Breaking new ground in the petrochemicals sector · 2 Customer Collaboration and ... Brazil 6 36 17...
Transcript of Breaking new ground in the petrochemicals sector · 2 Customer Collaboration and ... Brazil 6 36 17...
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A.T. Kearney is a global top management consulting firm focusing on turning strategies into reality
• Tradition – Founded in 1926 in Chicago
• Global footprint – 57 offices in 39 countries
• Local - Strong presence in the Middle East
• Resources – Over 3,000 global employees
A.T. Kearney company profile
• Industries – Wide breadth spanning
• Competencies – Ranging from Strategy, Operations, Transformation
– Energy, Process & Utilities – Government – Telecom – Consumer Goods & Retail
– Financial Institutions – Automotive – Transportation – Healthcare
Overview of work
We use strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results
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Source: A.T. Kearney
We deliver Immediate Impact and Growing Advantage through our collaborative, authentic and forward-thinking style
Forward-thinking Authentic Collaborative
Immediate Impact, Growing Advantage Our Promise
How we deliver
4
Source: A.T. Kearney
Agenda of today
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Source: A.T. Kearney
8
Topic Speaker Duration
1 Navigating Global and Regional Trends
• Thomas Rings • Dr. Bernhard Hartmann 15:00 – 15:40
2 Customer Collaboration and Innovation
• Dr. Tobias Lewe • Richard Forrest 15:40 – 16:20
Break 15 min
3 Building Sustainable and Profitable Downstream Industries
• Dan Starta • José Antonio Alberich 16:35 – 17:15
4 Q&A and closing • Louis Besland 17:15 – 17:30
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Thomas Rings Head of Global Energy and Chemicals Practice
Dr. Bernhard Hartmann Head of Asian Energy and Chemicals Practice
Source: A.T. Kearney
Navigating global and regional trends that will transform the Chemical Industry landscape
Thomas Rings and Dr. Bernhard Hartmann Partners, A.T. Kearney
Global trends impact the Chemical landscape
Industry shifts to “CHIMEA”
Increasing volatility
Non-conventional feedstock
Fight for market access
1
3
2
4
11
Source: A.T. Kearney
Global chemical trends
Shale gas is becoming a material feedstock
• Leverage non-conventional feedstock 1
12
Source: CMAI, Deutsche Bank chemical industry report, EIA, A.T. Kearney
0
500
1,000
1,500
South East Asia naphtha
Western Europe naphtha
North East Asia naphtha
China CTL
US AVG feedstock
mix
US shale gas
Saudi Arabia ethane
Ethylene cost-curve per feedstock (2012, US$ per mt)
2012 average price
US shale gas is becoming more cost competitive
China’s naphtha feedstock is high on cost curve
China
USA
Canada
Mexico
AustraliaSouth Africa
Argentina
Brazil6
3617
11
19
111422
Europe
India2
18
North Africa 15
Global shale gas reserves (in trillion m3)
Shale gas advantage is a game changer for NA The trends of the global chemical industry
• Leverage non-conventional feedstock: North America
13
Q1-Q2 2012 2007
0%
North America Centric PetChem
Overview of profitability per region (% operating income)
30%
15%
Europe/ Asia Centric PetChem
Specialty
Nova
Westlake
Reliance Evonik
Total
LYB O&P Americas
Clariant SinopecChem
Eastman
AkzoNobel
Mitsubishi
DSM PKN Orlen
Westlake
Nova
LYB NA
Source: company reports, IEA World Energy Outlook, A.T. Kearney
1
• North America becomes a net exporter of natural gas by 2020 and of oil by 2030
• Natural gas demand will rise by 50% in 2035 of which almost half will come from shale gas
Shift in global energy balance
China is also considering to use shale gas…
14
63
93
65
7
28
3
2035
219
2020 2015 Golden rule - Government
targets Low unconventional -
14
Policies in 12th 5 year plan Shale gas production targets (bn m3)
Source: Public government information, IEA WEO 2012 Golden Rules for a Golden Age of Gas, Oxford Research Paper, A.T. Kearney
• Leverage non-conventional feedstock: China 1
government decides to develop only a small share of shale gas
government adopts the best policy for shale gas
Clear shale gas classification
Complete shale gas volume assessment
Speed up exploration and development
Set incentives and market based pricing
Build new infrastructures
...but coal seems to be a more immediate option
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EG Methanol Ammonia Coal-to-Liquid Coal-to-SynGas Coal-to-Calcium
Carbide Coal-to-Gas
Cap
acity
(in
MM
T)
14
+700%
2 2011 2015
23
+465%
4 2011 2015 2011 2015 2011 2015
119
+60%
74 28
+8%
26
Source: NSDR, HTSEC, KBR, Chemical Engineering(China), China 12th 5-year plan, ChinaCoalResearch Institute, Duke University, A.T. Kearney
15
App
licat
ion
• Leverage non-conventional feedstock: China CTL 1
LNG Jet fuel Acetylene Clothing, timber, fuel
• Industry shifts to CHIMEA
Following customers’ shift to the East
Automotive
21% 16% 17% 14% 9%8%8%8%
55%
22% 25%
51%
26%
50%
31%
40%
Rest of World North America Europe Asia
Construction
New players emerging in Fortune 500
23% 17% 17% 14%21%
27%
38%
18%
29%
37%
15%
31%
37%
10%
33%
34%
2011
93
CAGR 19%
481
2007
49
451
2003
19
407
Emerging Established
The trends of the global chemical industry
2
16
2007 2010 E2014 E2025
2007 2010 E2014 E2025
Source: Global Insight, IHS Global Insight Construction Data 2008, JP Morgan, Fortune 500, A.T. Kearney
• Industry shifts to CHIMEA
Industry’s center of gravity is shifting to CHIMEA
2
RoW
NAFTA
Europe
Asia
2025E
4,276
312 544
671
2,749
2010
2,353
173
455
578
1,147
2009
1,871
133
396
508
834
1985
480
48
144
216
72
? 2-3 Europe
2-3 Middle East
3-5 Asia
Top 10 chemical players (rank by turnover)
1-2 NAFTA
1985 2010 2025E
1 Bayer 2 BASF 3 Hoechst 4 ICI 5 Dow Chem. 6 DuPont 7 Ciba-Geigy 8 Montedison 9 Rhone-Poul.
10 Monsanto
BASF Dow Chem. ExxonMobil Sinopec SABIC Ineos Group Shell DuPont LyondellBasell Total
Chemical market value (1985 – 2025E, € bn)
17
Source: CEFIC, Chemical Week, Verband Chemische Industrie, Chemical & Engineering News, annual reports, A.T. Kearney
Now and near future...
If China and US become exporters
Fight for market access will intensify
0%
25%
50%
2030 2025 2020 2015 2000
Will China become a net exporter? … and when?
The trends of the global chemical industry
Chinese Polymer net imports (% of total demand)
Schematic chemicals trade flows
Impact on high cost feedstock regions like Europe and North Asia could be dramatic
• Fight for market access: China net exporter 3
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Source: CMAI, Shell, Chemical Week, A.T. Kearney
Chinese SOEs are pursuing their autarky goal
• Fight for market access: Chinese growth and investments 3 Revenue 2009 and 2011 (in US$ bn)
Major 2012 investments of Chinese players
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Source: IEA, company websites, press research, A.T. Kearney
• 33% stake in 5 U.S. shale gas fields
• 20% stake in Shell assets in Groundbirch • Take over of Molopo's coal steam gas assets
• Acquisition of Canada’s Nexen Inc. (Under Approval) • 33% stake of Tullow in 3 areas in Uganda
• New production facility investment in Gansu • Production facilities for para-aramid (5-year)
• Acquisitions of Total's Colombian Assets
28
38
53
315
394
16
31
36
166
188
2009 2011
+110%
+90%
+49%
+23%
+75%
Description Value (US$ bn)
2.2
1.0 0.5
1.0
7.9 5.5
15.1 1.5
MNCs in China will need to better manage risks
• Fight for market access: risks, challenges and uncertainties 3
20 Source: European Chamber of Commerce China; A.T. Kearney
Commodity pricing
• Non-transparent reward of oil import and wholesale licensees
• Adjusted prices of oil products for Chinese SOEs
Financial support
• Direct subsidies to SOEs
• Preferential financing to SOEs from national banks
• R&D funding for local players
• Lower capital cost for SOEs
Regulation
• Enforcement of environmental and safety laws
• Toxic chemicals’ registration
• Local content regulation
• Increasing volatility
Global economy more susceptible to crises
1973-74 Oil crisis
1980 Latin Am. debt crisis
2000 Dot- com
bubble
1979 Energy crisis
2008 Subprime mortgage crisis
1994 Economic crisis in Mexico
1989-1991 US savings & loan
crisis
What’s next?
The trends of the global chemical industry
More frequent boom/bust cycles (World GDP growth %, p.a.)
4
-2%
0%
2%
4%
6%
8%
21
Source: The World Bank – Data, IMF, US Bureau of Economic Analysis, A.T. Kearney
1971 1975 1980 1985 1990 1995 2000 2005 2010
1997 Asian financial crisis
11 Sept 2001
Military
Conflict
Currency
Devaluation
Global
Pandemic
Technical
Break- through
Political
Instability
Real Estate
Bubble
Renewable Energy
Crisis
Country
Disintegration
• Increasing volatility: feedstock price volatility
High feedstock volatility despite no shortages
• Short term production fluctuations
• Macro-economic uncertainty
• Speculation and decoupling of oil and gas prices
Oil resources and production costs
The trends of the global chemical industry
4
22
Source: International Energy Agency, U.S. Energy Information Administration, BP, Dow Jones, A.T. Kearney
Key drivers for feedstock price volatility
40
80
100
120
5,000 4,000 3,000 2,000 1,000
60
0 6,000 7,000 8,000 9,000 0
20
Price 2012
Pro- duced
Price 2000 Conventional
oil in MENA
Other Conven- tional oil
Heavy oil and
bitumen
Oil shales
Gas-to-liquids
Coal-to-liquids
Deepwater & ultra deepwater
CO
2-E
OR
Oth
er E
OR
A
rctic
USD 2010 / Barrel billion barrel
These trends lead to four strategic questions
Strategic imperatives for chemical players
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Strategic questions
Source: A.T. Kearney
ü Changed product trade flows and more volatility
ü Alternative feedstock may drive volatility further
ü State-driven players will change the landscape
ü New target markets and customers
Non-conventional feedstock
Industry shifts to CHIMEA
Fight for market access
Increasing volatility
Implications for chemical players
1. What is the right business model to compete in?
2. How to secure access to a long term sustainable and low cost feedstock position?
3. Which regional and customer markets to serve?
4. How to withstand market unpredictability and volatility?
Global chemical trends
We see three business models to compete on
Specialties Polymers Basic Chemicals Petrochemicals
Focused specialty players
Asset driven players
Broad based specialty players
The chemical industry structure in 2025
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Integrated players 1
2
3
Source: A.T. Kearney
• Access to low cost feedstock • Low cost manufacturing
• Ability to fund growth investments
Key success factors • Manage supply/ demand balance
• Access to markets • Customer intimacy • Innovation
capability
• Complexity management
Key success factors • Supply chain excellence
• Supply chain excellence
GCC players have to balance global and local development
25 25 Source: A.T. Kearney
• Local employment
• Diversification from oil
• Development of knowledge economies
Global expansion Local economic development
Balance feedstock
position & financial
capability
• Current business model ‒ React quickly to supply
demand trends ‒ Certify market access around
the world
• Extend business model downstream ‒ Build capabilities in innovation
& technology ‒ Develop intimacy with different
industrial customers
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Dr. Tobias Lewe Lead Partner Europe Energy and Chemicals
Richard Forrest Head of EMEA Energy and Chemicals Practice
Source: A.T. Kearney
GCC has been successful in building a world- class petrochemical industry in a few decades
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Source: GPCA, company websites, A.T. Kearney
1990 2000
GCC petrochemical evolution
2011 revenues
USD 100 bn
Selection
1970 1980 2010
Historical drivers of GCC petrochemical growth now appear at risk
− Abundance of natural resources
− Favorable geographic location
− Extensive government investment
− Low cost labor force − JVs to bring external
know-how
Historical growth drivers Global chemical trends
Increasing volatility
Non-conventional feedstock
Industry shifts to CHIMEA
Global chemical trends GCC growth drivers
Source: A.T. Kearney
30
Fight for market access
Major GCC players have started to address these future challenges via innovation and collaboration
• Global Bridge Initiative –technology CoEs for Kuwaiti public and private organizations
• Pearl GTL technology – World’s largest GTL plant by Qatar Petroleum and Shell
Source: company / organization websites, A.T. Kearney
• SABIC and Cambridge Univ. – partnership to develop new chemical technologies
• KACST – R&D centers of excellence in Saudi Arabia
• Borouge innovation center –innovative plastics solutions tailored to Middle East needs
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Regional selection
• KAUST – collaborative research to catalyze Saudi economic diversification
Innovation and collaboration initiatives
Our recent C3X study confirmed the importance of the Chemicals industry in the Gulf region
• Yearly survey among global chemicals majors and their customers since 2008
• Analyses the chemical industry based on managers’ market perspective
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29%
Western Europe
21%
Far East
67%
84%
13%
Latin America
21%
8%
North America
29%
Other
6% 13%
Customers‘ view Manufacturers‘ view
2nd most important growth market
48%
Middle East
42%
Source: C3X, A.T. Kearney
All players agree on the raising importance of collaboration along the Chemicals value chain
End consumer
Chemicals customers
Chemicals manufacturers
Feedstock supplier
Degree of collaboration in the value chain
55%
In 5 years
82%
Today In 5 years
94%
Today
67%
Today
35%
In 5 years
90%
Today
59% 74%
In 5 years
Chemicals manufacturers view
Customers view
33
Source: C3X, A.T. Kearney
However, lack of people, strategy, processes, governance and trust are main obstacles to collaboration
Ineffective governance
Undefined strategy
Top-5 obstacles to collaboration Ineffective
management processes
Lack of trust in outside parties
Customer point of view
34
Source: C3X, A.T. Kearney
People (limited resources / wrong talent)
5
3
4 2
1
Even when collaboration exists, processes lack of consistency and expected payback is still short term
35
More than 5 years
0%
Within 4 - 5 years
18%
Within 2 - 3 years
52%
Within 1 year
24%
Collaboration benefits measurement
No benefit expected
6%
End consumer
Chemicals customers
Chemicals manufac-
turers Feedstock supplier
Repeatable processes for collaboration
46% 36%
72%
36%
82%
36%
29%30%74%
44%
59%
30%
Customers view
Chemical manufacturer
view Consistently deployed
Consistently deployed
Inconsistently deployed
Inconsistently deployed
Source: C3X, A.T. Kearney
Building a strong Customer/ Manufacturer collaboration is an opportunity to foster innovation
Innovation Design and development of new products, services, processes and business models
36
Supply chain mgt.
Better information enabling efficient Operations planning, inventory and distribution optimization, leveraging better sourcing conditions
Production Better production planning, capital spend optimization, product complexity management, specifications rework and joint process improvement
Sales and marketing Joint value proposition definition, co-branding possibilities
Ranked 1st benefit of collaboration(1)
(1) 66% of respondents, Source: A.T. Kearney
Collaboration benefits
Innovation is strongly and increasingly valued by customers…
Key buying criteria for clients over time Customers innovation vision
37
Source: C3X, A.T. Kearney
60%
40%
0%
Commercial sales support
Social sustainability
Supply chain services
100%
80% Environmental sustainability
Technical sales support Innovation
Product performance/ features
Price (per performance)
Availiability Delivery reliability
Spring 2012
Spring 2011
Spring 2010
Fall 2009
Spring 2009
Fall 2008
New special value-added, Commercial services 15%
New special value-added Logistical services 29%
New business model 41%
New chemical products 71%
New product features 71%
New applications 74%
Perception of company as innovative leader 76%
New technologies 79%
… but not yet fully recognized by manufacturers who have a limited understanding of their customers
Customers perceive a limited understanding from their manufacturers
Importance of innovation
No
Basic 21%
Fair 50%
Good 23%
Expert 5%
38
Source: C3X, A.T. Kearney
56%
82%-26%
Manufacturers view Customers view
Only 43% of Manufacturers regularly meet their customer’s customers
Value levers of excellent innovation management
T Launch T 0 T Profit
Time-to- Market
Time-to-Profit
Cumulative profit
Time Idea
Increase growth through innovation
Improve product profitability
Increase innovation efficiency and speed
Idea
Idea
Idea
Project #1 Project #2
Project #3
Idea Idea
Idea
Idea
Four main levers can be activated to generate significant value through better innovation management
Innovation portfolio
Idea Idea Idea
Idea
Innovation life cycle
Build foundation for innovation (to support growth, efficiency, speed and profitability)
Source: A.T. Kearney
1 2
3
4
Illustrative
Idea
Idea
39
Convenience Use of specific coatings to “self-clean”
Anti-dirt composite panels
Self cleaning car interior & exterior
Use of electric / magnetic technology to change color
Easy transform color and effects on panels
Chameleon car
Potential innovation platforms
Potential innovation platforms identification Example Suppliers of raw materials
Chemicals … OEM Automotive Consumers
Trendy
Low maintenance
To be successful in innovation, it is key to develop a clear perspective on your value chain
Global trends
Well being & personalization
A more sustainable
planet Use of metal hydride to reflect heat
Metal hydride systems for air conditioning
Reduced emissions
Environ-mentally friendly
Source: A.T. Kearney
Formulations
40
Value Chain collaboration can generate fruitful triggers in all the dimensions of innovation
Procter & Gamble's strategy of open innovation now produces > 35% of the company's innovations and billions of dollars in revenue
• Evonik and Daimler are partnering to develop Lithium Ion batteries for automobiles to increase driving range, pushed by customers needs
Venture capital fund ($200mn) by Alstom, Schneider and Rhodia to identify and develop new Cleantechs
Global selection
Extended leverage Product development Early scouting
Source: company websites, A.T. Kearney
Examples of successful value chain collaboration
41
Impact of best practice collaboration on ME petrochemicals could represent significant impact
Expected customers impacts Costs
With collaboration
Without collaboration
+3-5%
-2-4%
With collaboration
Without collaboration
Source: GPCA, A.T. Kearney
$ +3.0 ~ +5.0 bn revenue
$ -1.7 ~ -3.4 bn costs
GCC additional potential Revenue
42
$ +2.2 ~ +4.3 bn profit