4 SABIC strategyGrowth 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 197616,800 employees in 23 countries (EU 2,300)Sales € 11.4 bln in 2002Net profit: 2003 Q1/Q2 850 mln $Total production in 2002 were 40 mln tonnes (EU 6 mln)70% shares by KSA governmentJoint Ventures with a.o. Shell, Exxon and Mitsubishi
7 SABIC’s European acquisition…… First important step outside KSA towards leading global manufacturing position in petrochemicalsCloser to European customers and expansion of customer baseEuropean production sitesExperienced Marketing and R&D staff in EuropeSpringboard for further growth in EuropeBuilding on SABIC’s knowledge and know-how in the field of polymers and hydrocarbons
9 …. resulted in a #4 global ranking for ethylene…. KTa
10 …. and for poly-olefins as well. (#4 in EU) Kton
11 Summarising SABIC Manufacturing and R&D sites 4 highly integrated sites direct access to low cost feedstockworld-scale facilities direct market accessGelsenkirchenGeleenHoustonAl JubailYanbuVadodaraRiyadhKerteh
12 Global competitiveness developments: Europe has become a local-for-local producer,USGC will get one
13 What about cycles in the global petrochemical industry ?
14 Which drivers to manage in a cyclical business? Access to feedstockLarge scaleSite integrationClose to markets
15 #1: Cheap gas feedstock only in the Middle East CanNorRussiaUKUkr.USANeth.Turkm.Kaz.Uzb.ChinaMexIraqIranIndiaLib.Alg.BanglKuwPak.MalVenUAEIndon.SaudiQatarNig.Aus
16 Impact of cheap feeds on derivatives will be …. LLDPE gasphase350 ktaTake into consideration:Cracker feedstockLicense costInfrastructureMarketing and Sales costResearch and DevelopmentOther business costWorking capital…HDPE slurry300 ktaEuropePP gasphase2*200 ktaCo-productsextension naphthacracker 650 ktaHDPE gasphase350 ktaLLDPE gasphase2*350 ktaMiddle EastEthane cracker1050 kta
17 …. a major cash costs advantage for the ME ME producerNWE producerTypical ranges forgas and naphthaStructuraldeltain cash costLow High Low HighGas price ($/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 tonnesPotential to grow to 1.5 mio tonnesHigh integration cracker/derivativesStrong cost positionARG area: good ethylene logistics, not yet for propylene.USGC: good logistic integrationStrong cracker sites are concentrated in the ARG region
20 #4: a market means population, wealth and/or growth. Population is shown here.ChinaCanRusUKDS.K.USAFUkrJpTkyIEsIranMexPakIndiaBanEgViePhilNigBirCoBrazEthThIndonZaS.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 crackersOnly 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%/yDemand: 22 mln ton, only marginally higher than in 2002Production: 94% of CTP
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 CompanyCountryYearNPCNPC OL6Iran2004520NPC OL720051100NPC OL91000NPC OL101320JUPCSaudi ArabiaBASFChina600Shell900Rio PolimerosBrasil2006500Yanpet800SABIC EPCNetherlands2007420 netNPC OL8DowQatar850Exxon
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
35 Conclusions Global GDP recovery in 2004+ Gap in Ethylene supply inRecovery of global utilisation rates in 2004+New projects in no big impact YETNew and still unknown projects will come up in 2004Impact only in 2006 and beyondSABIC ethylene capacity share to increase from 4.9% in 2003 to 6.1% in 2008.