1. 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) │

2. 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

3. China demand is continuously increasing
Global ethylene price
China’s ethylene imports
Source: BMI, NPC
Source: BMI, NPC

4. 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

5. 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

6. Feedstock: Directly related to profitability
Capacity expansion per raw materials
Polymer supply growth trends per countries
Source: BMI, NPC
Source: BMI, NPC

7. New ethylene investments forecasted next 10 years
Global Ethylene Additions by Region
Global Ethylene Additions by Feedstock
Source: BMI, NPC
Source: BMI, NPC

8. 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

9. 35% of all investments concentrated in US (Base Chem.,2016~2020)
Global Base Chemicals Capacity Outlook
Source: NPC

10. Middle East: Main point of investment strategy is Iran
Middle East Ethylene Capacity
Source: NPC

11. 2. Oil Price Volitility: Oil price remains in a range of $40~60/bbl
Trends of Naptha and Crude oil price
Source: Cischem

12. 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

13. 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

14. 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

15. 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

16. 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

17. Oil price affects supply and cost-competiveness
High oil price
Low oil price
Source: KPIA
Source: KPIA

18. 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

19. 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

20. Ethylene & Butadien price is increasing
Trends of feedstock and Material-in-process spread
Source: Cischem

21. Benzene: China’s Import volumes will be shrunk
Korea Monthly Export Volumes
Source: NPC

22. Petrochemical product’s spreads weaken
Olefin and Benzene Spread
Source: Cischem

23. 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

24. 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

25. Propylene’s supply & demand
Outlook for expanding production capacity (Global propylene)
Source: Cischem, Bloomberg, Platts

26. Propylene in China Outlook for propylene production
Propylene demand and self-sufficiency rate
Source: Wood Mackenzie
Source: Wood Mackenzie

27. 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

28. Butadien price Outlook for Downstream Demand
Outlook for global tire market
Source: IHS Chemical
Source: LMC International

29. 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

30. 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) │

31. 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)

32. Oil production and consumption
Trends of oil production and consumption in Iran (1965~2014)
Source: BP Statistical Review of World Energy

33. Natural gas production and consumption
Trends of natural gas production and consumption in Iran (1970~2014)
Source: BP Statistical Review of World Energy 2015

34. 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( )

35. Locations of gas pipeline in Europe, Turkey, Iran
Footnote: Dot lines represent pipelines under progress
Source: JOGMEC

36. -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

37. Feedstock for Petrochemical industry in Iran is Ethane
Composition of cracking material
Cracking plant status and production capacity
Source: BMI
Source: BMI, NPC

38. Olefin is the most productive material among others
Estimated production capacity in 2015 (Total)
Estimated production capacity in 2015 (Olefin)
Source: BMI
Source: BMI

39. BTX and Polyethylene Estimated production capacity in 2015 (BTX)
Estimated production capacity in 2015 (Polyethylene)
Source: BMI
Source: BMI

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

46. 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

47. -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

48. Plan to build Mokran petrochemical complex as a hurb in Chabahar FTIZ
Locations of FTIZ
Blueprint for Mokran complex
Source: NPC
Source: NMDC

49. 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

50. 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

51. 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

52. 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

53. 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

54. 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) │

55. 1. Petrochemical products exported to Iran
Polyethylene exported to Iran from Korea (2006~2015)
Source: KITA

56. 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

57. 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