On- Purpose Butadiene (OPBD) Will Be Needed In The Future Gale Richards Director Strategic Project Analysis TPC Group
Disclaimer This Report includes forecasts, projec5ons and other predic5ve statements that represent TPC Group s assump5ons and expecta5ons in light of currently available informa5on. These forecasts, etc., are based on industry trends, markets and other factors, and they involve risks, variables and uncertain5es. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projec5ons or predic5ve statements contained herein.
PresentaFon Contents BD Supply and Demand OPBD Need Globally and in North America ProducFon Routes to OPBD TPC Group Pursuit of OPBD
TPC Group Is A Leader In C4 Processing Company Description Market leader in C4 Processing with approximately 30% share of capacity Butadiene Capacity Share North America C4 Processing services include crude C4 off-take, aggregation, storage, separation, purification and ratable transport and delivery of C4 components to manufacturing end-users in a variety of industry segments Market leader in butene-1 with 35% share Among North America s largest merchant producers of isobutylene and derivatives Performance Products consists of C4 and C3 derivatives for fuels, fuel and lubricant additives and a variety of other end uses Headquartered in Houston, Texas, the Company has three manufacturing facilities along the Gulf Coast. North American Market Positions Product Capacity Capacity Share Butadiene 1,400 27% * Butene- 1 315 35% HR- Polyisobutylene 260 61% Diisobutylene 80 100% (*) Source: IHS North America capacity data
C4s (Butadiene) Is A Co- Product From Ethylene Cracking The C4 co- product stream is the source for butadiene in NA. The shale effect has seriously reduced the volume of C4s. ü Ethane cracking has dramafcally reduced BD supply ü Ethylene ProducFon Is Increasing, But Not Butadiene ProducFon North America Steam Crackers Source: IHS Data
Shale Gas Advantaged Ethane Is The Cause The concentration and quantity of crude C4s produced per ton of ethylene produced is highly dependent on the feedstock. Naphtha and gas oil cracking produces the greatest quantity of crude C4s with much higher butadiene content. Typical C4 ProducFon From Various Cracker Feedstocks Pounds per per 100 100 Pound Pound of Ethylene of Ethylene 45 40 35 Naphtha to Ethane: - 89% Reduction in CC4-81% Reduction in BD 30 25 20 15 10 5 0 Ethane Propane Butane Light Naphtha Gas Oil Butadiene Isobutylene Butene-1 Butene-2 Butanes ~ Source: IHS Data
Butadiene Demand Global BD demand is closely correlated to global GDP growth and to 5re sales A regression analysis predicts global BD demand growth of 4.1%/yr through 2025 Current global demand is 12,000 kmt/yr and forecasted to reach 17,000 kmt/yr by 2025 Sources: IHS Data, EIA Data
Butadiene Balance BD supply is not expected to grow at the same pace as demand Ethylene cracker co- product will con5nue to be the main source of BD produc5on; however, it is unlikely that only new BD extrac5on capacity could meet BD growth Base Case es5mates 2,800 kmt/yr of Global On- Purpose BD requirement by 2025 Base Case: 4.1% (China @ 8.8%, India @ 16.2%) Ethylene Growth Rate: 3.5% Source: IHS Single Client Study
On- Purpose Butadiene (OPBD) Is Needed ü EliminaFng the on- purpose volume gap would require demand destrucfon of 14% to achieve 3% butadiene growth rate instead of 4% +/- 0.5% change in global butadiene demand equals +/- 1,000 kmt volume change ü The global shor_all will increase over Fme Crackers in North America have strong economic incen5ves for light feed Some European crackers will process more propane and butane as exports from the US increase Shale gas exists globally Already drilling in Poland and China Announced in Argen5na May take some 5me, but will be done Chinese coal to olefins Compe55ve ethylene Zero butadiene
OPBD is Needed in North America Based on global economic growth outlook, shale energy, and forward looking trade flows, OPBD is structurally aaracfve in North America Ø Shale, Shale, Shale Cost advantaged feedstocks and cost advantaged energy Existing NA infrastructure leveraged Ø With NA a net importer, OPBD is attractive in NA NA currently imports 600 MT BD (finished and contained in C4) and will continue to be a net importer for the forecasted future NA Finished BD Imports NA Total Net BD Imports Source: IHS Data Source: IHS Data
On- Purpose Butadiene (OPBD) Roadmap Normal Butane Ethylene By-Product C4 Olefins (steam cracker & refinery) Dehydrogenation TPC Group Dimerization Distillation Fermentation & Dehydration Dehydrogenation TPC Group N- butene OXO-D TM (Oxidative Dehydrogenation) TPC Group QPEC (Oxidative Dehydrogenation) Chinese TradiFonal Routes Bio- based Routes Butadiene Extraction Many different technologies, but only five primary feedstocks Finished Butadiene Sugar (biomass) Fermentation 1,4- BDO Dehydration Fermentation Succinic Acid Hydrogenolysis Distillation Ethanol Dehydrogenation & Dehydration
OPBD Routes The best route depends on whether best is defined as fastest, lowest cost operation, feed availability, lowest capex, most green, Bio- based routes are not progressing rapidly Years of development needed S5ll determining economic capabili5es By- product C4 olefins route is progressing in China Feedstock C4 olefins currently available due to low alkylate produc5on by refineries for gasoline. However, feedstock supply could become key going forward due to developing uses. QPEC technology (Oxida5ve Dehydrogena5on) NGLs route is aaracfve in NA Cost advantaged feedstocks and energy Proven technology OXO- D TM (Oxida5ve Dehydrogena5on)
TPC Group SoluFon TPC Group is developing the best overall solufon to the butadiene shortage in the simplest and most capital efficient manner TPC Group Will Leverage ExisFng CapabiliFes ü ExisFng Assets Two independent butadiene produc5on / C4 processing sites Five butadiene extrac5on trains (two of which are idle) Idle dehydrogena5on unit ü Extensive infrastructure ü Commercially Proven Technology Normal butane to butadiene via dehydrogena5on (prac5ced for 15+ years) Normal butane to butenes via dehydrogena5on (prac5ced for 45 years) N- butenes to butadiene via OXO- D TM (prac5ced for 45 years)