FORO PEMEX Petroquímica 2013 WTC Conference & Exhibition Center - Mexico City June 5, 2013

Transcription

1 FORO PEMEX Petroquímica 2013 WTC Conference & Exhibition Center - Mexico City June 5, 2013 Global Outlook for Ethylene & Propylene Impact of Shale In North America Mark Eramo Vice President Chemical Industry Insights Houston, TX mark.eramo@ihs.com

2 Construction Energy Oil & Gas Automotive Metals & Mining Government Power & Utilities Chemicals Transportation Healthcare Electronics & Telecom Agriculture Consumer & Retail Energy Coal Shipping Military & Security Financial Aerospace & Defense

3 The IHS Chemicals Business Line Aligned to deliver a broad array of services Same-Day & Information Efficient delivery of high-velocity, qualityassured content Converged solutions delivered with and across world-class technology & platforms Technology & Analytics New delivery systems and analytics & tools (internal & external) Chemical Insight Deep insights & knowledge that leverage data, analysis and platforms Consulting Advisory Consulting leveraging data, knowledge, analytics & insights Leading integrated global information supplier and consultancy providing end-to-end solutions leveraged across the full breadth of IHS capabilities

4 Agenda Chemical Building Blocks & Current State of the Industry Impact of Energy Changing Demand Trends Shifting New Capacity Trade Volumes are Growing Profit Cycle is Mixed

5 Chemical Industry Building Blocks Ethylene Methanol Chlorine Propylene Benzene The Chemical Industry is a key enabler of modern living: Medical, Transportation, Construction, Packaging, Food Processing, Water Distribution, Fuel, etc Investments driven by cost advantage and/or proximity to demand centers Demand growth accelerating in the developing regions Strategy development requires complete understanding of the value-chain

6 Current State of the Global Industry Supply Capacity is being added or transformed Higher Cost units are closing down Demand Recovery limited to fast-growth centers, most others see little or no increase Earnings Energy cost in control extreme product cost differences based on location, technology Industry Continues to Evolve into a New World Order

7 Light Olefins: An Easy Proxy For The Industry Ethylene is the largest of the basic chemical building blocks Ethylene, propylene and methanol are expanding at a rapid pace driven by shale in North America Benzene and chlorine showing more modest growth Basic Chemical Capacity, Million Metric Tons Benzene Chlorine Propylene Methanol Ethylene

8 Hydrocarbon Feedstock Costs: Key Driver In Chemicals Manufacturing Crude Oil FCC Refinery Natural Gas Propylene REFORMER Naphtha Gas Oil Propane Ethane Butane Condensate Gas Processing Unit BTX Extraction Steam Reformer Raffinate Pygas Benzene Toluene/Xylene Heavy Aromatics C 5 /C 6 Non Aromatics Ethylene Unit SynGas Benzene Toluene Xylene Methanol Synthesis Methane/Hydrogen Butadiene Mixed Butylenes Propylene Ethylene Fuel Oil Methanol

9 North America Energy Trends Crude Oil Versus Natural Gas Dollars Per Million Btu Forecast Source: IHS CERA Gas as % of Crude 120% Crude (WTI) Natural Gas Gas as % of Crude 100% 80% 60% 40% 20% 0%

10 North America Energy Trends Crude Oil Versus Natural Gas Dollars Per Million Btu Gas as % of Crude 120% Crude (WTI) Natural Gas Gas as % of Crude 100% 80% 60% 40% 20% 0%

11 Demand for Basic Chemicals Driven By Durable/Non-durable Goods Strong economic growth supports basic chemical demand growth via consumer goods demand Modest light olefins growth in 2012 suggesting weak consumer demand Ethylene GDP elasticity in 2012 fell below 1.0 Forecast of 1xGDP is conservative compared to historical growth and elasticity

12 Petrochemical Value-Chain Consumers Retail Consumer Goods Energy Petrochemicals Derivatives

13 The Rise of the Emerging Market Consumer The share of Global GDP related to consumption is converging in noted markets Emerging market s share will match that of U.S. & Europe within the next 7 years Message to producers is clear: do not ignore the absolute size of U.S. and European market, but for rapid growth you need to look to the emerging world 25% 20% 15% 10% 5% 0% Ratio of Domestic Consumption to Global GDP U.S. Western Europe BRIC

14 Cumulative Ethylene Demand Growth Driven By Developing Regions Million Metric Tons, Ethylene % of Annual World Growth Developed Regions 82% 65% 53% 40% 30% 30% Developed Countries Developing Countries World

15 Production growth continues to be supported by rapid growth in real demand Asia and India Basic Chemical and Plastics Production Change (1990 Base) Million Metric Tons

16 Challenging economic conditions & threats of imports continue to weaken outlook West Europe Basic Chemicals and Plastics Production Change (1990 Base) Million Metric Tons

17 New capacity is necessary to return this region to historical production levels North American Basic Chemicals and Plastics Production Change (1990 base) Million Metric Tons

18 The Investment Impact Resulting From Energy Dynamics On Chemicals Is Very Broad The competitive landscape has changed Many product chains directly effected Ripples through product chains are becoming evident Impact is transformational for the US basic chemical market C1 Ammonia Ammonium Nitrate Ammonium Sulfate Urea Methanol Chlorine Chlorine EDC PVC VCM Ethylene Ethylene Ethylene Glycol Ethylene Oxide Polyethylene Propylene Propylene Polypropylene Other Butadiene

19 Ethylene Capacity Expansions' Driven By Low Cost Feedstock & Integration Strategy Cost of production is closely tied to cost of hydrocarbon feedstock's Location of advantaged feedstock's play key role in capital investment decisions North America prepares for a surge in capacity Asia and Middle East continue to build as planned

20 2012 Global Ethylene Capacity 149 Million Metric Tons Gas Oil 3% Other 3% Ethane 35% Africa/Middle East 20% Asia 34% Naphtha 47% Butane 4% Ethylene Production By Feedstock Propane 8% Europe 20% Americas 26% Ethylene Nameplate Capacity By Major Region

21 Consistent And Strong Growth In Asia Million Metric Tons, Ethylene 30.0 Regional Ethylene Capacity Growth North America Europe Middle East Asia Pacific Others

22 Consistent And Strong Growth In Asia Percent of Total Capacity Growth 50% Regional Ethylene Capacity Growth 40% 30% 20% 10% 0% North America Europe Middle East Asia Pacific Others

23 North America Energy Markets driving Unprecedented Ethylene Capacity Additions Company Projected North American. Ethylene Capacity Additions ( ) (Annualized, Thousand Metric Tons per Year) Ethylene Capacity Additions Location Total Additions BASF/Total Port Arthur. TX ChevronPhillips Cedar Bayou, TX 1,500 1,500 Dow Taft & Freeport 386 1,500 1,886 Eastman Longview, TX Equistar All Locations 884* 884 ExxonMobil Baytown, TX 1,500 1,500 Formosa Point Comfort, TX Ineos Chocolate Bayou OxyChem Ingleside, TX 550* 550 Sasol Lake Charles, LA 1,400* 1,400 Shell Monaca, PA 1,000* 1,000 Westlake All Locations Williams Geismar, LA Braskem Idesa Mexico 1,000 1,000 Nova Sarnia 250* 250 Announced: 7,864 3,900 11,764 Firm: 6,974 1,500 8,474 Note: * Highlighted figures indicate hypothetical capacity additions not identified or confirmed by the company

24 Investment In New Capacity Will Drive North America Exports Higher North America returns as a competitive supplier with increasing capacity Accelerating demand growth in developing regions outpace capacity growth requiring increasing imports Assume low cost Middle East and North America suppliers grow market share Naphtha based export countries in Asia lose market share

25 Ethane Cracking Advantage Providing Renewed Investments In North America USD per Metric Ton, Ethylene $1,400 Regional Ethylene Cash Cost $1,200 $1,000 $800 $600 $400 $200 $ U.S. Ethane South Asia Naphtha West Europe Naphtha

26 Development of Two Low-Cost Ethylene Production Regions Shale development has enabled the North American producer to become one of the lowest cost producers in the world Combined with the Middle East, 40%+ of the global ethylene capacity is now cost advantaged

27 Advantaged Ethane Cracking Will Dominate Ethylene Derivative Trade USA Canada Ethylene Net Equivalent Exports (million metric tons) Saudi Arabia Qatar Iran Kuwait

28 Advantaged Ethane Cracking Will Dominate Ethylene Derivative Trade S. Korea Japan Taiwan USA Canada Ethylene Net Equivalent Exports (million metric tons) Saudi Arabia Qatar Iran Kuwait Singapore Thailand Malaysia

29 North America Ethylene Equivalent Net Exports Driven By Low Cost Ethane Million Metric Tons, Ethylene 12.0 Ethylene Equivalent Net Exports By Derivative Thousand BPD, Equivalent Ethane Others Polyethylene Vinyls

30 Profit Cycle Dynamics Vary By Feedstock & Region Overall market recovery delayed on slower demand and acceleration of capacity Gas-based producers see steady high margins and no downturn Market fundamentals suggest high-cost producer margins will struggle Capacity additions likely to be moderated versus current forecast

31 U.S. & West Europe Integrated Polyethylene Cash Margins Cents Per Pound, Polyethylene Dollars Per Ton US Ethane to PE Chain Margin W.Europe Naphtha to PE Chain Margin

32 Chemical Industry Building Blocks Propylene On-Purpose production will continue to rise Technology related to region and feedstock Steam cracker and FCC supply trends also vary by region Demand growth trending towards ethylene (GDP) due to higher price relative to ethylene

33 Propylene Producers Around The World......have benefitted from advantaged feedstocks...have been striving for self-sufficiency...are adding huge volumes of capacity...will struggle to place volume in current market

34 A Problem That Needed A Solution Late 1990 s Gap between demand and supply growing Steam cracker FCC Ethylene growing slower than propylene Feedslates getting lighter Gasoline demand growth slow New refinery developments limited High Severity FCC help

35 An Issue With Steam Cracker Production Global Propylene/Ethylene Ratio Demand Steam Cracker Production

36 The History of Propylene Supply Production, Million Metric Tons Share of Total, Percent Steam Cracker Refineries Propane Dehydro Metathesis HS FCC Methanol-to-Olefins Others On-Purpose Share

37 The Initial Solutions Propane Dehydrogenation (PDH) Catalytic process Propane feedstock, readily available Simple route to propylene C C=C C=C Metathesis C C C C Traditionally used to turn propylene into ethylene/c4s Reversal of process to produce propylene C4s supply has become a challenge C C C

38 Alternative Solutions Olefins Inter-conversion Uses higher olefins as feedstock Main potential is in refineries Refinery focus is fuels Methanol To Olefins Difficult to justify based on market priced methanol Coal To Methanol makes MTO interesting If coal price is low enough process is attractive

39 Propylene Supply Options Are Many Russia Africa China U.S. Middle East

40 Middle East Supply Developments Production, Million Metric Tons Steam Cracker Refineries Propane Dehydro Metathesis HS FCC Others

41 China Investing In On-purpose Propylene To Close The Supply Gap Propylene Production and Demand, Million Metric Tons Steam Cracker Refineries Propane Dehydro Metathesis HS FCC Methanol-to- Olefins Net Equivalent Demand

42 North America Seeking A Home For NGLs Shale gas reserves barely tapped Methane Ethane There is plenty more to come Fuel, CNG... Steam Crackers Options Propane??? Domestic fuel - limited Exports - will start to increase, still advantaged pricing Chemicals - PDH is coming

43 Building On-purpose Propylene Capacity, Million Metric Tons Middle East United States China Others

44 Propylene Markets Are In Transition Propylene Equivalents, Million Metric Tons 6 4 Net Exports Net Imports North America South America Europe Middle East Asia Others

45 Conclusions Basic chemicals enable modern living linking growth to consumer demand Investment decisions driven by costs, which are tied to energy trends & integration strategies North America investments in chemicals is significant again Chemicals trade continues to expand with supply dislocations Industry up-cycle shifting with potential for over-supply

46 FORO PEMEX Petroquímica 2013 WTC Conference & Exhibition Center - Mexico City June 5, 2013 Global Outlook for Ethylene & Propylene Impact of Shale In North America Mark Eramo Vice President Chemical Industry Insights Houston, TX mark.eramo@ihs.com