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INVESTMENT IN CHINA AS AN INTEGRAL PART OF CEPSA’S GROWTH STRATEGY
November 2015
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015 1
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Since August 2011, CEPSA’s sole shareholder is International PetroleumInvestment Company (IPIC)
For CEPSA, integration in IPIC represents a great opportunity for growthand international expansion and a major business challenge.
Who is CEPSA
IPIC – OUR SHAREHOLDER
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
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• Spain's fourth biggest industrial group in terms of turnover.
• A team of over 10,800 professionals
• Spread over six areas of activity
Who is CEPSA
THE COMPANY
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
We are a global energy company with more than
85 years of history, operating at every stage ofthe oil value chain
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• Surfactants (n-Par/LAB/LABSA/Alcohol Derivatives)
• Cumene / Phenol / Acetone• Solvents
2014 KEY FIGURES
Workforce: 1,108
Turnover: 3 billion EUR
3 BUSINESS LINES
CEPSA Química AT A GLANCE
CEPSA Química Today
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
LAB plantBécancour, QuebecCanada
120,000 t/yr. LAB
LAB plantPuente Mayorga
220,000 t/yr. LAB80,000 t/yr. LABSA
400,000 t/yr. Paraffins
Phenol PlantPalos de la Frontera
800,000 t/yr. Cumene600,000 t/yr. Phenol370,000 t/yr. Acetone24,000 t/yr. AMS
Phenol PlantShanghai (China)
360,000 t/yr. Cumene250,000 t/yr. Phenol
150,000 t/yr. Acetone
LAB plantSalvador de BahíaBrazil
220,000 t/yr. LAB120,000 t/yr. LABSA
Sinarmas CEPSA Pte LtdSingapore
Fatty Alcohols (under construction)
GLOBAL FOOTPRINT
CEPSA Química Today
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015 5
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CEPSA QUIMICA’S INTERNATIONALISATION
CEPSA Química Today
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
1980
Initial petrochemical activities in CEPSA Refineries
1967
1960
1970
1980Incorporation of CEPSA UK and CEPSA Italia
Start-up of Puente Mayorga Plant (JV Conoco) – LAB Production
1970
Start-up of Guadarranque Plant (JV Amoco) – PTA/PIA Production
1976
1990
Acquisition of 100% Guadarranque Plant –PTA/PIA Production
1987
Acquisition of 100% Puente Mayorga Plant –LAB Production
1984
1994Acquisition of Palos Plant – Cumene/Phenol Production
1994Construction of Becancour Plant (51% CQ) – LAB Production
2000
1999
Acquisition of 72% of DETEN, Brazil – LAB Production
2001
Construction of Montreal Plant (51% CQ)– PTA Production
2015
Acquisition of 100% Becancour Plant –LAB Production
2015Divestment of PTA/PIA/PET Plants
2015
Shanghai chemical plant start-up
2010
Merger of Petrochemicalactivities
2008
2014Constitution of Sinarmas CEPSA for bio alcohol plant
STRATEGIC VISION
CEPSA Química Today
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Chemicals strategic visionTo become a market leader (size and geography) in the business segments it operates, maximizing integration along the value chain and being at the technological forefront.
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
LAB 40%#1 producer worldwide
Integration 75%Paraffins >75%Benzene 40%
Phenol 40%#2 producer worldwide
Integration 50%Propylene 40%Benzene >50%
Solvents 20%#1 Supplier Iberia, Italy & UK
Integration 100%
KEYS FOR SUCCESS
CEPSA Quimica Strategy
• Integration with Refining Activities • Internationalization
Phenol & Acetone World producer
# 1# 2
Cumene World producer
# 1 LAB World producer
• Focus on markets and products wherewe have a relevant position
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Kerosene
Hydrogen
Fuel Gas
Propylene
Benzene
Fuel Oil
Sulphur
Steam
Steam
Propane
Naphtha
Jet Fuel
Aromatics
Byproducts
REFINERIES
PETROCHEMICALS
• Partnership with clients
• Innovation and Technology
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
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© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
INNOVATION AND TECHNOLOGY
For Cepsa, research is a tool for value creation, competitiveness and
sustainable growth, which contributes to improving the quality of its products and the technological
capabilities of the Company
CEPSA Química Strategy
Fixed Bed Alkylation. DETAL®
• DETAL® technology launched in 1995. First unit started up inCEPSA Quimica Canada. Developed and co-licensed by CEPSA/UOP
• Since 2004 all new LAB units have used DETAL® technology. NewDETAL® launched in 2010
Partnership
Solid-bedalkylation
n-olefins
BenzeneLAB
87% of new LAB
capacity installed since
1995 uses CEPSA’s
technology.
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Phenol Business Line
PHENOL VALUE CHAIN
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
Cepsa Química
Cepsa
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Phenol Business Line
PHENOL & ACETONE END USES
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
MOBILE PHONES, COMPUTERS LAPTOPS AND LED LIGHTS
LIGHT AND RESISTANT PLASTICS AND RUBBER
COMPOSITE MATERIALS, SCRATCH RESISTANT AND EASY-TO CLEAN FURNITURE AND MOULDING RESINS
ACETYLSALICYLIC ACID AND COMPLEX VITAMINS
UNIVERSAL SOLVENT. ACRYLIC POLYMERS FOR PAINTS AND COATINGS
WHY CHINA?
And…250 million Chinese people will
become middle class in the next 10 years
2014 Figures
World No. 1 car sales
CEPSA Chemical Shanghai
GDP growth 7.5%
World No. 1 mobile phone sales
The World largest economy (*)
(*) By GDP (PPP) (**) List of references: Images courtesy of CoolDesign, Stuart Miles and Feelart at FreeDigitalPhotos.net
1.36 Billion people
12© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
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6,4 5,5
,0
2,5
• Drive for self-sufficiency
Chinese market: With the biggest phenol demand growth rate worldwide, over 3 times higher than the rest of the world
Phenol Derivatives growth (2015-2020)
13% BPA
8% Alkylphenol
4% Phenolic Resins
BPA new plants
Chang Chun
Jiangsu Ruisheng
Shandong Lihuayi
Sinopec Sabic
Sinopec Mitsui
Nan Ya Plastic
Shiyou Chemical
Chinese Phenol Trade Chinese Acetone Trade
CEPSA Chemical Shanghai
WHY CHINA?
• Growth in downstream industry
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
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WHY SHANGHAI?
CQ
LUCITE COVESTRO
EVONIK
LUCITE: 70,000 MT of Acetone consumption
COVESTRO: 200,000 MT Phenol demand
EVONIK: 50,000 MT of Acetone consumption
CHINA: Around 25% of Chinese Demand
Around 65% of Chinese Demand
SHANGHAI CHEMICAL INDUSTRIAL PARK (SCIP)
CEPSA Chemical Shanghai
Around 20% of Global Demand
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
Largest
Phenol/Acetone hub in the world !!
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THE PROJECT
CEPSA Chemical Shanghai
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
PETROCHEMICAL PLANTProduction Capacity:
• 360,000 t/yr. of Cumene • 250,000 t/yr. of Phenol• 150,000 t/yr. of Acetone
First CEPSA Petrochemical Plant in Asia
+75% 25%
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
State Administration of Work Safety
(国家安全生产监督管理总局)
Ministry of Environmental
Protection(环境保护部)
Ministry of Public Security
(公安部)
State Administration for Industry and
Commerce(国家工商行政管理总
局)
Ministry of Railways(铁道部)
Ministry of Transport(交通部)
Inspection and Quarantine
Bureau(检验检疫局)
Customs(中国海关)
Maritime Safety
Administration(海事部)
General Administration of
Quality(国家质量监督检验检疫总局)
LESSONS LEARNED – BUSINESS CULTURE
CEPSA Chemical Shanghai
• You should work with experienced locally based advisors to leveragetheir experience and assist with negotiations.
• Most Procedure and support can be imported but much work is requiredfor adaptation and training.
• Understand the nature of the bureaucracy and approvals required.Developing/maintaining good relationship with authorities.
• Be aware that negotiations can be long and drawn-out, especially whendealing with key deal terms and pricing. You need to be flexible, patientand persistent.
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
LESSONS LEARNED – HUMAN RESOURCES AS A KEY FACTOR
CEPSA Chemical Shanghai
Early hiring of a local HR Mgr is mandatory.
Selection and starting date of First Line Management is
critical / Don’t change horses in the middle of the race.
Mid-level managers are young compared with Western
standards while turnover is high.
The talent market is very competitive.
Chinese workers value career advancement
opportunities. Make sure there´s a clear path for career
development and advancement.
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6,4 5,5
,0
2,5
2015
Capacity Demand
Bubble size represents MMT
Americas (67%)
EMEA (79%) Asia (76%)
3.0 2.3
3.3 2.7 5.8 4.5
CURRENTLY OVERCAPACITYMARKET BALANCED IN 2017
THE MARKET CHALLENGE - PHENOL SUPPLY DEMAND
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015
CEPSA Chemical Shanghai
New Plants in China 2015 (kMT)
SLOWDOWN IN CHINA
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015 19
CEPSA Chemical Shanghai
A hard landing already occurred in 1H15:
Electricity production (0.4% increase YTY in
2Q15).
Housing stars dropped by 16% and land
sales by 30% in 1H.
Tax revenue slowed to 5.5% in 2Q (TR rises
twice as fast as GDP)
A New stimulus is in place:
Boosting local Government financing.
Housing Recovery to support growth
already happening.
Think long term
谢谢Thank you
© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015