circular economy: impact on global feedstocks strategies · 2019-11-16 · source: icis supply and...

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Circular Economy: Impact on global feedstocks strategies

Elite Conference

21st International Conference

Mumbai, November 2019

Stefano Zehnder

Vice President, Global Feedstock & Refining

ICIS Consulting

www.icis.com 2

Agenda

Oil Demand Sensitivities

The Drive from Petrochemicals & Refinery Integration

Abundant Hydrocarbons Availability

An Indian Perspective on Feedstocks

Are we overestimating Petrochemical Demand?

Conclusions

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Oil Demand Trends

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Global Energy Demand Developments

Source: ICIS Supply and Demand Database

AAGR% Growth 2019 - 2040

Fuel Oil

0.09%

0.57%

1.77%

3.46%

1.29%

Coal

Oil

Nat Gas

Non Fossil

Total Energy

www.icis.com 5 Source: ICIS Supply and Demand Database

Shorter Term Increments (2018-25) MMTOE

Fuel Oil -100

0

100

200

300

400

500

600

North AM South AM EU F.USSR AF ME NEAsia SAsiaP

Coal Oil Gas Non Fossil

A refiner’s perspective:

Global Energy Demand Developments: Uneven Geographically…

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A refiner’s perspective (and of an Oil Producer…): Global Oil Demand Developments for Selected Products


2018 Oil Demand Profile AAGR% Growth - 2018 - 2040

Fuel Oil

• Subtracting non-oil contribution from Demand, implies a net increase for oil of just 0.6%

• Petrochemical feedstocks and aviation fuels are the fastest growing areas, road fuels expansion is slowing

• Not all petrochemical feedstocks demand will be available to refiners…

LPG 7%

Naphtha 7%

Gasoline 25%

Gas Oil 31%

Jet/Kerosene 8%

Fuel Oil 9%

Others 13%

-1.84%

0.50%

2.31%

-0.01%

2.71%

0.57%

Fuel Oil

Gas Oil

Jet/Kero

Gasoline

Naphtha & LPG

Total Oil

www.icis.com 7 Source: ICIS Supply and Demand Database

Fuel Oil

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Para-Xylene

Toluene

Benzene

Butadiene

Propylene

Ethylene

AAGR % 2019-2040

Petchem growth shows a different scale….

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Not all “Oil Demand” is derived from crude (bio fuels, etc.)

Much of incremental petrochemical demand will be satisfied by NGLs (less feedstock per olefin yields…)

Naphtha still the key raw material, but role of lighter feedstocks (olefins) rapidly increasing

IMO implementation will affect Fuel Oil demand, with a major impact on gas oil requirements

-90

-60

-30

0

30

60

90

GO

Incremental, Million Tonnes


Bio Fuels FO

Potential

Global Oil Demand one step further - 2019 vs. 2025

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Oil Demand Sensitivities

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country-level sales ban

Regional sales/ production/ circulation ban or country-level ban currently being considered

Denmark • petrol and

diesel car sales ban from 2030

Norway • ICE car sales

ban from 2025

France • petrol and

diesel car sales ban from 2040

• diesel car circulation banned in Paris from 2025

United Kingdom • ICE car sales

ban from 2050

Netherlands • ICE car sales

ban from 2030

Taiwan • ICE car sales

ban from 2040

India • ICE car sales

ban from 2030

Ireland • petrol diesel

car sales ban from 2030

United States • California, Connecticut, Maryland,

Massachusetts, New York, Oregon, Rhode Island and Vermont participating in International Zero-Emission Vehicle (ZEV) Alliance with an aim to make passenger car sales all in ZEV by 2050

Israel • Petrol and

diesel car import ban from 2030

Canada • Quebec participating

in International ZEV Alliance with an aim to make passenger car sales all in ZEV by 2050

Germany • considering petrol and diesel

car sales ban in long term (part of International ZEV Alliance)

• diesel car circulation limited in some cities, i.e. Hamburg

Spain • diesel car circulation

banned in Madrid from 2025

Mexico • diesel car circulation banned in

Mexico City from 2025

Greece • diesel car circulation

banned in Athens from 2025

Belgium • diesel car circulation

banned in Brussels from 2030

Italy • Diesel car circulation

ban planned in Rome from 2024

China • ICE car sales and

production ban currently being considered

Yes, Countries and Regions Plan ICE bans... but when?

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How will Internal Combustion Engines Fit in Different Scenarios?

Source: various statistics with forecast and elaborations from ICIS Analytics and Consulting

0%

5%

10%

15%

20%

25%

30%

2010 2015 2020 2025 2030

Passenger Vehicles Fleet’s Electrification Scenarios Key Markets (Battery + all Hybrids)

China West Europe US (incl. Light Trucks)

40%

80%

“business as usual” Scenario

Future electrification scenarios may present huge variations in the role of ICE vehicles in the circulating fleet

A “business as usual” scenario would take a long time to replace conventional ICEs (hybrid would still use, albeit considerably downsized, ICEs).

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How will Internal Combustion Engines Fit in Different Scenarios?

Source: various statistics with forecast and elaborations from ICIS Consulting

0%

5%

10%

15%

20%

25%

30%

2010 2015 2020 2025 2030

Passenger Vehicles Fleet’s Electrification Scenarios Key Markets (Battery + all Hybrids)


40%

80%

“Drastic Scenario” 2022 ban on sales

of pure ICE vehicles

“business as usual” Scenario

Future electrification scenarios may present huge variations in the role of ICE vehicles in the circulating fleet

A “business as usual” scenario would take a long time to replace conventional ICEs (hybrid would still use, albeit considerably downsized, ICEs)

It would require a “Drastic” Scenario (i.e. assuming no pure ICE vehicles sales after 2022) to consistently bring electrification beyond 50% of the fleet by 2030

The effect of this “Drastic” scenario would be faster in the Chinese market.

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Road Fuel Demand Sensitivity: China EV Developments: a Base Case unlikely to impact on Oil Demand before 2025

Source: various statistics with forecast and elaborations from ICIS Consulting

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

1,80,000

(th

ou

san

d t

on

nes

)

China Road Fuel Demand

Gasoline_Demand_Low Gasoline_Demand_Base Gasoline_Demand_High

Diesel_Demand_Low Diesel_Demand_Base Diesel_Demand_High

-40,000

-30,000

-20,000

-10,000

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2017-2030 2030-40

China Incremental Road Fuel Demand

Road Fuel Demand Low

Road Fuel Demand Base

Road Fuel Demand High

‘000 Tonnes

www.icis.com 14 Source: various statistics with forecast and elaborations from ICIS Consulting

-60,000

-40,000

-20,000

-

2017-2030 2030-40

West Europe Incremental Road Fuel Demand

Road Fuel Demand LowRoad Fuel Demand BaseRoad Fuel Demand High

40,000

80,000

1,20,000

1,60,000

2,00,000

(th

ou

san

d t

on

nes

)

Western Europe Road Fuel Demand

Gasoline_Demand_Low Gasoline_Demand_Base Gasoline_Demand_High

Diesel_Demand_Low Diesel_Demand_Base Diesel_Demand_High

Road Fuel Demand Sensitivity: Western Europe EV Developments: a Base Case unlikely to impact on Oil Demand before 2025

‘000 Tonnes

www.icis.com 15 Source: various statistics with forecast and elaborations from ICIS Consulting

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

4,00,000

4,50,000

(th

ou

san

d t

on

nes

)

US Road Fuel Demand

Gasoline_Demand_Low Gasoline_Demand_Base Gasoline_Demand_HighDiesel_Demand_Low Diesel_Demand_Base Diesel_Demand_High

-1,20,000

-1,00,000

-80,000

-60,000

-40,000

-20,000

-

2017-2030 2030-40

US Incremental Road Fuel Demand

Road Fuel Demand Low

Road Fuel Demand Base

Road Fuel Demand High

Road Fuel Demand Sensitivity: US EV Developments: a Base Case unlikely to impact on Oil Demand before 2025

‘000 Tonnes

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-

100

200

300

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

Global Bunker Demand by Fuel (Million Tonnes)

The Other Key Sensitivity The IMO Impact is expected to be disruptive

High Sulfur Fuel Oil

Scrubbed High SulfurFuel Oil

Low Sulfur Fuel Oil

Gas Oil

LNG

Source: ICIS Supply and Demand Database & ICIS Consulting

IMO 2020 rules focus on reducing SOx emissions from global shipping. They will require reducing global sulphur content in Fuel Oil “Straight run” production of low sulfur fuel oil is very limited, blending required

The shift away from High Sulfur Fuel Oil will require a major increase in demand for Gas Oil bunkers and call for the need of “cracking more fuel oil”..

By 2025, contribution from LNG and from “Scrubbers” will still be limited. LNG based fleet needs time to develop, and Scrubbers additions not always a fit.

Just one of the many possible scenarios…

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Road Transportation fuels: Shape and Size of the Global Fleet is Varied


0

100

200

300

400

2010 2015 2020 2025 2030

Passenger Vehicles Fleet’s Evolution Key Markets (millions)


China is by now the largest global market, and its vehicles’ fleet is rapidly reaching the size of those in Western Europe and the US.

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Shape and Size of the Global Fleet is Varied


Recent Market Profiles Key Markets

Sales "Scrap" Net Additions

China

West Europe

US, (incl.

Light Trucks)

Whilst China’s developments still imply “additional cars to the existing fleet”, West Europe and the US are already characterised by more important “replacements within the existing fleet”.

The impact from “restrictions to”, or “bans of”, Internal Combustion Engines (ICEs) will be strongly

linked to the size of new vehicles sales, but also the degree of “replacements”. China can “replace faster”…

www.icis.com 19

Electrification Profile: a small but fast Growing Trend


China W. Europe

U.S.

Battery All Hybrids

Electrification Profile of Passenger Vehicles in Key Markets (sales) The combined 3 markets represent

about 60% of global Battery and Hybrid passenger vehicles sales, growing 40% on previous year…

…But still less than 4% of total sales

China is the only major market where Battery only vehicles are the predominant electrification option, reflecting domestic incentives.

Hybrids vehicles were the electrification of choice in West. Europe and the US

A number of different scenarios could be possible in the future…

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New Refining Capacity & Integration with Petchem

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Almost 80% of refining capacity addition till 2025 will be in the Middle East and Asia

= 1000 kbd new capacity

Refining Capacity Additions (2019-2025)

= 1000 kbd speculative capacity

[VALUE]*

Crude

S & C AMERICA

31

Crude

FORMER USSR

2195

800

Crude

NORTH EAST ASIA

-80 Crude

EUROPE

610

340

Crude

NORTH AMERICA

1507

400

Crude

ASIA AND PACIFIC 538

200

Crude

AFRICA

1735

1250

Crude

MIDDLE EAST

www.icis.com 22

Almost 80% of refining capacity addition till 2025 will be in the Middle East and Asia

= 1000 kbd new capacity

Refining Capacity Additions (2019-2025)

= 1000 kbd speculative capacity

538 172 210

34

200

Crude FCC HC Coking

AFRICA

1735 198

408 125

1250

Crude FCC HC Coking

MIDDLE EAST

1507 390 400 58

400

Crude FCC HC Coking

ASIA AND PACIFIC

610 11 5 149 340

Crude FCC HC CokingNORTH AMERICA

550 129 80 133

Crude FCC HC Coking

S & C AMERICA

31 30 284 213

Crude FCC HC Coking

FORMER USSR

2195

326 723

238

800

Crude FCC HC Coking

NORTH EAST ASIA

-80

0 57 42

Crude FCC HC Coking

EUROPE

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More than one hundred million tons/year refining capacity may come on stream in the next five years. (+2 Million bd)

2022: SHENGHONG R&C 16,000 (320 mbd)

2019: HENGLI PC 20,000 (400mbd)

2019: ZHEJIANG PC 20,000 (400 mbd)

Legend

Green field

Brown field

2020: Start up

Confirmed Capacity Unit: KTA

2020: SINOPEC/KPC 10,000 (200 mbd)

2023: TANGSHAN RISUN CHEMICAL 15,000 (300 mbd)

Source: ICIS supply and demand database

2021: PETROCHINA/PDVSA 20,000 (400 mbd)

2020: SINOPEC SHANGHAI GAOQIAO 7,000(140mbd)

China Refining Capacity is rapidly expanding It will support Global Scale Naphtha Crackers and PX new Complexes

2024: NORINCO &ARAMCO 15,000 (300mbd)

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Much of new capacity could be delayed or canceled, implying potential rationalization at less competitive complexes. (another +2.5 million bd)

2020: CNOOC REF. AND PC 18,000

2026: SINOPEC QINGDAO 10,000

2021: FUJIAN GULEI PETROCHEMICAL 16,000

2021: SINOPEC ZHENHAI 17,000

2026: PETROCHINA JINXI 10,000

Legend

Green field

Brown field

2020: Start up

Speculative Capacity Unit: KTA

2022: PETROCHINA CHONGQING 10,000

2026: PETROCHINA SHANQIU 10,000

Source: ICIS supply and demand database

2026: SINOPEC YANSHAN 12,000

China Refining Capacity is rapidly expanding, more… The potential pace and scale could be disruptive (most petchem integrated…)

2023: YULONG PETROCHEMICAL 20,000

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Petrochemical and Petroleum Product Demand Comparison

Naphtha Surplus (Deficit) (MMTPA)

2018 2020 2025 2030

World 15 21 10 (14)

APAC (4) (2) (7) (17)

NEA (50) (43) (55) (90)

Asia Combined (55) (45) (62) (107)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2025 2030

CA

GR

fro

m 2

01

7 (%

)

Refined Products Petchem

* Petrochemical Demand Growth Proxy of Ethylene, Propylene and BTX Demand

A faster petrochemical growth vis-à-vis refined fuel products is promoting the construction and proposal of new sites which primarily are Petrochemical focused: • Hengli (2018-19) >40% Petrochemicals /Feed • Zhejiang (2019) >40% Petrochemicals /Feed • Rapid (2019) >30% Petrochemicals / Feed • Shenghong (2021) >30% Petrochemicals /Feed • Brunei (2019) >30% Petrochemicals /Feed • Saudi COTC (2024?) >45% Petrochemicals

Additional and refining capacity will be needed to prevent a naphtha deficit longer term

Global Growth in Demand

Global Refineries are increasingly targeting Petrochemicals A strategic opportunity away from fuels, but will require targeted investment

www.icis.com 26 Copyright © 2016 ICIS – Private & Confidential

Many new sites are very heavily integrated and pushing towards a “COTC” operation, although fuels “only” refineries are still prevalent

in or near markets with fuels product deficits

Rapid, Brunei Hengyi

Hengli, Zheijiang

Simple [SERIES NAME] Dangote, SA Jazan

Tangshan Risun, STAR Turkey

Sinopec / KPC

0 10 20 30 40 50 60 70 80 90 100

wt % Petrochemical Yield

Minor Integration Integrated Refinery Proposed COTC Future COTC ?

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New Chinese Refinery are aiming at 40% petchem yields

www.icis.com 28

Key Products Integration, New Projects 2018-25 Asia additions are overwhelming, with China dominating

Asia and Middle East have key reliance on Refineries

0

10

20

30

40

50

60

70

80

NORTHAMERICA

SOUTH &CENTRALAMERICA

EUROPE FORMERUSSR

AFRICA MIDDLEEAST

NORTHEASTASIA

ASIAAND

PACIFIC

MM

TPA

Non Refinery Sources C2 Refinery

C3 Refinery C2/C3 ex NGL

PX

0%

20%

40%

60%

80%

100%

World NORTHAMERICA

SOUTH &CENTRALAMERICA

EUROPE FORMERUSSR

AFRICA MIDDLEEAST

NORTHEASTASIA

ASIA ANDPACIFIC

Non Refinery Sources C2 RefineryC3 Refinery C2/C3 ex NGLPX

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Abundant Hydrocarbon Availability

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US NGLs: Ethane Ethane Implications: Including expected domestic demand and committed current exports should still allow for availability of rejected ethane. Assuming all announced Chinese projects (included in the chart) is not realistic…


Brazil

India

UK

Norway

Canada Sweden

Belgium

China Mexico

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LPG Scenarios

All rights reserved. By accepting this slide set, the recipient acknowledges that all information contained herein is confidential and will not be disclosed to third parties without the prior written agreement from ICIS

Source: ICIS

• Incremental US availability, primarily in the form of Propane, are feeding incremental deficits in Europe and Asia • Basically all the Middle Eastern surplus is addressed to Asia • International LPG markets will remain comfortably supplied thanks to higher production from NGLs in the US and the Middle East • Despite a growing role of petrochemicals, energy markets remain the largest demand factor, with seasonal price variations

www.icis.com 32

Naphtha Scenarios

All rights reserved. By accepting this slide set, the recipient acknowledges that all information contained herein is confidential and will not be disclosed to third parties without the prior written agreement from ICIS

Source: ICIS

• New refining capacity in Asia is sharply reducing the regional Naphtha deficit • Whilst naphtha release from Europe refiners is increasing (gasoline surplus), demand for petrochemicals is reduced by increasingly competing

access to ethane and LPG • Basically all the Middle Eastern surplus is addressed to Asia • International naphtha markets will remain comfortably supplied thanks to higher availability from US and reduced deficits from key importers • When crude prices increase, naphtha relative values tend to decline (larger crude-naphtha discounts). This is considered in the price forecast,

and in the different crude scenarios

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An Indian Perspective

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Indian Petrochemical Import Requirements

Source: various statistics with elaborations from ICIS Analytics and Consulting

www.icis.com 35 Source: various statistics with elaborations from ICIS Analytics and Consulting

0

1

2

3

4

5

6

7

8

Local NGLs Local Refineries Imports Local NGLs Local Refineries Imports

2010 >7 Million Tonnes

Naphtha

Ethane & Ref Gas

LPGs

27%

50%

23%

The Indian Ethylene Feedstocks Picture

www.icis.com 36

The Indian Ethylene Feedstocks Picture


0

2

4

6

8

10

12

14

16

Local NGLs Local Refineries Imports Local NGLs Local Refineries Imports


Naphtha

Ethane & Ref Gas

LPGs


27%

50%

23%

10%

58%

32%

www.icis.com 37

The Indian Petrochemical Feedstocks Picture


What’s Next?

More integration with domestic refineries Refinery Gases, Middle Distillates

More imports of Light NGLs Propane for PDH

Ethane from US?

Something Else? Coal, Methanol???

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Are we overestimating petrochemical demand?

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PE more “local for local”, driven by daily necessities than other polymers

Source: ICIS Supply & Demand Database

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Kilo

gra

ms

China per capita PE consumption US per capita PE consumption European per capita PE consumption

Copyright © 2019 ICIS – Private & Confidential

www.icis.com 40 ICIS Supply & Demand Database

Are we Overestimating Demand? Risk of major demand loss, an example…

• Business as usual is that public and legislative pressure to deal with plastic rubbish goes away

• Medium case: Industry responds – demand loss 60m tonnes versus base case during the whole forecast period

• Worst case is an industry failure and more lost demand

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

‘00

0 t

on

nes

Global PE demand

Base case, business as usual - 3.6% per year Crisis builds, industry responds - 3% per year

Crisis builds, industrt fails to respond - 2% per year

Ethylene Cash Cost Curve

Lighter feedstock maintain their cost advantages; at ~70 USD/bbl oil MTO remains uncompetitive

0

200

400

600

800

1000

1200

1400

0 20 40 60 80 100 120 140 160

Eth

yle

ne

Co

sts

of

Pro

du

ctio

n (

USD

/to

nn

e)

Cumulative Ethylene Production; Million Tonnes per Year

Estimated Regional Ethylene Cash Cost Curve - 2018

North American Ethane

North American LPG

Middle East Naphtha

Europe LPG

Europe Naphtha

NEA Naphtha

China CTO

Middle East LPG

SEA Naphtha

China MTO

Europe Imported Ethane**

SOURCE: ICIS Consulting

Middle East Ethane

**Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination, includes Liquefaction & Handling Costs

www.icis.com 42


24%

20% 52%

4%

Ethane&Ref Gas LPGs Naphtha Others

What About Feedstock? A simplified approach…but not the full story…

The Base Case (PE at 3.6% AAG)

Incremental Feedstock Demand 140 Million Tonnes per year

(to produce 65 MMt/y of Ethylene)

2019-2030

www.icis.com 43


24%

20% 52%

4%

Ethane&Ref Gas LPGs Naphtha Others

What About Feedstock? A simplified approach…but not the full story…

The Base Case (PE at 3.6% AAG)

Incremental Feedstock Demand 140 Million Tonnes per year

(to produce 65 MMt/y of Ethylene)

Sensitivity Cases: Potential Feedstock Impact (expressed in Million Tonnes per year of Naphtha Equivalent)

0

50

100

150

200

250

Base CasePE at 3.6% AAG

Industry ReactsPE at 3% AAG

Industry FailsPE at 2.4% AAG

ReducedDemand ?

Naphtha

Others

-35 MMT/y

-48 MMT/y

-83 MMT/y

Reduced PE demand could wipe off 40% of incremental feedstock requirements in naphtha terms, but…

Assuming a $60/bbl oil scenario tends to keep incremental ethane/light feedstocks in the picture, basically zeroing incremental naphtha demand in worst case…

Degree of PE chemical recycling will influence volumes of “CO2 attractive” incremental feedstocks to flexible naphtha crackers (Pyrolysis…?)…

Will naphtha get cheaper? Oil demand affected? What about environmental values?

Will ethylene and derivatives lose relative value to steam-cracking co-products?

A new competitive landscape…requiring careful scenario planning…

LPGs

Ethane & Ref Gas

+74 MMT/y

2019-2030

www.icis.com 44

Conclusions & Key Implications

www.icis.com 45

Conclusions & Key Implications

Demand for lower Carbon Intensity fuels and greater efficiency is supporting ample hydrocarbons avails, with Oil Demand affected. A concern for Oil Producers?

Refiners, and more so Oil Producers, with Asia and Middle East at center stage, are heavily moving into petrochemicals releasing additional feedstocks, and potentially participating in increased supply. Too much supply?

Incremental Petrochemical demand is not “granted”: Refiners and Petrochemical producers will need to be “proactive”, to ensure new materials will answer future needs, in a sustainable way. “Hydrocarbon Processing” will gain in relative importance.

www.icis.com 46

THANK YOU

Any Questions?

Please Contact us: www.icis.com

Balasubramaniam Ramani

Senior Consulting Manager,

Singapore

Stefano Zehnder,

Vice President Consulting,

Italy

[email protected] [email protected]

http://www.icis.com/

circular economy: impact on global feedstocks strategies · 2019-11-16 · source: icis supply and...

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