outlook for the chemical industry - globuc - globuc€¦ · outlook for the chemical industry...

Confidential. © 2018 IHS MarkitTM. All Rights Reserved.

6th Downstream Project Management

3-4 December 2019 │Brussels, Belgium

Outlook for the Chemical Industry Development and Implications of the Crude to Chemicals Integration

Olivier Maronneaud

Director, Chemical Consulting

© 2019 IHS Markit. All Rights Reserved

Agenda

Chemical Outlook

Integration Drivers

Crude-to-Chemicals Implications

Source: Shutterstock


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Agenda

Chemical Outlook

Integration Drivers




Consumer

products

Transportation Packaging

Construction Recreation

Industrial Medical

Pharmaceutical Personal care

Textiles Electronics

Aerospace Business equipment

The Chemical Industry Enables Modern Living

Formulated

products /

performance

materials

Commodities

Differentiated

commodities

Technical

specialties

Chemical

intermediates

Olefins

Aromatics

Chlor-alkali

Others

Base

chemicals

Refined

products

& natural

gas liquids

NGLs

Naphtha

Fuel Oils

Gasoline

Diesel

Oil

Gas

Coal

Renewable

Natural

resources


Multi-billion dollar investment decisions rest on key market

fundamentals and emerging mega-trends

Basics: Unchanged over time

Building blocks for consumer goods

Economic growth drives demand

Low cost position endures & thrives

Market access & logistics are critical

Emerging trends: Continue evolving

Energy market fundamentals

Social license to operate

Technology & world scale

Use of digital technology


Investments in base chemical capacity continue, increasing by over

150 million metric tons between 2018 and 2025

0

100

200

300

400

500

600

700

800

900

2000 2005 2010 2015 2020 2025

Ethylene Propylene Methanol Chlorine Benzene Paraxylene

Total Base Chemical Capacity by Market

Source: IHS Markit © 2019 IHS Markit

Mill

ion

Me

tric

To

n


APAC (primarily China) is adding over 50% of new capacity followed by

N. America and Middle East as surplus capacity emerges

-10

0

10

20

30

40

2000 2005 2010 2015 2020 2025

Ethylene Propylene (PG/CG) Methanol

Chlorine Benzene Paraxylene

World Base Chemical Annual Capacity Growth by Market


Mil

lio

n M

etr

ic T

on

-10

0

10

20

30

40

2000 2005 2010 2015 2020 2025

China APAC (less China) North AmericaWest Europe Middle East South AmericaOthers

World Base Chemical Annual Capacity Growth by Region


Mil

lio

n M

etr

ic T

on


0

50

100

150

200

250

300

350

2000 2005 2010 2015 2020 2025

China Canada

United States Saudi Arabia

South Korea Iran

India

Total Base Chemical Capacity for select countries

Source: IHS Markit

Mil

lio

n M

etr

ic T

on

s

© 2019 IHS Markit

China and N. America investment continues at rapid pace

Total base chemical capacity includes: ethylene, propylene (PG,CG), methanol, chlorine, benzene, paraxylene

0

10

20

30

40

50

2000 2005 2010 2015 2020 2025

Canada Saudi Arabia

South Korea Iran

India

Total Base Chemical Capacity for select countries

Source: IHS Markit

Mil

lio

n M

etr

ic T

on

s

© 2019 IHS Markit


Global base chemical demand increased to over 500 million metric

tons in 2019 despite a deceleration in the rate of growth

0

100

200

300

400

500

600

700

800

2000 2005 2010 2015 2020 2025

Ethylene Propylene Methanol Chlorine Benzene Paraxylene

Total Base Chemical Demand by Market


Mill

ion

Me

tric

To

n


-20

-10

0

10

20

30

40

2000 2005 2010 2015 2020 2025

China APAC (less China) North AmericaWest Europe Middle East South AmericaOthers

World Base Chemical Annual Demand Growth by region


Mill

ion

Me

tric

To

n

-20

-10

0

10

20

30

40

2000 2005 2010 2015 2020 2025

Ethylene Propylene (PG/CG) Methanol

Chlorine Benzene Paraxylene

World Base Chemical Annual Demand Growth by market


Mill

ion

Me

tric

To

n

APAC (primarily China) is adding over 60% of new demand growth

globally, driven by light olefins end-use applications

Confidential. © 2018 IHS MarkitTM. All Rights Reserved.

Impact

on energy

transformation

by mobility

Crude to

chemicals

and refinery

integration

Impact of

plastics waste

on demand

Light vs

heavy

feedstocks

Global

impact on

petrochemicals

by China

MEGA-TRENDS IMPACTING THE 2020S


Agenda

Chemical Outlook

Integration Drivers




Efficiency gains create peak oil demand despite underlying growth in

GDP, population, transportation and petrochemical feedstock demand

40

50

60

70

80

90

100

110

120

199

0

199

5

200

0

200

5

201

0

201

5

202

0

202

5

203

0

203

5

204

0

204

5

205

0

World oil (total liquids) demand by scenario

Note: Liquids include refined products, NGLs, biofuels, and other miscellaneous liquids. The 2017 outlooks went to 2040 only. The 2018 outlooks extend to 2050.

Source: IHS Markit, International Energy Agency (IEA)

Mill

ion

ba

rre

ls p

er

da

y

Rivalry

History Autonomy

© 2019 IHS Markit


Demand “peaks” before 2040 for most refined products

2032

2036

2032

2030

2037

Gasoline

Transportation

Diesel

Gasoils

Residual

Fuel Oil

Total Refined

Products

Transportation diesel refers to demand in

road, rail, pipeline and domestic navigation Europe Worldwide

2018

2020

2026

2027

2018

0

20

40

60

80

100

120

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

North America Europe Asia Middle East Africa CIS Latin America

World refined product demand by region

Millio

n b

/dSource: IHS Markit © 2019 IHS Markit


In a world of declining gasoline demand, petrochemicals growth

remains attractive (although long-term moves more toward GDP parity)

-1.0

0.0

1.0

2.0

3.0

-10%

-5%

0%

5%

10%

15%

20%

2000 2005 2010 2015 2020 2025 2030 2035 2040

Petchem Demand Growth (YoY) GDP Growth GDP Elasticity (right axis)

Petchem vs GDP Growth Elasticity


Gro

wth

Pe

rce

nta

ge

Ela

sticity

Forecast


From a financial standpoint, diversification and integration with refining

lead to more competitive and stable financials

0%

10%

20%

30%

40% Refining Petchem

Companies Included: ExxonMobil, BP, Shell, Chevron, P66

Historical ROCE – chemicals and refining

© 2019 IHS Markit

RO

CE

Source: IHS Markit

-30

-20

-10

0

10

20

30

40

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Fully Integrated Ethylene IntegratedParaxylene Integrated Non Integrated

2020: East-of-Suez refinery margin analysis


Cumulative crude capacity, thousand b/d

Net

Cas

hM

arg

ins

, $

/ba

rre

l o

f C

rud

e 1st 2nd

Quartile

3rd

Quartile4th

Quartile

Most refineries in the

1st quartile are highly

integrated with

petrochemicals


Refinery and petrochemical plants have achieved various degree of

integration

Naphtha

Reformate

Propylene

C2 & LPG Gas

Hydrogen

C4=

Crude Flexibility

Fuels

Lube base oil

Energy Integration

General operations and support (G&A) for joint site operations

Feed Flexibility

• Ethane

• LPG

• Condensate splits

Petrochemicals

Refinery Petrochemical


Progression of refining & petrochemical operations integration

Recovery aromatics

& FCC olefins

Pre-1990s

<15%

Yield of chemicals / barrel of crude oil processed

Steam cracker site integration

plus commodity derivatives

1990 – 2000s

~15-25%

Increase scale of chemical

integration & derivatives

complexity

2010 – 2020

~25-40%

Simple

recovery

Forward

integration

Chemicals

emphasis

Development of

COTC technology

2020+

~40-80%

COTC


Agenda

Chemical Outlook

Integration Drivers




Many companies are already integrated with further development

expected in the near future

12%14%

9% 10%

4%6%

16%

15%

8%

11%

9%

6%

16% 16%

11% 11%

8%8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Reliance Sinopec Aramco Exxon BP Chevron

% I

nte

gra

tio

n

2010 2018 2024

Refinery Petchem Integration (%)

Source: IHS Markit (Company Strategy and Performance Services) © 2019 IHS Markit

Temporary decline

due to Motiva assets

split

Only integrated assets for the companies have been considered for calculating the integration percentage share


Several new projects have been announced with RRPCL in India and

SABIC/Aramco JV in Saudi focussing on Olefins

Projects

Refinery

Capacity

(MMTPA)

Ethylene

Capacity

(MMTPA)

Propylene

Capacity

(MMTPA)

P-Xylene

Capacity

(MMTPA)

Est. Chem.

conversion

(%/bbl of oil)

Investment

($bn)

Estimated Start

Trial Operation

Hengli Petrochemical 20 1.5 0.7 4.3 42 11.4 Comm. Q2 2019

Zhejiang Petroleum

and Chemical (ZPC)

Phase 1&2

40 2.8 3.3 4.0 45 12 + 12Q2 2020 (1st phase)

2nd Phase 2022?

Hengyi (Brunei) PMB

Refinery-Petrochem8 (Phase-1)

14 (Phase-2)

0.5

1.5- 1.5 >40 3.45

Phase 1: 2019

Phase 2: ??

Shenghong refinery

and Int. Petrochem16 1.1 - - 60 11.0 2021 H2

Sinopec-KPC PC JV

(Zhanjiang)15 0.8 0.6 - - - 2020

Tangshan Xuyang

(Risun)***15 1.5 - 3.5 >50 8.5 2023

Aramco/SABIC JV 20 3.0 1.9 - 40 - 50 20 Beyond 2025

RRPCL Project 60 7-8 5-6 - 30 - 40 - Beyond 2025


Key defining attributes of deep integration/COTC

Requires additional market

and capital

capability/presence and

brings risk; deep pockets

and market access

needed

Full operational benefits

require flexibility and deep

commercial and

operational agility and

capability

Product portfolio breadth

requires process and

product applications

know-how

Substantive capital

exposure rewards those

who can efficiently

deploy capital in low-

capex locales

Scale Complexity Technology Project execution

This implies large MNC or NOCs operating in growing markets with low capital costs

Note: MNC = multi national company

NOC = national oil company


Crude to Chemicals scale is unprecedent

3.0 3.6 4.2 4.8

1.92.3

2.73.0

0.9

1.1

1.3

1.4

0

1

2

3

4

5

6

7

8

9

10

50% 60% 70% 80%

Millio

n M

etr

ic T

on

s/Y

ear

Conversion Rate

Ethylene Propylene C4'sSource: IHS Markit © 2019 IHS Markit

COTC Output at Different Crude Conversion Rates

Feed: 20 Million Metric Tons/Year or 0.4 mmbpd Crude Oil

Base Case


And a lot less number of projects will be required to address demand

growth

0

5

10

15

20

25

30

35

40

45

50

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Mil

lio

n M

etr

ic T

on

s/Y

ea

r

No. of COTC Plants

50% Conversion Gap Ethylene Hypothetical capacity

Number of COTC Plants Required vs. Ethylene Hypothetical Capacity

Conversion Rate: 50%

Ethylene hypothetical capacity until 2030

Ethylene

hypothetical

capacity until

2025


0

5

10

15

20

25

30

35

40

45

50

1 2 3 4 5 6 7 8 9 10 11

Mil

lio

n M

etr

ic T

on

s/Y

ea

r

No. of COTC Plants

70% Conversion Gap Ethylene Hypothetical capacity

Number of COTC Plants Required vs. Ethylene Hypothetical Capacity

Conversion Rate: 70%


Ethylene

hypothetical

capacity until

2025

Ethylene hypothetical capacity until 2030


In China, the commissioning of Hengli and ZPC are expected to turn

the PX market to a long position

70%

75%

80%

85%

90%

95%

100%

-5

0

5

10

15

20

25

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Op

era

tin

g R

ate

Millio

n M

etr

ic T

on

s

Demand Growth China NEA ex China SEAISC Americas Europe Middle East AfricaGlobal Excess Capacity Operating Rate


Paraxylene demand growth vs. capacity growth


Takeaways

• Strong cycle for chemicals, but optimism is

weakening reflecting economic and geo-political

risks

• Refined product demand is growing worldwide, but

peak is on the horizon supporting the development

of downstream integrated complexes into chemicals

• COTC are high capital investment and location

such as China and India with low Capex are relevant

• Industry structure will change as COTC scale is

unprecedented; market can only handle few of

these complexes


Questions?

IHS Markit Customer Care

[email protected]

Americas: +1 800 IHS CARE (+1 800 447 2273)

Europe, Middle East, and Africa: +44 (0) 1344 328 300

Asia and the Pacific Rim: +604 291 3600

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Contact details

Olivier Maronneaud

Director – Chemical Consulting

London, UK

Mob: +44 777 321 4388

[email protected]

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