David Lines Principal - The Annual GPCA · PDF fileDavid Lines Principal ... Cumene / Phenol...

David Lines Principal Middle East

The Future for Middle East Petchem Downstream Developments

Session 4

PP: BD\Bahrain\GPCA Seminar 2012\Seminars\Future for ME Petchem – David Lines

Agenda

n  Overview of major downstream projects - Middle East new projects - Sadara – an example of diversified project potentials

n  Key drivers for change - Social, economic, efficiencies, market developments,

incentives, industrial land

n  Future implications for the Middle East Petrochemicals industry - Conclusions & Recommendations

1


Downstream - Reduced methane/ethane availability is driving Middle East investment down the value chain

Ammonia Methanol PE (butene -1) PP (homo-polymer) MEG PVC

2030

Intermediates Basic Chemicals Diversification

2000 1980

Aromatics PE (hexene -1) PP (copolymer) Oxo-alcohols Acetic acid VAM LAO

Nylon 6 & 6,6 Bis-phenol A Polycarbonate EVA ABS Glycol Ethers Acrylates Acrylonitrile Elastomers PU

2010

2


Downstream - Mega projects provide the opportunity for downstream investments

Feedstock Methane, ethane, LPG, naphtha Methanol, olefin, aromatic, co-product

Scale 2-3 million tons/year <500 thousand tons/year

Ownership will involve state Co. may be private, multiple stakeholders

Capital $5-10 billion <$500 million

Technology Readily available May be restricted

Key Success Factors

Feedstock advantage Capital cost

Marketing and sales, Technology, Logistics

SECONDARY PROJECTS PRIMARY PROJECTS

3


Downstream – new developments in the Petrochemical Industry – moving away from the ‘typical’ regional C1-C4 chemistries Country Company Partners Key new products

KSA PetroRabigh Aramco/Sumitomo PO, EPDM, PMMA, TPO

KSA Sadara Aramco/Dow PO, MDI, TDI, TPO, Amines, PU, Polyols

KSA SABIC Kayan SABIC EO, Cumene, Phenol, BPA, PC

KSA SABIC Kemya SABIC/ExxonMobil halobutyl, SBR, PBR, EPDM, TPO & carbon black

KSA Sipchem Sipchem EVA, EA & BA

KSA SAAC Tasnee/Dow/Evonik Acrylic Acid, SAP

KSA Petrochemical Conversion Co

Chevron Phillips/SIIG PA6,6

4


Sadara – Example of the new direction of the regions Petrochemical industry – supporting downstream industries

Products End Use

Amines herbicides & fungicides, oilfield chemicals, electronics, textiles and consumer products

Glycol Ethers electronics, coatings to surface and industrial cleaners

Isocyanates (TDI & MDI)

Polyether Polyols

PU rigid foams, flexible foams, polyurethane systems formulations, coatings,

adhesives, sealants & elastomers.

Polyethylene packaging, hygiene & medical, and electrical & telecommunication cable markets.

PO Elastomers (TPO)

Consumer Goods, Membranes, Transportation and Building & Construction

Propylene Glycol De-icing fluids , heat transfer fluids, pharmaceutical, food, flavouring, personal care

Transportation (Auto parts & fluids) Construction

(Pipes, Adhesives &

Sealants)

Packaging and

Containers (Food & non-

Food)

Consumer Goods

Adhesives & Sealants

Coatings industrial,

maintenance & marine

Oil & Gas

Downstream Downstream Industries

5


Drivers - Demand side fundamentals are supported by developing markets – whilst a huge growth potential, changing dynamics

0%

2%

4%

6%

8%

10%

0 10 20 30 40 50 60

Proj

ecte

d C

AG

R 2

013-

18

Consumption per capita (2012) kg/capita

Bubble Size = Market size 2012

China

India South

America

W Europe

North America Africa

Asia Pacific

Middle East

Japan

C&E Europe

CONSUMPTION PER CAPITA OF POLYOLEFINS 2012 (forecast)

6


Drivers - GCC GDP breakdown by sector - 2011

0%

20%

40%

60%

80%

100%

Saudi Arabia

Qatar UAE Bahrain Oman Kuwait

Other

Oil & Gas

Transport & Com.

Trade & Hospitality

Finance & Insurance

Government Services

Construction

Manufacturing

7


PP: 40935/Final Report/Sec_5

n  Increased urbanization.

n  Improved literacy n  Increased openness n  Large family units. n  Improved quality of

life n  Female working n  Unemployment

KEY DRIVERS

n  Population growth n  Increase income n  educated middle

class. n  80 % of population in

~ 30 cities n  60% of population <24

years n  Literacy rates >80% n  Households

increasing at 4.5% per year

DEMOGRAPHIC TRENDS

n  Growing educated labour force

n  Increased demand of domestic products.

n  Increase in purchasing power.

n  Products/services to women and families.

n  Increasing public housing required

n  Increasing private ownership of houses

IMPLICATIONS

Drivers - Social-Economic (GCC)

8


KSA - Royal Commission of Jubail & Yanbu

KSA – Modon Industrial Cities

KSA – PetroRabigh Polymer Park

KSA – Sadara/SABIC/RCJY PlasChem Park

UAE – Jebel Ali DFZ

UAE – Abu Dhabi Polymer Park

Oman – Sohar Complex

Egypt - 6th October City & 10th Ramadan City

Drivers - Government & Industry Enablers – Key to downstream application industrialization

MODON (SAUDI ARABIA)

9


Drivers – Industrial Clusters

0

2

4

6

8

10

Infrastructure

ClusterSynergy

ProductDiversificat

ion

Level ofIntegration

InvestmentEnvironme

ntSize

Proximityto Market

Innovation

Experience

Eco IndustrialPetrochem. ClusterEdmonton, Canada

Abu Dhabi PlasticsPark Abu Dhabi,UAE

Kertih Plastics ParkMalaysia

Plastic City Turkey

Plastics Parks India

Key: 10 Excellent 8 Very Good 6 Good 4 Limited 2 Poor

Infrastructure

Diversification

Investment Environment

10


Drivers - ‘Golden Projects’

INVESTMENT INCENTIVES (Downstream Industrial Developments)

n  Incentives for industrial investment, by: (for example) China, Eastern Europe, Singapore, Thailand have spurred growth over the last decades.

n  Without the feedstock advantages, enjoyed by the Petrochemical Sector, the downstream industrial development requires some government investment incentives

n  ‘Golden Projects’ are required to lure global industrial leading companies to establish GCC manufacturing

11


Future - investments to be more complex n  Methane and Ethane availability much reduced

n  Future investments to be increasingly based on heavier feedstocks or further down the value chain, adding complexity

n  SABIC targeting 10% of 2020 revenue from specialities

-  Encouraging ‘clustering’ with MODON for industrial integration, six new industrial cities for ‘underdeveloped’ regions in Saudi Arabia

n  Governments:

-  Wish to encourage job creation

-  Understand that labour intensive industries at competitive disadvantage to China

-  Need to balance profitability versus jobs and local economy

-  Encouraging ‘clustering’ for coherent integration

-  Feedstock allocations linked to downstream development criteria 12


Future - Outlook for the longer term is still positive, although short-term difficulties still remain

LONG TERM •  Fundamentals remain in

place; strong growth potentials

•  Demand growth continues to drive new downstream developments

•  Export will still be a major requirement SHORT TERM

•  Poor industry margins

•  Economic downturn •  Significant new

product additions available

MID TERM •  Economic recovery to trend

levels in the 2-3 year window? •  Proliferation of downstream

specialty chemicals •  Success of future government

measures starting to pay off KEY ISSUES •  Pace of economic recovery •  Government enablers for

investment •  Job Creation

13


Future - Conclusions

n  Middle East model has been very successful, but needs to adapt and change to downstream development needs

n  Markets recovering with Middle East supply growth to continue as dominant exporter

n  Future investments to be increasingly based on heavier feedstocks or further down the value chain, adding complexity however opening up many downstream development opportunities

n  States to balance profitability versus jobs and local economy; encouraging investment by enablers and ‘clustering’ for coherent integration

14

David Lines Principal Middle East

The Future for Middle East Petchem Downstream Developments

Session 4

Manuel E. Asali Principal Middle East

Technology Trends Shaping the Future Petrochemical Industry

Session 5

PP: BD\Bahrain\GPCA Seminar 2012\Seminars\Technology Trends Shaping the Future Petrochemical Industry – Manuel E. Asali

Agenda

n  Beyond oil and gas? -  The world’s energy and feedstock diet

n  Different worlds - Traditional - Technology trends: from coal to renewables

n  Implications for the Middle East Petrochemical Industry - Opportunities and challenges

1


Beyond oil and gas?

Coal 27%

Oil 32%

Natural gas 22%

Nuclear 6%

Hydro 2%

Other * 11%

WORLD’S ENERGY DIET 2010

* Note, Other includes biofuels, geothermal, solar, wind, waste, etc Source: International Energy Agency – IEA – 2012 Key World Energy Statistics

n  Oil, gas and coal make over 80% of the world’s energy supply

n  Other sources still very small

n  Continued dependence for energy and chemicals

2


The share of Petrochemicals is quite small

Source: International Energy Agency – IEA – 2012 Key World Energy Statistics

WORLD’S ENERGY USES 2010

n  Petrochemical feedstocks represent no more than 5-7%

n  Some GCC countries are shifting priorities

n  Other energy sources would free-up feedstock for our industry

Industry 19%

Non-energy

6%

Transport 19% Residenti

al & Commerc

ial 24%

Power 32%

Residential & Commercial

24%

3


Feedstocks Naphtha

NGLs

Natural gas

Coal

Building blocks Ethylene

Propylene

C4s

Benzene

Toluene

Xylenes

Syngas

Intermediates EDC / VCM MEG Styrene Acrylic Acid ACN MMA Cumene / Phenol Cyclohexane MDI / TDI PTA Methanol NH3

Polymers PE / PP PVC PS ABS PMMA Polycarbonate Nylons Polyurethanes PET Elastomers POM / Resins Fertilizers

Energy: Fuel Power Transportation

Traditional Petrochemical Build-up

4


But the world is changing with new feedstocks, new products and new routes to make old products

New entrants Green PE Green PP PHA PLA PTT DME Bio-routes GTL / FT liquids Synthetic naphtha

?

Feedstocks Naphtha

NGLs

Natural gas

Coal

Renewables Ethanol Biomass

Residue/waste


Propylene

C4s

Benzene

Toluene

Xylenes

Syngas




5


Carbon-based feedstocks can be found in a wide range of sources

Cellulose Hemi - cellulose

Lignin Starch

Sugar Natural Oils

Amino Acids

Methane

Ethane LPG Condensate

Naphtha

Gas Oil Fuel Oil

Resid

Coal

RENEWABLES NATURAL GAS PETROLEUM COAL

CH2O CnH (2n+2) C


A “Coal-based world” can be built on Syngas, Methanol and MTO/MTP

Feedstocks Naphtha

NGLs

Natural gas

Coal


Residue/waste


Propylene

C4s

Benzene

Toluene

Xylenes

Syngas




New entrants Green PE Green PP PHA PLA PTT DME Bio-routes CTL / FT liquids Synthetic naphtha

6


Coal to olefins (CTO) exemplifies recent Chinese innovation

n  Three technology suppliers: -  UOP [MTO] -  Lurgi [MTP] -  Dalian Institute of Chemical

Physics (DICP) [DMTO]

n  3 plants operating and several others underway

n  Coal technology becoming more efficient

Methanol

SAPO-34 model

Ethylene Propylene

Heavies Water

7


Other chemicals and fuels can be derived directly from Coal Building blocks

Ethylene

Propylene

C4s

Benzene

Toluene

Xylenes

Syngas

Intermediates VCM MEG Styrene Acrylic Acid ACN MMA Cumene / Phenol Cyclohexane MDI / TDI PTA Methanol NH3


New entrants Green PE Green PP PHA PLA PTT DME Bio-routes CTL / FT liquids Synthetic naphtha Energy: Fuel Power Transportation

Feedstocks Naphtha

NGLs

Natural gas

Coal

Ethanol

8


27%

30%

43%

Reformate/Aromatics Complex

Coal tar

China is leveraging its cheap coal by going “back to the future” in at least 2 cases

Coke Oven Light Oil

Calcium Carbide

Acetylene VCM HCl

0

10

20

30

Millio

n Ton

s

VCM GROWTH IN CHINA

Ethylene Acetylene

Pygas

BENZENE VCM

9


Coal to MEG is a new technology recently commercialized in China

MEG Dimethyl Oxalate

Methyl Nitrite Methanol

Gasification Nitrite Formation

Carbony-lation

Hydro-genolysis

n  Coal-to-MEG designated as one of the demonstration projects

n  China’s coal resources provide cost advantage over traditional MEG

n  MEG demand spurred by rapid growth of Chinese polyester industry

n … but, fiber-grade quality still an issue

MeOH Synthesis

&

10


The same approach via Syngas can be emulated with Methane – we could live in a “Natural Gas world”

Building Blocks Ethylene

Propylene

C4s

Benzene

Toluene

Xylenes

Syngas


New Entrants Green PE Green PP PHA PLA PTT DME Bio-routes GTL / FT Liquids Synthetic Naphtha Energy: Fuel Power Transportation

Feedstocks Naphtha

NGLs

Natural Gas

Coal


Residue/Waste


11


Gas to Olefins via MTO/MTP is considered around the world

Methanol

SAPO-34 model

Ethylene Propylene

Heavies Water

Methane

n  Trinidad & Tobago is planning to use this approach

n  Shale gas is prompting investment in the US: -  PDH -  Catadiene to Butadiene (BDH) - Methanex moving Chile plant to

the USGC - MTO/MTP

12


Transportation fuels via Natural Gas (GTL)

n  GTL an alternative to make fuels

n  Abundant shale gas makes this possible elsewhere

n  Electric cars based on natural-gas electricity?

Reforming

Hydrogen Production

Unit

Fischer Tropsch

Synthesis

Air Separation

Unit

Hydrotreating/ Cracking

LPG

NAPHTHA

DIESEL

FT products

Syngas

Steam

Natural gas

Pure Oxygen

Hydrogen

13


How about producing the Syngas from renewables or waste? Polymers PE / PP PVC PS ABS PMMA Polycarbonate Nylons Polyurethanes PET Elastomers POM / Resins Fertilizers

New Entrants Green PE Green PP PHA PLA PTT DME Bio-routes GTL / FT liquids Synthetic Naphtha Energy: Fuel Power Transportation

Feedstocks Naphtha

NGLs

Natural Gas

Coal

Renewables Biomass

Residue/Waste


Propylene

C4s

Benzene

Toluene

Xylenes

Syngas


14


A bio route to olefins via MTO/MTP

Biomass

n  Biomass, residues and waste into syngas, methanol and olefins

n  Municipal solid waste (MSW) to: -  Electricity - Methanol and olefins?

n  No fuel versus food issues

n  Bio-MTBE?

Methanol

SAPO-34 model

Ethylene Propylene

Heavies Water

15


The Ethanol approach Intermediates EDC / VCM MEG Styrene Acrylic Acid ACN MMA Cumene / Phenol Cyclohexane MDI / TDI PTA Methanol NH3


New Entrants Green PE Green PP PHA PLA PTT DME Bio-routes GTL / FT Liquids Synthetic Naphtha Energy: Fuel Power Transportation

Feedstocks Naphtha

NGLs

Natural Gas

Coal


Residue/waste


Propylene

C4s

Benzene

Toluene

Xylenes

Syngas

16


Braskem’s approach to Green Polyethylene

CH3CH2OH CH2=CH2 + H2O

Braskem is producing 200 000 ton of “green” polyethylene

Sugarcane

17


Once Green Ethylene is available, then Green MEG (and Green PVC) are also possible

The label reads: “Up to 30% made from plants 100% recyclable plastic bottle”

18


“Green Propylene” is also possible

Ethanol Dehydration Dimerization Metathesis

Sugarcane Ethylene

Ethylene

Butenes Green Propylene

There are other routes such as Sugarcane to Propanol to Propylene; Vegetable oil FCC to Propylene, etc.

20


Some renewable routes bypass the traditional building blocks Intermediates EDC / VCM MEG Styrene Acrylic Acid ACN MMA Cumene / Phenol Cyclohexane MDI / TDI PTA Methanol NH3


Feedstocks Naphtha

NGLs

Natural Gas

Coal

Renewables Sugars Biomass

Residue/Waste


Propylene

C4s

Benzene

Toluene

Xylenes

Syngas


New Entrants Green PE Green PP PHA PLA PTT DME Bio-routes GTL / FT Liquids Synthetic Naphtha

21


Renewable/Biodegradable Polylactic Acid has been making inroads

22


DuPont has pioneered a process to produce Bio-PDO to make PTT

GLUCOSE 1,3 - PROPANEDIOL GENETICALLY MODIFIED

MICROBES

DuPont/Tate & Lyle started up in 2006 (45 000 tons per year)

Bio-PDO

23


Researchers are working on numerous routes to many chemicals and plastics via fermentation, algae farms, etc.

Heterotrophic Algae Tailored oils APR, Bio - gasoline,

jet, aromatics

Fermentation Iso - butanol, derivs.

EDGE™ Fermentation 3 - HP, BioAcrylic acid

Fermentation Isoprenoids

In - silico biotech, BDO, others

PHAs, derivs. Natural oil

Metathesis Prods. Syngas, CO fermentation.

Pyrolysis fuels Bio - succinic acid Bio - succinic acid Cellulosic sugar

fermentation

24


No single answer: in the end, it will boil down to fragmented solutions for different regions based on markets and economics

+16

+12

+3

+3

Gas Oil CoalShaleGas

CornSugarcane

PalmOil

SoyN. America§ Coal§ Shale gas *§ Corn*§ Soy*§ Oil§ Gas*

S. America§ Sugar cane*§ Gas*§ Shale gas§ Oil§ Soy§ Corn

China§ Coal*§ Shale gas§ Corn§ Soy§ Sugarcane

Middle East§ Oil§ Gas*§ Shale gas

SE Asia§ Palm* § Shale gas§ Sugar cane§ Gas

Russia§ Coal§ Gas§ Oil§ Shale gas

25


What does this mean for the Middle East?

OPPORTUNITIES CHALLENGES

n  Renewed competition from gas-rich areas, especially US

n  Energy prices equalized?

n  Competing materials

n  Technology access difficult

n  Beyond commodities

n  Petrochemicals from methane and NGLs will be continue competitive

n  Region has plenty of resources:

-  Hydrocarbons

-  Solar energy

n  Alternative sources of energy can free-up feedstock

The GCC will continue to be an important petrochemical hub

27


Conclusions

n  Oil and gas still here for a while

n  Regional solutions based on local feedstocks will grow -  Coal in China -  Shale gas in the US, and elsewhere? -  Green ethylene in Brazil and India

n  … and innovation will continue: new routes and products

n  Middle East will continue to be a strong petrochemical player

n  Technologies more complex as companies move down the value chain

Our industry is more exciting today than it was 10 years ago!

28

Manuel E. Asali Principal Middle East

Technology Trends Shaping the Future Petrochemical Industry

Session 5

Project Development and Financing – Keys to Success

Graham Hoar Vice President Middle East

Session 6

PP: BD\Bahrain\GPCA Seminar 2012\Seminars\Project Development and Financing – Graham Hoar

Agenda

n  Project Drivers

n  Project Implementation

n  Project Financing

n  Conclusions

1


Success factors in petrochemicals are clear and robust…

Size

Location

Capture economies of scale

Access to feedstocks/logistics/markets

PARAMETER KEY OBJECTIVES

Technology Cost advantage/product differentiation

Synergies with adjacent facilities Integration

PETROCHEMICALS COMPETITIVENESS CRITERIA

2


Multiple ideas are evaluated to deliver an optimal project

Concept Screening Pre-feasibility Feasibility Implementation

Idea Generation

Feasibility Study

Pre-Feasibility Study

Opportunity Screening FEED

EPC

Partner Evaluation

Technology Evaluation

Market Evaluation

Check Financials

Project Concept

Project Definition Project Scope Project Outline Basic Design

Partner Selection

5


Market Environment – Determines Revenue n  Market Dynamics and Price Forecasting

- Demand segment drivers need to be clearly understood - Key assumptions need to be clear - Exploit Nexant’s highly respected methodologies to assist you!

n  Delivered Cost Competitiveness - Need to understand projected plant and logistics costs - Need to develop knowledge of potential competitors - Shows which plants can survive a downturn

n  Market Entry Strategy - Where will market deficits be? - Netbacks should be maximised but multiple sales channels is wise -  In-house marketing & sales department vs offtaker?

6


Technology Selection – Determines Costs n  Capital cost (including license fee) n  Operating cost

- Specific consumption of raw materials and utilities - Catalyst requirements (change frequency, number of suppliers) - Plant capacity limits and product quality specification

n  Experience - Number of plants at or above the proposed scale - Licensor market share; reliability of existing references

n  Innovation is an essential part of our business -  Need to balance risk versus reward (lenders tend to be risk averse) -  Advances in technology and scale CAN be financed BUT will attract scrutiny

Some technology is closely held so a JV with marketing rights may be a pre-requisite

7


A disciplined approach to setting and achieving deadlines is essential to deliver a successful project on time

Proceed? Financial Close

Handover Handover

REVIEW DEVELOPMENT EPC START UP OPERATION

Technology Technology BDP BDP

EPC EPC

Agreements Agreements

S - U Owner Project Management Owner Project Management

Set up Company Set up Company Operate Operate

Hire, train Hire, train

Engineering

Feasibility Study

Position

TIME

Invite, receive bids, evaluate, select, negotiate BDP BDP Basic Design Package PP: BD/C/2860_AW

Construction

Procurement Financing

First Review

8


A number of contracting strategies exist, which vary in the risk to each party

n  Reimbursable basis -  Offers shorter implementation time at risk of poorer project definition -  Cost may be lower than LSTK as EPC contractor may price risk more

conservatively than owner n  Lump Sum Turn Key (LSTK) -  Preferred by lenders but has cost premium, especially if changes are

necessary n  Hybrids -  ‘Convertible’ LSTK shortens FEED stage but then fixes price -  EPCM – fixed with reimbursable construction

9


There is no right or wrong contracting strategy although lenders will prefer LSTK and need to be persuaded of merits of an alternative

A LSTK contract does not mean zero risk to the owner, although the EPC contractor does bear more risk (for which it should charge)

10


Project Finance now widely used for Energy and Chemicals projects n  Offers debt with limited recourse by lenders:

- Interest rate above corporate debt but higher leverage and longer tenors - Attractive to protect balance sheet of parent company - Attractive to JV companies even if partners have different credit ratings

n  Experienced Financial Advisor required, which will appoint independent market, technical, environmental, insurance and legal advisors

n  Advantaged portion of financing available (e.g. SIDF and PIF in KSA)

n  Export Credit Agencies (ECAs) playing a more substantial role -  Commercial banks reduced participation since liquidity crisis -  ECA funds available for loan at lower interest rates -  Typically take longer as public bodies unwilling to act in “undue haste”

11


Project Finance Global and Regional Trends and Issues n  Global project finance: -  2011 loans market totalled US$214 billion, up 3% on 2010 -  Over half lent to energy and chemicals sectors -  Liquidity reduced since financial crisis with pricing higher -  Financiers far more selective, focussing on key clients

n  Middle East trend to diversify along chemical value chain: -  Returns lower than past gas-based projects -  Technology security issues -  Added complexity; mitigation needed (e.g. tougher lender reliability tests) -  Availability of equity (esp. Saudi Arabia) but investor expectations high -  Increasing use of ECA’s, Islamic financing/Sukuk and SIDF/PIF loans

17


Lenders Require Robust Market Outlooks to Test Project Viability n  Robust market forecasts required

- Realistic growth and price/margin forecasts - Sound, proven methodology required as lenders

will test this and demand convincing answers

n  Solid understanding of competitiveness issues

- Can a project survive in downturn conditions?

n  Market entry strategy - Analysis of target customers/markets with realistic

penetration assumptions - Are offtake arrangements reasonable?

ADHESIVES PAINTS

CARPETING RUBBER

FABRICS COSMETICS

FERTILIZERS PLASTICS

12


What are the Key Elements of Technical Risk which lenders wish to be addressed?

n  Is the design proven at this scale? n  Can project facilities be constructed by

contractor within schedule proposed? n  Will facilities operate as planned? n  Are interfaces well defined and managed? n  Will capital cost estimates and contingencies

prove adequate for project completion? n  Are the main contracts reasonable from a

technical perspective? n  Is the financial model a realistic reflection of

likely project performance?

13


International commercial banks and ECAs require environmental due diligence which confirms compliance with Equator Principles

n  Evaluate whether Project complies with: -  National Regulatory requirements -  Internationally accepted World Bank

and other Guidelines

n  Advise Lenders whether Project complies with Equator Principles

n  Nexant has wide ranging regional experience providing advice on Environmental issues

16


Project Development and Financing Conclusions – Keys to Success

n  Ensure secure feedstock supply

n  Screen options and determine feasibility through detailed analysis to create a robust project, selecting JV partners as required

n  Select optimal project implementation strategy; if project financing: -  LSTK contracting strategy no longer essential (but still preferred) -  Select experienced financial advisor and ensure that all project risks are

clearly understood with mitigants in place -  Middle East projects finding financing more challenging with multilateral

blending of finance options more attractive

18

Middle East projects still attractive but returns lower than past gas-based projects


Nexant has a Strong Track Record as Lenders’ Independent Market, Technical and Environmental Advisor

n  Lenders Independent Advisor since 1977

n  Highly qualified experts with extensive experience advising on global investments

n  Experience and credibility advising lenders on market, technical and environmental issues in energy and chemicals sectors

n  Fully familiar with project implementation from finance initiation to construction and operation performance monitoring

Nexant’s record includes acting as advisor in over $75 billion worth of successfully financed engagements

19

Project Development and Financing – Keys to Success

Graham Hoar Vice President Middle East

Session 6

Richard Sleep Senior Vice President Europe, Middle East & Africa

Exploiting Change to Deliver Value

Concluding Remarks

PP: Reference number

Successful exploitation of change requires insight into the industry

Our agenda explored change and the insights required to stay ahead and deliver sustainable competitive value

n  Asia – the global petrochemical consumption engine

n  North America – both market and advantaged feedstock

n  Middle East - downstream opportunities and innovation

n  Technology – opening new routes and providing advantage

n  Financing – the new order


Many sources of sustainable competitive advantage are possible Advantaged feedstocks

Innovative products Talent

Adaptability & insight

Operational excellence

Access to finance

Infrastructure & integration

Restricted technology

Market access

Unique market

offerings


Sustained competitive market advantage can come from unique offerings or restricted market access

n  Population growth n  Per capita increase n  Household growth

n  Increasing consumption

n  Mature but large n  Mature but large


Downstream products provide opportunities to differentiate for sustained competitive advantage

n Feedstocks

n Commodity Petrochemicals

n Polyolefins

n Intermediates

n Differentiated Products

n Innovative Materials

Technology can provide a greater advantage further downstream


Restricted advantageous technology gives further differentiation

n Feedstocks

n Many Technology Providers

n Competitive Licensed Offerings

n Restricted Technology

n Differentiated Products

n Innovative Materials Partnerships and operational know-how are critical


Easy finance has gone so competitive advantage is now possible

Liquid Equity Markets

Funds from Commercial Banks

Pre 2008: Easy Money!

Export Credit Agencies

Middle East Equity Markets

Islamic Finance

Partnerships and intelligence are critical

Post 2009: Smart Money


Exploiting change requires intelligence and deep industry insight

In the absence of low cost feedstocks all avenues to competitive advantage must be secured

Adaptability and speed of

implementation

Operational excellence and

process know-how

Talent

Partnership

Innovation and market Intimacy

Richard Sleep Senior Vice President Europe, Middle East & Africa

Exploiting Change to Deliver Value

Concluding Remarks

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