© 2013 platts, mcgraw hill financial. all rights reserved. life after shale gas: a race for...
TRANSCRIPT
© 2013 Platts, McGraw Hill Financial. All rights reserved.
Life after shale gas: A race for marketshare
Prema Viswanathan, Associate Editorial Director, Petrochemicals, PlattsIPF, Tehran, 7-8 June 2014
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Heards system propels market interface
PX: Bid July at $1,220/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, T/T 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX:Jun/Jul bid heard at $13/mt CFR TND, Asia origin(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Offer Any July at $1,238/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Offer Any July at $1,240/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Bid 1H July at $1,220/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
PX: Jul bid heard at $1,215/mt CFR TND, Asia origin, T/T 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
PX: Bid July at $1,220/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, T/T 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX:Jun/Jul bid heard at $13/mt CFR TND, Asia origin(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Offer Any July at $1,238/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Offer Any July at $1,240/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: Bid 1H July at $1,220/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
PX: Jul bid heard at $1,215/mt CFR TND, Asia origin, T/T 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
PX: Bid 1H July at $1,210/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H1 Jun offer heard at $1,238/mt CFR Ningbo, Asia origin, if form e, +1.75% return (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H1 Jul bid heard at $1,220/mt CFR Ningbo/Dalian/Jiangyin, Asia origin(exluding India/China/ME and Iran), L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX : 1h June offer at 1236 cfr NB, asia, if form e, +1.75% return (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
PX: Bid 1H July at $1,210/mt, CFR nb/tw/dl, Asia origin, origin excluding all ME, India and China, L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H1 Jun offer heard at $1,238/mt CFR Ningbo, Asia origin, if form e, +1.75% return (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H1 Jul bid heard at $1,220/mt CFR Ningbo/Dalian/Jiangyin, Asia origin(exluding India/China/ME and Iran), L/C 30 days(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt(for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px) PX : 1h June offer at 1236 cfr NB, asia, if form e, +1.75% return (for details contact Michelle Kim at [email protected] or +65-6530-6425; yahoo IM: platts_asia_px)
May 21, 2014
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Agenda
• US shale boom and impact on aromatics • Production shifts to Middle East, Asia • Middle East shift away from light feeds• China’s opportunities & challenges• India’s unmet potential• Conclusion
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Chemical companies profit from growth
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• Despite narrowing margins the global chemical industry accounts for $3 trillion
• Stocks of US chemical companies (eg. Dow Chemical) have been doing well
Dow Chemical (NYSE:DOW)Historical Stock Chart1 Year : From Apr 2013 to Apr 2014
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US projects capitalise on ethane surplus
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Ethane use to grow for next decade
10Source: Platts
• Ethane consumption in US crackers has climbed from 41% of total feedstock in 2005 to 58% of total feedstock in 2013
• Ethane is expected to account for 76% of US cracker feedstock by 2024– Cut in propane use is
necessitating PDH development– Aromatics output at the cracker
has diminished, contributing to a tighter benzene market
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Cheap ethane driving the boom
11Source: Platts
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US cracker margins – never better
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Source: Platts
• Since early 2011, margins for US ethane and E/P Mix have climbed from $500/mt to $1,000/mt
• Naphtha margins, though, fluctuate from negative to $500/mt
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Greenfields: Producers are “all-in”
13Source: Company announcements, Platts
Company Location ,000 mt/yr ETA
Formosa Plastics CUSA Texas 800 2016
ExxonMobil Chemical Texas 1,500 2017
Chevron Phillips Chemical Texas 1,500 2017
Dow Chemical Texas 1,500 2017
Sasol Louisiana 1,500 2017
Occidental/Mexichem Texas 550 2017
Appalachian Resin W. Virginia 250 2017
Aither Chemical/RMG W. Virginia 200-300 2017
Odebrecht (Braskem) W. Virginia 1,000-1,500 2018
Axiall Louisiana 1,000 2019
Shin-Etsu (Shintech) Louisiana 1,000 2019
Shell Chemical Pennsylvania 1,000-1,500 2019
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Brownfield projects: Good barometers
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Source: Company announcements, Platts
Company Location +,000 mt/yr ETA
BASF-Total Texas 60 2012
Dow Chemical (restart) Louisiana 400 2012
Westlake Chemical Louisiana 110 2013
Williams Louisiana 230 2013
BASF-Total Texas 100 2014
Westlake Chemical Kentucky 80 2014
Ineos Texas 120 2014
Westlake Chemical Louisiana 110 2015
LyondellBasell Texas (3) 830 2014-16
Dow Chemical TX/LA (2) 400 2014-16
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The abundance of ethane Is encouraging investment
Ethane demand will struggle to keep pace with supply growth
Short balance in 2018 indicates ethane needs to flow from the Williston to supply crackers in the Gulf Coast
Source: Bentek Market Call: North American NGLs
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But investments based on imported ethane may not be cost-effective
Plant SpecsPlant size (million mt) 1
Operating Rate 95%Ethane feedstock requirement (b/d) 50,000.00 Total feedstock (b/year) 17,337,500.00
Source: Platts Petrochemical Analytics
Capital Requirements
Ship Capacity (bbls) 250,000
Total deliveries needed 69.00
Vessels needed for total deliveries 12
Vessel cost $ 85,000,000.00
Total vessel outlay $ 1,020,000,000.00
Per year contract volume (bbl) 17,337,500.00
Per year contracted outlay $ 86,940,000.00
Total contract outlay (20-years) $ 1,738,800,000.00
Anticipated Plant Cost $ 3,500,000,000.00
Total plant capital cost $ 6,258,800,000.00
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Regional PE net trade overview
17Source: Platts Petrochemical Analytics
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Propylene squeezed at the cracker
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Propylene will see a much larger impact
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• During the next decade, propylene produced by US crackers will fall 30% to 3.5 million metric tons in 2023 – down from just below 5 million metric tons in 2013
• Such a drop is forcing industry to adopt on-purpose processes
2020
Shale gas will yield less aromatics
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US shift to light feeds expected to sink aromatics output
Source: Platts Petrochemical Analytics
• Pygas to decrease 40%• Crude C4 to decrease 20%• Propylene to decrease 20%
• 69% growth in ethane based output• 32% decrease in naphtha based
output
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Middle East adds petchem capacity
Source: GPCA
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Gas shortage to intensify in Middle East
-55
-50
-45
-40
-35
-30
2012 2013 2014 2015
In billion cubic metersSource: Booz & Co
• Depleting supply of ethane in the GCC has forced producers to look at refinery-petchem integration and production of aromatics• Government push towards job creation has also led to downstream expansion and diversification into aromatics
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Middle East opts for aromatics, adds value
Source: GPCA
Aromatics product Capacity in MT/year
Benzene 3,655,000
Styrene 3,295,000
Toluene 2,035,000
Paraxylene 3,618,000
Mixed Xylenes 4,533,000Source: Platts
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Iran is the wild card which could bolster Middle East advantage
Source: UN Comtrade, Platts Petrochemical Analytics
Iranian PE exports prior to sanctions
• Iran exports continue despite sanctions
• China is now Iran’s No1 trading partner
• Major exporter of PE and methanol to China
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Asia leads in chemicals capacity growth
• US, Europe. Japan have been the major production hubs in the past• But Asia and the Middle East are fast catching up
Region Country Growth : 2012-2020
North America 25%
Latin America 33%
Western Europe 24%
Emerging Europe 35%
Africa, Middle East 40%
Asia-Pacific 46%
China 66%
India 59%
South Korea 35%
Japan 22%
Source: American Chemistry Council (ACC)
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• Chemical production in China seen rising 8.5% in 2015 versus 8.8% in 2014, 8.5% in 2013: ACC
• China moving towards self-sufficiency, new methanol-to-aromatics and coal-to-benzene projects to help boost competitiveness
• But China expected to continue importing petchems, including aromatics in the next decade
China: Opportunities
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China’s shale gas ambitions
• China targeting shale gas output of 6.5 billion cubic meters/year by 2015, 60 billion-100 billion cu m/year by 2020
• China’s shale gas output in 2013 was just 200 million cu m, according to the Ministry of Land and Resources
• Sinopec, CNPC leading the way• By 2015, 110 new wells likely at
Changning-Weiyuan
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New CTO/MTO projects
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CTO/MTO could flood global PE market
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• CTO and MTO projects in China could add up to 10 million mt of new PE capacity in the country by 2020 – nearly equal to China’s forecast demand growth.
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China’s coal advantage
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• While coal CFR China has averaged just over $7/MMBtu, naphtha has averaged just over $20/MMBtu and JKM or spot LNG price just over $18/MMBtu. So a ratio of 1:2.8:2.6.
Source: Platts
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India: Unfulfilled Potential
• New optimism with business-friendly government at the helm, promise to prioritise infrastructure projects
• IMF said in April that India’s GDP is set to grow 5.4% in FY 2013-2014, and 6.4% in 2015-2016
• Forecast based on strengthening global growth, improving export competitiveness, recently approved projects, stabilising currency
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India’s petchems imports to increase
Source: 12th Five Year Plan report, Government of India
• Inflation, policy delays, regulatory logjam, high interest rates curbing growth
• But low per capita consumption an opportunity for petchem players
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Global oil markets: Stable on the surface
34Source: Platts Dated Brent assessments
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Petchems don’t always track crude
Petchem markets are increasingly driven by supply-demand factors
Source: Platts
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Conclusion
• US petchem industry set to revive on shale gas boom• But US will be short of aromatics, may need to import
more• Europe set for consolidation on uncompetitive feedstocks• Middle East diversifying from gas based petchems to
liquids, may meet the US shortfall• China growth moderates, but imports to continue despite
move towards self-sufficiency• India’s growth story yet to unfurl, but demand set to
improve
