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Content. PIC IntroductionPIC Business PortfolioIntroduction to PetrochemicalsPetrochemicals Industries Business within Kuwait Oil SectorStrategic GrowthChallengesPIC efforts to implement LTS. 2. KPC\'s Strategic Direction for PIC is :Increase petrochemicals contribution in KPC\'s turnover. PI

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slide1

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

content
Content
  • PIC Introduction
  • PIC Business Portfolio
  • Introduction to Petrochemicals
  • Petrochemicals Industries Business within Kuwait Oil Sector
  • Strategic Growth
  • Challenges
  • PIC efforts to implement LTS
slide3
PIC Among Kuwait Petroleum Corporation Subsidiaries

KOC

KAFCO

KNPC

KUFPEC

OSSC

PIC

is the petrochemical arm of

Kuwait Petroleum Corporation

KPC

ODC

KOTC

KGOC

KPI

KPC’s Strategic Direction for PIC is :

Increase petrochemicals contribution in KPC’s turnover

pic vision
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
slide7
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

slide8
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

EQUATE is the common operator for (PP, TKOC, TKAC and TKSC)

MEGlobal markets Ethylene Glycol produced inside and outside Kuwait

pic products
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
there are three major building blocks in petrochemicals
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

Petrochemical building blocks

Petrochemical products

Steam Cracking

Ethane

LPG

Polyethylene's

EDC/VCM/PVC

Ethylene Glycol

1

Ethylene

Pygas

Pyrolysis Gasoil

Fuel Gas

Steam

Propylene

Polypropylene

Acrylonitrile

Light Naphtha

Butadiene

Butylenes

C5s

C4 and C5

Naphtha Splitter

Whole Naphtha

Heavy Naphtha

Naphtha Reforming

2

Styrene

Nylon

PTA/ Polyester

Raffinate

Aromatics

Reformate

Vacuum Gas Oil

FCC

Propylene

3

Cat Naphtha etc

slide13
Worldwide Trends in Petrochemicals

Source Nexant

Since the 1990s, key petrochemicals have achieved above GDP growth rates globally.

slide14
Middle East Trends in Petrochemicals Market share

Source Nexant

PIC into petchem

  • ME started from a small presence & increasingly projected its importance in the petrochemicals sector, registering good growth in market share
future outlook
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.
maintaining competitive advantages
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
critical success factors
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
kpc strategic directions petrochemicals
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.
pic s previous growth path has resulted in the creation of a successful portfolio
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

Create viableoptions

Kuwait : Olefins-II, Aromatics, Styrene

Overseas : PTA, PET, EG

Build emergingbusinesses

  • Downstream extensions
  • Further internationalexpansions

Extend anddefend corebusinesses

  • Growth Parameters
  • New core extensions
  • Derivatives
  • Integration
  • Value creation thru partnerships
  • Achieve competitiveregional position
  • Expand domesticpetrochemicalcapacities

THE

FUTURE

COMPLETED

COMPLETED

Time Frame

2001–2005

2010-2020

2005–2010

In the current Horizon, PIC plans to further strengthen its position inside and outside Kuwait

Horizon 2

Horizon 1

Horizon 3

create scale and enhance the positioning of its core businesses and diversify its portfolio
Create scale and enhance the positioning of its core businesses and diversify its portfolio
opportunities
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.
linking our growth plan to kpc downstream businesses
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.
sources of integration value
Sources of Integration Value
  • 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
competiveness in international markets
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
competiveness in international markets29
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
slide30
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 )
petrochemicals industries are a major player in kuwait gdp creation
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

project opportunities under development
Project Opportunities under development
  • China Project with Kuwait Petroleum International to implement an Integrated Refinery/Petrochemicals Complex
  • Olefins III Project – World-scale project opportunity in Kuwait
  • PTA/PET Project in Kuwait.
  • Refinery/Petrochemicals integration Projects in Kuwait
challenges34
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
pic transition to product oriented organization
PIC transition to Product Oriented Organization

Chairman & Managing Director

  • The organization is Product Focus
  • Introduced new functions like Corporate ENGHSE
  • Established the basis for Growth focused Team work
  • Introduced best practices and business governance

Board Secretary

Deputy Chairman & DMD Planning

DMD Admin & Finance

Finance

Corporate Planning

Human Resources

Engineering and HS&E

ERM

Information Technology

Services & Comm.

Six Sigma

DMD Fertilizers

DMD Aromatics

DMD Olefins

Business Analysis & Planning

Business Analysis & Planning

Business Analysis & Planning

Marketing

Marketing

Marketing

Fertilizers (Manufacturing)

Business Dev.

Business Dev.

MEGlobal

KARO

Equipolymers

PP

GPIC

TKSC

Olefins II

EQUATE

slide37
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
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