Shell remains upbeat on the petrochemical industry despite a slowdown in feedstock demand, a Shell Chemicals VP told Oil Review.
Shell Chemicals New Business Development & Ventures Vice President, Iain John Lo, spoke to Oil Review about his outlook for the petrochemical sector and the company's strategy for the region.
Lo believes there is a general slowdown in feedstock demand due to the economic downturn, but claimed that Shell takes a long term view when working on large scale projects.
"Fundamentally, the outlook for the petrochemical industry is good. Historically, average growth for the industry has been higher than GDP. People will always want the creature comforts that petrochemicals can bring you," he said.
Lo explained that Shell's strategy was to try to integrate their own feedstock into refining and chemicals. They do not want to get involved in everything as they want to remain focused on their own portfolio.
"We are a global business and we have a few derivatives which we believe are leading the market: including propylene oxide and Alpha olefins. We consider these as strong products," he added.
"Our geography is quite concentrated, we are in the US, Europe, Middle East (Saudi and recently Qatar), China and Singapore."
Regional focus
Shell has been involved in Saudi Arabia with Saudi Basic Industries Corporation (SABIC), and since 1984 working on SADAF (Saudi Arabia Petrochemical Company), which is a long term project.
Lo talked about the importance of cluster cities, like Jubail in Saudi and Ras Laffan in Qatar for the petrochemical industry to develop in the region. This is because cluster cities have the main infrastructure already in place.
"When the partnering with industry properly takes off, it will certainly help and this will mean you will not have to ship your products a long way. There is enough demand for this partnership to flourish," he added.
Lo said Shell was looking towards Iraq in terms of petrochemicals. "We have been awarded the Basra Gas Company contract, which is essentially gathering associated gas. But importantly within associated gas there is interesting feedstock. Clearly we are interested in building some synergies with petrochemicals."
He talked about the new world scale petrochemical project which will be jointly developed by Qatar Petroleum (QP) and Shell at Ras Laffan Industrial City. The two sides signed Heads of Agreement for the project in December 2011.
This project will feature a mixed feed cracker and a 1.5mn tonnes per year mono-ethylene glycol plant, the largest ever built. The project also consolidates Shell's strong partnership with Qatar Petroleum across the full chain of hydrocarbon development.
"I think it is an interesting project for Shell and it builds upon our presence in the country. Having worked with Qatar Petroleum internationally in the Petrochemical sector, it is great to be finally able to work with them in Qatar itself. I see the relationship going from strength to strength," Lo concluded.
