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Tecnon OrbiChem Marketing Seminar at APIC 2008The World Chemical Industry Focuses on Asia

Victor Peng, Consultant Acetyls & Methanol Singapore, May 27, 2008

Coal-based Methanol Helps China to Independence for Acetic Acidand a Leading Position in DME

AGENDA

• China’s Importance In The Global Methanol Market

• Composition of Coal And Natural Gas-based Methanol Production In China

• China’s Independence of Acetic Acid Production• China’s Leading Position In DME

GLOBAL METHANOL MARKET

Everyone anticipating a “flood of methanol” as more projects come online

in Middle East and China

2007 2008 2009 20100

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Thousand Tons

RoW

China

Figure 1GLOBAL METHANOL CAPACITY ADDITIONS 2007-2010

Source: Tecnon OrbiChem

100

200

300

400

500

600

700

800

900

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Dollars/ton


Figure 2METHANOL CONTRACT PRICES – 2005-2008

Asia

N America

West Europe

100

200

300

400

500

600

700

800

900

1,000

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Dollars/ton


Figure 3METHANOL SPOT PRICES – 2005-2008

Asia

N America

West Europe

AGENDA

• China’s Importance In The Global Methanol Market• Composition of Coal And Natural Gas-based

Methanol Production In China• China’s Independence of Acetic Acid Production• China’s Leading Position In DME

21%

3%

70%

1%

5%12%

3%

78%

1%

6%

Oil

Natural Gas

Coal

Nuclear

Hydroelectric

Source: BP Statistical Review of World Energy June 2007

Figure 4COMPOSITION OF CHINA’S ENERGY PRODUCTION AND CONSUMPTION IN 2006

Production Consumption

2007 2008 2009 2010 Plan0

2,000

4,000

6,000

8,000

10,000

12,000

Coal-based

Natural Gas-based


Figure 5COMPOSITION OF COAL AND NATURAL GAS-BASED METHANOL CAPACITY ADDITIONS IN CHINA

Thousand Tons

AGENDA

• China’s Importance In The Global Methanol Market• Composition of Coal And Natural Gas-based Methanol

Production In China• China’s Independence of Acetic Acid Production• China’s Leading Position In DME

MethanolCarbonylation

AcetaldehydeBased

ButaneOxidation

By-Product CoalGasification

EthyleneOxidation

NaphthaOxidation

Others0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Capacity, ktpa

2005

2010

2015


ACETIC ACID CAPACITY BY PROCESS

North America28%

South America0%

West Europe14%

China22%

Northeast Asia17%

Middle East & Africa

1%

East Europe4%

South & Southeast Asia14%

Total = 11,054 kMT

Figure 6GLOBAL ACETIC ACID CAPACITY TO PRODUCE –2006 BY REGION


North America25%

South America0%

West Europe12%

China28%

Northeast Asia16%

Middle East & Africa

2%

East Europe4%

South & Southeast Asia13%

Total = 12,105 kMTSource: Tecnon OrbiChem

Figure 7GLOBAL ACETIC ACID CAPACITY TO PRODUCE –2007 BY REGION

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-700

-600

-500

-400

-300

-200

-100

0

100

200


Figure 8CHINA’S ACETIC ACID NET TRADE 2005-2015

Thousand Tons


Figure 9ACETIC ACID CAPACITIES IN CHINA (2007)

Ji’an Shenghua: 200k (ethanol-based)

Jilin Petchem: 210k (ethylene-based)

Tianjin Guanda: 40k (ethanol-based)

Xinyu Sanyang: 100k (ethanol-based)

Wujing: 230k (CMC)

Jinyimeng: 100k (ethanol-based)

Yankuang Cathay: 300k (CMC)

Jiangsu Sopo: 600k (CMC)

Yaraco: 400k (GMC)

Nantong Acetic Acid: 20k (ethanol-based)

Henan NanyangTianguan: 15k (ethanol-based)

Yangzi Petchem: 90k

(ethylene-based)

Celanese: 600k (CMC)

Shanghai Petchem: 100k

(ethylene-based)Nanning Chemical: 20k (ethanol-based)

CMC=Coal-based Methanol Carbonylation

GMC=Natural Gas-based Methanol Carbonylation

Daqing Petroleum Administration:

200k (CMC)


Figure 10ACETIC ACID CAPACITIES IN CHINA (2008-2012)

Ji’an Shenghua: 200k (ethanol-based)

Jilin Petchem: 210k (ethylene-based)

Tianjin Guanda: 40k (ethanol-based)

Xinyu Sanyang: 100k (ethanol-based)

Wujing: 230k (CMC)

Jinyimeng: 100k (ethanol-based)

Yankuang Cathay: 300k (CMC)


Yaraco: 400k (GMC)

Nantong Acetic Acid: 20k (ethanol-based)

Henan NanyangTianguan: 15k (ethanol-based)

Yangzi Petchem: 90k

(ethylene-based)

Shaanxi Yulin: 150k (GMC)

Wujing: 300k (CMC)

BP YPC: 500k (GMC)Guizhou Crystal: 36k (CMC)

Shandong Hualu Hengsheng: 200k (CMC)

Henan Shunda: 200k (CMC)

Yunnan Yunwei: 200k (CMC)


Yaraco: 650 (GMC)

Shandong Mingshui Great Chemical: 100k (CMC)

Celanese: 600k (CMC)

Shanghai Petchem: 100k

(ethylene-based)

CMC=Coal-based Methanol Carbonylation

GMC=Natural Gas-based Methanol Carbonylation

Nanning Chemical: 20k (ethanol-based)

Shaanxi Weihe:

35k (CMC)

Yanchang Group: 200k (CMC)

Daqing Petroleum Administration:

200k (CMC)

AGENDA

• China’s Importance In The Global Methanol Market• Composition of Coal And Natural Gas-based Methanol

Production In China• China’s Independence of Acetic Acid Production• China’s Leading Position In DME

WHAT IS DME

• DME is the simplest ether having the chemical formula of CH3OCH3

• DME is a colourless gas at ambient temperature, chemically stable, and can be easily liquefied.

• The physical properties of liquid DME are so similar to those ofLPG that DME can be distributed, stored, etc. using LPG handlingtechnology.

• DME’s low auto ignition temperature makes it a promising fuel candidate for diesel engines.

• DME is being used as an aerosol propellant in hair spray and other personal care products to replace CFC and LPG propellants

HOW IS DME BEING MADE

Methanol DME

Dehydration


Figure 11DME AS A COOKING FUEL

Picture Courtesy of Shandong Jiutai

Figure 12DME AS A AUTOMOBILE FUEL


Figure 13

DME AS AN AEROSOL PROPELLANT


Figure 14DME AS A WELDING AND CUTTING FUEL


Figure 15DME AS A REFRIGERANT


2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

1,0002,0003,000

4,0005,0006,0007,0008,0009,000

10,00011,00012,00013,000

Thousand Tons per Annum


Figure 16DME CAPACITIES - CHINA

0

200

400

600

800

1,000

1,200

0 20 40 60 80 100

Figure 17DME vs PROPANE

Bulk Propane or DME, $/ton LPGequivalent

Brent Crude Oil $/bbl

Plots of propane price month by month

1996-2008

Plots of propane price month by month

1996-2008

A1 Total ex plant cost - 200 ktpa coal-based DME plant

A2 Cash cost - 200 ktpa coal-based DME plant


B1

B2

Total ex plant cost - 1000 ktpa coal-based DME plant

Cash cost - 1000 ktpa coal-based DME plant

A1

B1A2

B2

0

200

400

600

800

1,000

1,200

0 20 40 60 80 100

Figure 18DME vs DIESEL

Bulk Diesel or DME, $/ton Dieselequivalent

Brent Crude Oil $/bbl

Plots of diesel price month by month

1996-2008

Plots of diesel price month by month

1996-2008

A1

B1


A1 Total ex plant cost - 200 ktpa coal-based DME plant

A2 Cash cost - 200 ktpa coal-based DME plant

B1

B2

Total ex plant cost - 1000 ktpa coal-based DME plant

Cash cost - 1000 ktpa coal-based DME plant

A2

B2

CONCLUSIONS• The “virtual flood” of methanol from Middle East and China is not yet

so severe as expected. But China helped improve the methanol industry balance.

• About 80% of the new methanol capacities that will come on stream in China from 2008 to 2010 are coal-based. 94% of the planned capacities in China are coal-based.

• China became the world’s largest acetic acid producer in 2007, and will gradually achieve self-sufficiency of acetic acid production through to 2012, and become a net exporter from 2014.

• DME produced from cheap coal in China is competitive with hydrocarbon fuels derived from crude oil at present, and likely to be competitive in the foreseeable future.

• Final Conclusion: Increasing domestic methanol capacities, mainly coal-based, helps China achieve self-sufficiency of acetic acid and a leading position in DME as a new fuel.

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