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SAUDI PETROCHEMICALS: BUILDING VALUE THROUGH COMPETITIVENESS 26th January, 2015 Key Enablers for Competitiveness VALUE THROUGH COMPETITIVENESS Government policies and support Increased efficiency and value chains Innovation and sustainability Value Contribution Creating value for the national economy Direct, indirect and induced employment Major weight to Tadawul (KSA stock exchange) Dividend payments Support base for KSA’s downstream industry Innovation and knowledge eco systems through research and technology (R&T) and Application Development Centers in KSA and globally Solid base for the growth of service industries, e.g., insurance, banking, logistics State of the art assets Cash payments to service sector No. 1 ESSENTIAL ENABLERS OF COMPETITIVENESS Key Enablers for Competitiveness Government policies and support • Feedstock allocation at competitive prices. • Competitive infrastructure -port facilities and services. • Increasing economic diversity through Saudi national industrialization program. • Funding through Public Investment Fund, Human Resources Development Fund, SAIIC.* Increased efficiency and value chains • Industry has created more than 50 value chains across a wide range of products. • Today’s value chains more sophisticated than those of petrochemicals, steel, cement. • National Industrial Cluster Program leading development of Saudi auto industry. Innovation and sustainability • Innovations in products, applications and technologies. • Nineteen global technology and innovation centers, with four in KSA. • Open innovation through collaboration with first tier universities and customers. • Innovation portfolio (10,000 patents). • Special Industrial Zones (SEZs). • SABIC aspires to reduce energy intensity and greenhouse gases 25% by 2025. • Human capital development though undergraduate and graduate scholarships and training programs. • Promotion of small to medium-sized enterprises (SMEs). • Coordinating operations with Saudi Energy Efficiency program. • Sustainable solutions across the value chain. *SAIIC = Saudi Arabian Industrial Investment Company No. 2 KSA Petrochemical Industry Value contribution VALUE CONTRIBUTION TO NATIONAL ECONOMY Contribution to GDP • In 2013 domestic petrochemical industry was 4.3% of GDP or 43% of total manufacturing value addition to GDP. • Market capitalization of listed petrochemical companies 32% of Tadawul (stock exchange).* Assets and Market capitalization • Industry created state of the art technology asset base of SR 600 bn. • In 2013, listed Petrochemical Co.’s market capitalization was 20.5% of GDP. Direct payments to Saudis and Saudi entities** • In 2013, estimated direct cash payments of SR 42.5 bn to Saudi entities, including SR 20.1 bn in dividends and SR 4.5 bn Zakat and social insurance. • Cash payments to domestic services companies like insurance, banking, and logistics approximately SR 6.6 bn. * In the first half of 2014. ** Excluding payments for feedstock, power and gas. No. 3 VALUE CONTRIBUTION TO NATIONAL ECONOMY (CONT.) KSA Petrochemical Industry Value contribution • Direct employment of 35,000. Employment creation and Saudi Salary payments • Direct annual salary and benefits payments to Saudi employees SR 11.3 bn. • McKinsey estimates total employment of 280,0000 (Direct + Indirect supplier or contractor + indirect customer + induced). • Annual Indirect and Induced Saudi salary payments approx. SR 13 bn. • The industry made large investments in training institutes, research and technology, and Application Development Centers. Research and technology • SABIC’s SPADC, which cost of SR 472 mn and houses 180 scientists, acts as building block for knowledge, skills and to drive downstream development. • Large investments made by Aramco, SIPCHEM, Tasnee and others on training, research and technology centers. Added value of petrochemicals industry • Huge amount of value created directly and indirectly germinating from KSA’s Petrochemical industry. • The value created by petrochemicals industry – as opposed to the direct export of all feedstock – is estimated by be US$34 bn annually. No. 4 CONCLUSION • Saudi Arabia’s petrochemical industry is a major contributor to GDP, employment creation, new investments, financial markets and a key constituent of the downstream as a result of: • Feedstock competitiveness; • Supportive government policies; • Constantly improving efficiency; • Commitment to innovation and sustainability. No. 5 THANK YOU