INDUSTRY INSIGHTThought Leadership

The view from the kingdom

Abdel Hadi Al Suhaimi, Executive President, S-Chem and Chairman, GPCA Responsible Care Committee, speaks to Insight about meeting sustainability objectives, while driving growth in an increasingly volatile global economic environment. He shares the latest updates from the Responsible Care Committee and touches upon Saudi Vision 2030 and the recently announced USD 148.34 billion National Industrial Strategy

2022 has been a tumultuous year globally. How has demand for petrochemicals been impacted in key export markets for S-Chem?

It has indeed been a turbulent year due to several factors. The world petrochemicals market is worth over USD 600 billion with an estimated compound annual growth of 4-5%. Volatile oil prices, high energy cost in Europe (as a result of the Ukraine conflict), supply chain constraints in some areas, high inflation, rising interest rates and fears of recession combined have a significant impact on industrial and consumer demand for petrochemical products. Also let’s not forget the impact of geopolitics and logistical issues in different parts of the world. Demand by downstream manufacturers has been good for most products in the first half of 2022. However, the demand has been weak recently, particularly in the second half of the year as they continue to operate at minimum rates.

How do you expect the industry to perform in the coming year and what would be some of the key challenges to watch?

It all depends among other things on whether the world economy is headed toward a recession (or economic slowdown) or modest growth in 2023. Most experts agree an economic recession is eminent but may disagree on its timing. Moreover, increased capacities for some products in key markets will impact demand-supply balance and put pressure on prices. Regional producers are mostly export-oriented and compete in almost the same markets. So GCC manufacturers will have to seek and expand in other growing markets and grow regionally as well.

Saudi Arabia has ambitious economic plans and is steadily advancing its Vision 2030. What role can chemical companies in the Kingdom, including S-Chem, play in making the Vision a reality in less than a decade?

Saudi Arabia targets to increase the share of non-oil exports from 16% in 2016 to 50% in 2030. Last year the non-oil exports grew by 35%. Petrochemicals make up almost 60% of the non-oil exports and they form a key element of the National Industrial Development program as the government aims to increase downstream industries and expand the industrial base in the Kingdom to create higher value products, generate jobs and reduce reliance on imports. Petrochemical and chemical companies like S-Chem employ mostly Saudis, aspire to grow and contribute to local content as envisioned and encouraged by the government.

What role can the chemical industry play in the National Industrial Strategy recently launched by Crown Prince Mohammed bin Salman to increase the industrial exports value to 557 billion riyals by 2030 (USD 148.34 billion) and what are the enablers needed to achieve its ambitious targets?

The Saudi industrial strategy focuses on sustainability, localization, diversification, and privatization. Local petrochemical manufacturers are directly concerned with the first two focus areas of the National Industrial Strategy. In my view, availability of feedstock, the right technology partner and perhaps some sort of strategic alliances with downstream industries are among the key enablers for the Strategy.

What is the industry in the region doing to meet growing expectations to lower its emissions, and how is S-Chem approaching this trend?

Sustainability objectives of petrochemicals generally fall under two categories: carbon emissions reduction and carbon capture. S-Chem’s current efforts are focused on reduction of emissions.  A number of projects are under development to reduce CO2 emissions through optimizing fuel gas consumption and improving production efficiency. On the other hand, new carbon capture technologies will be explored and assessed for potential adoption in the future. Moreover, partnership with research institutions to develop suitable carbon capture methods will be considered as well as other carbon reduction initiatives such as Saudi Arabia’s Public Investment Fund’s (PIF) recently announced Regional Voluntary Carbon Market Company, which will support businesses and industries in the region as they transition to net zero.

What are some of the current challenges to making the industry more sustainable, and how can these obstacles be overcome?

Petrochemical and chemical products are important for everyday life and are used in many applications, including packaging, medical equipment, household goods, construction material, textiles, paints and other products. The industry’s challenges are to remain competitive despite margin erosion (e.g., products in the aromatic compound chain) and continue to expand during slow economic growth, while pursuing sustainability regulations through ESG targets. Meeting sustainability targets will impact business cost in the next decades since the industry has to invest in new technologies to improve production efficiency, reduce energy input and meet GHG targets so it can overcome obstacles.

You’re the Chairman of the GPCA Responsible Care Committee, and as such, can you shed some light on the recent Environment, Health, Safety & Security (EHS&S) developments among Responsible Care® chemical companies in the region? 

Most petrochemical and chemical companies in the region are represented on the GPCA Responsible Care Committee. The Committee and its Sub-Committees have adopted several initiatives covering the EH&S space. Among some of the initiatives’ highlights, for instance, are the Product Stewardship Committee (PSC)’s efforts to support the implementation of the Globally Harmonized System of Classification and Labelling of Chemicals (GHS) in the GCC region. The Product Stewardship Committee is also working on a Product Stewardship certification program and are planning to hold a seminar at the end of November 2022. The Committee is engaged with regulators in the region to better understand the impact of newly introduced global regulations on GCC producers. These include the new regulations in Europe with regards to carbon taxation and the EU Green Deal, Turkey REACH, BIS, etc. Moreover, the Gulf Process Network was launched last year with some ambitious plans, including conducting several successful peer reviews and promoting knowledge sharing through process safety workshops. A process safety workshop was held in March 2022. In addition, our Contractor Safety taskforce is in full gear with clearly set objectives and plans to develop a contractor qualification program based on best practices globally and regionally.