Main content | back to top
Archive
Spring 2007 - Playing to our strengths
Ben van Beurden was appointed Executive Vice President of Shell Chemicals Ltd at the end of last year. Here, he outlines why he believes that being part of a major energy company brings a significant advantage in the new global economy.
As someone who has worked for Shell for almost 25 years, mostly outside chemicals, I may bring a slightly different perspective to the business. But I've watched it evolve over the years and have no doubt it is recognised as a major source of strategic strength and value for the Shell Group.
One only needs to look at the Group's multi-billion dollar investments in the Nanhai joint venture in China and to expand our integrated chemicals complex in Singapore. These world-scale projects represent a significant commitment to petrochemicals and reflect the strategic importance of the Shell Chemicals business, in its own right and as part of the value proposition Shell offers major resource or demand holders.
Natural extension
Petrochemicals are a natural extension of hydrocarbon value chains and can bring national companies or governments a broader range of skills and technology, a route to diversify industry and exports, and wider economic development.
Our Sadaf joint venture in Saudi Arabia, formed 25 years ago with Saudi Basic Industries Corporation, has been an incredibly successful example of this proposition. Sadaf established a new world-class hub for petrochemicals based on advantaged gas feedstock.
Saudi Arabia petrochemical company (SADAF) content
We conduct a sizeable amount of business through joint ventures and other partnerships and they are an important part of our growth plans. Indeed, partnerships between international companies and major resource holders will become key to meeting predicted future demand growth for chemicals.
To be a partner of choice, we need to be recognised by major resource holders as adding real value and I believe we are well positioned to meet their needs.
Having a broad portfolio, including chemicals, is a major factor in the selection of international companies as partners. Equally important is the ability to deliver mega projects, and Nanhai has added significantly to our track record. It has performed exceptionally since its startup last year.
As well as providing us with experience of operating in a very important growth market for chemicals, the joint venture has also demonstrated to our Chinese partners - and other potential partners - our ability to plan, develop and bring a major project onstream, on time and on budget.
Nanhai's reputation will help in the further development of Shell's chemicals interests in China - in the article 'Trading places' in this issue you can read about some of the first steps we have already taken to expand our business there.
Successful project execution is just one of the strengths that we can bring to a partnership. We also have technologies and operating experience to offer a differentiated slate of chemical derivatives, and the marketing, commercial and logistics expertise to bring these products to developing and global markets.
Leveraging synergies
Being part of a major integrated energy company also offers opportunities for Shell Chemicals to leverage strategic advantages in terms of inherent manufacturing synergies, and the ability to benefit from the Group's focus and investment in innovation and technology, which includes access to new sources and types of chemical feedstock.
There are a number of very interesting new technologies being developed that could strengthen our portfolio pipeline - you can read about some of these areas in the article 'Technology for tomorrow's world' in this issue.
The development, with Qatar Petroleum, of the world's largest Gas-to-Liquids (GTL) plant in Qatar is one of the first examples of how new technology is going to be a key differentiator in the future. Shell's GTL technology is aimed primarily at meeting global demand for transport fuels but this massive investment in gas processing is very synergistic with chemicals and opens up a whole range of future opportunities - within the GTL plant or as part of a co-located cracker complex.
The output from the Qatar plant itself will include 260,000 tonnes per annum of Normal Paraffin, a feedstock for one of the most widely used chemical surfactants in the world.
While technology is undoubtedly a source of competitive advantage, it is not a panacea. In the fast changing, competitive environment in which we operate efficiency and flexibility are key to maintaining a leadership position. Over the last few years we have taken steps to ensure that we have a robust and sustainable business model for optimum efficiency and future growth.
This has included rebalancing both our assets and product portfolio, making disciplined decisions on new capital investments, and implementing global work processes that both simplify the way we work internally and make it easier for our customers to do business with us.
Meanwhile there has also been sharper focus on maximising synergies across all of Shell's downstream activities. As a result, chemicals manufacturing assets are now managed and operated, together with oil refineries and other downstream production operations, by a dedicated Manufacturing organisation.
Oil-chemicals advantage
Having all these assets under a single governance system makes the most of our intellectual horsepower by facilitating the sharing of knowledge and experience.This has the potential to improve performance in areas that matter to our customers - including reliability, technical availability, product quality and capacity.
It also makes it easier for us to leverage what we call the oil-chemicals advantage - the operational and technical synergies that exist between oil refining and chemicals manufacturing. Today, it is no coincidence that the majority of our assets are located at shared oil-chemical sites and that these locations are often strategically the most important to us.
As the changing dynamics of the energy markets impact the price and availability of chemical feedstocks, those players that are closely integrated with oil processing - and have the ability to optimise process streams and adapt to different feedstocks - are clearly best placed to succeed.
We are actively pursuing a number of projects designed to further strengthen the integration between refinery and chemical operations, the largest of which is the recently announced Shell Eastern Petrochemicals Complex (SEPC) project in Singapore.
SEPC will add significantly to our chemicals capacity in Singapore, enabling us to respond to the needs of customers in the region, while at the same time creating a fully integrated facility with the Shell refinery there.
Joined-up strategy
This project clearly illustrates how a joined-up downstream strategy, coupled with a focus on maximising existing infrastructure, can bring benefits such as advantaged feedstocks, operating efficiencies and valuable by-products.
What this means for our customers is increased security of supply, strategic stability and a greater ability to respond to their growth plans.
Of course most of our assets are still in our heartland markets of North America and Europe and they continue to be vitally important to our business. Here, where volumes are high but growth rates relatively low, there is even greater need to utilise advantaged feedstocks, optimise hydrocarbon streams and run plants reliably and efficiently.
We are investing to revitalise and maximise these key assets, with a particular emphasis on strengthening reliability.
The future is hard to predict but I could see a scenario where stand-alone petrochemical companies could become more marginal players. They are less likely to bounce back from the effects of the cyclical nature of the chemicals business and those that don't weather the downturns so well will be more susceptible to rationalisation.
We have gone to great lengths to make our assets and portfolio as robust and advantaged as possible and have reinforced their resilience by integrating closely with refineries and other feedstock operations.
By playing to these strengths we are better able to absorb the effect of downturns that are part of the cyclical nature of our industry, while being well positioned to exploit new opportunities that emerge through technology or access to new markets and natural resources.
The strengths of an integrated energy and petrochemicals company play out well in the modern global economy, where there is often a gap between new and emerging natural resource holders and their ability to access growth markets. Shell is one of just a few companies able to provide a link between the two through its broad product portfolio, technologies and proven economic, commercial and project experience.
Wholesome proposition
Increasingly, large upstream developments have a chemicals element to them as resource holders look to monetise their hydrocarbons, which makes Shell's proposition with integrated chemical value chains more wholesome.
Being a valued part of the Shell Group can give Shell Chemicals a seat at the table in some of these major new developments and that can only be good for our customers.
As I reflect on the first few months in my new role, I am convinced that few companies are better positioned to become a top-tier player in the new global energy and petrochemicals landscape. It is an exciting time to be leading Shell Chemicals.
About Ben van Beurden
Ben van Beurden joined Shell in 1983 as a gas processing engineer, after graduating in chemical engineering from Delft University in The Netherlands. In 1987 he became an assistant plant manager at Pernis in The Netherlands before moving to the Port Sudan Refinery in 1989.
In 1996 Ben became the General Manager Operations of Malaysia LNG (Liquefied Natural Gas). His next role, as Vice President of Mexico Gas and Power, involved helping to build a new LNG business for Shell in Mexico.
After a two-year assignment as the Private Assistant to the Chairman of Shell he was appointed Vice President Manufacturing Excellence and Support at the start of 2005. He took up his current role as Executive Vice President Shell Chemicals Ltd on 1 December 2006.