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SABIC EuroPetrochemicals Business Intelligence & Strategic Planning How short will ethylene get? Peter Frenken Fourth Global PVC Conference 18-19 November.

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Presentation on theme: "SABIC EuroPetrochemicals Business Intelligence & Strategic Planning How short will ethylene get? Peter Frenken Fourth Global PVC Conference 18-19 November."— Presentation transcript:

1 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning How short will ethylene get? Peter Frenken Fourth Global PVC Conference November 2003

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

3 3 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning SABIC : Facts and Figures

4 4 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning 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 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 5 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Basic facts SABIC Established in ,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 6 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning SABIC Feedstocks/Major Products (excl Metals) 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 PRODUCED Sourced Polymers Polyester Polystyrenes Melamine PVC HDPE LDPE LLDPE PP

7 7 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning 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 8 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning ……of an allready growing affiliate…… (Kton)

9 9 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning …. resulted in a #4 global ranking for ethylene…. KTa

10 10 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning …. and for poly-olefins as well. (#4 in EU) Kton

11 11 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Summarising SABIC Manufacturing and R&D sites 4 highly integrated sitesdirect access to low cost feedstock world-scale facilitiesdirect market access Houston Vadodara Riyadh Al Jubail Yanbu Geleen Gelsenkirchen Kerteh

12 12 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Global competitiveness developments: Europe has become a local-for-local producer, USGC will get one

13 13 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning What about cycles in the global petrochemical industry ?

14 14 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Which drivers to manage in a cyclical business? Access to feedstock Large scale Site integration Close to markets

15 15 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning #1: Cheap gas feedstock only in the Middle East Russia CanNor UK Neth. USA Mex Ukr. China Ven Iran Mal Indon. Aus Nig. Alg. Lib. Saudi UAE Qatar Iraq Uzb. Kaz. Turkm. Kuw India Bangl Pak.

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

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

18 18 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning #2: Middle East will have scale advantage as well

19 19 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning #3: Integration Strong cracker sites are concentrated in the ARG region 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

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

21 21 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning 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 costsConclusions

22 22 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Ethylene part1: How has European ethylene been doing?

23 23 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning 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 24 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Here it is: European consolidation……..

25 25 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning...which resulted in a higher share top5 players.

26 26 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Ethylene part 2: Ethylene will be short because of capacity growth is behind demand growth/economic growth scenario

27 27 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Delayed economic recovery in 2003 but recovery to come

28 28 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Global ethylene demand growth of 4.4 % in

29 29 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning A.A.I PE demand 4.4% in PVC 4.5%, styrene 4.2%, MEG 6.0%

30 30 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Ethylene supply gap in and speculations on 2005 delays

31 31 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Major capacity developments will be in Iran, China, KSA CompanyCountryYearNPC NPC OL6Iran NPC OL7Iran NPC OL9Iran NPC OL10Iran JUPCSaudi Arabia BASFChina ShellChina Rio PolimerosBrasil YanpetSaudi Arabia ShellChina SABIC EPCNetherlands net NPC OL8Iran DowQatar ExxonChina

32 32 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning By 2008 Europe and USA will no longer have a dominant position ME capacity share will further increase from 9 to 17%

33 33 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Resulting high global utilisation rates will not be sustainable

34 34 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Conclusions

35 35 SABIC EuroPetrochemicals Business Intelligence & Strategic Planning Conclusions Global GDP recovery in Gap in Ethylene supply in Recovery of global utilisation rates in 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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