Share with your friends

GCC chemical companies on the move as global competitors

GCC chemical companies on move as global competitors

A dramatic fall in crude oil prices, reduced advantage from cheap feedstocks, a shifting competitive landscape, and other challenges are forcing GCC chemical producers to rethink the way they have done business for decades. Taking a cue from chemical industries in both the East and West, GCC companies are exploring a variety of solutions that are showing strong potential for sustainable growth in the future.

Oliver Gawad

Senior Director, Deal Advisory, Strategy Industrials & Chemicals

KPMG in Saudi Arabia


Related content

Door on yellow wall

In today’s global economy, the ‘new normal’ means different things to different businesses in different regions. For chemical producers in countries belonging to The Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates — the new normal means that the golden years of advantaged cheap feedstocks and high growth are over, at least for the moment.

No wonder that GCC petrochemical producers are taking a long, hard look at how to maintain their competitiveness. Solutions are being developed that include examining new business models, undertaking M&As and joint ventures (JVs) enhancing the international footprint, upgrading operations and supporting a corporate culture focused on innovation and commercial excellence.

New strategies and business models

GCC chemical producers are facing a paradigm shift from a strategy based on volume and domestic feedstocks to a more holistic and global approach, often including a move further down the value chain.

Most GCC companies have traditionally been focused on commodity production. Today many of these companies are considering a transition to higher-margin specialty chemicals to remain competitive, even as they recognize the enormous challenges in making such a move.

Keeping in mind the challenges involved in adopting a new business model, a number of major GCC chemical producers are planning to diversify their existing model through JVs and other transactions with multinationals.

Regional developments

Agreements between companies within the GCC are helping to create the critical mass needed to benefit from shared services, utilities and procurement as well as innovation efforts and people development.

The biggest example of this kind of regional development — and the biggest-ever chemical complex to be built in a single phase — is Sadara, a USD20 billion petrochemical facility in Jubail, Saudi Arabia, being constructed by Saudi Aramco and Dow Chemical as well as PlasChem Park. A number of Sadara’s 26 plants will make a combined 2.7 million metric tons of product annually, including polyethylene, propylene oxide, elastomers, glycol ethers, amines, isocyanates and polyether polyols. Many of these products have never previously been produced in the GCC.

A new era for the region

Entering a new era, GCC chemical producers will gradually need to resemble other players in the rest of the world. Regional advantages will remain, though not what they have been in the past. For example, feedstock prices for the GCC will still be at the lower end, and companies will still be strategically positioned between major markets in both Europe and Asia. GCC chemical companies will become more and more subject to the principles of business success that apply elsewhere. With careful guidance and an openness to change, they can maintain and even increase their competitive advantage in today’s world markets.

Connect with us


Want to do business with KPMG?


loading image Request for proposal