PIC Joint Ventures - Kuwait Petroleum Corporation

Report
Strategies for Improving Profitability and
Competitiveness and PIC’s initiatives for achieving
Growth
Yousef Al Ateeqi,
Deputy Managing Director (Olefins)
Petrochemical Industries Company
14th Feb 2012
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Content
 PIC Introduction
 PIC Business Portfolio
 Introduction to Petrochemicals
 Petrochemicals Industries Business within
Kuwait Oil Sector
 Strategic Growth
 Challenges
 PIC efforts to implement LTS
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
2
PIC Among Kuwait Petroleum Corporation
Subsidiaries
KAFCO
KOC
KNPC
KUFPEC
OSSC
KPC
PIC
is the petrochemical arm of
Kuwait Petroleum Corporation
ODC
KGOC
KOTC
KPI
KPC’s Strategic Direction for PIC is :
Increase petrochemicals contribution in KPC’s turnover
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
3
PIC Vision
We aspire to be a recognized global petrochemical player leveraging
Kuwait national resources in value added partnerships to drive
growth and being admired by our stakeholders
PIC Mission
 PIC ,as a subsidiary of Kuwait Petroleum Corporation, shall achieve a
marked position with downstream extension into high value petrochemical
business while ensuring integration with KPC activities both domestically
and internationally through:
─ Maximizing value addition of Kuwait hydrocarbons resources
─ Excelling our organizational performance through peoples’
empowerment and infusing industry best practices
─ Creating a challenging and fulfilling environment that will support skills
and capabilities development
─ Collaborating closely with our partners towards a sustained and
diversified global growth
─ Fostering National economy
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
4
2030 KPC Downstream Sector Mission & Vision
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
5
PIC Business Portfolio
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Petrochemicals Growth in Kuwait
Realizing their long term potential, Kuwait ventured into
commodity petrochemicals in 1990s
A Historical perspective for PIC …..
 1963 : Started with Fertilizers business
 1993 : MOU signed with UCC for setting up a world scale
Olefins Complex
 1995 : EQUATE Petrochemicals Company formed
 1997 : PP Plant and EQUATE Complex successfully
commissioned
 2008/2009 : Olefins II, Aromatics and Styrene Plants start
up
1997
Polypropylene, Ethylene, Polyethylene and MEG produced for the 1st time in
Kuwait
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
7
PIC Business Portfolio
PIC has diversified its position as a significant player in
Petrochemicals, with local and International investments
International Investments
Local Investments
Fertilizer Business
Polypropylene Business
MEGlobal markets Ethylene Glycol produced inside
and outside Kuwait
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
EQUATE is the common operator for (PP, TKOC,
TKAC and TKSC)
8
PIC Products
 65% of the Petrochemicals products in PIC portfolio
are produced in Kuwait
 PIC operates the Fertilizer plants
 PIC markets
─ Fertilizer product from Kuwait & GPIC plants
─ Polypropylene produced in Kuwait
─ Paraxylene Produced in Kuwait
 PIC Joint Ventures
─ Equate produce PE & EG and market Polyethylene & Styrene
─ MEGlobal market Ethylene Glycol produced inside and outside Kuwait
─ Equipolymers produce and markets PET
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
9
Growth in PIC Profits (1995 – 2011)
Total Company Profit & Loss from 1995/1996 To 2011/2012
300,000,000
250,000,000
200,000,000
KD
150,000,000
100,000,000
50,000,000
0
-50,000,000
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
10
Introduction to
Petrochemicals
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
There are three major building blocks in
petrochemicals
Ethylene, Propylene, and Aromatics are the essential building blocks for the
major petrochemical chains
Feed stocks Processes
Ethane
LPG
Pygas
Pyrolysis Gasoil
Fuel Gas
Steam
1
Steam
Cracking
Light
Naphth
a
Whole Naphtha Naphtha
Splitter
Heavy
Naphtha
Raffinate
Reformate
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Ethylene
Propylene
C4 and C5
2
Naphtha
Reformi
Aromatics
ng
Vacuum Gas Oil
Cat Naphtha etc
Petrochemical
building blocks
FCC
3
Petrochemic
al products
Polyethylene's
EDC/VCM/PVC
Ethylene
Glycol
Polypropylene
Acrylonitrile
Butadiene
Butylenes
C5s
Styrene
Nylon
PTA/ Polyester
Propylene
12
Worldwide Trends in Petrochemicals
Source Nexant
250
Historical
Forecast
200
Total MMTPA
Ethylene
150
Propylene
100
PTA
50
Paraxylene
0
1990
1995
2000
2005
2010
2015
2020
2025
Since the 1990s, key petrochemicals have achieved above GDP growth
rates globally.
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
13
Middle East Trends in Petrochemicals Market share
Source Nexant
20%
ME Marketshare %
Historical
Forecast
Ethylene
15%
Propylene
10%
Paraxylene
5%
PTA
0%
1990
1995
2000
2005
2010
2015
2020
2025
ME started from a small presence & increasingly projected its importance in the
petrochemicals sector, registering good growth in market share
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
14
Future Outlook
 Middle East producers are very competitive and well
positioned to supply the fast-growing markets.
 Middle East feedstock slate will be heavier with lesser
advantages.
 New projects will require access to technologies and new
approaches to development.
 Innovation is a joint effort and requires a strong customer
oriented culture.
 Higher expectation on Job creation and industry returns
 Industry cooperation can benefit all.
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
15
Maintaining Competitive Advantages
 Feedstock allocation & pricing– need to be better than netback
basis
 Competitive energy cost
 Improved product offering, packaging and logistics to target
growing end users markets

Government Support and incentives to promote investment

Promote downstream units as small and medium business
unlike conventional mega projects

Expectation on returns and job creation objective need to be
aligned
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
16
Shift to Differentiated Products
Commodity Products
Differentiated/Downstream
Products
Low Value
High Value
High Volume
Moderate to low volume
Capital Intensive
Low Capital Investment
Low Labor requirements
Labor intensive
High level of integration
Usually non-integrated
Proximity to market not critical
Links to market very critical
Supply Chain/Logistics relatively
less critical
Supply Chain/Logistics very
critical
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
17
Critical Success factors
 Scale and level of integration
 Access to technology – Differentiated products
 Marketing and Distribution
―Customer Focus – Innovation and Customer Support
―Supply Chain / Logistics efficiency
 Improved Projects Management and Execution
― CAPEX control and reduce delays
Developing and Retaining best skill
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
18
Petrochemicals Industries
Business within Kuwait Oil Sector
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
KPC Strategic Directions - Petrochemicals

Pursue growth in petrochemicals, both inside and
outside of Kuwait, with a partner focusing on high
growth petrochemical products.

Pursue full and effective integration between the
petrochemical operations and KPC’s operations inside
and outside Kuwait.

Build and acquire leading petrochemical assets in
mature markets outside Kuwait with a proper foreign
partner.

Pursue partial or full privatization of the petrochemical
activity.
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
20
PIC’s previous growth path has resulted in the
creation of a successful portfolio
KPC’s vision for PIC : Grow in Petrochemicals Inside and Outside Kuwait
Stage 1
Stage 2
Kuwait : Olefins-II, Aromatics, Styrene
Overseas : PTA, PET, EG
Build emerging
businesses
Extend and
defend core
businesses


Achieve
competitive
regional
position
Expand domestic
petrochemical
capacities
COMPLETED
Create viable
options
 Downstream
extensions
 Further international
expansions
Growth Parameters
 New core extensions
 Derivatives
 Integration
COMPLETED
 Value creation thru
THE
partnerships
FUTURE
Time Frame
2001–2005
2005–2010
2010-2020
Horizon 1
Horizon 2
Horizon 3
In the current Horizon, PIC plans to further strengthen its position inside and
outside Kuwait
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
21
PIC’s future growth portfolio will target
three key growth themes
Enhance Core
Olefins
Derivatives
Portfolio
Financially
Attractive/
Diversifying
Investments
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Broaden
Portfolio
through
Refinery/PC
Integration
22
Create scale and enhance the positioning of its core
businesses and diversify its portfolio
PIC’s olefin portfolio
Joint investments with
“sister” K companies
•will be measurably enhanced by building scale
and share and diversifying feedstock exposure,
product mix and asset location
•will provide the basis for overall advantage and
allow PIC to leverage a core strength of KPC (i.e.
hydrocarbon advantage)
Investments in “linked”
•provide capital cycle diversification and the
downstream specialties
prospect of higher less cycle earnings component
and diversified chemicals
Targeting Asian
investments
•will provide diversification of asset base outside
and also allows for capital optimization and
enhancement of channels to market
Opportunistic M&A
•Grow/maintain market share in core businesses
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
23
Strategic Growth
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Opportunities
 feedstock allocation to projects with a diversified product slates
 Enhance business scale in near term with new olefins facilities
 Access high growth international projects and markets through
strategic partnerships

Opportunity to develop required local skills through knowledge
transfer and support strategic growth

Investments in downstream specialty chemicals & polymers will add
value and diversify the overall portfolio

Opportunity to boost private sector industrialization and participation
in local economy.
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
25
Linking our growth plan to KPC downstream
businesses
 PIC business growth has key linkages with KPC, KNPC, KPI
and KOC :
 KPC/KOC for Gas feedstocks for EQUATE and TKOC.
 KNPC for liquid feedstocks like Propylene/Naphtha for
PP and TKAC
 KPI for diversified refinery streams as feedstock to
proposed China Project
This value-adding collaboration within downstream sector of
KPC will continue, building upon its integrated approach with
new petchem projects, inside and outside Kuwait.
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
26
Sources of Integration Value
Margin
Maximization
Operating
Cost
Reduction
CAPEX
Optimization
Portfolio
Options
Sustainability
Benefits
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
 Opportunity to create value for both
sides “refining & petrochemicals”
exists on a large scale
─ Large new petrochemicals facilities
─ Existing and planned refineries optimization
─ Broad product offering to meet Petrochemicals
market demand, commodity and specialty
products for the integrated complex
─ Flexibility to process a wide variety of
feedstocks
─ Cost synergies while maintaining resources
allocation
─ Capital optimization through planning to
execution
27
Competiveness in International Markets

Building upon core portfolio positions to expand
advantaged business positions in olefins and aromatics
both within Kuwait and in selected regional locations

Partnering with sister “K” companies to build downstream
cracker projects linked to current portfolio

Investing in selected downstream investments that have
connectivity to PIC and Partner business interests

Establishing criteria for and pursue opportunistic, financial
investments (i.e. M&A) with key caveats
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
28
Competiveness in International Markets
 Aggressive investment in core portfolio with objective of
increasing overall regional/global share
 Build shared investment projects with KPI & KNPC to
achieve refinery /petrochemicals integration diversifying
feedstock base
 Develop a linked specialty platform
 Major geographic diversification investment
 Grow/maintain market share in core businesses
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
29
Key Drivers for Growth

Access to advantaged feedstocks (e.g. methane, ethane, naphtha etc.)

Integration with KPC refining sector, inside & outside Kuwait

Access to world class technology and marketing tie-up with partnerships

KPC financial strength and global positioning

Track record in managing world scale petrochemical complex projects and
plants

Geographically located close to high growth Asian markets

Well established relationship with financial sector

Continuing the development of local skills through knowledge transfer and
support strategic growth

Enhance private sector industrialization and participation in local economy.

Contribute to the local Economy ( GDP )
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
30
Petrochemicals industries are a major player
in Kuwait GDP creation

Petrochemicals is a key enabler for industrialization

1$ of direct GDP creation in the chemical sector produces
~1.87 $ of total GDP creation in the Kuwaiti economy

Manufacturing share of GDP approx 6%

Manufacturing share of non Oil GDP approx 10%
Contribution of manufacturing sector to GDP lowest in
Kuwait among GCC countries
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
31
Project Opportunities under development
1. China Project with Kuwait Petroleum International
to implement an Integrated Refinery/Petrochemicals
Complex
2. Olefins III Project
opportunity in Kuwait
–
World-scale
project
3. PTA/PET Project in Kuwait.
4. Refinery/Petrochemicals
Kuwait
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
integration
Projects
in
32
Challenges
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Challenges
 Limited ethane availability, tightening lighter feedstock
availability with less feedstock advantage
 Constraints related to land availability, utilities and
infrastructural facilities
 Limited exposure to specialty petrochemicals business
 Increased global competition from low cost high scale
operators in Middle East and market regions
 Interlinked and highly leveraged global economy
 Increasing reliance on emerging markets economic prosperity
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
34
PIC efforts to implement LTS
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
PIC transition to Product Oriented Organization
•The organization
Chairman &
Director
isManaging
Product
Focus
Board Secretary
Deputy Chairman
& DMD Planning
DMD Admin & Finance
•Introduced new functions like
Corporate
Finance
Corporate Planning
ENGHSE
Engineering and
HS&E
Information
Technology
Human Resources
ERM
Services & Comm.
Six Sigma
•Established the basis for Growth focused Team
work
DMD Fertilizers
DMD Aromatics
DMD Olefins
Business
Analysis &
Planning
Fertilizers
(Manufacturi
ng)
Marketing
Business
Analysis &
Planning
Business
Dev.
Marketing
Business
Analysis &
Planning
Business
Dev.
Marketing
•Introduced best practices and business
governance
GPIC
KARO
TKSC
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
Equipolymers
PP
MEGlobal
EQUATE
Olefins II
36
Initiatives supporting PIC LTS
implementation

Developing the PIC-PGS : A conceptual Gated
System was developed for overall execution of
Capital Projects

Continuous improvement – Six sigma program

Competency development

Responsible Care and CSR program

Focus on certified management systems in Quality,
Environment, Safety & Health
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
37
© Petrochemical Industries Company 2005
A Subsidiary of Kuwait Petroleum Corporation
38

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