Weathering the storm
Hamad Alterkait, Chairman, PIC, discusses the company’s M&A ambitions, future project plans, and the COVID-19 implications on chemical supply chains in the region. Why senior management had a crucial role to play in ‘rescuing the supply chain from collapse’ and what sacrifices chemical companies were forced to make in order to survive the storm? Read his interview for Insight to learn all of this and more.
What will be the key implications on the supply chain as a result of the coronavirus pandemic for the Arabian Gulf petrochemical industry which is export-oriented?
The very day and inception of the coronavirus pandemic until this moment represent the most significant shock that has ever been dealt on global supply chains. This was truly and utterly unexpected for chemical and petrochemical players in the region, but also business leaders in all industries across the globe. The sheer length of this pandemic combined with the continuation of a global recession, low oil prices, the China-US trade war, which was already under way even prior to the pandemic, ongoing economic turmoil and the spread of the disease raised a lot of questions about globalization. The pandemic led investors to review their plans and manufacturers to rethink their strategy and projects. Without a doubt, the period from March 2020 until today is going to be remembered as a case study of the most significant supply chain disruptions faced by any industry ever for years to come – even when the crisis has finally settled.
What levers can companies employ to increase the resilience and agility of their supply chain?
The levers that organizations can adopt to increase their supply chain resilience can differ from one company to another. Large companies export their products daily and simply cannot afford for their exports to come to a halt. There are companies which, thanks to the nature and size of their business, can more easily entertain supply chain disruptions and navigate around them with their supply chain infrastructure. My short message for chemical companies – whether they are small, large, or medium size – is to ensure that their supply chain infrastructure is very flexible. The ease and convenience which managing a single source of supply chain providers can offer is outweighed by the risk of something going wrong with your supplier’s operations and the subsequent disruption to the delivery of your goods. Before you know it, you’ve run into enormous issues, are scrambling to find alternative providers and incurring significant delays. Having a diversified and flexible supplier network and adopting ‘out of the box’ thinking will help companies manage and increase the resilience and agility of their supply chain.
At Board and senior management level, how important is fostering supply chain competitiveness and investment?
The pandemic brought like never before supply chain considerations to the attention of senior management and companies’ shareholders. Many difficult decisions needed to be made. Companies were forced to choose maintaining their productivity and delivering their product, irrespective of the cost incurred, over the competitiveness of their business model. At times this was at odds with the company’s vision. Compromises were sometimes made at the expense of the business to save customers and encourage them to grow.
The top management at all companies began to rethink their investments due to disruptions in the contractor industry, the shortage of labor, longer lead times, and suppliers’ inability to deliver raw materials. Prior to the pandemic senior leaders would not concern themselves with how the product was delivered because that was never an issue. Their focus was on profitability, customer range, productivity, etc. as they believed the business model, including the supply chain, was already smooth and did not need to be reviewed. With the pandemic spreading all over, the first question on senior leaders’ minds was ‘Can we deliver what we produced?’ The new top of mind issue was supply chain competitiveness and investment. Thankfully, fresh capital was injected to diversify the source of supply chain infrastructure and overcome the challenges which ensured the reliable supply of their products to the world.
Tell us more about PIC’s 2040 strategy. What does it entail and how are you seeking to realize it?
Petrochemical Industries Company (PIC) is under the umbrella of Kuwait Petroleum Corporation (KPC), and the 2040 strategy has been formulated on that basis. Our next 20-year plan has been under review since the pandemic started to reflect the new reality which COVID-19 brought along. The overall key objective of the 2040 strategy envisions PIC’s growth in petrochemicals. The plan is for PIC to build its own grassroots project in Kuwait in the coming 20 years.
To build critical mass and expand our presence globally, we are also moving ahead with our M&A ambitions, looking at suitable acquisition and consolidation targets across the globe and are ready to make the move whenever the right opportunity arises. PIC will continue to invest in grassroots projects and markets in regions that we believe are going to be a growing area for petrochemicals, profitable, and also very reliable in terms of continuation. This is especially true when we consider the feedstock availability and the marketing of the products out of these projects. In summary, we are looking at different growth opportunities from a holistic point of view and hope that our plans will materialize in the coming years.
How has the COVID-19 pandemic affected your projects?
We have put on a temporary hold both our CKPC project in Alberta, Canada, as well as our Olefins IV project in Kuwait. We are going to review the two projects and in due time whenever the opportunity arises once the pandemic is over, we will resume our activities. Both of these projects are very much linked to many suppliers of equipment and suppliers linked with banks for the project financing; progress also depends on our partners, so it is definitely going to take some time before we can put them all in one pool and resume the work. We will announce officially, pending further discussion and review, a revised date for when the plant in Alberta will be commissioned and whether we will select to continue with Olefins IV based on any feedstock available.
As a founding member of GPCA, what is the importance of establishing regional platforms such as ours for the advancement and development of the chemical and petrochemical industry in the region?
I would like to highly commend GPCA for providing a platform for knowledge sharing and the exchange of vital information during the pandemic. Through its virtual webinars the association provided comprehensive and up to date insights which immensely helped the industry to make sense of the challenges and changes that were unravelling in real time and not to lose sight of the global picture. GPCA fulfilled its critical role for the chemical and petrochemical industry in the region by keeping every member, manufacturer, customer, and supplier well connected and informed. This association is the backbone for all of us as members and for the development of the chemical industry in the GCC.