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GPIC: investing in the sustainability of its business and its operations

GPIC: investing in the sustainability of its business and its operations



GPIC: building on its success

Leaving behind a challenging year, GPIC says it will prevail through the general slump in the economy by adopting bold production targets, optimising output and ensuring a dynamic focus on operational excellence, its president Dr Abdulrahman Jawahery tells Pummy Kaul

January 2019

Bahrain-based Gulf Petrochemical Industries Company (GPIC) has continued to build on its success in 2018 by achieving record production milestones, lowering the cost of production as well as achieving higher exports compared to budget, says GPIC president Dr Abdulrahman Jawahery.

“GPIC has managed to lower the cost of production by 3 per cent compared to budget. It has also achieved 12,240 million tonnes (mt) higher production compared to budget and our exports are 3 per cent higher compared to budget,” says Dr Jawahery in an exclusive interview with Gulf Industry.

GPIC’s total production capacity sits at 1.5 million tonnes, with roughly 40 per cent being urea, followed by ammonia and methanol at around the equal capacity percentage. In 2018, urea reached 656,606 mt, followed by ammonia at 421,171 mt and methanol at 424,645 mt respectively,” he says.

In 2018, GPIC carried out a total plant turnaround after almost three years of continuous operations. Because of this, the projected production and export is expected to be less than 2017.

Dr Jawahery: spearheading growth at GPIC

Dr Jawahery: spearheading growth at GPIC

In 2018, GPIC has exported a total of 1.15 million tonnes of ammonia, urea and methanol; this represents a 5.5 per cent drop from 2017. GPIC’s export records by product showed 423,486 tonnes of methanol, a 6.7 per cent drop from 2017, 689,793 tonnes of urea, an increase of 1.2 per cent from 2017 and 37,421 tonnes of ammonia 21 per cent less than the planned exports during the year. The products were shipped by 71 vessels to their final destination.

The total planned production of ammonia, urea and methanol in 2019 will be 1.58 million tonnes, out of which 1.19 million tonnes will be available for export, Dr Jawahery says.

According to him, the traditional markets have witnessed a dramatic shift and the company is exploring any potential new emerging opportunities and customers coming from a number of key regions around the globe.

For GPIC, China and Brazil has had the highest share of the company’s exports in 2018 with 18 per cent followed by India with 16 per cent and Taiwan with 14 per cent, he says.

Due to increase in global demand for the GPIC’s products during 2018, GPIC’s revenue expectations for the full-year 2018 is $341 million compared to $299 million in 2017. The percentage contribution for each of the following products is ammonia 3 per cent, urea 53.5 per cent and methanol 43.5 per cent. Its revenue projection for 2019 is $325 million, he says.

Also, the construction of its new $8.8 million Urea Formaldehyde (UF 85) plant has been completed. The unit is now under commissioning and production is expected to have started by the fourth week of December 2018 with an output of 22 metric tonnes per day (mtpd). The total investment in this project is $13 million.

 

Excerpts from the interview:

What were the main highlights and milestones of GPIC’s performance in 2018?

In 2018, GPIC has managed to lower the cost of production by 3 per cent compared to budget. It has also achieved 12,240 million tonnes (MT) higher production compared to budget and our exports are 3 per cent higher compared to budget.

 

What was the total production and actual output for 2018, for each of the following products: ammonia, methanol and urea?

Dr Jawahery being briefed on the progress on plant turnaround operations

Dr Jawahery being briefed on the progress on plant turnaround operations

GPIC’s total production capacity sits at 1.5 million tonnes, with roughly 40 per cent being urea, followed by ammonia and methanol at around the equal capacity percentage.

Our 2018 production breakdown reflects the percentages mentioned above, where urea reached 656,606 mt, followed by ammonia at 421,171 mt and methanol at 424,645 mt respectively.

Our output capacity for 2019 is expected to be just over 684,000 mt for urea, with methanol at an expected 454,860 mt and ammonia at 444,030 mt.

 

What production capacity expansions did the company recently complete or are due to be taken up in the near future?

GPIC is constantly looking to add value to the market and its shareholders and stakeholders alike. The company firmly adopts, what we term, Integral-Forward-Focus, which means we manage our operations, our plants and our strategy pre-emptively. Preemptive moves exist all along the value chain and it’s about capturing those opportunities and/or cornering aspects such as raw materials and components to position one’s product offering in a unique way.

As part of this overarching strategy, we have also adopted a number of step changes to increase the production capacity of our plants whilst at the same time never compromising our quality, efficiency and exceptional internationally recognised health and safety standards.

Looking to the future we are focusing on a number of prospects and projects that align to our brand proposition, our 2030 Corporate Strategy and our strong partnership and relationship with our shareholders. As we proactively explore these potential growth options, our decisions will be firmly grounded in a value proposition that makes investment sense for our shareholders and stakeholders alike.

 

What is the status of the new facility within the GPIC being built to produce Urea Formaldehyde? What is the expected production target and when is the actual production expected to start?

The construction of our Urea Formaldehyde (UF 85) plant has been completed. The unit is now under commissioning and production is expected to start by the fourth week of December 2018 with an output of 22 metric tonnes per day (mtpd). The total investment in this project is $13 million.

GPIC achieved a record 30 million working hours without any lost time accident, exceeding 6,070 days

GPIC achieved a record 30 million working hours without any lost time accident, exceeding 6,070 days

The 22 mtpd Urea Formaldehyde (UF-85) plant, reflects GPIC’s sincere commitment towards society while ensuring the sustainability of its operation through economic efficiency, effective use of its products, conservation of natural resources, thereby minimizing impacts on environment and bio-diversity.

This plant has been designed and constructed for GPIC’s captive consumption. This will make the existing operation more reliable without being dependent on any external agencies.

 

What are the revenue expectations of GPIC for full-year 2018 and how would the figure compare with 2017? What is the projection for 2019?

Due to increase in global demand for the GPIC’s products during 2018, revenue expectations for the full-year 2018 is $341 million compared to 2017 that was $299 million. The percentage contribution for each of the following products is ammonia 3 per cent, urea 53.5 per cent and methanol 43.5 per cent. Our revenue projection for 2019 is $325 million.

 

What were the export statistics for 2018? How does it compare with 2017? What is the projection for 2019?

In 2018, GPIC carried out a total plant turnaround after almost three years of continuous operations. Because of this, the projected production and export is expected to be less than 2017. In 2018, GPIC has exported a total of 1.15 million tonnes of ammonia, urea and methanol; this represents a 5.5 per cent drop from 2017. GPIC’s export records by product showed 423,486 tonnes of methanol, a 6.7 per cent drop from 2017, 689,793 tonnes of urea, an increase of 1.2 per cent from 2017 and 37,421 tonnes of ammonia 21 per cent less than the planned exports during the year. The products were shipped by 71 vessels to their final destination.

The total planned production of ammonia, urea and methanol in 2019 will be 1.58 million tonnes, out of which 1.19 million tonnes will be available for export.

 

Which were the top two export markets in 2018? Which other markets did you export to in that period?

The traditional markets have witnessed a dramatic shift and the company is exploring any potential new emerging opportunities and customers coming from a number of key regions around the globe. The markets like Taiwan, India, USA, Brazil and countries in East Asia have showed sound and growing trends in imports for GPIC’s products, whilst more traditional markets have witnessed an internal consolidation of their imports in general, resulting in a shift in market purchasing patterns.

For GPIC, China and Brazil has had the highest share of the company’s exports in 2018 with 18 per cent followed by India with 16 per cent and Taiwan with 14 per cent. This has all been achieved in accordance with the marketing plan and contractual obligations and in spite of an unstable global market.

 

How much worth of capex projects were undertaken by GPIC in 2018? What were the main projects undertaken?

GPIC: focusing on a number of projects that align to its brand proposition

GPIC: focusing on a number of projects that align to its brand proposition

Every year we undertake substantial investment in the sustainability of our business and our operations. In fact, GPIC does not relate its Capex investment to the revenue it generates. Instead, revenue generation is for us, a by-product of our company’s sustainability strategy in terms of the three pillars – People, Planet and Profits.

GPIC generally budgets around BD15 million each year to undertake its short-term and long-term Capex projects. Of course, volatile markets and global economic instability have resulted in all companies across every sector and every industry, consolidating their costs. GPIC is by no means immune to these factors either, and has during the course of 2018 consolidated and prioritised its Capex investment accordingly.

 

GPIC has been licensed by the Ministry of Transport and Telecommunications (MTT) Ports and Maritime Navigation Affairs Directorate to operate and manage the company’s private export terminal. What new steps does GPIC plan to take on this front?

GPIC was amongst the first industrial organisation in Bahrain to acquire the “Port Operator License” in July 2017 issued by the Ports & Maritime Navigation Affairs for operating and managing its jetty for the export of Urea to the international market. This provides our stakeholders and clients official assurance that GPIC Marine Terminal was built with the highest international standards for export terminals, and meeting all marine and industrial safety requirements for loading large bulk carriers.

Moreover, this licence provides further commitments by the company to comply with all the requirements and regulations set by the port and marine affairs of the Ministry of Transport and Telecommunications, as the regulator of the maritime industry in the Kingdom of Bahrain. This includes all safety, health, environment and security requirements and regulations according to international standards, which will be subject to regular inspections and audits of the facility for the renewal of this license.

 

How much CO2 is being treated daily after the commissioning of the carbon capture system at GPIC?

GPIC is one of the first petrochemical companies in the Middle East to embark on a Carbon Dioxide Recovery (CDR) Project, to cut down greenhouse gas (GHG) emissions and to improve overall efficiency of natural resources by enhanced production of Methanol and Urea in its complex.

GPIC’s CDR unit utilises the latest state-of-the-art and commercially proven technology from MHI, Japan to recover carbon dioxide from the Methanol reformer flue gas stack to increase Methanol Production by 120 metric tonnes per day and the Urea production by 80 tonnes per day. The project was completed successfully in December 2009 ahead of its planned schedule.

The CDR unit has helped in minimising the emission of CO2, a greenhouse gas, through its recovery from the waste flue gas to the atmosphere. The unit captures 450 tonnes of CO2 per day, resulting in GHG emissions reducing by 0.12 million tonnes of CO2 annually. Since 2009 GPIC’s CDR plant has reduced more than 1.1 million tonnes of CO2 emissions to the atmosphere.

 

How much cost savings did GPIC achieve in 2018 and how?

GPIC achieved a cost savings of 3% on overall budget. The savings are due to the following cost reduction initiatives:

GPIC: one of the first petrochemical companies in the Middle East to embark on a CDR Project

GPIC: one of the first petrochemical companies in the Middle East to embark on a CDR Project

a) Implementation of energy efficient equipment during the Turnaround in March-April 2018.

b) An efficient cost management strategy set by Their Excellences the Board of Directors has enabled cost reduction and optimisation particularly in fixed costs. This is as well as initiatives to reduce variable costs, better negotiation and management of our relationship with insurance companies and service contractors, which has contributed to reducing or preventing fixed costs from rising any further. Such cost optimization has enabled GPIC to remain competitive.

c) Moving forward, the ongoing debottlenecking project will ensure that the fixed costs are investigated in more detail; economies of scale are identified, therefore further reducing the cost of production per tonne.

 

How has GPIC coped up with the low oil prices scenario?

GPIC has a strong governance culture, which is designed to ensure a sustainable approach to its business operations and to all of its stakeholders. The company’s values and focused vision underpins its strong record of accomplishment of success and achievements over its many years of operation.

Although this has indeed been a challenging year for every industry and sector, and GPIC has not been immune to the impact of these external forces, the company, through adopting bold production targets, optimising production and ensuring a dynamic focus on operational excellence, will prevail through the general slump in the economy.

Looking at the future, GPIC believes that the means to adding continued value to the company’s shareholders and all of its stakeholders, is through remaining competitive and sustainable through strong growth strategies and implementing a clear and tangible 2030 Corporate Strategic Plan.

As you are aware GPIC produces three main products, two of which granular urea and ammonia are classified as nitrogenous fertilisers while the third one methanol is regarded as a petrochemical. All of the three GPIC products need natural gas as a direct feedstock for their production.

Historically speaking natural gas has generally correlated to the international crude oil prices. In recent years, the falling crude oil prices have significantly affected the natural gas based petrochemical industry creating several challenges for companies especially those that are planning new investments. The volatile crude oil market has dramatically affected the petrochemical feedstock choices, trade patterns, capital spending plans, new plant locations, operating rates, and production technologies.

Methanol is an obvious example of how a discreet petrochemical, which is not even a downstream product of crude oil suddenly got closely linked to crude oil price dynamics and the overall energy complex through the emergence and growth of the methanol-to-olefins (MTO) industry in China.

Already the largest methanol consumer in the world, MTO now makes up around a third of the China market’s demand, accounting for more than 17 million tonnes/year. Plants that produce ethylene and propylene (MTO) as well as some that produce only propylene (MTP) compete with traditional naphtha crackers in the olefins market. When crude oil prices decrease, so too do those of ethylene and propylene, and methanol must also compete with a cheaper naphtha feedstock.

This competition creates a ceiling price for methanol in China, above which the increasingly important MTO demand will disappear. In addition, while MTO only currently exists in China, the huge size and influence of the Chinese market means that the link created by it between methanol and crude oil effectively also holds true for the rest of the global market. Crude oil has thus become what is essentially a substitute feedstock for methanol. Yet it also has the ability to influence the methanol market by influencing demand.




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