ENGINE OF GROWTH

Kuwait 2018 | ENERGY & INDUSTRY | INTERVIEW

TBY talks to Bakheet Al-Rashidi, former President & CEO of Kuwait Petroleum International (KPI), on the company's successful operations in the past year, its investment plans, and opportunities in the sector.

Bakheet Al-Rashid
BIOGRAPHY
Bakheet Al-Rashidi was the President & CEO of KPI. During his tenure, he led KPI’s major projects to success. A graduate of Alexandria University in chemical engineering, Al-Rashidi has over 30 years of experience in the refining industry. He began his career at Kuwait National Petroleum Company (KNPC) and headed several functions. He held the position of Deputy Chairman and Deputy Managing Director for Planning & Local Marketing from 2007 to 2013. He was a Board Member of Kuwait Oil Company (KOC) from 2011 to 2012 and the Chairman & Managing Director of Kuwait Aromatics (KARO) from 2009 till 2012.

How was 2017 for KPI's operations?

KPI has a network of more than 4,700 retail fuel stations across Europe, with operations mainly in Italy, the Netherlands, Belgium, Luxembourg, Spain, Sweden, and Denmark for retail fuels, direct supplies, and lubricants. KPI is also a leading jet fuel marketer, supplying over 200 airlines at over 60 international and regional airports. After recording the highest operating profit in the 2015-16 financial year, KPI's financial performance during FY2016-17 was satisfying, as it was mainly achieved through strategic and operational initiatives, including cost savings, in spite of tough market conditions. KPI achieved a record product sales volume and has increased its market share in many regions. This was progressively achieved over the past three years at average sales growth rate of over 6% per year. Divestments from under-performing markets or areas with supply issues helped KPI to optimize operations. KPI implemented a cost control program, not only for operating cost reduction and CAPEX deferment or rationalization, but also to enhance margins through efficiency improvement schemes.

Are there any plans for investment by the company?

Diversification can reduce business risks, and KPI's international investments are in further downstream product development, including petrochemical and capturing retail-marketing opportunities. Diversification can stabilize our income stream from external sources via the local-demand refineries overseas and will simultaneously reduce the risk of crude oil shocks, thus providing us with a competitive edge. Re-deploying existing manpower, recruiting fresh talent, and managing relevant and critical competencies including market intelligence, business development, M&A, and corporate finance, have been KPI's top priorities. We have undertaken a company-wide organization capability and development initiative that will nurture in-house talent. Training and development and K-Lead programs have been at the top of KPI's priority to prepare employees to manage change and accelerate business developments in refining and marketing globally.

What are your long-term strategic goals, and how you plan to achieve them?

We have seen a slowdown in downstream investment, just as upstream investment has been reduced. When product prices are low, the refining margin is not healthy enough to support major investment in downstream activities. Building a new refinery has become expensive because a large, integrated complex refinery is needed, with petrochemicals production capabilities and expensive units to crack fuel oil. With these requirements, it will cost no less than USD7-9 billion per project. However, in Kuwait and other GCC countries, KPI is proceeding with these projects because the oil business is cyclical. After three to five years in a downward cycle, there will be no projects around while demand has grown. We will face that period with great projects on hand. Demand will catch up, especially in the Middle East and Asia.

How do you foresee the global oil trade evolving, and what opportunities does that yield?

Crude oil is one of the most widely used and actively traded products in the world, and accordingly, the price of oil remains center stage as an important economic indicator for both present conditions as well as expectations for the future. Crude oil and petroleum products have the highest share of energy consumption in the EU region, which is the world's second-largest producer of petroleum products, after the US. For Kuwait and Saudi Arabia, securing a large downstream portfolio in Asia is part of a long-term strategy to consolidate their shares in a key market. While competition will grow, strategic initiatives will result in long-term gains and further consolidation of Asian-Middle East energy tie-ups. As global markets move toward rebalancing, Kuwait is redesigning its investment and growth strategies with signs of recovery in global markets in 2017. Kuwait has maintained a promising and low risk classification, a stable outlook with strong macroeconomic fundamentals, a transparent legal system, stability, and a commitment to smoothly support international business development strategies.