While the external market shows elements of uncertainty and volatility, GCC players have clear ideas with regards to the internal capabilities that needs to be developed to compete effectively in the market.

• 74 per cent of respondents believe that developing advanced trading capabilities for refined products is either “important” or “very important” for Gulf refiners to capture more value from the growing export of refined products.
• For 92 per cent of respondents, technology and innovation are considered “important” or “very important” for their organisation. They are seen as particularly critical given the expected disruptions that will affect the downstream industry in the coming years.

The refining and petrochemicals market in the GCC is expected to remain volatile in the medium-term, with significant uncertainties on the demand side, mainly linked to the economic growth prospects of the US, Europe and China.

According to a recent industry survey conducted jointly by the Gulf Downstream Association (GDA) and The Boston Consulting Group (BCG), in the longer-term, several trends are expected to have a potentially disruptive impact on the demand for refined products – such as efficiency improvements; electric vehicles and other alternative fuels for transportation; demographics (for example, an ageing population in advanced economies); new mobility models such as car-sharing/-pooling; changes in the power generation mix, with increasing share of natural gas; and the new MARPOL regulation (marine pollution convention imposed by the International Maritime Organization), with the development of a new marine fuel mix.

All of these factors exists in a context of continued capacity additions in the Middle East and Asia, triggered often by self-sufficiency and energy security considerations rather than economics or global demand and supply considerations, as per the ‘Gulf Downstream Industry Survey’.

All these variables, both on the supply and on the demand side, will contribute to a persisting situation of uncertainty also longer term.

“Refining is a traditionally cyclical industry, so players are used to ups and downs – nevertheless, the uncertainties laying ahead in the next decade are probably more than used to be in the past”, says Mirko Rubeis, partner and managing director at BCG, was quoted as commenting in a press release.

The Gulf Downstream Industry Survey was conducted from July to August 2017, with approximately 40 executives, experts, and professionals from national oil companies, financial institutions, and major equipment manufacturers with interest in the GCC bringing different perspectives on the Gulf downstream industry.

The survey gauged the sentiment about external factors, such as macroeconomic sentiment, refined product supply and demand, refining margins, competition, and regulation. It also investigated internal capabilities, such as technology and innovation, operations, projects, organisation and processes, and people and talent.

Capital programmes of Gulf refiners are expected to increase in value or remain the same in the future. However, almost half of the respondents believe that they do not have yet the full set of systems, processes, and capabilities to effectively manage large capital programmes.

Gulf refiners also face challenges to attract and retain talents, particularly within the local workforce. Capability building should focus mainly in the area of technology and innovation, followed by engineering and technical, ranking second, the survey found respondents as suggesting. The other areas of attention are operations and commercial/marketing, reflecting the shift required to key players in the region to evolve from simple manufacturer to trader and marketer of products in the competitive global arena.