economic impacts of value-added uses of oil and natural gas
TRANSCRIPT
ECONOMIC IMPACTS OF VALUE-ADDED
USES OF OIL AND NATURAL GAS
Evar Umeozor, Ph.D.
Senior Research Engineer
June 20, 2020
www.ceri.ca
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Allan Fogwill
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OVERVIEWFounded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors.
Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public.
CERI publications include:
Market specific studies
Geopolitical analyses
Quarterly commodity reports (crude oil, electricity and natural gas)
In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.
CORE FUNDERS
FUNDING SUPPORT
IVEY FOUNDATION
IN-KIND SUPPORT
Alberta Energy Regulator | Bow Valley College | CEPA Foundation
JWN Energy | Northern Alberta Institute of Technology
Petroleum Services Association of Canada
S.M. BLAIR FAMILY FOUNDATION
AGENDA
Background
Methodology
Results
Conclusions
Questions?
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BACKGROUND – Global Feedstocks
5
0
100
200
300
400
500
600
700
2015 2020 2025 2030 2035 2040 2045 2050
Mto
e
Year
Coal Oil Gas Biomass
Source: Data by IEA, Figure by CERI
BACKGROUND – Regional Feedstocks
6
71%
11%
66%
37%
11%
78%
15%
84%
56%
18%
11%
19%16%
7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
North America Europe Middle East China Other Asia
% o
f F
eedsto
ck u
sed
Ethane Naphtha Other
Source: Data by Deloitte, Figure by CERI
BACKGROUND – Feedstocks and Products
7
Source: IEA 2018
BACKGROUND – Study Focus
8
Feedstock Product Assessment Methods
- Gas-based
- Oil-based
- Gas-based (Natural
gas): Ammonia,
Methanol
- Oil-based (Naphtha):
Ethylene, Propylene
- Process (amounts of
feedstocks, products and
GHG emissions)
- Microeconomic (FOB
supply cost)
- Macroeconomic
(employment,
salary/wage, tax revenue,
GDP impacts)
METHODOLOGY – IPEM Workflow
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METHODOLOGY – Business Cases & Attributes
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Attribute Reference Business Case
(RBC)
Competitive Business Case
(CBC)
Facility Size Smaller Bigger
Process Efficiency Lower Higher
Project Funding Debt Equity
Carbon Tax Yes No
METHODOLOGY – Product Supply Scenarios
11
• Business As Usual (BAU) Scenario;
𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝐷𝑒𝑚𝑎𝑛𝑑 + 𝐸𝑥𝑝𝑜𝑟𝑡𝑠 = 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦 + 𝐼𝑚𝑝𝑜𝑟𝑡𝑠
• Medium Supply Growth (MSG) Scenario;
𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝐷𝑒𝑚𝑎𝑛𝑑 + 𝐸𝑥𝑝𝑜𝑟𝑡𝑠 = 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦 = 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦𝐵𝐴𝑈 + 𝐼𝑚𝑝𝑜𝑟𝑡𝑠𝐵𝐴𝑈 + 1% 𝐺𝑙𝑜𝑏𝑎𝑙 𝐸𝑥𝑝𝑜𝑟𝑡 𝑀𝑎𝑟𝑘𝑒𝑡
• High Supply Growth (HSG) Scenario;
𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝐷𝑒𝑚𝑎𝑛𝑑 + 𝐸𝑥𝑝𝑜𝑟𝑡𝑠 = 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦 = 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑆𝑢𝑝𝑝𝑙𝑦𝐵𝐴𝑈 + 𝐼𝑚𝑝𝑜𝑟𝑡𝑠𝐵𝐴𝑈 + 3% 𝐺𝑙𝑜𝑏𝑎𝑙 𝐸𝑥𝑝𝑜𝑟𝑡 𝑀𝑎𝑟𝑘𝑒𝑡
RESULTS – Supply Costs
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0
200
400
600
800
1000
1200
1400
1600
1800
AB SK NL AB SK NL
Reference Business Case (RBC) Competitive Business Case (CBC)
$/t
Ammonia Ethylene Methanol Propylene
RESULTS – Cash Costs
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0
400
800
1,200
1,600
Am
mo
nia
Me
tha
nol
Eth
yle
ne/P
ropyle
ne
Am
mo
nia
Me
tha
nol
Eth
yle
ne/P
ropyle
ne
Am
mo
nia
Me
tha
nol
Eth
yle
ne/P
ropyle
ne
AB SK NL
$/t
RBC CBC
RESULTS – Carbon Tax (Additional to Costs)
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37.36
31.93
44.74
39.64
33.03
27.42
44.74
39.64
0
10
20
30
40
RBC CBC RBC CBC RBC CBC RBC CBC
Ammonia Ethylene Methanol Propylene
$/t
RESULTS – Cash Flows and Pay Back Periods
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RESULTS – Cash Flows and Pay Back Periods
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RESULTS – Regional Price Competitiveness
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0
100
200
300
400
500
600
700
North America Europe Asia RBC CBC
Price
Ra
nge
(U
S$
/t)
Ammonia Price
RESULTS – Regional Price Competitiveness
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0
100
200
300
400
500
600
700
North America Europe Asia RBC CBC
Price
Ra
nge
(U
S$
/t)
Ammonia Price
$37
$32
RESULTS – Regional Price Competitiveness
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0
50
100
150
200
250
300
350
400
450
500
North America Europe Asia RBC CBC
Price
Ra
nge
(U
S$
/t)
Methanol Price
RESULTS – Regional Price Competitiveness
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0
50
100
150
200
250
300
350
400
450
500
North America Europe Asia RBC CBC
Price
Ra
nge
(U
S$
/t)
Methanol Price
$33
$27
RESULTS – Regional Price Competitiveness
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0
200
400
600
800
1000
1200
1400
1600
1800
North America Europe Asia RBC CBC
Pri
ce R
ange
(U
S$/t
)
Ethylene Price
RESULTS – Regional Price Competitiveness
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0
200
400
600
800
1000
1200
1400
1600
1800
North America Europe Asia RBC CBC
Pri
ce R
ange
(U
S$/t
)
Ethylene Price
$45
$40
RESULTS – Regional Price Competitiveness
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0
200
400
600
800
1000
1200
1400
1600
1800
North America Europe Asia RBC CBC
Pri
ce R
ange
(U
S$/t
)
Propylene Price
RESULTS – Regional Price Competitiveness
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0
200
400
600
800
1000
1200
1400
1600
1800
North America Europe Asia RBC CBC
Pri
ce R
ange
(U
S$/t
)
Propylene Price
$45
$40
RESULTS – Economic Impacts of Scenarios
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Economic Impacts
BAU
Total GDP Increase
(USD Million)
Total Tax Increase
(USD Million)
Jobs created Total Pay
Increase
(USD Million)
Methanol 2020 - - - -
2030 5.69 0.88 16 0.46
2040 44.30 9.30 64 0.75
2050 107.02 28.27 103 1.21
Ammonia 2020 - - - -
2030 68.99 4.70 199 2.04
2040 261.22 20.49 376 3.83
2050 574.02 48.96 551 5.81
Ethylene 2020 - - - -
2030 134.10 53.41 386 4.27
2040 604.83 280.04 870 10.21
2050 1,528.16 777.57 1,466 18.35
Propylene 2020 - - - -
2030 15.77 5.38 45 0.61
2040 79.67 33.09 115 1.37
2050 204.22 96.83 196 2.50
RESULTS – Economic Impacts of Scenarios
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Economic Impacts
MSG
Total GDP Increase
(USD Million)
Total Tax Increase
(USD Million)
Jobs created Total Pay Increase
(USD Million)
Methanol 2020 4.01 0.62 115 0.63
2030 50.34 10.90 145 0.97
2040 131.79 35.50 190 1.57
2050 262.99 82.57 252 2.52
Ammonia 2020 7.45 0.37 214 1.17
2030 122.33 8.31 352 2.69
2040 357.91 28.05 515 4.54
2050 718.59 61.18 689 6.59
Ethylene 2020 26.63 8.31 766 4.17
2030 426.14 171.52 1,226 9.40
2040 1,288.35 593.25 1,854 17.25
2050 2,748.08 1,384.92 2,636 28.00
Propylene 2020 15.08 4.76 434 2.36
2030 194.07 76.83 559 3.80
2040 513.16 231.80 738 6.13
2050 1,019.11 504.83 978 9.62
RESULTS – Economic Impacts of Scenarios
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Economic Impacts
HSG
Total GDP Increase
(USD Million)
Total Tax Increase
(USD Million)
Jobs created Total Pay Increase
(USD Million)
Methanol 2020 6.39 1.23 184 1.00
2030 80.03 20.29 230 1.54
2040 208.95 62.80 301 2.48
2050 415.99 140.99 399 3.98
Ammonia 2020 14.91 0.85 429 2.34
2030 200.35 14.35 577 3.97
2040 522.11 41.95 751 5.96
2050 977.99 84.34 938 8.15
Ethylene 2020 48.62 15.66 1,399 7.62
2030 680.57 275.87 1,959 13.98
2040 1,891.42 871.36 2,722 23.52
2050 3,828.88 1,924.97 3,673 36.59
Propylene 2020 26.90 8.71 774 4.22
2030 336.63 135.50 969 6.46
2040 868.79 396.73 1,250 10.10
2050 1,693.17 844.49 1,624 15.56
CONCLUSIONS
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• Tariffs on imports is a major driver of whether to import or produce locally (relatively higher in Asian countries)
• In terms of global trading opportunity, decreasing order would be: methanol, ethylene, propylene, and ammonia
• Lower emissions transportation is a major driver of methanol demand growth
• Many countries are going for self-sufficiency in ammonia production due to its ties to agricultural sector for fertilizer production
• A lot of countries with negative olefins trade balance, indicate potential export opportunities
• Export-focused olefins production might need to be in polymer form for ease of movement to destination markets
• Oil-based pathways may not be viable in Canada, still crude oil access to market needed and future refinery-petrochemical investments integration maybe way forward
QUESTIONS?
33
Please submit your text questions and comments using the Questions panel.
A recording of the presentation will be sent to you following the event.
UPCOMING EVENTS
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Register at www.ceri.ca/events
CERI 2020 Petrochemical ConferencePetrochemicals and the Energy Evolution
29
THANK YOU
Canadian Energy Research Institute
ceri_canada
Visit www.ceri.ca for the latest research
Addendum – General Model Assumptions
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Input Value
OPEX inflation 2%
Feedstock price inflation 2%
Discount rate 10%
Interest rate 3.5%
Utilization factor 70% (Year 1), 80% (Year 2), 95% (Other)
CAPEX allocation 20% (Year 1), 50% (Year 2), 30% (Year 3)
Construction period 3 Years
Operating period 27 Years
Corporate tax AB (11%, 10%, 9%, 8% - all other years), SK (10%), NL (15%), Canada (15%)
Addendum – Canadian Refining Capacity
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479
67
318
130
392402
130
0
100
200
300
400
500
600
Alberta British Columbia New Brunswick Newfoundland andLabrador
Ontario Quebec Saskatchewan
Capacity M
b/d
Addendum – Major Methanol Importers
32
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Tho
usa
nd
USD
Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019
Addendum – Major Ammonia Importers
33
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
India USA SouthKorea
Morocco China Belgium Turkey Germany Ukraine Taipei,Chinese
France Mexico Norway Thailand Spain
Tho
usa
nd
USD
Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019
Addendum – Major Ethylene Importers
34
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Tho
usa
nd
USD
Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019
Addendum – Major Propylene Importers
35
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Tho
usa
nd
USD
Imported value in 2015 Imported value in 2016 Imported value in 2017
Imported value in 2018 Imported value in 2019