Petrochemical Industry

Transcription

1 Braskem >> The Company >> Petrochemical Industry Petrochemical Industry Brazil: Brief History of the Petrochemical Complexes in Brazil Overview of the Brazilian Petrochemical Industry The Role of Petrobras Thermoplastic Resins Market Worldwide: World Petrochemical Market Crackers Profile Utilization Rate Resin Capacity by Region Main Players in the Americas Historical Spread of Resins Brazil Brief History of the Petrochemical Complexes in Brazil The history of Brazil's petrochemical industry began in the early 50's, when intense demand emerged for a new product: plas cs. Amid this development and moderniza on period, consump on grew rapidly, signaling the need to create a na onal industry capable of mee ng this demand. Un l then, the country had met its needs through imports. Currently, the main petrochemical complexes, which are integrated with the feedstock cracking units, are: Capuava in São Paulo, Camaçari in Bahia, Triunfo in Rio Grande do Sul and Duque de Caxias in Rio de Janeiro. Capuava Complex (São Paulo state) The first complex established in Brazil, started opera ons in The project was funded by private capital from a São Paulo business group (União), in partnership with the government and with the par cipa on of foreign capital, which came to be known as the "Tripar te" model. The government's investment was made through Petroquisa, a Petrobras subsidiary for the petrochemical industry, while the foreign capital was important for providing the required technology. Today the complex comprises producers of petrochemical products used to make thermoplas c resins, rubbers, paints and other products. The complex has ethylene production capacity of 700 kton. Camaçari Complex (Bahia state) The Camaçari Complex, Brazil's first planned petrochemical complex, started its opera ons in 1978, and also adopted the "Tripartite" funding model. The complex is composed of producers of petrochemical products used to make thermoplas c resins, fer lizers and copper metallurgy, as well as other applications. The petrochemical complex has ethylene production capacity of 1,280 kton. Triunfo Complex (Rio Grande do Sul state) A er the complex in the state of Bahia, this was the third naphtha based petrochemical complex built in Brazil in the 70s. The Triunfo complex cracker Copesul (today Braskem) started opera ons in Today the Triunfo Complex has annual ethylene production capacity of 1,452 kton. Duque de Caxias Complex (Rio de Janeiro state)

2 Brazil's first integrated gas chemical complex was built in Duque de Caxias, Rio de Janeiro. Opera ons started up in 2005, and the gas cracking unit has annual ethylene production capacity of 520 kton. Overview of the Brazilian Petrochemical Industry The petrochemical chain is divided into first, second and third genera on producers, based on the manufacturing phase of the various petrochemical raw materials or inputs. The chain represents the transforma on of sub products obtained from the refining of crude oil, primarily naphtha or natural gas, into consumer or industrial products used for a variety of purposes. The main raw material used in Brazil's petrochemical chain is naphtha, followed by natural gas. Petrobras is the only producer of naphtha and natural gas in Brazil, mee ng domes c demand through its own produc on as well as imports. Petrobras monopoly was broken in 2002, and since then local petrochemical complexes have begun to import these products directly to meet their. The naphtha and/or gas undergo a process called cracking, which results in the basic petrochemicals such as ethylene, propylene and aromatics. The type of feedstock (i.e., raw material) used results in various different yields and product mixes. First Generation Producers In Brazil, first genera on producers, known as "crackers", fracture or "crack" the naphtha (a byproduct of the oil refining process) or natural gas, the two main feedstocks used, transforming them into basic petrochemicals. The crackers buy their naphtha mainly from Petrobras, but also from foreign suppliers. Crackers using natural gas as feedstock are supplied exclusively by Petrobras. The basic petrochemicals produced by naphtha cracking units include: olefins, mainly ethylene, propylene and butadiene; and aromatics, such as benzene, toluene and xylenes. With the acquisi on of Qua or, Braskem became the only Brazilian company of first genera on, which operate four cracking units and sell basic petrochemicals to second genera on producers, promo ng the integra on of the chain. Basic petrochemicals, which have gaseous or liquid forms, are transported through pipelines to second genera on producers, which in

3 general are located near cracking units, where they undergo additional processing. Second Generation Producers Second genera on producers process the basic petrochemicals purchased from naphtha cracking units to make intermediate petrochemical products, which include: polyethylene, polystyrene and EDC/PVC (made from ethylene); polypropylene and acrylonitrile (made from propylene); cumene and ethylbenzene (made from benzene): and polybutadiene (made from butadiene). Intermediate petrochemicals are produced in solid forms in pallets or in powdered form and are usually transported by truck to the sites of third genera on producers, which generally are not located near second genera on producers. Braskem is the only integrated first and second generation thermoplastic resin producer operating in Brazil. Third Generation Producers Third genera on manufacturers purchase intermediate petrochemicals from second genera on producers and transform them into final products, including: plastics (made from polyethylene, polypropylene and PVC); acrylic fibers (made from acrylonitrile); nylon (which in Brazil is made from phenol); elastomers (made from butadiene); and disposable packaging (made from polystyrene and polypropylene). Third generation manufacturers make a variety of consumer and industrial products, including containers and packaging materials such as sacks, shrink wrap and bo les, fabrics, detergents, paints, auto parts, toys and consumer electronics. Brazil currently has more than 11,500 third generation manufacturers. The Role of Petrobras Prior to 1995, Brazil's cons tu on gave the government a monopoly, exercised through Petrobras, in the research, explora on, produc on, refinement, importa on and transport of all crude oil and refined petroleum products (excluding petrochemicals) in Brazil. The cons tu on also stated that byproducts of the refining process, such as naphtha, could only be supplied in Brazil by Petrobras or its intermediary. Naphtha is the primary feedstock used in Brazil in the produc on of basic petrochemicals such as ethylene and propylene. In 1995, Brazil's cons tu on was amended to allow oil and oil related ac vi es to be exercised by private companies through concessions or licenses granted by the federal government. Since 1995, the federal government has implemented a number of measures to deregulate the country's petrochemical industry. In 1997, Federal Law 9,478/97 regulated the cons tu onal amendment of 1995 by crea ng the Na onal Energy Policy Council and the Na onal Petroleum Agency, which were charged with regula ng and overseeing the country's petroleum and energy sectors. With the crea on of the Na onal Petroleum Agency, new rules and regula ons were introduced to eliminate gradually Petrobras' monopoly. Brazil currently depends on imports for close to a third of its naphtha consumption. Thermoplastic Resins Market Overview Brazil is La n America's leading producer of basic petrochemicals and also leads the region in second genera on petrochemical capacity. Brazil's importance in the region is the result of the reorganiza on of the country's petrochemical industry and growth in domes c demand. Apparent consump on of thermoplas c resins in Brazil (domes c produc on plus imports less exports) has grown over the past few years at an average annual rate of 4.7%, driven by Brazil's economic growth, be er distribu on of wealth and higher purchasing power in the C, D and E income groups. Considering only the resins market (PE, PP, PVC), the

4 poten al for growth in plas cs consump on in Brazil is demonstrated by a comparison with consump on rates in developed na ons such as the United States, where in 2014 resin consump on stood at 68 kg per person, compared with just 25 kg per person in Brazil. Since the introduc on of the Brazilian real in 1994 and the subsequent stabiliza on of the country's economy, resin consumption has registered strong growth. Prices in the Brazilian Market Prices for petrochemical products in the Brazilian market follow international benchmarks. Worldwide World Petrochemical Market The recent industry scenario has been characterized by structural changes that range from the commissioning of new petrochemical complexes to the forma on of new global groups made up of strategic alliances, acquisi ons and/or mergers. The pursuit for feedstock availability, cost compe veness and presence in large commodity consumer markets has driven the industry restructuring at the global level. In recent years, the use of ethane as a feedstock for the produc on of ethylene has increased as a result of the divergence between the cost of natural gas and naphtha, especially in the Middle East and United States. In 2015, the global ethylene capacity is es mated at 165 million tons. Between 2015 and 2019, several petrochemical companies have announced plans to build addi onal capacity of ethylene, mainly in Asia, Middle East and North America, totaling 24 million tons, with 9 million tons in China and 8 million tons in USA. However, expansions of ethylene capacity are frequently subject to delays and it is not possible to predict when, and if, the planned additional capacity will be commissioned. Crackers Profile The main process in ethylene produc on is hydrocarbon cracking, which accounts for 98% of the world produc on. Ethylene can also be obtained through the recovery of refinery gas currents, ethanol and coal. The cracking process accepts a variety of hydrocarbons, whose source can be natural gas (ethane, propane and butane) or petroleum (naphtha and condensate). The use of different types of feedstock results in different products in the cracking process. Comparison of ethane-based and naphtha-based crackers - yield and products.

5 Utilization Rate The opera ng rates reflect the balance between supply and demand, characterizing the petrochemical industry's up and down cycles. Usually, decisions on new investments are made in the up cycle periods, when industry margins are more a rac ve. As a result of the investment maturity period and considering that the plants have a minimum scale of economic feasibility, when these new plants come on stream, there is surplus supply in the short and medium terms and a consequent reduc on in the operating rates. Resin Capacity by Region The world's annual resin capacity produc on (PP/PE/PVC) is approximately 183 million tons, led by Asia and followed by Europe and the United States. It is es mated that by 2019 there will be a capacity increase of around 46 million tons, mainly driven by the growth in polyethylene (PE) production, concentrated in the Middle East, China and United States. Main Players in the Americas In 2015, the American con nent produced approximately 40 million tons of resins (PE, PP and PVC), 20% of the world's production. Braskem ranks first among the leading petrochemical players, with annual production of 7,080 thousand tons. Historical Spread of Resins The thermoplas cs resins (PE, PP and PVC) are commodi es that are sold in global markets. Prices of these resins are influenced by global macroeconomic factors, the cost of raw materials, demand trends in the industries that consume these resins and transporta ons costs. In order to have an idea of the industry profitability, the "spread" (difference between resin price and cost of feedstock for production) is used as a tool. The following graph shows the resin spreads, using the price of High Density Polyethylene (HDPE) in Europe (the world's largest resin production) less the cost of naphtha-based feedstock.

6 The last down cycle in the sector was in 2002, when spreads were below US$500/ton. The global economic crisis affected the profitability of the petrochemical industry at the end of 2008 witnessed a recovery from the second quarter of However, Europe's sovereign debt crisis adversely impacted the global financial system in the second half of 2011, leading to slowing demand for petrochemicals. In Brazil, the demand for thermoplas c resins fell 1% in 2014, due to the challenging economic scenario.