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200230 Business Project: Critical Incident Analysis

­­­Critical Incident Causes

Founded in 1976, SABIC Company is now one of the world’s leaders in the area of petrochemicals manufacturing. SABIC is owned by the Saudi Arabian government that owns over 70% of its shares, while the remaining 30% have private Saudi Arabian and foreign investors (SABIC, 2009a). SABIC is one of the world’s leaders in producing ethylene, ethylene glycol, methanol, MTBE and polyethylene, and its production capacity is projected to grow to 130 million metric tons by 2020 (SABIC, 2009a). As estimated by the end of 2008, the net profit of SABIC amount to $5.86 billion, while the total assets by the same period equal $72.5 billion.

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In 2008, SABIC faced a critical incident caused by the sudden and abrupt outage of electricity at its five plants in Jubail (SABIC, 2009). The electricity was cut for about an hour, but SABIC officials assess the potential damage to the Jubail plants in 3 to 5 days of repair works and millions of Saudi Riyals (SABIC, 2009). The Saudi Electricity Company (also known as SEC), through its CEO Ali al-Barrak, reported that the electricity cuts were caused by accidental line problems observed in the region where SABIC plants are situated.

Critical Incident Development

The critical incident developed into the need for SABIC to stop the production process at the five Jubail plants that we’re unable to fulfill their functions due to the outage of electricity supply. Moreover, SABIC Vice President Mutlaq Al-Morished reported that numerous other SABIC plants had to stop functioning because of the discussed electricity outages. Mutlaq Al-Morished also went further to report that several ovens in Jubail plants had damaged pipes as the result of the electricity supply problems, which meant that these plants would not be able to function in 3 to 5 days but would need complete replacement of the damaged parts that might amount to week (or several weeks) of standing by.

At the same time, Ali al-Barrak of the Saudi Electricity Company stated that his company was controlling the electricity supply to industrial facilities, and the Jubail incident was a result of an unpredictable performance of certain equipment pieces. Further, Ali al-Barrak noted, the SEC was fully responsible for electricity supply and could assure SABIC and other affected companies that no sudden electricity outages would happen.

Handling the Critical Incident

The handling of the critical incident involved several related activities that ranged from carrying out the urgent repair works in the five SABIC Jubail plants and the considerable public debate between the SEC officials and the top management of SABIC and other companies affected by 2008 electricity cuts to this or that extent. The most controversial topic of this debate touched upon the issues of compensation that SEC, according to SABIC’s perception of the situation, had to pay to all the companies affected by the sudden electricity outages. Needless to say, SEC rejected even the slightest possibility of the compensation for the incident that happened not by the company’s fault.

The Industrial Chamber of the East also became involved in the handling of the critical incident. The Chamber’s Chairman Salman Al Jishi expressed his doubt about the actual possibility of figuring out the exact cost of the damages, if any, that SABIC or any other company might suffer as a result of electricity outages. At the same time, stressing the danger of such outages for the production processes of the affected companies and their relations with the partners and customers, the Industrial Chamber of the East believed SEC’s claims about the accidental nature of 2008 cuttings and saw no legal reasons for compensation.

Lessons Learnt

Naturally, the critical incident discussed above served as a powerful impact for SABIC to learn things about electricity supply, its importance, and the need for friendly cooperation with electricity providers like SEC. At the same time, the critical incident made SABIC officials consider the possibility of launching its own power stations to provide electricity and energy to its facilities around the country. This step might allow SABIC to avoid uncontrolled and sudden energy outages and might protect the company from serious financial losses associated with the discussed electricity outages. As well, SABIC officials noted the possibility of involving foreign energy providers to facilitate the uninterrupted energy supply for industrial facilities in Saudi Arabia.

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To practically implement the knowledge acquired as a result of this critical incident, SABIC Vice President Mutlaq Al-Morished announced the opening of the world’s largest energy and water producing plant that would add the lacking energy capacity to the one produced by SABIC and provide proper electricity supply to SABIC plants in Jubail. Mutlaq Al-Morished also noticed that the plant would provide 2750 MW of electricity and 800 thousand cubic meters of drinking water per day. Thus, the lessons learned by SABIC in the critical incident discussed above might serve not only industrial but social needs as well.

Reference

SABIC. (2009) Limited impact of power outage on some SABIC plants in Jubail. [online] Welcome to SABIC. Web.

SABIC. (2009a) Our Company. [online] Welcome to SABIC, Web.

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