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Singapore Shanghai Houston New York London Düsseldorf Dubai Prepared for: Gas Processors Association October 2008 Prepared for: Gas Processors Association.

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Presentation on theme: "Singapore Shanghai Houston New York London Düsseldorf Dubai Prepared for: Gas Processors Association October 2008 Prepared for: Gas Processors Association."— Presentation transcript:

1 Singapore Shanghai Houston New York London Düsseldorf Dubai Prepared for: Gas Processors Association October 2008 Prepared for: Gas Processors Association October 2008 Olefins Feedstock Demand… If You Build It, Will It Come? Olefins Feedstock Demand… If You Build It, Will It Come? Mike Kelly Consultant – Light Olefins Mike Kelly Consultant – Light Olefins

2 October 2008 Trends in Light Olefins  Olefins Value Chain  Current Conditions  Near Term Strategic Issues:  Shifting Energy and Regional Competition  Capacity Overbuild  Olefins Profitability  Wrap Up  Olefins Value Chain  Current Conditions  Near Term Strategic Issues:  Shifting Energy and Regional Competition  Capacity Overbuild  Olefins Profitability  Wrap Up

3 October 2008 Olefins Supply-Chain Dynamics Energy Olefins Production Derivatives Durable / Non-Durable Consumers Retail Sector

4 October 2008 Olefins Flow Diagram FeedstocksEnergyPetrochemicals Naphtha Gas Oil Field Condensates Field Condensates Ethane Propane Butanes Propylene Ethylene Pygas Benzene Toluene/Xylene Heavy Aromatics C 5 /C 6 Non Aromatics Pygas Benzene Toluene/Xylene Heavy Aromatics C 5 /C 6 Non Aromatics Crude C 4 Butadiene Mixed Butylenes Crude C 4 Butadiene Mixed Butylenes Fuel Oil Methane/Hydrogen Natural Gas Crude Oil Refinery Gas Separation Unit Ethylene Unit Ethylene Unit

5 October 2008 Propylene Has Multiple Sources Propane Metathesis Ethylene/Butylene Naphtha/NGL Refinery FCC Unit Alkylation Unit Isobutane High Octane Alkylate Gasoline Gas Oil Non-Chemical Refinery Grade 60% purity Cracker Cumene, Oligomers, Isopropanol Polymer Grade (99.5%) Chemical Grade (93%) Purification Splitter Propane Chemical Propane Dehydrogenation (PDH) On Purpose

6 October 2008

7 Current Conditions

8 October 2008 U.S. Ethylene Cash Cost Trends

9 October 2008 United States Monthly Ethylene Net Equivalent Trade

10 October 2008 U.S. Ethylene Capacity Utilization

11 October 2008 Energy Impact on Regional Ethylene Economics

12 October 2008 High Energy Means Higher Cost In The Petrochemical Chain

13 October 2008 North America Energy Price Trends Source: Purvin & Gertz

14 October 2008 N. America NE Asia / W. Europe (~18) 9.4 High Energy Means Distinct Advantage Middle East Cumulative Ethylene Capacity (Million Metric Tons) Dollars Per Metric Ton WTI Crude Oil, $/Bbl ($/MMBtu) USGC Natural Gas, $/MMBtu N. America Middle East 2003 NE Asia / W. Europe (~5) 5.5

15 October 2008 Acceleration In Global Capacity Build-up

16 October 2008 Middle East & Asia Dominate Current Wave Of New Capacity  Middle East adding major portion of new additions, driven by incentives for industrial development  Asia additions driven by higher self-sufficiency and industrial development  India, South America, Africa, all adding capacity driven by industrial development  Limited to no new capacity in North America and Europe Yanpet Ethylene – Saudi Arabia

17 October 2008 WorldWorld Ethylene Capacity Growth Trends JapanKoreaChinaTaiwan SingaporeThailandIndiaOther Asia North AmericaMiddle East Million Metric Tons

18 October 2008 The Immediate Threat... Nine Million Tons By Mid-2009 CompanyCountryCapacity(kT)Time Arya Sasol Iran1000 Q1 08 Jam PC Iran1340 Q2 08 Jubail ChevPhil Saudi Arabia 300 Q3 08 SEPC Saudi Arabia 1000 Q3 08 Yansab Saudi Arabia 1300 Q4 08 Petro-Rabigh Saudi Arabia 1250 Q4 08 TKOCKuwait850 SHARQ Saudi Arabia H 09 RLOCQatar1300 Q2 09 Capacity Add., MMT 1H '08 Q4 '08 Q3 '08 1H '09

19 October 2008 Middle East Takes Market Share

20 October 2008 Capacity Build-up Impact on the U.S. Olefins Industry

21 October 2008 United States Ethylene Net Equivalent Trade

22 October 2008 United States Ethylene Demand Forecast

23 October 2008 United States Ethylene Feedstock Consumption

24 October 2008 U.S. Steam Crackers Shift Lighter

25 October 2008 Feedstock Impact on U.S. Steam Cracker Propylene Production

26 October 2008 Light Olefins Margin Trough Expected By 2010

27 October 2008 Ethylene Oversupply To Follow Period Of Balanced Conditions

28 October 2008 U.S. Ethylene Supply & Demand

29 October 2008 The Olefins Business Cycle Continues… Dollars Per Metric Ton U.S. Integrated Olefins/PolyOlefins Cash Margins

30 October 2008  Volatile energy markets continue to challenge producer economics  Oversupply due to acceleration in new olefins capacity and slowing demand growth  Olefins markets transitioning from peak to trough cycle conditions…trough margins most severe for naphtha crackers  NGL consumption in US market depends on Gas-to-Crude ratio and investment in light feed capability Conclusions

31 October 2008  Forecast assumes capacity build- up will result in lower U.S. steam cracker operating rates  Current energy dynamics have supported max light feed cracking…we’ve seen the peak  Increased NGL consumption by U.S. steam crackers is not expected to come without investment in light feed capability  Empty Field of Dreams Will It Come?

32 October 2008 Say it ain’t so Joe!

33 October 2008 HoustonHouston LondonLondon SingaporeSingapore DubaiDubai New York ShanghaiShanghai DuesseldorfDuesseldorf THANK YOU ! Contact any CMAI location to assist in your petrochemicals market analysis THANK YOU ! Contact any CMAI location to assist in your petrochemicals market analysis CHEMICAL MARKET ASSOCIATES, INC.


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