xlviii foro nacional de la industria química · global business development, chemicals ....
TRANSCRIPT
Mark Eramo, Vice-President IHS Markit Global Business Development, Chemicals [email protected]
XLVIII Foro Nacional de la Industria Química
Impact of Oil & Gas On Global Petrochemical Market Developments Presented By:
October 27-28, 2016 Hyatt Regency - Mexico City, Mexico
© 2016 IHS Markit. All Rights Reserved.
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• The Chemical Industry Enables and Provides…
• Impact of Energy on Chemical Investment Decisions
• Select Regional Perspectives
• Ethylene & Propylene In An Era Of “Energy at the Extremes”
• Strategic Considerations
3
Impact of Oil & Gas On Petrochemical Markets AGENDA
© 2016 IHS MARKIT
The Global Chemical Industry… … Enabling Modern Living
Automotive / transportation Consumer products Packaging Building / construction Recreation / sport Industrial Medical Pharmaceutical Personal care Textiles Electrical / electronics Aircraft / aerospace Business equipment
CUSTOMERS Formulated products / performance materials
Plastics and engineering resins • Extruded films, pipe,
profiles, coatings, sheet, foams
• Blow-molded parts • Composites
Synthetic fibers Rubber products Paints and coatings Adhesives and sealants Lubricants Water treatment products Cleaning products Industrial chemicals Flame retardants
Commodities
Differentiated commodities
Technical specialties
Chemical Intermediates
Base Chemicals
Olefins (ethylene, propylene, butylene)
Aromatics (benzene,
toluene, xylenes)
Chlor-akali (chlorine, caustic
soda)
Others (ammonia, phosphorous)
CHEMICAL INDUSTRY VALUE CHAIN ENERGY & FEEDSTOCKS
Mining, drilling, refining,
gas processing
Oil Gas Coal Minerals Renewables
ENERGY & FEEDSTOCKS
4
© 2016 IHS MARKIT
Global Energy & Economic Fundamentals Impact Chemical Investment Decisions
• Crude oil price trends impact regional competitiveness and profitability for chemicals.
• Ethane/gas based investments in North America and coal-based assets in China, see lower margins in low crude oil market.
• Assumptions on economy and energy drive key decisions of location, feedstock, technology, scale, cost position, trade, etc.…
• Uncertainty results in delayed approvals; when combined with steady growth leads to tighter market conditions in certain markets
• Crude oil (energy) “at the extremes” impacts demand for chemicals and plastics. On the high end, it can “destroy” demand and on the low end it can stimulate demand.
5
© 2016 IHS MARKIT
Gas-to-Crude Ratio Drives Regional Investment Activity In The Chemical Industry
0%
20%
40%
60%
80%
100%
120%
0.0
3.0
6.0
9.0
12.0
15.0
18.0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Crude (WTI) Natural Gas Gas-to-Crude Ratio
Regional Energy Pricing Trends : Low Gas-to-Crude Ratio Favors North America Investments
Source: IHS
$ / M
M B
tu
Gas
-to-C
rude
Rat
io
6
© 2016 IHS MARKIT
Impact of Changing Energy Dynamics On Regional Chemical Capacity Additions
-30%
0%
30%
60%
90%
120%
-10
0
10
20
30
40
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
Gas
-to-C
rude
Oil
BTU
Rat
io, %
Mill
ion
Met
ric T
ons
China Asia Less China (with India)Middle East North AmericaWest Europe Gas-To-Crude BTU Ratio, %
Annual Change - Total Basic Chemicals Capacity: Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
7
© 2016 IHS MARKIT
-30%
0%
30%
60%
90%
120%
-10
0
10
20
30
40
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
Gas
-to-C
rude
Oil
BTU
Rat
io, %
Mill
ion
Met
ric T
ons
China Asia Less China (with India)Middle East North AmericaWest Europe Gas-To-Crude BTU Ratio, %
Annual Change - Total Basic Chemicals Capacity: Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
8
Impact of Changing Energy Dynamics On Regional Chemical Capacity Additions
© 2016 IHS MARKIT
-30%
0%
30%
60%
90%
120%
-10
0
10
20
30
40
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
Gas
-to-C
rude
Oil
BTU
Rat
io, %
Mill
ion
Met
ric T
ons
China Asia Less China (with India)Middle East North AmericaWest Europe Gas-To-Crude BTU Ratio, %
Annual Change - Total Basic Chemicals Capacity: Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
9
Impact of Changing Energy Dynamics On Regional Chemical Capacity Additions
© 2016 IHS MARKIT
-30%
0%
30%
60%
90%
120%
-10
0
10
20
30
40
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
Gas
-to-C
rude
Oil
BTU
Rat
io, %
Mill
ion
Met
ric T
ons
China Asia Less China (with India)Middle East North AmericaWest Europe Gas-To-Crude BTU Ratio, %
Annual Change - Total Basic Chemicals Capacity: Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
10
Impact of Changing Energy Dynamics On Regional Chemical Capacity Additions
© 2016 IHS MARKIT
• The Chemical Industry Enables and Provides…
• Impact of Energy on Chemical Investment Decisions
• Select Regional Perspectives
• Ethylene & Propylene In An Era Of “Energy at the Extremes”
• Strategic Considerations
11
Impact of Oil & Gas On Petrochemical Markets AGENDA
© 2016 IHS MARKIT
Benzene
Chlorine
Ethylene
Methanol
Paraxylene Propylene PG
Global Base Chemical Assets By Location
12
580 MM metric tons in 2015
© 2016 IHS MARKIT
0
150
300
450
600
750
900
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
China Asia Less China (with India)North America Middle East + AfricaEurope South America
Base Chemicals – Total Capacity By Region Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
Source: IHS © 2016 IHS
Mill
ion
Met
ric T
ons
Base Chemical Capacity To Exceed 750 MM Metric Tons By 2025, Dominated By Growth Across Asia/Pacific
Chemical Investment “Rules”
• Secure an energy & feedstock advantage.
• Leverage current technology and build world-scale.
• Invest with proximity to local markets and/or access to trade routes.
• Build to leverage an upstream and/or downstream integrated position.
13
© 2016 IHS MARKIT
Beyond 2020…Where Will The Next Wave Of Capacity Be Built? Region 2015 2025 Delta
North America
90
137
47
South America
24
26
2
Europe
89
101
12 Middle East / Africa
77
119
42
Asia/India w/o China
130
163
33
China
172
241
69
Total
582
787
205
Total Basic Chemical* Capacity (Million Metric Tons)
* Ethylene, Propylene, Methanol, Benzene, Paraxylene, Chlorine
14
© 2016 IHS MARKIT
Investment Decisions Must Evaluate Many Factors Beyond Energy & Economy
Investment Assumptions: • Global crude oil price scenarios • Global economic growth outlook • Geo-political considerations
• Iran sanctions • North American energy market • Current state of the profit cycle • China structural changes • Non-conventional technology • Sustainability • Levels of integration • Regional CAPEX differentials • Logistics investments
15
Braskem-Idesa Ethylene/PE Plant Nanchital, Veracruz, Mexico
Start-Up: June 2016
Investment Assumptions: • Global crude oil price scenarios • Global economic growth outlook • Geo-political considerations
• Iran sanctions • North American energy market • Current state of the profit cycle • China structural changes • Non-conventional technology • Sustainability • Levels of integration • Regional CAPEX differentials • Logistics investments
© 2016 IHS MARKIT
China Slower Pace Of New Investments & Focus On: > Industry Competitiveness > Safety & Pollution control > Segment Consolidation
16
• The government balancing between economic growth, social stability, industry restructuring.
• Tighten pollution control; industry safety performance; rationalize inefficient assets.
• Develop modern coal chemicals asset base.
• Consolidation of 100+ chemical industry parks into seven national chemical industrial zones.
• Rapid growth in private investment potentially changes future behavior.
• Overseas investment activity is also very active.
China 13th Five Year Plan
© 2016 IHS MARKIT
China 13th 5-Year Plan Slows Pace Of New Investments; Focus Shifts To Competitive Position, Safety & Pollution, Consolidation
17
0
50
100
150
200
250
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
Propylene (PG/CG) Ethylene Paraxylene
Benzene Methanol Chlorine
China - Base Chemical Total Capacity
Source: IHS © 2016 IHS
Mill
ion
Met
ric T
ons
Basic chemicals expansions of 200 MM metric tons over two decades (2005 – 2025). Self-sufficiency in propylene 85+% by 2020; ethylene remains near 60%.
© 2016 IHS MARKIT
Middle East Rate Of Investment Slows; Adding Diverse Feedstocks; Focused On Operational Efficiencies
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• Ethane prices in Saudi Arabia raised to reflect transition in strategy for future investments.
• Low crude prices sharpen focus on operational costs.
• Sadara project represents measured approach in Saudi Arabia to diversify businesses within chemicals industry.
• Lifting of nuclear sanctions on Iran has re-opened plans to expand the chemical space; insurance and financing remain an issue.
• Regional significant dependence on exports continues well into the future.
© 2016 IHS MARKIT
Middle East Focus Shifting To Feed-slate Diversity And Improving Operational Efficiencies
19
0
20
40
60
80
100
120
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Mill
ion
Met
ric T
ons
Propylene (PG/CG) Ethylene ParaxyleneBenzene Methanol Chlorine
Middle East Base Chemical Capacity
© 2016 IHS MARKIT
North America: An Attractive Place For Chemicals Investments Once Again
• Low cost energy and natural gas liquids provide sustainable advantage.
• Advantaged feedstock will enable an additional wave beyond 2020, assuming crude oil price recovery (near $80/bbl) and low natural gas pricing (near $4/MM BTU).
• Domestic and International companies seek to invest; leveraging the low-cost opportunities. New entrants to create increased competition in domestic markets
• Logistics & port infrastructure investment needed to support higher level of exports.
20
© 2016 IHS MARKIT
North America Low Cost Brings Back Base Chemical & Associated Derivative Investments
-10
10
30
50
70
90
110
130
150
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
Ethylene Propylene (PG/CG) Methanol Chlorine Benzene Paraxylene
North America - Base Chemical Total Capacity
Source: IHS © 2016 IHS
Forecast
Mill
ion
Met
ric T
ons
21
© 2016 IHS MARKIT
• The Chemical Industry Enables and Provides…
• Impact of Energy on Chemical Investment Decisions
• Select Regional Perspectives
• Ethylene & Propylene In An Era Of “Energy at the Extremes”
• Strategic Considerations
22
Impact of Oil & Gas On Petrochemical Markets AGENDA
© 2016 IHS MARKIT
Energy At The Extremes Has Catalyzed A “New Era” In Light Olefins Production
23
• For decades, light olefins supply based on refinery & naphtha cracker integrated sites
• Ethane crackers emerged where ethane was advantaged; USGC, Mexico, Alberta, Middle East; other areas where liquids rich gas was “trapped”.
• Propylene was a byproduct of refining and heavy or flexible steam cracking.
• Today light olefins are being made on purpose via a variety of technologies beyond refining and steam cracking: PDH, CTO/P, MTO/P, Metathesis, GTO/P, OCM
Propylene
Ethylene
PDH = Propane Dehydro CTO = Coal to Olefins CTP = Coal to Propylene MTO = Methanol to Olefins MTP = Methanol to Propylene GTO = Natural gas to Olefins GTP = Natural gas to Propylene OCM = Oxidative Coupling of methane
© 2016 IHS MARKIT
Beyond 2020…what are todays conversations about where the next wave of light olefins investments will be located?
Ethylene
Propylene PG
© 2016 IHS MARKIT
Energy & Feedstocks Will Influence Location & Technology For New Capacity Decisions
25
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Brent Crude Henry Hub Gas USGC Ethane
USGC Propane NEA Naphtha China Coal
Crude Oil – vs – Natural Gas & NGLs
© 2016 IHS
Con
stan
t 20
14$
Per M
MB
tu
Notes: China Coal is on a 6000kcal/kg basis, Qinhuangdao FOB Source: IHS
© 2016 IHS MARKIT
Non-conventional Technology Providing Options For Future Olefins Investments
0
200
400
600
800
1000
1200
1400
USEthane
US PDH NEA PDH NEANaphtha
WEPNaphtha
2011 2013 2015
Conventional Olefins Cash Cost (US$ / MT)
US GTP US GTO NEA CTO NEA MTO
Non-conventional Olefins Cash Costs (US$ / MT)
PDH = Propane Dehydro; GTP = Gas to Propylene; GTO = Gas to Olefins; CTO = Coal to Olefins; MTO = Methanol to Olefins
26
© 2016 IHS MARKIT
Ethylene Market Key Issues
27
• New Ethylene Capacity: delayed
start up timing of all “first wave” US ethylene units. Pushed out and/or removed some additions in China (MTO/CTO)
• Build-cycle Disruption: under investing in new capacity during 2020-21 period, supporting margin “up-cycle” .
• Effective Global Operating Rates: expected to be high over the next 5 years assuming steady economic growth, current new-build profile, unplanned outages.
• Naphtha crackers: required to balance demand; increasing cash cost combined with need for more naphtha cracking will push ethylene prices higher.
© 2016 IHS MARKIT
75
80
85
90
95
100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Global Op Rate Global Op Rate (Steam Cracker)NEA Op Rate WEP Op RateNAM Op Rate
Global Ethylene Nameplate Operating Rates
© 2016 IHS
Perc
ent
Source: IHS
North America “Wave” Of Capacity Will Not Overwhelm The Global Balance
28
© 2016 IHS MARKIT
5,089 5,726
12,458
-2,844 -3,060 -3,828
-597 -564 -1,759
14,041
18,266 19,686
-8,323
-10,550
-14,768
-390 -440 -1,103
-7,356 -9,521
-10,604
Ethylene Net Equivalent Trade Growth continues in Advantaged Regions
2011
2016
2021
*Others: Africa, Indian Sub., CIS & Baltic, Central Europe
North America
West Europe
Others*
South America Middle East
Southeast Asia
Northeast Asia
© 2016 IHS MARKIT
Propylene Market Key Issues
Propylene Requires On-Purpose Investment: margins for incremental supply will have to support new investments On-Purpose Technology Will Vary: dependent on regional feedstock advantage - PDH in U.S., Middle East, and Asia along with coal to olefins in China; Chinese PDH units based on propane imports that compete into fuels market. MTP is high cost. Build phase is delayed: investment in North American on-purpose propylene production delayed as questions over energy and the economy persist; “GTP under study”. Regional imbalance causes price volatility: overcapacity in propylene will cause major price shifts regionally but balance out over time. US monomer balance is long, derivatives are tighter. Low prices stimulate demand: propylene demand growth is seeing strength due to ample low cost supplies.
30
© 2016 IHS MARKIT
On-Purpose Propylene Supply To Reach 25% By 2020 Changing Competitive Landscape For Derivative Markets
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
% O
n- P
urpo
se
Stm. Crackers FCC Splitters DehydroMetathesis Olefin Cracking Methanol to OlefinsMethanol to Propylene Coal to Olefins Coal to PropyleneHS FCC Others On-Purpose % On-Purpose
Global Propylene Supply By Technology
Mill
ion
Met
ric T
ons
On Purpose Co-Product
31
© 2016 IHS MARKIT
Regional Propylene Equivalent Trade Flow Reduction In China Net Imports Result In Global Rebalancing
2011
North America
South America
West Europe
Middle East
Northeast Asia
Southeast Asia
2016
Others*
2021
*Others: Africa, Indian Sub., CIS & Baltic, Central Europe
1,720 890
1,950
-367 -465 -701
1,142 748
-404
-1,432
-2,413
-4,008
2,366
3,813 3,681 -3,062 -2,262
-156
-305 -228 -231
© 2016 IHS MARKIT
Pathways To A Competitive Petrochemical Industry…
Strategic Implications
• Energy markets impact chemical investment decisions. High level of uncertainty presents difficult scenarios for planning the best path forward.
• The investment landscape is changing with non-conventional options on technology and feedstock selection.
• Board level decisions require higher returns for approval; CAPEX is higher; Risk premiums escalate; approvals delayed.
• Investment decisions delays in 2015/16 could lead to supply limitations in the 2020+.
• Ethylene capacity additions globally outpace demand growth; Naphtha crackers required to balance demand; co-products (propylene, benzene) require new “on-purpose” supply options.
33
Mark Eramo, Vice-President IHS Markit Global Business Development, Chemicals [email protected]
XLVIII Foro Nacional de la Industria Química
Impact of Oil & Gas On Global Petrochemical Market Developments Presented By:
October 27-28, 2016 Hyatt Regency - Mexico City, Mexico
GRACIAS!!