Global Petrochemical Overview: Changing Olefins...

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Global Petrochemical Overview:

Changing Olefins Markets

APLA, 10th November 2014

Prepared for:

34th Latin American Petrochemical Annual Meeting

By Nexant and ChemVision

ChemVision


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What are the global olefin demand trends? How are feedstock developments affecting monomer supply? How do changing global dynamics influence Brazil?


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Global ethylene demand recovered in 2013, after stalling in 2012 due to concerns surrounding the Chinese economy.

Olefins Demand by Region, 2014-e

Million tons

Demand by Region, 2014-2020

Volume Growth, %

APLA, 10th November 2014 2

0

50

100

150

Ethylene Propylene Butadiene

North America South America

Western Europe Middle East

Asia Pacific

0 5 10 15 20

Butadiene

Propylene

Ethylene

North America South America

Western Europe Middle East

Asia Pacific

Asian development is supported by both domestic demand and exports to Western markets. Key growth markets include China, Indonesia and India.


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Polyethylene accounts for 60% of total ethylene demand. Almost all new steam crackers have polyethylene units as the main on-site ethylene consumer.

HDPE

LLDPE

Ethylene Oxide

LDPE

EDC

Others Styrene

3,9

0 2 4 6

Styrene

Others

Ethylene Oxide

EDC

LDPE

Global Average

HDPE

LLDPE

Source: Nexant Analysis

Global Ethylene Demand by Derivative, 2014-e

Volume = 134 million tons

Global Ethylene Demand Growth by Derivative

Volume Growth, %


While polyethylene dictates ethylene market dynamics, propylene is influenced by polypropylene. Polypropylene accounts for around 65% of global propylene production and drives propylene

growth of 4.3%


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-

1.000

2.000

3.000

2000 2005 2010

Ethylene Propylene Butadiene Mixed C4

Ethylene production is continuing

to trend towards lighter

feedstocks

Reduced propylene and C4

availability from steam crackers

thus promoting on-purpose

production

Propylene prices expected to

trade marginally higher than

ethylene, which is highly

sensitive to polymer markets and

inter material competition.

Price spikes in butadiene also

due to record high natural rubber

prices in 2011 supporting robust

growth for alternative synthetic

rubbers

Propylene prices are tied with ethylene, although expected to trade marginally higher; butadiene pricing is influenced by demand dynamics and natural rubber trends.

U.S. Olefins Historic Pricing

Current US Dollars per Ton



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How are feedstock developments affecting monomer supply?



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Each region has its own unique feedstock and market position shaping investment trends.

IA: High

FS: Ethane/NGLs

New activity driven by shale gas

NORTH AMERICA

IA: Low/decline

FS: Naphtha/Ethane

Selective investments in FSU/EE

Further rationalisation in the EU

EUROPE

IA: Low/moderate

FS: Mixed

Potential for ethane, naphtha

and bio based projects

SOUTH AMERICA

IA: Moderate

FS: Ethane/NGLs

Further utilisation of ethane & NGLs

Selective Refinery integrated projects

MIDDLE EAST & AFRICA

IA: High

FS: Naphtha/Coal

Refinery integrated projects with

further expansions in CTO/MTO

CHINA

IA: Moderate

FS: Naphtha

Refinery integrated projects in

selected markets by NOCs

SEA/INDIA

IA = INVESTMENT ACTIVITY

FS = FEEDSTOCK SLATE



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0

50000

100000

150000

200000

250000


2010 2015 2020 2025

0

20

40

60

80

100

120

140

160

180


Rest of Asia Middle East & Africa

Europe United States

China Rest of North America

Brazil Rest of South America

Global olefin capacity growth is underpinned by Asia, particularly China, with a combination of steam cracker development and coal-based olefins production.

Olefins Capacity by Region/Country, 2014-e

Million tons

Global Olefins Capacity Outlook, 2010-2025

Million tons


4.6%

5.1%

4.1%


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Shortage of conventional supply is driving major

investment in unconventional propylene and

butadiene capacity

Ethane exports from the U.S. will be available for

ethylene producers in Europe, South America

and Asia from 2016

Lower LPG prices relative to naphtha are

impacting propylene and butadiene supply in

most regions

Poor liquids cracking economics has created

interest in MTO/MTP and PDH

Chinese supply security agenda is encouraging a

surge in coal/methanol based olefins

United States ethane supply continues to boom. Security concern in China continues to support investment in coal based olefins.

Global Ethylene Feedstock Demand

Million tons

Global Supply Themes


0

100

200

300

400

500

600

2000 2005 2010 2015 2020 2025

Butane Ethane Ethanol Gas Oil

Methanol Naphtha Pentane Propane

8


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0

50

100

150

2010 2015 2020 2025

Refinery FCC/DCC Steam Cracker On-Purpose

0

5000

10000

15000

2010 2015 2020 2025

Extractive distillation Dehydrogenation

Move to lighter feedstocks has reduced propylene co-product production and global CC4 availability resulting in increased investment in on-purpose production.

Global Propylene Production by Process

Million tons

Global Butadiene Production by Process

Million tons


Nearly 10% of butadiene will be produced

from dehydrogenation by 2025

Chinese companies are implementing

numerous butylene dehydrogenation projects

using new (and proven) Chinese technology

30% of global propylene supply will be from

unconventional sources by 2025

PDH has been through a phase of major

expansion in the Middle East, but the focus is

now moving to China and the U.S..

Methanol-based projects have focused on

China.

9


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0

5

10

15

20

25

30

35

40

2010 2015 2020 2025

Steam cracker - naphtha Steam cracker - mixed feed

Steam cracker - heavy liquid Steam cracker - ethane

Steam cracker - E/P FCC offgas recovery

An estimated 12 million tons of new ethane-based ethylene capacity will become available in the U.S. in the next 10 years. New capacity is focused in the gulf.

U.S. Ethylene Production by Process

Million tons


U.S. Firm Projects

Company Location Capacity,

000 tons

Start-

Up

ExxonMobil Baytown, TX 1,500 2017

Formosa Point Comfort, TX 1,000 2017

Dow Freeport, TX 1,500 2017

Sasol Lake Charles, LA 1,500 2018

CP Chemical Cedar Bayou, TX 1,500 2017

Ingleside Ethylene Ingleside, TX 554 2017

Recent & Announced U.S. Expansions/Conversions

INEOS

Westlake

Williams

Proposed Projects

Shell

Axiall/Lotte

BASF TOTAL

LyondellBasell

SABIC

Aither Chemical

Odebrecht

10


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The U.S. will reinforce and improve its position as a net exporter as cost competitive capacity additions based on shale gas developments are commercialised.

Source: Nexant Analysis

U.S. Ethylene Demand from Key Derivatives

2014 = Approx. 25 million tons

Million tons

U.S. Net Trade in Key Ethylene Derivatives

(Million tons Ethylene equivalent)

0

10

20

30

40

2010 2015 2020 2025

LDPE LLDPE HDPE

Ethylene Oxide Styrene EDC & VCM

Others

-2

0

2

4

6

8

2010 2015 2020 2025

LDPE LLDPE HDPEMEG Styrene Vinyls


The new capacity developments in the US will require producers to establish major derivative

export positions in South America, Europe and Asia.

11


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New pipelines and export terminals will permit up to 6m tons per year of ethane exports. As yet there are no proposals for a new ethylene export terminal in the U.S..

Source: Nexant Analysis, OICA

Recent developments in U.S. ethane/NGL transmission infrastructure

Joffre

Sarnia

Tioga

Marcus Hook

Export Terminal

Mont

Belvieu

Mariner East

Pipeline Mariner West

Pipeline

ATEX Pipeline

Vantage

Pipeline

Asia South America

Europe

The ATEX (Appalachia-to-Texas

Express) pipeline links four

fractionators in the Marcellus region to

the Mt Belvieu storage and distribution

hub

The planned Enterprise export

terminal will allow around 4m

tons/year of exports from Mt Belvieu

The Mariner East and Vantage

pipelines will each transport around

1m tons/year of ethane to Canada

Several other pipelines are being

developed to link into the ATEX and

directly into Mt Belvieu from mid

America gas fields

12 APLA, 10th November 2014


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How do changing global dynamics influence Brazil?



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0,0

1,0

2,0

3,0

4,0

5,0


Production Consumption

Brazil is the leading player in the South American olefin industry. Steam cracker projects include COMPERJ and projects in Bolivia, Colombia, Peru, Argentina and Venezuela.

South America Olefins

Production and Consumption, 2013

Million tons


Note: Shaded area represents Brazil’ share of South America

14


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0

100000

200000

300000

400000

500000

Ethylene Propylene Butadiene HDPE LDPE &LLDPE

PP (HP) PP (CP)

Imports Exports

Brazil currently is a net exporter, but is expected to face growing shortfalls which will be met by exports from the U.S.

Brazil Olefins and Key Derivatives

Import/ Exports 2013

Thousand tons



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Longer term, after 2020 (most likely around 2025), natural gas availability, mainly from Pre-

Salt, may increase ethane availability and improve PE’s competitiveness

Similarly, LPG production from Pre-Salt can become in excess over demand, as fuel,

converting Brazil into a net exporter. This scenario may offer opportunities for use of

propane and butane as chemical feedstock.

An interesting option is for Brazil to import competitive ethane from the U.S. to expand

cracker capacity, similar to recent trends in Europe

Although just starting to develop, shale gas and liquids from Argentina could also become

an important new feedstock source

Thus, in the next decade, Brazil will have a number of opportunities to become a more

competitive player in monomers, aggregating value along the production chain.

Competitive raw material supply is likely to change

Brazil in the Future



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Thank you!

ChemVision

Anna Ibbotson

[email protected]

Carlos Lopes

[email protected]

To find out more, please visit us at the Nexant booth


Slide Title Area







Nexant, Inc.

San Francisco

New York

Houston

Washington

London

Frankfurt

Bahrain

Singapore

Bangkok

Shanghai

Kuala Lumpur

1 King’s Arms Yard,

London, EC2R 7AF

Telephone: +44 20 7950 1600

Facsimile: +44 20 7950 1550

www.nexant.com

“This presentation was prepared by Nexant Limited (“Nexant”). Except where specifically stated otherwise in the

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