etileno/propileno update - ptq.pemex.gob.mx · singapore shanghai foropemex houston petroquímica...

Foro PEMEX Petroquímica - Junio 2011Singapore Shanghai Houston New York London Düsseldorf Dubai

Etileno/Propileno Update

FORO PEMEX Petroquimica 2011

Bangkok

John SteklaDirector – Ethylene

[email protected]

1 281 752 3244

has

acquired

mailto:[email protected]

Copyright © 2011 IHS Inc. All Rights Reserved.

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Foro PEMEX Petroquímica - Junio 2011

Shale Natural Gas

Feedstocks


Black Warrior BasinFloyd & Chattanooga

Arkoma BasinFayetteville

Delaware BasinBarnett/Woodford

North LA, East TX Haynesville & Bossier

Illinois Basin New Albany

Appalachian Basin Marcellus

Michigan BasinAntrim

US Lean Gas Shale

Plays

Source: Enterprise Products

Rich Shale Gas

Lean Shale Gas


Appalachian BasinMarcellus & Huron & Ohio

Williston BasinBakken

Uinta BasinMancos.

Piceance BasinMancos

Ft Worth BasinBarnett

Arkoma BasinWoodford

Anadarko BasinWoodford

South TXEagle Ford & Pearsall

Denver BasinNiobrara

San Juan BasinMancos

Michigan Basin Utica

Powder River BasinNiobrara

Permian BasinAvalon & Wolfcamp

US Rich Gas Shale

Plays


Rich Shale Gas

Lean Shale Gas


Appalachian BasinMarcellus & Huron & Ohio

Williston BasinBakken

Uinta BasinMancos.

Piceance BasinMancos

Ft Worth BasinBarnett

Black Warrior BasinFloyd & Chattanooga

Arkoma BasinFayetteville



Delaware BasinBarnett/Woodford

South TXEagle Ford & Pearsall

North LA, East TX Haynesville & Bossier

Denver BasinNiobrara

San Juan BasinMancos

Illinois Basin New Albany

Michigan Basin Utica

Powder River BasinNiobrara

Appalachian Basin Marcellus

Permian BasinAvalon & Wolfcamp

Michigan BasinAntrim



All US Shale Plays


Rich Shale Gas

Lean Shale Gas


Stranded Liquids from Wet Shale Gas Need to Find a Home

Source: EIA

Steam

Crackers


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

U.S. Natural Gas Production by Source

Shale Gas Associated Tight GasCoalbed Methane Other OffshoreAlaska

Source: EIA


Ethane Relative Prices Fallen Most

0%

20%

40%

60%

80%

100%

120%

2000 2002 2004 2006 2008 2010 2012 2014

US Propane to Crude Price Ratio

US Ethane- to- Crude Price Ratio

US Naphtha to Crude Price Ratio

US Price Ratios To WTI Crude Oil

Source: Purvin & Gertz


2009

Gas-Based Competitive

Advantage Bubbles Up, Globally

50

150

250

350

450

550

650

750

850

950

0 25 50 75 100 125 150

Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant

Cumulative Ethylene Capacity (Million Tons)

West

Europe

North

AmericaAsia

Middle East

2003

2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu

2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu


Eagle Ford Map

Source: Doxa Energy


Five Key Points for the

Ethylene Industry


Ethylene

LLDPE

PVCPolystyrene/ABS

PET/Ethylene Glycol

Polyethylene

HDPE

1. Ethylene Demand Driven By What We Consume

LDPE


120 Million Tons Ethylene

2. Heavy Feeds & Polyethylene Dominate GlobalEthylene Market

Polyethylene61%

Styrene7%

EDC/VCM/PVC11%

Ethylene Oxide/Glycol13%

Other8%

2010 Ethylene Demand

Ethane33%

Naphtha/Gas Oil53%

Propane &Butane12%

Other2%

2010 Ethylene Supply


3. Asia Dominates Demand Growth;

NAM Domestic Demand Recovering

0

10

20

30

40

50

60

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

North America West Europe Asia Others Middle East

Million Metric Tons,Ethylene & Primary Derivative Consumption

2009 Consumption (kg/capita):North America = 50West Europe = 48 Asia = 13


4. Global Operating Rates Are Cyclical

Resulting in Cyclical Profitability

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Million Metric Tons, Global Ethylene Capacity & Demand

Demand Capacity

78.0

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

96.0Operating Rate, Percent

Operating Rate

ForecastPeak Peak

Peak

Trough

Trough

Trough


0%

20%

40%

60%

80%

100%

120%

0

2

4

6

8

10

12

14

16

18

20

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Gas as % of Crude

$ / MM Btu

Crude (WTI) Natural Gas Gas as % of Crude

5. A Favorable Energy Outlook for North America


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2008 2009 2010 2011 2012 2013 2014 2015

United Arab Emirates Saudi Arabia Qatar Kuwait Iran Cumulative Capacity Addition

Middle East Wave Almost CompleteNew Middle East Ethylene Capacity, Million Metric Tons Cumulative

Forecast


Demand Leading Asia’s GrowthNew Asia Ethylene Capacity, Million Metric Tons Cumulative

0.0

5.0

10.0

15.0

20.0

25.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2008 2009 2010 2011 2012 2013 2014 2015

Japan Philippines SingaporeThailand China Korea (South)Taiwan Cumulative Capacity Addition

Forecast


Ethylene Production Cash Cost

Drivers

• Feedstocks

– Natural Gas Prices vs. Crude Oil Prices

– Ethane Prices

– Other Feedstock Pricing

• Co-Product Credits


0

110

220

331

441

551

661

772

882

992

1102

1213

1323

0

5

10

15

20

25

30

35

40

45

50

55

Apr 08 Apr 15 Apr 25 May 02 May 09 May 16 May 23 May 31

Cents Per Pound

Light Naphtha Purity EthaneWeighted Average Coprod. Int. Lt. NaphthaPropane ButaneGas Oil

Dollars Per Metric Ton

Spot Cash Cost Drivers

U.S. Daily Ethylene Cash CostsData through 2 June


300

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

09 A J O 10 A J O 11 A J O 12 A J O

Global Monthly Ethylene Prices

U.S. Large Buyer Contract Price WEP Contract Price SEA CFR Spot Price


Forecast


Nameplate Capacity Deficit Without

Capacity Additions

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0.0

0.5

1.0

1.5

2.0

2.5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011 12 13 14 15

Net Deficit Deficit (% of capacity)

% of CapacityMillion Metric Tons


Nameplate Capacity Deficit

With Capacity Additions

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0.0

0.5

1.0

1.5

2.0

2.5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011 12 13 14 15

Net Deficit Deficit (% of capacity)

% of CapacityMillion Metric Tons


65%

70%

75%

80%

85%

90%

95%

100%

9

10

11

12

13

14

15

16

17

01 Q3 02 Q3 03 Q3 04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3

Operating RateBillion Pounds

U.S. Ethylene Supply/Demand Outlook

Total Demand Effective Operating Rate Nameplate Operating Rate

Forecast


NA Ethylene Expansion “Talk” In The

Press ~ 6.0 Million Tons By 2017Company 2012 2013 2014 2015** 2016+

Announced (-000- MT)Westlake, Lake Charles 110 110

Ineos, Chocolate Bayou 115

Chevron Phillips 1200*

Dow 384 1400*

Equistar 230

Shell 1000*

Braskem/Idesa 1000

Unconfirmed (-000- MT)Williams 100

Formosa 450

Total 839 100 110 2650 2400

Cumulative Total 839 939 1049 3699 6099

* Dow, Shell, and Chevron Phillips capacity additions shown are CMAI estimates


US Ethylene Industry has SIgnificant

Exports of Derivatives

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Ethylene Vinyls/PVC StyrenicsPolyethylene Oxide/Glycol Others

Net Exports

Net Imports

Million Metric Tons,Ethylene EquivalentsBarrels Per Day,Ethane Equivalents

374

312

250

187

125

62

0

- 62 -5%

0%

5%

10%

15%

20%

25%

30%

Proportion of

US Ethylene Production

Forecast


Net Equivalent Ethylene Trade

Mexico

-2000

-1500

-1000

-500

0

500

05 06 07 08 09 10 11 12 13 14 15

Others Glycol Polyethylene Styrenics Vinyls Ethylene Net Trade

Thousand Metric Tons

Net Exports

Net Imports


Ethylene Market Summary• Economic recession and long-

term manufacturing trends hurt domestic demand in N. America and Europe

• Asia demand growth healthy and is the world’s “demand future”

• Anticipated Middle East capacity wave slow to have full impact

• N. America shale gas revolutionizes competitiveness; keeps margins strong; investment will be coming!

Polyethylene Bags


Propileno


Propylene Supply Profile

Other Technologies

Steam Cracker or Olefin Plant

Ethane

Propane Other propylene consumers: acrylonitrile,

propylene oxide, acrylic acid, oxo-alcohols

PG & CG

Propylene

Markets

Propane to LPG

Cumene, Oligomers

Isopropanol

FCC Unit

Alkylation

Unit

Isobutane

High Octane Alkylate

Gasoline

Other Fuel Uses

Purification Splitter Unit

Refining Industry

Chemical Industry

Gas

Oil

RG

Propylene

Market

Crude

UnitCrude

Oil

Motor

Gasoline

Motor

Gasoline

Naphtha

Ethylene

& Olefins

Polypropylene

Unit

Injection

Molding,

Fibers,

Films

Propane Dehydro

Metathesis

Olefin Cracking

HSFCC

Methanol-to-Olefins

Others


Production Shift By 2015

Stm. Crackers

60%

FCC/Splitters

24%

On-Purpose

16%

Stm. Crackers

51%

FCC Splitters

49%

Stm. Crackers

35%FCC Splitters

55%

On-Purpose

10%

Stm. Crackers

71%

FCC Splitters

24%

On-Purpose

5%

Stm. Crackers

44%

FCC Splitters

3%

On-Purpose

53%

Stm. Crackers

55%FCC

Splitters23%

On-Purpose

22%

Total Production = 97.5 Million Metric Tons


Datang International Power

Duolun, Inner Mongolia

C3 500 (MTP)

Chinese CTO/MTO Capacity 2010-2015 (‘000 metric tons per year)

Shenhua Group

Baotou, Inner Mongolia

C2/C3 300/300 (MTO)Shenhua Ningmei

Yuling, Shaanxi

C3 500 (MTP)

CTO/MTO 2010

CTO/MTO 2011-2015

Zhongyuan PC

Puyang, Henan

C2/C3 60/103 (MTO)

Zhejiang Tiansheng

Shaoxing, Zhejian

C2/C3 300/300 (MTO)

Yulin Energy & Chem

Yulin, Shaanxi

C2/C3 300/300 (MTO)

Shaanxi Yanchang

Yan’an, Shaanxi

C2/C3 450/450 (MTO)

China + Coal = Olefins

Pucheng Clean Energy

Pucheng, Shaanxi

C2/C3 300/380 (MTO)

Yankuang Guohong

Zoucheng, Shandong

C2/C3 300/300 (MTO)


US C3/C4 Olefin Volumes Decline

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

2000 2002 2004 2006 2008 2010 2012 2014

US Ethylene Production

US Propylene Production

US Butadiene Production

Index 1.0 = US Olefin Production From Steam Crackers in 2000


US C3/C4 Olefin Prices Skyrocket

50%

75%

100%

125%

150%

175%

200%

225%

250%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

US Propylene-to-Ethylene Price Ratio

US Butadiene-to-Ethylene Price Ratio

US Price Ratios To Ethylene


Propylene Production in the U.S. Not

Likely to Improve

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Metathesis (-0.9/19.8) Dehydro (0.0/69.0) FCC Splitters (0.2/0.3)

Stm. Crackers (-5.6/-2.7) Total Capacity (-0.2/1.0)

Million Metric Tons

(% AAGR = 05-10/10-15)


Net Equivalent Propylene Trade

Mexico

-1200

-1000

-800

-600

-400

-200

0

200

05 06 07 08 09 10 11 12 13 14 15

Propylene Acrylonitrile Polypropylene Others Net Trade


Net Imports

Net Exports


Net Equivalent Propylene Trade

United States

-500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

05 06 07 08 09 10 11 12 13 14 15

Propylene Acrylonitrile Polypropylene Others Net Trade


Net Imports

Net Exports


US AN Still Needed By the World

400

50

4070

20

60

135 90

160

240

2010 Global Acrylonitrile Trade Patterns



Propylene Prices

• The world order has flipped….U.S. now the highest

• Transition began in 2007/2008 but was masked by the recession during 2009

• Presents good investment opportunities


Short-term Propylene Forecast

0

500

1,000

1,500

2,000

2,500

3,000Naphtha Northeast Asia Spot Average US$/Metric Ton C&F Japan

Crude Oil Brent West Europe Spot, Avg. 1st Month $/ton FOB North Sea

Propylene Polymer Grade Southeast Asia Spot, Avg. US$/Metric Ton CFR SE Asia

Propylene Polymer Grade North America Contract-Benchmark Stream Value Cents/Pound Delivered United StatesPropylene Contained Value West Europe Contract-Benchmark Contained Value Euro/Metric Ton Delivered W. Europe

$/ton$/ton$/ton$/ton

May 2011 Prices

US = 97.0 cpp

WEP = 1,245 E/ton

ASP = 1,555 $/ton


Long Term Propylene Price Forecast

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

NAM Net Trans. Contract Price WEP Contract Price SEA CFR Spot Price



Propylene Market Summary• Shale gas revolution in North America

and declining refining industry results in supply of propylene to be structurally short

• US propylene consumers lose competiveness, especially for PP, as Middle East and Asia continue to add PP investments

• Propylene supply gap will be filled with “on-purpose” technologies and demand moderation throughout the world

• Higher propylene feedstock prices will require PP to compete on properties more than cost, resulting in slower demand growth relative to history

• Other propylene derivatives (acrylonitrile, phenol, etc.) will be key price drivers of propylene.

Polypropylene Caps


Potential Risks to U.S.

Propylene Investments

• Overbuild of non-PP derivatives in

other regions backs out U.S. exports

• Overbuild of new on-purpose

production units causes RG to move

back to the incremental supply

• Gas to crude parity

• Methanol to Propylene gains a large

market share

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