models. Integration, innovation, consolidations, enhancing the quality and effectiveness of human capital, revisiting (cancelling, delaying, re-scoping) of some planned investment projects, increasing global footprints by more international alliances and M&As … are visible trends among many players as some necessary responses. These, in the face of deteriorating some of the conducive conditions (e.g. feedstock price and availability, other current incentives), looming overcapacity / down-cycle, emerging trade dynamics after the demise of TPP and TITIP / new wave of protectionism … These are sure necessary responses. But are they also sufficient considering mega-trends in general and the game changing factors in (petro)chemicals discussed in my previous analysis in particular ? It depends, I would say. It depends on how some of these measures are defined, translated into clear objectives and implemented successfully. Let me take just four of these responses: Integration and its links with: Consolidation, as well as Innovation and its key requirement: Human Capital.
Integration: Refinery-Petrochemicals (vertical) integration is high on the regional agenda but has still a long way to go. Saudi Aramco has been leading the way with Petrorabigh and Sadara mega joint ventures with Sumitomo and Dow respectively. Other GCC countries (UAE, Kuwait, Oman) are planning and are in different stages. Iran is seriously considering the matter as well. Horizontal integration (e.g. around industrial clusters) have also started to take shape for example around Sadara JV in Al-Jubail-2. However, the region is still in earlier miles of its integrative journey. The three other elements -as follow- need to be addressed simultaneously for extracting maximum possible (corporate and social) values out of comprehensive and multi-dimensional integration. Filling in the value chain gaps (e.g. in propylene and aromatics value chains), especially in the countries with broad industrial bases such as Iran, is also an “integral part of integration”
Consolidation: (You can call it organizational integration too). After a rather significant international acquisitions and merger journey by the local players (SABIC, IPIC, Aramco, KPC, OOC) of renowned Western companies (DSM, Huntsman, GE-Plastic, NOVA, Borealis, LANXESS, MEglobal) a new wave of consolidation seems to have kicked in: SABIC’s taking over of Shell share in the tradition-rich Sadaf JV and Tasnee selling its Cristal titanium oxide business to US-based Tronox are the two very recent examples. Iran, for instance, needs still to create functioning consolidation models post the abrupt NPC “privatization” which has created a fractured landscape for petrochemicals governance and challenges for further growth. Consolidation is an area which must and will further evolve. The interplay between the state-owned enterprises and other players such as regional conglomerates, foreign corporations, local family companies and stock markets, as well as high-level government policies will determine the future paths. In the context of fierce competition (global, regional and local) the ME players will face serious (scale, efficiency) challenges which, if mastered professionally, could create added value and new opportunities.
Innovation: Not many new chemical molecules for industrial uses have been created recently. Innovation in manufacturing processes and applications of existing chemicals and/or their modifications and service differentiations have though been plentiful and highly effective. Middle Eastern players, besides creating their own research and innovation centers, can and should profit from the existing world-class innovations and best practices by striking international alliances with key research, engineering and commercial institutions- from companies to academia. However this would –foremost- need a healthy supply of talent in different disciplines enabled by progressive national and corporate policies and strategies. Human Capital: The region as a whole is not short of a healthy supply of talent in different disciplines mentioned above. At the national levels though, there are difference in individual countries, depending on their socio-political (demographic, developmental, governance, cultural) conditions. Despite these national differences and at the corporate levels, the industry must take a much more active role in creating, nurturing and enhancing its human capital as THE most both: immediate and sustainable success factor. Just to mention a very recent global executive survey conducted by Boston Consulting (BCG) – with the key finding: Leadership and talent management capabilities have a surprisingly strong correlation with financial performance. “Talent magnets”—those companies that rated themselves strongest on 20 leadership and talent management capabilities—increased their revenues 2.2 times faster and their profits 1.5 times faster than “talent laggards,” or those companies that rated themselves the weakest.
Middle East Petrochemicals as a whole is at a turning point. The image of lowest-cost supplier of bulk petrochemicals to the world’s consuming markets is challenged by new feeds (shale, coal), technologies and significant new capacities within those very markets. The regional players though have still strong means to address these and their other challenges. Whether in Saudi Arabia or in Iran: the excellence in and interplays between integration, consolidation, innovation and human capital are among the key measures for the regional petrochemical industry to maintain competitiveness and for reaching new heights.
Aman Amanpour spoke at Iranian National Petrochemicals Conference
Aman Amanpour delivered a keynote presentation on 26th February 2017 in Tehran at the “National Iranian Petrochemicals Conference: Opportunities and Threats”. The title of his speech was: “Value by Integration, Competition, Sustainability – Premier Enterprises’ Approaches”. In the afternoon he was invited to attend a panel of Iranian industry leaders where the key challenges and opportunities of hydrocarbon and petrochemicals were debated and provided his views on topics such as investment strategies, foreign and domestic partnership, value chain, portfolio and technology aspects, financing as well as some business obstacles and best practices.
Aman Amanpour chaired the 4th Maximising Propylene Yields conference in Frankfurt 7&8th December2016
Representatives of renowned chemical companies and experts from specialist entities presented and discussed the latest on market, business, partnerships, technologies (traditional and on-purpose), innovations, operational excellence, value chains, derivatives, challenges and opportunities of propylene as a key petrochemicals building block. One of the key common conclusion being: in spite of short-term pressure on market prices and margins, maximizing propylene yield via innovative routes makes strategic and long-term sense, considering continued demand growth, as well as unique derivatives’ properties for current and upcoming novel applications in key consuming sectors.
The 11th GPCA, 27-29 Nov 2016 in Dubai under the theme” “Competitiveness: Riding New Waves”.
Aman Amanpour comments : The mood at this year’s event was subdued as companies struggle to cope with low oil prices, diminishing availability of advantaged gas feedstock, business models not fully fit-for-purpose and reduced profitability. There were plenty talks in the keynote speeches of “innovation, integration, consolidation, competition with other regions, more specialty and higher value products and service offers, creating jobs, maintaining the value in the region ….” Themes which were also at centre of almost all of the past 10 GPCAs. New(er) being though the challenges mentioned in the first sentence above. While China/Asia, US and Iran are moving to add significant capacities, GCC players have entered their more stagnant phase of capacity addition. And while the challenges coming from the two former countries/regions were taken due note of, the latter (Iran) with its target (and serious effort) of doubling their current 65mtpa petrochemical capacity by middle of next decade was rarely discussed. For me though the highest challenge for GCC petrochemicals sector is the incompatibility of their wishful model of replicating similar value chains as in the advanced economies with their demographic, competitive advantages, integrative and socio-cultural realities. Saudi Arabia and to some extend other GCC countries have achieved an impressive and admirable growth and profitability in certain petrochemicals value chain thanks to advantaged feedstock, fit-for-purpose portfolio / business models, partnering with key global players for organic growth and some significant acquisition and investment abroad. Going forward though some of these elements such as availability of advantaged feed, aspired new portfolio versus the limited local market size for such product mix … in addition to the aforementioned challenges will continue to limit the growth and profitability. We shall see in a year time at 12th GPCA how these themes, challenges and (hopefully) new opportunities would evolve.
Recent personal and process safety incidents in the Middle East
Recently we’ve observed some major incidents in some hydrocarbon and petrochemicals operations in the Middle East. Saudi Arabia and Iran as two major players have been among the scenes. Iran has experienced in recent months several fire and explosion incidents in some petrochemicals plants, leading to fatalities, injuries and severe damages to the environment, neighborhoods , assets and certainly (corporate and individual) reputations. The latest in the series has been a major fire on Wednesday 6th July 2016 in the para-Xylene tower and tanks of Bu-Ali-Sina petrochemical complex in Bandar-Imam-Khomeini. The complex belongs to the Persian Gulf Petrochemical Holding, Iran’s largest petrochemical producer, which belongs partially to National Petrochemical Company, a subsidiary of Ministry of Petroleum (MoP), and partially to some (private and quasi-private) institutions. In the last days there have been much updates and news from the MoP and other sources on this incident. Fortunately and till now there hasn’t been any fatality or major injuries reported. Not knowing yet the root and contributing causes of this incident and based on mere reading of these news and comments, I wish to share some initial observations and “hunches”: 1) The fact that the Minister, several deputy ministers and senior executives have gone to the location and stayed there until the fire is under control sends mixed messages: sense of urgency and responsibility, but also tells something about the “management systems and management styles” … , 2) The decision to let all liquids in the tank(s) to be burnt for several days for the fire to (self) extinguish seems very strange ! Even if the risk to people working there and assets may have brought under control, yet how about (civil and industrial) neighborhoods and overall environmental impacts in this densely industrial and populated area? There sure can and must be solutions at local and national levels to actively fight and distinguish the fire at much shorter times. Going on such a path, again, gives a flavor of the quality, processes, tools and techniques of the decision (making or taking). 3) What remains to be hoped is a thorough and professional RCA (root cause analysis) with lessons learnt plus clear implementable remedy plan(s) for across the plants and sites. The least helpful approach -in case the cause hasn’t been sabotage, willful act or gross negligence- would be a mere search for culprit(s) and punishing them. Training, re-training, work place motivation/satisfaction, introducing and continuously improving “management systems”, utilizing of best-practices nationally and internationally, empowering and trusting in those trained and competent staff and most importantly: promoting and achieving a progressive and “regenerative” HSSE culture and battle for winning “hearts and minds” across the organizations. Starting at the very top level and cascading throughout the organization. These seem to me as some key milestones of a journey towards safer, more reliable and sustainable operations.
Middle East Petrochemicals: Portfolio Choices - tailoring the Value Chain or just pushing Downstream ?
Aman Amanpour opines : Going downstream, producing specialties instead of commodity chemicals, ‘adding value’, avoidance of ‘raw selling’, multiplying effect on GDP … industrial clusters, job creation … have been on top of countries’ agendas in the region: KSA, Iran, UAE, … as if there’s a new trend and no one wants to stay behind! But can a one-size-fits-all approach really fit all? Here are some key factors (in no order of importance) to test against for the “fitness” of a choice: state and prospect of national economy, history of petrochemicals (and related industries) development, current value chains and capacities, human capital, resources (feedstock, energy), availability, degree of industrialization, upstream/downstream integrations / synergies (existing and potential), nature of markets and customers (domestic, export), demographics, state-vs.-private sectors, country’s macroeconomic priorities, availability of foreign and/or indigenous technologies and best-practices, state of international markets and competitive scene for existing and targeted product-businesses, (geo)political imperatives, availability of technology and market leaders to partner with. Such factors should be analyzed in depth with the help of own available experts and experienced consultants to help determine whether certain aspired portfolio choices are feasible in a specific country / entity or otherwise. Let’s take the regional countries with current (petro)chemicals footprint and ambitions : Saudi Arabia, Iran, UAE, Qatar, Oman, Kuwait, Bahrain, Iraq, Turkey, Egypt, Algeria. Take also: China, India, US, Europe (West/East/South), Japan, Korea, Russia, Singapore, Thailand, Malaysia … and reflect on the above factors! European Chemical players have already admitted their lack of competiveness with Middle Eastern, US and Chinese player in base and intermediate chemicals and are stressing on their strength which is in downstream of the chain and “solution provision”. Japanese players take a similar approach – see the recent feature in Chemical Week Could all of these very different countries, regions and their entities be successful in adopting a sophisticated and/or full value chain of chemicals? Which ones (who?) are better off focusing on certain (what?) portion of the value chain and based on their “comparative advantages” and leave the other (what?) portions to others (who?)? Coming back to the Middle East, I’d just take few countries and offer some brief views: Saudi Arabia: after two decades of heavy “production-mainly--for-export-and-highly-profitable” of base and intermediate chemicals, banking on cheap and ample feedstock and mainly in joint ventures with major foreign partners, the country has embarked since middle of last decade on an ambitious and partially successful journey of global expansion (SABIC), adding more potent players (Aramco, private sector), expansion of value chain and integration with refineries. The combination of the old and new model has proven so far viable - in economic as well as developmental terms. Yet delivery on the full “clusters program” and plans for further massive expansion of the (lower paid) labor intensive consumer and fabricated goods industries will be difficult to achieve -in view of country’s specific labor market and other societal/cultural aspects.
Iran: the country has already a large petrochemicals manufacturing base (second only to KSA in the region) and a moderately developed downstream of chemicals production. Post sanctions, plans and engagements are in place to finish a plethora of incomplete projects –mainly in base and intermediates chemicals- which, if successful, would double the current capacity to 120 mtpa within a decade from now. There are though gaps, especially in propylene and aromatics value chains, which if filled, could help broadening and deepening the downstream of chemicals and their consuming sectors, creating more value and employment. Yet I’d challenge the current notion of “avoidance of raw selling” if that’s meant at making and selling base and intermediate chemicals which in fact add in their own way significant value to the country’s ample and low cost feedstock, supply / integrate with local downstream and provide major clout in the global markets and value chains. In addition and commercial best practices have shown, there are further scopes for creative deals (incl. “virtual integration”) for even more value with international clients and partners. UAE, Qatar, Kuwait, Oman: these countries have also developed their cracker complexes plus the immediate derivatives and target – to different extends- at completing the chemicals value chain and its downstream manufacturing industries. Apart from several questions which can be raised here, let’s pick just a very simple one: with what workforce? Even for projecting and running of the current less labor intensive facilities they are heavily relying on the expatriates at all levels. Conclusion: “horses for courses” as the saying goes. (Petro)chemicals manufacturing and businesses are global, so are their value chains and integration. Notwithstanding and within macro-economic plans based on national interests which the governments’ need to device / implement and strategic corporate objectives that enterprises need to achieve, there are ways and means to optimize the (‘triple’)bottom lines based on inherent and/or comparative advantages within and outside of national boundaries or corporate fences. No part of the (petro)chemicals value chains is of less or more value per se. The right mix and design make it.
Global Petrochemicals: How the Scene has Changed? Why? What to come Next?
Aman Amanpour opines : Oil, China, Shale, Coal, Biotech, Economy, Demographics, Geopolitics, Iran are some key words. In short: there are more questions (uncertainties, risks, volatilities) than answers (confidence, clear trend lines). Below I’ll try to tackle each and their interplays addressing the 3-in-1-questions posted above.
Oil: the slump in crude oil prices has dramatically flattened the curve of (e.g. ethylene) production cost. With that the advantages of US and Middle Eastern gas/NGL-based producers have become less pronounced compared to European and Asian liquid-based makers. The latter, marginal, “price maker” (least competitive) producers, with reduced cash cost due to cheaper naphtha/liquids, brought the prices down, yet overall improved their margins too. The lower oil and Chemicals prices are expected to spur the demand over time – but will they? See next:
China: as the country took on their “rebalancing”, away from production-for-export-focused model and towards more services and domestic consumptions, the rate of petrochemicals’ demand growth slowed compared to what the world was used to / planned for in the previous decade. This factor will play against the demand stimulating effect of lower oil prices – for China, but also for other emerging economies such as Brazil, Russia which are in trouble for different reasons. This has created a high level of inventory not only for oil and its fuel products but also for petrochemicals, which in turn are creating another ceiling for the prices.
Shale: low oil price has put massive pressure on the viability of significant number of shale resources in US. However, forces which contributed to low oil price (see Geopolitics) are surprised to see how resilient shale has so far been. Yet with time the trend is clearly towards less shale oil production and with that and to a large extend also with adverse impact on supply security of shale gas and associated ethane – a key plan premise of a plethora of new US petrochemical complexes announced and being built. Which portion of these announcements –apart from those already under construction and/or FID’d- will go ahead? Answer to this question will determine to a large extend the ability of supply side to put a lid on, otherwise, looming overcapacity.
Coal: again China! The country has managed within few years to commercialize and expand significantly on the coal-based chemicals production. Not only the older routes such as calcium carbide -> acetylene -> VCM -> PVC, but more importantly the modern processes of coal-to-methanol-to-olefins (ethylene and propylene): CTO/CTP MTO/MTP, as well as cola-to-MEG and coal-to-acetic acid. Self sufficiency targets, monetizing on their vast coal reserves and cost advantage during the high oil price era have been the main driving forces. Now lower and volatile oil prices -one would expect- could retard this development? Yet the strategic nature of the initiative and the “sunk capex” would overall keep this trend in China in place. Therefore a certain –significant or moderate, depending on economics- element of global overcapacity would be expected to come from this angle.
Biotech: the renewable, carbon-neutral, bio-based feed-stocks and routs have been under rapid developments in the last several years. From ethanol or butanol (from sugar, corn or cellulosic raw materials) as drop-in solutions or as ‘platform chemicals’ to get, for example, ethylene from, to new bio-degradable plastics such as poly lactic acid (PLA) … have been commercialized and were about to become competitive as the oil price was high. The latter, again and among other factors, has and will further impact this value chain, compete with petro-chemicals.
Economy & Demographics: Europe, Japan and North America have so far not fully recovered from the tremors of the 2008-10 financial and economic crises. Major BRICS and other emerging economies have either entered into a more moderate growth (China, South Africa) or into stagnation and recession (Russia, Brazil). India being an exception with still healthy growth rates, hence well growing chemicals demand. Besides, the aging population in the developed economies and “baby boomers” retiring is putting another lid on future demand patterns of this part of the world which enters into a “new normal” in terms of quantitative and chemicals-related consumptions of goods and services.
Geopolitics: many if not all of the factors discussed so far are impacted –directly or indirectly- by the global political dynamics and power plays. Many decisions and behaviors which have impacted macro-economies, oil price, shale, China have been highly political having their roots in (mostly zero-sum) national, regional and global power plays and conflicting vested interests. A prime example: Saudi Arabia’s move to increase output and veto production cuts at OPEC to mainly push out more costly productions (shale, deep water, arctic), as well as hurting certain rivals (Iran, Russia) was a key factor in creating the oil oversupply and price plummeting. These realities are key to understand and based on which design a tailored risk-based-approach for the decisions touching organization, investment, partnership, trade … which chemical players are taking. On the other side many (geo)political impacts stem from “unintended consequences” (e.g. wars, interventions, terrorism) which are even not fully understood and forecast by all direct players and their think-tanks, let alone industry professionals.
Iran: putting the complex politics around this country aside for a moment and looking at Iran purely from petrochemicals (beside oil) perspective. It was clear that once nuclear sanctions were lifted, Iran would push massively though completion and commissioning of their plethora of unfinished petrochemical projects. Surprisingly though very few of the players have heeded this factor and considered it in their analysis, forecasting and investment planning. Take just two examples from the key value chains: ethylene and methanol. Having already a capacity of 5.2 mtpa ethylene, Iran stands a good chance to add another 7 mtpa within next 5 years –if not earlier. Also with a current methanol capacity of 5mtpa, the country is planning to add another 15 (if not 20) mtpa of capacity within the same time frame. These are massive additions! Part of their methanol though could be converted to propylene (MTO/MTP) which in turn would boost the C3 / derivatives capacities. With a similar willingness to increase the oil and gas production and export, and in turn their influence on chemicals cost/competitiveness, Iran will be impacting heavily both chemicals and energy markets.
Conclusions: It seems a good chunk of investments to come on stream in this decade in the base and intermediate chemicals (from those already on the drawing boards and in the pipelines) and outside China and Iran [which will push ahead regardless of market supply and demand] will run the risk of failing to achieve their premised targets plus contributing to global oversupply. Unless they get delayed, phased and some cancelled.
Saudi Arabia increasses the Petrochemicals feeedstock prices
After decades of cheap feedstock prices, which gave Saudi petrochemical producers a massive cost advantage— the government is significantly increasing the prices of ethane and methane, starting in 2016. The move follows the country's decision to reduce subsidies and raise government revenues following higher defense spending and the collapse in the? price of oil. The price of ethane, as of 2016, will rise 133%, to $1.75/million Btu from 75 cts/million Btu, bringing Saudi ethylene producers closer to those in the United States in terms of feedstock costs. The price of methane, a feedstock used to produce methanol ?and ammonia, among others, as well as source of energy for the petrochemical plants, rises by 67% from from 75 cts/million Btu to $1.25/million Btu. The increase in feedstock costs in Saudi Arabia has long been anticipated, albeit lobbyed to avoid, by the petrochemical producers in the Kingdom. Yet the country still has the lowest gas prices in the region and possibly the world.
Aman Amanpour's next "Masterclass in Petrochemicals" and "Strategic Management in Petrochemicals" will be in Dubai 31 Jan-4 Feb 2016.
The programs are separate modules, yet complementary and could be combined as the dates are back-to-back. Please click on ["Masterclass"] and ["Mini-MBA"] for more details on the programs’ content, target audiences, locations, further details and for registration. These programs are organized and supported by the Euro Petroleum Consultants - a reputable consulting, training and event management company ("EPC")
Iran’s Petrochemical Industries: Opportunities, Challenges and immediate Requirements.
Iran Petrochemicals industry is and could further be country’s most prominent industrial sector based on considerable potentials in terms of natural and human resources as well as large domestic and established export markets. Also from the regional and even global perspective, Iran is one of the countries with still large untapped investment potential in terms of human (educated & skilled work force) and natural (feedstock) resources as well as some unique infrastructure and integrative elements. Iran’s petrochemicals’ history and developments demonstrate both achievements and setbacks. However, international sanctions, NPC’s pre-mature “privatization” (chaotic fire-selling of best assets to rich but unprofessional individuals/institutions), mismanagement , lack of clear strategy, ambigeous feedstock policy with contrarian views , investment funding issues , limited access to best practices (project, operations, international relations and commercial management) and some technologies … have retarded and in some cases stopped the progress in the last 10 years. There’s currently a heated debate on some key policies and the way forward, as well as some corrective actions in the country to address the issues. These all, post JCPOA signed in July/2015, having already achieved IAEA’s compliance confirmation (incl. clearance on past activities: “PMD”) on 15th December, awaiting now the “Implementation Day (I-Day)” which is pending Iran’s remaining actions and the expected suspending/lifting of nuclear related sanctions during early 2016. On the other side, the risk (real and perceived) of sanctions' “snap-back” will remain in case IAEA and G(5+1) observe non-compliance on the Iranian part. This risk however, although of “high impact”, is being assessed by most geo-political analysts, as well as by International companies interested in trade with and investment in Iran, as of “low probability”. There’s already a significant international interest in Iran’s petrochemicals sector – as observed at the latest Iranian Petrochemicals Forum (“IPF”) in Tehran, mid December- in all aspects by different entities in terms of: equity partnership, trade, EPC, technology licensing, other services and consulting. Most if not all of those entities are aware of potential risks but, overall and for the reasons mentioned, are attracted to create, revive and maintain the foothold and relationship with Iran’s key petrochemicals players. On the other side and given the choice, Iranian players are also keen to create, revive and maintain the relationship with the international providers of: excess capital, market know-how, technologies and (commercial and operational) excellence. Besides and to create a balance to the current Chinese players, European and Japanese firms are quite clearly the preferred options for Iran. However, foreign investment and partnership – even if available to fullest potentials- represent only some important “necessary conditions” for reviving and further developing Iran’s petrochemicals industry to the heights it deserves. Yet addressing the domestic issues mentioned earlier plus setting out and implementing a grand strategy would create the key “sufficient conditions” for achieving the much announced objectives and targets. Besides capable engineers and scientists which the country undoubtedly posses and further requires, there’s an acute need for best-practice-trained, nurtured, properly deployed and developed next generation of world-class managers and leaders for the industry. A close interplay between the public (ministries, other entities) and private sector sure is needed to address these issues and requirements. Yet as many examples of successful (China, India, Singapore, Malaysia, Saudi Arabia, even Europe and US in their earlier phases) and failed (post Soviet & Eastern Europe industrial disintegration in the name of “privatization”) cases show: the public sector leadership for planning, investment partnership (domestic and foreign), integration, infrastructure and project executions for developing industries at similar stage of evolution is paramount – despite many hypes and noises to the contrary!
Two events on Iran Investment opportunities in Dubai (29 Sep) and Muscat (25 Oct) 2015 were organized by the MEED magazine
Aman Amanpour was invited as one of the three panelists to provide insight and address the questions. Read more. Themes and topics presented by the speakers included: Opportunity Iran: State of the economy & financial sector, preparing for re-entry: The legal frameworks in Iran & on-going compliance with outstanding sanction obligations, snapshot of Iran’s energy and infrastructure projects market and those likely to be green-lighted early 2016. Then the panel candidly explored and addressed the questions of: entry strategies for international companies and potential approaches to the market, practical ideas and tactics about entering Iran, what the difficulties and risks are, where the opportunities lie, establishing a branch office & appointing an agent, participation in tenders, JVs, service contracts & BOT/BOO, using free zones, considerations in stakeholder strategy , negotiating contracts, cultural aspects and brief sector opportunities.
Aman Amanpour was invited to speak at Iran's "First High-level Symposium on Industrial and Trade Policies" on "Challenges and prospects of downstream petrochemical industries" in Tehran — 10th and 11th of October 2015
Aman's speach scope was "Developing downstream petrochemical industries: opportunities, challenges and the way forward: A cluster, value chain and integrative approach. Requirements for tailored model(s) based on local specifics and international best practices". Here's the gist of what he presented which was very well received and lively discussed - both at the Symposium, as well as at a dedicated workshop few days later with senior managers of different institutions and industries : Looking at drivers in different countries and regions, two main tendencies in developing (petro)chemicals industries are recognized: “Resource Push” and “Market Pull”. The former relates to the intention of adding value to (raw) resources destined for export or being used domestically –e.g. oil and gas and their initial products-. The latter has been the approach taken by nations with large consuming markets and to create value chains for their economic development and industrialization. Iran fulfilling to different extends both aspects, requires a dedicated approach, yet utilizing the existing best practices and experiences. Integration –an important factor to create synergy and efficiency- was discussed with examples of configurations and as related to chemicals value chains. Clusters: after introducing the cluster concept and drivers, examples of industrial clusters were given and their characteristics, followed by mapping some successful clusters across the world. Then was discussed the high-level cost structures of different element of chemicals value chain and the impact of these differences on investment planning / decision and overall competitiveness of such chemicals. Considering (chemicals, plastics) consumption curves, behavior of consumptions per capita and the intensity of chemicals consumptions in each consuming industry are other important aspects which in turn impact on optimal development of the downstream chemicals industries. Then was presented: some detailed facts and discussing some International best practices in world’s different regions. Europe, Asia, Middle East and some countries focusing with special attentions to the paths which two renowned organizations took –with different philosophies and historical backgrounds- for developing their chemicals assets and value chains.
Aman Amanpour's next "Masterclass in Petrochemicals" and "miniMBA in Petrochemicals will be in Dubai 8-12 November 2015 ans 29Nov-3 Dec in Doha/Qatar
The programs are separate modules, yet complementary and could be combined as the dates are back-to-back. Please click on ["Masterclass"] and ["Mini-MBA"] for more details on the programs’ content, target audiences, locations, further details and for registration. These programs are organized and supported by the Euro Petroleum Consultants - a reputable consulting, training and event management company ("EPC")
International Oil Companies (IOCs) and their positions on Climate debate ahead of Paris/Dec 2015
Aman Amanpour comments:
Recently BP’s CEO was asked about the company’s position on Climate debate and he gave this comment: “”At the end of May, BP signed a letter with other oil and gas companies calling for a global carbon price. Why did the business do that? This year is important as we have the United Nations Climate Change Conference in Paris in December, at which around 200 countries will gather to try to achieve a universal agreement on climate change. Early this year, I was at another conference with the heads of Total, Statoil and Shell and the audience was asking us about our position. We realized that we needed to speak with a common voice and language. We were later joined by Eni, BG and Repsol. The timing is right for us to have our voice heard. Gas is an important bridge to a lower-carbon future. Replacing coal consumption with gas for power generation by 1% has the same impact on emissions as increasing renewables by 11%. Today, our portfolio is 50/50 oil and gas. In a decade, we expect it will be around 60% gas.””
Here’s Aman Amanpour’s comment which he published in a social media group debating the issue: “”Yes the oil majors have long jumped on the band-wagon of sympathizing with climate problematic, presenting themselves as part of the solution rather than the problem. This is partially for image cleaning (or "green wash" as activists call it) and partially genuine. Genuine because, a.o., they can recourse to gas a (comparatively) cleaner fuel. Shell has been leading the way with their portfolio being (especially post BG take over) clearly 60+% gas. True is the statement that gas would be a fair low CO2 transition/bridge to fossil fuel-free future (note their language: “a lower-carbon future”!). But how long are we to reach this future? Here's where the divergence in views and vested interests starts to crystallize. Major oil/gas companies and their (in this respect) aligned institutions such as OPEC, OECD/IEA, EIA etc. forecast a still lion’s share dependency on fossil fuels even till 2050 which, to them, is manageable in terms of climate with the provisions they suggest (shift from oil/coal to gas, CCT, CO2 pricing/cap-and trade, some limited shares of renewables etc.) . And of course they base such forecasting on their "impressive" scenario-planning with huge data base and complex modeling capabilities. While this is and will remain part of reality of the energy world, it can and to some extend will –if not challenged- partially lead to a self-fulfilling-prophecy effect as, with such views becoming dominant, the breathe and depth of R&D and investment in renewable would be negatively impacted – the major drive to a fossil-fuel –free future. Needless to also remind that cheap oil and gas prices will play an impeding role and the ability of some major players to strive for such an environment. On the other side the developments in renewable, foremost solar followed by wind, are already breathtaking. The technological and commercializing pace is very much mimicking those of IT/communication/internet/consumer electronics space in the last two decades. This has, despite all those forecastings, influencing and opposing vested interests, the potential for further disruptive leap-frogging , so that by the middle of this century the share of renewable energy could be much higher – perhaps the lion’s share- in the energy mix. There are strong and emerging forces pushing in this direction too. Middle East in general and countries such as Iran in particular are among rare countries which are not only blessed with vast fossil fuel resources but mind-boggling potentials in renewable, foremost in solar, which must and will (sooner or later) take a leading role in their developments. “”
US Cracker investments are moving ahead despite changed (market, oil/gas) environments, yet with added risks and uncertainties. Aman Amanpour comments.
US Cracker investments are moving ahead despite changed (market, oil/gas) environments, yet with added risks and uncertainties .. Looking into different sources and deducing from dialogue with diverse stakeholders: there are 6 cracker (and derivatives) projects which are under construction with total ethylene capacity of ca. 8mtpa, one recently taken FID: with 0.5mtpa and one very likely to take FID this year with 1.5mtpa. This brings us to a firm additional US ethylene capacity from these 8 crackers to over 10mtpa by 2019/2020 (8mtpa by 2018). Besides, there are 5 more crackers in feasibility/permitting phase with an additional not-yet-FID capacity of ca. 6.5mtpa. From this list one has a targeted FID of Q3/2016 but for the rest there are no public FID dates. Hence out of the above total of 16.5mtpa ethane cracker capacity, I’d conclude that 10 mtpa will be built before/at the end of this decade. As these are under construction or FID’d with secured ethane supply, it’s safe to assume they will come on stream, regardless of the crude oil or gas/ethane price and supply/demand developments within this decade or beyond. Besides these uncertainties, there is another unquantifiable risk building all these assets, even those already under construction or FID’d – and that is : EPC / labor market and contracting strategies. Many of the companies building already the assets have gone for “cost reimbursable” model instead of lump-sum-turn-key (LSTK), outsourcing some key construction to Asia, “modularization”, etc. This is due to the very tight EPC market and shortage of skilled labor and technical staff which forces the EPC contractors to add a conservative (high) premium if they are to accept LSTK/fixed. Despite all the creative measures, it could still mean that the capex might go [significantly?] higher than what had been assessed on the eve of FID, rendering the projects less competitive on the life-cycle basis than assumed during the planning phase. Adding to the lower oil/gas ratio than perhaps initially premised and EPC and skilled-labor challenges, there are significant Asian capacity additions –foremost Chinese CTO/MTO, but also Naphtha crackers- as well as the “wild card” of Iranian incomplete and planned projects to be completed once sanctions are lifted. Add to this the uncertain state of world and regional economies, setting the upcoming demand scene, make all market participants bracing for another “interesting” ride on the petrochemicals’ never-ending cyclical journey.
Saudi Arabia has slashed its massive Renewable program but intensifies Nuclear plans. Why?
Aman Amanpour comments : Saudi Arabia has slashed its massive Renewable program but intensifies Nuclear plans. Why? Establishing of 'KA-Care' (King Abdullah City for Atomic and Renewable Energy) and announcing 54 GW of renewable (mainly solar) energy last couple of years came as a big bang not only for the country, but also for the whole solar industry world-wide. Rumored since last year but clear since the new King Salman started his reign, it became public that the solar plans -at least in that scale have stopped. And in the last few days (21 June 2015) we're hearing that KSA has sigend a sizeable nuclear deal with Russia's Rosatom. KA-Care's original plans for Nuclear power capacity was 18 GW. The Kingdom has also signed cooperation agreements with France and South Korea in this space ... But why slashing solar and proceeding with Nuclear in a country with world's highest irradiation ? It seems there has been internal debates and different preferences based on different interests. Ministry of Petroleum and Saudi Electricity Company (SEC) seem to be "aligned players" here. SEC has been advocating since a while its preference to increase the utilization of existing power plant capacities (at 63 GW by end of 2014), enhancing efficiencies and reducing transmission waste etc. before investing in any further generation capacities. The debate on internal transfer prices for crude oil (Still being burned for power in KSA!) and gas (less and less available) has sure played a role too. And of course the recent slump in oil prices hasn't been helpful for renewable / solar either. Yet would the decision to kill big and long-term solar program is a signal from the highest levels in the kingdom that the era of high oil prices is over, perhaps indefinitely, from their perspective? And if so, why then picking the Nuclear with its massive capex need and other obvious risks? There are already some guess works and speculations ... but the matter will sure be clearer in the coming weeks and months.
GCC Petrochemicals: an update on the growth pace, changed investment model and new trends in regions' different countries
Aman Amanpour contributed.
Iran Petrochemicals in a tension field between different forces: current status and upcoming prospect.
Aman Amanpour comments: Iran Petrochemicals in a tension field between different forces: current status and upcoming prospect. Summary: Iran Petrochemicals industry is and could further be country’s one of if not the most prominent industrial sector based on considerable potentials in terms of key resources as well as large domestic and established export markets. Also from the regional and even global perspective, Iran is one of the countries with still large untapped investment potential based on human (educated & skilled work force) and natural (feedstock, energy) resources as well as some unique infrastructure and integrative elements. Iran’s petrochemicals’ history and developments demonstrate both achievements and setbacks. However recently and currently, international sanctions, NPC’s pre-mature “privatization” (chaotic fire-selling of best assets to rich but unprofessional individuals/institutions, weakening of NPC’s central planning and execution), mismanagement / lack of clear strategy, feedstock policy with contrarian views and unresolved debates , investment funding issues , limited access to best practices (projects, operations, international relations and commercial management) and some technologies … have retarded and in some cases stopped the progress in the last 10 years. There’s now a heated debate, as well as some corrective actions in the country to address such issues on the eve a possible final nuclear deal (to be achieved by end of June/2015). One of the (among several other key) areas impacted by these challenges is the overall portfolio management both at producers and overall country level. A prime example: Methanol. Besides current considerable 7 mtpa Methanol capacity, there’s a mind boggling new investments list announced to come on stream in the next five years. The rationale being heard is a “full steam” utilization of Methanol-to-Olefin (MTO) and particularly Methanol-to-Propylene (MTP) to develop the underinvested propylene value chain, as well as the hope that China which is currently the front runner in CTO/MTO/MTP utilization would remain and further expand to be an attractive export market for excess Methanol, plus the fact that the technology side looks manageable based on some purchased licenses and domestic capabilities. There are many debates going on currently for and against such initiatives. Yet the simple question which seems unanswered is: whether there have been sufficient risk/value based market, value chains and economics studies which have been independently reviewed by competent experts supporting or otherwise such investment decisions? And this is just one example among many … Iran petrochemicals industry offers much higher potentials and deserves much better treatments and destiny as it is currently observed.
Leadership Insight by Aman Amanpour - Petrochemicals Industry:
Leadership Insight by Aman Amanpour - Petrochemicals Industry. Business and Strategic Excellence is vital – especially during Tough Times! Falling / uncertain oil and erratic regional gas prices, shale plays, North American capacity additions, emerging technologies, new feedstocks and on-purpose routes, Middle Eastern countries transforming their business models…‘Sleeping giants’ getting up, the threat of Asian and Chinese demand slump, European and North Asian economic woes, environmental and legislative challenges, historical and ever-lasting restructurings, mergers and acquisitions, substitutions of products and transformations of applications, clients industries and end consumers… Fore reading the whole text and Aman's upcoming Petrochemicals training courses click here.
Aman Amanpour delivered a keynote speech at Platts European Petrochem Conference 11&12 March 2015 in Dusseldorf/Germany.
Aman Amanpour delivered a keynote speech at Platts European Petrochem Conference 11&12 March 2015 in Dusseldorf/Germany . The title of his speach was: "Petrochem Business & Investment: Some key Impacts and Outlooks in a shifted Economic and Oil /Gas World". Some of the topics he discussed were: " 2015: state of macro-economy, oil/gas, NA (shale) feedstock …, Impacts on cash cost curve / competitiveness, New crackers investments: ethane vs. naphtha, plan vs. realities …, Europe: old predicaments and new hopes , Propylene and Methanol: the “on-purpose” journey …, Middle East: shifted strengths and challenges, Conclusions and outlook for Petrochemicals in 2015."
Aman Amanpour's next "Masterclass in Petrochemicals" and "miniMBA in Petrochemicals will be in Dubai 1-5 February 2015
Aman Amanpour's next "Masterclass in Petrochemicals" and "miniMBA in Petrochemicals will be in Dubai 2-6 Nov 2014
The programs are separate modules, yet complementary and could be combined as the dates are back-to-back. Please click on ("Masterclass") and ("MiniMBA") for more details on the programs’ content, target audiences, locations, further details and for registration. These programs are organized and supported by the Euro Petroleum Consultants - a reputable consulting, training and event management company ("EPC")
Aman Amanpour conducted "miniMBA in Petrochemicals in Moscow 8-10 Oct 2014
The course was organized in cooperation with Euro Petroleum Consultants (EPC) and visited by senior managers from the renowned oil/gas/ petrochemicals companies and the related service providing industries. Much ground was covered ... and the Delegates participated interactively during the 3 course days. At the end they provided very positive and encouraging accounts of their experience of this Premier Event in Moscow.
2 Sep 2014: China’s chemical demand is still growing at a double-digit ratepushing large domestic and international chemical corporations to strive to capture that growth with more investments in the country.The picture is much more positive than a year ago as the concern about the China’s (rate of) growth slow-down and its impact on our industry was looming. Quite evidently the CTO/MTO/CTMEG/PDH … have been among powerful vehicles from the supply side. However, the urbanization and growth of the middle class which spur the increase in per capita consumer goods and performance chemicals' demand- mainly propylene based- have been the main driving forces. On coal-to-chemicals projects: it is projected that ca. 30% of the Ethylene production of 80 mtpa by 2020 will come from these routes. However, some of the challenges here are the heavy capital cost, water shortages in the western region of China, high carbon emissions, and waste disposal. Yet all the key Western and Asian players are adapting themselves to the new realities, new technologies/value chains and government policies in terms of investing in higher value added products, end-use-focused activities, partnership and technology transfer and investment relocation from coastal areas to inlands. The impact of China on the global chemicals is and will be significant. China's output of Chemicals has been 1.3 trillion US-dollarin 2013 which is roughly one-third of the world's output! Yet China's impact needs to be put in the context of other two key regions' new dynamics: ME’s shifted investment model from light-to-heavy feedstocks and US/NA's shale plays and the reverse shift: from heavy to light. The changed global trade flows as the consequences of the new trends in China, Middle East and Noth Americas will impact all regions and shape up new forces.
Latest on Responsible Care:
"Chemical makers historically have had to contend with regulators where product safety was concerned but now have to develop new tools to address concerns across the supply chain and respond to the private sector deselecting products as retailers, brand owners, and consumers push to eliminate certain chemicals", reporsts 'IHS Chemical Week' and further: "At ACC’s annual Responsible Care conference in May, ACC CEO Cal Dooley said that product deselection efforts in the private sector, encouraged by NGOs and consumers, was one of industry’s biggest threats. NGOs and consumer groups are increasingly targeting retailers because they “realize that Walmart and Target are not in the business of convincing the public that their products are safe,” Dooley says. “They are in the business of meeting consumer needs.” If consumer fears can be exploited in the absence of a response that takes into account exposure risks, life cycle analysis and overall health, sustainability, and environmental risks, it could lead to product deselection, he says. Product safety codes, which commit to communicating with the public, reflect that retailers, standard-setting bodies, and brand owners can just as effectively and easily regulate chemicals in commerce as regulators can. Product safety is likely to expand to areas such as collaboration on assessment tools that incorporate more than just hazard assessments. Industry needs to extend that advocacy through the value chain to communicate the safety and effectiveness of its products and counteract deselection pressures." for full report visit: Link.
Aman Amanpour will chair the 2nd day of the 11th Global Petrochemicals Conference - 3 & 4 June 2014 in Berlin/Germany and also leading a session on “Joint Ventures”.
For more information on the event please visit: Link
Aman Amanpour delivered the Keynote Speach at the Platts European Petrochemicals Conference in Dusseldorf, Germany on 18.03.2014. The topic of his Speach being: “Regional & global petrochemicals - Mutual Dynamics in view of changed games in feedstocks, technologies and markets”, covering (main topics): World Economy: a snap-shot, Emerging Feedstocks and Technologies, Impacts on Markets and Competitiveness, Some Open Questions …, Conclusions on global Petrochemical trends, Current Middle Eastern Environment, Middle East Petrochem: Past, Current -> upcoming Phase in view of Changes, Conclusions on Middle East Petrochemicals trends.
Aman Amanpour was invited by Port of Tarragona, Spain to present and chair the expert session on the Petrochemical Days 20 & 21 June 2018. The themes of the events were : "Investigating Middle East, Welcoming Iran" . Experts on Middle East, Iran and Spain contributed from different perspectives on trade and investment, opportunities and challenges, as well as practical ways and experiences in handling them.
Aman's Presentation topics comprised: describing the diversity of the MENA region and its petrochemicals footprint, growth history, place in the world markets, initial and evolving models, upcoming projects, competitive scene and challenges. Focusing then on Iran, he highlighted some facts, historical developments, analyzing the recent, current and prospective competitiveness, challenges and opportunities (SWOT). He finished with some conclusive remarkes:
ME Petrochemicals still gravity centre for Base Chem & Intermediates, Advantaged in Feed, Scale, Infrastructure, and Successful M&As / JVs, yet Challenged by :
–Inter-regional competition: US, China, India…
–Initial model changing, new model not fully tested yet
–Oil price impact, export and domestic market realities, downstream development, demography, geopolitics…
–GCC: small domestic market, China’s self sufficiency
–Iran: geopolitics, structural issues, FDI & tech access
Iran: despite challenges: largest ME market, offering huge long-term investment and commercial opportunities
Iran’s Majles targets to quadruple the gaseous petrochemicals feedstocks. Apparently the drive behind this strange move has been balancing government’s budget under the load of sanctions, without understanding the breadth and depth of the issue and its repercussions on the industry and even the whole economy. It all started with “privatization” of the Iranian petrochemicals sector under President Ahmadinejad”. A “privatization” which wasn’t a true one, rather submitting valuable assets to in -large parts- well connected investors, yet alien to the industry and ,to a smaller part, floating their shares on the stock market, attracting small savers. A de-facto atomization of what used to be –comparing to other areas- a rather well managed public owned industry. Investments stalled, production went down the drain, other operations and markets in shamble. Of course all these were exacerbated by sanctions but chiefly having as root causes this atomization, excessive greed and bad management. As the sector was still fully under NPC (National Petrochemicals Company), a subsidiary of ministry of petroleum, it was receiving advantaged gaseous feedstock to the tune of $0.03/m3 ($0.86/mmbtu), in the same ball park as with the neighboring GCC producers. This had led to a significant asset, portfolio and market share growth in the early to late 2000’s, making the NPC only second to SABIC in the region and with good prospect of even a faster growth – in tandem with prospective development of (incl. South Pars) huge gas fields. Now that it is obvious what this so called “privatization” did to this key industry, plus the government need for cash, some of the pundits have found the cure in more than four-folding of the feedstock price from 3 to 13 cents per cubic meter - overnight!. This sure would be “a cure worse than the disease itself”! The share prices have already plummeted to the detriment of many small investors. The big guys though are mostly safe and have already cut off and channeled big slices elsewhere. The measure, if not revoked or moderated, would further hurt not only the existence and the growth of Iran’s (petro)chemicals industry, but will also represent a big set-back to other related industry and service sectors on the domestic front and a significant blow to country’s regional and international competitiveness, customer base and market share. We don’t forget this unjustified, un-thought-through and superficial move is happening in one of the world feedstock richest countries where still more than 700 mscf/day gas is being flared and while the economics of the US shale-based and China’s coal-based chemical projects already put a serious challenge to all of the ME producers anyways. A better solution would be to integrate back all of the major petrochemicals assets and projects into NPC while maintaining the advantaged feedstock pricing! This would become, again, left-pocket-right-pocket for the government in terms of boosting of its earnings and shall restore the advantaged position of Iran’s petrochemicals industry. Private sector can and should rather invest in the downstream of the chemicals value chain.
Iran: changes in upstream oil & gas contracts. Right time and step ? After settling of the new government in Iran followed by a possible nuclear deal and as prospects of initially easing, then lifting international sanctions become more real, forces within and without the country are scrambling to prepare for seizing the opening. Recently a work-group within Iran’s petroleum ministry led by Mr. Mehdi Hosseini, an industry veteran, has prepared and announced new sets of “fiscal regimes” or “petroleum contracts” for upstream deals to replace much loathed “buy-back” schemes. The key cornerstones of the new deal seem to be: expanding the tenure from few to 20-25 years, variable and risk-based ROI for the investors, joint ventures with 51% local content, pay back by lifting produced oil. Yet distancing from “production sharing agreements (PSA)” – dubbing the new scheme as “Iranian Petroleum Contracts (IPC)”. There has been a domestic seminar in February unveiling and offering the draft for further national debate before finalizing the scheme. Iran’s Oil Ministry plans to hold a conference in London in July to introduce the new contract terms to international companies. Overall this is the right time for Iran to revise the contracts as a key and necessary requisite for attracting fresh investments. However, the step will not be sufficient to reach even this objective, let alone a comprehensive and successful revamp of Iran’s hydrocarbon industry. For the latter there’s a prime need to develop a holistic new plan with national interests in mind, as well as clearly defined objectives for the sector including strategies for its subsectors (oil, gas, petrochemicals, infrastructures etc.). Within these strategies critical priorities and levers for their effective implementation are to be defined such as: development of the shared fields with neighbors, arresting the decline of the mature fields (IOR/EOR), new explorations, adopting of cutting edge technologies, integration across the up-mid-downstream value chain, further replacement of domestic oil consumption with gas, enhancing monetization of gas and its products (power, chemicals, liquid fuels, water) and export of their excess to regional and world markets etc. And all these of course necessitate experienced, skilled and dedicated people in charge – at all levels- which in turn puts professional and leadership training, talent management and succession planning at the top of the priority list. Only within such a holistic approach could developing of fit-for-purpose techno-commercial contracts make a real difference. Let’s hope that the responsible officials consider, respect in action and implement such a way forward. And even for short-term and crisis management, differentiating between undertakings to be designed and performed in sequence from those to be done in parallel. Putting the ‘chart in front of the horse' has never worked: in Iran, nor elsewhere.
Aman Amanpour has produced and conducts two public petrochemicals training courses: “Masterclass” and “Mini-MBA”, each twice in March/April and November 2014.
The programs are separate modules, yet complementary and could be combined as the dates are back-to-back. Please click on ("Masterclass") and ("Mini-MBA") for more details on the programs’ content, target audiences, locations and further details. These programs are organized and supported by the Euro Petroleum Consultants (EPC) - a reputable consulting, training and event management company (Link).
INEOS Gargemouth standoff: what does it tell us about the prospect of petrochemicals in Europe and beyond? Beyond the rare “industrial action” on the part of INEOS (= closing down the plant to pressure the workforce to accept cuts in pension schemes and other employment terms) and to muster maximum possible government support and grant money … here are some causes and effects coming quickly to my mind leading to and coming out of this crisis: Lack of European petrochemicals competitiveness: “the last straws which are breaking camel’s back” … Closing down European assets would make some (partly expected, partly not) room for market to absorb new capacities in US, ME and China … Definitely bad news for UK and Europe manufacturing sector, economic recovery with socio-political impacts … Could be replicated in other regions with similar cost pressures (e.g. Korea, Japan) … Case for importing ethane from US by INEOS: a precedent which could be replicated elsewhere ?(Italy is also contemplating) … In case of wide-spread export of Ethane from US (I’d doubt; see the last sentence!), the domestic price of US ethane would rise - with the corresponding impact on the petchem industry there and elsewhere … On 25/10/13: the news came that parties reached an agreement to restart the complex ... Yet part of the agreement is indeed to spend that additional shareholder’s money (GBP 300 million) and the government grant and loan (GBP 9 and 125 millions resp.) to build a terminal to import ethane from US ! But is this a short-term firefighting or a sustainable survival way for some European assets? From today’s vantage point I could hardly see the latter could be on the cards.
Aman Amanpour spoke at this "Launch" event of PlATTS Global Aromatics on 26 & 27th September in Seoul. Aman provided his perspectives on the state of the Aromatics value chain and its future prospects in the context of global forces and the tension fields in and around the prtrochemicals industry. Some focus areas were, a.o., the emergence of the new technologies and feedstocks (Shale, Coal, Bio-based, On-Purpose Routes, etc...) in conjunction with some heavily impacting regional developments such as in US, Middle East, Asia and South America.
Will Middle East Petrochemicals remain competitive? Can the world absorb all the petchem plants in the global pipeline ? These questions are since a while favorite topics in petrochemical conferences and events. Different parties offer different perspectives. My short answers to the questions are: Yes and Yes, But and But…! To dissect the “But” part we need to look at the global scene and the dynamics in different world regions. Shale in US is indeed a revolution and has revived the industry there after some decades of stagnation, rationalization and having exited the export markets. 5-10 new cracker complexes and a series of on-purpose propylene plants (PDH) have been announced in the US and if only part of them materialize till end of this decade, that would mean an addition of 10 mtpa of ethylene and 3-4 mtpa of propylene. Currently the cash cost of ethane / propane crackers in US is similar or lower that those mixed-feed crackers in Saudi Arabia ! This due to low current propane price in US due to lack of exportability (which may change as additional liquefaction capacities are built). Sure the US domestic demand growth won’t be able to absorb all this volume and a significant amount needs to be exported. But where to ? South America, Asia, Europe …? The former two regions (Brasil, Mexico, Venezuela, India, China, Indonesia …) and most dramatically among them China –currently based on coal monetization and in near future perhaps also shale?!- are scrambling to add their own capacities, targeting at ‘self sufficiency’. Europe’s demand is stagnating and it would take major chunks of US materials only at the cost of domestic capacity closures … Therefore the main competition for the export markets will be between Middle East and US in the years to come. But as the ME producers are cracking more propane, butane and naphtha and less ethane (by force: lack of ethane and by ‘choice’: going downstream for industrialization and job creation), their competitiveness, whilst still strong on the delivered cash cost to Asia basis, will overall be eroded compared with the past two decades and emerging US low cost producers. Whether the targeted “downstreaming and serving local markets” would really mean less volume available from ME for export is to me doubtful. More so, as GCC (Saudi, Qatar, UAE, Oman among them) are still adding capacity and once Iran and Iraq as the two remaining countries in the region with –still- ample and cheap ethane potential, overcome their political problems and embark on a new petchem building wave. All these “buildings” are based on the “hope” (i.e. lack of certainty!) that Aisa – mainly China- and to some extend other BRICS countries would grow healthily and absorb all these. They may do. And even if they do, the next bottom of the next cycle based on, inter alia, overcapacity could only be delayed by some years and not avoided. Please also see my interview with the World Refining Association on related topics a while ago: Click Here , which I’ll expand on in my contribution to their event in Frankfurt this coming 11-13 June 2013.
Iran Gas Pipeline to Pakistan moves ahead - despite massive pressure from US and its regional allies.
On 11th March 2013 the building of the Pakistani segment of the pipeline was inaugurated by both countries’ Presidents. The initiative started ca. 20 years ago and was
initially supposed to take Iranian Gas to both Pakistan and India. In 2008 India withdrew from the project, followed by Iran and Pakistan deciding to proceed and,
inter alia, agreeing on the price formula basis (then: x% Japanese Crude +y $ per mmbtu). Iran began and finished the bigger Iranian segment of the pipeline
(Assaluyeh-Iranshahr, 990 Km) and is about to finish the shorter segment between Iranshahr and the boarder (300 Km), already having spent ca. USD 3 bn. This Iranian
segment makes the 7th Trans-Iranian gas pipeline (IGAT-7) and has a maximum transport capacity for 100 mscmd. The gas supply to Pakistan would start in Dec 2014 with
initially 1.5 million standard cubic meter per day (mscmd) and will then increase to 20.5 mscmd (750 mscfd). The segment in Pakistan (780 Km, 40 inch) would cost
another USD 2bn. Iran offered to finance USD 500 mln of it while Pakistan targets at financing the rest by domestic funding. Moreover, there has been an agreement for
Iran to build a 400 kbpd refinery in Pakistani port of Gwader overlooking the strategic and vital Strait of Hormuz. All these have happened in the current extremely
tense and polarized geopolitical environment in the region with US and its regional allies –foremost Saudi Arabia- exerting covert and overt pressure on Pakistan to
stall the initiatives. The fact that that Pakistan proceeded with the projects despite of the aforementioned pressure is significant : a major breakthrough and
precedent in regional energy scene with Iran as a major potential supplier , as well as in terms of wider geopolitical and alliance impacts.
Dow withdraws from NAM over dispute on gas export policy. “”Dow Chemical has withdrawn from National Association of Manufacturers (NAM), citing a position on natural gas exports taken by the group last week. Dow’s decision to leave the top US manufacturing trade association underscores the company’s frustration with the policy position of key trade groups such as NAM and ACC on gas exports. Dow says it believes that ACC’s and NAM’s decisions on gas exports “are being dominated by the oil and gas industry.” Dow said last week it was reviewing membership in NAM and ACC because of their position on gas exports. “” AND: “”Dow joined with other chemical makers and industrial users of natural gas earlier this month to form America Energy’s Advantage (AEA), a group that advocates against unfettered exports of natural gas. AEA says it will “encourage the federal government to move cautiously on permitting natural gas exports in order to measure impact on price, security, and jobs.” Other members of AEA include Celanese and Eastman Chemical, as well as aluminum producer Alcoa and steel maker Nucor.”” (both quotes from Chemical Week, 21 January 2013). This indeed is a strong reaction and reflects exemplary how different interests within a nation could collide – even when there seems to be a sudden “century’s golden opportunity (shale gas) emerging for all”! The conflict reminds the predicament of some current LNG exporters who themselves are in dire need for gas and “gas products” and in bad need for gas import from far-away (building LNG regasification terminals) or via pipeline from the neighbors while exporting LNG ship after ship, day-in-day-out, to “oversea’s long term clients”. Oman and UAE being two cases in point. In case of US manufacturing-vs.-oil/gas-industries one has both the freedom to protest and (re)organize), as well as the learning from the above mentioned failed cases to resist history repeating itself. Moreover and in the fierce battle with cheap-feedstock-regions such as Middle East, the US Chemicals and other manufacturers have a double incentive not to let the opportunity go easily. It is though interesting to see how the resultant of the forces will lead the journey and whether a compromise will be reached. Equally interesting would be the US Administration’s position vis-à-vis the lobbies of these two powerful industries.
The World Refinery Associaiton conducted recently an interview with Aman Amanpour in run up to the 10th Global Petrochemicals Conderence in Frankfurt. The Conference Director - Bryony Senczyszyn- writes: ""I recently conducted an interview with Aman Amanpour, former President of Shell Chemicals Middle East, about the current challenges facing the global petrochemical industry and how we can stimulate growth in the industry. He believes that "Europe is still spearheading some vital R&D and innovations, especially in performance/specialty chemicals and advance materials" and the future lies in integrating producing and consuming hubs and clusters.
Questions answered included:
• What do you think are the main challenges facing the global petrochemical industry?
• How can petrochemical producers increase efficiency across the value chain?
• What do European companies need to do to stay competitive? ""
Saudi Gas price: speculations and debates resume again on a possible increase in 2013.
After similar heated debates and speculations in the last few years and especially during 2011 : “Riyadh froze the gas prize for 2012, but scrapped the fixed-term contracts that had been in place. This means the Oil Ministry can change the price as needed, which allows it far more flexibility than in the past. MEED reported in February 2012 that the gas price would be frozen at the $0.75 level for the rest of the year, but no information has yet been forthcoming about 2013 tariffs” (MEED, 17th Dec 2012). But fact is that the opinions in the country are not aligned on the issue. There have been much internal studies and surveys to ascertain the overall impact of the gas/feedstock price increase on the overall Saudi economy and society. The results were clearly in favor of maintaining a significant feedstock advantage over other regions, if not necessarily keeping the current famous $ 0.75 / mmbtu, for the petrochemicals industry from the overall economic as well as job creation angles. However, there are additional factors to be considered for the policy makers to make the final call on the gas price. These are: alternative uses of hydrocarbons (e.g. for power generation), alternative sources of power (e.g., nuclear, renewable, coal), economics of additional gas exploration/production (e.g. in empty quarter, off-shore red-sea, northern shale resources), industrial development and the need for employment creation (e.g., downstream products, domestic customer industries), current and future development and substantial increase of global gas supply (e.g., shale and tight gas in US, India, and China; increased exports of gas from Russia, Qatar,Central Asia, etc.), legal framework, including WTO guidelines and regulations. In a recent interview with Reuters at the annual GPCA late November/2012 in Dubai I offered some perspectives on the subject which was used in a cryptive quotation in an article Reuters have composed based on various inputs/interviews – as: “” The decision on the Saudi gas price is now even more important in light of the U.S. shale gas revolution," said Aman Amanpour, an independent petrochemicals and energy consultant.”” Here’s the link to the full article: Reuters Article on Saudi Gas Price. And here's the full text of my comments in that interview with Reuters: “”The success story of GCC countries, started with Saudi, has been due to advantaged ethane and methane (natural gas) feedstocks to attract foreign partnership to develop petrochemicals in the last 30 years. Since a few years they are at a juncture, where they don't have additional advantaged associated gas as petchem feedstock on one side. And on the other side there's been a national policy to enter into more value added chemicals, not to export chemicals at an intermediate level, rather to process them further to add value and to capture the value in the kingdom of Saudi Arabia, enhancing national economy, industrialization and job creations. These two developments have one common consequence, which is : if you lack ethane plus want to go to the more value added petchems that need to be produced, you need to use heavier feedstock than ethane to be able to produce propylene, butadiene / butenes, and aromatics and then process them further into more added value products. But on the other side by the nature of the new feedstock that I just mentioned their prices cannot be advantaged compared to ethane, these are products that have an international market value, so at most what the countries can do is to offer a decent discount which is what they are doing now. In terms of traditional feedstock for this region which is ethane, this is where the question must be focused on. Most of GCC countries including Saudi Arabia don't have much more economic ethane to offer anyway. The lion's share of petchems that are being currently produced in this region are from ethane especially in Saudi Arabia. So if they change the price, if they increase the price now for the old / current producers, for the old joint ventures, they would of course hit the profitability and the competitiveness of these players, most of them having foreign partners. And of course this will make the foreign partners unhappy because they will have less profits. This decision is now even more important in light of the US shale gas revolution, while the price of ethane in the US is still higher than the price now being offered in Saudi for the past 20-30 years. So there's an additional element of competition, they (GCC) could increase the gas price to some extent but whatever that increase may be, it would erode the profitability and competitive edge of the GCC players when compared. Going forward the generation of the newly planned petchem production in GCC from now till around 2020 will be less competitive than the old projects and that’s a fact. “”
Syrian Conflict: Is this a (proxy) Energy/Gas war ?
I, like many other humans across the world, have been following, not with interest rather with great concern, the Syrian conflicts since it erupted in 2011 and then conflagrated later and till today. There have been many views on who’s right and who’s wrong. Whether Assad represents, allegedly, “the worst of the Dictators in the same league with Saddam and Gaddafi” and whether the Free Syrian Army, again allegedly, resembles the true “Democrats” and “Republicans” a la Obama and Busch having been, to exaggerate a little for crystallizing the point, the key questions … Yet recently I came across some information sources and analysis from two diametrically opposing camps which suggest that, whatever the other higher motives, ENERGY AND ESPECIALLY GAS play a cardinal role in initiating and then perpetuating what already has become a bloody civil war with threats to the greater region and the whole world. Here are the two links from the two representative sources from the two camps at two different times but with similar, if not identical, conclusions. One from an ex-CIA / Western source: Natrular Gas Asia. And the other one from an opposite source: Global Research. To me both are quite reach in information content and with sound analysis. Therefore I refrain from further comments and leave it to reader’s judgment to make his/her own conclusions on the above posed and many other related questions.
Iran announced privatization of remaining Petrochemicals assets. According to Petroleum ministry’s website: Shana 15 petrochemical assets have been allocated since December 2011 to “Persian Gulf Petrochemical Holding” and will be floated in ca. 2 months (i.e. till end of Sep 2012) to the stock market. This means further privatization of the remaining shares of the government owed NPC in these companies which are (NPC shared %): PCC (45), NPCI (100), Rahavaran Fonoon (100), Pasargad (100), Mahshahr Petchem Services (100), Petchem Ind. Devlp Mgmt (100), Noori Petchem (76.55), BIPCC (70), Bu-Ali-Sina (70), Pars (60), Tondgooyan (75), Khoozestan (70), Fajr (70), Mobin (100), Arvand (80). With this, NPC will not have any stake in these assets any more. This step is in continuation of previous “privatizations” which were actually more pushing the assets from NPC/Ministry to the quasi-government entities and public pension funds. Whatever the hopes and intentions behind these moves, I believe the Iranian petrochemicals industry at its current state of development needs the care and support of the central government if it’s to further thrive and (re)claim its deserved national and international leading roles. The examples in the region and beyond (e.g. in Saudi, Qatar, India, Malaysia and China) are the best prove of how a mixed model of government lead and master-planning plus supporting of gradual and natural development of (real!) private sector could guarantee success. Iran would be well served to take note of such best practices, considering bespoke course correction and adaptations.
Second quarter 2012 results and related comments herald now even weaker prospects than assumed for chemicals. As expected or rather not?
Downturn in Europe, slowdown in China and other pandemic socio-political problems are weighing heavily on the world (political) economy, hence on the manufacturing and
chemical industries. Although such cautious prospects are being given a validity just for the next 1-2 years, yet having been an observer of the recent diverse
turmoils which have repeatedly caught the whole world by surprise, one could never be sure, this would be a short-lived blip. The era when many claimed capabilities
of macro and micro-economic forecast -with near mathematical precision- is over. The lesson being: we should always talk about and act upon “political economy” -as
Adam Smith and earlier founders of this modern science always called it - there’s no such things as “pure economy” as an exact science ; while governed by hard laws,
it is at the end a social science, hence subject to complex social and human interactions and behaviors for which no erliable mathematical model has been / could be
developed (the meltdown in 2008 being a case in point) . To drive this home, let me continue for the rest by quoting to Chemical Week’s recent comments on the 2nd
quarter’s performance versus those delivered only few months ago:
“""Global economies have been not only volatile, but conditions clearly deteriorated as the quarter progressed,” says Dow Chemical chairman and CEO Andrew Liveris.
“This led to weakening demand and extremely cautious buying sentiment which in turn impacted pricing and volume.” The change in tone at Dow is notable because it had
maintained one of the more bullish outlooks earlier this year, predicting that the global economies would accelerate in second-half 2012. Dow now warns that industry
could be facing difficult conditions for the next two years. “The new reality is that this world is not in a normal growth mode,” Liveris says. “And it does not appear that we will see [normal growth] for at least 12 to 24 months. Producers have cut GDP forecasts to account for the new reality. For 2012, BASF says it now expects global GDP to expand only by 2.3%, down 0.4 percentage points from its assumption earlier this year. For industrial production, BASF sees growth at 3.4%, and chemical production at 3.5%, a reduction of 0.7 and 0.6 percentage points, respectively. More ominously, BASF says “the Chinese growth engine has started to stall.” China has been a key factor in driving quick recovery and healthy profits out of the global recession. “We at best expect second half to be flat compared to first half,” says BASF executive chairman Kurt Bock. DuPont’s GDP forecasts have been reduced “slightly but not considerably” in recent months, says Nicholas Fanandakis, DuPont executive v.p. and CFO. The company’s forecast calls for global GDP growth of 2.4% in 2012 with the U.S. growing at 2.1% and China in the high-7% range, he says. Global economies are not improving as the rates hoped for earlier this year and companies are bracing for sluggish conditions in second-half 2012."""
GCC Petrochemicals Production Capacity Grows 13.5%. June 20/2012, Source Chemical Week.
Petrochemical production capacity in the Gulf Cooperation Council (GCC) states grew by 13.5% last year, the Gulf Petrochemicals and Chemicals Association (GPCA) says.
Production rose to close to 116 million m.t./year in 2011, compared with 102 million m.t./year in 2010. The increase follows major capacity additions across the
region, GPCA says.
Saudi Arabia accounted for more than half the $100 billion sales generated by the GCC petchems sector with Sabic posting revenues of $50.6 billion and net profit of
$7.8 billion. 2011 marked a year of consolidation in the region, following a slump in demand caused by the 2008 economic downturn. “Continued investment and
significant new agreements demonstrate the leading role the GCC petrochemicals sector is playing worldwide,” says Abdulwahab Al Sadoun, secretary general of GPCA.
“We are optimistic about 2012, despite the gloomy economic forecast in European and overseas markets, due to the continued focus on technology, innovation and long-
term partnerships,” Al Sadoun says. He singled out Sadara, a $20 billion petchems project as the most significant investment announced last year. Sadara, a joint
venture between Saudi Aramco and Dow Chemical will develop 26 manufacturing units at Jubail, Saudi Arabia, many of which will be the first such production facilities
in the region.
Tighter sanctions on Iran, state of Chinese economy and impact on both countries’ petrochemicals dynamics.
Iran is only one, though a major, of the China’s petrochemicals suppliers. Yet the concurrent sanctions -especially by EU on chemicals import- on Iran and economic slow
down in china could lead to conclusions which could be misleading in terms of the trade and other relations between the two countries, leading to an illusions as
if China would have deliberately shifted away from Iranian import. Since late 2011 there are significant reductions in China’s import of base chemicals such as
methanol, ethylene glycol, monomers and polymers from all of their suppliers. This has to do with the deliberate economic cooling down of Chinese government (including
drying of cheap credit to avoid housing bubble) since middle of last year and its impact on the construction sector which is the main consumer of these materials. This
overall reduction has also and proportionally impacted the Iranian export to China. On the other side and due to real pressure from EU which formally has targeted to stop petchem import from Iran from 1 May/2012 plus the payment / banking problems, there has been a net shift away from Europe to –mainly- China, India and Indonesia on the Iranian part and other suppliers such as from Saudi Arabia to fill into the Europe gap (an unspoken and probably unwanted swap!). Admittedly, even in Asia there are pressures on Iran mainly regarding transacting LCs, payments and shipping. Yet Iranian and their Asian customers have been -so far- “creative” to overcome these obstacles. Such developments plus another “oscillation around set point” of a GDP target of 7.5% by Chinese government could reverse the cooling down policies of just less than a year ago, boosting the building and housing sector again. The net effect, one could expect, would be again: a higher share of Iranian materials in the coming months in the Chinese petrochemicals and polymer import statistics.
Aman Amanpour spoke and chaired two sessions at the 9th Global Petrochemical Conference in Cologne-Germany, 14-16 May 2012.
The event was well received with the focus on themes such as value creation through petchem-refinery integration, industry's strategy overview, current and emerging trends, as well as regional coverage. Aman delivered a presentation on "New Phase of Middle East Petrochemical Development: in a Tension Field of Global and Regional Game Changing Forces". He also chaired two sessions on Operational Excellence and Optimizing Feedstocks and Catalysts where several other speakers offered their perspectives, followed by lively debates. Here's the link to the Event's Website
Iran is to set up (new) Petrochemical Hubs, said NPC’s MD Mr. Abdolhossein Bayat on 18th April in an interview during Iran’ Oil Show. Chahbahar, Sarakhs, Qeshm, Lavan and Kish are to be the new 5 Petrochemicals hubs, in addition to the existing Assaluyeh and Bandar Imam Khomeini hubs (zones). Here’s the link to the full interview: I read this interview with “one eye smiling, another crying”. SMILING eye: indeed Iranian petrochemicals industry can boast significant achievements, especially after end of the imposed war with Iraq in 1988 until 2004. During this period and thank to county’s hard working and qualified experts and managers many complex projects were defined, planned, executed and brought, albeit with some delays and inefficiencies but overall successfully, on stream. Some international partners could also be attracted to co-invest based on some key attractive offers such as those of ample and low cost feedstock, supply of educated workforce and availability of domestic engineering and construction capabilities. Many other projects were planned for the upcoming years during the very same period as well. CRYING eye: since 2004 and due to ensuing domestic and international political troubles, rapid and frequent turn-over in the Ministry of Petroleum and NPC leadership, including in the ranks of middle to senior managers plus a myriad of other issues and inefficiencies … those successful developments were stalled abruptly and altogether. Now reading that instead of taking a realistic stock and targeting at finishing the existing long-delayed projects in the two a/m existing hubs, there are talks about ‘5 new hubs’ and difficult-to-deliver promises, with an uncritical tone and as if current projects have been successfully delivered, existing capacities fully utilized, rest of the related businesses well done and there’s just time to leapfrog forward ... Under different circumstance Iranian Petrochemical sector could have already been leading the regional pack and one of the top 5-10 in the world – something which Saudi Arabia and SABIC, starting later and even lacking some inherent advantages their Iranian peers have, proved achievable.
The debate of “Peak Oil” still on further heating : geopolitics versus geology and technology. Are the supply of the finite fossil fuels, or at least their cheap supply, coming to an end soon (“Peak Oil”)? By definition? Or by prevailing (and changing) circumstances? Peak-supply or peak-demand? which one coming first ? OPEC, OECD, emerging markets, break-even cost, breakthrough technologies, climate, geopolitics vs. geology … all the same factors are used by proponents and opponents, yet coming to different, sometimes diametrically opposing conclusions. I found this article in EER: http://www.europeanenergyreview.eu/site/pagina.php?id_mailing=269&toegang=06138bc5af6023646ede0e1f7c1eac75&id=3641 and the subsequent debates around it a good example reflecting different expert views. I for myself think , as demonstrated by breakthrough commercialization of renewable energies’ and bio-based as well as Gas-and-Coal-to-Liquid technologies – to just mention some key words- that the mankind can and must replace the fossil (hydro)carbons as means of fuel supply, both as primary energy source, as well as in transportation. The remaining (hydro)carbons in the geological formations could still be partially used to address other non-fuel needs of the modern society: chiefly to produce (petro)chemicals and novel materials. The latter, in turn, will enhance further replacement of fossil fuels by, e.g., availing more effective, lighter, hi-tech (e.g. in solar, renewable) and economical components. Making or breaking (threshold factors) are more policy questions and a function of “vested interests” than other common (but still important) factors in this debate.
Iraq central government withdrew on 31 January its opposition to a deal between ExxonMobil and the Kurdistan Regional Government (KRG). A move which demonstrates the importance of and need for further developing the South Iraq oil resources. ExxonMobil leads the West Qurna-I consortium and is heavily involved in and leading major infrastructure projects, not least the massive water injection initiative into the depleting oil fields from which government but also all other parties (incl. IOC) will benefit. The government's initial threat to displace ExxonMobil from the South projects in case of latter's going ahead with the massive E&P deal with KRG first narrowed down to "banning from future deals" and then completely removed. They simply couldn't afford to maintain any thereat, let alone any actual punishment due to the aforementioned vast dependency in the South. This move will though set a precedent for other oil companies eager to work with KRG and not having done so far to avoid blacklisting by Baghdad. This move also will strengthen to some extend the US influence post their forces withdrawal in the oil sector and in the domestic politics by proxy. Iran , with its strong position with Shia-led regime in Baghdad, may not have liked this move and would sure follow with interest the ensuing developments. Yet the other side of the coin for Iran would be to -indirectly and via proxy- access the top-notch Western and US technologies and operational excellence for their own purposes. This of course as long as their current close relations with and influence on Baghdad (and to some extend Erbil) can hold.
Published in European Energy Review: Following the Petrodollar in the Persian Gulf Crisis. The Myth of isolated Iran. Aman Amanpour comments. This is an excellent narrative, pointing to some key motives of the US/Western new campaign in the Persian Gulf - despite some inaccuracies (some details of energy deals involving Iran and other countries and misjudgements ( underestimating the impact of sanctions on Iran's economy and people, as well as provocative foreign policies of Iranian regime besides their repressive and disastrous domestic track records).
I would add another (though interrelated with those mentioned) motive: fear of Iran's increasing regional influence and gap-filling after US withdrawal from Iraq. This one in its own right makes the nuclear issue secondary. Even a non-nuclear but strong Iran is feared by US/Israel in that sense. Alas, again, Iranian regime's words (more than) and deeds) fuel further this fear, hence strengthening the drive for sanctions and war.
That the sanctions are the second best options to a apocalyptic US/Israeli war against Iran - in the eyes of "Europeans"- is indeed naive at best and sinister at worst: they could (and, alas, would) be sequential as we've seen in Iraq and other cases, with disastrous consequences for the whole world. I
I very much welcome that EER has -to me belatedly- started to bring up this issue and I hope this crucial and urgent topic will be debated / enriched constructively in the direction of raising educated voices against repression and war, recoursing to more civilized ways of conflict resolution in the second decade of the third millenia ... Not least for the cause of uninterrupted flow of energy and trade - hence civilized and normal relations- between the nations.
GPCA Forum 2011: “Moving Downstream – Creating Added Value and Sustainable Growth’. Could the key requisites to achieving this motto be thoroughly addressed? The 6th annual meeting was held, bigger and richer than ever, between 13th -15th December in Atlantis Hotel-Dubai where 1600 regional and global players met to speak, talk, listen, engage, exchange and not least understand … the what, how, why … of the current and upcoming dynamics of the industry – globally but also in the GCC / Middle East and address the main motto of the gathering: “ ‘Moving Downstream – Creating Added Value and Sustainable Growth’.” It was not the first time that “Moving Downstream …” was dominating GPCA and other ME-related Petchem-Fora. I listened to plenty of high quality and to-the-point contributions and engaged in many interesting and relevant discussions, addressing conference’s main theme. Yet I felt the TWO MAJOR interlinked PRE-REQUISITES for its successful and sustainable implementation did not find the deserved attention, articulation and solution proposals to address them: GCC’s SOCIAL FABRIC / DEMOGRAPHICS and region’s COMPETITIVENESS in labor intensive downstream processing of performance and specialty chemicals vis-à-vis Asian giants such as China and India ! This despite (and perhaps because of!) powerful emphasis and recent significant achievements in the area of “degree level” (university) education and growing affluent population of youngsters, many of them un(or-ungainfuly)-employed. The problem seems straight-forward, not though the solution! Big emphasis on “degree level” comes from affluence, hence relative disdain for vocational training among GCC youngsters / their families who have ambitious managerial entry level targets and corresponding high salary expectation which in turn creates deficit in technicians and skilled workers and/or renders the cost-base uncompetitive. Guest workers could help less and less as this runs against the mandatory –in some places enforced quotas- governments’ “nationalization” policies of workforce. That 50% of local population (women) are not available for certain jobs due to cultural and religious consideration adds further to the challenge. And finally GCC’s rather small domestic market size for finished goods which, if locally produced, must be able to compete with Asians - unless putting trade barriers which the region is currently complaining about as conducted in India, China, Europe against its petchem exports !
Current state of global economy and post Q3 projected outlooks for chemical industry. Aman Amanpour :
After still healthy Q3/11 results, several Industry leaders (Dow, BASF, LyondelBasel, just to name a few) have sent bullish messages. With different nuances, yet the common elements have been: “just a little correcting down growth forecast for this and next year, no/less risk of a double dip, two speed economies in developed and developing economies – the latter engine still pulling strongly …” But how can the industry’s perspective, be so delinked from virtual (financial) and real economies, Euro crisis, US unemployment and public resentments (Occupy movement), high oil prices, Chinese slow-down, Middle Eastern wars and revolutions, new waves of trade barriers and protectionism … ?? The bosses give here no answer. I for myself believe, although some elements may have a familiar nature, leading us post events back to a new more or less familiar equilibrium, yet this time round we shall encounter some new and irreversible trends and outcomes. Thereafter and at best entering into a “new normal”. So at this stage I’d only say: let’s hope for the best and get prepared for the worst !
Aman Amanpour spoke at Middle East Chemical Week in Ab-Dhabi (16th - 19th Oct/2011). The title of his speech was" "Development and Implementation of Industrial Culsters Programs in the GCC: Key Success Factors, Enablers and Challenges". The presentation was focus on the envisaged governments promoted "cluster programs" to boost the develoment of the downsteam of Petrochmicals industries to enhance the national economies, creating jobs and boosting further industrialization. The speech was followed by a lively discussion about the hitherto successes, for example in Saudi Arabia, whether there's a limit to further progress, region's domestic demand versus export, where are the stumbling blocks and show-stoppers, potential of regional integration and synergies as well as region's overall competitiveness regarging more sophisticated chemicals / polymers and fabricated materials in the fast changing and reshaping (petro)chemicals world.
Aman Amanpour spoke at and chaired the second day of MENA 9th Olefin and Polyolefin Conference in Dubai - 10 and 11th Oct/2011. The title of his speach was "Global Petrochemicals Markets Outlook". The speech highlighted the impact of some important emerging trends on the prospects of petrochemicals value chains, location and perspectives of future investments and the supply / demand picture. It was then followed by interesting debates about the health of the current petrochemicals markets and the propspects as we're going forward, especially in view of the current and emerging economic, technological, political and demographic trends and riks in the USA, Europe, Middle East, BRICS countries and - last not least- China.
BASF takes the top spot in CW's annual ranking of chemical makers by revenue for the fifth year in a row, with revenues of $63.2 billion (p. 21). BASF has opened a $10-billion lead over Dow Chemical and ExxonMobil, which have held the second and third. What is though more than eye catching is the strong, speedy and steady march of the Middle Eastern and Chinese players' close chase for the highest ranks. Even more interestingly is their close partnership and synergies which will no doubt be one of the major factors shaping up the future of this industry.
IMF applauded after its delegation’s visit to Iran early June: “ … The subsidy reform program should considerably improve Iran’s medium term outlook by rationalizing domestic energy use, increasing export revenues, strengthening overall competitiveness, and bringing economic activity in Iran closer to its full potential”. I think IMF have been too quick and too shallow in their judgments. Indeed there have been an impact on fuel and energy consumption, reducing the demand and relieving the government from burden of importing gasoline in the wake of international sanctions. This plus some related positive impact on the environment, are perhaps the only targets achieved. Inflation though has risen from 12.5% just before the subsidy reforms in November 2010, to 25% in June/July 2011. The promised cash subsidies to producing industries to keep them whole, avoiding rises in their product prices, is apparently now happening or happening with hiccups. A significant portion of population are refusing to pay their utility bills which have been risen many folds. This, together with $ 45 government payment to each person (75 million Iranians receive it out of 77 millions), decline in oil production due to insufficient investment / maintenance exacerbated by sanctions, plus recent decline in oil prices will certainly put pressure on government means and people sentiments. A more targeted distribution of funds to more needy people could have alleviated the issue, yet it seems to be too late to switch to such as system as once an entitlement is given, it’s difficult to withdraw. As repeatedly confirmed in different parts of the world, IMF’s “universal recipes” are more ideological and based on promoting the model of, “free market economy”, rather than targeting at addressing the real problems of the ailing economies and improvements of people’s living conditions.
The Renewable Future. Nairobi - Renewable energy triggers sharply polarized views. For some, it is a costly white elephant; for others, it is humanity’s savior, promising to emancipate us (and our environment) from the “folly” of fossil fuels. So a hardheaded, credible, and, above all, impartial analysis, which would provide a much-needed dose of pragmatism and realism to the debate, is long overdue. The new report by the United Nations Intergovernmental Panel on Climate Change (IPCC), involving more than 120 scientists, economists, and technology specialists, provides that long-overdue assessment. It adopts a global perspective and reconciles developed and developing countries’ interests, while weighing the broader economic, environmental, and social issues at stake.
The summary, signed by representatives of the more than 190 countries meeting this week in the United Arab Emirates, concludes that renewable energy is an increasingly practical and highly promising option. Costs are falling – and are likely to fall even further as innovation accelerates and global energy demand continues to rise. The researchers have painstakingly sifted more than 160 scenarios, including in-depth examinations of four. The most optimistic of these predicts that renewables could account for close to 80% of total energy supply by mid-century, thereby cutting greenhouse-gas emissions by around one-third. Of course, only time will tell whether or not this figure will be reached. Some of the six renewable-energy technologies evaluated, such as those that generate electricity from the oceans, will require more research, development, and incubation before they reach commercial maturity. But others, such as wind, solar, and geothermal, are in some circumstances already cost competitive – or nearly cost competitive – with fossil fuels. The IPCC report also underscores what some development experts and economists have been saying for years: energy choices should take into account wider benefits. Renewables cut air pollution, which is costing the global economy billions of dollars a year in health-care costs alone. Photovoltaics can be rapidly deployed in rural areas without the need for installing an expensive grid system – Bangladesh is a pioneering case in point. And we are only just coming to grips with the cooling costs of thermal power plants in terms of finite water resources – let alone the future price of unchecked climate change. The ball is now firmly in politicians’ court. The IPCC assessment points out that renewables are already growing. In 2009, installed capacity of wind and PVs increased by more than 30% and 50%, respectively. But the really big numbers are unlikely to be reached without the kinds of supportive public policies that have catalyzed the expansion of renewables in countries such as China and Germany. Smart and forward-looking national policies are imperative. Kenya’s new feed-in tariff has triggered a rapid expansion of geothermal capacity, and, at 300MW, the largest wind-farm project in sub-Saharan Africa.
But diverse national policies can achieve only so much. International policies, including the lending decisions of the World Bank and regional development banks, must evolve, as do the strategies of the UN and bilateral donors.
The importance of moving forward to a new global climate agreement in Durban, South Africa, this year cannot be underestimated. A comprehensive agreement would bring certainty to the carbon markets and strengthen the various mechanisms that are already encouraging renewables in developing economies and pump-priming private-sector investments. The Rio+20 meeting in Brazil next year is another opportunity to spark the transition to a global green economy. Technical challenges remain: seamlessly managing an array of very different energy sources will require investment in better national and regional grids. Yet the opportunities – to keep the global temperature rise this century to under two degrees Celsius, and to generate decent employment in clean-tech industries for millions of people – far outweigh the challenges. Clean and renewable energy will be an indispensable component of the fight against poverty worldwide. The IPCC estimates that the costs of triggering a renewable revolution could range from $3 trillion to more than $12 trillion between now and 2030. That sounds pricey – and it is. But so are fossil-fuel subsidies, which, with barely a murmur of protest, are currently running at more than $600 billion a year.
The IPCC report has provided a solid, scientific foundation for a low-carbon, resource-efficient future. Governments now have a clearer perspective on how to empower the lives and livelihoods of the world’s seven billion people (9-10 billion by 2050), while keeping humanity’s footprint, including climate change, within the planet’s boundaries of environmental sustainability. For more information on full and summary report visit the IPCC's special website for this report
Dow Chemical’s recent announcement of a world-scale cracker, together with previous announcements –brown and Greenfield expansions- by several majors, would take the US capacity additions to more than 4.5 million tons / year by 2017. These are all on the back of the euphoria of cheaper ethane feedstock from “shale gas revolution”. A welcome rebound, one could say, in light of recent US producers’ giving up on base chemicals in general and ethylene/derivatives in particular due to latter’s centre of gravity having been shifted to Middle East and Asia? Yes and no. Sure the US consumption growth of 2% on the existing large base would mean another 3.5 mtpa within the same time frame (till 2017). Yet it would be quite a gamble if the US producers would count on exporting, of whatever excess to domestic growth, especially to Asia, targeting at displacing ME producers. First: the fate, sustainability and equilibrium cost base of shale-based ethane are yet to be firmer than what today’s status is. Second: the Middle-Eastern producers are not that easy to displace due to their –even post shale- still significant advantage, as well as other integrated deals with Chinese/Asians. And third: as China is growing, shifting to alternative energy sources and resorting to “clean coal” including for chemicals value chain, less and less of an export market it will be anyway – for anyone: US or ME producers equally. This fact, together with other macro-economic factors, is among the reasons why the ME producers are already shifting their priority and upcoming investments towards performance products and specialties destined for domestic/regional consumptions. Unless a super-healthy growth at US home, together with South American sustained market growth could offer a home to substantial (base) petrochemicals produced in North America, such euphoria could lead to a bitter awakening in the second half of this decade.
West’s different treatments of Libya and Bahrain: But is “Oil” the common factor? Aman Amanpour comments.
“"Whenever you intervene in a country, whatever your intentions, you are intervening on someone’s side. In this case, the United States, France and Britain are intervening in favor of a poorly defined group of mutually hostile and suspicious tribes and factions that have failed to coalesce, at least so far, into a meaningful military force. The intervention may well succeed. The question is whether the outcome will create a morally superior nation. It is said that there can’t be anything worse than Gadhafi. But Gadhafi did not rule for 42 years because he was simply a dictator using force against innocents, but rather because he speaks to a real and powerful dimension of Libya”", so opines a US-based ‘Intelligence’ think-thank. And I would add: No matter how one feels about Libya today and the role of the Gadhafi government; regardless of how one evaluates the Libyan opposition, a Western-led war or intervention in Libya is a disaster for the Libyan people, and for peace and stability in the region, including the lomger-term security of energy supply, and around the world.
And Bahrain ? To me, IT VIVIDLY EXPOSES THE MYTH ABOUT "PREVENTING ATTACKS ON CIVILIANS. The U.S. and its allies are repeating over and over that they are trying to "prevent attacks on civilians" in Libya and are acting from humanitarian motives. Yet, consider these “humanitarians” and how they react to Bahrain! The U.S. Fifth Fleet is based in Bahrain. Its people have been valiantly but peacefully demonstrating for democratic changes for weeks. They had some initial success. The regime responded initially with deadly repression and later with hints at reform. On March 14, however, hours after US Secretary of Defense Gates visited Bahrain, the Bahraini government commenced a brutal crackdown, backed up by Saudi Arabian troops. Helicopters, tear gas, rubber bullets, and live ammunition were used, killing and injuring many people. Nearly all of Bahrain's security forces are foreign mercenaries. Unlike the Libyan rebels, the Bahraini people have absolutely no arms. But there has been no talk of a no-fly zone over Bahrain, of course let alone attacks on the Bahraini and their Allies’!
Is this confirming the conventional wisdom that the real motivation for the West in both Bahrain and Libya, and indeed the whole region, is to control the ‘OIL’? Is this West’s main strategic interest and a primary financial interest for big business? If not, what other plausible justifications could be offered to the young and bright minds in the region and the world? I don’t know. But if it is really for ‘OIL’, then I at least know that this will defeat the purpose longer-term. Look at “Project Iraq”: eight years down the road of invasion, which led then to occupation by self-driven military machine till today, much blood has flown, yet not much ‘OIL’ yet. And it will not flow, sustainably, until people of Iraq take democratic control of their land and fate.
The collapse of the Old Oil Order ?? Professor Michael T. Klare's article is laud and clear, with its two-line summary: "Whatever the outcome of the protests, uprisings, and rebellions now sweeping the Middle East, one thing is guaranteed: the world of oil will be permanently transformed. Consider everything that's now happening as just the first tremor of an oilquake that will shake our world to its core". Here's the full article : http://www.europeanenergyreview.eu/index.php?id=2796.
To me, comments Aman Amanpour, there are some real and strong elements of truth in this analysis: historical realities, hard facts, familiar patterns, current revolutionary waves and hence the projected (harsh) expectations. Yet I would continue the thought process: there are some mitigations too: other substantial sources of (hydro)carbon: oil, gas, coal, biomass ... outside of MENA region and virtually all over the world. For reasons of proven technological advancements, I won't differentiat greatly whether the origin is liquid, gas or solid: GTL/XTL, DME, Clean Coal, LNG are here some key words. As to geographical and other alternatives to MENA resources: Brazil, Russia's Arctic & Deepwater, oil sand, Australia, CBM, hydrates, shale oil/gas, other Arctic ... Short-to-medium-term, all these resources will be economical, hence abundantly on-stream, if the price of conventional oil (equivalent) goes to and sustains, as the analyis expects, at 3-digits. Looking at the half-full of the glass and for longer-term : all these would be also more than a welcome combination as to further boosting alternative / clean energies: solar, wind, geothermal, hydrogen, 2nd-generation-biofuel, even (new) nuclear ... which, in turn, would help creating and accelerating independence from fossil fuels, nasty international politics and regional dictators ? Would be good for environment, economies, peace, stability, hence for entire world and humanity. But, admittedly, bad for: ... ? Most of the reades of these lines, I'm sure, could easily fill into the ...
Latest Export Statistics on Iran’s Petrochemicals: Iran’s PCC announced http://www.shana.ir/166822-en.html on 28th February that Iran’s petrochemicals product exports hit 12.8 million tons in the 11 months of the current Iranian year (starting 21 March). However, and reading further, comments Aman Amanpour, the news reveals that the top products exported have been LPG (propane, ethane) and “heavy cuts”, followed by methanol and urea. Such products, especially the formers, comprising 33% of total exports tonnage, are valuable yet, when sold as such on international markets, certainly undervalued feed-stocks for further processing in customers’ own petrochemicals plants. Also Methanol and Urea, another 25% of total export tonnage could find much enhanced uses in the value chain of the domestic industries and agriculture in terms of overall economic value and job creation potentials for the young Iranian society. The balance (deducting the above: ca. 42% of total tonnage) of exported products are expected to be mainly: Polyethylene, Aromatics, some other Intermediates. Even these derivatives are semi-finished products which, in a smoothly run economy, could create a much higher domestic value when compared to export alternatives. The real pride of and in the industry should come when the story would simply reverse: extracting domestic (and even importing when feasible) resources (including human and technological), process them domestically for maximum value creation / societal development, then export the finished goods & services beyond internal demand! Alas, the current country’s state of affairs is not allowing the required initiatives and investments in the related sectors - not even at the level and pace of previously and recently envisaged and planned.
Libya’s political strife has already begun to impact its energy production, and this is just the beginning.
Unlike energy produced in most African states, nearly all of Libya’s oil and natural gas is produced onshore. This reduces development costs but increases the chances that political instability could impact output — and Libya has been anything but stable of late. Libya’s 1.8 million barrels per day (bpd) of oil output can be broken into two categories. The first comes from a basin in the country’s western extreme and is exported from a single major hub just west of Tripoli. The second basin is in the country’s eastern region and is exported from a variety of facilities in eastern cities. At the risk of oversimplifying, Libya’s population is split in half: Leader Moammar Gadhafi’s power base is in Tripoli in the extreme west, the opposition is concentrated in Benghazi in the east, with a 600 kilometer-wide (370 miles) gulf of nearly empty desert in between. Read more: Unrest and Libya's Energy Industry | STRATFOR
The International Year of Chemistry 2011 (IYC 2011) is a worldwide celebration of the achievements of chemistry and its contributions to the well-being of humankind. Under the unifying theme “Chemistry—our life, our future,” IYC 2011 will offer a range of interactive, entertaining, and educational activities for all ages. The Year of Chemistry is intended to reach across the globe, with opportunities for public participation at the local, regional, and national level. The launch of the International Year of Chemistry is a great opportunity to get the message across to the public that chemistry is a provider of solutions to global challenges, rather than simply a cause of pollution. Aman Amanpour has just joined the IYC 2001-Network. To get more information visit: http://www.chemistry2011.org
BP – Rosneft partnership: IOCs changing gears again – returning to “MRH” from OECD ?
It was just few years years ago that major IOCs were turning back to the resources in the OECD countries as a safer bet compared to technically easier and cheaper oil, yet in politically shaky-risky major-resource-holding (MRH) countries. Now it seems that the page is being turned again. The News of BP-Rosneft partnership is significant. The significance of the deal has not been sufficiently appreciated by mainstream media. The agreement signals the start of a new M&A frenzy in the upstream sector, as international oil companies (IOC’s) are rapidly stepping up their attempts to realise joint-ventures with national oil companies (NOC’s). This rush to Russia and other MRH countries is a direct result of the “Macondo” oil spill. ‘The disaster in the Gulf of Mexico has turned traditional notions of political risk on their head. Ironically, Russia is now deemed a safer and potentially more rewarding bet than a politically capricious country like the US! Read the full story from the interesting contribution by Matthew Hulbert in the European Energy Review: http://www.europeanenergyreview.eu/index.php?id=2731
Iran to produce DME as a clean fuel. TEHRAN January 31 (Shana): Head of the Petrochemical Research and Technology Company, Gholamreza Joukar reported of achieving the knowledge of converting methanol to dimethyl ether (DME) as a clean fuel and suitable alternative to gas oil production. See the full story from the Shana website: http://www.shana.ir/165382-en.html
Here are Aman Amanpour comments:
""Actually DME is an already known alternative Mogas supplement. Being an Ether, the molecule is not as hazardous (for health and environment) as compounds such as Aromatics (e.g. Benzene). Being an "oxygenate", it could even help cleaner burning of gasoline, reducing NOx/SOx and smog-building potential, pretty much like MTBE. The latter was -to me and many others- a much better fuel component than e.g. Ethanol which was promoted as alternative, displacing MTBE -mainly in US and some other countruies- years ago. More of framers' lobby (in the USA) and related politics than sound science. Although the water-solubility of MTBE had led to some underground water contaminations (more taste/smell than health issue due to low odor threshold of ethers even at few ppm concentrations) in the areas which are more dependent on underground water tables than other water sources. But then again and even there: this was more of tackling the problem of leaking underground gasoline tanks rather than anything else. Actually other Mogas components (again: such as aromatics at % levels) are much more hazardous if leaked into water, yet they don't taste/smell - i.e. lack the 'warning signals' which Ethers have- until at high and dangerous concentrations. DME could exhibit similar behaviours as MTBE. One difference is its lower molecular weight, hence higher vapor pressure (comparable to that of Ethanol) which could make trouble in blending and pipeline / transportation stages - although it may not be as hygroscopic (water-absorbing) as Ethanol, creating lesser issues ... (this I need to re-look at and confrirm).
Feasibility / Economics:
Another positive aspect with DME : it's virtually a way of gas liquefaction (Natural Gas -> Methanol -> DME), chemically, rather than physically (LNG) - pretty much comparable with GTL (Fischer-Tropsch conversion), with the difference that here you'd make ('clean') Mogas component with DME, rather than "clean diesel" with GTL. The technology is known / proven. It just may need some scale-ups to take it to new world-scale capacity. Further, the huge Methanol capacities (on stream and planned) in Iran has the potential to render this conversion economic - together with and emanating from some a/m and other potentials, as well as when compared to the cost of other alternatives (in general but also specific to Iran under sanctions).
In short: this would be a totally different game compared to pouring valuable but highly hazardous petchem feedstocks / intermediates into the mogas pool!""
Germany’s Upcoming Energy Revolution. Germany’s Environment Minister Norbert Röttgen calls the new German energy strategy a ‘civil revolution’, but he could just as well have described it as the making of a future civil energy war. The extremely ambitious strategy is pitting the coddled renewable energy sector against the neglected gas sector. It requires the building of large new power grids, which are being sharply opposed by the public. And it is setting up Germany’s four major utility companies, which demand an EU-wide renewable energy policy, against the German Environment Ministry, which wants to create renewable energy jobs – in Germany.
The super-targets set by the German energy strategy:
* boost the share of renewables to 80% of the electricity consumption, and 60% of the primary energy consumption by 2050
* reduce CO2 emissions by 40% by 2030 and 80% by 2050
* halve Germany’s primary energy consumption by 2050
* double the yearly rate of building upgrades to increase energy efficiency in the built environment from 1% to 2% per year
* reduce energy consumption in the transport sector by 40% until 2050
* use all the additional income – an estimated €2 billion per year – from the emissions trading scheme, which comes into full force in 2013, for measures to boost climate protection, energy efficiency and renewable energy research
* launch a monitoring scheme that is to check every three years whether the strategy is on track
Get the full stroy from the European Energy Review site: http://www.europeanenergyreview.eu/index.php?id=2702
This indeed could be seen as a revolutioary and quite progressive manifesto. However and as I noted in my comment there: " It's indeed amazing if (?) Germans would have ignored gas in their long-term energy strategy. How could they? Even if they wanted to move away from gas to renewables or whattever else, they need to deal with and have a position / transion plan on/for it, like they have one on nuclear. This especially in light of all exciting things happening in the gas world and other countries (US, EU, China, rest of the West & East...) scrambling to adapt and understand: Shale, LNG, Pipeline, GTL, Russia, ME, Caspian ... Aman Amanpour"
Obama’ State of Union message, 25/1/2011
WASHINGTON --The US energy sector on Wednesday was sharply critical of President Barack Obama’s “state of the union” address, charging that the president was trying to demonise the petroleum industry and that he would stifle much-needed job growth.
In his annual address to Congress on Tuesday, Obama called for new government spending on biomedical research, information technology “and especially clean-energy technology” to help spur employment.
“We need to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. (Applause.) I don’t know if -- I don’t know if you’ve noticed, but they’re doing just fine on their own. (Laughter.) So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s”
Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: By 2035, 80 percent of America’s electricity will come from clean energy sources. (Applause.)
The National Petrochemical and Refiners Association (NPRA) charged that Obama was trying to vilify the nation’s petroleum producers and refiners.
“If his attack demonising the petroleum industry succeeds, it will destroy jobs instead of creating them,” said NPRA president Charles Drevna.
He said that in singling out the oil industry for higher taxes, the president would only succeed in “raising costs for consumers instead of lowering them, and require billions in taxpayer dollars to fund unending subsidies for untested technologies unable to survive on their own”.
“It makes no sense to destroy existing jobs held by hard-working Americans today in hopes of creating new jobs that may never materialise tomorrow,” Drevna added.