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Closing the Import Gap – Will the US Become a Net Exporter Before 2020? IHS World Methanol Conference October 2016
Closing the Import Gap – Will the US Become a Net Exporter Before 2020? IHS World Methanol Conference October 2016
US Methanol Market
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
NYMEX Forward Sep-2016 NYMEX Forward Sep-2013
3
Low Cost Natural Gas Feedstock – US Production Advantage
Natural gas forward curve for NYMEX Henry Hub has decreased significantly since 2013 due to shale gas boom
US production located on the lower end of the global cost curve
Cost advantage has led to many project announcements in the US Gulf Coast
Natural Gas Forward Curve - NYMEX Henry Hub
$/MMBtu
Source: Bloomberg
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Challenges to US Capacity Additions – High Barriers to Entry
Despite announcements, recent crude oil market weakness combined with significant barriers to entry have delayed construction of announced projects:
1. Securing EPC Contract. Very difficult to source economic, truly fixed price EPC needed for financing with capex inflation across US
— Projects announced with $1.5-2bn cost routinely end up at $2.5-3.5bn once full EPC price obtained. At that point, or shortly after, projects are often cancelled
2. Time and Capital Intensive. Project financing can be difficult to source given long time frame of 5+ years for facility to be operational and uncertainty on off-take pricing
— Raising very risky development capital of ~$50MM+ is difficult. However, once spent, does not mean project will continue because debt/equity providers wary of “spending good money after bad”
3. Early Mover’s Advantage. Early mover’s advantage as each successive greenfield methanol facility will have less incentive to build capacity, particularly as import deficit shrinks
Feasibility Study
Permitting, Front End Engineering Design and
Final Investment Decision
EPC & Commissioning
Performance Testing & Commercial Operations
Time Frame
5+ Years
6 -18 Months
6 – 36 Months
36 – 42 Months
3 – 6 Months
Illustrative Project Timeline
Source: Company Estimates
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Tempered Capacity Addition Expectations
Existing Capacity Location Process Capacity (ktons)
Pampa Fuels LLC Pampa, TX Natural Gas 65
Praxair Geismar, LA Natural Gas 45
Millennium Deer Park, TX Natural Gas 620
Eastman Kingsport, TN Coal 195
OCI Beaumont Beaumont, TX Natural Gas 912
LyondellBasell Channelview, TX Natural Gas 780
Methanex - Geismar 1 Geismar, LA Natural Gas 1,000
Methanex - Geismar 2 Geismar, LA Natural Gas 1,000
Fairway LLC (Celanese/Mitsui JV) Clear Lake, TX Natural Gas 1,300
Total 5,917
Announced Projects Location Date Capacity
Natgasoline (OCI/G2X) Beaumont, TX 2017 1,750
Yuhuang Chemical St. James Parish, LA - 1,800
Big Lake Fuels Lake Charles, LA - 1,400
Due to the timeline requirements of new build facilities, Natgasoline will be the only project addition to come on-line in this decade
Source: Company Estimates
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US Methanol Supply/Demand Outlook
In 2015, US demand for methanol was ~6 mn tons, with 50%+ sourced from imports
In Q4 2015, Fairway LLC (Celanese/Mitsui JV) and Geismar 2 (Methanex) added 2.3 mn t/yr of capacity
‒ Due to unexpectedly fast start-up, US market saw a temporary supply glut late 2015/early 2016
Moving forward, many expected projects have been delayed indefinitely with only one project expected in the next decade (see next slide)
‒ Due to tempered supply addition expectations, imports are expected to continue to supply the US, with minimal exports to China
‒ US will not be expected to be a large net exporter within this decade
US Historical & Projected Supply/Demand
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Production Net Import/(Exports) Domestic Demand
Source: Company Estimates
Corporate Overview
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OCI N.V. Profile
Leading global natural gas-based fertilizer & chemicals producer
‒ Production facilities in the United States, the Netherlands, Egypt and Algeria complemented by global distribution network
‒ Top 5 five global nitrogen-based fertilizer producer: current total sellable fertilizer & chemical capacity of 8.4 million metric tons increasing to c.12.6 million metric ton by 2017
‒ Globally competitive position with access to low cost natural gas feedstock
‒ Two greenfield facilities under construction, Iowa Fertilizer Company (IFCo) and Natgasoline
2015 and 2016: Transformational Years
‒ Demerger of the Construction & Engineering business in March 2015; Orascom Construction Ltd. now listed on NASDAQ Dubai & EGX
‒ Natgasoline: new 50% strategic partner, Consolidated Energy AG (“CEL”), adds expertise across the value chain
Trading on Euronext Amsterdam (NYSE Euronext: OCI)
Summary Overview
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OCI’s facility near Beaumont, TX (“OCI Beaumont”) is an integrated methanol and ammonia facility
strategically located on the Texas Gulf Coast
OCI N.V. acquired the Beaumont plant from Eastman Chemical Company in May 2011. Previously the
Beaumont plant was owned by Terra Industries and DuPont, and was shut down from 2004 until
OCI’s acquisition in 2011
Following a comprehensive upgrade, methanol and ammonia production commenced in July 2012
and December 2011, respectively
OCI Partners completed all work related to debottlenecking project in Q1 2015, with ammonia and
methanol lines restarted in Q2 2015
OCI Partners
Facility Overview
Capacity
Product Pre – Debottlenecking Capacity Production During Full Year
2014
Current Production Capacity post-Debottlenecking Project
Product Storage Capacity
Metric Tons/Day Metric Tons/ Year Metric Tons Metric Tons/ Day Metric Tons/ Year Metric Tons
Methanol 2,000 730,000 617,031 2,500 912,500 42,000
(two tanks)
Ammonia 726 264,990 259,214 907 331,000 33,000
(two tanks)
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Natgasoline
Commissioning expected H2 2017
Overall project progress 62% complete as of 31 July 2016
Engineering: Air Liquide’s progress is approximately 99%
Procurement: All long-lead and proprietary equipment purchased and
majority delivered to site
Construction: Site preparation and piling work complete with foundation
work, piping installation and steel erection well underway
Significant Progress to Date
World scale greenfield methanol production complex currently under development, located in Beaumont, Texas
Expected to produce approximately 1.75 million metric tons of methanol per year
Well positioned in the US Gulf Coast to take advantage of the growing demand for methanol, with ease of access to domestic US demand as well as to international
markets including Europe and Asia
Air Liquide Global E&C Solutions is supplying proven Lurgi MegaMethanol® process technology
Natgasoline will benefit from operational expertise of its sponsors CEL and OCI - both are global leaders in methanol and related petrochemical production
Natgasoline LLC Overview
Project Location – Beaumont, TX
Plant Location
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BioMCN
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OCI acquired BioMCN in June 2015 for EUR 15M
BioMCN is one of Europe’s largest methanol producers and a
pioneer in bio-methanol
Consists of two plants, of which one is operational (440 ktpa)
and one mothballed (430 ktpa)
The plant site is located at the Chemical Park Delfzijl, The
Netherlands, is connected to the national natural gas grid and
has easy logistical access to major European end markets via
road, rail, barge and sea freight
BioMCN sources bio-gas from waste digestion plants through
the Dutch national gas grid by purchasing bio-gas certificates to
label methanol as biomethanol
BioMCN Overview Strategic Location in The Netherlands
Low investment cost for entry into European market, 15 – 20% market share
Methanol consumption in Western Europe is currently more than 7 mtpa , of which more
than 5 mtpa is imported - deficit is expected to continue to increase for foreseeable
future.
Entry into the biomethanol market
Weaker European natural gas market will lower future feedstock costs
Strategic Value
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Key Takeaways
US shale gas boom has driven down natural gas production costs for domestic producers, well positioned on global cost curve
While US cost advantage has led to many project announcements, current crude oil environment and barriers to entry (securing economic EPC, financing, first mover’s advantage) provides significant challenge for actual completion
Natgasoline LLC will be the last project to come on-line before 2020, maintaining the US import deficit market this decade
The US may become a net exporter but not before 2020, exports of methanol could make their way to China depending on Chinese import demands at the time
Omar Darwazah [email protected] T +(1) 646-589-6194 OCI N.V. corporate website: www.oci.nl OCI Partners LP corporate website: www.ocipartnerslp.com
