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37
A Strategic Vision for the Sustainable Growth of our Petrochemical Business Osamu Ishitobi Director and Senior Managing Executive Officer Rabigh Project Office May 2006
Transcript

A Strategic Vision for the Sustainable Growth

of our Petrochemical Business

Osamu IshitobiDirector and Senior Managing Executive Officer

Rabigh Project Office

May 2006

Sumitomo Chemical

3

Sumitomo Chemical’s Petrochemical Milestones1691 The Besshi copper mine opens.

1913 The House of Sumitomo opens a fertilizer plant to produce fertilizers from sulfur dioxide recovered from copper smelting emissions.

1958 Sumitomo Chemical Starts petrochemical operations at its Ehime Works.

1965  Sumitomo Chiba Chemical Co., Ltd. is established and begins petrochemical operations at the Chiba Works.

1984  The Petrochemical Corporation of Singapore (PCS) begins operations.

1997 PCS commences operation of a new ethylene cracker under its 2nd-Phase expansion.

2005 Sumitomo Chemical and Saudi Aramco forms Rabigh Refining and Petrochemical Co.

4

Net Sales & Operating Income by Segment

5

Major Global Locations

l

Manufacturing OperationOther Operation

6

Basic Chemicals

IT-related chemicals

Where We Want to Be ?

Petrochemicals & Plastics

Fine Chemicals

Hybrid Chemistry

A Truly Global Chemical Company

High profitability

Pharmaceuticals

Cost Competitiveness

Technological Synergy

Core Competencies

Agricultural Chemicals

Global MarketGlobal Standard

Process Development Process & Production Technology Biotechnology

Polymer Synthesis Inorganic SynthesisAnalytical Chemistry

Safety Assessment Catalyst TechnologyOrganic Synthesis

7

Sumitomo Chemical’s Petrochemical Milestones1691 The Besshi copper mine opened.

1913 The House of Sumitomo opens a fertilizer plant to produce fertilizers from sulfur dioxide recovered from copper smelting emissions.

1958 Sumitomo Chemical Starts petrochemical operations at its Ehime Works.

1965  Sumitomo Chiba Chemical Co., Ltd. is established and begins petrochemical operations at the Chiba Works.

1984  The Petrochemical Corporation of Singapore (PCS) begins operations.

1997 PCS commences operation of a new ethylene cracker under its 2nd-Phase expansion.

2005 Sumitomo Chemical and Saudi Aramco forms Rabigh Refining and Petrochemical Co.

8

Sumitomo Chemical Group's Petrochemical Products

FEEDSTOCK Monomer Derivatives

Ethylene

AcetaldehydePropylene

POAN

Butadiene

Isobutylene

MTBEMMA

Butene-1

Benzene

SM

LDPE/LLDPE

EVA

EPDM

TPEPP

Polymer Alloy

PS

Methionine

SBR

SAP

Naphtha/LPG

Toluene

Xylene

Focused on Technologically competitive productsPolyolefins, EPDM/TPE, PO (Petrochemicals Sector)

MMA, Resorcin, Methionine (Other Sectors)

Resorcin

ABS

EPPE

Gas Oil/NGL

Petrochemical Business Environment

10

Cyclical BusinessSegment Contribution to Weighted Average EBIT

Current Dollars Per Metric Ton200

Rev : Mar 2006

Reinvestment Level Earnings

PlasticsMethanolChlor-Alk.AromaticsOlefins

175

150

125

100

75

50

25

0

-25Cost & non-cost competitiveness is required to be profitable

even at the bottom of the business cycle.-50

-7585 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

11

Domestic Naphtha & SEA LDPE Price

0

100

200

300

400

500

600

700

Feb-90

Apr-91

Jan-93

Oct-94

Jul-96

Apr-98

Jan-00

Oct-01

Jul-03

Apr-05

0

200

400

600

800

1000

1200

1400

1600

Naphtha C+F JapanPlatt's Mid (US$/T)

LDPE Film Spot SEAICIS (US$/MT)

12

Polyolefin Market Forecast

Average growth of GDP and demand for polyolefin in ’05~’10

GDP PE PP note

World  4.0% 4.8% 5.5%

3.1%

8.0%

7.0%

Driven by Asian demand

Japan 2.0% (0.8%) PP grows

China 8.7% 7.6% Growing at high rates

SEA 6.3% 6.6% Growing faster than GDP

(Source METI)

• Market Maturation in Japan ⇒Market development with high-performance products

• Growing Asian Market ⇒Market entry of Global Petchem. players        →Cost competitiveness is the key

• Market Maturation in Japan ⇒Market development with high-performance products

• Growing Asian Market ⇒Market entry of Global Petchem. players        →Cost competitiveness is the key

13

Energy and Ethylene Demand ForecastYear 2000 → 2030 Primary Energy Demand will grow at 1.7%/Yr

Coal:1.4%Oil:1.5% (non-OECD countries grow)

Gas: 2.4%⇒ Gas demand grows faster, driven mainly by

Power Generation.⇒ Ethane production increases as LNG demand

goes up. →Surplus of heavier fuel oils(Refinery-Petrochemical integration)

Year 2000 → 2030 Primary Energy Demand will grow at 1.7%/Yr

Coal:1.4%Oil:1.5% (non-OECD countries grow)

Gas: 2.4%⇒ Gas demand grows faster, driven mainly by

Power Generation.⇒ Ethane production increases as LNG demand

goes up. →Surplus of heavier fuel oils(Refinery-Petrochemical integration)

World Primary Energy Demand

0

10

20

2000 2010 2020 2030

Billio

n t

oe

Others

Hydro

Nuclear

Gas

Oil

Coal

World Ethylene derivatives demand and ethylene source

0

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010

Mil.

to

ns/

Yr

Others

N, GO

E, P, B

Capacity

World Ethylene Derivatives Demand and its sources

Year 2000 → 2010Ethylene Demand Growth 4.9%/Year  

90 → 140M tons/Yr (+50M tons/Yr)-Gas base +30M tons/Yr (6.6%/Yr)

      (Ethane、Propylene、Butane)

-Liquid base +20M tons/Yr (3.5%/Yr)  (Naphtha、Gas Oil)

Gas base increase from 38 → 45%

 ⇒ Ethane will be the key feedstock for Petrochemical business development.

Year 2000 → 2010Ethylene Demand Growth 4.9%/Year  

90 → 140M tons/Yr (+50M tons/Yr)-Gas base +30M tons/Yr (6.6%/Yr)

      (Ethane、Propylene、Butane)

-Liquid base +20M tons/Yr (3.5%/Yr)  (Naphtha、Gas Oil)

Gas base increase from 38 → 45%

 ⇒ Ethane will be the key feedstock for Petrochemical business development.

(METI and Sumitomo Chemical)

14

Planned Petrochemical Plant Expansions

New plants planned in Middle East and China through ’05~’10

0

2000

4000

6000

8000

10000

2005 2006 2007 2008 2009 2010

New Ethylene Plants planned by 2010

ME China Others

(KTA)

(CMAI)

・ Capacity grows significantly(112M tons in 2004 ⇒Over140M tons)

・ 75% of New Capacity comes from ME and China. Global Producers in US and Europe enter into Asian Market

・ Capacity grows significantly(112M tons in 2004 ⇒Over140M tons)

・ 75% of New Capacity comes from ME and China. Global Producers in US and Europe enter into Asian Market

Outlook for Sumitomo Chemical’s Petrochemical Business

16

Ethylene Production in Japan has grown in parallel with GDP growth

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Th

ou

sa

nd

to

ns

Trillio

n Y

en

0

100

200

300

400

500

600

Ethylene Product ion

Cars & Trucks product ions

Elect r ical products sh ipping value

GDP

Ehime Chiba PCS I PCS IIKEC RabighPSPC

1979 oil crisis1973 oil crisis

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

50

40

30

20

10

Millio

nY

en

Th

ou

sa

nd

un

its

10

3MJ

/t

E thy lene Energy Uni t Consumption

17

Improvement in Catalyst ActivityToday, 100s of times higher!

'60 '70 '80 '90 '00

Slurry PolymerisationBulk polymerisation

Gas-phaseNew Gas-PhaseDevelopment in

PP Polymerisation Process

Improvement ofproduct quality

Cost reduction due tosimplified facilities

PurchasedCat

SC-cat(DX3)

PurchasedCat

PurchasedCat

SC-cat(DX4)

SC-cat(DX5)

SC-cat(DX9)

SC-cat(EX)

Development of Sumitomo Technology (1) PP

18

'60 '70 '80 '90 '00

HP-LDPE(Autoclave)

ZN-LLDPE(Gas)

Innovation of Process &Products

Star t of LDPEProduct ion

High per formanceZN catalyst

Gas Phase Process

m-LLDPE

EPPE

EPPE(Gas)

Tubu lar Process m-LLDPE(Gas)*

HP-LDPE(Tubular)

)

ZN-LLDPE(HIP)

m-LLDPE( HIP)

Improvement ofproduct quality

Cost reduction due tosimplified facilities

*Evolue

Development of Sumitomo Technology (2) PE

19

'80 '90 '00

Solid Products, FilmLamination, Co-Injected Products

Hollow ProductsFoaming ProductsVariety of Products

CAE

In ject ion-Blow

SC Co2- In ject ion

Foaming Tech .

SP Mold

Co-In ject ion

Gas- In ject ion

CAO

Total Material Solution

New Product Devlopment

Development of Sumitomo Technology (3) Processing

20’70 ’80 ’90 ’00

Green SustainableGreen SustainableHighly Cost Competitive,Highly Cost Competitive,

Propylene oxide

HCl oxidation

Caprolactam

On-purpose process

Direct oxidation process

Low temp. processMMA

Resorcin

Hydroperoxide process

Key : Catalyst Design andProcess Development

Key : Catalyst Design andProcess Development

Development of Sumitomo Technology (4) Bulk Monomer

Petrochemical Business Strategy

22

Strategic Responses to Dynamic Market Changes

Secure Reliable and Stable Supply of Feedstock

Volatile Raw Materials Market

Mature Japanese MarketLosing Cost Competitiveness

due to size and high raw material costs

Supply High Performance products

Shift to Asian MarketGrowing Asian Market

Western & Middle Eastern Players entering into Asian Market

Develop New Technology

23

Sumitomo’s Global Petrochemical Business Strategy

Rabigh PJ reinforces Sumitomo’s global petrochemical businesses

・ supplying cost-competitive products

 ⇒supporting the optimization of JAPAN & Singapore units’ product lines (shifting to premium & specialty products)

・ enlarging total business presence in the world market

 ⇒intensifying marketing network and R&D effectiveness

・ world-scale production unit

 ⇒enhancing Sumitomo’s proprietary technologies Commodity products

Homo/Block PP, LDPE, LLDPE, HDPE, PO

Specialty productsTPE, special ethylene-

copolymers, terpolymer PP, random PP, plastomers

Premium productsPP for automotive, EPPE

EVA

JAPAN:Focusing on specialty & premium productsMarketing globally

JAPAN:Focusing on specialty & premium productsMarketing globally

Singapore, North America:Focusing mostly onpremium productsMarketing to Asia and North America

Singapore, North America:Focusing mostly onpremium productsMarketing to Asia and North America

Saudi Arabia:Focusing on premium &commodity products, Marketing to Asia and Europe

Saudi Arabia:Focusing on premium &commodity products, Marketing to Asia and Europe

Optimizing product lines among the production sites,accelerating the expansion of Sumitomo’s global petrochemical business

Optimizing product lines among the production sites,accelerating the expansion of Sumitomo’s global petrochemical business

24

Globalization of petrochemical business

Giant step toward globalization

1958Entered Petrochemical Business – Ehime, Japan

1984Started operation at a center of emerging market - Singapore

2008New operation at a feedstock source –Rabigh

25

Rabigh Project (1)

Rabigh Project

Upgrading the world-class oil refinery at Rabigh

Upgrading the world-class oil refinery at Rabigh

Constructing a large-scale petrochemical plant

Constructing a large-scale petrochemical plant

Pursuing economies of scale and synergies from refining and petrochemical integration

Pursuing economies of scale and synergies from refining and petrochemical integration

Sumitomo Chemical’s business strategy and competitive strengths best match the Rabigh project

Securing low-cost feedstock overseasMobilizing advanced technologies in petrochemical operations

Utilizing broad marketing mainly in Asia

Ethane Feedstock

Ethane Feedstock

Significant earnings enhancement for Sumitomo’s petrochemical business

26

TopperTopper

First Step to an Integrated Complex of Oil Refining and Petrochemicals

FCCFCC

Ethane CrackerEthane Cracker

NaphthaNaphtha

KeroseneKerosene

Gas OilGas Oil

GasolineGasoline

Heavy Oil Products, etc.Heavy Oil Products, etc.

Ethylene (about 1.3 million tons/year)

Ethylene (about 1.3 million tons/year)

MEG(600,000 tons/year)

MEG(600,000 tons/year)

<Current>

CrudeOil

Butane

Ethane

Propylene (0.9 million tons/year)

Propylene (0.9 million tons/year)

PP [Block](350,000 tons/year)

PP [Block](350,000 tons/year)

Residual OilResidual Oil

【Rabigh Refining & Petrochemical Co. ( “Petro-Rabigh” ) 】

400,000 barrels/day

Easy Processing PE(250,000 tons/year)

Rabigh Project (2)

Easy Processing PE(250,000 tons/year)

C4LLDPE(350,000 tons/year)

C4LLDPE(350,000 tons/year)

HDPE(300,000 tons/year)

HDPE(300,000 tons/year)

PP [Homo](350,000 tons/year)

PP [Homo](350,000 tons/year)

PO(200,000 tons/year)

PO(200,000 tons/year)

1,200,000 tons/year

<Plan> Petrochemicals

Construction Start : Early 2006Start-up of the Complex : 2nd Half 2008

Construction Start : Early 2006Start-up of the Complex : 2nd Half 2008

27

Global Ethylene Cash Costs by Site

50100150200250300350400450500550600

0 20 40 60 80 100 120 140 160CUMULATIVE ETHYLENE CAPACITY (million tons)

(Dollars per Ton )

Ethylene Production Basis Year 2010

New Liquid Cracker

Middle East plants

28

Significance of Rabigh Project

◆ Securing competitive raw materials   →Global Business development with

competitive derivative products  

◆ Securing competitive raw materials   →Global Business development with

competitive derivative products  

Reinforcement of Sumitomo’s Business,

especially Petrochemicals

Reinforcement of Sumitomo’s Business,

especially Petrochemicals

◆ Crude Oil 400K BBL/D Ethane 1,200K Ton/Y(10% of total consumption in Japan)

◆ Crude Oil 400K BBL/D Ethane 1,200K Ton/Y(10% of total consumption in Japan)

Securing Energy Resources in Japan

Securing Energy Resources in Japan

◆ Build Industrial Park in cooperation with PetroRabigh 

→ Development of Local economy◆ Proceed Rabigh PJ, in cooperation

with Saudi Aramco, with Sumitomo Chemical's various Petrochemical technology, its down stream expertise and collaboration with Sumitomo Chemical’s group companies

◆ Build Industrial Park in cooperation with PetroRabigh 

→ Development of Local economy◆ Proceed Rabigh PJ, in cooperation

with Saudi Aramco, with Sumitomo Chemical's various Petrochemical technology, its down stream expertise and collaboration with Sumitomo Chemical’s group companies

Sustainable Industrialization in Saudi Arabia

Sustainable Industrialization in Saudi Arabia

29

Business Strategy for Polyolefins

Improving Profitability of Petrochemicalsthrough Various Initiatives

Improving Profitability of Petrochemicalsthrough Various Initiatives

(Unit : 1000 tons/yr)

PP(360)

Metathesis Project ( Increasing Production of Propylene )

Converting LLDPE Plant to PP Plant

Closing Small PP Facilities to Build a LargerCapacity Plant

(Japan)

(Singapore)

Shift to Higher Value-AddedProducts( e.g. Production of TPE)Converting LLDPE Plant to EPPE Plant

(After PP Plant Conversion)

PP(650)

LDPE(250)

LLDPE(183)

PP(338)

LDPE(172)

( * Including EPPE Production)**

EPPE(250)

HDPE(300)

LLDPE(350)

PP(700)

(Saudi Arabia)

(North America)

Converting LLDPE Plant to EPPE Plant

World scale cost competitive plants

30

TPC’s Higher Value-Added Products Strategy

EVA

7%

Random PP12%

Block PP

25%LDPE

25%LLDPE16%

Homo PP

15%

1997 2004

LLDPE to PP Plant Conversion

Production of EMMAValue Added Products

Ratio :56%

2010

Block PP

32%

Random PP

17%

EVA 4%EMMA 3%

LDPE 20%

Homo PP24%

Block PP

18%

Random PP

5%

EVA

4%

LDPE 32%

LLDPE17%

Homo PP24%

Value Added Products Ratio :45%

Value Added Products Ratio:27%

※①Random PP includes Ter-polymers

  ②Block PP includes PP compound

31

Strategic Customer Support

CustomersCustomers

Material SolutionMaterial Solution Processing SolutionProcessing Solution

PolymerDesign

Monomer

PolymerizationCatalyst

Analysis

PolymerizationProcess

SyntheticRubber

Elastomer

PolymerAlloy

ProductDesign

ProcessingMethod

PracticalEvaluation

CAE, CAO

32

Prop

erty

of P

rodu

cts

Goo

d(M

echa

nica

l str

engt

h, S

eala

bilit

y et

c.)

Processability Good(Extrusion pressure, Bubble stability)

High pressure LDPE

Metallocene L-LDPE

Applications of Sumitomo PE

Ziegler catalyzedL-LDPE EPPE

33

Requirement for Automotive Parts and Performance of PP

Fle xu r al M o d u lus (Kg/c m2)2 0 4 00 6 0 9 0

Izod

Impa

ct(K

g・cm

/cm

2 ) 

(23℃

)

5

1 0

5 0

Bum pe r

Inte rior Pa ne l

E ngine room pa rts

He a ter Case parts

Trim

PP C omposite

PP

P PE Alloy

ABSABS /G F

2

2 0

(× 10 3)

Expansion of Automotive Parts applications through PP Technology

34

Development of High-Performance Polymers

""World Class"World Class"CatalystCatalyst//CoCo--catalystcatalyst

Design & Synthesis TechnologyDesign & Synthesis Technology

ActivityActivity Comonomer Comonomer DistributionDistributionControlControl

High StiffnessPP

Soft Type PP

New EasyProcessing PE

BimodalHAO-LL

UnimodalHAO-LL

StereoStereo-- regularity regularity ControlControl

PolymerizationPolymerizationProcessProcess

Catalyst Morphology Catalyst Morphology ControlControl

35

0

100

200

300

400

500

600

700Sumitomo New PO ProcessSecond Plant in Rabigh

76 84 86 88 90 92 94 96 98 00 02 04 06 08 10-----

Sumitomo New PO ProcessFirst Plant in Chiba

PO/SM Plant in Chiba(licensed by Lyondell)

De-bottleneckingsthrough process improvement

De-bottleneckingof new PO plantK

TA

Sumitomo-Nihon OxiranePO Capacity

Chlorhydrin On purpose productionCumene, (H2O2)

(Direct oxidation)Co-productionPO/SM, PO/TBA

√ waste water√ market conditionof co-product

Establishment of PO Platform

36

A Strategic Vision for the Sustainable Growth

Secure Reliable and Stable Supply of Feedstock Rabigh Project

Supply High-Performance products

PP Composite, Soft Type PPHigh Stiffness PP, EPPE TPE, Special Copolymer

Enhancing Marketing Ability based in SingaporeShift to Asian Market

Developing New TechnologySustainable TechnologyCustomer-oriented Technology

Thank you !!


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