world olefins market: anticipating massive middle east ... - singapore/cmai... · massive middle...
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2008 APIC – CMAI Seminar2008 APIC – CMAI SeminarSingaporeSingapore ShanghaiShanghai HoustonHouston New YorkNew York LondonLondon DüsseldorfDüsseldorf DubaiDubaiSingaporeSingapore ShanghaiShanghai HoustonHouston New YorkNew York LondonLondon DüsseldorfDüsseldorf DubaiDubai
Steve ZingerSteve ZingerManaging Director Managing Director -- AsiaAsia
Service Leader Service Leader –– Asia OlefinsAsia [email protected]@cmaiglobal.com
APIC Marketing Seminar by CMAIAPIC Marketing Seminar by CMAISingapore, May 27, 2008Singapore, May 27, 2008
World Olefins Market: Anticipating Massive Middle East Capacity and
Satisfying Asian Demand
World Olefins Market: Anticipating World Olefins Market: Anticipating Massive Middle East Capacity and Massive Middle East Capacity and
Satisfying Asian DemandSatisfying Asian Demand
The global olefin markets are now anticipating massive amounts of new Middle East and Asia capacity to start impacting the market by the end of this year. Much of this capacity will be absorbed by rapid demand growth for petrochemicals in Asia, but too much new olefin capacity coming on-line ahead of demand growth during the 2009-2011 period.
The Middle East is investing in large amounts of new ethylene capacity due to very low-cost feedstock availability and the desire to diversify the local economies and provide local employment. The Middle East will also invest heavily in the propylene industry because of the use of heavier cracker feedstocks and the implementation of several on-purpose propylene technologies.
In Asia, China will continue to be the main driver for growth in manufacturing, thirst for raw materials, and ultimately demand for consumer goods. In 2009, China will invest in about 9 million metric tons of new ethylene capacity, inclusive of 3 plants using coal-to-olefins technology. The olefin industries in Japan, Korea, and Taiwan will continue to be very dependent on the growth patterns in China, but new olefin investments in these areas will be very small over the next 5 years in order to avoid competition with the large investments in China and the Middle East. In Southeast Asia, Singapore and Thailand will start-up large amounts of new ethylene capacity in 2009-2011, but other investments are under consideration in Vietnam, Philippines, and Indonesia. India resembles “China” with its strong GDP growth and large population growth, and several significant olefin projects are planned in India over the next five years.
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Past Capacity Evenly DistributedPast Capacity Evenly DistributedPast Capacity Evenly Distributed
North AmericaNorth America West EuropeWest Europe Middle EastMiddle EastTotal AsiaTotal Asia OthersOthers
97 97 98 98 99 99 0000 0101 0202 030300112233445566778899
1010Ethylene Capacity Additions, MMTEthylene Capacity Additions, MMT
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Future Capacity: Asia & M.E.Future Capacity: Asia & M.E.Future Capacity: Asia & M.E.
Middle EastMiddle East Total AsiaTotal Asia North AmericaNorth America
West EuropeWest Europe OthersOthers
0707 0808 0909 1010 1111 121200112233445566778899
1010Ethylene Capacity Additions, MMTEthylene Capacity Additions, MMT
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Asia & Middle East FocusAsia & Middle East FocusAsia & Middle East Focus
• Middle East Capacity Additions– Saudi Arabia– Iran– Others
• Asia Capacity Additions– China– Japan/Korea/Taiwan– Southeast Asia– India
• Global Market Impact
•• Middle East Capacity Middle East Capacity AdditionsAdditions–– Saudi ArabiaSaudi Arabia–– IranIran–– OthersOthers
•• Asia Capacity Asia Capacity AdditionsAdditions–– ChinaChina–– Japan/Korea/TaiwanJapan/Korea/Taiwan–– Southeast AsiaSoutheast Asia–– IndiaIndia
•• Global Market ImpactGlobal Market Impact
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
The Olefin Story in Middle EastThe Olefin Story in Middle EastThe Olefin Story in Middle East• Over 9 MMT new ethylene and
4 MMT new propylene coming on-line in 2008-9
• Low feedstock costs produce ethylene at $100-200 per ton
• Diversifying economy & providing jobs are a key investment factor
• Mostly PE, MEG, and PP; but other derivatives coming
• Heavier cracker feedstocks produce significant propylene
• Propane dehydro, metathesis and HS FCC more common
•• Over 9 MMT new ethylene and Over 9 MMT new ethylene and 4 MMT new propylene coming 4 MMT new propylene coming onon--line in 2008line in 2008--99
•• Low feedstock costs produce Low feedstock costs produce ethylene at $100ethylene at $100--200 per ton200 per ton
•• Diversifying economy & Diversifying economy & providing jobs are a key providing jobs are a key investment factorinvestment factor
•• Mostly PE, MEG, and PP; but Mostly PE, MEG, and PP; but other derivatives comingother derivatives coming
•• Heavier cracker feedstocks Heavier cracker feedstocks produce significant propylene produce significant propylene
•• Propane dehydro, metathesis Propane dehydro, metathesis and HS FCC more commonand HS FCC more common
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Where are the Ethylene Projects?Where are the Ethylene Projects?Where are the Ethylene Projects?
3.63.6
Other MDE
0.80.8North Africa
2.52.5
8.28.2
20072007
*Year*Year--End capacities in Million Metric TonsEnd capacities in Million Metric Tons
Saudi Arabia
9.49.4
0.80.8
6.86.818.218.2
20122012
Iran
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Nine Million Tons in 12 MonthsMiddle East Ethylene AdditionsNine Million Tons in 12 MonthsNine Million Tons in 12 MonthsMiddle East Ethylene AdditionsMiddle East Ethylene Additions
Q2 08Q2 08Saudi ArabiaSaudi ArabiaJubail Jubail ChevPhilChevPhil
TimeTimeCountryCountryCompanyCompany
Q3 08Q3 08Saudi ArabiaSaudi ArabiaPetroPetro--RabighRabighQ3 08Q3 08Saudi ArabiaSaudi ArabiaYansabYansabQ3 08Q3 08Saudi ArabiaSaudi ArabiaSEPCSEPC
Q4 08Q4 08KuwaitKuwaitTKOCTKOC
Q1 09Q1 09QatarQatarRLOCRLOCQ4 08Q4 08Saudi ArabiaSaudi ArabiaSHARQSHARQ
Q2 08Q2 08IranIranJam PCJam PCQ1 08Q1 08IranIranArya SasolArya Sasol
00
22
44
66
88
1010Capacity Additions, MMTCapacity Additions, MMT
Q1+Q2 '08
Q4 '08
Q3 '08
Q1 '09
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Iranian Cracker StatusIranian Cracker StatusIranian Cracker Status
• 4.9 MMT online by end 2008
• ...after which Iranian projects do not significantly affect global markets
• Next “mega-crackers“ are post 2012, part of the next olefins cycle
•• 4.9 MMT online by 4.9 MMT online by end 2008end 2008
•• ...after which Iranian ...after which Iranian projects do not projects do not significantly affect significantly affect global marketsglobal markets
•• Next Next ““megamega--crackerscrackers““ are post are post 2012, part of the next 2012, part of the next olefins cycleolefins cycle
00
11
22
33
44
55
66
77
0505 0606 0707 0808 0909 1010 1111 1212
YearYear--End Ethylene Capacity, MMTEnd Ethylene Capacity, MMT
Arya Sasol, Jam
Existing Capacity
Gach-saran
IlamMorvarid
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
More M.E. Ethylene Is Coming….More M.E. Ethylene Is ComingMore M.E. Ethylene Is Coming……..
OtherOtherUAEUAEQatarQatarKuwaitKuwaitIranIranSaudi ArabiaSaudi Arabia
0707 0808 0909 1010 1111 12120.00.0
1.01.0
2.02.0
3.03.0
4.04.0
5.05.0
6.06.0
7.07.0Ethylene Capacity Additions, MMTEthylene Capacity Additions, MMT
QP/Honam 2012QP/ExxonMobil 2012
Borouge 2010
RasTanura 2012
TKOC 2008 RLOC 2009
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
North Africa Is Also BuildingNorth Africa Is Also BuildingNorth Africa Is Also Building
AlgeriaSonatrach/Total JV
1100 kT 2013
LibyaDow/NOC scoping
expansion of existing cracker
Egypt• E-Chem scoping
options• OPC Propane
dehydro
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
EthaneEthane PropanePropane ButaneButane Condensate/NaphthaCondensate/Naphtha FCC OffgasFCC Offgas
Heavier Feedstock will be CrackedHeavier Feedstock will be CrackedHeavier Feedstock will be Cracked
00 200200 400400 600600 800800 10001000 12001200 14001400
KayanKayan
PetroPetro--RabighRabigh
SHARQSHARQ
SEPCSEPC
YansabYansab
Jubail Chev PhilJubail Chev Phil
Average CrackerAverage Cracker
Ethylene Capacity, Thousand Metric TonsEthylene Capacity, Thousand Metric Tons
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
M.E. Also Uses Alternative C3 TechM.E. Also Uses Alternative C3 TechM.E. Also Uses Alternative C3 Tech
Steam CrackerSteam Cracker Propane DehydroPropane DehydroFCCFCC MetathesisMetathesis
0707 0808 0909 1010 1111 12120.00.0
0.50.5
1.01.0
1.51.5
2.02.0
2.52.5Propylene Capacity Additions, MMTPropylene Capacity Additions, MMT
MetathesisMetathesis•• 2009 Ibn Zahr (KSA)2009 Ibn Zahr (KSA)•• 2010 Borouge (UAE)2010 Borouge (UAE)•• 2011 Saudi Polymers (KSA)2011 Saudi Polymers (KSA)•• 2012 QP/Honam (Qatar)2012 QP/Honam (Qatar)
FCC / HS FCCFCC / HS FCC•• 2006 Oman Ref2006 Oman Ref•• 2008 PetroRabigh (KSA)2008 PetroRabigh (KSA)•• 2012 RasTanura (KSA)2012 RasTanura (KSA)
Propane DehydrogenationPropane Dehydrogenation•• 2008 Advanced PP (KSA)2008 Advanced PP (KSA)•• 2008 Natpet (KSA)2008 Natpet (KSA)•• 2009 Al2009 Al--Waha (KSA)Waha (KSA)
Steam CrackersSteam Crackers•• KSA, Iran, Kuwait, QatarKSA, Iran, Kuwait, Qatar
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
The Olefin Story in AsiaThe Olefin Story in AsiaThe Olefin Story in Asia
• China will continue to have explosive growth
• Japan, Korea, Taiwan will feed the Chinese giant
• SE Asia continues to attract investors
• India possibly the next China
•• China will continue to China will continue to have explosive growthhave explosive growth
•• Japan, Korea, Taiwan Japan, Korea, Taiwan will feed the Chinese will feed the Chinese giantgiant
•• SE Asia continues to SE Asia continues to attract investorsattract investors
•• India possibly the next India possibly the next ChinaChina
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
China’s Explosive GrowthChinaChina’’s Explosive Growths Explosive Growth
9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 07070.00.0
2.02.0
4.04.0
6.06.0
8.08.0
10.010.0
12.012.0
14.014.0
16.016.0China Production Index, 1990 = 1.0 China Production Index, 1990 = 1.0
Motor VehiclesMotor VehiclesTelevisionsTelevisionsRefrigeratorsRefrigeratorsWashing MachinesWashing Machines
6x6x 7x7x10x10x 15x15x
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Status Of New Olefin Projects?Status Of New Olefin Projects?Status Of New Olefin Projects?
DushanziDushanzi
FujianFujian
ZhenhaiZhenhai
DaqingDaqing
FushunFushun
PanjinPanjin
Tianjin PCTianjin PC
In 2009In 2009: : 6 MMT C2 6 MMT C2 3 MMT C33 MMT C3
Naphtha CrackerNaphtha Cracker
Shenhua Shenhua (Ningmei)(Ningmei) 20102010
Shenhua Shenhua (Baotou)(Baotou) 20102010
Datang IntDatang Int’’l 2010l 2010
CoalCoal--toto--Olefins PlantOlefins Plant
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Why Does China Like Coal?Why Does China Like Coal?Why Does China Like Coal?
• Second largest coal reserves in the world
• National energy and petrochemical security
• Development provides inland jobs
•• Second largest coal Second largest coal reserves in the worldreserves in the world
•• National energy and National energy and petrochemical securitypetrochemical security
•• Development provides Development provides inland jobsinland jobs
• Coal is cheaper than crude oil based industry
•• Coal is cheaper than Coal is cheaper than crude oil based crude oil based industryindustry
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Coal is Cheap Feed!Coal is Cheap Feed!Coal is Cheap Feed!
Dubai Crude OilDubai Crude Oil
20002000 20012001 20022002 20032003 20042004 20052005 20062006 20072007 2008200800
22
44
66
88
1010
1212
1414$/MMBTU$/MMBTU
00
1313
2626
3939
5252
6565
7878
9191
Crude Oil Crude Oil $/BBL$/BBL
Qinhuangdao CoalQinhuangdao Coal
CoalCoal$/TON$/TON
330330
285285
240240
5050
9595
140140
190190
00
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Japan, Korea, And TaiwanCapacity Additions Will Subside
Japan, Korea, And TaiwanJapan, Korea, And TaiwanCapacity Additions Will SubsideCapacity Additions Will Subside
TaiwanTaiwanKoreaKoreaJapanJapan
Ethylene Capacity, MMTEthylene Capacity, MMT
0.00.0
5.05.0
10.010.0
15.015.0
20.020.0
25.025.0
20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012
YNCC 2006YNCC 2006LG Daesan 2007LG Daesan 2007Formosa #3 2007Formosa #3 2007
SamsungTotal 2007SamsungTotal 2007
Lotte Daesan 2008Lotte Daesan 2008
2525--50% of capacity is exported 50% of capacity is exported 4040--50% of exports are to China50% of exports are to China
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Southeast Asia Ethylene PlansSoutheast Asia EthyleneSoutheast Asia Ethylene PlansPlans
Shell 2010Shell 2010ExxonMobil 2011 ExxonMobil 2011
PTT 2009PTT 2009MOC (Siam/Dow) 2010MOC (Siam/Dow) 2010
Other plants under consideration: Other plants under consideration: Vietnam, Philippines, IndonesiaVietnam, Philippines, Indonesia
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Is India The Next China As A Major Petrochemical Player?Is India The Next China As A Is India The Next China As A Major Petrochemical Player?Major Petrochemical Player?
• How is India like China?+ Strong GDP Growth+ Large Population+ Transformation of poor to
middle class
•• How is India How is India likelike China?China?++ Strong GDP GrowthStrong GDP Growth++ Large PopulationLarge Population++ Transformation of poor to Transformation of poor to
middle classmiddle class
• How is India unlike China?– Poorer infrastructure– / + Different political landscape+ Growing population
•• How is India How is India unlikeunlike China?China?–– Poorer infrastructurePoorer infrastructure–– / + Different political landscape/ + Different political landscape++ Growing populationGrowing population
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
New Olefin Projects In IndiaNew Olefin Projects In IndiaNew Olefin Projects In India
New DelhiNew Delhi
MumbaiMumbaiJamnagarJamnagar
Reliance Refinery 2008Reliance Refinery 2008
PanipatPanipatIndian Oil Cracker 2009Indian Oil Cracker 2009 AssamAssam
BPCL Cracker 2012BPCL Cracker 2012
Other Other ““megamega”” projects under consideration by ONGC, GAIL, HPCLprojects under consideration by ONGC, GAIL, HPCL
West BengalWest BengalHaldia Cracker 2008Haldia Cracker 2008
Reliance Cracker 2012Reliance Cracker 2012
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
New Asia Ethylene Project SummaryNew Asia Ethylene Project SummaryNew Asia Ethylene Project Summary
Japan/Korea/TaiwanJapan/Korea/Taiwan ChinaChinaSE AsiaSE Asia IndiaIndia
0707 0808 0909 1010 1111 12120.00.0
1.01.0
2.02.0
3.03.0
4.04.0
5.05.0
6.06.0Ethylene Capacity Additions, MMT Ethylene Capacity Additions, MMT
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Asia Uses Alternative C3 TechsAsia Uses Alternative C3 TechsAsia Uses Alternative C3 Techs
Steam CrackerSteam Cracker FCCFCC Methanol Methanol to Olefinsto OlefinsMetathesisMetathesis PDHPDH
0707 0808 0909 1010 1111 12120.00.00.50.51.01.01.51.52.02.02.52.53.03.03.53.54.04.04.54.5Propylene Capacity Additions, MMTPropylene Capacity Additions, MMT
MetathesisMetathesis•• 2008 Titan (Malaysia)2008 Titan (Malaysia)•• 2008 SamsungTotal (Korea)2008 SamsungTotal (Korea)•• 2009 Mitsubishi (Japan)2009 Mitsubishi (Japan)•• 2009 Chiba JV (Japan)2009 Chiba JV (Japan)•• 2010 Pertamina (Indonesia)2010 Pertamina (Indonesia)•• 2010 MOC (Thailand)2010 MOC (Thailand)
FCC / HS FCCFCC / HS FCC•• 2008 SK Energy (Korea)2008 SK Energy (Korea)•• 2008 Petron (Philippines)2008 Petron (Philippines)•• 2009 PetroVietnam (Vietnam)2009 PetroVietnam (Vietnam)
Propane DehydrogenationPropane Dehydrogenation•• 2009 HMC (Thailand)2009 HMC (Thailand)
Steam CrackersSteam Crackers•• China, Singapore, ThailandChina, Singapore, Thailand
MethanolMethanol--toto--OlefinsOlefins•• 2010 Datang Int2010 Datang Int’’l (China)l (China)•• 2010 Shenhua (China)2010 Shenhua (China)•• 2010 Shenhua (China)2010 Shenhua (China)
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
Olefins… The Next Five YearsOlefinsOlefins…… The Next Five YearsThe Next Five Years
• Production costs?
• Trade flow?
• Operating rates and margins?
•• Production costs?Production costs?
•• Trade flow?Trade flow?
•• Operating rates and Operating rates and margins?margins?
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
M.E. Production Is Cheapest On The Ethylene Cost CurveM.E. Production Is Cheapest M.E. Production Is Cheapest On The Ethylene Cost CurveOn The Ethylene Cost Curve
Cumulative Ethylene Capacity, MMTCumulative Ethylene Capacity, MMT
West EuropeWest Europe
Southeast AsiaSoutheast Asia
Northeast AsiaNortheast AsiaNorth AmericaNorth America
00 2020 4040 6060 8080 100100 120120 140140
20072007
00
200200
400400
600600
800800
10001000
12001200Ethylene Production Costs, $/MT Ethylene Production Costs, $/MT
Middle EastMiddle East
$600+/tn$600+/tn
WTI = USD72/BBLWTI = USD72/BBL
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
The Middle East will Dominate Ethylene Derivative Exports
The Middle East will Dominate The Middle East will Dominate Ethylene Derivative ExportsEthylene Derivative Exports
North AmericaNorth America West EuropeWest Europe Middle EastMiddle EastAsiaAsia OthersOthers
Ethylene Net Equivalent Trade, MMTEthylene Net Equivalent Trade, MMT
--2525--2020--1515--1010
--550055
1010151520202525
0202 0303 0404 0505 0606 0707 0808 0909 1010 1111 1212
Net ExportsNet Exports
Net ImportsNet Imports
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
……And Propylene Derivative Trade Too!And Propylene Derivative Trade Too!
North AmericaNorth America West EuropeWest Europe Middle EastMiddle EastAsiaAsia OthersOthers
Propylene Net Equivalent Trade, MMTPropylene Net Equivalent Trade, MMT
--88
--66
--44
--22
00
22
44
66
88Net ExportsNet Exports
Net ImportsNet Imports
0202 0303 0404 0505 0606 0707 0808 0909 1010 1111 1212
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
By 2009… A Major Case of “Industry Indigestion”
By 2009By 2009…… A Major Case of A Major Case of ““Industry IndigestionIndustry Indigestion””
MarginsMargins Operating RateOperating Rate0101 0202 0303 0404 0505 0606 0707 0808 0909 1010 1111 1212 1313 1414 151500
100100200200300300400400500500600600700700800800900900
1,0001,000
Asia Naphtha Cracker Asia Naphtha Cracker Cash Margins, $/MMTCash Margins, $/MMT
7575
8080
8585
9090
9595
100100
105105
Average CrackerAverage CrackerOp. Rate, %Op. Rate, %
2008 APIC – CMAI Seminar2008 APIC – CMAI Seminar
ConclusionsConclusionsConclusions• Most olefin investment in
the Middle East or Asia– Make friends with the
Middle East and Asian Olefin Giants!
•• Most olefin investment in Most olefin investment in the Middle East or Asiathe Middle East or Asia–– Make friends with the Make friends with the
Middle East and Asian Middle East and Asian Olefin Giants!Olefin Giants!
• Upcoming margin trough is unavoidable for olefins & olefin derivative producers– Look for opportunities to compete (survive)!
• Align with customers with differentiated products• Venture with low feedstock costs in ME, Africa, & Russia• Feedstock flexibility to LPG, Condensates• Alternative feedstocks & technologies• Refinery integration & synergies• Propylene & butadiene co-products
•• Upcoming margin trough is unavoidable Upcoming margin trough is unavoidable for olefins & olefin derivative producersfor olefins & olefin derivative producers–– Look for opportunities to compete (survive)!Look for opportunities to compete (survive)!
•• Align with customers with differentiated productsAlign with customers with differentiated products•• Venture with low feedstock costs in ME, Africa, & RussiaVenture with low feedstock costs in ME, Africa, & Russia•• Feedstock flexibility to LPG, CondensatesFeedstock flexibility to LPG, Condensates•• Alternative feedstocks & technologiesAlternative feedstocks & technologies•• Refinery integration & synergiesRefinery integration & synergies•• Propylene & butadiene coPropylene & butadiene co--productsproducts