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Interview

Eng. Osama Mahdy – Chairman and CEO, SIDPEC, Egypt

23.05.2017 / Energyboardroom

Eng. Osama Mahdy, of Sidi Kerir Petrochemicals Company (SIDPEC), highlights the company’s amazing journey of success in the past 17 years and the important position SIDPEC occupies within Egypt’s petrochemicals sector.

Eng. Osama, can you give an overview of Sidi Kerir Petrochemicals Company (SIDPEC) to our international audience?

“We have established such a firm relationship with our clients in the EU that they usually prefer to wait to receive our products rather than do business with other suppliers!”

Sidi Kerir Petrochemicals Company (SIDPEC) is a national petrochemical company established in December 2000 with a capacity of 225,000 kilo ton per annum (KTA) of polyethylene of various grades, from applications for film grades, to blow molding grades and also injection grades.

We receive our feedstock from GASCO, who receives gas from the Western Desert. This is extracted into C2, which is a mixture of ethane and propane. We take this C2, distillate and purify to produce ethylene, which is then used to produce polyethylene.

We also buy our electricity needs from the Egyptian Electric Company, which is another example of how we are integrated within the Egyptian energy ecosystem – we we do not have our own power generation plants.

At the time of SIDPEC’s establishment, we were the biggest petrochemical facility in Egypt but with the 2016 inauguration of our neighboring sister company, Egyptian Ethylene & Derivatives Company (ETHYDCO), which is twice our capacity, we are now the second-largest. Once the new extension plant is built, however, we will return to the top.

Having been in operations for 17 years, we have been long-established with a strong track record both nationally and internationally. As one of our customers have said to us, ‘we are the jewel in the crown of Egypt’. Our slogan is, ‘today experience, tomorrow perfection’.

You joined the company when it began production in December 2000, so you have seen firsthand the success that SIDPEC has become in the past 17 years. How do you account for this success?

It is primarily due to serious efforts by our management and employees to improve our performance on a daily basis. This means complying with all the standards in both local and European markets, complying with environmental regulations, as well as maintaining our competitiveness on all aspects. Transparency is also a priority for us and we communicate professionally with all our stakeholders and clients.

Another factor is the technology advancement of the facility. We currently have a little over 1,000 employees, which is small when you consider that we have such a large complex, because we are focused on bringing in world-class technology. With the technology we are offering, we can also maintain our operations to the highest HSEQ standards. It is important to note that we are in an agricultural area, so we need to always bear in mind the safety of our neighbors and local communities.

What are your main priorities for the company now?

We definitely want to extend this successful track record, so we are implementing a plan to revamp this company. As we have been working for 17 years, it is time to replace some equipment and upgrade some facilities. This was planned last year and we will finish this by the end of 2017. Some critical equipment currently being replaced will return to service by early August, hopefully. As a result, we are currently operating at 85 percent capacity. Once these improvements finish, we hope to reach 100 percent, if not more.

Most notably, we are also in the process of constructing a new plant in our facility to increase our production capacity even further. This new plant will add 450,000 KTA of polypropylene to our existing capacity, which means tripling our current capacity by 2021, which is when production is expected to begin. This will be a USD 1 billion dollar project, so we are very focused on delivering success in order to maintain our excellent reputation and give an even better new impression to the world.

The reason for this is to bring additional value to the natural gas that GASCO is currently exporting to foreign markets. Egypt is currently importing more than 900,000 kilo tons per annum (KTA) of polypropylene of different grades. There is a huge demand locally for such products. We will convert the available natural gas to polypropylene (some grades of which are not currently being produced in Egypt), which will be produced to cover the local market demand, while a proportion will also be exported to our distributors in the European Union.

As you mentioned SIDPEC serves both local and international markets, what is the spread of your international operations?

We are currently selling around 68 percent to the local markets while exporting 32 percent internationally. At the beginning, the ratio was 50 percent but the local markets have expanded, so we had to increase the local proportion.

As for our exports, we mainly export to the EU. This is firstly because we have a good agreement with the EU and Egyptian exports are free of customs. Secondly, our specifications here match European requirements because we are following European regulations in our facility.

We have established such a firm relationship with our clients in the EU that they usually prefer to wait to receive our products rather than do business with other suppliers! It shows the trust they have in us.

We manage to do this because we are good partners. This means we announce our production plans in advance to our customers, we price our products well, we maintain good quality, we have excellent logistics and we are well-organized. The idea is to avoid making a single mistake. This is what being professional means – and this is what differentiates us from the competition.

We see that the Gulf countries have also placed significant emphasis on the petrochemicals sector. How well can Egypt compete with them?

There are Gulf companies competing with us even in the local sector as they face no tariffs on imports here under the Greater Arab Free Trade Area (GAFTA). But I am proud to say that we are currently the market leader domestically.

The Gulf region benefits from their scale and capacity. This is something we cannot match in Egypt perhaps but we operate very professional and very efficiently. Our strength can be seen in the fact that we managed to continue operating successfully even during the 2008 financial crisis or during the political instability in the past few years. This is evident in the trust our customers have in us.

As human development is one of the six pillars of the Ministry of Petroleum’s Modernization Program for the sector, how is SIDPEC playing a part in this?

We focus a lot on staff development. Since the very beginning, we have sent our employees to foreign companies or licensors to receive quality training. Subsequently, we offer training courses both in Egypt and overseas, we provide on-job training and overall, we try to ensure that our employees improve their skills daily.

We also offer opportunities for our youths to gain practical experience in the petrochemical sector, because currently that is not easy in Egypt. In Europe and the US, students are able to spend some time in real petrochemical plants to gain hands-on experience but this is still not the general case in Egypt. This is why SIDPEC offers any interested student the chance to spend two to three weeks with us to understand more about the sector.

SIDPEC’s success is partly attributable to the young generation working with us. The older generation may be more experienced but the younger generations bring fresh energy, ambition and new ideas to the table. This is important for the success of any company.

We have also supported ETHYDCO’s development from the beginning by providing some of our experienced engineers to them to cooperate to establish a new company. We then continue the talent development pipeline by training new staff in SIDPEC. This is how it works in the Egyptian sector and the reason why we have such a qualified workforce in oil and gas.

Giving back to the local communities is also important for us. For instance, the desert expressway from Cairo to Alexandria cost about EGP 27 million to build and it was paid for by all the petroleum companies operating in the area. SIDPEC contributed about 20 percent of the cost, and we made sure that the road was constructed to international standards. Earlier this year, we also installed around 12,000 LED lights in three villages around us to improve their living standards. We also provide donations to hospitals and schools and other local community institutions and events, because we truly believe that we are part of the local community!

Having been part of SIDPEC’s journey for the past 17 years, what is your vision for SIDPEC?

In ten years I hope SIDPEC will become the largest petrochemical company in Egypt. We already have more plans in the works and we are always seeking to improve!

Do you have a final message for investors looking to Egypt?

Come and invest in Egypt, whether in the petrochemicals sector or in other sectors. H.E. President Sisi himself has made the petrochemicals sector one of national priority, but overall, Egypt is taking all the necessary and right steps to promote stability and I believe the investor environment here is very promising.

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