Q1. Sabic, one of the partners of GPIC posted a sharp fall in fourth-quarter profit, due to a drop in demand for petrochemical products. How has the global economic slowdown affected GPIC?
In looking over the past turbulent year analysts predict a gloomy 2009 for the petrochemicals sector. We are taking preventive measures wherever required to ward off the impact. Like Darwin said, it is not the strongest that will survive, nor the most intelligent, but the one most responsive to change - and that means having a dynamic organisation and GPIC epitomises that entirely.
Q2. Considering that world demand for petrochemicals is slowing, would the GPIC halt output? If so, which product output would be pruned?
Many plants around the world are shutting down production or reducing the capacity to reduce inventory levels due to high operating cost and as the financial freeze begins to bite. However, GPIC has no concerns as 2009 kicks off. We have not shut down any capacity and do not foresee the need to in the short term at least. This has been attributed to the effective operations of the production units and adhering to stringent control on expenditure, regardless of the volatility of product prices. In addition, due to our product mix, market strategy and the strong cooperation of our marketers (mainly SABIC of Saudi Arabia and PIC of Kuwait) which have proved very successful, we do not anticipate any curtailment or interruption of production in any of our products. We believe the demand for our products will continue to be good due to the extremely reliable operations and on time delivery commitment.
Q3. Are there any plans to cut jobs in view of bleak times ahead? Will there be any delay in any of the company’s expansion plans?
There is no delay in our expansion plans since these plans are already underway. As we do not have excess staff or under utilisation of manpower, we do not see any need for job cuts either in the short term or in the longer term. Although GPIC will actively seek to keep costs to a minimum, it will neither cut jobs nor change the operational budget for 2009. We have already presented our projection to the Board of Directors and our expenditure was already at the optimum efficient level. We are very well placed to deal with the current situation. Our inventories are in excellent shape and we can call on the very strong marketing network of our shareholders and their global capabilities.
Q4. What has been the production performance of the company in 2008? How many tonnes of Ammonia, Urea and Methanol did GPIC produce?
All the plants were operated in a reliable, safe and efficient manner whilst maintaining the specified standards in terms of quality for all products. All the targets approved by the Board of Directors for production and export were achieved well within schedule. Ammonia production, Urea production, Methanol Production, saleable products and total products were the highest yearly production achieved so far. In 2008 Ammonia production was 473,810 tonnes, Urea production was 661,443 tonnes and Methanol production was 410,235. The total combined production (Ammonia + Urea + Methanol = 1,545,488 tonnes) for the year was 8% above the budget. The total saleable production (Ammonia + Urea + Methanol = 1,172,430 tonnes), for the year was also 8% above the budget.
Q5. What was the capacity utilisation at all the three plants?
In 2008 the Ammonia plant achieved 108% capacity utilisation and 109% utilisation factor, the Urea plant achieved 106% capacity utilisation and 106% utilisation factor, while the Methanol plant achieved 104% capacity utilisation and 105% utilisation factor.
Q6. How did GPIC enhance and strengthen its Health, Safety and Environmental (HSE) management systems in 2008? What were the achievements?
2008 was an exceptional year for GPIC in terms of Safety, Health and Environment (SHE) excellence. During the year, GPIC continued to enhance and strengthen its Safety, Health and Environmental (SHE) management systems. These efforts culminated in winning the Chemical Sector Award for a record fifth time from the Royal Society for the Prevention of Accidents (RoSPA) and the GCC Environmental Award for the Best Establishment Adhering to Environmental Legislations.
GPIC continued enhancement of its SHE systems by wining the 2008 Robert W. Campbell Award from the National Safety Council from the United States of America. This prestigious accolade makes GPIC the only company in the world to win the Robert W. Campbell Award and the Sir George Earle Trophy confirming the company’s excellence in the field of health, safety and care for the environment.
GPIC achieved 7,740,966 person-hours of work or 2,416 continuous working days without a lost time accident. Similarly, contractors working for GPIC achieved 5,114,855 person-hours of work or 1,953 continuous work days without a lost time accident. The total combined safe working hours attained is 12,855,821.
The company implemented the Behavioural Based Safety Programme (BBS), which aims to increase the awareness of employees towards best safety practices and instill these as inbuilt behaviour patterns.
The company reaffirmed its compliance to local and international occupational health, safety and environmental laws and regulations and was successfully certified to the Integrated Management System of Publicly Available Standard (PAS) 99 from the British Standards Institute (BSI). The first integrated assessment was successfully carried out in January 2008.
Q7. How is the carbon dioxide reduction deal signed with Masdar different from GPIC’s agreement with Mitsubishi Heavy Industries (MHI), Japan and Tecnimont ICB of India?
The GPIC Board of Directors approved US$ 52 Million to construct a Carbon Dioxide Recovery plant, which is essentially an environmental project that aims to further improve the company’s performance in reducing its Carbon Dioxide emissions. In addition, we have a very caring and considerate Board of Directors who always supports us in reinvesting in our complex and ensuring that its safety and reliability are never compromised, even during tough market conditions.
The project represents an important milestone in GPIC’s plans for sustainable growth and GPIC was dedicated to leading the promotion of the Clean Development Mechanism (CDM) within the petrochemical industry. With this system GPIC will become the first petrochemical company in the Middle East to use such environmentally friendly technology.
Since 2007, Masdar has been developing competences to assist oil, gas and industrial companies in the region to monetise the corresponding carbon emission reduction from CDM projects.
Masdar will manage the CDM process which will lead to the project being registered at the UN regulatory body, a pre-requisite to the generation of Certified Emission Reductions (CER’s).
The company had previously cooperated with Japan’s Mitsubishi Heavy Industries Company which built the GPIC Urea plant in 1998 on schedule and is considered one of the best Urea plants in the world.
Q8. How much has GPIC invested so far for the objective of improving safety, reliability, performance and preservation of the environment?
GPIC is a firm believer that continual improvement in plant safety and reliability is the key distinguishing factor between success or average performance in the petrochemical and fertilizer industries. At GPIC we invest extensively in safety, occupational health, care for the environment and the reliability of our plant. Our average annual investment in these areas for the last five years has been around US$ 131.5 Million. This has enabled us to ensure that our complex at Sitra, which has been now in operation for over 24 years, looks newer than when we received it from the project company in 1985.
Q9. How much did the in-house spare part manufacturing programme save for the company last year?
We witnessed that the high cost of spare parts, time required for replenishment and procurement and lead time for availability, were contributing factors in higher production cost and risk on plant reliability. In-house manufacturing of spare parts was visualised as an alternative means to reduce these impacts. We saved around BD170,000 last year alone.
The programme started in 2000 and was expanded to cover a lot of fast moving and high cost items utilising in-house capabilities and resources. To date the programme has saved the company BD 1.615 Million.
Q.10. Is there a problem with feedstock for your operations and plans for expansion?
Although GPIC is looking for expansion opportunities it is true that what we need most is access to competitive feedstock as Bahrain’s resources are limited. However, over the last two years Bahrain has been actively exploring for new oil and gas fields in its territorial waters. Contracts have been awarded and geological and seismic work is underway. Due to the huge advancement in technology the new wells can be drilled deeper than in the past. There is also an enhanced oil recovery programme underway which is aiming to increase output by 100% to 70,000 bpd. GPIC is a top priority in the allocation of these new resources and is hopeful to benefit from them in the next 2-3 years.