Europe's loss in oil and gas market is Middle East's gain, says AspenTech
- Bahrain: Monday, January 21 - 2013 at 12:42
- PRESS RELEASE
Globalisation has blurred commercial boundaries. In a European Commission 2007 report, between 1995 and 2005, world chemical production increased by almost 40%. However, over 95% of that growth was concentrated in developing countries.
Maintaining a focus on supply chain management will help companies meet customer demands and regulatory requirements and keep ahead of the fast-moving industry trend.
Rob Howard is AspenTech's Senior Director of Business Consulting for the Middle East and North Africa (MENA) based in Bahrain and responsible for leading a team of technical consultants who work with Middle East clients to improve the profitability of their engineering, manufacturing and supply chain business processes and solutions.
Here, Rob provides insights into the trends across the resource rich MENA region, opportunities and the key issues affecting companies' operational performance.
From a chemical and polymers perspective, we are seeing a growing level of naphtha cracking with the objective of generating olefin feed stocks and downstream derivatives. The Sadara joint venture is currently constructing a new $20bn petrochemical complex in Saudi Arabia.
In the UAE, expansion can be seen with a new a refinery expansion at Ruwais to add 400,000 barrel per day (bpd) capacity. These large sites are increasingly taking market share away from established OECD countries.
Furthermore, these refineries are often complex operations. They make high specification products that are then widely exported and sold for premium prices.
There are also many revamps of existing plants taking place, some of which are in response to more stringent gasoline, diesel and sulphur regulations. In petrochemicals, the Middle East is also becoming a higher value producer of products. Plant operators are introducing more differentiated, higher value polymers.
For instance, in the last couple of years we have seen the first manufacturing of polycarbonates and related specialty polymers emerge in Saudi Arabia.
In addition, countries such as Saudi Arabia are finding it difficult to secure new ethane for their petrochemical plants.
So, increasingly new plants are switching instead to cracking products like propane, butane and naphtha and generating more diversified olefins as by-products to make different kinds of polymers for end users.
In 2012, the price of ethane in Saudi Arabia legislated at 75 cents per million British Thermal Units (BTUs). Historically, ethane prices in Western Europe and the United States have been around ten times this figure.
Recently in the US, however, due to the shale gas explosion, prices have fallen to around $3 per million BTUs. This means that for the first time in almost a generation, US crackers are becoming competitive with those in the Middle East.
As a result, there is a growing need for Middle East operators to ensure that their integrated petrochemical complexes are flexible in what feeds they can process.
With the right planning, scheduling and operational systems in place they can use these different feedstocks in an optimum way, thereby helping drive margin improvement potential.
For example, many companies have adopted AspenTech's Aspen PIMS to optimise crude selection and Aspen Petroleum Scheduler to create feasible, economical refinery plans.
The end result is minimised supply chain upsets, improved yield of more valuable products, increased manufacturing efficiency and reduced margin leakage.
Investment and integration leads to opportunity
It has been predicted that Ethylene production in the Middle East and Asia will continue to expand and the annual growth rate will diminish in Western Europe. Middle Eastern producers are starting to exploit their feedstock advantages and this will drive the expansion of the chemical sector.
New cracker capacity being constructed in these regions is in much larger and more technically advanced plants that can achieve significantly lower unit costs than their aging European counterparts.
Refiners have to overcome a host of challenges from cultural issues around silo mentality to logistical concerns including location and the cost of inventory to issues with skills shortages. Process industry software technology is playing an important role to help tackle these problems.
Equipped with latest software tools, refiners can meet demand and use applications as a basis to launch a more transaction-oriented and commercially astute approach to their business operations.
For Middle East companies, integrating the overall business processes from planning through to scheduling and execution can achieve significant improvements in performance with payback in months. The region is well placed to capitalise upon market opportunities that exist today.
The short-term return is technological innovation and commercial growth - the long-term reward will be a thriving talent pipeline and an improved competitive infrastructure.
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