Downstream: Refining & Petrochemical Markets · Market Reporting Consulting Events Downstream:...

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Market Reporting

Consulting

Events

Downstream: Refining & Petrochemical Markets

THEC – Houston, TX - January 28, 2020



• Population: Chinese – Global – without energy

• Global oil demand vs US demand?

• NGL – LPG – C3 and C4

• What IMO 2020 – LCFS – RFS – Carbon sequestration mean?

• Vehicle park: Global – US – China – EV

• Who produces and what is petroleum coke used for?

Energy Price Reporting Agency?

Argus Media?

Did You Know:



What is a Price Reporting Agency (PRA)



• PRAs validate the data and create price assessments according to

methodology.

• Indices are used in:

- Term contracts - Financial derivatives

- Financial reporting - Internal transfer pricing, etc.

• Globally recognized energy PRAs:

- Argus - ICIS - OPIS - Platts

• Also, CME and Ice’s trading platforms and third parties like Thomson

Reuters, The Wall Street Journal, Bloomberg, Global View, etc.

How Does the PRA System Work?



Argus Media: Integrated Global PRA, Conference & Consulting Company

• Headquartered in London

• 22 offices

• 1,000+ staff

• 500+ journalists

• 80+ consultants

• 25,000 price assessments

• Over 160 publications

• 70+ conferences annually

• 300 consulting projects annually

London

Moscow

Dubai

New York

Portland

Calgary

Santiago

Rio de Janeiro

Mexico City

Beijing

Shanghai

Tokyo

Sydney

Astana

Kiev

Cape Town

Riga

Mexico City

San Francisco

Washington, DC

Global reach



Petrochemical markets

Petroleum markets

Unintended consequences

Current disrupters

What to look out for

US Downstream Outlook



$0

$20

$40

$60

$80

$100

$120

$140

$160

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2007 2009 2011 2013 2015 2017 2019

US Conventional Oil Production US Tight Oil Production

– Argus, EIA2019 data through October

$/bl’000 b/d • 2010 shale

revolution

• Tight light oil now

major US oil product

• Feedstock quality

changing

• US consumes

around 10mn b/d…

now a net exporter

• US is world’s largest

oil producer

US Oil Production and Price



45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

mn cf/d

Consumption Production

Production

Consumption

• Increased demand

from industry and

electricity

• US went from

import to export

• Regasification to

liquification (LNG)

US Natural Gas Production and Demand

– EIA



• Crude oil relatively

low relatively and

stable

• NG prices

extremely low –

being rejected

• Feedstock

preference

changing; to NG

and ethane, with

propane following

US Natural Gas and Ethane Prices at All Time Lows

0

20

40

60

80

100

120

140

160

Jan

-07

May-0

7

Sep

-07

Jan

-08

May-0

8

Sep

-08

Jan

-09

May-0

9

Sep

-09

Jan

-10

May-1

0

Sep

-10

Jan

-11

May-1

1

Sep

-11

Jan

-12

May-1

2

Sep

-12

Jan

-13

May-1

3

Sep

-13

Jan

-14

May-1

4

Sep

-14

Jan

-15

May-1

5

Sep

-15

Jan

-16

May-1

6

Sep

-16

Jan

-17

May-1

7

Sep

-17

Jan

-18

May-1

8

Sep

-18

Jan

-19

May-1

9

Sep

-19

Jan

-20

May-2

0

Sep

-20

Jan

-21

(barrel of oil equivalent), $/bl

Propane Ethane Natural gas Crude oil-Argus Consulting Services

Forecast

Crude

Ethane

Propane

Natural Gas



Continued Production Optimization: Feedstock and Products

Feedstock

- Demand

- Quality

- Price

Products

- Demand (GDP)

- Regulations

- Technology

- Price

- Logistics

- Alternatives

Offshore & Onshore

Crude

LPG

Gasoline

Naphtha

Jet

Diesel

Fuel oil

Asphalt

Base oil

PetcokeCoker

VGO

Petrochemicals

• Ethylene

• Propylene

• Butylene

• ….

Gas

NGLs

Fertilizers

LNG

Methanol

Power



0

500

1000

1500

2000

1998 2001 2004 2007 2010 2013 2016 2019

TW

h

Wind, Solar, Biomass Nuclear and Hydro Coal Natural Gas

US Power Generation • Plentiful cheap gas supplies increase NG share and allows cleaner power supply

• US coal demand is plummeting

• Tax support and improved technology allows penetration of alternative power supply

Cheap Gas Displaces Coal

Coal

Natural gas



US Ethane Being Monetized

0

10

20

30

40

50

60

2008 2018 2025

mn tEthylene production

34%

40%

0

10

20

30

40

50

60

2008 2018 2025

mn t Polyethylene production

31%39%

0

10

20

30

40

50

60

2008 2018 2025

mn t Ethane production

106%

34%

• 42 crackers in the US

• 30-35 years old, from the 1960s

• 2 new crackers in 2017




• 3 still under construction, and

more being considered

• 4 new units in 2017




– Argus Consulting Services – Argus Consulting Services – Argus Consulting Services



US Ethane being Monetized, but Also Attractive for Export

0

2

4

6

8

10

12

14

2008 2018 2025

mn t Ethane export

41%

0

0.2

0.4

0.6

0.8

1

2008 2018 2025

mn tEthylene export

160%

65%

0

2

4

6

8

10

12

14

2008 2018 2025

mn t Polyethylene export

20%

97%

– Argus Consulting Services



• Recent infrastructure buildout –terminals, storage and ships ensured export

• Exports started in 2018

• US largest LPG exporter in the world

• Increasingly used for petchemsand residential

• Continued growth expected, as the combination of ample supply and robust logistics should keep prices low relative to crude and naphtha

US LPG Market Transformed to World’s Largest Export Market

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2010 2015 2020 2025

mn tTotal Consumption Total Production Net position




0

100

200

300

400

500

600

700

800

900

1,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Peru

Honduras

Chile

Brazil

Venezuela

Colombia

Costa Rica

Canada

Guatemala

Ecuador

Panama

Mexico

Total

2019 data through October

’000 bpd

– Argus Consulting Services, EIA

0

200

400

600

800

1,000

1,200

1,400

1,600

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

United Kingdom

Ecuador

Argentina

Gibraltar

Peru

Panama

Colombia

Brazil

France

Chile

Netherlands

Mexico

Total

2019 data through October

’000 bpd

– Argus Consulting Services, EIA

• US exports gasoline and diesel

• US benefits from Latin America’s growing demand for products

• 2019 levels down due to high levels of maintenance activity in PADD 3

US Becoming Gasoline and Diesel Exporter

Gasoline Diesel



Regulations Drive Changes, e.g. Renewables/Biofuels

US Ethanol, Cellulosic, Renewable Diesel

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2011 2013 2015 2017 2019

mm

Btu

California CNG and LNG consumption

RNG (CARB) Total (CARB) Total (EIA)

– CARB, EIA data, Argus Consulting Services



0

10

20

30

40

2000 2004 2008 2012 2016 2020

mn

t

US petcoke exports

USGC USWC Other– Argus Consulting Services

• US refiners invested in cokerstwo decades ago to handle the growing amount of heavy crude oil

• Continued utilization due to price differential (light vs heavy crudes)

• Continued global demand for cement and power (gasifier)

Additional Coker Capacity Expanding Petcoke Push in Seaborne Markets



Market behavior and

unintended consequences



0

100

200

300

400

500

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

TW

h

China power generation

Thermal power generation Hydro and Nuclear Wind and solar

– NBS, Argus Consulting Services

• Asean imports of coal rising

as fast as Europe is

declining

• Chinese power demand

outpacing expansion of

non-coal generation

capacity for now

• Indian power demand

currently very weak, but

long-term growth likely

Coal Generation Still Expanding in High-Growth Economies



Lighter Feedstock Produces Lighter Products

GAS

Offshore & Onshore

NGL

Fertilizers

CRUDE

LPG

Gasoline

Naphtha

Jet

Diesel

Fuel Oil

Asphalt

Base oil

PetcokeCoker

VGO

LNG

Petrochemicals• ethylene• propylene• butylene• pygas• C5+• benzene• toluene

Methanol

Power



18%11%

9%8%

6%

7%

6%

5%

3%

17%

17%

16%

16%

78%42%

40%

30%

26%

15%

30%24%

17% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ethane Propane Butane Full Naphtha Atm Gas Oil

Fuel gas

Ethylene

Propylene

Butadiene

Butylene/butane

Benzene

Toluene

Other Pygas

Fuel Oil

Shift in Feedstock has Critical Impact on Supply




• Not only US made investments

• 2020 China capacity additions –

High impact… 154% growth

• Malaysia, Russia, Oman and

others also impact 2020

• Will US ethane end up as

feedstock for Chinese crackers?

• What is the effect of ethylene

export?

Overcapacity is Developing in Ethylene



267527 587 654

8531,007 1,132 1,099 1,174 1,178

1,380 1,288 1,337

144

189 210335

526506

507 549617

764

826 940 870

366

377391

449

499503

524 541539

573

592 588 546

425388

362 364327

298

309 321

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

’000 b/d

US Refined Products Exports Asphalt & Misc.

Oxygenates

Lubes & Waxes

Unfinished oils

Jet fuel

Resid fuel oil

Pet. coke

Gasoline &

Blendstocks

Distillate

-Argus Consulting Services, EIA2019 data through October

• 2018, PADD 3 at all-time capacity utilization.

• 2019 levels down due to maintenance activity in PADD 3

• Unlikely further growth beyond 2018 levels until early 2023

• Asia and Europe will supply the incremental growth in Latin America

US Products Exports are Near Limits of Refining Capacity



• Ethanol blending plateau at 10vol%.

• No demand growth due to stagnant gasoline demand and regulations.

• Renewable diesel feedstock – What is the life cycle?

• Open loop scrubbers – Where does the sulfur go?

Regulations: Costs, Limitations and Opportunities



Key

developments

to watch…



Local, global and geopolitics issues• Hurricanes/storms, increased labor and insurance costs, regulations, taxes, currency

• OPEC, Iran, Iraq and political environment

• Tariffs, war, health and anti-fracking

Sustainability, environment and decarbonized economy• Negative public awareness, industry image

• Regulations and finance

Financial and trading companies taking ownership in energy companies

Technology breakthrough… looooong term• When will China explore shale gas?

• Heavy crude oil upgrading, crude to petrochemical

• Electric vehicles, batteries, power storage, carbon sequestration…

Global Trends: Opportunities and Threats



In Conclusion

consulting services



o Crude

o Power

o Natural gas

o Biomass

o Biofuel/Biochems

o Refined Products

o Petroleum Coke

o Coal

o Sulfur

o Asphalt

o Metals

o Logistics/Freight

o Fertilizers

o Oil products

o LPG / NGL / LNG

o Petrochemicals

Argus Consulting Services product-set

Near-term outlooks

Series of 2-year outlooks,

and Argus fundamentals

Long-term analysis

20+ years forecasts included in

analytics and multiclient products

Bespoke projects

Assignments structured

around a particular client need

Multiclient off-the-shelf Single client tailored support

Argus’ fundamental

market understanding

and global, complete

data



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argusmedia.com

consulting services

Kristine Klavers – Sr. Vice President Consulting, AmericasEmail: [email protected]

Phone: +1 713 400 7860

Web: argusmedia/consulting.com

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