By Saad al-Kuwari
• The petrochemical and fertiliser industry is undergoing a strategic transformation and requires an effective partnership between the government and the private sector
• Incorporating companies in the petrochemical sector boosts revenues and raises earnings per share
• Highlighting the innovation index as one of the most important distinguishing features of the petrochemical and fertiliser industry will enable the sector to respond to current and future market requirements
Qatar, through Qatar Petroleum and Industries Qatar, the shareholder and operator, could achieve even greater income if methane and ethane were used in a better way in manufacturing, increasing the volume of petrochemical products, fertilisers and petroleum additives, as these are considered the main feedstock for this industry.
Here, I would like to touch upon these matters, using two studies carried out by two consultants: (Qatar Oil and Gas Trade Office and MSI Consulting Office), each of which, studied independently, but they agreed on the final conclusions, namely:
1. The contribution of petrochemical industry, fertilisers and direct petroleum additives to the GDP for the last seven years has exceeded about QR18bn, with an annual average of QR2.8bn. The amalgamation of, for example, petrochemical companies in Qatar reduces operating expenses and unifies decision-making for expansion and investment, as well as immediate sales.
2. Qatar produces and exports surplus quantities of liquefied petroleum gas (LPG), as well as naphtha products of various types and, economically it is preferred to use it for the manufacture of chemical and petrochemical products. The North Gas Field Expansion Project will contribute to the production of methane and ethane, and this will drive the industry in future.
3. The petrochemical and fertiliser industry was started in the seventies and the government is the largest investor in this sector, through Qatar Petroleum, Industries Qatar, and other joint-stock companies between the government, the private sector, and individual "shareholders".
It is also possible to exploit propane gas, butane and naphtha as a feedstock, in addition to methane and ethane, which contribute to the process of raising production and expanding the base of products with high characteristics and quality in addition to traditional products.
4. The returns of the industry are not very high, if we take into account the length of time it needs to develop its projects. And if the shareholders put their money in alternative projects (such as the real estate sector, banking sector or the services sector) they would probably have achieved greater returns, and therefore, restoring the confidence of investors is important in this Industry.
Obviously, as this industry flourishes in Qatar, it will put Qatar on the map of the world, and we look forward to Qatar being a major player and being unique with its abundant production of gas that is used in this industry of petrochemicals and fertilisers.
This is in addition to petroleum additives and other manufacturing industries and strives to achieve product quality so that it meets the requirements of the market. And the marketing capacity is an important matter, as it requires a specialised entity and has complete independence from traditional hydrocarbon products such as crude oil, petroleum products, iron and others.
Every time I visit a petrochemical or chemical fertiliser plant anywhere in the world, and listen to the officials' explanation with precision and detail, I look forward to contributing to the localisation of this industry and transforming it into an added value at a low cost and exporting it in Qatar.
5. Qatar is heading for vertical expansion instead of horizontal expansion in the petrochemical and chemical fertilisers industry, producing advanced materials and allocating them in the petrochemical sector, producing urea of special quality for soil and agricultural crops and increasing their added value, not just competing with the gas industry and increasing production.
The petrochemical and fertiliser industry achieved successes in the past, with some non-essential negatives that foreign companies benefited from, such as manufacturing technology, marketing mechanisms and its commission.
We need more future investments, especially in chemical fertilisers, as the wheel of investment in these projects, whether in the petrochemical industry, fertilisers or chemical additives, has stopped for more than 10 years and no expansion or new projects have been established in the sector.
The industry is going through a strategic transformation and a very decisive phase in light of unprecedented social, political and economic changes, especially as it suffers from the rapid decline in global chemical prices since mid-2014, the increase in local feedstock prices, and the emergence of global competition.
It needs to withstand the challenges, but at the same time it will achieve long-term opportunities for it, and it must move towards basic chemical and commodity chemicals with a greater number of specialised chemical industries to enhance its competitiveness, which is very important not only to establish an industrial base that achieves added value, but for increasing non-oil exports, from the petrochemical sector and other related industries as well. It can easily attract new international companies to establish specialised factories and raise the percentage of production capacities.
The importance of this industry comes after the brilliant development in the field of chemicals in the past 10 years — from buildings to airplanes and cars, full of materials that have been developed in recent decades, as their content consists of plastics to polymers and batteries, which all come from chemicals.
For example, it is possible to produce a global chain to improve packaging and enhance the productivity of flexible materials to enhance local content in construction. This chain has competitive advantages in future, given the strong need to balance the increasing rate of consumption and raise awareness about sustainability, and the production and development of the ‘Coher Chain high quality polyolefin plastomer'.
And the production of varieties of urea, for example a high-quality type of urea, helps reduce emissions of hazardous nitrogen oxides from the exhaust of diesel engines, in addition to those resulting from industrial procedures.
It is reported that this material is a pure type of urea that is produced in the form of granules, by using spin forming technology, which is characterised by its low energy consumption and superior physical and mechanical properties to the product, applications of the new product include heavy trucks, cement production plants, power production plants, and machines that are not used in road and maritime transport.
* Saad Abdulla al-Kuwari is an expert in oil and gas and is exploring the future of energy.
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