PETROCHEMICAL WINNING STRATEGY SABIC : FROM GREEN FIELD TO GLOBAL GROWTH IOC Petrochemical Conclave, India 16 March 2012 Henry Wang, SABIC IOC Mar12 CSP EA HW 20123
INTRODUCTION Good afternoon and thank you for kind invitation to speak Henry Wang : Executive Adviser Corporate Strategy and Planning Saudi Basic Industries Corporation (SABIC) India Petrochemical & Chemical Growths SABIC set out on the journey 35 years ago We are happy to share our experience and learning with India Government and our valued Strategic Partners in India No. 1
SABIC : OUR JOURNEY. 1976 only a vision Today a leading Global Petrochemical Company Revenue >$50 Billion Net Income $7.8 Billion Production > 67 Million Metric Tons Present in > 40 Countries 87 International Subsidiaries & Sales Offices 16 Technology & Innovation Centers 33,000 employees & talented individuals...no longer a vision but a reality No. 2
SABIC : OUR BUSINESSES 6 Global Strategic Business Units (SBUs) Chemicals Polymers Performance Chemicals Innovative Plastics Fertilizers Metals From 1976 onwards a growth engine meeting worldwide demand for Petrochemicals, growing from 6 to 67 million tons per year production No. 3
SABIC : OUR GROWTH SUCCESS STORY From Green Field & Fishing Villages to Global Growth Share our story and our learnings SABIC is a case study with Unparalleled experience in helping our Strategic Partners succeed Growth with Global Partners Growth capabilities and competencies Emerge and Succeed on the World Stage No. 4
SABIC : THE BEGINNING 1970 Saudi Arabia largely un-industrialized Saudi Government Vision & Strategy aimed at : Modernize the country and its infrastructure Diversify the economy to develop a 20 th century economy Focused on Education Health Services Infrastructure development Private business participation GDP Added Value Contributions Reduce dependence on oil Develop Refining, Gas and Petrochemicals (when Petrochemicals was a regional business and global trading of chemicals limited) No. 5
SABIC : EARLY IMPORTANT DECISIONS Simultaneously develop people, infrastructure and the economy Open up Labour markets & created employment Invest our oil proceeds in diversification and development Encourage imports of leading EPC, construction Equipment and supplies Offer competitive financing up to 60% of capital investment Develop State-Owned Enterprises (SOEs) for rapid development of Power supply, Water, and Infrastructure 2 Commercial SOEs developed SABIC and SAMAREC: Reduced country risk for investors Facilitate access to Saudi Arabia Localize expertise, know-how, and management Aggressively encourage Foreign Direct Investment in Refining & Petrochemicals No. 6
SABIC : EARLY IMPORTANT DECISIONS (CONT D) Build gas distribution capability for industry, desalination and power Develop 2 industrial cities Al Jubail on the East Coast Yanbu on the West Coast Establish the Royal Commission For Jubail and Yanbu to: Co-ordinate Ministries, Authorities, Utility providers Develop Infrastructure Manage land allocation Provide telecommunications Municipal and industrial services to residents and tenants No. 7
SABIC : INDUSTRIAL DEVELOPMENT : A TALE OF TWO CITIES : JUBAIL Al Jubail was a quiet fishing village in the 1960 s. Today it is a world scale chemicals and refining hub and still growing. It is a modern industrial city Planned with growth in mind phase 1 = 35,000 hectares Built in 2 parts Residential and Industrial. With phase 2 total land area reaches 75,000 Hectares! Development included: Road networks Water, power, telecoms, sewers Connections between industrial port and industrial sites by pipelines & iron ore conveyor Two ports constructed: one industrial, chemical, fertilizer, sulphur, refinery products, RORO ships, connection to sites. A commercial port commercial for containers and plastics products PE,PP,PS,PVC No. 8
SABIC : SEEING IS BELIEVING No. 9
SABIC : Jubail : Seeing is believing No. 10
SABIC : YANBU : SEEING IS BELIEVING No. 11
SABIC : JUBAIL : SEEING IS BELIEVING No. 12
SABIC : INDUSTRIAL DEVELOPMENT : A TALE OF TWO CITIES Jubail and Yanbu today producing the majority of SABIC Petrochemical & Chemicals, Fertilisers, Iron & Steel Products The 2 cities are perfect locations Enabling deep integration Reducing total capex and opex No. 13
SABIC : ITS FORMATION AND PURPOSE SABIC was created by the Saudi government in 1976, with $3 Billion capital, to utilize associated gas to produce value-added chemicals, polymers, fertilizers In 1984, the first public offering of 25% of SABIC was made for public purchase SABIC was created as the government vehicle for Development of Petrochemical & Chemical Clusters Fertilizers Metals We had many doubters and critics This was a regional industry and KSA did not have critical mass Petrochemical trading was limited back then We had many doubters who paid lip service & did not believe we can succeed. No. 14
SABIC : WE BELIEVED! We were sure that we would succeed, we now know why, and we are happy to share with you. The primary success factor is the vision of the Saudi government They were generous in their support They met their commitments SOEs were created and with Ministries delivered quality facilities, reliable services and supply of fuel gas and feedstock SABIC was always managed as a commercial enterprise Managed by SABIC Board provided advisory and strategic direction AND KSA issue resolution (Infrastructure/regulatory We embraced integrity, focusing on delivery and performance In the 70 s and 80 s we operated as a holding company, transforming by the 90 s to a corporate business model No. 15
SABIC : WE BELIEVED! Complexes were developed on a stand-alone basis They were developed jointly with world leaders To provide technology and know-how To jointly develop projects and share EPC experience Share management, commissioning, start-up, and operational experience To train Saudi engineers, operators, and technicians (up to 2+ years) To market and sell products Plants were designed using best-in-class proven world scale technologies Using first class contractors and suppliers With total quality principles, Highest EHSS standards, Safety commitment, all from CEO level Investing in logistical infrastructure, and participating in a chemical shipping company No. 16
SABIC : WE BELIEVED! We developed our own Marketing and sales organization ahead of start-up Focused early on the Customer Developing capabilities to adopt new technologies successfully Early R&D focus 1989 begin development of SABIC R&D capability 1992 Riyadh R&D centre World class, analytical, unique PE Pilot plant A willingness to learn Embrace best practices Continually adopt new, more sophisticated processes and systems Constant Organizational adaptation, leveraging experience & responding to changes Business model developed from a holding company to a Global Corporation today No. 17
SABIC : GROWTH IN KSA AND THEN GLOBALLY From our outset we excelled in the pursuit of growth We grew organically either with JV or 100% owned structures By 2000 we realized growth was needed at home and abroad For stronger presence in mature and emerging markets 2000 Revenue ~$7Billion, with 10% in Europe 2002 Acquisition of DSM Petrochemicals 2006 Acquisition of Huntsman UK Petrochemicals 2007 Acquisition of GE Plastics, now SABIC Innovative Plastic 2009 Sinopec JV in China start up 2010 Beginning of China growth Platform Successful JV More JV s to come No. 18
SABIC : TODAY A GLOBAL CORPORATION We are now experienced in organic, JV, and M&A growth Our KSA growth continues We want to share our experience to grow in new areas and markets which provide opportunities to add value Many emerging economies will find SABIC the right partner for growth We are ourselves the product of an emerging economy! We have fresh and first hand experience FROM GREENFIELD TO GLOBAL GROWTH No. 19
SABIC & INDIA We have a sincere and genuine interest to collaborate with the India Petrochemical, Chemical & Energy industry and the Government of India to grow the Petrochemical & Chemical industry. Petrochemical growth is the foundation of economic growth, creating high quality employment, and enables downstream investment. SABIC s experience is one of rapid, efficient and effective monetization of valuable resources We have played and still play a major role in the development of the KSA economy From Green Fields & Fishing Villages to Global Player Sustainable Developments & Successes We create sustainable Win-Win Partnership with all our Strategic Partners globally SABIC : A MAJOR GLOBAL PETROCHEMICAL CORPORATION No. 20
THANK YOU FOR THE KIND INVITATION TO SPEAK IOC Mar12 CSP EA HW 20123