Petrochemicals Outlook: Markets in Transition · 08.12.2017 · Market Reporting Consulting Events...

London

Houston

Singapore

Moscow

Dubai

New York

Portland

Calgary

Santiago

Bogota

Rio de Janeiro

Beijing

Shanghai

Tokyo

Sydney

Astana

Kiev

Cape Town

Riga

San Francisco

Washington

Market Reporting

Consulting

Events

Petrochemicals Outlook: Markets in Transition

Paige Marie MorseDecember 2017

Market Reporting

Consulting

Events

Markets in Transition: 2018 Outlook

Feedstocks: Fundamental changes in cost and selectionNew sources and improving logistics

Development: Regional dynamics are a major factorExisting asset base must adapt

Transition: Dynamics in opposite directionsMajor petrochemicals not moving together

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Argus continues to invest and grow

Santiago

Rio de Janeiro

Cape Town Sydney

Dubai

Shanghai

Tokyo

BeijingAstana

Calgary

Bogotá

WashingtonNew York

Riga

Kiev

Houston

London Moscow

Singapore

# of employees843 # of journalist employees384

Americas

225

103

Asia

EuropeCIS

364

136

118

150

62

72San Francisco

46%

13%

5%

6%

9%

5%

6%

9% 1%

Editorial SalesMarketing ConferencesTechnology Bus DevelopmentConsulting Corporate ServicesProduct Development

Employees by region

2016 2017

Americas 193 225

Europe 305 364

CIS 113 118

Asia 119 136

Total 730 843

Employees by function


illuminating the markets

• Full range of international petrochemicalservices, including key derivatives.

• A quality one stop shop for pricing, consultingand analysis thru the entire energy space.

• Mitigate risk with an in-depth understanding ofcurrent market and have confidence in thedecisions made using our analysis.

Argus Petrochemical Services

Copyright © 2017 Argus Media Ltd. All rights reserved.

Benzene

Butadiene

Ethylene

Toluene andXylenes

Fuels andOctane

C5 andHydrocarbonResins

Methanol

Polymers

PropyleneChlor-alkali


Energy price evolution


Shifting feedstock relationships

0.45

0.55

0.65

0.75

0.85

0.95

1.05

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US Europe Asia

— Argus Consulting

C3

/Nap

hth

aR

atio

Propane has been getting cheaper vs Naphtha


• Propane/Naphtharatio has droppedas NGL availabilityhas grown in US

• LPG neededeconomicincentive to findoutlet inpetrochemicals

The Petrochemical Value Chain

Crude Oil Natural Gas

Fee

dst

ock

Pri

mar

yp

etr

och

em

ical

s

Condensate Butanes Propane Ethane Methane

STEAMCRACKING

OlefinsSynthesis Gas

Pygas

Naphtha

Aromatics

Xylene Toluene Benzene Ethylene Propylene Butadiene

Methanol

AmmoniaC5’s

DerivativesPolyethylenePolystyrene

Polypropylene SyntheticRubber

Adhesives


Product Mix varies with Cracker Feedstock


Shift towardsEthane hascritical impacton supply ofotherpetrochemicals

Global olefins prices



Europe moving to lighter feedslate

• Naphtha remainsdominantfeedstock forsteam crackers

• Ethaneinvestments yetto be fullyrealized

Source: Argus LPG Analytics


US Ethane exports: Wide-ranging destinations

US Propane exports: Changing market dynamic


Source: Argus LPG World

LPG prices higher than expected in 2017


• Strongpetrochemicaldemand from Asia

• Exports havecreated tighterlocal market

• Improved logisticsmay allow forlower inventoryneeds


+15mn t 2011-2016+36mn t 2016-2021

Global ethylene capacity growth

-5,000

0

5,000

10,000

15,000

2016 2021

MT

Western EuropeCoal driven

0

5,000

10,000

15,000

2016 2021

MT

Northeast Asia

0

5,000

10,000

15,000

2016 2021

MT

Africa and Middle East

Slowing growth

0

5,000

10,000

15,000

2016 2021

MT

North America

NGL driven0

5,000

10,000

15,000

2016 2021

MT

Central and Eastern Europe

0

5,000

10,000

15,000

2016 2021

MT

Southeast Asia

-5,000

0

5,000

10,000

15,000

2016 2021

MT

Latin America

• Cost advantage drives expansion in Ethylene, and Polyethylene


US steam cracker capacity growth


Most Expansion in China

Asia ethylene capacity additions in 2014-2021 • Improved marginsboost capacityexpansions

• Asian expansions5mn t/yr 2017 and3mn t/yr 2018-20

• China leads addingnew CTO/MTO andsteam crackers

* Prorated annual capacities presented

• Most additions in high demand region (Asia)

• Also driven by feedstock advantage: coal in Asia; propane in NA

Propylene capacity growth


Propylene production by region – 2016 and 2021


• China favors on-purpose productionas demand growsfaster than co-product routes

• US continues torely on refineries,with growing PDH

Source: Argus 2017 Propylene Annual

mnt

On-purpose includes: Propane dehydrogenation (PDH), Coal-to-Olefins (CTO),Methanol-to-Olefins (MTO), and metathesis

On-purpose capacity by region in 2017


• On-purpose capacitygrew fastest in past fiveyears

• PDH capacity grew 24pcin past five years . . .Slowing to 11pc

• PDH now accounts for15pc of Chinesecapacity

• 12 unitsoperating sincefirst in 2013

• Operationsstabilizingbefore recentinspections

• Outages cancreatesignificant pricevolatility

Chinese PDH operations


Source: Argus Propylene and Derivatives

Company Location Capacity (‘000 t/y) Technology Notes

Flint Hills Resources Houston, TX 650 Lummus Operating since 2010

Dow Freeport, TX 750 UOP Oleflex Operating Dec15

Enterprise Mont Belvieu, TX 750 Lummus start-up Fall 2017

Inter Pipeline Alberta, Canada 2 x 500 UOP Oleflex 2021; + 500 PP

Pembina/PIC Alberta, Canada 550 UOP Oleflex 2021; + 550 PP

Formosa Plastics Point Comfort, TX 550 Uhde STAR Unlikely before 2022

Rextac Odessa, TX NA TBA cancelled

C3 Petrochemicals Chocolate Bayou, TX 2 x 500 UOP Oleflex suspended

Sunoco Logistics Pennsylvania NA TBA Under evaluation

Dow TBA NA TBA Under evaluation

Lyondell USGC Up to 1mn t TBA PO planned; Possible PP

PDH units: North American projects


• Utilize domestic feedstock, butdemanding multi-step process

◦ Proceeds through syn gas,methanol intermediate, mixedproducts

• Most integrated to polymer for ease ofshipment to market

• New environmental requirements maydelay planned units

CTO units: Complex process


Source: Argus China Petroleum

• Growing feedstock trade helps to share competitiveness . . .

enabling petrochemicals growth in many regions

• CTO developments important in China . . .

but environmental concerns may impact growth

• Europe has been more resilient than expected . . .

but Ethylene/PE deluge will be significant test

• Cost metrics are shifting with supply sources . . .

challenging previous metrics for regional pricing

Signposts: Emerging disruptions


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Paige Marie Morse, PhDVice President, Propylene and derivatives

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Petrochemicals Outlook: Markets in Transition · 08.12.2017 · Market Reporting Consulting Events...

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