16
December
2014
HYDROCARBON
ENGINEERING
have a projected capital investment budget of US$ 28 billion. In
addition, neighbouring Malaysia, Indonesia and Brunei are also
planning their own independent refinery and petrochemicals
complex to fulfill similar needs.
Taken together, these integrated refinery and petrochemical
sites represent more than US$ 50 billion investments over the next
few years till 2020 (Table 1). In addition to these megasites, a
number of individual chemicals projects are being planned or
developed across the region. This is a massive investment plan in
the coming years and needs to be very well thought through by
the project sponsors and developers in terms of risks and returns.
The ASEAN NOCs championing the megasites need to
address six critical areas to ensure that their investments stay
attractive and are sustainable over the long term.
Downstream investments
NOCs need to consider how far downstream they will go in each
value chain (bulk petrochemicals, polymers, engineered plastics,
specialty chemicals, etc.) to maximise the investment returns.
Since ASEAN countries are currently oversupplied as a region in
the production of bulk petrochemicals and polymers, NOCs need
to look into the growing demand for other chemical products
such as olefin derivatives, engineered plastics, specialty chemicals
and other niche products/green chemicals to develop the
appropriate slate of products for their integrated complexes. This
requires a detailed understanding of the end consumer markets
and customer preferences/needs and translating that into
product specifications that could be manufactured locally. It is
also essential to build significant research and development and
innovation capabilities in the NOCs as well as codevelop
application centres with customers to create new products. Only
by marrying the complex molecular chemistry with deep customer
insights and innovation capabilities will NOCs be able to develop
the right slate of products.
Site development
Once the NOCs have acquired a deep understanding of the
individual products they would produce and the individual
product requirements, they need to build up their sites in a
manner that maximises the site’s competitive advantage. Optimal
development of the site requires fundamental thinking regarding
site infrastructure (land, utilities, ports) and logistics (inbound and
outbound), access to raw materials, the
localisation of critical technologies, ways to
attract small and medium sized enterprises to
the location, incubating and developing value
added/ancillary/support services to the
businesses and attracting the right capabilities to
the site. These issues need to be fundamentally
addressed upfront and the NOCs/project
owners need to develop the right strategies to
build a truly competitive site. Megaproject
developers in ASEAN countries have the luxury
of starting from a clean sheet as a lot of the
investments are greenfield in nature. As such,
NOCs should learn from the experiences of
other integrated megasites such as the Jurong
Island in Singapore, Ludwigschafen in Germany,
Jubail/Yanbu in Saudi Arabia and ensure they
understand the current best practices in place
and how to improve upon them even further. In the experience of
the Boston Consulting Group, optimal site development is one of
the critical successes factors for a cost competitive positioning on
the petrochemicals supply curve.
Partnerships
NOCs and their joint venture partners cannot expect to do it all
by themselves when it comes to optimally developing the
megasites and housing all the right capabilities. Crafting the right
partnerships is critical to ensure optimal site development. For
example, Petronas is teaming up with consortia of international
companies such as Evonik (specialty chemicals), Versalis
(elastomers) and Itochu (downstream plants) for the development
of the RAPID project. In Vietnam, Petrovietnam is partnering with
the regional champion PTTGC to develop an integrated refinery
and petrochemicals complex with the possibility for other
international players to join in. The quality of the partnership
‘eco-system’ is extremely critical for the successful development
of the sites as partners need to bring complementary skills and
capabilities to the table.
In this context, NOCs should form a holistic view on all the
companies they could potentially partner with across key areas
such as development of utilities (e.g. cogeneration), development
of services (e.g. asset management, value added services,
maintenance/turnaround/IT services), development of logistics
facilities (e.g. warehousing, port services etc.) and development of
local workforce/ human capital (e.g. technical academies, local
research and development centers etc.). Crafting such partnerships
across all these areas requires a holistic approach, way beyond
laying out an outsourcing strategy for the various infrastructure/
service requirements.
NOCs also need to clearly identify and agree the appropriate
roles and responsibilities for the various partners involved in the
site and take upon themselves the role of the master planner and
matchmaker for the site. Developing a partnership strategy,
identifying the right partners and developing the roles and
responsibilities needs to be closely linked to the entire site
strategy. In this context, finding out the right mechanism to ensure
the whole complex is run on an integrated margin basis is
paramount to unlock the full potential and value of the megasite.
Capturing the full value of integration is difficult, even in sites that
have a single owner, given cultural differences, incentives
Figure 2.
ASEAN ethylene cost curve and challenging cost
positioning of ASEAN companies.
