Aramco targets 150% sales rise

Saudi Aramco chief has set ambitious targets for the Gulf's chemical and petrochemical producers over the next 10 years, in what he termed will be the region's golden age.

The targets involve a 150 per cent increase in sales from $80bn in 2010 to $200bn in 2020; five-times rise in workforce and a ten-fold increase in research and development spend from half per cent of a company's revenues to 5 per cent.

From today until 2020, the number of R&D scientists and engineers in the sector should also be multiplied by a factor of 50 from about 500 to 25,000.

Khalid Al Falih, president and CEO of the world's largest oil company said these targets are "doable" and "essential" if the chemical industry wants to take its place alongside oil and gas as one of the Gulf's pillar industries.

This year, he said total global chemical sales will roughly total $3.5 trillion or nearly four times the combined GDP of GCC, directly employing 10mn people and enabling indirect employment of another 50mn.

Despite being home to more than one-third of the world's oil and nearly a quarter of natural gas reserves, the Gulf has a market share of only $40bn or a little more than1 per cent of the total.

"The Gulf's share of global chemical production is only one and a half per cent," Al Falih told the fifth GPCA forum. "On the other hand Europe has 60,000 chemical companies employing more than 1.2mn people. Think about the fact that on the continent, chemicals stand second only to pharmaceuticals in terns of value added per employee or more than 80 per cent higher than the combined average of all manufacturing sectors.

"So how do chemical industries elsewhere in the word generate massive revenues, contribute so much to GDP, and create so many good jobs?

He said the region's counterparts have wide product diversity and immense downstream value addition by going beyond petrochemicals. They supply specialty and performance chemical products to industries like automotive, construction, electronics, textiles, pharmaceuticals and agriculture.

"Without a doubt, we enjoy significant energy advantages," he said. "But is the Gulf pulling its weight when it comes to the wider petrochemical and chemical industry? The answer is unfortunately no, because when we consider downstream conversion and finished products, that is, areas that are much richer in terms of value and employment potential, the region has a lot of catching up to do."

In a business-as-usual scenario, GCC chemicals output is forecast to double from $40bn to $80bn in 2020 but Al Falih said the region must target $150bn-$200bn per year by capitalising not only on growing existing businesses but more so on creating new ones.

This massive expansion entails job creation, which he said must result to a growth in chemicals-related workforce by a factor of 10. "This is achievable given the tremendous job-creation potential of specialty chemicals and associated downstream industries," he said. "For every one person directly employed in the global chemical industry, five more people work in related businesses and for every million dollars that is invested in the conversion industry, 30 jobs are created versus less than three jobs for the same investment in the primary industry."

The region has relied primarily on the licensing of technology from others so to be able to create new businesses, the region's producers should increase its investments on R&D. Al Falih said the GCC petrochemical sector currently spends only half a percent of its revenues in R&D compared to 2.5 to 3 per cent by leading European and American firms.

"If we are to compete and lead globally, I believe the Gulf's chemical sector must increase in R&D spending by a factor of 10 or to roughly 5 per cent of the total sales," he said. "Part of the solution also lies with the academic and research institutions throughout the Gulf. By tying their initiatives back to the needs of the region's chemical enterprises, these research centres can develop into significant hubs of excellence."

At the bottom of all these targets is the task to develop talent. In addition to revenue and value addition, production of sophisticated researchers, scientist and entrepreneurs and marketers produced need also be assessed.

"Since so little data is available for the Gulf, I will hazard a guess that at the most there are 500 true scientists, engineers and researchers employed in the chemicals R&D across the GCC. I therefore propose that we establish an aggressive target of multiplying this by a factor of 50 over the next coming two decades."

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