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Confidential. © 2018 IHS MarkitTM. All Rights Reserved.Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
US PetrochemicalsThe growing importance of export markets
EIA Energy ConferenceJune 4, 2018
Blake Eskew, Vice President - Business Development Oil Markets / Midstream / Downstream / Chemicals Houston, TX blake.eskew@ihsmarkit.com
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Addressing strategic challenges with interconnected capabilities
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The comprehensive single source for global data & information, key market insights, analysis & forecasts
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Core Segments within Energy & Natural Resources
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Transactions
UPSTREAM
• Global Gas• Coal• Power and Renewables• Regional Gas, Power
and Coal Markets
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• Curated Content• Integrated Energy Events & CERAWeek
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• Crude Oil Markets• Midstream Oil and
Natural Gas Liquids• Refining and Marketing• Company Strategies and
Performance
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• Base Chemicals & Plastics
• Specialty Chemicals• Costs & Technology• Company Benchmarking
& Analytics
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• Transportation• Consumer products• Packaging• Construction• Recreation• Industrial• Medical• Pharmaceutical• Personal care• Textiles• Electronics• Aerospace• Business equipment
OilGasCoalMineralsRenewables
Customers
Olefins AromaticsChlor-alkaliOthers
CommoditiesDifferentiated commoditiesTechnical specialties
Chemical industry value chain
Formulated products / performance materials
Natural resources
Chemicalintermediates
Base chemicals
The Chemical Industry Enables Modern Living
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Perc
ent c
hang
e
World Advanced countries Emerging markets
Global economic growth remains strong and steady, if serious mistakes on trade, monetary policy, and international relations can be avoidedReal GDP
Source: IHS Markit © 2018 IHS Markit
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Economic growth in advanced countries and emerging markets are key drivers to petrochemical demand growth
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1990-2000 2000-2010 2010-2020 2020-2030Ethylene Propylene (PG/CG) Methanol ChlorineBenzene Paraxylene Weighted Average
GDP Elasticity: rate of market growth / rate of global economic growth
Source: IHS Markit © 2018 IHS Markit
Per
cent
age
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Ethylene Propylene(PG/CG)
Methanol Chlorine Benzene Paraxylene
Avg. 2012 - 2016 2017 Avg. 2018 - 2022
Global demand growth and 2017 estimated total demand
Source: IHS Markit © 2018 IHS Markit
Mill
ion
Met
ric T
ons
Ethylene and propylene remain in high growth mode; methanol growth stabilizes
152 102
78 73
46 41
Global demand estimate for 2017
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The energy and petrochemical industries are closely related
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
There are several primary routes to produce olefins
Crude Oil
Natural Gas
Crude Unit
Nat Gas Processing
FCC Unit
Refinery Grade Propylene
Ethylene
Polymer grade PropyleneSteam Cracker
PropyleneSplitter
PropaneDehydrogenation
Methanol-to-OlefinsMethanol-to-Propylene
Coal-to-OlefinsCoal-to-Propylene
Ethane, Propane, Butane
Propane
LPG, Naphtha, Gas Oil
Coal
Nat Gas
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US NGL production is growing with shale gas and tight oil plays
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2000 2005 2010 2015 2020 2025
NaturalGasoline
Isobutane
NormalButane
Propane
Ethane
US lower 48 NGL production by product
Source: IHS Markit © 2018 IHS Markit
Mill
ion
barr
els
per d
ay
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2000 2005 2010 2015 2020 2025
Chart Title
Permian
SCOOP
Woodford
Utica
Niobrara
Marcellus
Eagle Ford
Barnett
Bakken
Other gassourcedRefining
NGL production from key shale gas and tight oil plays
Source: IHS Markit © 2018 IHS Markit
Mill
ion
b/d
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Combination of high crude prices and stable natural gas is attractive for North America gas-based chemical investments
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Brent Crude Henry Hub Gas USGC Ethane USGC Propane NEA Naphtha
Con
stan
t201
4 D
olla
rs P
er M
MB
tu
Crude Oil - VS - Natural Gas & NGLsCrude Oil - VS - Natural Gas & NGLsCrude Oil - VS - Natural Gas & NGLsCrude Oil - VS - Natural Gas & NGLs
Source: IHS Markit © 2018 IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Ethane cracking is expected to maintain a large cash cost advantage
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017USGC - Ethane Northeast Asia - Naphtha
Ethylene Cast Cost Comparison
Source: IHS Markit © 2018 IHS Markit
USD
olla
r Per
Met
ric T
on
Cash cost = Feed + VC + FC – co-product
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63,832 57,481
21,706 9,812
Global Ethylene production by feed type (KTA ethylene by feed)
Source: IHS Markit © 2018 IHS Markit
Naphtha, 66,669
Ethane, 69,629
Other, 22,891
LPG, 13,383
NGLs increasingly important to olefins as crackers shift to ethane
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60%
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100%
2000 2003 2006 2009 2012 2015 2018 2021Gasoline (FCC) Naphtha Gas OilNat Gas Ethane PropaneButane Coal Other
Propylene production by feedstock
Source: IHS Markit © 2018 IHS Markit
Propane
More ethane for ethylene more propane for propylene
2017 (inner)Production = 143 MMTA
2022 (outer)Production = 173 MMTA
3.5 MMTA Ethylene~ 9 MMTA LPG
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Ethylene equivalent trade will continue to expand as the industry builds in low-cost regions and exports to high demand growth regions
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1990 1995 2000 2005 2010 2015 2020 2025
North America South America West Europe Middle EastIndian Sub. Northeast Asia Southeast Asia Others
Global Net Equivalent Trade - Ethylene
Source: IHS Markit © 2018 IHS Markit
Mill
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Met
ric T
ons
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
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Chart Title
Base Chemical Price Sensitive Miscellaneous Fuel Exports Rejection
US ethane demand and rejection
Source: IHS Markit © 2018 IHS Markit
Mill
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barr
els
per d
ay
1st Wave 2nd Wave
MIll
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Met
ric to
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ear
The first wave of US ethane crackers and exports is proceeding but the second wave is uncertain
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Improvements in ethane shipping and capital cost differentials are changing olefins investment patterns
Ethane Export Terminal(s)
Ethane CrackerPE unit
Ethane
Ship Pellets
Ethane CrackerPE unit
Capital costs in China are currently 50 to 70% of USGC
Can the advantage be sustained? Similar
pattern seen for propylene, but China incentive is stronger
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Ethylene cash costs and capital cost advantages make Chinese ethane-based capacity competitive
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USGC - Ethane China - Ethane from US China - Naphtha Europe - Naphtha
2020-2025 Average
2020-2025 Average
World Ethylene Cast Cost Comparison
Source: IHS Markit © 2018 IHS Markit
USD
olla
r Per
Met
ric T
on
Cash cost = Feed + VC + FC – co-product
• Cash costs for ethane cracking in China are higher than in the US due to ethane transport costs
• But - finished product shipping is reduced or eliminated
• In addition, capital cost savings may outweigh the higher operating and feedstock costs
• Ethane cracking capital cost in China is roughly half of naphtha cracking –economics depend on need for co-products
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NGL and mixed feed crackers dominate near-term capacity additions
• In addition, over 9 million tons of additional ethane-based units have been announced for China but are still in the planning stages
• In the US, almost 15 million tons of additional ethane-based capacity is under discussion
• With annual demand growth of 6 million tons, the capacity will be needed
• But – is there enough ethane? And where will it be built?
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China India Other Asia Middle East Europe/CIS Africa North America
Ethane Other NGL Mixed Naphtha Other
World Ethylene Capacity Changes: 2017-2022
Source: IHS Markit © 2018 IHS Markit
Thou
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Met
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ons
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Energy and chemical exports from North America will continue to rise• Natural gas in North America remains
advantaged versus crude• North America will remain an attractive
region for capital investments in base chemicals, derivatives, and feedstocks
• Ethane to China can work - capital versus operating cost dynamics and supply risk tolerance will determine how much is built
• Second wave of ethane crackers will come – but in US or China?
• ,
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