NEW DIRECTIONS FOR

REFINING – IMPLICATIONS

FOR PETROCHEMICALS

CLIVE GIBSONVICE PRESIDENT

NEXANT

THAILAND

cgibson@nexant.com

APIC 2018 1

Petrochemicals demand growth likely to significantly outpace oil demand in percentage terms

5

Global Annual Average Growth Forecast (2018-2030), percent

-5

0

5

Transport Fuel Fuel Oil Olefins & Aromatics

APIC 2018

Near Term

Fuel oil demand to be significantly reduced

due to IMO regulations as shippers consider

alternative fuels to meet sulphur restrictions

Longer Term

Transport fuels growth curtailed by impact of

EVs and autonomous vehicles as well as

selective restrictions on diesel use

Despite increasing environmental pressures

on petrochemicals usage, strong growth

expected to continue

For refining industry, short term challenges focus on IMO bunker fuel regulations

APIC 2018 6

2016 2020 2025

Bun

ker

Fue

l Typ

e

HSFO LSFO Diesel/Gas Oil LNG

Potential IMO impact to bunker fuel demand

▪ Shortage of low sulphur bunker fuels

▪ Limited availability of alternative fuels

▪ Higher refinery operating rates

▪ Surplus high sulphur fuel

▪ Price volatility particularly focusing on low sulphur crude

oils, diesel/gas oil and high sulphur fuel oil

▪ Higher logistics costs for many industries

▪ Selective investment in ship scrubbers and refinery

upgrading

Potential short term impacts

In the medium term, EVs will have a limited impact on transportation fuels demand but ongoing

efficiency improvements will restrict transportation fuels demand growth

APIC 2018 7

EV Outlook: Little industry consenus

Managing molecules to maximize value via integration has been a key industry driver

8APIC 2018

REFINERY PETROCHEMICALS

Gases

Naphtha

Reformate

Kerosene

Gas Oils

Propylene

Hydrogen

Fuel

Gasoline compts

C4s

OLEFINS

AROMATICS

OTHERS

Advantaged refining and petrochemicals portfolios leading recent value chain returns

Company Financial Performance by Sector - ExxonMobil

0

10

20

30

40

50

60

2005 2007 2009 2011 2013 2015 2017Ret

urn

on A

vera

ge C

apita

l E

mpl

oyed

per

cent

Upstream Downstream Chemicals

9

Source: Nexant, Company Results

APIC 2018

Current levels of integration reflects geographical drivers such as feedstock availability, technology,

market dynamics and industry structure

10

S Asia SE Asia NE Asia Europe AmericasMid East Integrated Non-Integrated

Refinery Integration – Ethylene Capacity

Refinery Integration – Propylene Capacity

Refinery Integration – Major Petrochemicals Capacity

Ethylene

Paraxylene

Propylene

S Asia SE Asia NE Asia Europe AmericasMid East Integrated Non-Integrated

APIC 2018

Demand Simple Complex Deep

11

Conventional Refining

Demand Simple Complex Deep

Heavy Products Other Light Products Petrochemicals

Indicative Refinery Yield versus Global Demand (weight basis)

Integrated Complexes

IntegratedAromatics

IntegratedOlefins

The development of grass roots world scale integrated refinery-petrochemicals complexes has allowed

refiners to diversify product portfolios and balance supply-demand dynamics

Global

APIC 2018

Simple Complex Deep IntegratedAromatics

IntegratedOlefins

The primary driver of integrated refinery-petrochemicals complexes is improved investment returns

12

Conventional Refining Integrated Complex

Indicative Gross Margins, Singapore US$/bbl

Allowed refiners to diversify product

portfolios into petrochemicals

Significant increase in investment costs

offset by improvement in returns

Recent grass roots developments typically

involve national oil companies due to scale

Recent projects typically employing FCC

technologies to maximise petrochemicals

integration via propylene

APIC 2018

Demand Simple Complex Deep

“Crude Oil to Chemicals” represents a major shift in the degree of refinery-petrochemicals integration

13

Conventional Refining Refining – Petrochemicals integration

IntegratedAromatics

IntegratedOlefins

Crude oil toChemicals 1

Crude oil toChemicals 2

Demand Simple Complex Deep

Heavy Products Other Light Products Petrochemicals

Indicative Refinery Yield versus Global Demand (weight basis)

APIC 2018

“Crude Oil to Chemicals” reconfigures conventional technologies to maximise petrochemicals yield

Olefins/Aromatics Complex

UtilitiesResidue

Upgrading

Hydrocracking/ Fluidised

Catalytic Cracking

Hydrotreating

Crude Distillation

Fuels

APIC 2018 14

“Crude Oil to Chemicals” can employ both carbon rejection and hydrogen addition technologies,

and may employ direct crude processing

Solvent Deasphalting

Residue Hydrocracking

Gasification

CokingResidue

Hydrocracking

Flexicoking

FluidisedCatalytic Cracking

Residue Hydrotreating

Fluidised Catalytic Cracking

Hydrocracking

APIC 2018 15

16APIC 2018

World scale “Crude Oil to Chemicals” projects are already in planning, execution and operations

▪ China, 2019-2021

▪ 2 integrated complexes

Dalian

Zhoushan

▪ 400kbd refineries (Phase 1)

▪ Conventional crude oils

▪ >4 mmta paraxylene plus

olefins derivatives

▪ Back-integration from polyester

Execution

▪ Singapore, 2014

▪ Jurong Island

▪ 1 mmta ethylene cracker

▪ Direct crude oil cracking

▪ Key feature: Tapis crude oil

▪ Integrated with existing refinery-

petrochemicals complex

Operating

▪ Saudi Arabia, 2025+

▪ 2 integrated projects

400kbd refinery at Yanbu

producing 9 mmta chemicals

TC2C complex employing

CB&I/ CLG/Aramco

technologies producing 70-

80 percent chemicals

Planning

Hengli Petrochemical is likely to commercialise the first world leading scale integrated complex to

achieve petrochemicals yields of over 40 percent. This is targeted to be fully operational by 2020

Aromatics Complex

Solvent Deasphalting

VGO Hydrocracking

Residue Hydrocracking

Diesel Hydrocracking

Naphtha Hydrotreating

Gasification

Crude Distillation

OlefinsComplex

Fuels

APIC 2018 17

Whilst world scale “Crude Oil to Chemicals” integrated complexes may offer strong long term benefits,

the pace of developments will likely be limited by a number of factors

APIC 2018 18

Feedstock

Secure access to abundant supplies

Markets

Adjacent – or secure long haul access – to growing

target demand centres

Cost

Access to funding and/or external financing

Location

Local cost factors critical for competitiveness

Technology

Not all leading edge technologies available readily

for license

Ethylene Propylene PX

Annual Demand Growth World Scale Capacity World Scale COTC

Annual Incremental Demand

versus world scale Capacity

Feedstocks

Integration

Technology

sourcing unconventional materials

to capture cost advantage

extracting the most value from

what we have wherever we can

using innovation to capture

a sustainable advantage

A closing thought from APIC 2012 here in KL……

19APIC 2018

We must all keep FIT to survive

….but….

Only the fittest will thrive

2020 VISION Keeping FIT for the future – staying in shape to address the key industry MEGA trends

Nexant, Inc.

San Francisco

New York

Houston

Washington

London

Frankfurt

Bahrain

Singapore

Bangkok

Shanghai

Kuala Lumpur

www.nexant.com

22nd Floor, Rasa Tower I,

555 Phahonyothin Road,

Kwaeng Chatuchak,

Khet Chatuchak,

Bangkok 10900 Thailand

Telephone: +662 793 4600

Facsimile: +662 937 0144

www.nexant.com

“This presentation was prepared by Nexant Asia Limited (“Nexant”). Except where specifically stated otherwise in the

presentation, the information contained herein was prepared on the basis of information that is publicly available and

has not been independently verified or otherwise examined to determine its accuracy, completeness or financial

feasibility. Neither NEXANT, nor any person acting on behalf of NEXANT assumes any liabilities with respect to the

use of or for damages resulting from the use of any information contained in this presentation. NEXANT does not

represent or warrant that any assumed conditions will come to pass.

This presentation is integral and must be read in its entirety.

The presentation is given on the understanding that the recipient will maintain the contents confidential except for

internal use. The presentation should not be reproduced, distributed or used without first obtaining prior written consent

by NEXANT. This presentation may not be relied upon by others.

This notice must accompany every copy of this presentation.”

T: +66 2793 4602

E. cgibson@nexant.com

Energy & Chemicals Advisory

Clive Gibson

Vice President