1. Deputy Managing Director (Olefins) Petrochemical Industries Company
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

2. Content PIC Introduction PIC Business Portfolio
Introduction to Petrochemicals
Petrochemicals Industries Business within Kuwait Oil Sector
Strategic Growth
Challenges
PIC efforts to implement LTS

3. PIC Among Kuwait Petroleum Corporation Subsidiaries
OSSC
KOTC
KPC
KOC
KNPC
KGOC
KAFCO
ODC
KPI
KUFPEC
PIC
is the petrochemical arm of
Kuwait Petroleum Corporation
PIC is the Petrochemical arm of KPC ……………..
KPC’s strategic direction for PIC is to :
Pursue growth in petrochemicals inside and outside Kuwait,
Focus on high growth Olefins, Aromatics and downstream products.
Pursue full and effective integration.
Leverage the technical and marketing skills of mature markets into new petrochemical projects in growth markets.
Pursue partial or full privatization of the petrochemical activities.
KPC’s Strategic Direction for PIC is :
Increase petrochemicals contribution in KPC’s turnover

4. 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

5. 2030 KPC Downstream Sector Mission & Vision

6. PIC Business Portfolio

7. 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

8. 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
MEGlobal markets Ethylene Glycol produced inside and outside Kuwait
EQUATE is the common operator for (PP, TKOC, TKAC and TKSC)

9. 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
Our primary motive to grow and diversify in petrochemicals has translated into implementation of three major Projects within Kuwait
The Olefins Complex is an extension of EQUATE Complex and a joint venture between the EQUATE Partners
Feedstock Ethane will be supplied by KNPC from their new Ethane Recovery Plant, which is now under construction in Mina Al-Ahmadi.
The product slate is also similar to EQUATE with a new MEG Plant of 600 KTA capacity
PE will be produced through expansion of existing EQUATE facilities.
The Project is scheduled for commissioning ………..

10. Growth in PIC Profits (1995 – 2011)

11. Introduction to Petrochemicals

12. 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
Ethane
LPG
Steam Cracking 1
Ethylene
Polyethylene's
EDC/VCM/PVC
Ethylene Glycol
Pygas
Pyrolysis Gasoil
Fuel Gas
Steam
Propylene
Polypropylene
Acrylonitrile
Light Naphtha
Butadiene
Butylenes
C5s
C4 and C5
Naphtha Splitter
Whole Naphtha
When we consider petrochemicals, there are four main streams of building block or “basic chemicals”. Ethylene, Propylene, C3s and C5s and finally the Aromatics (mainly benzene and paraxylene from a chemical market viewpoint).
There are three main processes to produce these. All processes are mature and with the possible exception of “Methanol to Olefins” there seems little likelihood of a significant technology driven change in the next 20 years. Of the three processes two are very well know to refiners, the Continuous Catalytic Reformer (CCR) and the Fluid Catalytic Cracker (FCC).
Both of these illustrate the symbiosis of refining and petrochemicals. While originally designed for the needs of the growing mogas pools, as the growth rates of the fuels demand reached plateau, the opportunity to extract propylene from the FCC and aromatics for chemicals from the CCR became economically compelling. In fact the paraxylene demand has been such that a string of dedicated CCRs have been built in Asia in the past 15 years. The yield of propylene from FCCs can be very significant, however the fundamentals of VGO conversion make it unlikely the FCC will ever become exclusively a propylene machine.
The steam cracker is the best known dedicated basic chemicals process. Steam crackers can take a range of different feedstock all the way from ethane at the light end through to VGO and Resid at the heavy end, although the heavy feed know-how is currently on in the domain of two or three integrated refining/chemical companies.
CLICK FOR REFINERY ANIMATION. One very interesting feature of all of these processes with the exception of ethane cracking as that they all exhibit significant levels of refinery integration. At one side is the sharing and optimisation of yields through tailoring naphtha to the very different needs of steam cracking (which likes high paraffin content, generally light naphtha) and reforming (where high N+A, generally heavy naphtha gives the most economic yields). At the other end the ability to push by-product feeds to their maximum fuel value is a discipline which makes EMCC stand alone as a the top integrated refining/petrochemical performer.
Lets look a little closer at yield from different olefin feedstock as we build the thinking of the areas where Aramco may be able to develop competitive differentiation.
Heavy Naphtha
Naphtha Reforming 2
Styrene
Nylon
PTA/ Polyester
Raffinate
Aromatics
Reformate
Vacuum Gas Oil
FCC 3
Propylene
Cat Naphtha etc

13. Worldwide Trends in Petrochemicals
Source Nexant
Since the 1990s, key petrochemicals have achieved above GDP growth rates globally.

14. 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

15. 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.

16. 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

17. Shift to Differentiated Products
Commodity Products
Differentiated/Downstream Products
Low Value
High Value
High Volume
Moderate to low volume
Capital Intensive
Low Capital Investment
Low Labor requirements
Labor intensive
High level of integration
Usually non-integrated
Proximity to market not critical
Links to market very critical
Supply Chain/Logistics relatively less critical
Supply Chain/Logistics very critical

18. 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

19. Petrochemicals Industries Business within Kuwait Oil Sector

20. 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.

21. 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
Time Frame
2001–2005
2005–2010
Expand domestic petrochemical capacities
Achieve competitive regional position
Downstream extensions
Further international expansions
Extend and defend core businesses
Build emerging businesses
Create viable options
Horizon 1
Horizon 2
Horizon 3
Stage 1
Stage 2
Kuwait : Olefins-II, Aromatics, Styrene
Overseas : PTA, PET, EG
COMPLETED
THE
FUTURE
Growth Parameters
New core extensions
Derivatives
Integration
Value creation thru partnerships
In the current Horizon, PIC plans to further strengthen its position inside and outside Kuwait

22. PIC’s future growth portfolio will target three key growth themes
Enhance Core Olefins Derivatives Portfolio
Broaden Portfolio through Refinery/PC Integration
Financially Attractive/ Diversifying Investments

23. Create scale and enhance the positioning of its core businesses and diversify its portfolio
PIC’s olefin portfolio
will be measurably enhanced by building scale and share and diversifying feedstock exposure, product mix and asset location
Joint investments with “sister” K companies
will provide the basis for overall advantage and allow PIC to leverage a core strength of KPC (i.e. hydrocarbon advantage)
Investments in “linked” downstream specialties and diversified chemicals
provide capital cycle diversification and the prospect of higher less cycle earnings component
Targeting Asian investments
will provide diversification of asset base outside and also allows for capital optimization and enhancement of channels to market
Opportunistic M&A
Grow/maintain market share in core businesses

24. Strategic Growth

25. 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.

26. 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.

27. Sources of Integration Value
Margin Maximization
Operating Cost Reduction
CAPEX Optimization
Portfolio Options
Sustainability Benefits
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

28. 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

29. 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

30. 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 )

31. 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

32. 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

33. Challenges

34. 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

35. PIC efforts to implement LTS

36. PIC transition to Product Oriented Organization
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
Chairman & Managing Director
Board Secretary
Marketing
Business Analysis & Planning
Business Dev.
Fertilizers (Manufacturing)
DMD Fertilizers
DMD Aromatics
DMD Olefins
Finance
Corporate Planning
Information Technology
Deputy Chairman & DMD Planning
Six Sigma
DMD Admin & Finance
Human Resources
Services & Comm.
Engineering and HS&E
MEGlobal
Equipolymers PP
Olefins II
EQUATE
KARO
GPIC
TKSC
ERM

37. 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

38. Thank you