staying competitive in a feedstock driven market oct15.pdf · staying competitive in a feedstock...
TRANSCRIPT
Staying Competitive in a Feedstock Driven Market
Prepared for: NY Metro Section of AIChEOctober 19, 2015
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Agenda
Nexant Presentation to NY Metro Section of AIChE
� Nexant Overview� Changes in the Global Petrochemical Landscape� Global Industry Dynamics
- Ethylene- Propylene- Butadiene
� Conclusions
Nexant Overview
Nexant is a global strategic, financial and technical advisory firm
Corporate Overview Business Divisions
Energy & Chemicals Advisory
Energy Demand Management
Energy Software & Grid Management
� Founded in 2000 as a spinoff of Bechtel’s Technology and Consulting Group; ChemSystems established in 1964 and purchased by Nexant in 2001 from IBM
� Nexant provides high value-added services and products for the global energy and chemicals industries
� Over 700 employees globally
� Have completed over 3,000 client assignments in over 100 countries
� Principal investors include Telesoft Partners, Symphony Technology, Oak Investment Partners, Intel Capital, and The Beacon Group
� Organized into three business units
� Business advisory services integrated across the entire energy value chain
� Technical, strategic, market, financial (new build, M&A, IPO) and project feasibility consulting services
� Advanced clean energy technology consulting services for development and commercialization
� Clients are oil, gas and chemical companies, financial companies, investors and governments
� Design/management services for the largest U.S. energy efficiency incentive programs
� Demand-side management and carbon management services for end-users, government and energy services
� Advanced software for electric utilities, U.S. ISOs, grid operators, and energy market participants
� Automated systems for electric power grids� Application service provider for energy market
participants and energy producers�
4Nexant Presentation to NY Metro Section of AIChE
Nexant’s Energy and Chemical Advisory team provides expertise across the energy value chain
POWER GAS CHEMICALSDOWNSTREAM OIL GREEN CHEMICALS RENEWABLE ENERGY
Energy Chemicals and Clean-tech
Renewable/Traditional Product Interface
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� Electric Power� Grid
Management � Distribution
Software� Energy
Efficiency� Demand Side
Management
� Gas Market Analysis and Forecasts
� Gas Monetization
� Gas Regulation� LNG & Pipeline
Projects
� Petroleum Refining
� Petroleum Logistics
� Product Market� Forecasts � Coal to liquids� Gas to liquids
� Biomass � Gasification� Solar (Thermal
& PV)� Wind Power� Clean Coal� Capture and
Sequestration� Fuel Cells &
Hydrogen� Geothermal
� C1 Chemicals and Fertilizers
� Olefins� Aromatics� Polymers� Inorganics� Specialty
Chemicals� Advanced
Materials
� Syngas� Biopolymers� Olefins� Alcohols� Aromatics� Sourced from
Biomass, Algae, Wastes, and Agricultural Sources
Nexant Presentation to NY Metro Section of AIChE
Leading global advisory to the energy and chemical industries with a proven track record
� Nexant has been advising clients in the energy and chemicals industries for 50 years
� We have completed over 3,000 client assignments including market assessments, technology evaluations, valuations/appraisals and due diligence
Proven Track Record
Global Footprint� Nexant has offices in the major energy and chemical producing and consuming
regions of the world
� Strong international presence allows us to provide valuable insights through our consultants’ local market knowledge and our vast network of sector specialists
� Over 150 consultants worldwide in Energy and Chemical Advisory
� Our consultants blend strategic consulting, operational and technical expertise with deep energy and chemical sector knowledge
� Nexant’s consultants are typically Chemical Engineers, Economists, and MBA Graduates who have significant prior experience working at energy and chemical producers
Our People
Headquarters Main Offices
Representative Offices
San Francisco Washington,
DC
White Plains
London Frankfurt
Bahrain
TokyoSeoul
Shanghai
Singapore
Kuala LumpurBangkok
Buenos Aires
La Paz Rio de
Janeiro
Project Offices
New Delhi
Pretoria
Abuja
6Nexant Presentation to NY Metro Section of AIChE
Changes in the Global Petrochemical Landscape
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What a difference a year makes
Nexant Presentation to NY Metro Section of AIChE
Brent Crude Oil Price Decline, monthly average
Source: Nexant
40
60
80
100
120
140
Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015
US$ p
er B
arre
l
9
What a difference a year makes…..
Nexant Presentation to NY Metro Section of AIChE
Q2 2014
0
50
100
150
Bren
t Cru
de O
il US$
/bbl
0
500
1,000
1,500
USA
Prod
ucts
US$
per
Ton
Q2 2015
10
The fall in oil prices has dramatically altered the investment landscape
Nexant Presentation to NY Metro Section of AIChE
� Cancellation or delay of projects in major regions� Decrease in planned ethane exports from the United States� Reduced availability of investment funds by oil producing countries such as
Venezuela� Reduced emphasis on renewables into fuel, though significant emphasis on
renewables into chemicals remain
Source: Nexant/EIA
40
60
80
100
120
140
Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015
US$ p
er B
arre
l
Iran
Venezuela
LibyaRussiaSaudi Arabia
KuwaitUAE
NigeriaIraq
Government FiscalBreak Even - 2014
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Impact of oil prices on economies results in winners and losers
Nexant Presentation to NY Metro Section of AIChE
(6)(5)(4)(3)(2)(1)0123
Estim
ated
Cha
nge i
n GD
P, Pe
rcen
t
$40 Crude Oil $10 Decline in Crude OilSource: UBS/Oxford Economics
12
Uncertain times – but sources of competitive advantage remain clear and robust in refining and chemicals sectors
Nexant Presentation to NY Metro Section of AIChE
PARAMETER KEY OBJECTIVES
Size
Location
Process Technology
Integration
Capture economies of scale
Access to low cost feedstocks/deficit markets
Cost advantage/product differentiation
Synergies with adjacent facilities
Global Ethylene Industry Dynamics
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Regional petrochemicals trends – changing dynamics but familiar themes� United States� Lighter feedstocks� Export markets� Capital costs� Product differentiation
� Middle East� Heavier feedstocks� Export markets� Integration� Product differentiation
� China� Diversified feedstocks� Economic growth� Environmental issues� Product differentiation
Ethylene Capacity Drivers
0
50
100
150
200
2014 2020
Millio
n To
ns
North America
22%
Middle East21%
China35%
Other22%
Ethylene Capacity Additions by Region
40
Nexant Presentation to NY Metro Section of AIChE
Naphtha share is forecast to decline as a result of increase light feedstock consumption in U.S., Europe, and M. East and CTO/MTO in China
Nexant Presentation to NY Metro Section of AIChE2014 2015 2020
Coal Gas Oil
2014 2015 2020
Naphtha
2014 2015 2020
Ethane
2014 2015 2020
Butane Propane +4
+9
+10
+16
Millions tons per year of ethylene Global Ethylene Capacity by Feedstock
0%
25%
50%
75%
100%
2014 2015 2020
Naphtha Ethane ButanePropane Gas Oil CTO/MTO
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Oil prices have had a radical effect on feedstock prices since late 2014, but the effects on competitiveness are less well definedU.S. Ethylene Costs (U.S.$ per ton)
U.S. Ethylene Feedstock Consumption (Million tons)
Source AFPM
0
500
1,000
1,500
2,000
2,500
3,000
3,500
EthaneQ2 2014
NaphthaQ2 2014
EthaneQ2 2015
NaphthaQ2 2015
Net Materials Utilities Fixed Costs
0
10
20
30
40
50
60
2014 2015 2020Naphtha Ethane Butane Propane
Nexant Presentation to NY Metro Section of AIChE 16
Over 50 Coal based projects focused in China
Phase 1: Coke Based Phase 3: New TechnologyPhase 2: Syngas
o Acetylene based VCM
o Benzene
o Methanol/Ammoniao MTO/MTP
o MEG via DMOo Acetyl to ethanolo Methanol to PX
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Many projects in implementation phase but facing increasing challenges
CTO CTMEG MTOMajor Development Trends� Opportunity to valorize
“stranded coal”.� Coastal projects importing
methanol
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Sector Challenges� Environmental issues� Capital cost� Production cost
competitiveness
Nexant Presentation to NY Metro Section of AIChE
Gas Oil40%
Naphtha48%
Methanol12%
China Ethylene Feedstock Consumption – 2015
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Petrochemicals feedstock cost advantages remain at lower oil prices but are substantially reduced
Nexant Presentation to NY Metro Section of AIChE
Global Ethylene Production Cost Curves versus Brent Crude Oil Price
0
1,000
2,000
3,000
0 50 100 150 200
Ethy
lene C
ash
Cost
(C
urre
nt U
.S. D
ollar
s per
Ton
Ethy
lene)
Ethylene Cumulative Capacity (million tons)
Oil Price (US$ per bbl)
140
100
70
50
Lighter Feedstocks Liquids Cracking
The cost curve is much steeper with higher oil prices
Global Propylene Industry Dynamics
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There are three primary routes to on-purpose propylene
Nexant Presentation to NY Metro Section of AIChE
…metathesis of ethylene feedstock from ethane, methanol conversion from coal or natural gas, and PDH from propane
Steam cracking and refinery FCCs currently account for a majority of propylene supply. On-purpose production is still relatively modest
Nexant Presentation to NY Metro Section of AIChE
Global Propylene Capacity by Feedstock (2015)
Global Propylene Capacity by Feedstock (Volume Basis, 2015)
05
101520253035404550
NorthAmerica
WesternEurope
MiddleEast
AsiaPacific
Millio
n To
ns
Cracker Refinery PDHMTO/MTP Others
22
0%10%20%30%40%50%60%70%80%90%
100%
NorthAmerica
WesternEurope
MiddleEast
AsiaPacific
Cracker Refinery PDHMTO/MTP Others
Going forward, a greater need for on-purpose production capacity is emerging to meet future propylene demand requirements
Nexant Presentation to NY Metro Section of AIChE
2014 2015 2020
Cracker
2014 2015 2020
Refinery
2014 2015 2020
On-Purpose+21
+4
+3
Millions Tons per Year of Propylene Global Propylene Capacity by Feedstock
0%
25%
50%
75%
100%
2014 2015 2020Cracker Refinery On-Purpose
23
05,000
10,00015,00020,00025,00030,00035,00040,00045,000
2014 2015 2020
Thou
sand
Tons
Refinery CrackerCTO/MTO On-Purpose
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China’s propylene expansion driving non-conventional technology routes
Nexant Presentation to NY Metro Section of AIChE
China Propylene Capacity by Feedstock China Propylene Capacity
0%10%20%30%40%50%60%70%80%90%
100%
2014 2015 2020
Tech
nolo
gy
Refinery CrackerCTO/MTO On-Purpose
Global Butadiene Industry Dynamics
Butane/butene dehydrogenation is an alternative route for butadiene production
Nexant Presentation to NY Metro Section of AIChE
C4 Stream
ButadieneIsobutylene
Refinery FCCU DehydrogenationButane/Butene
Dehydrogenation
Styrene Butadiene Rubber,Polybutadiene Rubber,
Styrene Butadiene Latex,etc.
Mixed Butanes Butadiene DerivativesMixed Butenes Butene-1
n-Butane Derivatives,Acetic Acid,
etc.
Butan-2-ol,Higher Oxo-
Alcohols,etc.
LLDPE comononer,
HDPE comonomer,
etc.
High Purity:� Butyl rubber� etc.
Contained:� MTBE� ETBE� etc.
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There is increased investment in alternative sources, with a step change in 2012-2014Global Butadiene Production by Process(Million tons)
0
5
10
15
20
2010 2012 2014 2016 2018 2020
Extractive Distillation On-Purpose
� Global butadiene production in 2014 was 10.7 million tons where approximately 3 percent of butadiene was produced from dehydrogenation
� Chinese companies reacted quickly to the peak pricing in 2011-2012 and are implementing numerous butenedehydrogenation projects using new (and proven) Chinese technology
� By 2020, more than 6 percent of butadiene will be produced from dehydrogenation globally
Nexant Presentation to NY Metro Section of AIChE 27
Feedstock costs main driver of butadiene economics
Nexant Presentation to NY Metro Section of AIChE
U.S. Butadiene Costs (U.S.$ per ton)
� Historically, extractive distillation has been the low cost route to butadiene
� As the market requires on-purpose butadiene (OPBD), new sources of marginally cost effective butadiene supply (i.e., bio-based butadiene) are being explored
0200400600800
1,0001,2001,4001,6001,8002,000
ExtractiveDistillation
Q2 2014
On-PurposeQ2 2014
ExtractiveDistillation
Q2 2015
On-PurposeQ2 2015
Net Materials Utilities Fixed Costs
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Conclusions
In summary…
Nexant Presentation to NY Metro Section of AIChE
� The fall in oil prices has dramatically altered the investment landscape� In order to ensure competitive feedstock positions, major regions are changing to
alternative feedstocks� Lower oil prices have narrowed the gap between high and low cost olefins
producers, but Middle East and U.S. NGL-based producers remain the most competitive
� The United States has moved toward light feedstocks due to their cost advantages
� The Middle East is focusing on integration with refineries to obtain sources of competitive advantage and capture them through the value chain
� Coalfield methanol-to-olefins (MTO) in China remains highly competitive, although MTO plants based on purchased methanol face a more challenging situation
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Nexant Inc.44 South BroadwayWhite Plains, NY 10601Telephone: + 1 914 609 0391Facsimile: + 1 914 609 0399
www.nexant.com
“This presentation was prepared by Nexant Inc. (“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.”
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Energy & Chemicals Advisory
Marisabel DolanSenior Consultant