09-methanol industry outlook-jason cheskomay2014f

8/10/2019 09-Methanol Industry Outlook-Jason CheskoMay2014f

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METHANEX CORPORATION 2013

Jason Chesko, Senior Manager, Fuels

Methanex Corporation

May 2014

PROMSUS

Methanol Industry Outlook


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Forward-looking Statements

Information contained in these materials or presented orally at this presentation,

either in prepared remarks or in response to questions, contains forward-looking

statements. Actual results could differ materially from those contemplated by the

forward-looking statements. For more information, we direct you to our 2013 MD&A

and our first quarter 2014 MD&A and the slide at the end of this presentation.

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Methanex & MethanolIndustry

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- Methanex- Methanol Industry

- Supply/Demand

- Pricing Environment

- Energy Applications- Methanol to Olefins

- DME

- Fuel Blending

- Marine Fuels

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Overview


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2013 METHANEX CORPORATION

Methanex: Global Methanol Leader

~US$ 3 billion sales globally (2013)

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Methanol Usage..

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By Derivative By Region

Source: Methanexas at Dec 31, 2013


7/33METHANEX CORPORATION 2013

Methanol Production

Today, methanol is primarily

produced from natural gas andcoal (China)

Methanol is increasingly being produced from renewables

Long-term vision is more renewable/bio methanol (ie; for methanol inships, transportation fuels)

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Source: CRISource: CRI



2013 Regional Production

NA: 1.9 MMT

LA: 7.5 MMT

EU: 8.4 MMT

AP: 28.9 MMT(China: 19 MMT)

Source: IHS August 2013.

ME: 12.8 MMT

2013 China Capacity(42 MMT)

Coal - 28 MMT

Nat Gas - 9 MMT

Coke Oven - 7 MMT

China estimated to operate at 45 50% rates



Methanol projectannouncements in NorthAmerica due to lower naturalgas price environment

Methanex Projects -Louisiana

Other Restarts & New ProjectAnnouncements

Modest growth outlook inAtlantic Basin

North American Methanol Capacity Growth

Equipment in transit to Geismar, Louisiana

Methanex Geismar, Louisiana project site

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Global Methanol S&D Evolution: 2013 vs 2017

Net

27M

42M 53M

19M 21M

41M 59M

6M

6M

S&D S&D

1M

1M

2013 2017

Net

Atlantic

Supply

Demand

Pacific

Source: IHSDemand figures exclude integrated Methanol to Olefins



0

50

100

150

200

250

300

350

400

450

500

0 10000 20000 30000 40000 50000 60000 70000

Delivered

cash

Cost

(USD/tonne)

Cumulative Capacity (000 tonnes / year)

Methanol Industry Cost Curve

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Steep cost curve, set by China natural gas based production

China, Russia

Exports,

Germany, India,

E. Europe

Eq. Guinea,

Indonesia, Iran,Malaysia,

Methanex Plants,Oman,Qatar,Saudi,Trinidad(MHTL),Venezuela, USA

Source: MethanexAssumes $105/bbl Brent oil; RMB 640/MT coal (approx. US$105/tonne)



Methanol Price Environment

Key Factors: Energy Prices/Cost Curve, Reinvestment

Economics (long-term)

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Source:IHS Chemical April 2014


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Methanol Demand

Formaldehyde Acetic AcidWood Industry, Pharmaceuticals, Automotive Fleece, Adhesives, Paints

Dimethyl Terephthalate Methyl ChlorideRecyclable plastic bottles Silicones

Energy & MTO

(40% of Demand; High Growth)Traditional Uses (60% of Demand)

Fuel Blending

Methanol is being used in an increasing number of

energy applications

MTOMethanol-to-Olefins

Marine Fuels

DME (di-methyl-ether)

MTBE

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Methanol Industry Growth

Energy demand driving higher industry growth

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Source: IHS Chemical 2014 Update, April, 2014. Excludes integrated methanol demand for methanol to olefins and propylene

(000s tonnes)CAGR: 6.0%

CAGR: 8.1%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E

Chemical MTBE/TAME Fuel DME MTO/MTP (Merchant)


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Methanol Energy/Fuel Applications Drivers

Lower cost than oil products

Clean-burning

Energy Security &Diversification

Low infrastructure costsHigh efficiency and

performance

Renewable methanol options

Source: IHS Chemical

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015

US$/

btu

US$/b

arrel

Crude Oil (WTI)

Natural Gas (HHub)

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Methanol to Olefins (MTO)

China has commercialized MTO - an emerging oil product substitution opportunity

Two main pathways progressing Integrated olefins produced from directly from coal, methanol an intermediate step

Merchant (MTO) methanol purchased from external suppliers

China merchant capacity is developing rapidly 3 merchant plants operating (methanol demand ~3.3 mmtpa)

Ningbo Skyfords 1.8 MMT merchant methanol to 0.6 MMT olefins plant

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Dimethyl Ether (DME)

Large DME - LPG Blending market in China

DME emerging as a transportation fuel Volvo commercializing DME for heavy trucks in North

America in 2015

Global ASTM Standard for DME Fuel issued

Many sites in the U.S. under evaluation for DME plants

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Economical

High Performance

Ultra-low Emissions (No

Soot or Particulate

Matter)

Low Infrastructure Costs

Easy to handle, store,

dispense

95% GHG reduction

potential (biomass)

Volvo DME Truck DME-LPG Blending


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Methanol Fuel Blending in China

Xinjiang

Tibet

Qinghai

Gansu

ZhejiangHunan Jiangxi

GuangdongYunnan Hong Kong

Jiangsu

Sichuan

Shaanxi

Shanxi

Guizhou

Fujian

Macau

Shanghai

Hainan

Ningxia

M15, M30& M50

M15, M25

M45

M10Chongqing

Shandong

Anhui

Jilin

Guangxi

Henan

Hubei

Heilongjiang

Tianjin

M5, M15, M85 & M100

Hebei

BeijingInner

Mongolia

Liaoning

M15

M15,M30

M15

M15,M30

M15

M15 China is successfully commercializing

methanol fuels

Example: M15 = 15% methanol, 85% gasolineSource: Methanex, China PDRCs, Shanxi Methanol office

M15

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Methanol Fuel Blending Activity

Egypt

China

Commercial / near-commercial

Assessment stage

Australia

Israel

New Zealand

Trinidad &Tobago

U.K.

Netherlands

Denmark

Iran

Uzbekistan

Significant methanol fuel blending activity developing outside China

Turkmenistan

Iceland

Switzerland

Azerbaijan

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Alaska

Vietnam

Russia

U.S.


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Methanol as a Marine Fuel

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M th l M i F l


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Methanol as a Marine Fuel Regulations Driving Change

Regulations driving change

Emission Control Areas (ECA) 2015 near term focus

In 2020, IMO targeting all marine fuels globally to be 0.5%sulphur

Global Emission Control Areas (ECAs)

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Marine Fuels - Alternatives

Alternatives for meeting SECA guidelines

HFO (Heavy fuel oil) with scrubbers

Marine Diesel Oil (MDO) / Marine Gas Oil (MGO)

Alternative fuels: LNG, Methanol / DME

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Marine Fuels Economics

Historically, methanol has been more economical than Marine Gas

Oil

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Energy Price Comparison | MGO vs Methanol (mmbtu basis, LHV)

* Calcula ted a s the average of Si ngapore 0.5% MGO, San Francis co 0.5% MGO, and Rotterdam MDO pricing (LQM)

when data is avail able . Source: Bloomberg & LQM

^ Simpl e a verage o f NE China Spot, USGC Spot, and Ro tterdam T2 Spot prices from CMAI.

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

2008 2009 2010 2011 2012 2013

$/mmbtu

MGO Price * Global Avg. Methanol Price


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Methanol as a Marine Fuel Commercial Developments

SPIRETH Project technology confirmation

Engine manufacturers developing methanol compatible engines

MAN 2 stroke engines

Wartsila 4 stroke engines

Standards and regulations under development

Risk Classification Societies DNV, Lloyds Register

Marine fuels regulations being updated for methanol

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Methanol as a Marine Fuel Commercial Developments

Stena

Methanex (Waterfront Shipping) taking delivery of seven newmethanol ships in 2016 (MANs ME-LGI flex fuel engine)

Significant interest developing in Europe, North America & Asia

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Thank You.

Q & A

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FORWARD-LOOKING INFORMATION WARNING

This Presentation contains forward-looking statements with respect to us and our industry. These statements relate to future events or our future performance. All statements other thanstatements of historical fact are forward-looking statements. Statements that include the words believes, expects, may, will, should, potential, estimates, anticipates,aim, goal or other comparable terminology and similar statements of a future or forward-looking nature identify forward-looking statements.

More particularly and without limitation, any statements regarding the following are forward-looking statements: expected demand for methanol and its derivatives, expected newmethanol supply or restart of idled capacity and t iming for start-up of the same, expected shutdowns (either temporary or permanent) or restarts of existing methanol supply (includingour own facilities), including, without limitation, the timing and length of planned maintenance outages, expected methanol and energy prices, expected levels of methanol purchasesfrom traders or other third parties, expected levels, timing and availability of economically priced natural gas supply to ea ch of our plants, capital committed by third parties towardsfuture natural gas exploration and development in the vicinity of our plants, our expected capital expenditures, including, without limitation, those to support natural gas exploration anddevelopment for our plants, anticipated operating rates of our plants, expected operating costs, including natural gas feedstock costs and logistics costs, expected tax rates or resolutionsto tax disputes, expected cash flows, earnings capability and share price, availability of committed credit facilities and other financing, ability to meet covenants or obtain waiversassociated with our long-term debt obligations, including, without limitation, the Egypt limited recourse debt facilities that have conditions associated with upstream natural gasdevelopment and the finalization of certain land title registration and related mortgages that require action by Egyptian governmental entities, our shareholder distribution strategy andanticipated distributions to shareholders, commercial viability and timing of, or our ability to execute, future projects, plant restarts, capacity expansions, plant relocations, or otherbusiness initiatives or opportunities, including the planned relocation of idle Chile methanol plants to Geismar, Louisiana(Geismar), our financial strength and ability to meet futurefinancial commitments, expected global or regional economic activity (including industrial production levels), expected outcomes of litigation or other disputes, claims and assessments,expected actions of governments, government agencies, gas suppliers, courts, tribunals or other third parties, and expected impact on our operations in Egypt or our financial condition asa consequence of civil unrest or actions taken or inaction by the Government of Egypt and its agencies.

We believe that we have a reasonable basis for making such forward-looking statements. The forward-looking statements in this document are based on our experience, our perception oftrends, current conditions and expected future developments as well as other factors. Certain material factors or assumptions were applied in drawing the conclusions or making theforecasts or projections that are included in these forward-looking statements, including, without limitation, future expectations and assumptions concerning the following: the supply of,demand for, and price of methanol, methanol derivatives, natural gas, coal, oil and oil derivat ives, the success of our natural gas exploration and development in Chile, our ability toprocure natural gas feedstock on commercially acceptable terms, operating rates of our facilities, receipt of remaining required permits in connection with our Geismar projects, receiptor issuance of third-party consents or approvals, including, without limitation, governmental registrations of land title and related mortgages in Egypt, governmental approvals related tonatural gas exploration rights or rights to purchase natural gas, the establishment of new fuel standards, operating costs including natural gas feedstock and logistics costs, capital costs,tax rates, cash flows, foreign exchange rates and interest rates, the availability of committed credit facilities and other financing, timing of completion and cost of our Geismar projects,global and regional economic activity (including industrial production levels), absence of a material negative impact from major natural disasters, absence of a material negative impactfrom changes in laws or regulations, absence of a material negative impact from political instability in the countries in which we operate, enforcement of contractual arrangements andability to perform contractual obligations by customers, natural gas and other suppliers and other third parties, and satisfaction of conditions precedent contained in the Geismar 1natural gas supply agreement.

However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-lookingstatements. The risks and uncertainties primarily include those attendant with producing and marketing methanol and successfu lly carrying out major capital expenditure projects in

various jurisdictions, including, without limitation: conditions in the methanol and other industries including fluctuations in the supply, demand for and price of methanol and itsderivatives, including demand for methanol for energy uses, the price of natural gas, coal, oil and oil derivatives, the success of natural gas exploration and development activities insouthern Chile, our ability to obtain natural gas feedstock on commercially acceptable terms to underpin current operations and future production growth opportunities, the ability tosuccessfully carry out corporate initiatives and strategies, actions of competitors, suppliers and financial institutions, conditions within the natural gas delivery systems that may preventdelivery of our natural gas supply requirements, our ability to meet timeline and budget targets for our Geismar projects, including cost pressures arising from labour costs, competingdemand for natural gas, especially with respect to domestic needs for gas and electricity in Chile and Egypt, actions of governments and governmental authorities, including, withoutlimitation, the implementation of policies or other measures that could impact the supply of or demand for methanol or its de rivatives, changes in laws or regulations, import or exportrestrictions, anti-dumping measures, increases in duties, taxes and government royalties, and other actions by governments that may adversely affect our operations or existingcontractual arrangements, world-wide economic conditions, satisfaction of conditions precedent contained in the Geismar 1 natural gas supply agreement, and other risks described in our2013 Managements Discussion and Analysis and our First Quarter 2014 Managements Discussion and Analysis .

Having in mind these and other factors, investors and other readers are cautioned not to place undue reliance on forward-looking statements. They are not a substitute for the exercise ofones own due diligence and judgment. The outcomes anticipated in forward-looking statements may not occur and we do not undertake to update forward-looking statements except asrequired by applicable securities laws.

Forward-looking Statements

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Backup Slides

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Methanol Fuel Blending Europe

3% methanol blending in European fuel specifications

Netherlands & UK already blending methanol

Switzerland & Iceland close to commercializing

Government support for methanol fuels in Iceland, UK

Methanol fuels an official fuel at World Rally Championship

Methanol Fuel Cell / Electric Vehicle Project in Denmark

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Methanol Fuel Blending United States

Momentum developing for methanol

fuels in the U.S. Shale Gas

Fuel Freedom Foundation

US Energy Security Council

Open Fuel Standard

Joint Alcohol Fuel Alliance

Dr. Ernest Moniz, U.S. Secretary ofEnergy and co-author of MIT studyrecommending Methanol Fuels

MIT Study - The U.S. governmentshould implement an open fuel

standard that requires automobile

manufacturers to provide tri-flex-

fuel operation in light-duty

vehicles.

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Australia Methanol Fuel Blending

Methanol Fuels being commercialized in Australia

Project led by Coogee. Methanex is a partner Path to energy security

Methanol excise tax free status for 10 years (~A38c/litre,~$US 480/t)

Successful road tests completed

Testing program near completion (Orbital Corp.). Positiveresults

Commercial roll out of GEM8 and GEM56 in 2014;GEM15 in the future

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Israel Methanol Fuel Blending

Large gas finds in Israel & Strategic

need to reduce oil dependence Methanol program carried out by Dor

Chemicals and supervised bygovernmental steering committee

M15 Initial Focus

M15 demonstrations completed (13vehicles, 800,000 km, 2 years)

M15 testing being expanded to morevehicle types

Working on M15 Standard

M70 testing program validate highmethanol blends in FFVs

Targeting commercial introduction ofmethanol fuels over next couple ofyears

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Source: Alternative Fuels Initiative, Prime Minister's Office, Israel


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DME Global Activity

Indonesia800 ktpy planned

China11 mtpy capacity3050% in operation

India265 ktpyplanned

SwedenWorlds firstBioDME plant(2011)

Uzbekistan10 ktpy planned

VietnamProjectannounced

United States &Canada

Volvo CommercializingDME as a transportationfuel in 2015

Papua NewGuinea200 ktpy planned(2016)

Japan

80 ktpyoperational

Trinidad & Tobago100 KTA plant planned

Mitsubishi Corp. &Mitsubishi Gas Chemical

Egypt200 ktpyplanned

Israel50 ktpyplanned

LPG blending (current market) and as a diesel replacement (emerging market)

Source: International DME Association, IHS Chemical

California4 ktpyoperational

Commercial / near-commercial

Assessment stage

VietnamProjectannounced

09-methanol industry outlook-jason cheskomay2014f

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