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After The Fall - The Impact of Oil Price Volatility on Petrochemical Markets
Dr Charles Fryer
Tecnon OrbiChem Marketing Seminar at APIC 2015
Seoul, 7 May 2015
QUANTITY,BBL/DAY
PRICE, $/BBL
S
PERSIANGULF
USCHEAP
OIL SANDEXPENSIVE
75
50
100
150
25
OTHER OPEC
U.S.EXPENSIVE
RENEWABLEENERGY
OIL SANDCHEAP
CHEMICALFEEDSTOCKS
MOTORGASOLINE
SPACE ANDPROCESSHEAT
ELECTRICITYD
EQUILIBRIUMQUANTITY
125
APIC 2015LONG TERM CRUDE OIL MARKET EQUILIBRIUM
Source: Probe Economics
PRICE, $/BBL
QUANTITY,BBL/DAY
APIC 2015CRUDE OIL MARKET - PREVIOUS EQUILIBRIUM SAUDI-SUPPORTED $100/BBL PRICE
Source: Probe Economics
S
PERSIANGULF
USCHEAP
75
50
100
150
OTHER OPEC
RENEWABLEENERGY
CHEMICALFEEDSTOCKS
MOTORGASOLINE
SPACE ANDPROCESSHEAT
ELECTRICITYD
QUANTITYSUPPLIED
25
125
Adjustmentof Production
PRICE, $/BBL
QUANTITY,BBL/DAY
S
PERSIANGULF
USCHEAP
OIL SANDEXPENSIVE
75
50
100
150
OTHER OPEC
U.S.EXPENSIVE
RENEWABLEENERGY
OIL SANDCHEAP
CHEMICALFEEDSTOCKS
MOTORGASOLINE
SPACE ANDPROCESSHEAT
ELECTRICITYD
QUANTITYDEMANDED
QUANTITYAVAILABLE
SURPLUS
25
125
APIC 2015CRUDE OIL MARKET EQUILIBRIUM -CURRENT POSITION
Source: Probe Economics
APIC 2015PRICE EQUIVALENCE OF FEEDSTOCKS FOR ETHYLENE PRODUCTION
Source: Tecnon OrbiChem
Heavy Fuel Oil $/ton
50 100 150 200 250 300 350 400 450 500 550 600 650 7000C
Natural Gas $/mmBtu
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D
E 0 100 200 300 400 500 600 700 800
Ethane $/ton
A, B and C at market equivalenceC, D and E at heat content equivalence
Naphtha $/ton
A0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
B
Crude Oil $/bbl
10 20 30 40 50 60 70 80 90 100 110 120 130 1400
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
$/ton
A
This graph enables typical plant cash production costs of ethylene to be
estimated from the price of naphtha, depending on the current propylene to ethylene price ratio prevailing in the
market in question
0.8
0.9
1.0
0.7
1.1
1.2
1.3
Propylene/EthylenePrice Ratio
Naphtha $/ton
Heavy Fuel Oil $/ton
Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D
50 100 150 200 250 300 350 400 450 500 550 600 650 7000B
Natural Gas $/mmBtu
APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Naphtha, Medium Sized Cracker
Source: Tecnon OrbiChem
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
$/ton Naphtha Europe - AsiaMay 2014
Propylene/EthylenePrice Ratio
1.00 Europe
0.95 Asia
ANaphtha $/ton
Heavy Fuel Oil $/ton
Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D
50 100 150 200 250 300 350 400 450 500 550 600 650 7000B
Natural Gas $/mmBtu
Spot Ethylene price NE Asia Feb 2015
Naphtha Europe - AsiaFeb 2015
Spot Ethylene price NE Asia May 2014
APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Naphtha, Medium Sized Cracker
Source: Tecnon OrbiChem
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
$/ton
ex ethane
ex naphtha
Propylene/EthylenePrice Ratio
0.95
NaphthaEurope - AsiaMay 2014
E0 100 200 300 400 500 600 700 800
Ethane $/ton
ANaphtha $/ton
Heavy Fuel Oil $/ton
Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D
50 100 150 200 250 300 350 400 450 500 550 600 650 7000B
Natural Gas $/mmBtu
NaphthaEurope - Asia
Feb 2015
APIC 2015CASH PRODUCTION COST OF ETHYLENE
Source: Tecnon OrbiChem
Spot Ethylene price NE Asia May 2014
Spot Ethylene price NE Asia Feb 2015
Middle East – old gasMiddle East – new gas
USA – shale gas
0
5
10
15
20
25
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
$/mmBtu
Source: Tecnon OrbiChem
APIC 2015US NATURAL GAS & ETHANE PRICES
US Nat Gas $/mmBtu
US Ethane $/mmBtuequivalent
ktpa
APIC 2015ETHANE BALANCE IN THE USA
EthyleneCapacity Using Ethane
Ethane Capacity to Consume
EthaneProduction Capacity
Note:The USA has in
addition 8,700 kpta of ethylene capacity based on light liquid
feeds (propane, butane, naphtha)
Ethane ExportCapability
2012 2013 2014 2015 2016 2017 2018 2019 2020
$/ton
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
10 20 30 40 50 60 70 80 90 100 110 120 130 1400
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16
Propylene/EthylenePrice Ratio
0.8
Middle East – old gasMiddle East – new gas
Naphtha $/ton
Crude Oil $/bbl
Natural Gas $/mmBtu
ex naphtha
Ethylene production cost in the USA from naphtha allowing for the price of propylene that was 1.43 times that of ethylene (February 2015)
0.9
1.0
0.7
1.1
1.2
1.3
ex ethane priced at heat value
Spot Ethylene price NE Asia Feb 2015
NaphthaEurope – Asia
Feb 2015
Ethane in Europe/AsiaImported from USA
USA – shale gas
APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Medium Sized Cracker
Source: Tecnon OrbiChem
$/ton
APIC 2015CASH PRODUCTION COST OF PROPYLENEfrom Naphtha Cracker versus PDH Propylene cash
production cost via naphtha cracker at ratio 1.0 to ethylene
Naphtha $/ton
Heavy Fuel Oil $/ton
Crude Oil $/bbl
Natural Gas $/mmBtu
Source: Tecnon OrbiChem
A
10 20 30 40 50 60 70 80 90 100 110 120 130 1400C
1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D
50 100 150 200 250 300 350 400 450 500 550 600 650 7000B
Assumption: PropanePrice = Naphtha
Price x 0.90 (in $/ton)
Propylene cash production cost via propane dehydro
Spot propylene priceNE Asia May 2014
NaphthaEurope - AsiaMay 2014
NaphthaEurope - Asia
Feb 2015
Spot propylene priceNE Asia Feb 2015
APIC 2015ASIAN 0.865PTA + 0.35MEG PRICE TREND & CAPROLACTAM PRICE TREND vs BRENT CRUDE
Source: Tecnon OrbiChem
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
Brent Crude Oil $/bbl
$/ton
1999-2008
2010
2009
2011
2012
2013
2014
2015?
Caprolactam
PTA + MEG
0
200
400
600
800
1,000
1,200
1,400
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
0
200
400
600
800
1,000
1,200
1,400
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
$/ton PTA
Source: Tecnon OrbiChem
APIC 2015PTA PRODUCTION COST vs CRUDE OIL PRICEfrom Medium Sized Asian Plant
Paraxylene – AveragedRelationship to Crude Oil
Packing, loading shipping
Acetic Acid
Cats & Chemicals
Fixed costs of PTA plant
Cost of Production
Crude Oil Price $/bbl
Energy related costs (fuel oil, electricity)
2009
2010
2011
2012
2013
2014
2015
Source: Tecnon OrbiChem
For a given year:
World Tightness Index = log10
Capability
Capability - Consumption
Capability = Annual Nameplate Capacity less Capacity off line*
* Due to unscheduled stoppages, not scheduled maintenance turnarounds
APIC 2015TIGHTNESS INDEX
Tightness World Capacity WorldIndex Utilisation Rate Markets
1.4 96.0% Very Tight
1.2 93.7% Tight
1.0 90.0% Balanced
0.8 84.0% Loose
0.6 75.0% Over-Supplied(Sloppy)
Tightness Index
APIC 2015PTA PRICE HISTORY - ASIA
Brent Crude Oil Price $/bbl
VERYTIGHT
TIGHT
BALANCED
OVER-SUPPLIED(SLOPPY)
LOOSE
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
40 50 60 70 80 90 100 110 120 130 140
2009
2010
2011
2012
2013
2014
2015
Source: Tecnon OrbiChem
March 2015
APIC 2015PTA PRICE SCENARIOS - ASIA
Source: Tecnon OrbiChem
Tightness Index
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
40 50 60 70 80 90 100 110 120 130 140
Brent Crude Oil Price $/bbl
VERYTIGHT
TIGHT
BALANCED
OVER-SUPPLIED(SLOPPY)
LOOSE
USA Europe Asia
Ethane based ethylene Very Negative Negative Negative
- its derivatives Slightly Negative Slightly Negative Slightly Negative
Propane/Butane based olefins Negative Negative Negative
- their derivatives Slightly Negative Slightly Negative Slightly Negative
Naphtha based BTX,Butadiene Positive Very Positive Very Positive
- their derivatives Slightly Positive Positive Positive
Methane/LNG based Slightly Negative Positive Very Positive
Source: Probe Economics, Tecnon OrbiChem
APIC 2015EFFECT OF LOW OIL PRICES ON CHEMICAL INDUSTRY COMPETITIVENESS
APIC 2015CONCLUSIONS
What is the Effect of Cheap Crude Oil on Profits?
•BAD for:� ethane cracking� propane dehydrogenation� butane dehydrogenation
•GOOD for: naphtha cracking
•NEUTRAL for: naphtha reforming to BTX
•VARIABLE for: downstream chemicals
•GOOD for replacement of:� cotton by polyester fibre� wood by commodity plastics� metal by engineering plastics� glass by PET resin, polycarbonate
Source: Tecnon OrbiChem
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