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I. Global Petrochemical Industry II. Iran Petrochemical Industry
III. Petrochemical Cooperation with Korea-Iran NH Investment & Securities Global Credit Strategist: Hwan Jong (Louis) Shin tel 02) │
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1. Situation and Outlook of the Global Petrochemical Industry
Global Linkage – GDP to Petrochemicals Demand Growth Global Energy Prices (US$/mm BTU) Source: BMI, NPC Source: BMI, NPC
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China demand is continuously increasing
Global ethylene price China’s ethylene imports Source: BMI, NPC Source: BMI, NPC
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China’s coal chemistry structure and outlook
Structure of China’s coal chemistry Outlook for China’s CTO production capacity Source: Wood Mackenzie Source: Wood Mackenzie
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China’s increasing self-sufficiency rate is a negative factor
Trends of Exports and Imports (TPA, EG) % change of imports and self-sufficiency rate Source: Wood Mackenzie Source: Wood Mackenzie
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Feedstock: Directly related to profitability
Capacity expansion per raw materials Polymer supply growth trends per countries Source: BMI, NPC Source: BMI, NPC
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New ethylene investments forecasted next 10 years
Global Ethylene Additions by Region Global Ethylene Additions by Feedstock Source: BMI, NPC Source: BMI, NPC
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Global investment strategy based on local status
Outlook for productions of feedstocks in North America Net Trade per materials in China Source: BMI, NPC Source: BMI, NPC
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35% of all investments concentrated in US (Base Chem.,2016~2020)
Global Base Chemicals Capacity Outlook Source: NPC
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Middle East: Main point of investment strategy is Iran
Middle East Ethylene Capacity Source: NPC
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2. Oil Price Volitility: Oil price remains in a range of $40~60/bbl
Trends of Naptha and Crude oil price Source: Cischem
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Oil price expected to remain in a range of $40~60/bbl
Number of Us oil rigs and WTI price Supply-demand outlook for global oil (supply-demand balance) (left) (Oil Price) (right) Source: Baker Huges, Bloomberg Source: International Energy Agency, World Bank
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Appearance of US LNG, a substitute for oil
Factors determining the directions of oil price Upper pressure Lower pressure Increases of Oil Demand Shale gas production expanded faster than expected Iran, Russia join the efforts to cut oil productions Volume of production increases Cost of Shale gas increases OPEC’s agreement to cut the volume halted Under $50/bbl, volume of shale gas produced decreased Cost to produce shale gas decreased due to efficiency improved Substitutes for transportation fuel, such as Natural gas Source: KPIA
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Competitiveness of NCC is somewhat superior in case of low oil price
Correlation between Brent Crude Oil and chemical products (1990~2016) Source: Wood Mackenzie
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Not possible to be produced
Competitiveness of NCC is somewhat superior in case of low oil price Comparison of ethylene production cost, cracker margins by areas Ethylene (C2) Propylene (C3) Butadiene (C4) BTX (C6) Others NCC Process 31% 15% 11% 24% 19% CTO Process 100% Not possible to be produced ECC Process 82% 3% 5% 7% cracker margins by areas Source: Wood Mackenzie
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Exports dependency on China is still high
Trends of exporting petrochemical products to China Composition of Exports to China per products Source: KPIA Source: Wood Mackenzie
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Oil price affects supply and cost-competiveness
High oil price Low oil price Source: KPIA Source: KPIA
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Upstream/Downstream features and EBITDA Margin Rate
Upstream vs. Downstream EBITDA Margin Rate Upstream Downstream Feedstock Naptha Raw Material /Material-in-process Size Large Small-Medium Competition Oligopoly Competitive Integration High Low Diversification Several products A few, specific products Source: KPIA Source: KPIA
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3. Distinction of Chemical Products: Products derived from Naphtha are susceptive to the change of oil price Correlation between Brent Crude Oil and chemical products (1990~2016) Source: Wood Mackenzie, ArgusMedia, PetroChem Wire
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Ethylene & Butadien price is increasing
Trends of feedstock and Material-in-process spread Source: Cischem
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Benzene: China’s Import volumes will be shrunk
Korea Monthly Export Volumes Source: NPC
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Petrochemical product’s spreads weaken
Olefin and Benzene Spread Source: Cischem
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Outlook for each products’ supply
Outlook for supply per products Supply % operation China Self-Sufficiency Rate Outlook for supply Ethylene Worse Decreased Increased Since the late of 2017, ECC increased in N.America leads to deteriorating supply Propylene China’s self-sufficiency rate increases and supply in N. America increases Butadien Improved Sustained Over-supply is gradually improved P-X Due to slow-down of new expansion, supply improvement expected TPA Restricted supply improvement Source: KPIA
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Supply-demand of ethylene expected to be deteriorated
ECC Project in North America Trends for Global Ethylene Cracker expansion State Volume of Expansion Year of Initiation OxyChem/Mexichem TX 550 2017.1H CP Chemical 1,500 2017.2H ExxonMobil Dow Formosa 1,150 2018 Shintech LA 500 Sasol LCCP 1,550 2019 Lotte/Westlake JV 1,200 Shell PA 2020 PTT Global Chemical OH 1,000 2021 SABIC/ExxonMobil 1,800 Source: Bloomberg, Platts, IHS Source: Bloomberg, Platts, IHS
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Propylene’s supply & demand
Outlook for expanding production capacity (Global propylene) Source: Cischem, Bloomberg, Platts
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Propylene in China Outlook for propylene production
Propylene demand and self-sufficiency rate Source: Wood Mackenzie Source: Wood Mackenzie
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Butadien supply outlook
Butadien expansion status Trends for Global butadien expansion Country Capacity (10 Mil. Ton/year) Year of Initiation Indian Oil Corp India 138 2013 Petrochina Sichuan China 150 PCS Singapore 100 2014 Shandong Huamao Industry Shangdong Kenli Petrochem Shangdong Wanda Chemical 2015 Sinope Yangzi 120 Sinopec Shanghai Sandara Chemcial Saudi 280 2016 Source: Bloomberg, Cischem, Chemlocus Source: Bloomberg, Cischem, Chemlocus
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Butadien price Outlook for Downstream Demand
Outlook for global tire market Source: IHS Chemical Source: LMC International
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Outlook for P-X Supply Country Capacity (10,000Ton/year)
P-X Expansion Trends for P-X Expansion Country Capacity (10,000Ton/year) Year of Initiation Reliance Industries 4 India 140 2017 PetroRabigh Saudi 134 Sinochem Hongrun Petrochemical Co. China 80 Nghi Son Petrochemical Vietnam Ningbo Zhongjin Petrochemica 200 2020 Saudi Aramco 100 Sinopec Hainan Refining APC Bahrain 2021 CNOOC-Kings 96 Source: Wood Mackenzie Source: Wood Mackenzie
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I. Global Petrochemical Industry II. Iran Petrochemical Industry
III. Petrochemical Cooperation with Korea-Iran NH Investment & Securities Global Credit Strategist: Hwan Jong (Louis) Shin tel 02) │
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1. Iran Energy Industry: Due to economical disruption, operating rate of petrochemical plant is still low Map of wells in Iran Source: Japan Oil, Gas and Metals National Corporation (JOGMEC)
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Oil production and consumption
Trends of oil production and consumption in Iran (1965~2014) Source: BP Statistical Review of World Energy
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Natural gas production and consumption
Trends of natural gas production and consumption in Iran (1970~2014) Source: BP Statistical Review of World Energy 2015
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Comparison between Buy-back contracts and IPC
Content Risk Buy-Back A form of short-term contracts between NIOC and IOC IOC’s property in terms of oil-gas assets not to be approved All fees for exploration, development, production paid by IOC Not allowed to declare Force Majeure IOC paid back with a volume of production, equivalent to a portion of revenue as a fee A high possibility of Project halted IOC not allowed to possess shares of oil-gas wells under developments Short contract period, fixed fee rate, uncertainty about break-even cost IPC Guarantees of 8 years of exploration and 20 years of development/production IOC taking a toll in case of failure Project ownership not allowed to be transferred Local vendors with a lack of technology Service fees would be determined based on several factors Iran government and NIOC’s interruptions strictly managed Property of developed oil-gas assets belonging to NIOC IOC taking a part in SOC investment Source: Dongbu Securities Co.Ltd( )
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Locations of gas pipeline in Europe, Turkey, Iran
Footnote: Dot lines represent pipelines under progress Source: JOGMEC
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-Olefin is the most productive feedstock
2. Status of Petrochemical Industry in Iran 1) Status of Industry -Operating rate of petrochemical plant is still low due to economical disruption -Feedstock is Ethane -Olefin is the most productive feedstock -Petrochemcial hurbs are Mahshahr PETZone and Assaluyeh PSEEZ -Interruption by government is the factor lagging the development of petrochemical industry 2) Structure of Industry NPC is a monopoly in Iran Branches of NPC are under process of privatization 3) Current Issues -5 Petrochemical complex would be arranged as five-year term development plan In Mahshahr PETZone, 7 plants are being constructed In Assaluyeh PSEEZ, 22 plants are being constructed -Otehrs: Olefin, Polyethylene producing-facility expansion -West Ethylene pipeline construction project -Central Ethane-Ethylene pipeline construction project
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Feedstock for Petrochemical industry in Iran is Ethane
Composition of cracking material Cracking plant status and production capacity Source: BMI Source: BMI, NPC
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Olefin is the most productive material among others
Estimated production capacity in 2015 (Total) Estimated production capacity in 2015 (Olefin) Source: BMI Source: BMI
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BTX and Polyethylene Estimated production capacity in 2015 (BTX)
Estimated production capacity in 2015 (Polyethylene) Source: BMI Source: BMI
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Annual Production Capacity
Iran Petrochemical Hurb: Mahshahr PETZONE & Assaluyeh PSEEZ Petrochemical complex status in Iran Locations of Mahshahr PETZONE & Assaluyeh PSEEZ Location Number of plants Annual Production Capacity (Million Ton) Mahshahr PETZONE 21 26 Assaluyeh PSEEZ 13 25 Other 17 9 Total 51 60 Source: NPC Source: Google Earth
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Hurb: Mahshahr PETZONE & Assaluyeh PSEEZ
Petrochemical complex: Mahshahr PETZONE Petrochemical complex: Assaluyeh PSEEZ Name of complex Area (ha) Products (1000Ton/year) BIPC 270 Include the petrochemical complex below Kharazmi B. Imam Provide total operation service in complex Faravaresh B. Imam Propane(1,090), Butane(908), Ethane(565) Kimia B. Imam MTBE(500), EDC(440) Basparan B. Imam PVC(175), Polyethlyene Ab Niroo B. Imam Desalination Plant Arvand EDC(890),PVC(340) Amir Kabir Ethylene(520), LDPE(300),LLDPE(260) Buali Sina Naptha(838) Tondguyan PET(835), PTA(700) Khuzestan - Fajr Karun Acid producing plant Fanavaran Methanol(1,000) Razi Ammonia(1,337), Sulfur(538) Marun C2+(1,900), Ethylene(1,100) Laleh LDPE(300) Farabi Ghadir VCM(150), PVC(120) Shimi Baft C4(101), MTBE(90) Navid Zar Shimi Polypropylene(160) Shahid Rasouli Shimi Tex Arya MEK(3) Arya Phosphoric Jonoub Rejal Takht-e-Jamshid SBR(30), PBR(18) Name of complex Area (ha) Products (1000Ton/year) Pardis 65 Ammonia(680) Nouri(Borzuyeh) 61 Naptha(2,000), Paraxylene(750) Pars 37 Ethane(1,600), Propane(980), Butane(570) Arya Sasol Polymer 78 Ethylene(1,000), Polyethylene(600) Mobin 84 Desalination Plant Zagros 31 Methanol(3,300) Mehr 13 HDPE(300) Jam 99 Ethylene(1,321), Polyethylene(600) Morvarid 8 Ethylene(500) Kavian 43 Ethylene(2,000) Farsa Shimi 7 MEG(400) Jam Polypropylene Polypropylene(300) Jam Ehtemam 2 Formaldehyde(40) Source: NPC Source: NPC
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Other locations Petrochemical complex: others
Locations of petrochemical complex in Iran Name of complex Area (ha) Products (1000Ton/year) Shazand(Arak) 523 Ethylene(307), Propylene(128) Isfahan 165 BTX(206) Kharg 155 Methanol(660), Sulfur(170) Tabriz 391 Ethylene(136), Polyethylene(100) Shiraz 300 Ammonia(433) Khorasan 204 Ammonia(300) Kermanshah 296 Ammonia(396) Bisotoon 63 LAB(50) Kermanshan Polymer 55 HDPE(300) Orumiyeh 110 Sulfur(50) Llam 108 Poly Nar 20 Polypropylene(60) Abadan 50 PVC(110) Iran Carbon 13 - Ghaed Basir 30 ABS(35) NPC Alliance Polyethylene(250) Lorestan 130 Polyethylene(300) Source: NPC Source: NPC
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Iran’s Petrochemical project: Mahshahr & Assaluyeh
Mahshahr PETZONE: 7 plants under construction Assaluyeh PSEEZ: 22 plants under construction Project Start of Production Contractor Production Capacity (1000Ton/year) 2nd Isocyanates 2015 Karoon Petrochem Co. 116 Pentaerythritol 2016 Shahid Rasouli Petrochem Co. 29 Propane De-Hydrogenation (PDH) 2017 Salman-e-Farsi Petrochem Co. 450 Acrylonitrile 2018 Arg Petrochem Co. 126 Acrylates Ofogh Polymer Co. 395 MAH, BDO, PBT Ibn-e-Sina PetroKimiya Co. 319 MAH Modabberan Shimi Co. 39 Total 1,473 Project Start of Production Contractor Production Capacity (1000Ton/year) Assaluyeh Ethylene Glycols 2015 Morvarid Petrochem Co. 554 16th Ammonia/Urea 2016 Pardis Petrochem Co. 1,755 12th Methanol Middle East Kimiya Pars Co. 1,650 11th Methanol 2017 Venlran Apadana Petrochem Co. 14th Ammonia/Urea Hengam Petrochem Co. 1,800 7th Methanol Marjan Petrochem Co. 13th Ammonia/Urea Hormoz Urea Fertilizer Co. SBS/SB/LCBR, ABS Jam Petrochem Co. 260 ESBR Assaluyeh Sadaf Chemical Co. 136 EPS Dalahoo Kimiya Sanayeh Co. 120 8th Methanol Sabalan Petrochem Co. 9th Methanol Dena Petrochem Co. 13th Methanol Di Polymer Aryan Petrochem Co. 14th Methanol Arman Methano Co. PDH Mehr Petrokimiya Co. 900 Ethylene Glycols Pars Phenol Co. 12th Olefin 2018 Kian Petrochem Co. 5,567 16th Olefin & Methanol Bushehr Petrochem Co. 5,098 8th Ammonia/Urea Lavan Petrochem Co. 1st Ammonia/Methanol Arg Shimi Parsa Co. 1,290 2nd Ammonia/Methanol Lavan Industry Expansion Co. Total 34,634 Source: NPC Source: NPC
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Iran’s Petrochemical project: others
Other ongoing projects in Iran Project Start of Production Contractor Production Capacity (1000Ton/year) Mahabad HPDE/LLDPE 2015 Mahabad Petrochem Co. 330 Kordestan LDPE Kordestan Petrochem Co. 300 Hamedan PVC 2016 Hegmataneh Petrochem Industry Co. 48 7th Ammonia/Urea Petrochem Industries Development Management Co. 1,755 8th Olefin Gachsaran Petrochem Co. 1,090 10th Methanol Kaveh Methanol Co. 2,310 13th Olefin 2017 Ilam Petrochem Co. 822 Hamedan Ethoxylates Ibn-e-Sina Hamedan Petrochem Co. 266 Kazeroun LLDPE/HDPE Kazerun Petrochem Co. Mamasani HDPE Mamasani Petrochem Co. Drab HDPE Darab Petrochem Co. 10th Ammonia/Urea Zanjan Petrochem Industry Co. 11th Ammonia/Urea Lordegan Urea Fertilizer Co. 12th Ammonia/Urea Golestan Petrochem Industry Co. 15th Olefin Genaveh-Dashtestan Petrochem Co. 1,099 9th Ammonia/Urea Masjid Soleiman Petrochem Co. Expandable Polystyrene Petro Ramsheh Co. 50 Project Start of Production Contractor Production Capacity (1000Ton/year) Andimeshik LDPE 2018 Andimeshk Petrochem Co. 300 Miandoab HDPE Miandoab Petrochem Co. 140 Dhdasht HDPE Dehdasht Petrochem Co. Broujen HDPE Broujen Petrochem Co. 14th Olefin Firouzabad Petrochem Co. 1,090 Jahrom LLDPE/HDPE Jahrom Petrochem Co. Fasa LDPE Fasa Petrochem Co. Estahban EVA n/a 100 15th Ammonia/Urea Ardabil Petrochem Co. 1,755 Khomein Polypropylene Di Arya Polymer Co. 17th Olefin Sepehr Dehloran Petrochem Industries Co. 960 15th Methanol Siraf Energy Petrochem Co. 1,650 Nodan Polyacetal Kazeroun Petrochem Co. 20 Total 23,505 Source: NPC
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West Ehylene Pipeline project
West Ethylene pipeline construction project West Ethylene pipeline map Project Products Production Capacity (1000Ton/year) Kermanshah HDPE HDPE 300 Khoramabad HDPE Kordestan LDPE LDPE Mahabad HPDE/LLDPE HDPE/LLDPE Miandob HDPE 140 Andimeshk LDPE Ibn-e-Sina Hamedan Ethyleneoxide 180 Kazeroon HDPE/LLDPE Mamasani HDPE 3000 Dehdasht HDPE Boroujen HDPE Source: NPC Source: NPC
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Central Ethane-Ethylene Pipeline project
Central Ethane-Ethylene pipeline construction project Central Ethane-Ethylene pipeline map Project Products Production Capacity (1000Ton/year) Jahrom HDPE/LLDPE HDPE/LLDPE 300 Fasa LDPE LDPE Dara HDPE HDPE Estahban VAM VAM 100 Source: NPC Source: NPC
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-NPC, Petrochemical products supplied 10% more in 206
3.Outlook and plan (1) A development plan -In Chabahar FTIZ, Mokran petrochemical complex, a hurb of petrochemical industry, are to be constructed (2) Outlook -NPC, Petrochemical products supplied 10% more in 206 -A smooth supply of feedstock due to natural gas expansion Developments of car, construction/infra sector are a basement to increase domestic demand China’s economy slow-down, a risk of disruption as uncertain factors -Outlook for production: focused on increasing production volume of ethylene
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Plan to build Mokran petrochemical complex as a hurb in Chabahar FTIZ
Locations of FTIZ Blueprint for Mokran complex Source: NPC Source: NMDC
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Outlook for the Industry
Outlook for production & consumption of Natural Gas (2014~2021) Factors related to petrochemical products consumption (2014~2020) Source: PMI Source: NMDC
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Capacity: focused on increasing productions of ethylene
Trends and forecasts of Olefin produced (2014~2018) 2014 2015 2016 2017 2018 Ethylene 8,876 11,076 12,076 13,034 16,734 Propylene 2,410 2,740 3,190 3,764 4,322 Butadien 240 370 Total 11,526 14,056 15,506 17,038 21,426 Source: BMI, NPC
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Capacity: BTX(8%) and Polyethylene(53%)
Trends and forecasts of BTX produced (2014~2018) Trends and forecasts of Polyethylene production capacity (2014~2018) 2014 2015 2016 2017 2018 Benzene 1,390 1,770 2,152 Tolouene 825 Xylenes 1,690 2,310 Total 3,905 4,905 5,287 2014 2015 2016 2017 2018 Polyethylene 7,055 7,655 8,555 10,795 HDPE 2,685 2,835 3,585 4,925 LDPE 2,375 2,675 3,275 LLDPE 1,995 2,145 2,295 2,595 Source: BMI, NPC Source: BMI, NPC
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Capacity: Others(110%) and Materials-in-process(44%)
Trends and forecasts of others’ production capacity (2014~2018) Trends and forecasts of materials-in-process production capacity (2014~2018) 2014 2015 2016 2017 2018 Ethylene glycol 1,950 2,504 3,618 4,172 Ethylene oxide 1,770 1,870 Styrene 1,295 1,735 Ethylene dichloride 1,260 Vinyl chloride 930 Vinyl acetate 320 420 Ethylbenzene 100 576 Total 7,625 8,179 9,393 10,963 2014 2015 2016 2017 2018 Methanol 14,705 18,665 28,565 33,845 Ammonia 10,620 12,560 14,710 21,160 23,310 Urea 6,365 6,605 7,965 12,090 14,050 Total 31,690 33,870 41,340 61,815 71,205 Source: BMI, NPC Source: BMI, NPC
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Capacity: Synthetic resins(40%) & Synthetic rubber(53%)
Trends and forecasts of Synthetic resins(excl. polyethylene) production capacity (2014~2018) Trends and forecasts of Synthetic rubber production capacity (2014~2018) 2014 2015 2016 2017 2018 Polypropylene 1,290 1,740 2,040 PVC 940 988 ABS 290 490 Total 2,520 2,568 3,218 3,518 2014 2015 2016 2017 2018 PET 705 Polystyrene 250 670 SBR 90 226 Total 1,045 1,601 Source: BMI, NPC Source: BMI, NPC
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I. Global Petrochemical Industry II. Iran Petrochemical Industry
III. Petrochemical Cooperation with Korea-Iran NH Investment & Securities Global Credit Strategist: Hwan Jong (Louis) Shin tel 02) │
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1. Petrochemical products exported to Iran
Polyethylene exported to Iran from Korea (2006~2015) Source: KITA
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Synthetic rubber & Syntetic resine exported to Iran
Synthetic rubber exported to Iran from Korea (2006~2015) Synthetic resine(excl.polyethylene) exported to Iran from Korea (2006~2015) Source: KITA Source: KITA
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2. Petrochemical cooperation with Korea and Iran
① Utilized as diverse ways of procuring Feedstocks such as Naptha, Condensate, Butadien ② In the previous 10 years (2006~2016), exports to Iran from Koreas are polyethylene, synthesis resin, synthesis rubber. Further competition expected to be intensified ③ Need to pay attention to exporting facilities in a response to Iran’s expanding investment in petrochemical industry ④ Possibility for JV investment in case of exporting to Iran and Europe Global petrochemical companies(Dow, Total, etc) promote the expansion of petrochemical complex by coordination with companies in middle east(SABIC, QP, etc). Stable supply, low transportation cost would be anticipated Review on going into polypropylene business with Hyosung’s NPC. Looking for the opportunity and optimization by going into local business Risk: possibility of Snapback as per changes of geopolitical circumstances. Lack of policy of securing probable investment
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