The GCC Fertilizer Industry s Landscape & Growth Dimension By Dr. Abdulwahab Al-Sadoun Secretary General, GPCA
Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities
Early Fertilizer Production in the GCC Key driver/enabler for developing a GCC chemical industry was to capture the value wasted by flaring significant volume of associated gas throughout the region Country Volume of Flared Gas in the GCC Year 1976 Volume of Flared Gas (Bn SCF) Flared Gas Share of Total Gas Produced Abu Dhabi 293 60.9% Kuwait 127 27.4% Qatar 81 34.7% Saudi Arabia 1,342 75.1% Source: OPEC Statistical Bulletin, 1979 To turn waste to value, the Chemical Industry presented the best option from: Economical, Social and Environmental perspectives
Early Fertilizer Production in the GCC Creating a Domestic Market for the gas in the GCC has a clear benefit in terms of employment and GDP contribution Employment Creation 1 (Jobs/ 1 million MMBTU) 550 600 15 110 GDP contribution 1 ( SAR/ Mmbtu) 180 150 Petro/chemicals 2 Aluminum 3 LNG Exports Power Generation 1 Including direct, indirect and induced effects 2 Including C1 and C2 only, for average product portfolio of GCC producer 3 Includes refinery, smelter and rolling mill 40 15 Source : McKinsey, 2010
Early Fertilizer Production in the GCC Abundant supply of natural resources has enabled the development and consistent capacity expansion of the fertilizer industry in the Arabian Gulf 45 40 35 30 25 20 15 10 5 0 GCC Fertilizer Capacity Expansion (Million tons) 29.9 19.6 13.5 11.4 8.8 7.0 3.0 3.4 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 42.3
Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities
Current Industry Landscape The GCC fertilizer industry is predominantly focused on mainstream fertilizers with Saudi Arabia having the lion s share of regional fertilizer capacity Diammonium phosphate (DAP) 13% Fertilizer Capacity by Product, 2017: 42.3 Million Tons Others 16% Ammonia 31% Urea 40% Source: GPCA Analysis, 2017 Note: Others include intermediate products (Phosphoric Acid, PPA, Sulphuric Acid, and Specialty Fertilizers) Fertilizer Capacity by Country, 2017 Total: 42.3 Million Tons Oman 11% UAE 8% Qatar 24% Kuwait 4% Bahrain 2% Saudi Arabia 51%
Current Industry Landscape Product Portfolio In its first three decades, the industry s product portfolio was predominantly N-based fertilizers, which accounted for > 90% of total output From 2007, P-based fertilizers were added to the product mix Between (1966-2017), change in the industry s mix: Ammonia (-21%) Urea (-8%) DAP (+13%) Others (+16%) GCC fertilizer capacity & product portfolio (1966-2017) 0.3 3.0 5.6 17.3 42.3 39% 61% 3% 2% 11% 16% 42% 45% 2% 38% 54% 53% 50% 13% 31% 40% 1966 1976 1986 2006 2017 100% = MT Others DAP Ammonia Urea 9 Source: GPCA Analysis, 2017
Million GCC Fertilizer Landscape Focus on Export The GCC fertilizer industry is export oriented with over 90% of mainstream fertilizers exported overseas, making the GCC a major global export region 25 GCC Fertilizer Export (Million Tons) GCC s Share in Global Export; Y 2015 20 15 10 10.2 10.6 11.5 11.3 12.5 13.7 15.4 18.4 18.1 20.1 20.5 68% 86% 89% 5 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: United Nations, 2017 32% 14% 11% Urea DAP Ammonia GCC Others Source: IFA, 2017
GCC Fertilizer Landscape Focus on Export Fertilizers produced in the GCC are exported to over 80 countries worldwide Asia is the largest importer of GCC fertilizers followed by North and Latin America respectively Despite being one of the main importing regions of fertilizers globally, the EU s imports of GCC fertilizers is negligible (1%)! GCC Fertilizers Export by Destination (2016) Total: 20.5 mt North America Europe 19% 1% 17% 6% Africa South America 56% Asia Others 1% Source: GPCA Analysis, 2017
Current Industry Landscape Global Positioning The GCC has established itself as a global production hub for inorganic fertilizers its global position is significant and growing steadily GCC 6% Global Ammonia Production Capacity 2016 = 217.7 Million Tons Africa 5% Latin America 5% West Europe 6% Central Europe 4% North America 9% Rest of West Asia 2% South Asia 10% Oceania 1% East Asia 38% Eastern Europe and Central Asia 14% GCC 8% Global Urea Production Capacity 2016 = 208.2 Million Tons North America 6% Rest of West Asia Latin America 4% 4% Africa 6% Eastern Europe and Central Asia 8% West Europe 3% Central Europe 2% South Asia 16% East Asia 43% Global DAP Production Capacity 2016 = 62.2 Million Tons GCC 5% West Asia (excl GCC) 8% Eastern Europe and Central Asia 2% South Asia 15% Latin America 2% Africa 16% Oceania 2% Central Europe 1% East Asia 30% North America 19% 10 Source: IFA, 2017
Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities
Growth Dimension (2006 2016) Production Capacity & Export volume growth trajectory (2006-2016), in numbers: Over 18 million tons of production capacity was added, representing 93% of production capacity in 2006, a CAGR of 6.9% Over 10 million tons of export volume was added, doubling the export volume of the Y 2006, a CAGR of 7.3% Capacity and Export Growth Pattern, 2006 2016; Million Tons CAGR 19.6 6.9% 7.3% Capacity 18.2 37.8 +0.93 Export 10.3 10.2 20.5 2006 2016 2006 2016 +1.1
Growth Dimension Global Context In a global context, GCC fertilizer capacity has been growing at the fastest pace globally over the past decade Between 2006-2016 Production capacity growth rate of GCC fertilizers (ammonia, urea and DAP) was 6.9%, the highest globally Over the same period, the corresponding growth rate of the global industry was 1% As a result, GCC s global share in fertilizer production increased from 4% to 7% Source: GPCA, IFA, 2017 Global Ammonia, Urea, DAP Capacity Growth Million Tons (2000 2016) 491.5 450.2 74.1 Others 79.7 33.8 6.9 17.4 35 5.5 Africa GCC 20 42 45 0.7 N. America E&C Europe 43 48 1.2 South Asia 61 64 0.6 East Asia GCC 187 191 2006 2016 4% 7% Note: Growth rate 6.9% p.a. includes only 3 products: ammonia, urea and DAP CAGR (%) 0.3
Growth Dimension Projected (2017 2025) Phosphate fertilizers will drive capacity additions in the region, as Saudi Arabia s Maaden continue its aggressive expansion drive 7.4 49.8 Oman 5% 42.3 2017 2017-2025 2025 Source: GPCA Analysis, 2017 Saudi Arabia 95%
Growth Dimension (2017-2025) Four GCC projects currently in the pipeline will add 7.4 million tons of production capacity at an estimated capital investment of USD 8 billion 1 Phosphate Fertilizers Plant 3 3 Urea Formaldehyde 2 Ammonia Plant 4 Salalah Methanol Co. Ammonia Plant
Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities
Key Challenges Key challenges facing the GCC fertilizer industry include: Changing Competitiveness Lower coal and gas prices have pulled down the floor price for N, P, and K fertilizers by ca. 60% (vs. 2008 level), affecting profitability and intensifying competition in markets Increasing Regional Self-Sufficiency Challenging Regulatory Policies Challenging Trade Developments Drive for self-sufficiency in key markets (China, USA, India) leveraging low prices of shale gas, oil and coal India: Drive to revise current fertilizer subsidy regime China: Export tax policy EU: Circular Economy with emphasis on organic fertilizers Development of trade blocs in different geographies has led to increased competition for GCC fertilizer exports
Key Challenges Shrinking export markets; key nitrogen importers targeting self-reliance South Asia Urea Imports (2015), Million Tons 12.7 Urea Capacity Additions (2016-2021), Million Tons South Asia 3.9 North America Latin America East Asia West Europe Oceania West Asia 2.4 2.2 5.1 5.7 8.8 8.6 North America Latin America SE Asia EECA Africa 1.1 1.6 2.1 3.6 3.5 Africa 2.1
Key Challenges. India & USA are targeting self reliance in N-account, jointly the two countries account for almost half of the GCC N-fertilizer exports. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 55% 52% 57% 56% 60% 57% 45% 48% 43% 44% 40% 43% 2006 2008 2010 2012 2014 2016 India and USA Others New market segments and geographies need to be explored to offset possible market share shrinking
The Opportunities ahead Investment opportunities for GCC players exist in regions looking to capitalize on low cost gas assets or growing fertilizer markets (e.g. Africa and the Americas) Innovations in technology have led to increases in energy efficiency and capacity gains which in turn can improve margins and environmental performance Further diversification of product portfolio towards speciality fertilizers to remain competitive is critical Fertilizers are key for Africa's agricultural transformation; population and economic growth in Africa should also generate opportunities in this bourgeoning market
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