World Olefins Market: Anticipating Massive Middle East Capacity and Satisfying Asian Demand

Transcription

1 World Olefins Market: Anticipating Massive Middle East Capacity and Satisfying Asian Demand Steve Zinger Managing Director - Asia Service Leader Asia Olefins szinger@cmaiglobal.com APIC Marketing Seminar by CMAI Singapore, May 27, 2008 Singapore Shanghai 2008 Houston APIC New York CMAI London Seminar Düsseldorf Dubai The global olefin markets are now anticipating massive amounts of new Middle East and Asia capacity to start impacting the market by the end of this year. Much of this capacity will be absorbed by rapid demand growth for petrochemicals in Asia, but too much new olefin capacity coming on-line ahead of demand growth during the period. The Middle East is investing in large amounts of new ethylene capacity due to very lowcost feedstock availability and the desire to diversify the local economies and provide local employment. The Middle East will also invest heavily in the propylene industry because of the use of heavier cracker feedstocks and the implementation of several on-purpose propylene technologies. In Asia, China will continue to be the main driver for growth in manufacturing, thirst for raw materials, and ultimately demand for consumer goods. In 2009, China will invest in about 9 million metric tons of new ethylene capacity, inclusive of 3 plants using coalto-olefins technology. The olefin industries in Japan, Korea, and Taiwan will continue to be very dependent on the growth patterns in China, but new olefin investments in these areas will be very small over the next 5 years in order to avoid competition with the large investments in China and the Middle East. In Southeast Asia, Singapore and Thailand will start-up large amounts of new ethylene capacity in , but other investments are under consideration in Vietnam, Philippines, and Indonesia. India resembles China with its strong GDP growth and large population growth, and several significant olefin projects are planned in India over the next five years.

2 Past Capacity Evenly Distributed Ethylene Capacity Additions, MMT North America Total Asia West Europe Others Middle East

3 Future Capacity: Asia & M.E. Ethylene Capacity Additions, MMT Middle East Total Asia North America West Europe Others

4 Asia & Middle East Focus Middle East Capacity Additions Saudi Arabia Iran Others Asia Capacity Additions China Japan/Korea/Taiwan Southeast Asia India Global Market Impact

5 The Olefin Story in Middle East Over 9 MMT new ethylene and 4 MMT new propylene coming on-line in Low feedstock costs produce ethylene at $ per ton Diversifying economy & providing jobs are a key investment factor Mostly PE, MEG, and PP; but other derivatives coming Heavier cracker feedstocks produce significant propylene Propane dehydro, metathesis and HS FCC more common

6 Where are the Ethylene Projects? Other MDE North Africa Iran Saudi Arabia *Year-End capacities in Million Metric Tons

7 Nine Million Tons in 12 Months Middle East Ethylene Additions Company Country Time Capacity Additions, MMT 10 Q1 '09 Arya Sasol Jam PC Jubail ChevPhil SEPC Yansab Iran Iran Saudi Arabia Saudi Arabia Saudi Arabia Q1 08 Q2 08 Q2 08 Q3 08 Q Q4 '08 Q3 '08 Petro-Rabigh Saudi Arabia Q3 08 TKOC SHARQ RLOC Kuwait Saudi Arabia Qatar Q4 08 Q4 08 Q Q1+Q2 '08

8 Iranian Cracker Status 4.9 MMT online by end after which Iranian projects do not significantly affect global markets Next mega- crackers are post 2012, part of the next olefins cycle Year-End Ethylene Capacity, MMT 7 Gachsaran 6 Ilam Morvarid Arya Sasol, Jam Existing Capacity

9 More M.E. Ethylene Is Coming. Ethylene Capacity Additions, MMT TKOC 2008 RLOC 2009 Borouge 2010 QP/Honam 2012 QP/ExxonMobil 2012 RasTanura Saudi Arabia Iran Kuwait Qatar UAE Other

10 North Africa Is Also Building Algeria Sonatrach/Total JV 1100 kt 2013 Libya Dow/NOC scoping expansion of existing cracker Egypt E-Chem scoping options OPC Propane dehydro

11 Heavier Feedstock will be Cracked Average Cracker Jubail Chev Phil Yansab SEPC SHARQ Petro-Rabigh Kayan Ethane Propane Ethylene Capacity, Thousand Metric Tons Butane Condensate/Naphtha FCC Offgas

12 M.E. Also Uses Alternative C3 Tech Propylene Capacity Additions, MMT Steam Crackers KSA, Iran, Kuwait, Qatar Propane Dehydrogenation 2008 Advanced PP (KSA) 2008 Natpet (KSA) 2009 Al-Waha (KSA) Steam Cracker FCC Propane Dehydro Metathesis FCC / HS FCC 2006 Oman Ref 2008 PetroRabigh (KSA) 2012 RasTanura (KSA) Metathesis 2009 Ibn Zahr (KSA) 2010 Borouge (UAE) 2011 Saudi Polymers (KSA) 2012 QP/Honam (Qatar)

13 The Olefin Story in Asia China will continue to have explosive growth Japan, Korea, Taiwan will feed the Chinese giant SE Asia continues to attract investors India possibly the next China

14 China s s Explosive Growth China Production Index, 1990 = x 7x 10x 15x Washing Machines Refrigerators Televisions Motor Vehicles

15 Status Of New Olefin Projects? Dushanzi In 2009: 6 MMT C2 3 MMT C3 Shenhua (Baotou) 2010 Datang Int l l 2010 Daqing Fushun Panjin Shenhua (Ningmei) 2010 Tianjin PC Zhenhai Naphtha Cracker Coal-to to-olefins Plant Fujian

16 Why Does China Like Coal? Second largest coal reserves in the world National energy and petrochemical security Development provides inland jobs Coal is cheaper than crude oil based industry

17 $/MMBTU Coal is Cheap Feed! Crude Oil $/BBL Coal $/TON Dubai Crude Oil Qinhuangdao Coal

18 Japan, Korea, And Taiwan Capacity Additions Will Subside Ethylene Capacity, MMT 25.0 YNCC 2006 LG Daesan Formosa # SamsungTotal 2007 Lotte Daesan Japan 25-50% 50% of capacity is exported 40-50% of exports are to China Korea Taiwan

19 Southeast Asia Ethylene Plans PTT 2009 MOC (Siam/Dow) 2010 Shell 2010 ExxonMobil 2011 Other plants under consideration: Vietnam, Philippines, Indonesia

20 Is India The Next China As A Major Petrochemical Player? How is India like China? + Strong GDP Growth + Large Population + Transformation of poor to middle class How is India unlike China? Poorer infrastructure / + Different political landscape + Growing population

21 New Olefin Projects In India Panipat Indian Oil Cracker 2009 Assam BPCL Cracker 2012 New Delhi Jamnagar Reliance Refinery 2008 Reliance Cracker 2012 Mumbai West Bengal Haldia Cracker 2008 Other mega projects under consideration by ONGC, GAIL, HPCL

22 New Asia Ethylene Project Summary Ethylene Capacity Additions, MMT Japan/Korea/Taiwan China SE Asia India

23 Asia Uses Alternative C3 Techs Propylene Capacity Additions, MMT Steam Cracker Metathesis FCC PDH Methanol to Olefins Steam Crackers China, Singapore, Thailand FCC / HS FCC 2008 SK Energy (Korea) 2008 Petron (Philippines) 2009 PetroVietnam (Vietnam) Methanol-to to-olefins 2010 Datang Int l l (China) 2010 Shenhua (China) 2010 Shenhua (China) Metathesis 2008 Titan (Malaysia) 2008 SamsungTotal (Korea) 2009 Mitsubishi (Japan) 2009 Chiba JV (Japan) 2010 Pertamina (Indonesia) 2010 MOC (Thailand) Propane Dehydrogenation 2009 HMC (Thailand)

24 Olefins The Next Five Years Production costs? Trade flow? Operating rates and margins?

25 M.E. Production Is Cheapest On The Ethylene Cost Curve Ethylene Production Costs, $/MT 1200 WTI = USD72/BBL North America West Europe Northeast Asia Southeast Asia $600+/tn Middle East Cumulative Ethylene Capacity, MMT

26 The Middle East will Dominate Ethylene Derivative Exports Ethylene Net Equivalent Trade, MMT Net Exports Net Imports North America Asia West Europe Others Middle East

27 And Propylene Derivative Trade Too! Propylene Net Equivalent Trade, MMT Net Exports -6-8 Net Imports North America Asia West Europe Others Middle East

28 By 2009 A Major Case of Asia Naphtha Cracker Cash Margins, $/MMT 1,000 Industry Indigestion Margins Operating Rate Average Cracker Op. Rate, %

29 Conclusions Most olefin investment in the Middle East or Asia Make friends with the Middle East and Asian Olefin Giants! Upcoming margin trough is unavoidable for olefins & olefin derivative producers Look for opportunities to compete (survive)! Align with customers with differentiated products Venture with low feedstock costs in ME, Africa, & Russia Feedstock flexibility to LPG, Condensates Alternative feedstocks & technologies Refinery integration & synergies Propylene & butadiene co-products