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How short will ethylene get?

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Presentation on theme: "How short will ethylene get?"— Presentation transcript:

1 How short will ethylene get?
Peter Frenken Fourth Global PVC Conference 18-19 November 2003

2 SABIC: “a new kid in town”?
Global competitiveness and who are the locals? Enough mega plant addittions to supply ethylene? Conclusions and answers!

3 SABIC : Facts and Figures

4 SABIC strategy Growth total products capacity from 35 million mt/year in 2001, 40 million mt/year in 2002 and to 48 mt/year in 2010. For Petrochemicals SABIC has a global strategy. Share of Petrochemicals : 14.5 million mt/year Basic Chemicals (ethylene, propylene, methanol, MTBE, butadiene etc.) 4.8 million ton of Polyolefins. Strengthen positions in Petrochemicals by acquisitions and autonomous growth. Constantly exploring overseas opportunities for acquisition.

5 Basic facts SABIC 16,800 employees in 23 countries (EU 2,300)
Established in 1976 16,800 employees in 23 countries (EU 2,300) Sales € 11.4 bln in 2002 Net profit: 2003 Q1/Q2 850 mln $ Total production in 2002 were 40 mln tonnes (EU 6 mln) 70% shares by KSA government Joint Ventures with a.o. Shell, Exxon and Mitsubishi

6 SABIC Feedstocks/Major Products (excl Metals)
Sourced PRODUCED Ethane Methane Butane Styrene Propane Naphtha Benzene Salt Air Limestone Natural Gas Phosphate Rock Aluminium Potash Basic Chemicals Ethylene Propylene Butadiene Butene-1 Methanol (MEOH) Crude Industrial Ethanol (CIE) Methyl Tertiary Butyl Ether (MTBE) Benzene Styrene ParaXylene Intermediate Chemicals Ethylene Glycol Vinyl Chloride Monomer Caustic Soda 2-Ethyle Hexanol Dioctyl Phthalate Ammonia PTA Oxygen Nitrogen Argon Fertilizers Ammonia Urea Sulphuric Acid Polymers Polyester Polystyrenes Melamine PVC HDPE LDPE LLDPE PP

7 SABIC’s European acquisition……
First important step outside KSA towards leading global manufacturing position in petrochemicals Closer to European customers and expansion of customer base European production sites Experienced Marketing and R&D staff in Europe Springboard for further growth in Europe Building on SABIC’s knowledge and know-how in the field of polymers and hydrocarbons

8 ……of an allready growing affiliate……

9 …. resulted in a #4 global ranking for ethylene….

10 …. and for poly-olefins as well. (#4 in EU)

11 Summarising SABIC Manufacturing and R&D sites
4 highly integrated sites direct access to low cost feedstock world-scale facilities direct market access Gelsenkirchen Geleen Houston Al Jubail Yanbu Vadodara Riyadh Kerteh

12 Global competitiveness developments:
Europe has become a local-for-local producer, USGC will get one

13 What about cycles in the global petrochemical industry ?

14 Which drivers to manage in a cyclical business?
Access to feedstock Large scale Site integration Close to markets

15 #1: Cheap gas feedstock only in the Middle East
Can Nor Russia UK Ukr. USA Neth. Turkm. Kaz. Uzb. China Mex Iraq Iran India Lib. Alg. Bangl Kuw Pak. Mal Ven UAE Indon. Saudi Qatar Nig. Aus

16 Impact of cheap feeds on derivatives will be ….
LLDPE gasphase 350 kta Take into consideration: Cracker feedstock License cost Infrastructure Marketing and Sales cost Research and Development Other business cost Working capital HDPE slurry 300 kta Europe PP gasphase 2*200 kta Co-products extension naphtha cracker 650 kta HDPE gasphase 350 kta LLDPE gasphase 2*350 kta Middle East Ethane cracker 1050 kta

17 …. a major cash costs advantage for the ME
ME producer NWE producer Typical ranges for gas and naphtha Structural delta in cash cost Low High Low High Gas price ($/mmBTU) Naphtha (EUR/t) On a delivered cost basis this advantage will remain!

18 #2: Middle East will have scale advantage as well

19 #3: Integration Strong sites:
Current ethylene capacity around 1mio tonnes Potential to grow to 1.5 mio tonnes High integration cracker/derivatives Strong cost position ARG area: good ethylene logistics, not yet for propylene. USGC: good logistic integration Strong cracker sites are concentrated in the ARG region

20 #4: a market means population, wealth and/or growth.
Population is shown here. China Can Rus UK D S.K. USA F Ukr Jp Tky I Es Iran Mex Pak India Ban Eg Vie Phil Nig Bir Co Braz Eth Th Indon Za S.A. Ar

21 Conclusions In the ’90s EU became a local for local for EU producer
USGC will loose export position to Asia to the Middle East because of the structural increase of natural gas based ethane feedstock to the crackers Only local cost leaders will be able to compete against Middle East delivered costs

22 How has European ethylene been doing?
Ethylene part1: How has European ethylene been doing?

23 Observations Europe consolidated (to be shown)
Europe did not build much new capacity (to be shown) Capacity: 24 mln ton, modest recent historic growth of 3%/y Demand: 22 mln ton, only marginally higher than in 2002 Production: 94% of CTP

24 Here it is: European consolidation……..

25 ...which resulted in a higher share top5 players.

26 Ethylene part 2: Ethylene will be short because of capacity growth is behind demand growth/economic growth scenario

27 Delayed economic recovery in 2003 but recovery to come

28 Global ethylene demand growth of 4.4 % in 2004-2008

29 A.A.I PE demand 4.4% in 2004-2008 PVC 4.5%, styrene 4.2%, MEG 6.0%

30 Ethylene supply gap in 2003-2004 and speculations on 2005 delays

31 Major capacity developments will be in Iran, China, KSA
Company Country Year NPC NPC OL6 Iran 2004 520 NPC OL7 2005 1100 NPC OL9 1000 NPC OL10 1320 JUPC Saudi Arabia BASF China 600 Shell 900 Rio Polimeros Brasil 2006 500 Yanpet 800 SABIC EPC Netherlands 2007 420 net NPC OL8 Dow Qatar 850 Exxon

32 ME capacity share will further increase from 9 to 17%
By 2008 Europe and USA will no longer have a dominant position

33 Resulting high global utilisation rates will not be sustainable

34 Conclusions

35 Conclusions Global GDP recovery in 2004+
Gap in Ethylene supply in Recovery of global utilisation rates in 2004+ New projects in no big impact YET New and still unknown projects will come up in 2004 Impact only in 2006 and beyond SABIC ethylene capacity share to increase from 4.9% in 2003 to 6.1% in 2008.

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