after the fall - the impact of oil price volatility on ... 2015/2015_apic_charles_fryer.pdf ·...

After The Fall - The Impact of Oil Price Volatility on Petrochemical Markets

Dr Charles Fryer

Tecnon OrbiChem Marketing Seminar at APIC 2015

Seoul, 7 May 2015

QUANTITY,BBL/DAY

PRICE, $/BBL

S

PERSIANGULF

USCHEAP

OIL SANDEXPENSIVE

75

50

100

150

25

OTHER OPEC

U.S.EXPENSIVE

RENEWABLEENERGY

OIL SANDCHEAP

CHEMICALFEEDSTOCKS

MOTORGASOLINE

SPACE ANDPROCESSHEAT

ELECTRICITYD

EQUILIBRIUMQUANTITY

125

APIC 2015LONG TERM CRUDE OIL MARKET EQUILIBRIUM

Source: Probe Economics

PRICE, $/BBL

QUANTITY,BBL/DAY

APIC 2015CRUDE OIL MARKET - PREVIOUS EQUILIBRIUM SAUDI-SUPPORTED $100/BBL PRICE


S

PERSIANGULF

USCHEAP

75

50

100

150

OTHER OPEC

RENEWABLEENERGY

CHEMICALFEEDSTOCKS

MOTORGASOLINE


ELECTRICITYD

QUANTITYSUPPLIED

25

125

Adjustmentof Production

PRICE, $/BBL

QUANTITY,BBL/DAY

S

PERSIANGULF

USCHEAP

OIL SANDEXPENSIVE

75

50

100

150

OTHER OPEC

U.S.EXPENSIVE

RENEWABLEENERGY

OIL SANDCHEAP

CHEMICALFEEDSTOCKS

MOTORGASOLINE


ELECTRICITYD

QUANTITYDEMANDED

QUANTITYAVAILABLE

SURPLUS

25

125

APIC 2015CRUDE OIL MARKET EQUILIBRIUM -CURRENT POSITION


APIC 2015PRICE EQUIVALENCE OF FEEDSTOCKS FOR ETHYLENE PRODUCTION

Source: Tecnon OrbiChem

Heavy Fuel Oil $/ton

50 100 150 200 250 300 350 400 450 500 550 600 650 7000C

Natural Gas $/mmBtu

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D

E 0 100 200 300 400 500 600 700 800

Ethane $/ton

A, B and C at market equivalenceC, D and E at heat content equivalence

Naphtha $/ton

A0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

B

Crude Oil $/bbl

10 20 30 40 50 60 70 80 90 100 110 120 130 1400

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

$/ton

A

This graph enables typical plant cash production costs of ethylene to be

estimated from the price of naphtha, depending on the current propylene to ethylene price ratio prevailing in the

market in question

0.8

0.9

1.0

0.7

1.1

1.2

1.3

Propylene/EthylenePrice Ratio

Naphtha $/ton


Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D

50 100 150 200 250 300 350 400 450 500 550 600 650 7000B

Natural Gas $/mmBtu

APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Naphtha, Medium Sized Cracker


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

$/ton Naphtha Europe - AsiaMay 2014


1.00 Europe

0.95 Asia

ANaphtha $/ton


Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D

50 100 150 200 250 300 350 400 450 500 550 600 650 7000B

Natural Gas $/mmBtu

Spot Ethylene price NE Asia Feb 2015

Naphtha Europe - AsiaFeb 2015

Spot Ethylene price NE Asia May 2014

APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Naphtha, Medium Sized Cracker


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

$/ton

ex ethane

ex naphtha


0.95

NaphthaEurope - AsiaMay 2014

E0 100 200 300 400 500 600 700 800

Ethane $/ton

ANaphtha $/ton


Crude Oil $/bbl10 20 30 40 50 60 70 80 90 100 110 120 130 1400C

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D

50 100 150 200 250 300 350 400 450 500 550 600 650 7000B

Natural Gas $/mmBtu

NaphthaEurope - Asia

Feb 2015

APIC 2015CASH PRODUCTION COST OF ETHYLENE


Spot Ethylene price NE Asia May 2014


Middle East – old gasMiddle East – new gas

USA – shale gas

0

5

10

15

20

25

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

$/mmBtu


APIC 2015US NATURAL GAS & ETHANE PRICES

US Nat Gas $/mmBtu

US Ethane $/mmBtuequivalent

ktpa

APIC 2015ETHANE BALANCE IN THE USA

EthyleneCapacity Using Ethane

Ethane Capacity to Consume

EthaneProduction Capacity

Note:The USA has in

addition 8,700 kpta of ethylene capacity based on light liquid

feeds (propane, butane, naphtha)

Ethane ExportCapability

2012 2013 2014 2015 2016 2017 2018 2019 2020

$/ton

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

10 20 30 40 50 60 70 80 90 100 110 120 130 1400

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16


0.8

Middle East – old gasMiddle East – new gas

Naphtha $/ton

Crude Oil $/bbl

Natural Gas $/mmBtu

ex naphtha

Ethylene production cost in the USA from naphtha allowing for the price of propylene that was 1.43 times that of ethylene (February 2015)

0.9

1.0

0.7

1.1

1.2

1.3

ex ethane priced at heat value


NaphthaEurope – Asia

Feb 2015

Ethane in Europe/AsiaImported from USA

USA – shale gas

APIC 2015CASH PRODUCTION COST OF ETHYLENEfrom Medium Sized Cracker


$/ton

APIC 2015CASH PRODUCTION COST OF PROPYLENEfrom Naphtha Cracker versus PDH Propylene cash

production cost via naphtha cracker at ratio 1.0 to ethylene

Naphtha $/ton


Crude Oil $/bbl

Natural Gas $/mmBtu


A

10 20 30 40 50 60 70 80 90 100 110 120 130 1400C

1 2 3 4 5 6 7 8 9 10 11 12 13 140 15 16D

50 100 150 200 250 300 350 400 450 500 550 600 650 7000B

Assumption: PropanePrice = Naphtha

Price x 0.90 (in $/ton)

Propylene cash production cost via propane dehydro

Spot propylene priceNE Asia May 2014

NaphthaEurope - AsiaMay 2014

NaphthaEurope - Asia

Feb 2015

Spot propylene priceNE Asia Feb 2015

APIC 2015ASIAN 0.865PTA + 0.35MEG PRICE TREND & CAPROLACTAM PRICE TREND vs BRENT CRUDE


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Brent Crude Oil $/bbl

$/ton

1999-2008

2010

2009

2011

2012

2013

2014

2015?

Caprolactam

PTA + MEG

0

200

400

600

800

1,000

1,200

1,400

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

0

200

400

600

800

1,000

1,200

1,400

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton PTA


APIC 2015PTA PRODUCTION COST vs CRUDE OIL PRICEfrom Medium Sized Asian Plant

Paraxylene – AveragedRelationship to Crude Oil

Packing, loading shipping

Acetic Acid

Cats & Chemicals

Fixed costs of PTA plant

Cost of Production

Crude Oil Price $/bbl

Energy related costs (fuel oil, electricity)

2009

2010

2011

2012

2013

2014

2015


For a given year:

World Tightness Index = log10

Capability

Capability - Consumption

Capability = Annual Nameplate Capacity less Capacity off line*

* Due to unscheduled stoppages, not scheduled maintenance turnarounds

APIC 2015TIGHTNESS INDEX

Tightness World Capacity WorldIndex Utilisation Rate Markets

1.4 96.0% Very Tight

1.2 93.7% Tight

1.0 90.0% Balanced

0.8 84.0% Loose

0.6 75.0% Over-Supplied(Sloppy)

Tightness Index

APIC 2015PTA PRICE HISTORY - ASIA

Brent Crude Oil Price $/bbl

VERYTIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

40 50 60 70 80 90 100 110 120 130 140

2009

2010

2011

2012

2013

2014

2015


March 2015

APIC 2015PTA PRICE SCENARIOS - ASIA


Tightness Index

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

40 50 60 70 80 90 100 110 120 130 140

Brent Crude Oil Price $/bbl

VERYTIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

USA Europe Asia

Ethane based ethylene Very Negative Negative Negative

- its derivatives Slightly Negative Slightly Negative Slightly Negative

Propane/Butane based olefins Negative Negative Negative

- their derivatives Slightly Negative Slightly Negative Slightly Negative

Naphtha based BTX,Butadiene Positive Very Positive Very Positive

- their derivatives Slightly Positive Positive Positive

Methane/LNG based Slightly Negative Positive Very Positive

Source: Probe Economics, Tecnon OrbiChem

APIC 2015EFFECT OF LOW OIL PRICES ON CHEMICAL INDUSTRY COMPETITIVENESS

APIC 2015CONCLUSIONS

What is the Effect of Cheap Crude Oil on Profits?

•BAD for:� ethane cracking� propane dehydrogenation� butane dehydrogenation

•GOOD for: naphtha cracking

•NEUTRAL for: naphtha reforming to BTX

•VARIABLE for: downstream chemicals

•GOOD for replacement of:� cotton by polyester fibre� wood by commodity plastics� metal by engineering plastics� glass by PET resin, polycarbonate


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