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Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
6th Downstream Project Management
3-4 December 2019 │Brussels, Belgium
Outlook for the Chemical Industry Development and Implications of the Crude to Chemicals Integration
Olivier Maronneaud
Director, Chemical Consulting
© 2019 IHS Markit. All Rights Reserved
Agenda
Chemical Outlook
Integration Drivers
Crude-to-Chemicals Implications
Source: Shutterstock
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Agenda
Chemical Outlook
Integration Drivers
Crude-to-Chemicals Implications
Source: Shutterstock
© 2019 IHS Markit. All Rights Reserved
Consumer
products
Transportation Packaging
Construction Recreation
Industrial Medical
Pharmaceutical Personal care
Textiles Electronics
Aerospace Business equipment
The Chemical Industry Enables Modern Living
Formulated
products /
performance
materials
Commodities
Differentiated
commodities
Technical
specialties
Chemical
intermediates
Olefins
Aromatics
Chlor-alkali
Others
Base
chemicals
Refined
products
& natural
gas liquids
NGLs
Naphtha
Fuel Oils
Gasoline
Diesel
Oil
Gas
Coal
Renewable
Natural
resources
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Multi-billion dollar investment decisions rest on key market
fundamentals and emerging mega-trends
Basics: Unchanged over time
Building blocks for consumer goods
Economic growth drives demand
Low cost position endures & thrives
Market access & logistics are critical
Emerging trends: Continue evolving
Energy market fundamentals
Social license to operate
Technology & world scale
Use of digital technology
© 2019 IHS Markit. All Rights Reserved
Investments in base chemical capacity continue, increasing by over
150 million metric tons between 2018 and 2025
0
100
200
300
400
500
600
700
800
900
2000 2005 2010 2015 2020 2025
Ethylene Propylene Methanol Chlorine Benzene Paraxylene
Total Base Chemical Capacity by Market
Source: IHS Markit © 2019 IHS Markit
Mill
ion
Me
tric
To
n
© 2019 IHS Markit. All Rights Reserved
APAC (primarily China) is adding over 50% of new capacity followed by
N. America and Middle East as surplus capacity emerges
-10
0
10
20
30
40
2000 2005 2010 2015 2020 2025
Ethylene Propylene (PG/CG) Methanol
Chlorine Benzene Paraxylene
World Base Chemical Annual Capacity Growth by Market
Source: IHS Markit © 2019 IHS Markit
Mil
lio
n M
etr
ic T
on
-10
0
10
20
30
40
2000 2005 2010 2015 2020 2025
China APAC (less China) North AmericaWest Europe Middle East South AmericaOthers
World Base Chemical Annual Capacity Growth by Region
Source: IHS Markit © 2019 IHS Markit
Mil
lio
n M
etr
ic T
on
© 2019 IHS Markit. All Rights Reserved
0
50
100
150
200
250
300
350
2000 2005 2010 2015 2020 2025
China Canada
United States Saudi Arabia
South Korea Iran
India
Total Base Chemical Capacity for select countries
Source: IHS Markit
Mil
lio
n M
etr
ic T
on
s
© 2019 IHS Markit
China and N. America investment continues at rapid pace
Total base chemical capacity includes: ethylene, propylene (PG,CG), methanol, chlorine, benzene, paraxylene
0
10
20
30
40
50
2000 2005 2010 2015 2020 2025
Canada Saudi Arabia
South Korea Iran
India
Total Base Chemical Capacity for select countries
Source: IHS Markit
Mil
lio
n M
etr
ic T
on
s
© 2019 IHS Markit
© 2019 IHS Markit. All Rights Reserved
Global base chemical demand increased to over 500 million metric
tons in 2019 despite a deceleration in the rate of growth
0
100
200
300
400
500
600
700
800
2000 2005 2010 2015 2020 2025
Ethylene Propylene Methanol Chlorine Benzene Paraxylene
Total Base Chemical Demand by Market
Source: IHS Markit © 2019 IHS Markit
Mill
ion
Me
tric
To
n
© 2019 IHS Markit. All Rights Reserved
-20
-10
0
10
20
30
40
2000 2005 2010 2015 2020 2025
China APAC (less China) North AmericaWest Europe Middle East South AmericaOthers
World Base Chemical Annual Demand Growth by region
Source: IHS Markit © 2019 IHS Markit
Mill
ion
Me
tric
To
n
-20
-10
0
10
20
30
40
2000 2005 2010 2015 2020 2025
Ethylene Propylene (PG/CG) Methanol
Chlorine Benzene Paraxylene
World Base Chemical Annual Demand Growth by market
Source: IHS Markit © 2019 IHS Markit
Mill
ion
Me
tric
To
n
APAC (primarily China) is adding over 60% of new demand growth
globally, driven by light olefins end-use applications
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Impact
on energy
transformation
by mobility
Crude to
chemicals
and refinery
integration
Impact of
plastics waste
on demand
Light vs
heavy
feedstocks
Global
impact on
petrochemicals
by China
MEGA-TRENDS IMPACTING THE 2020S
© 2019 IHS Markit. All Rights Reserved
Agenda
Chemical Outlook
Integration Drivers
Crude-to-Chemicals Implications
Source: Shutterstock
© 2019 IHS Markit. All Rights Reserved
Efficiency gains create peak oil demand despite underlying growth in
GDP, population, transportation and petrochemical feedstock demand
40
50
60
70
80
90
100
110
120
199
0
199
5
200
0
200
5
201
0
201
5
202
0
202
5
203
0
203
5
204
0
204
5
205
0
World oil (total liquids) demand by scenario
Note: Liquids include refined products, NGLs, biofuels, and other miscellaneous liquids. The 2017 outlooks went to 2040 only. The 2018 outlooks extend to 2050.
Source: IHS Markit, International Energy Agency (IEA)
Mill
ion
ba
rre
ls p
er
da
y
Rivalry
History Autonomy
© 2019 IHS Markit
© 2019 IHS Markit. All Rights Reserved
Demand “peaks” before 2040 for most refined products
2032
2036
2032
2030
2037
Gasoline
Transportation
Diesel
Gasoils
Residual
Fuel Oil
Total Refined
Products
Transportation diesel refers to demand in
road, rail, pipeline and domestic navigation Europe Worldwide
2018
2020
2026
2027
2018
0
20
40
60
80
100
120
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
North America Europe Asia Middle East Africa CIS Latin America
World refined product demand by region
Millio
n b
/dSource: IHS Markit © 2019 IHS Markit
© 2019 IHS Markit. All Rights Reserved
In a world of declining gasoline demand, petrochemicals growth
remains attractive (although long-term moves more toward GDP parity)
-1.0
0.0
1.0
2.0
3.0
-10%
-5%
0%
5%
10%
15%
20%
2000 2005 2010 2015 2020 2025 2030 2035 2040
Petchem Demand Growth (YoY) GDP Growth GDP Elasticity (right axis)
Petchem vs GDP Growth Elasticity
Source: IHS Markit © 2019 IHS Markit
Gro
wth
Pe
rce
nta
ge
Ela
sticity
Forecast
© 2019 IHS Markit. All Rights Reserved
From a financial standpoint, diversification and integration with refining
lead to more competitive and stable financials
0%
10%
20%
30%
40% Refining Petchem
Companies Included: ExxonMobil, BP, Shell, Chevron, P66
Historical ROCE – chemicals and refining
© 2019 IHS Markit
RO
CE
Source: IHS Markit
-30
-20
-10
0
10
20
30
40
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Fully Integrated Ethylene IntegratedParaxylene Integrated Non Integrated
2020: East-of-Suez refinery margin analysis
Source: IHS Markit © 2019 IHS Markit
Cumulative crude capacity, thousand b/d
Net
Cas
hM
arg
ins
, $
/ba
rre
l o
f C
rud
e 1st 2nd
Quartile
3rd
Quartile4th
Quartile
Most refineries in the
1st quartile are highly
integrated with
petrochemicals
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Refinery and petrochemical plants have achieved various degree of
integration
Naphtha
Reformate
Propylene
C2 & LPG Gas
Hydrogen
C4=
Crude Flexibility
Fuels
Lube base oil
Energy Integration
General operations and support (G&A) for joint site operations
Feed Flexibility
• Ethane
• LPG
• Condensate splits
Petrochemicals
Refinery Petrochemical
© 2019 IHS Markit. All Rights Reserved
Progression of refining & petrochemical operations integration
Recovery aromatics
& FCC olefins
Pre-1990s
<15%
Yield of chemicals / barrel of crude oil processed
Steam cracker site integration
plus commodity derivatives
1990 – 2000s
~15-25%
Increase scale of chemical
integration & derivatives
complexity
2010 – 2020
~25-40%
Simple
recovery
Forward
integration
Chemicals
emphasis
Development of
COTC technology
2020+
~40-80%
COTC
© 2019 IHS Markit. All Rights Reserved
Agenda
Chemical Outlook
Integration Drivers
Crude-to-Chemicals Implications
Source: Shutterstock
© 2019 IHS Markit. All Rights Reserved
Many companies are already integrated with further development
expected in the near future
12%14%
9% 10%
4%6%
16%
15%
8%
11%
9%
6%
16% 16%
11% 11%
8%8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Reliance Sinopec Aramco Exxon BP Chevron
% I
nte
gra
tio
n
2010 2018 2024
Refinery Petchem Integration (%)
Source: IHS Markit (Company Strategy and Performance Services) © 2019 IHS Markit
Temporary decline
due to Motiva assets
split
Only integrated assets for the companies have been considered for calculating the integration percentage share
© 2019 IHS Markit. All Rights Reserved
Several new projects have been announced with RRPCL in India and
SABIC/Aramco JV in Saudi focussing on Olefins
Projects
Refinery
Capacity
(MMTPA)
Ethylene
Capacity
(MMTPA)
Propylene
Capacity
(MMTPA)
P-Xylene
Capacity
(MMTPA)
Est. Chem.
conversion
(%/bbl of oil)
Investment
($bn)
Estimated Start
Trial Operation
Hengli Petrochemical 20 1.5 0.7 4.3 42 11.4 Comm. Q2 2019
Zhejiang Petroleum
and Chemical (ZPC)
Phase 1&2
40 2.8 3.3 4.0 45 12 + 12Q2 2020 (1st phase)
2nd Phase 2022?
Hengyi (Brunei) PMB
Refinery-Petrochem8 (Phase-1)
14 (Phase-2)
0.5
1.5- 1.5 >40 3.45
Phase 1: 2019
Phase 2: ??
Shenghong refinery
and Int. Petrochem16 1.1 - - 60 11.0 2021 H2
Sinopec-KPC PC JV
(Zhanjiang)15 0.8 0.6 - - - 2020
Tangshan Xuyang
(Risun)***15 1.5 - 3.5 >50 8.5 2023
Aramco/SABIC JV 20 3.0 1.9 - 40 - 50 20 Beyond 2025
RRPCL Project 60 7-8 5-6 - 30 - 40 - Beyond 2025
© 2019 IHS Markit. All Rights Reserved
Key defining attributes of deep integration/COTC
Requires additional market
and capital
capability/presence and
brings risk; deep pockets
and market access
needed
Full operational benefits
require flexibility and deep
commercial and
operational agility and
capability
Product portfolio breadth
requires process and
product applications
know-how
Substantive capital
exposure rewards those
who can efficiently
deploy capital in low-
capex locales
Scale Complexity Technology Project execution
This implies large MNC or NOCs operating in growing markets with low capital costs
Note: MNC = multi national company
NOC = national oil company
© 2019 IHS Markit. All Rights Reserved
Crude to Chemicals scale is unprecedent
3.0 3.6 4.2 4.8
1.92.3
2.73.0
0.9
1.1
1.3
1.4
0
1
2
3
4
5
6
7
8
9
10
50% 60% 70% 80%
Millio
n M
etr
ic T
on
s/Y
ear
Conversion Rate
Ethylene Propylene C4'sSource: IHS Markit © 2019 IHS Markit
COTC Output at Different Crude Conversion Rates
Feed: 20 Million Metric Tons/Year or 0.4 mmbpd Crude Oil
Base Case
© 2019 IHS Markit. All Rights Reserved
And a lot less number of projects will be required to address demand
growth
0
5
10
15
20
25
30
35
40
45
50
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mil
lio
n M
etr
ic T
on
s/Y
ea
r
No. of COTC Plants
50% Conversion Gap Ethylene Hypothetical capacity
Number of COTC Plants Required vs. Ethylene Hypothetical Capacity
Conversion Rate: 50%
Ethylene hypothetical capacity until 2030
Ethylene
hypothetical
capacity until
2025
Source: IHS Markit © 2019 IHS Markit
0
5
10
15
20
25
30
35
40
45
50
1 2 3 4 5 6 7 8 9 10 11
Mil
lio
n M
etr
ic T
on
s/Y
ea
r
No. of COTC Plants
70% Conversion Gap Ethylene Hypothetical capacity
Number of COTC Plants Required vs. Ethylene Hypothetical Capacity
Conversion Rate: 70%
Source: IHS Markit © 2019 IHS Markit
Ethylene
hypothetical
capacity until
2025
Ethylene hypothetical capacity until 2030
© 2019 IHS Markit. All Rights Reserved
In China, the commissioning of Hengli and ZPC are expected to turn
the PX market to a long position
70%
75%
80%
85%
90%
95%
100%
-5
0
5
10
15
20
25
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Op
era
tin
g R
ate
Millio
n M
etr
ic T
on
s
Demand Growth China NEA ex China SEAISC Americas Europe Middle East AfricaGlobal Excess Capacity Operating Rate
Source: IHS Markit © 2019 IHS Markit
Paraxylene demand growth vs. capacity growth
© 2019 IHS Markit. All Rights Reserved
Takeaways
• Strong cycle for chemicals, but optimism is
weakening reflecting economic and geo-political
risks
• Refined product demand is growing worldwide, but
peak is on the horizon supporting the development
of downstream integrated complexes into chemicals
• COTC are high capital investment and location
such as China and India with low Capex are relevant
• Industry structure will change as COTC scale is
unprecedented; market can only handle few of
these complexes
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Contact details
Olivier Maronneaud
Director – Chemical Consulting
London, UK
Mob: +44 777 321 4388