Growth through diversification in Kuwait’s chemicals sector

Kuwait

Faisal Malallah, CEO of Al Kout Industrial Projects, talks to The Energy Year about the market for chemical products in Kuwait and the company’s progress as it expands into neighbouring countries. Al Kout Industrial Projects is a manufacturer of chemical products used in oilfield operations and wastewater treatment, among other applications.

How have the operations and strategy of Al Kout Industrial Projects evolved over recent years?
We have changed our strategy: we used to rely on just a few contracts locally, but we recognised that we had a customer concentration risk. Hence, we have been diversifying our sources of income from a client, product and market perspective.
In terms of products, we are aiming to expand our portfolio by adding new chemicals such as calcium chloride, chlorine derivatives and hydrochloric acid derivatives. What we have noticed is that the regional production of chemicals has been increasing, but mostly for the same products. We want to look at those that are in demand but don’t have adequate production regionally, because if we step up production of the same chemicals that every other manufacturer is producing, then we contribute to driving the prices down, spending capital without much in return.
This is also why we are looking to expand our trading business. We already own a trading company in Kuwait, Cisco Trading, which enables us to supply chemicals for almost every industry segment and application, even those that we do not produce ourselves. We now want to expand this activity to other regions.

Which markets do you find most interesting, and where do you have the biggest expectations?
Al Kout already serves local, regional, and international markets, with exports accounting for approximately 50% of our total sales. We have been looking at multiple regions so that if a market where we export experiences a downturn, we can mitigate that risk.
For example, we recently increased our business in Saudi Arabia and Jordan and started penetrating the Egyptian market more aggressively. We are also entering new markets such as South Africa, Brazil and Mexico.
North Africa is a region we are most interested in. We already ship there, but we want to tap into it further. The market has experienced volatility in the past, but now it is more stable. The demand for chemicals is encouraging and it is a friendly market, we already have some good relationships in place there.
We can grow our footprint easily because we can ship by sea in bulk, rather than by land like we do in the region here. Shipping by land involves trucks going back and forth all the time, which means more diesel consumption, truck maintenance, drivers’ wages and other expenses.

What are the biggest challenges when penetrating foreign markets?
In Saudi Arabia, we supply chemicals but do not have production. We established a partnership a few years ago, but we are looking to expand it because we have experienced that having a physical manufacturing presence is always better. However, Saudi Arabia is a difficult market because there are many producers there and regulations are tough to navigate. Some countries heavily protect their own producers, and sometimes we feel it’s not fair competition.

Are there any recent achievements you would highlight?
We have a broad client portfolio, serving both public and private entities. We supply chlorine to the MEW [Ministry of Electricity & Water & Renewable Energy], which uses it to sanitise drinking water in the whole country, and we built a chlorine dioxide injection plant for them. We can assist in establishing wastewater units, we provide the technology and help with the process.
In 2021, we inaugurated our USD 19.5-million ferric chloride plant, which represents the country’s first facility to produce this compound. We are also producing chlorine gas like never before, and we have done this without additional spending on capacity, just by optimising our operational procedures. This helped us obtain the highest profit in the history of the company in 2022.

What is your involvement in the domestic oil and gas sector?
We have business with KOC, KNPC and KIPIC, which are all heavily reliant on our products. For example, we provide around 20,000 tonnes a year of hydrochloric acid to contractors conducting drilling operations. We also supply caustic solutions to KNPC for use in refining processes.
The commissioning of the Al Zour Refinery represents a good opportunity, and we have already signed some contracts to supply them with chemicals that are essential to the refinery operations.
Besides industrial products, we are also in the process of manufacturing derivatives that we place in consumer markets, such as food-grade salt.
We proudly maintain extensive contracts with several companies under KPC. Our collaboration spans a diverse range of products. We are a trusted supplier within Kuwait’s dynamic oil sector, and through our steadfast dedication to excellence, we consistently deliver high-quality products that meet the stringent demands of our esteemed partners.
These partnerships underscore Al Kout’s pivotal role in supporting the operational needs and driving the success of Kuwait’s oil industry, while also showcasing our commitment to innovation and sustainability within the nation’s industrial landscape.

What makes Al Kout Industrial Projects stand out from its competition?
We have our own production facility in Kuwait that produces approximately 52,000 tonnes of chlorine gas per year, and we have a plant in Abu Dhabi to supply the local market in the UAE.
Within the chemicals segment, we are the leader in Kuwait, with a 100% market share, since we are the only company in the country that manufactures products such as caustic soda and sodium hypochlorite. One of our key advantages is that we can take a burden off the shoulders of oilfield services providers and operators looking for chemicals. They don’t need to source them. They just tell us which products they need, the quantities and the delivery time.
This allows oil and gas players to stay focused on their business. We are the paradigm of what it means to be a turnkey solutions provider. We operate end-to-end, from manufacturing to distribution and supply. Last year, for example, we expanded our fleet, which now has 60 trucks, as our export volumes increased.
We concentrate on being in compliance with EPA [Environment Public Authority] regulations, ensuring that we control our effluent and vapour discharges and that we do not have any liquid leakages into the sea or the soil, or vent out any chemicals that could harm the environment.

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