is the future of refiners in petrochemicals? · aspiration towards circular economy adoption. some...
TRANSCRIPT
Is the future of refiners in petrochemicals
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 2
In the last decade the world saw a drastic shift from worrying about peak oil supply to considering peak oil demand to be a reality in a not-too-distant future
This shift in perception of supply and demand has triggered some rethinking about the refining business In particular petrochemicals are seen as an increasingly important target for refiners
However while petrochemicals are no doubt an opportunity not all of this opportunity will be available to refiners and certainly it will not be an option open to all refiners
Fortunately while petrochemicals will play an increasingly important role in future oil demand there remains a story for refiners beyond petrochemicals
The Petrochemical Market OpportunityWe can hardly ignore the potential of the petrochemical market Petrochemical products are everywhere and they are integral to our modern societies ndash packaging clothing and gadgets just to name a few
While there is growing public awareness of the need to reduce single-use plastics there is no fundamental change in the consumerist culture today We are always on the quest for the next new goods ndash to be on-trend with fashion or to get hold of the latest mobile phone model
This behavior is set against the backdrop of growing urbanisation and middle-class populations especially in the developing economies which will drive more consumption as disposable income increases
Is the future of refiners in petrochemicals
MAN YIU TSE MARCH 2020
2040ICIS expects that in the long term to 2040 total petrochemical demand
will grow at 32year on average
Petrochemical Demand AAGR 2018-2040
0 1 2 3 4
Polyolefins
Key Elastomers
Polyesters
Other Key Plastics
TOTAL
Source ICIS Supply and Demand Database
Global Incremental Petrochemical Demand 600
500
400
300
200
100
0
Polyolefins
Other Key Plastics
Polyesters
Key Elastomers
2018 204020300
Mill
ion
Tonn
e
Source ICIS Supply and Demand Database
32
25
36
21
33
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 3
The Brookings Institution a Washington-based non-profit public policy organisation estimates that every second there are five people entering the middle-class population
ICIS expects that in the long term to 2040 total petrochemical demand will grow at 32year on average slightly above that of GDP with polyesters and polyolefins seeing the strongest growth
Looking at growth in absolute terms ICIS expects that between 2018 and 2030 the world will see an incremental petrochemical demand of around 193m tonnes and an additional 162m tonnes in the next 10 years to 2040 Polyolefins will be a major contributor to that growth
Feedstock Diversification and Growing Recycling EffortsAs such the feedstock required to satisfy some additional 355m tonnes of petrochemicals will be a target for refiners However not all petrochemical feedstocks demand will be available to refiners due to diversification of feedstock and growing recycling efforts
While steam cracking remains the key workhorse for petrochemical production non-traditional routes such as coal-to-olefins (CTO) methanol-to-olefins (MTO) and propane dehydrogenation (PDH) are expected to gain an important share ndash as much as 12 10 years later from just 2 10 years ago
The rise of PDH has been supported by the availability of imported NGLs particularly from the US and Middle East and growing propylene demand On-purpose propylene production has become an attractive option that is less capital intensive to meet propylene demand without having to manage the co-products
It is worth noting that close to 30 of propylene capacities added between 2010-2018 globally were PDH More PDH capacities are expected and PDH is expected to account for around 18 of propylene supply globally by 2030
Meanwhile investments in CTO and MTO have continued to be made in China While there are environmental concerns over coal feedstock diversification and economic growth for these coal-rich inland provinces are also priorities for the Chinese government
More PDH capacities are expected and PDH is
expected to account for around 18 of propylene supply globally by 2030
Changes in Global Feedstock Slates
0
20
40
60
80
100
2025202020152010
Ethane LPG Heavier LiquidsNaphtha
9
47
13
30
6
40
15
38
Source ICIS Supply and Demand Database
Global Olefins Feedstocks
0
20
40
60
80
100
2030202520182010
28 11 12
Steam CrackingNon-Traditional Routes
Refinery gasFCCMetathesisOthers
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 4
About 59mtpa of CTO and MTO capacities are expected to be added between 2020-2022 Further out the development of MTO which relies on imported methanol is expected to fizzle out
CTO investments however will remain given Chinarsquos large coal reserves ICIS considers around 52mtpa of CTO announced capacity to be speculative
Besides the non-traditional routes that would displace some feedstock markets for refiners the lightening of the feedstock slate in steam cracking will also reduce the naphtha requirement to some extent
This dynamic is chiefly attributable to expansions in the US and Middle East domestic ethane cracking
The US in particular has seen more than 8mtpa of ethane cracker capacity started up since 2017 Another 66mtpa is expected to be added from now till 2022
There is also increased use of imported ethane and LPG in international markets such as Asia Future expansions in this region include the Zhejiang Satellite Petrochemical ethane cracker project which comprises two 1250000 tonneyear ethane crackers with start-up expected in 2021 and 2023
Meanwhile PetroChina is also planning a 600000 tonneyear ethane cracker in Xinjiang province for start-up in 2023 which would utilise domestic ethane from the Tarim oilfield
Global Cracker Feedstock Slate
Heavier Liquids
NaphthaLPGEthane
EUROPE
Heavier Liquids
NaphthaLPGEthane
NORTH AMERICA
Heavier Liquids
NaphthaLPGEthane
S amp C AMERICA
Heavier Liquids
NaphthaLPGEthane
AFRICA
Heavier Liquids
NaphthaLPGEthane
MIDDLE EAST
Heavier Liquids
NaphthaLPGEthane
FORMER USSR
Heavier Liquids
NaphthaLPGEthane
NORTHEAST ASIA
Heavier Liquids
NaphthaLPGEthane
ASIA AND PACIFIC
68 74
19 168 6 5 4
3737
8 8
56 564752
797370 69
20 20 10110 0
39
17
52
23
0
60
81
35 27
1014 8 6
14108120 6
63 59
28 32
55
34
1 010 15 12 11 15 1416
34
0 0
2018 2015
Source ICIS Supply and Demand Database
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 5
Furthermore recycling efforts particularly in plastics are gaining traction driven by an aspiration towards circular economy adoption Some portions of virgin resin demand and thus feedstock demand will be displaced although the effects will likely be felt more in the longer term
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Nevertheless naphtha will remain an important and viable cracker feedstock outside the US and Middle East In Asia ICIS expects over 210m tonnes of incremental demand for naphtha between 2018-2040 of which 157m tonnes will come from Northeast Asia and about 54m tonnes from Asia and Pacific (Indian sub-continent Southeast Asia and Oceania)
To put that into perspective that is double the size of the current market Despite the dampening factors of feedstock diversification lightening of cracker feedstocks and growing recycling efforts there is still a very sizeable naphtha requirement to be fulfilled by refineries especially in Asia
Navigating the Challenging Market EnvironmentHowever this scenario will not benefit all refiners Firstly ICIS expects naphtha supply to remain sufficient to satisfy the rise in demand until post-2025
The Middle East would be the key supplier with its supply tending to be lighter as more naphtha is used for gasoline and aromatics
Shale development in the US has enabled this market to emerge as an additional supplier of light material ndash pentanes plus Asia will be the largest importer but demand will be contained by domestic refinery expansions
It is not always easy to anticipate how markets evolve in the petrochemical industry and even harder to foresee the repercussions of these changes to your companyrsquos growth strategy
With the ICIS Supply and Demand Database you gain a long-term view of rapidly changing petrochemicals markets and end-to-end perspectives across the global petrochemical supply chain including refineries more than 100 petrochemical commodities and 160 countries
ICIS Supply and Demand Database has all the data and analysis you need from 1978 and forecasts up to 2040 This powerful data and analytics tool helps you to optimise opportunities manage risks and enhance growth strategies
Identify opportunities with ICIS Supply and Demand Database
IMPROVE YOUR STRATEGY NOW
ICIS expects over 210m tonnes of
incremental demand for naphtha between
2018-2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 2
In the last decade the world saw a drastic shift from worrying about peak oil supply to considering peak oil demand to be a reality in a not-too-distant future
This shift in perception of supply and demand has triggered some rethinking about the refining business In particular petrochemicals are seen as an increasingly important target for refiners
However while petrochemicals are no doubt an opportunity not all of this opportunity will be available to refiners and certainly it will not be an option open to all refiners
Fortunately while petrochemicals will play an increasingly important role in future oil demand there remains a story for refiners beyond petrochemicals
The Petrochemical Market OpportunityWe can hardly ignore the potential of the petrochemical market Petrochemical products are everywhere and they are integral to our modern societies ndash packaging clothing and gadgets just to name a few
While there is growing public awareness of the need to reduce single-use plastics there is no fundamental change in the consumerist culture today We are always on the quest for the next new goods ndash to be on-trend with fashion or to get hold of the latest mobile phone model
This behavior is set against the backdrop of growing urbanisation and middle-class populations especially in the developing economies which will drive more consumption as disposable income increases
Is the future of refiners in petrochemicals
MAN YIU TSE MARCH 2020
2040ICIS expects that in the long term to 2040 total petrochemical demand
will grow at 32year on average
Petrochemical Demand AAGR 2018-2040
0 1 2 3 4
Polyolefins
Key Elastomers
Polyesters
Other Key Plastics
TOTAL
Source ICIS Supply and Demand Database
Global Incremental Petrochemical Demand 600
500
400
300
200
100
0
Polyolefins
Other Key Plastics
Polyesters
Key Elastomers
2018 204020300
Mill
ion
Tonn
e
Source ICIS Supply and Demand Database
32
25
36
21
33
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 3
The Brookings Institution a Washington-based non-profit public policy organisation estimates that every second there are five people entering the middle-class population
ICIS expects that in the long term to 2040 total petrochemical demand will grow at 32year on average slightly above that of GDP with polyesters and polyolefins seeing the strongest growth
Looking at growth in absolute terms ICIS expects that between 2018 and 2030 the world will see an incremental petrochemical demand of around 193m tonnes and an additional 162m tonnes in the next 10 years to 2040 Polyolefins will be a major contributor to that growth
Feedstock Diversification and Growing Recycling EffortsAs such the feedstock required to satisfy some additional 355m tonnes of petrochemicals will be a target for refiners However not all petrochemical feedstocks demand will be available to refiners due to diversification of feedstock and growing recycling efforts
While steam cracking remains the key workhorse for petrochemical production non-traditional routes such as coal-to-olefins (CTO) methanol-to-olefins (MTO) and propane dehydrogenation (PDH) are expected to gain an important share ndash as much as 12 10 years later from just 2 10 years ago
The rise of PDH has been supported by the availability of imported NGLs particularly from the US and Middle East and growing propylene demand On-purpose propylene production has become an attractive option that is less capital intensive to meet propylene demand without having to manage the co-products
It is worth noting that close to 30 of propylene capacities added between 2010-2018 globally were PDH More PDH capacities are expected and PDH is expected to account for around 18 of propylene supply globally by 2030
Meanwhile investments in CTO and MTO have continued to be made in China While there are environmental concerns over coal feedstock diversification and economic growth for these coal-rich inland provinces are also priorities for the Chinese government
More PDH capacities are expected and PDH is
expected to account for around 18 of propylene supply globally by 2030
Changes in Global Feedstock Slates
0
20
40
60
80
100
2025202020152010
Ethane LPG Heavier LiquidsNaphtha
9
47
13
30
6
40
15
38
Source ICIS Supply and Demand Database
Global Olefins Feedstocks
0
20
40
60
80
100
2030202520182010
28 11 12
Steam CrackingNon-Traditional Routes
Refinery gasFCCMetathesisOthers
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 4
About 59mtpa of CTO and MTO capacities are expected to be added between 2020-2022 Further out the development of MTO which relies on imported methanol is expected to fizzle out
CTO investments however will remain given Chinarsquos large coal reserves ICIS considers around 52mtpa of CTO announced capacity to be speculative
Besides the non-traditional routes that would displace some feedstock markets for refiners the lightening of the feedstock slate in steam cracking will also reduce the naphtha requirement to some extent
This dynamic is chiefly attributable to expansions in the US and Middle East domestic ethane cracking
The US in particular has seen more than 8mtpa of ethane cracker capacity started up since 2017 Another 66mtpa is expected to be added from now till 2022
There is also increased use of imported ethane and LPG in international markets such as Asia Future expansions in this region include the Zhejiang Satellite Petrochemical ethane cracker project which comprises two 1250000 tonneyear ethane crackers with start-up expected in 2021 and 2023
Meanwhile PetroChina is also planning a 600000 tonneyear ethane cracker in Xinjiang province for start-up in 2023 which would utilise domestic ethane from the Tarim oilfield
Global Cracker Feedstock Slate
Heavier Liquids
NaphthaLPGEthane
EUROPE
Heavier Liquids
NaphthaLPGEthane
NORTH AMERICA
Heavier Liquids
NaphthaLPGEthane
S amp C AMERICA
Heavier Liquids
NaphthaLPGEthane
AFRICA
Heavier Liquids
NaphthaLPGEthane
MIDDLE EAST
Heavier Liquids
NaphthaLPGEthane
FORMER USSR
Heavier Liquids
NaphthaLPGEthane
NORTHEAST ASIA
Heavier Liquids
NaphthaLPGEthane
ASIA AND PACIFIC
68 74
19 168 6 5 4
3737
8 8
56 564752
797370 69
20 20 10110 0
39
17
52
23
0
60
81
35 27
1014 8 6
14108120 6
63 59
28 32
55
34
1 010 15 12 11 15 1416
34
0 0
2018 2015
Source ICIS Supply and Demand Database
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 5
Furthermore recycling efforts particularly in plastics are gaining traction driven by an aspiration towards circular economy adoption Some portions of virgin resin demand and thus feedstock demand will be displaced although the effects will likely be felt more in the longer term
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Nevertheless naphtha will remain an important and viable cracker feedstock outside the US and Middle East In Asia ICIS expects over 210m tonnes of incremental demand for naphtha between 2018-2040 of which 157m tonnes will come from Northeast Asia and about 54m tonnes from Asia and Pacific (Indian sub-continent Southeast Asia and Oceania)
To put that into perspective that is double the size of the current market Despite the dampening factors of feedstock diversification lightening of cracker feedstocks and growing recycling efforts there is still a very sizeable naphtha requirement to be fulfilled by refineries especially in Asia
Navigating the Challenging Market EnvironmentHowever this scenario will not benefit all refiners Firstly ICIS expects naphtha supply to remain sufficient to satisfy the rise in demand until post-2025
The Middle East would be the key supplier with its supply tending to be lighter as more naphtha is used for gasoline and aromatics
Shale development in the US has enabled this market to emerge as an additional supplier of light material ndash pentanes plus Asia will be the largest importer but demand will be contained by domestic refinery expansions
It is not always easy to anticipate how markets evolve in the petrochemical industry and even harder to foresee the repercussions of these changes to your companyrsquos growth strategy
With the ICIS Supply and Demand Database you gain a long-term view of rapidly changing petrochemicals markets and end-to-end perspectives across the global petrochemical supply chain including refineries more than 100 petrochemical commodities and 160 countries
ICIS Supply and Demand Database has all the data and analysis you need from 1978 and forecasts up to 2040 This powerful data and analytics tool helps you to optimise opportunities manage risks and enhance growth strategies
Identify opportunities with ICIS Supply and Demand Database
IMPROVE YOUR STRATEGY NOW
ICIS expects over 210m tonnes of
incremental demand for naphtha between
2018-2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 3
The Brookings Institution a Washington-based non-profit public policy organisation estimates that every second there are five people entering the middle-class population
ICIS expects that in the long term to 2040 total petrochemical demand will grow at 32year on average slightly above that of GDP with polyesters and polyolefins seeing the strongest growth
Looking at growth in absolute terms ICIS expects that between 2018 and 2030 the world will see an incremental petrochemical demand of around 193m tonnes and an additional 162m tonnes in the next 10 years to 2040 Polyolefins will be a major contributor to that growth
Feedstock Diversification and Growing Recycling EffortsAs such the feedstock required to satisfy some additional 355m tonnes of petrochemicals will be a target for refiners However not all petrochemical feedstocks demand will be available to refiners due to diversification of feedstock and growing recycling efforts
While steam cracking remains the key workhorse for petrochemical production non-traditional routes such as coal-to-olefins (CTO) methanol-to-olefins (MTO) and propane dehydrogenation (PDH) are expected to gain an important share ndash as much as 12 10 years later from just 2 10 years ago
The rise of PDH has been supported by the availability of imported NGLs particularly from the US and Middle East and growing propylene demand On-purpose propylene production has become an attractive option that is less capital intensive to meet propylene demand without having to manage the co-products
It is worth noting that close to 30 of propylene capacities added between 2010-2018 globally were PDH More PDH capacities are expected and PDH is expected to account for around 18 of propylene supply globally by 2030
Meanwhile investments in CTO and MTO have continued to be made in China While there are environmental concerns over coal feedstock diversification and economic growth for these coal-rich inland provinces are also priorities for the Chinese government
More PDH capacities are expected and PDH is
expected to account for around 18 of propylene supply globally by 2030
Changes in Global Feedstock Slates
0
20
40
60
80
100
2025202020152010
Ethane LPG Heavier LiquidsNaphtha
9
47
13
30
6
40
15
38
Source ICIS Supply and Demand Database
Global Olefins Feedstocks
0
20
40
60
80
100
2030202520182010
28 11 12
Steam CrackingNon-Traditional Routes
Refinery gasFCCMetathesisOthers
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 4
About 59mtpa of CTO and MTO capacities are expected to be added between 2020-2022 Further out the development of MTO which relies on imported methanol is expected to fizzle out
CTO investments however will remain given Chinarsquos large coal reserves ICIS considers around 52mtpa of CTO announced capacity to be speculative
Besides the non-traditional routes that would displace some feedstock markets for refiners the lightening of the feedstock slate in steam cracking will also reduce the naphtha requirement to some extent
This dynamic is chiefly attributable to expansions in the US and Middle East domestic ethane cracking
The US in particular has seen more than 8mtpa of ethane cracker capacity started up since 2017 Another 66mtpa is expected to be added from now till 2022
There is also increased use of imported ethane and LPG in international markets such as Asia Future expansions in this region include the Zhejiang Satellite Petrochemical ethane cracker project which comprises two 1250000 tonneyear ethane crackers with start-up expected in 2021 and 2023
Meanwhile PetroChina is also planning a 600000 tonneyear ethane cracker in Xinjiang province for start-up in 2023 which would utilise domestic ethane from the Tarim oilfield
Global Cracker Feedstock Slate
Heavier Liquids
NaphthaLPGEthane
EUROPE
Heavier Liquids
NaphthaLPGEthane
NORTH AMERICA
Heavier Liquids
NaphthaLPGEthane
S amp C AMERICA
Heavier Liquids
NaphthaLPGEthane
AFRICA
Heavier Liquids
NaphthaLPGEthane
MIDDLE EAST
Heavier Liquids
NaphthaLPGEthane
FORMER USSR
Heavier Liquids
NaphthaLPGEthane
NORTHEAST ASIA
Heavier Liquids
NaphthaLPGEthane
ASIA AND PACIFIC
68 74
19 168 6 5 4
3737
8 8
56 564752
797370 69
20 20 10110 0
39
17
52
23
0
60
81
35 27
1014 8 6
14108120 6
63 59
28 32
55
34
1 010 15 12 11 15 1416
34
0 0
2018 2015
Source ICIS Supply and Demand Database
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 5
Furthermore recycling efforts particularly in plastics are gaining traction driven by an aspiration towards circular economy adoption Some portions of virgin resin demand and thus feedstock demand will be displaced although the effects will likely be felt more in the longer term
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Nevertheless naphtha will remain an important and viable cracker feedstock outside the US and Middle East In Asia ICIS expects over 210m tonnes of incremental demand for naphtha between 2018-2040 of which 157m tonnes will come from Northeast Asia and about 54m tonnes from Asia and Pacific (Indian sub-continent Southeast Asia and Oceania)
To put that into perspective that is double the size of the current market Despite the dampening factors of feedstock diversification lightening of cracker feedstocks and growing recycling efforts there is still a very sizeable naphtha requirement to be fulfilled by refineries especially in Asia
Navigating the Challenging Market EnvironmentHowever this scenario will not benefit all refiners Firstly ICIS expects naphtha supply to remain sufficient to satisfy the rise in demand until post-2025
The Middle East would be the key supplier with its supply tending to be lighter as more naphtha is used for gasoline and aromatics
Shale development in the US has enabled this market to emerge as an additional supplier of light material ndash pentanes plus Asia will be the largest importer but demand will be contained by domestic refinery expansions
It is not always easy to anticipate how markets evolve in the petrochemical industry and even harder to foresee the repercussions of these changes to your companyrsquos growth strategy
With the ICIS Supply and Demand Database you gain a long-term view of rapidly changing petrochemicals markets and end-to-end perspectives across the global petrochemical supply chain including refineries more than 100 petrochemical commodities and 160 countries
ICIS Supply and Demand Database has all the data and analysis you need from 1978 and forecasts up to 2040 This powerful data and analytics tool helps you to optimise opportunities manage risks and enhance growth strategies
Identify opportunities with ICIS Supply and Demand Database
IMPROVE YOUR STRATEGY NOW
ICIS expects over 210m tonnes of
incremental demand for naphtha between
2018-2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 4
About 59mtpa of CTO and MTO capacities are expected to be added between 2020-2022 Further out the development of MTO which relies on imported methanol is expected to fizzle out
CTO investments however will remain given Chinarsquos large coal reserves ICIS considers around 52mtpa of CTO announced capacity to be speculative
Besides the non-traditional routes that would displace some feedstock markets for refiners the lightening of the feedstock slate in steam cracking will also reduce the naphtha requirement to some extent
This dynamic is chiefly attributable to expansions in the US and Middle East domestic ethane cracking
The US in particular has seen more than 8mtpa of ethane cracker capacity started up since 2017 Another 66mtpa is expected to be added from now till 2022
There is also increased use of imported ethane and LPG in international markets such as Asia Future expansions in this region include the Zhejiang Satellite Petrochemical ethane cracker project which comprises two 1250000 tonneyear ethane crackers with start-up expected in 2021 and 2023
Meanwhile PetroChina is also planning a 600000 tonneyear ethane cracker in Xinjiang province for start-up in 2023 which would utilise domestic ethane from the Tarim oilfield
Global Cracker Feedstock Slate
Heavier Liquids
NaphthaLPGEthane
EUROPE
Heavier Liquids
NaphthaLPGEthane
NORTH AMERICA
Heavier Liquids
NaphthaLPGEthane
S amp C AMERICA
Heavier Liquids
NaphthaLPGEthane
AFRICA
Heavier Liquids
NaphthaLPGEthane
MIDDLE EAST
Heavier Liquids
NaphthaLPGEthane
FORMER USSR
Heavier Liquids
NaphthaLPGEthane
NORTHEAST ASIA
Heavier Liquids
NaphthaLPGEthane
ASIA AND PACIFIC
68 74
19 168 6 5 4
3737
8 8
56 564752
797370 69
20 20 10110 0
39
17
52
23
0
60
81
35 27
1014 8 6
14108120 6
63 59
28 32
55
34
1 010 15 12 11 15 1416
34
0 0
2018 2015
Source ICIS Supply and Demand Database
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 5
Furthermore recycling efforts particularly in plastics are gaining traction driven by an aspiration towards circular economy adoption Some portions of virgin resin demand and thus feedstock demand will be displaced although the effects will likely be felt more in the longer term
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Nevertheless naphtha will remain an important and viable cracker feedstock outside the US and Middle East In Asia ICIS expects over 210m tonnes of incremental demand for naphtha between 2018-2040 of which 157m tonnes will come from Northeast Asia and about 54m tonnes from Asia and Pacific (Indian sub-continent Southeast Asia and Oceania)
To put that into perspective that is double the size of the current market Despite the dampening factors of feedstock diversification lightening of cracker feedstocks and growing recycling efforts there is still a very sizeable naphtha requirement to be fulfilled by refineries especially in Asia
Navigating the Challenging Market EnvironmentHowever this scenario will not benefit all refiners Firstly ICIS expects naphtha supply to remain sufficient to satisfy the rise in demand until post-2025
The Middle East would be the key supplier with its supply tending to be lighter as more naphtha is used for gasoline and aromatics
Shale development in the US has enabled this market to emerge as an additional supplier of light material ndash pentanes plus Asia will be the largest importer but demand will be contained by domestic refinery expansions
It is not always easy to anticipate how markets evolve in the petrochemical industry and even harder to foresee the repercussions of these changes to your companyrsquos growth strategy
With the ICIS Supply and Demand Database you gain a long-term view of rapidly changing petrochemicals markets and end-to-end perspectives across the global petrochemical supply chain including refineries more than 100 petrochemical commodities and 160 countries
ICIS Supply and Demand Database has all the data and analysis you need from 1978 and forecasts up to 2040 This powerful data and analytics tool helps you to optimise opportunities manage risks and enhance growth strategies
Identify opportunities with ICIS Supply and Demand Database
IMPROVE YOUR STRATEGY NOW
ICIS expects over 210m tonnes of
incremental demand for naphtha between
2018-2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 5
Furthermore recycling efforts particularly in plastics are gaining traction driven by an aspiration towards circular economy adoption Some portions of virgin resin demand and thus feedstock demand will be displaced although the effects will likely be felt more in the longer term
In the polypropylene market currently recycled material accounts for a mere 2 of the global PP production ICIS expects its share to more than triple by 2040
Nevertheless naphtha will remain an important and viable cracker feedstock outside the US and Middle East In Asia ICIS expects over 210m tonnes of incremental demand for naphtha between 2018-2040 of which 157m tonnes will come from Northeast Asia and about 54m tonnes from Asia and Pacific (Indian sub-continent Southeast Asia and Oceania)
To put that into perspective that is double the size of the current market Despite the dampening factors of feedstock diversification lightening of cracker feedstocks and growing recycling efforts there is still a very sizeable naphtha requirement to be fulfilled by refineries especially in Asia
Navigating the Challenging Market EnvironmentHowever this scenario will not benefit all refiners Firstly ICIS expects naphtha supply to remain sufficient to satisfy the rise in demand until post-2025
The Middle East would be the key supplier with its supply tending to be lighter as more naphtha is used for gasoline and aromatics
Shale development in the US has enabled this market to emerge as an additional supplier of light material ndash pentanes plus Asia will be the largest importer but demand will be contained by domestic refinery expansions
It is not always easy to anticipate how markets evolve in the petrochemical industry and even harder to foresee the repercussions of these changes to your companyrsquos growth strategy
With the ICIS Supply and Demand Database you gain a long-term view of rapidly changing petrochemicals markets and end-to-end perspectives across the global petrochemical supply chain including refineries more than 100 petrochemical commodities and 160 countries
ICIS Supply and Demand Database has all the data and analysis you need from 1978 and forecasts up to 2040 This powerful data and analytics tool helps you to optimise opportunities manage risks and enhance growth strategies
Identify opportunities with ICIS Supply and Demand Database
IMPROVE YOUR STRATEGY NOW
ICIS expects over 210m tonnes of
incremental demand for naphtha between
2018-2040
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 6
Meanwhile a global gasoline surplus is expected to develop thanks to efficiency improvements and greater penetration of EVs leading to a growing share of naphtha to be used as petrochemical feedstock
Secondly many new sites are very heavily integrated pushing towards a so-called crude oil-to-chemicals operation ndash achieved by increasing conversions through existing conversion technologies In particular the refineries of Hengli and Zhejiang Petrochemical which have already started operation have an impressive 40 petrochemical yield
Of note Tangshan Risun has reworked its configuration from the time the project was first conceived to achieve higher conversion of chemicals Meanwhile existing refineries could also raise their conversion to chemicals
Reliance has an ambition to transform its business and has set an ultimate goal to achieve greater than 70 conversion of crude refined in Jamnagar to competitive chemical building blocks of olefins and aromatics
Around half of the additional ethylene supply between 2018-2025 in Asia will come from refining-petchem integrated complexes
Refiners hoping to gain shares in the petrochemical feedstock space by supplying to the merchant market will find it challenging given the ample supply of naphtha in the market
As such refiners need to expend effort in achieving greater operational excellence in all aspects such as production and supply chain management through partnerships with others as well as research and development in technologies so as to move themselves more to the left of the cost curve
Integration or closer cooperation and partnerships between refineries and petrochemical plants are also needed A more seamless operation will be beneficial for both the refiner and the petrochemical producer
While petrochemicals will be an increasing target for refiners it is not the only target left The oil product market after all is more than 10 times bigger than the petrochemical market
The narrative in the oil industry has changed
entirely from just 10 years ago necessitating shifts in
business strategies
Naphtha SupplyDemand Balances Petrochemical Yield of Select Refineries
150
100
50
0
-50
-100
-150
2030202520202010 2015
mill
ion
tonn
es
North America South amp Central America Europe
Former USSR Africa Middle East
Northeast Asia Asia and Pacific World
Source ICIS Supply and Demand Database
wt
Pet
roch
emic
al Y
ield
Minor Integration Integrated Refinery Proposed COTC Future COTC
Dangote SA Jazan
0 10 20 30 40 50 60 70 80 90 100
Sinopec KPC RAPID Brunei HengyiSaudi COTC Shenghong Tangshan Risun
Hengli ZhejiangHPCL BarmerSTAR Turkey
Source ICIS Supply and Demand Database
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market
Copyright 2020 Reed Business Information Ltd ICIS is a member of RBI and is part of RELX Group plc ICIS accepts no liability for commercial decisions based on this content
IS THE FUTURE OF REFINERS IN PETROCHEMICALS | 7
Asia Product Balances
LPG Naphtha (net) Gasoline
Kerosenes Gas Oils Residual Fuelv
2010 2018 2020 2025 2030 2035 2040
2010 2018 2020 2025 2030 2035 2040
150
100
50
0
-50
-100
-150
-200
-250
150
100
50
0
-50
-100
-150
-200
-250
Northeast Asia
Indian Sub-Continent
South Asia
Growing deficit of petrochemical feedstocks but growing surplus of fuels
Strong demand growth among the developing economies but lack investments in refining
More refinery investments needed post 2025
2010 2018 2020 2025 2030 2035 2040Source ICIS Supply and Demand Database
Man Yiu is an analyst in the energy and refining sector with a focus on the Asian region He manages and develops large databases on energy and refining analysis and performs medium-to-long term forecast for energy and oil products demand
Man Yiu TseSenior Analyst
Energy and Refining
There is still demand growth for fuels (gasoline diesel and jet kerosene) especially in the Indian sub-continent and Southeast Asia Without new refining investments the Indian sub-continent will see a deficit in fuels
Moreover there is a lack of refining investments in Southeast Asia with fuel and petrochemical feedstock deficits continuing to widen amid strong demand growth among the developing economies
Between 2020 and 2025 oil demand in Asia and Pacific is expected to grow 33m bblday In northeast Asia on the other hand there is a growing deficit of petrochemical feedstocks but growing surplus of fuels
Thus refiners need to carefully study and understand the market demand profile in order to plan and strategise how to map supply to demand It is imperative for refineries to stay relevant to the needs of the world giving the right product mix to the market
The narrative in the oil industry has changed entirely from just 10 years ago necessitating shifts in business strategies In the next 10 years and beyond we should not expect less dynamism
There are downside risks amid a renewed and stronger attention to climate action and sustainability should we see concrete actions to that end Refiners need to continue to prepare themselves to be timely for changes in the industry always keeping a medium- and long-term view of the market