Saudi government is keen to improve industry

Saudi Arabia’s Energy Minister Khalid al-Falih said that the Gulf region can claim only two percent of the world’s $4 trillion a year in chemicals revenue, including all the branches of downstream value addition despite its commodity leadership position in oil and gas leadership and production.

He said that this is largely due to the Gulf’s limited position in higher and value-added products.

“For example, our region’s share of global specialties revenues is barely one percent compared to 25 percent for Western Europe, and we account for only three percent of worldwide value addition from chemicals, compared to the 25 percent of value addition that comes from the United States,” Falih said.

The region locally consumes only about 18 percent of petrochemicals for conversion into higher value products while more than 80 percent are exported.

In return, the United States exports only one-third of its petrochemical production as basic commodities while the two-thirds are usually converted into higher value products, Falih explained.

“I urge our regional industry to match the US conversion rates by the year 2030. Likewise, the US and European chemical industries each employ between five and six million worker, directly and indirectly, compared to only about half a million here in the entire GCC.”

We are also falling behind our global competitors in terms of operational excellence since our region’s operating costs exceed US levels by between 15 and 20 percent and China's levels by double these percentages, Falih noted.

As a result, the profitability of the sector and its macroeconomic benefits have declined significantly. The competitive cost structure depends largely on the cost advantages of the feedstock rather than on the cost of production, Falih said, stressing the need for concerted efforts by the government, industry, investors and innovators to bridge these gaps.

“In other words, if we are to take a leadership position that corresponds to the immense potential of our region, the future-oriented progressive government policies must be supported by sound institutional strategies as well as an environment that fosters entrepreneurship, venture capital, research and development,” he said while delivering the inaugural address at the 12th Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum in Dubai.