US Petrochemical Renaissance What it means for Asia Kuala, Lumpur

Transcription

1 US Petrochemical Renaissance What it means for Asia Kuala, Lumpur Chuck Venezia SVP, Petrochemicals 20 August 2018 London Houston Moscow Singapore Dubai New York Beijing Kiev Tokyo Astana Shanghai Rio de Janeiro Washington DC Riga Calgary Brussels Cape Town Mexico City Berlin San Francisco Sydney Market Reporting Consulting Events

2 Argus Media group notices The Argus Media group (referred to herein as Argus ) makes no representations or warranties or other assurance, express or implied, about the accuracy or suitability of any information in this presentation and related materials (such as handouts, other presentation documents and recordings and any other materials or information distributed at or in connection with this presentation). The information or opinions contained in this presentation are provided on an as is basis without any warranty, condition or other representation as to its accuracy, completeness, or suitability for any particular purpose and shall not confer rights or remedies upon the recipients of this presentation or any other person. Data and information contained in the presentation come from a variety of sources, some of which are third parties outside Argus control and some of which may not have been verified. All analysis and opinions, data, projections and forecasts provided may be based on assumptions that are not correct or which change, being dependent upon fundamentals and other factors and events subject to change and uncertainty; future results or values could be materially different from any forecast or estimates described in the presentation. To the maximum extent permitted by law, Argus expressly disclaims any and all liability for any direct, indirect or consequential loss or damage, claims, costs and expenses, whether arising in negligence or otherwise, in connection with access to, use or application of these materials or suffered by any person as a result of relying on any information included in, or omission from, this presentation and related materials or otherwise in connection therewith. The information contained in this presentation and related materials is provided for general information purposes only and should not be construed as legal, tax, accounting or investment advice or the rendering of legal, consulting, or other professional services of any kind. Users of these materials should not in any manner rely upon or construe the information or resource materials in these materials as legal, or other professional advice and should not act or fail to act based upon the information in these materials.

3 Argus Ethylene Publications Argus Ethylene and Derivatives Argus Polymers Twice monthly global report on ethylene supply and demand issues, pricing, and trade flow Argus Olefins Outlook Key price assessments as well as insightful market commentaries Argus Ethylene Annual 10 year forecast and 5 year history for capacity, trade, and supply/demand balances

4 Agenda An update on US ethylene An update on US Polyethylene Impact on Global Supply and Demand Implications for Asia Concluding thoughts

5 U.S. Impact on ethylene and derivatives markets U.S. exports of ethane and LPG share some of the shale gas advantage with other regions Costly shipping and handling Rely on wide spread between NGLs and naphtha Ethylene export terminal(s) New Enterprise terminal due by end 2019 Others under discussion Exports of polyethylene and other ethylene derivatives

6 US ethane exports and potential destinations Ineos: 20 KBPD Max 40 KBPD Nova: 30 KBPD Red Deer, Canada Nova: 60 KBPD Sarnia, Canada Exxon/Shell: Max 50 KBPD Sabic: 36 KBPD Ineos: 20 KBPD Max 50 KBPD Mossmorran, UK Grangemouth, UK Wilton, UK Rafnes, Norway Stenungsund, Sweden Borealis: 16 KBPD Max 46 KBPD Marcus Hook, PA Sunoco: 50 KBPD Q Enterprise: 200 KBPD Q (90% contracted) Morgan s Point, TX Jamnagar, India Reliance: 75 KBPD 2017 Project to send ethane to Chinese crackers? Braskem: 30 KBPD Q Camacari, Brazil Copyright 2018 Argus Media Ltd. All rights reserved.

7 New US Ethylene Capacity Company Site Capacity 000t Timing Status Oxy-Mexichem Ingleside, TX 550 Q Operating Dow Freeport, TX 1500 Q Operating CP Chem Cedar Bayou, TX 1500 Q Operating ExxonMobil Baytown, TX 1500 Q Operating Indorama Lake Charles, LA 420 Q Mech complete Formosa Plastics Point Comfort, TX 1200 Q Under const. Shintech Plaquemine, LA 500 1H 2019 Under const. Sasol Lake Charles, LA 1500 Q Under const. Westlake/Lotte JV Lake Charles, LA 1000 Q Under const. Dow Freeport, TX 500 Q Under const. Total/Novealis JV Port Arthur, TX 1000 Q Under const. Shell Chemical Monaca, PA 1600 Q Under const. Total supply additions

8 US steam cracker capacity increases Expected profile of ethylene capacity additions as estimated by Argus +45pc increase in capacity Includes cracker debottlenecks

9 US ethylene capacity vs derivative consumption capacity Derivative capacity must exceed cracker capacity for balanced market 2012 last balanced year EPL new export capacity by early 2020

10 Ethylene production costs US and Middle East ethane crackers are low cost producers (Note: not including Saudi Arabia) Europe and Asia are less competitive with naphtha cracking Europe and Asia are investing in feedstock flexibility US is the low cost incremental producer

11 USGC ethylene gross margins we need new outlets! /lb of ethylene Jan-18 Feb-18 Mar-18 Apr-18 May-18 Ethane Propane Butane Lt Naphtha Gas oil US is becoming increasingly long in ethylene due to lack of processing/ export capabilities Only ethane currently gives a positive margin Argus Consulting Services

12 In ethylene, China set to be the real beneficiary of the new US terminal investment Coastal merchant players will continue to import ethylene. cfr China now the price setter for the region no longer SEA China will need US ethylene tons and the new US terminal. When will we see Chinese origin intra-sea borne ethylene trade?

13 US Ethylene operating rate US Operating rates strong but inventory rose overcapacity will restrict operating rates 2020 New ethylene export capacity comes online US should be balanced by 2025 with terminal capacity and new derivative plants

14 New US Polyethylene capacity Company Location Capacity in '000 t/yr Grade Start-up Current Status Dow Chemical Freeport, TX 400 LLDPE Sep-17 Operational Chevron Phillips Old Ocean, TX 500/500 HDPE/LLDPE Sep-17 Operational Ineos/Sasol La Porte, TX 470 HDPE 4Q 2017 Operational ExxonMobil Mont Belvieu, TX 650/650 HDPE/LLDPE 4Q 2017 Operational Dow Chemical Plaquemine, Louisiana 400 LDPE 1Q 2018 Operational Formosa Plastics Point Comfort, TX 225/300/225 HDPE/LDPE/LLDPE 4Q 2018 Construction Dow Chemical Taft, LA 125 HDPE 4Q 2018 Construction Dow Chemical Freeport 320 Elastomers 4Q 2018 Construction Sasol Lake Charles, LA 450/450 LLDPE/LDPE 4Q 2018/1Q 2019 Construction ExxonMobil Beaumont, TX 650 LLDPE 2019 Construction LyondellBasell La Porte, TX 500 HDPE 2019 Construction Dow Chemical Freeport, TX? 600 LLDPE 2021 Announced Nova Chemical Sarnia, Ontario 450 LLDPE/HDPE 2021 Construction Shell Chemical Monaca, PA 550/550/500 HDPE/LLDPE 2021 Construction Total All 8815 All

15 How large is the new US PE capacity? 3.5 mn tons/year of Polyethylene has now started up ft containers of PE every day 265 bags/min of PE +8 mn ton/year of Polyethylene capacity by ft containers of PE each day +600 bags/minute of PE

16 US/Canada Supply and Demand New US PE capacity running >80% ACC data shows high US inventory-but data is in question Exports currently ramping Exports must ramp up another 100,000 t/month or +220 mn lb/month for full utilization

17 GDP History and Forecasts GDP CAGR Africa - 3.8pc Brazil/Argentina - 2.2pc China - 6.2pc India - 7.9pc Russia - 1.5pc W Europe - 1.7pc US - 2.1pc World 3.8pc World GDP hit 4pc 2 nd half 2017

18 PE Demand Growth Rates PE consumption is a function of GDP PE CAGR Region/Country World NAM W Eur Africa China India Growth rate 4.0pc 2.2pc 1.4pc 3.5pc 6.1pc 7.1pc

19 Cumulative growth in global PE demand of 20.6mn t to 2022 China PE consumption growth is the driver 48pc of the demand growth High growth helping to absorb large PE expansions Copyright 2018 Argus Media group. All rights reserved.

20 Argus long term energy forecast assumptions US Natural gas to stay low Crude oil to increase to $80/bl by 2024 Ethane will be volatile but still very advantaged because of the large energy spread Copyright 2018 Argus Media Ltd. All rights reserved.

21 Ethylene Demand Growth Rates Ethylene consumption ratio to GDP based on history and future trends Ethylene CAGR Region/Country World NAM W Eur Africa China India Growth rate 3.7pc 6.3pc -0.05pc 0.7pc 7.3pc 3.9pc

22

23

24 Ethylene and PE Operating rates decline through 2021 Supply driven trough Margins will weaken Greater volatility 2-3pc decline in Op Rate Trough may last several years because of project momentum

25 Asia Pacific Operating Rate projections China brings on lots of capacity in timeframe US heavily exporting ethylene and PE to China Assumes large cost advantage for US producers through period

26

27 PE trade patterns US exports will grow by 6.1 mn t China imports will reach 15 mn t by 2022 Middle East to remain largest exporter

28 Implications for Asia Global healthy margin environment continues but PE margins will trend downward Asia PE prices will weaken US ethylene oversupplied/rate reductions Asia ethylene will stay strong because US ethylene trapped in US US to produce less C3=/C4+ as cracker rates reduce US will almost double polyethylene exports soon Lower US Prices More global volatility New US ethylene exports will be dominate source for China imports starting 2020 Global trough is coming Asia Operating rates will reduce significantly Naphtha margins will be low

29 Concluding thoughts New US ethylene project development has strong momentum Global healthy margin environment continues US ethylene oversupplied/rate reductions US will almost double polyethylene exports soon Lower US Prices More global volatility Global trough is coming Not as deep as previous demand driven troughs Likely an extended period of lower margins

30 Chuck Venezia SVP, Petrochemicals +1 (713) Houston Stay +Argusmediaplus Argus-media argusmediavideo Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, Argus publication titles, and Argus index names are trademarks of Argus Media Limited. For additional information, including details of our other trademarks, visit argusmedia.com/trademarks.