Hamad Rashed Al-Nuaimi, CEO of the Qatar Vinyl Company, speaks to Upper Reach about the importance of understanding your target market, your product, and involving education and the media in conveying to the public what industry needs.
Could you provide an overview of the downstream business in Qatar, and some of the country’s industrial advantages?
In Qatar, the oil was in for long time before the gas. I think that until the early ‘70s we never really thought about any downstream development but since then we’ve been keeping pace on developing the downstream for three reasons. The first, it’s not really right to just flare the gas and sell the oil. Secondly, it costs environmentally. And thirdly, for its real added value to petrochemicals.
So, this cyclical business is balancing itself and you are finally making an economic model of each project and each project has more than a 30-year life. The challenge in petrochemicals is that each project, of each type of chemical or petrochemical, is really very sensitive within its category and within its own type of market.
It is a known fact everything in economics is related to population and people growth, etc. But it depends on when will this growth happen and what are the proposed prospects for those specific markets. There are many studies prior to its execution, lots of consultants in these fields, and they’ll come up with modules on how the future will be. Then there are the basics of economics from which you can draw your plan. But at the end of the day you also have to have a shorter view of what is happening in the markets to that specific product and there you decide what your next step should be.
Normally you would do non-commitment work, specifically in the technical side, in the exploration type of design, looking for alternatives and solutions for problems, etc. Naturally, the more you study the project, the more advantage you will have and gain for the future of the project. This is a well-known rule in the project.
If you talk about Qatar, a lot of things can be done, because at the end of the day, the simple idea is added a value to a bigger picture and by adding the value you are able to source out and integrate the energy in a very competitive way.
Gas availability and the associated infrastructure are also coming up at the same time. Also, the geographical position of Qatar related to some competitors and related to the markets that we can target. It’s very viable because you can actually benefit from the freight cost of any product.
Additionally, the education system is being pushed together with the industry in Qatar. We will have the leadership type and the middle-management type coming in very easily from the local market.
The shale gas boom in countries such as the USA, Mozambique or China is having an impact on chemical companies worldwide. The U.S. chemicals industry has invested $15 billion in ethylene production, increasing capacity by 33%, due to the cost decreases in both raw materials and energy. How do you see the international chemical and petrochemical sector evolving and do you see shale gas as a particular threat to Qatar’s position?
Well, I don’t think it will stop the development but this is what I meant earlier by saying that there is no project that is going to really see the light without being complemented with a serious and detailed marketing study. In other words, you will have to have a project where you already have those targeted products you want to move.
The only thing left is being competitive. You have all the possibilities or all the probable types of competition aids available. What you need to do is to be a low-cost producer and therefore, you will be competing in this world. Otherwise, your profits and effort in this economic benefit are not really worth it.
In Qatar, you have the chance of integration, such as joint ventures in sharing, harboring, providing technology and licenses. There are lots of opportunities coming in where you can make noticeable savings on your capital and operations. The main focus is to be competitive and provide great products.
When we take for example the shale gas in the U.S., it is rather easier to predict if you will be a competitor or not in those particular areas. Many companies are going to be competing with the Qatar-based competitors and the clever way around it is to look at the market, analyze what you have and what they have, then evaluate yourself and commit yourself.
To be a low-cost producer, there are many ways, especially in the chemical and the petrochemical sectors. It’s very straightforward, basic economics: supply and demand. The prices are always up and down because of this. People are clever enough to schedule their shutdown around their competitors. It’s a continuous narrow-window-type economic view.
The minute you are on-stream, you really have to keep up with that and maintain yourself there. Then it’s really up to your technique and your ability to become a competitor. Being a competitor is knowing your product and its cost. So the more you integrate, the less you’ll spend on the “nice to have” and keep with the “must have” and “should have”, the safety, the environment and well-being of the community and your people... There are a lot of models where we are doing it that way.
You are talking about the key to being competitive is the downstream sector here, in the chemical and petrochemical in Qatar, is it an interesting sector for international investors?
I would believe so. In general, Qatar has many available energy recourses, which help the economics of any project. Like everywhere, the major part of it is the cost of energy. It is the added value to your profitability.
QVC was established in ‘97 and it has been growing ever since. How do you approach the international market and which markets is QVC trying to tackle at the moment?
At the moment, QVC is quite different from the rest of the petrochemicals. Most of our projects are not really for the final consumer. We are intermediate. That is, moving out of Qatar; our products are plunged to plunge. This is, again, the petrochemical business where long term is not really long term: three years is long enough. Therefore, it’s more or less secure when it comes to the market. The insecurity comes in the competition. The thing is the vinyl industry now, if you are new, if you are established and you are on-stream, you are in a much easier position than those who are old and in the same business. It’s a tough business, it’s a really down downstream. I think vinyl is a very specific type of industry and there are a lot of competitors but luckily most of them are older than us. The most important thing in our industry is availability of ethylene, so we need all these projects that are being scheduled ahead of us to be real for us to move on. So, we have to have the cracker starting. We can work the project at the same time, but it has to be a real project before we can actually start on adding to the existing production capacity. It’s just another step.
You always have to think in advance
Yes, we have also another step. It’s not just that we have more ethane and we are automatically there. You need a cracker, and then we come in.
QVC is not only focused on economic growth, the company claims to promote the sustainable development and contribute in many ways to Qatar’s aspirations to build a knowledge-based society, which is one of the pillars of vision 2030. Could you tell us how your company is integrating vision 2030, the human development pillar?
We are just like everybody else in oil and gas and petrochemicals. We have been involved and committed to assisting in any way we can and looking after the Qataris in the educational stream. At the very beginning we started with the university level.
We cooperate with Qatar Foundation, universities and colleges. We kept a very close relation with the Qatar University in all aspects, in fact. It’s not just pulling the educational curricula and trying to induce it to some industrial type of experience for the students, but also to work with universities with essential activities that are related to issues that in such a way everybody in the community is interested. We have actually picked since 2002 the issue of environment and health and we’ve been working with those universities and of course with the Ministry of Environment.
In fact, if you look at vinyl, it’s the only project in Qatar of its type and there are different measures for the vinyl industry. For example it’s the first project that was introduced to the standards of environment from the European Charter for the vinyl industry in Qatar. So we’ve been cultivating an education of this type. And you can’t do that directly with the regulator, so we had to use the universities as the media, and study certain solutions to certain problems, or certain awareness for certain problems. This is a very important part of the business that needs to be sustainable in terms of knowledge-based partners with the industry. I think that the first thing that you can look at is education on environment, where you can actually pass it to the rest of the community. It’s very important to do that worldwide. Between the industrialists and the regulators, there was always a tense feeling. In some areas they don’t even sit at the table – even in the GPCA where we are one of the founders, the Gulf Chemical and Petrochemical Association.
We discuss this because in the Gulf it is obvious that the manufacturers or the industrialists are really distanced, far away from the people. The only way of doing that is using the base of the educational institutes to get beyond that. It will take time but I’m sure it’s the right flow for transformation.
In the foreign direct investment world when countries or businesses are looking to where will be their next venture, of course the competitiveness rating of the country plays a big part. In many cases, the trepidation can be bureaucratic issues or slowness of government and perhaps when they want to set up and move forward. So even though you mentioned that in many cases regulators and companies don’t get along, Qatar has the almost unique opportunity of having this vision that has been very tangible. As QVC, have you found as that the Ministry of Energy and Industry do provide you with guidelines and support that provide you the environment to flourish? Do you think that this is something that Qatar has as an advantage?
I think that’s very particular for Qatar. I believe that the good thing about it is the guidelines and standards in Qatar have actually been produced through the industry itself.
I think it was a combined effort. QVC has worked for a very long time, very close to the ministry.
In America, it was only very recently that they asked the industrialists to be around the table of their meetings, while QP was always represented at a high level, in the panels or in the so-called Environmental Panels to evaluate projects. This interaction was happening a long time ago, and because actually the industry here was leading. So, a lot of the inputs were coming from the industry side but then of course, there’s also the Ministry of Environment which has done its own studies as well, using both the media and academia. What I’m talking about is also to meet the industry’s needs, also coming through is the school-based knowledge. At the end of the day, there is unawareness which we both have to work on and you can only do that by research and giving it to people who can really look at the problem while you are living with it. So, it might be a complicated issue but I don’t see any other way of overcoming problems or building solutions without using universities and research centers.
Do you think that QVC’s relationship with the Ministry of Energy and Industry makes joint venture partnership potential?
Yes, of course. QVC is nearly totally owned by Qatar Petroleum in one way or another but yes. I have the honor to be a QP so I was all my life in QP. Whatever you do around these things, if you have good intentions, things can be accomplished. It’s not an easy thing, and it’s not easier in some other places, but I think if we don’t keep this relationship, we may really face a lot of issues in the future. But I’m glad that it is at least heading that way.
What would be the message you would like to transmit to the international community, keeping in mind the intention of the Islamic Economic Forum due to be held?
When you talk about the investors, in this part of the world, they are money investors. They would like to see where their money is becoming more and more money. I think that from that angle, I can simply say that it’s a fact of life. It’s the market price that decides a lot of things, but it’s also a cultural type of work. Before you can really feel comfortable with something, you need to be associated with it, you need to understand what’s happening. You need to understand the cyclical business; you actually have to be very conversant in that because otherwise, you know you are not going to be realistic in your evaluation of where you want to put your money. Cyclical business is cyclical business... You have to look at 20, 30 years type of business and assume that.
I think Qatar is a very safe place to actually invest in. If somebody is coming in only with the investment, I believe that they also have to be conversant in what they are dealing with. As I said earlier, your indicators come first but then, secondly, you need to actually know what this business is about. When we started financing this project in 1998, I was dealing with engineers coming from the bank side and even the follow up of the project… there weren’t engineers coming in. Some banks will appoint will a consultant, but some banks do have their own technical staff and I think it’s fair because it’s very simple. If I want to put my money somewhere I would like to know and to understand what’s this, and Chemical and Petrochemical business it’s not that simple to understand.
How do you feel personally about the sector and what would you like to see as Qatar’s position as a global player?
I think Qatar has gone far in this short period of time. We have also learned a lot.
We have a very crowded history, short history of lots of work. I think we have very much benefited from that.
How much? I don’t know, it is rather difficult for me to measure it .
Naturally we have benefited from our educational system. It seems that the whole world is doing the same thing.
Now days, things have to be done in shorter period of time. Even talking about the human element, about training Qataris. Because of the multidiscipline we have and because of the multinationals we employ,
it was available for people to actually grow so quickly with projects like these. And I can see that in the past 12 years of this project, we have seen a lot of youngsters coming up much faster than what I was expecting.
Don’t wait until the economical environment is showing you the gloomy type of signals.
Don’t put the heaviest investment you have but use this for you to be really prepared with very little investment, with engagement of the new generation.
You have to use the young mind because I’m old and I know what age can do to you, so definitively that it’s really where you can invest. And at the same time, at the end of the day, when you are taking the decision you are prepared, you have a lot of avenues that you have visited before you even say “go ahead.” I think that with this in mind, the next decade or even the decade after that would be a theater of prosperity.