n. america polyolefins incremental change or transformation? · comperj: integrated petro chemical...

N. America Polyolefins

Incremental Change or Transformation?

SPE Blow Molding ConferencePittsburghOctober 8, 2012

SPE Blow Molding Conference

2

Braskem – largest PO producer in the Americas

Structural change in energy landscape

Boom in ethylene

Boom in propylene too?

SOURCE: CMAI; Braskem

Braskem is the largest polyolefin producer in the Americas

3,465 1,230

1,415

865 8151,180

Braskem CPChem

3,940

3,055

6,520

2,525

4,075

5,305

2,310

5,185

5,185

1,740

ExxonMobil Dow Formosa

1,065

TotalLBI

1,9302,310

925 440

Ineos

1,620

PPPE

Installed Americas capacitykT

3

Braskem is the leader in PP in N. America...


N. America PP capacitykT

0

200

400

600

800

1,000

1,200

1,400

1,600

4

Braskem is also making new investments across the Americas in polyolefins capacity

Greenfield integrated petrochemical complex

1 Mt/year of ethylene based on ethane cracker

1 Mt/year of HDPE and LDPE

Investment of ~$3.5 billion

MEXICO – ETHYLENE XXI PROJECT : Start-up in 2015

New Projects

NEW PROJECTS – under study

BRAZIL – PVC Expansion : Start-up in 2012

Expansion of capacity by 210 kT/yr in Alagoas

Investments of up to $500 million

Comperj: integrated petrochemical complex in the State of RJ

SOURCE: Braskem

Greenfield integrated petrochemical complex

1 Mt/year of ethylene based on ethane cracker

1 Mt/year of HDPE, LLDPE and LDPE

PERU – under study

5

Braskem is the leading producer of renewable polymers; commercialized Green PE

Start of works / Foundation Stone: April 2009Plant start-up: September 2010Investment: $250 millionCapacity – 200 kt/year

SOURCE: Braskem 6


7



Boom in ethylene


8SOURCE: EIA; Deutsche Bank; Shale Gas.com; USGS; NPC; McKinsey analysis

Shale gas resources are potential game changer for the N. America energy landscape

ExplorationDevelopingProducing (Tcf reserves)

Niobrara

Cody

Mowry

Gammon

Excello-Mulky

Marcellus (256)

Devonian

Chattanooga

ConasaugaFloyd-Neal

Fayetteville (20)

Haynesville/Bossier (251)

Woodford/Caney

Barnett (118)

Pearsall/Eagle Ford (>100)

Woodford (42)

Barnett and Woodford

BendPierre

Lewis

Hermosa

Mancos

Hilliard-Baxter-Mancos

Antrim

New Albany

Utica

Horn River Shale (40)

Montney (152)

Bakken

Granite Wash

928 9631,093 1,122

109163 159

190202

202 202

616827

Conven-tional

CBM

TightGas

ShaleGas

2011

2,310

2008

2,074

2007

1,30935

2003

1,211

58

35

L48 gas resources

Tcf xx Resources to production ratio (years)

54 57 89 94

9SOURCE: EIA; HPDI; McKinsey analysis

Growth in shale production

3

3

48% p.a.

2011

16

5

31 1

20093

9

5

1 011

2007

3

3

BarnettHaynesvilleMarcellus

FayettevilleWoodfordEaglefordUS gas production

from shaleBcfd

6% 19% 28%

x% Percent of US production

Shale gas in the US continues to expand, growing by 48% per year in the last 4 years, resulting in a collapse in US gas prices

Decline in US natural gas prices

$ / MMBtu

0

2

4

6

8

10

12

14

16

18

2012201120102009200820072006

LNG import to JapanNBP (UK)Henry Hub (US)

10

Estimates of N. America shale gas production have increased with time

SOURCE: HPDI, McKinsey NA gas supply model, Analyst Reports

0

10

20

30

40

50

60

70

80

90

Projected N. America NG supply1,3

bcfd

Canada

US Offshore & Associated

USConventional

US Tight

US CBM

US Shales

20201918171615141312111020090

10

20

30

40

50

60

70

80

90

Projected N. America NG supply1,2

bcfd

Canada

US Offshore & Associated

USConventional

US TightUS CBM

US Shales

2020191817161514131211102009

1 US tight gas based on horizontal wells in Permian, Anadarko, Tex-LA and all wells in Green River, Austin Chalk2 Based on AEO 2010 reference case gas demand 3 Based on AEO 2011 reference case gas demand; Associated gas production from Bakken and Niobrara included in shale gas category

June 2010 estimate June 2011 estimate

11

1 Excludes finding and land costs2 Associated gas plays and predominantly oil basins excluded from this chart

SOURCE: HPDI, Woodmac, Rystad, Industry reports, EIA, McKinsey

1,5001,3001,2001,1001,000900800700

16

5004003002001000 1,400

14

12

10

8

6

4

2

01,7001,600600

Technically Recoverable resources2

Tcf

Full cost Breakeven for gas basins1 2

$/MMbtu

ConventionalCBM

TightShale

Gas production can yield ~10% returns in the $4-6 / MMBtu range, setting a “ceiling” for US gas prices

2011 Prod. = 24 TCF

~30 yrs of resources below $4/MMbtu

40+ yrs of resources below $6/MMbtu

12SOURCE: EIA; Deutsche Bank; ShaleGas.com; USGS; NPC; company announcements; McKinsey

Light Tight Oil (LTO) plays in the US can provide somewhere between 5 to 24 billion barrels of recoverable resources

Niobrara

Cody Mowry Gammon

Marcellus

Barnett

Eagle Ford/Pearsall (>100)

Avalon

Bend

Anadarko

Hermosa

Mancos

Utica

Major US shale gas, liquids, and tight oil resources

Estimated recoverable oil resources

1030307075

700

Barnett

Atoka-Cherokee

Permian (basin)

600Anadarko (basin)

150

Monterey (Antelope)

4,0003,000

4,500

Niobrara

Mancos

250

Bakken (SK)

Eagle FordBakken (ND)

Cardium 650

WaltmanExshaw

Utica

Mississippi LimeViking

Sprayberry

16

121110987654321

MMbbl

Total estimates vary widely, e.g.:▪ NPC estimates 5-10 billion

barrels of recoverable resource▪ EIA estimates up to 24 billion

barrels of recoverable resource

Monterey Shale (Antelope Play) CA

Eagle Ford/Midway/Wilcox formations TX3

14

6

12 Exshaw Shales MT

11 Bakken Shale Canada

2 Bakken Shale ND

8

13

9

Producing

Prospects

Tight oil play status

Cleveland

4

1

Sprayberry

Permian

5

Mississippi Lime

Mowry/Niobrara Shale WY

7

Green River Oil

Cardium

Duvernay Viking

7

131415

17

10

15

16

17

TBDTBDTBDTBD

13

0100200300400500600700800900

1,0001,1001,2001,300

WattenbergMississippi limeMonterey

WoodfordNiobraraBone SpringAustin Chalk

SpraberryGranite WashBakkenEagleford

SOURCE: HPDI; EIA; McKinsey analysis

Light tight oil (LTO) is undergoing a growth trajectory and has now surpassed 1 million barrels per day in the US

Financialcrisis

LTO productionkbod

Proportion of US productionPercent of March 2012 prod.

72

2843

40

17

Crude oil and petroleum products net importskbod

L481

100% = 3.9 MMbod

US

100% = 6.4 MMbod

LTOOther

GoM & Alaska

7,5471,1449,472

Mar-12LTOConventional prod. + de-mand trends

781

Mar-10

1 L48 = Lower 48 states (excludes Alaska)

1 ,200 kbod Mar 2012

2000 201202 04 06 08 10

100 kbodMarch 2006

14SOURCE: HPDI

LTO development in the US is happening at a faster pace than shale gas

1 Bakken, Eagleford, Granite Wash, Spraberry, Austin Chalk, Bone Spring, Niobrara (classified wells not included), Woodford, Monterey2 Barnett, Eagleford, Fayetteville, Haynesville, Marcellus, Woodford

0

500

1,000

1,500

2,000

2,500

3,000

3,500

LTO1 3/2006Gas 1/2002

3/201212/201110/2007

6+ years

LTO Shale gas

24,500

Number of new wellsx

8,200

16,785

Oil in kbod, Gas in kboed

Point in time where gas and oil shale broke 100 kboed

6 years later, oil production rate is 45% higher than gas was

15

Most crude production estimates call for significant increase in US crude production

Several key concerns will drive LTO evolution

▪ Amount of LTO resource available within the plays

▪ Capital expenditures available for drilling and investment

▪ The cost of supply

Estimates for 2020 US LTO production range from 2.0 to 13.8 million barrels oil per day

5.3

2.02.52.41.2

McKinsey

13.8

5.6

Belfer Center

6.6

4.2

Rystad EnergyMcKinsey

4.4

3.7

BentekBernsteinCurrent Goldman

Sachs

3.4

2.9

Bentek

Oil production from LTO playsMillion barrels per day

SOURCE: Rystad; Belfer Center; Bentek; Bernstein Research; McKinsey

2020 Estimate2015 EstimateLow Case

Base CaseHigh Case

May 2012

Significant shale gas resources in other regions could alter petrochemical landscape

16

Mexico19 tm3

USA24 tm3

Argentina22 tm3

Canada11 tm3

China36 tm3

Australia11 tm3

S. Africa14 tm3

Libya8 tm3

Algeria7 tm3

Poland5 tm3

SOURCE: EIA


17



Boom in ethylene


18

Shale gas production has resulted in increase in NGL production, leaving more room for exports

SOURCE: Bentek

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2005 2007 2009 2011 2013 2015

Pentanes PlusButanePropane

Ethane

0.00.10.20.30.40.50.60.70.8

201520132005 2007 2009 2011

Pentanes PlusButanePropane and Propylene

Ethane and propane production growth has pushed overall NGL production up

The rapid growth has left a surplus allowing more exports

1 This category also includes isobutene and isobutylene.

NGL US productionMillion bbl per day

NGL US exportsMillion bbl per day

19

Estimate of ethane supply has increased by ~ 400kbd, equivalent to seven million tonnes of ethylene

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1412102009 11 13 15 17 19 20201816

L48 Ethane supplykbd

SOURCE: McKinsey North America Gas Model; OGJ; Company reports (ONEOK, Mistral, Pioneer, MarkWest, Eagle Rock, Chesapeake etc); EIA; MMS; US Bureau of Mines; Petral Consulting; Braskem

Current sourcesEaglefordMarcellus

BakkenGranite WashOther

Current level of consumption ~ 950 kbd

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2009 11 1210 13 15 17 19 2020181614

Current sourcesEagle FordMarcellus

Bakken Granite Wash

AvalonNiobraraWoodford

Barnett

Current level of consumption ~ 950 kbd

June 2010 estimateJune 2011 estimate

20

Crackers with higher ethane intake are now at a lower cost; cost curve has, therefore, steepened in N. America

$/tonne ethylene

Crackers with >45% liquids2

25000

1000900800700600

400300200

500

1000

3000020000150001000050000

1100

Q1/2011

1 Includes plants that are not running2 Over 45% of ethylene production is based on gas oil, naphtha, or butane

US/Canada ethylene cash cost curveUses reported/estimated feed mix by crackerUses simplified, standardized assumptions for fixed cash costs

SOURCE: McKinsey ethylene model

470

Average 2007

200

0

400300200100

0350003000025000

900

15000

800700600

10000

500

11001000

5000 20000

Variable costFixed cash cost

21

N. America crackers are now competitive in all markets

SOURCE: McKinsey cost curve model

Global ethylene costs curve – plant gate; Region splits$/tonne

1,100

1,000

900

800

700

600

500

400

300

200

100

0140,000130,000120,000110,000100,000

1,200

80,00070,00060,00040,000 90,00020,00010,0000 50,00030,000

ChinaAsia ex ChinaNorth America

South AmericaWestern EuropeMiddle East

115

2010 – Q2▪ Oil price = $80/Bbl▪ Excess ethane conditions in the US▪ Alberta natural gas price = $2.80/MMBTU▪ ME ethane = $0.75/MMBTU

Effective capacity (93% of nameplate), KTA

Price setting capacity

Global demand

US petchem players have restarted idled assets and are debottlenecking capacity to maximize ethane utilization

22

Company Location Year Investment Increased Ethane Demand Ethylene equivalent (kT)

Lyondell Basell Channelview 2009 Ethane Optimization 21 kbd 325

Dow Plaquemine 2009 Ethane Optimization 13 kbd 200

CPChem Cedar Bayou 2009 Capacity Rerated 7 kbd 110

Lyondell Basell Corpus Christi 2010 Ethane Optimization 4 kbd 60

Lyondell Basell LaPorte 2010 Ethane Optimization 17 kbd 260

ExxonMobil Beaumont 2010 Ethane Optimization 15 kbd 230

Shell Norco 2010 Ethane Optimization 26 kbd 400

CPChem Sweeney 2011 Restart Idled Cracker 16 kbd 245

Eastman Longview 2011 Restart Idled Cracker 4 kbd 60

Dow Various 2011 Debottleneck 30% increase

8 kbd 125

Dow Taft 2012 Restart Idled Cracker 15-20 kbd 230

Westlake Lake Charles 2012 Debottleneck 5 kbd 55

Lyondell Basell Channelview/LaPorte 2013 Debottleneck 15 kbd 230

Dow Plaquemine 2014 Ethane Optimization 5 kbd 75

Westlake Lake Charles 2014 Debottleneck 5 kbd 75

Dow Freeport 2016 Ethane Optimization 10 kbd 155

SOURCE: Braskem; Press articles

ESTIMATES

Total 2,835 kT

Several players are considering new-build crackers in the US

Dow Chemical Co. launched an ambitious plan to increase ethylene and propylene production, as well as integrate U.S. operations into feedstock "opportunities" by using the prolific shale gas resources of the Marcellus and Eagle Ford shales. Dow is finalizing plans to construct a "world-scale" ethylene production plant along the U.S. Gulf Coast, for start-up in 2017

April 25, 2011

SOURCE: Press articles

Shell Oil Co. said today it plans to build an ethylene "cracker“ somewhere in the Appalachian region, to process natural gas from the Marcellus shale region into substances used to make petrochemicals. The Houston-based company said it's evaluating options for ethylene derivatives to make at the plant, and the leading one is Polyethylene

June 6, 2011

Chevron Phillips Chemical on Monday announced it was conducting a feasibility study to build a cracker, saying that it would be a world-scale unit using ethane as a feedstock. The new facility will utilize the advantaged feed sources expected from development of shale gas reserves, the company said

March 28, 2011

ExxonMobil Chemical plans to build a world-scale ethylene plant at its Baytown, Texas, olefins complex and two polyethylene units. Plans call for construction to begin by next March on a 1.5 million mt/year ethylene-capacity steam cracker at the Baytown complex. Start-up could come as early as 2016

June 2, 2012

23

24

600

750

900

1,050

1,200

1,350

1,500

1,650

2020201920182017201620152014201320121 Based on EIA data plus 90KBD additional supply from refineries (above average 20-40KBD reported by EIA). Includes inventory removals2 Based on Goldman/ICIS estimates of expansions/flexibility changes in existing crackers plus new crackers by Dow, CP Chem, Exxon, Shell, Sasol, but

with 1-2 year delays in start of new crackers from initial start-up date announcements

Projected cracking capacity additions will not cover ethane supply in the short term

SOURCE: EIA; Hodson; Petral; Goldman Sachs, ICIS, McKinsey analysis

Thousand bbl per dayExcess ethane supply1

Cracker capacity to consume (CTC)2

Ethane supply versus cracker capacity

… but risk that excess is used by 2020 unless ethane supply growth continues or additional delays in new crackers

Huge early excess of ethane; ethane price

likely to fall to fuel value …

0

1,000

800

600

400

200

1,200

403020100403020100

800

600

400

200

1,200

1,000

0403020100

SOURCE: McKinsey1 Based on April 2009 prices for feeds and coproducts (except CC4 prices determined by model); outlook demand based on significant recession

ImportsUtilizationXXDomestic demand

Ethylene cost curve (plant gate, 2011, Scenario No. 2) with ethylene derivative trade flow1

USD per metric ton ethylene; million metric tons ethylene equivalents; nameplate ethylene capacities

North America Europe/FSU China

South America Middle East/Africa Non-China Asia

66% of ME production will be exported

Preference for EU vs. NCA can swing back and forth as relative costs change

93% 75% 93%

63%93%93%

26.629.4 28.5

22.2

8.0

5.8

0.9

11.9

2.0

5.9

Americas could become an island continent; ME will continue to export primarily to Asia and Europe

25


26



Boom in ethylene


27

Propylene supply-demand situation in N. America is tightening, leading to higher prices

SOURCE: Braskem analysis

3,458

1,328

28

18,470

13,684

Add’l builds

Net

750

Alky/poly

4,336

Chem demand

16,356

SupplyOn-purpose

CrackersRefining

1,500

Base case NA Propylene supply and demand 2015, KTA

Refining:▪ US FCC throughput

decrease (16%)▪ Includes Coker capacity

additions (488 KBPD)▪ Assumes some refinery

shutdowns (highest volume in Northeast)1

▪ Constant FCC propylene yield (7.88% US & Mexico, 10% Canada)

Key drivers

Chemicals:▪ No debottleneck or

expansions▪ Naphtha % of feedstock

constant thru 2015Additional builds included:▪ Dow PDH (750 KTA)▪ Enterprise PDH (750

KTA)▪ Others (750 KTA)

Deficit could be removed or turn to surplus, depending on how many new builds materialize

28

N. America refined gasoline demand projected to decline

SOURCE: McKinsey Global Institute

Demand1

kbd

8,000

6,000

4,000

2,000

16,000

14,000

12,000

10,000

0

Gasoline

Diesel

Biofuels

Efficiency gains

2020191817161514131211102009

x.x CAGR (2009-20), %

1 Area chart uses MGI Scenario 2 “Battered but resilient”

-1.8% p.a.

1.9% p.a.

8.0% p.a. ▪ Net refined gasoline demand to fall by 18%, or 1,595 MBD, in North America by 2020

▪ Continued legacy gains in fleet fuel efficiency extend downward trend in transportation fuels

▪ Substitution towards biofuels will also have a substantial impact on gasoline demand

▪ All scenarios will lead to at least some degree of refinery shutdowns

29

As a result, refining rationalization is likely to continue

1 Based on regional maximum recorded annual average throughput (2004)2 Does not include small ASPH/LUB stand-alone assets

Sources: OilDesk; McKinsey analysis

2.1

-3.0

-2.5

-0.4-0.3-0.10

0.1

0.6

1.6

PADD 1 net margin, 2009$/bbl

Net

mar

gin

($/b

bl) 9

8

7 6

5 4 3

2 1

10

Sunoco-Marcus Hook 1697

3 Conoco-Linden 270

Sunoco-Philadelphia 3624 5 Conoco-Trainer 192

PBF-Delaware City 1676

8 Western-Yorktown 50

United-Warren 682

Shutdown sequence

Demonstrated throughput1

kbd

Total2 1,570

PBF-Paulsboro 16110

Hess-Port Reading 589

Sunoco-Eagle Point 731

Sunoco Eagle Point: permanently shut February 1, 2010

PBF Delaware City: closed in 2009, but to be restarted in coming

weeks

PBF Paulsboro: 100 employees laid off

(Oct. 13, 2009)

Demonstrated throughput (kbd)

PBFOthersConoco

Sunoco

Higher PP prices appear to have impacted demand growth relative to its substitutes

30SOURCE: Braskem

4.0

-5.2

1.0

1.7

-10.07.7

12.4

-1.4

-1.0

29.0

3.7

4.4

-5.2

-9.2

-4.0

-5.6

Domestic sales

Distributors

InjectionMolding

Exports

Total Sales

Sheet

Film

Compounders

HDPEPP

Sales growth 2010-2011 (annualized)%

For many years, propylene-propane spreads could not justify PDH economics; more recently, spreads have been favorable

31

600

400

200

0

PG Propylene-Propane spreads1

$/tonne

2004 2006 2008 2010 2011

1,200

1,000

800

600

400

200

0

1990 1992 1994 1996 1998 2000 2002 2003

Margin for 10% IRR


1 Spreads between Propylene and 1.22*Propane price, which is stoichiometry for propane conversion to propylene in PDH; cost to convert propane to propylene is about $110/tonne and required return on investment is $200/tonne

Thank You!Thank You!

n. america polyolefins incremental change or transformation? · comperj: integrated petro chemical...

Documents