The Business Year

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Mohammad Al-Farhoud

CEO, Petrochemical Industries Company (PIC)

Mohammad A. Husain

President & CEO, EQUATE Petrochemical Company

Kuwait is a not only a major oil producer, but the country also has a strong petrochemical sector, with companies performing well locally and expanding their business.

What new technologies and innovations are currently having the largest impact on the petrochemical industry?

Mohammad Al-Farhoud First of all, there is a continuous development in the petrochemical industry that looks into operational efficiency and catalyzing processes. The second major driver is the growing development of available feedstock, especially with the adoption of shale gas and coal processing technologies. These low-cost feedstock production technologies are expected to have a significant impact on the petrochemical markets across the board. We currently do not work with these two technologies; we keep continuous track and will anticipate our strategy accordingly. One of the consequences of this development is that integration of refinery and petrochemical industries are speeded up to remain competitive. Integration of the two industries ultimately goes beyond feedstock security, as it will also widen the product portfolio and thus provides more downstream opportunities for local industries. In addition, in the Middle East, integration is moving fast to face the challenges of ethane availability constraints. In Kuwait, we are adopting this route for our new integrated complex in Al-Zour.

How would you assess the effect of low oil prices on the downstream sector in Kuwait?

Mohammad A. Husain It is a global phenomenon, not just a Kuwaiti one. Looking at numbers, oil prices dropped almost 50-60%, ethylene glycol prices dropped about 30-37%, and polyethylene dropped about 24-27%. So they are not really eye-to-eye, but there is of course an impact. That being said, demand remains healthy. But there is still caution with people waiting to see what happens. We are not over-supplying, because the utilization rate for ethylene glycol and polyethylene stands at almost 90%. Taking into consideration the amount of maintenance, we are almost at 97%. So the market is healthy. We need to keep looking at our value proposition, make sure it is reliable, keep looking at our area in the Gulf, and keep creating value for our shareholders. That is what we have to build on while we manage the current cycle of things at a macroeconomic and global level.

Which regions outside the GCC hold the most growth potential for PIC?

MAF Both our own and our JVs’ operations span the globe, and our investment strategy allows us to look into attractive projects in any part of the world. Apart from the Middle East, we currently assess Asia and North America as important growth areas for petrochemicals. North America has vast amounts of advanced feedstock as well as an attractive market. In Asia, we are primarily present in India, where we anticipate growth of the demand market especially. Our China project is currently on hold as the market regulations are tough on foreign investors at the moment. If we can work out a good partnership with Sinopec, we are interested in moving forward, as we are keen to be in China. Closer to home, after a recent meeting with the Minister of Oil in Bahrain, we are now in the final stages of launching an aromatics project there. As we want to build a balanced portfolio, it will require extensive investments from our side with little initial revenue, but we see great potential.

What are the key developments and changes that have characterized the past year for EQUATE?

MAH The main achievement for EQUATE was the acquisition of MEGlobal as a wholly owned subsidiary in December 2015, which shifted us from being a local operator to becoming a global player with operations in Canada, Germany, and also in the US. That has positioned us completely differently in the international market. Having our product in the US now with this acquisition has really been a major boost for us. We have not had considerable growth since 2009, so this has been a major increase in scale for EQUATE through that MEGlobal acquisition. It positioned us as the second-largest player in the US market after SABIC, with a 12% market share. In reality, we are the most active player in the US market, and everybody sees us as a global leader there. We produce 2.4 billion but actually bring in around 3 billion including through trade and other means. Our debottlenecking project for our polyethylene plant has been finalized and tested, so we are very happy about that. It will increase our polyethylene production from 825,000 tons per year to 1 million. That has pushed us into a good position.



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