philip leighton

7/31/2019 Philip Leighton

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WRA Refining and Petrochemicals in Russia and the CIS14th Annual Roundtable

Lessons the Russian Industry can Learnfrom the Middle East

November 2010


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Agenda

Part 1 Petrochemical Opportunities Gas Production in Russia and the CIS

Middle East and CIS Compared

Russia and CIS Competitiveness issues

Petrochemicals from associated gas

Conclusions

Part 2 Project Development Project Development Challenges

ME model

Russian model Conclusions


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23% World Total Reserves 18% Global Gas Production 3% Global Ethylene Production

7% World Total Reserves 5% Global Gas Production 0.2% Global Ethylene Production

Gas Production/Reserves in Russia/CIS

Enormous!

Most Russian gas is very dry (98%Methane)

Limited opportunity to extract

Ethane for Ethylene or otherpetrochemicals

Presently there is limited petrochemicals production in Russia / CIS


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Russian Oil and Gas Production Areasare Geographically Separate

Gas ProductionCentre

Oil ProductionCentres

It will require new infrastructure to capture wet gas


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Russia/CIS compared to Middle East

Russia/CIS gas production is 3 x of combined ME!

Russia oil production is similar to Saudi Arabia

Russia/CIS resemble Qatar as most hydrocarbon reserves are in gas

GAS Production (Reserves)

Mn toe

OIL Production (Reserves)

Mn toe

% Production (Reserves)

as GAS

Russia 475 (40,000) 494 (10,200) 49% (80%)

CIS 150 (13,000) 143 (6,400) 51% (66%)

Saudi Arabia 70 (7,100) 460 (36,000) 13% (16%)

Kuwait 11 (1,600) 121 (14,000) 9% (10%)

Qatar 80 (23,000) 58 (2,800) 58% (89%)

United Arab Emirates 44 (6,000) 121 (13,000) 27% (31%)


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Russia Competitiveness Issues

Feedstock

Potential cost is low for associated gas derived feedstocks. This might be the major source ofcompetitive advantage

Logistics

are poor, controlled access to domestic pipelines, otherwise exports by rail.

Distances are large for exports either WE (~2000km), or East to China (~7000km).

logistics create a $100-200/ton cost disadvantage compared with ME

However with current high oil prices this cost disadvantage is diluted

Refinery integration

presently very limited.

Opportunities for Refinery-PC integration are theoretically achievable.

However the focus of refinery upgrades has been to add value to exports of atmospheric gasoil and long residue rather than petrochemicals opportunities

Feedstock availability, feedstock pricing and product logistics are majorissues for Russia to address to build a competitive export industry


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Could Russian Future Gas be More Productive?

BCM

Will Yamal gas yield sufficient ethane to make extraction for Petrochemicalseconomic?

Yamal: 11 gas fields 5 oil and gas condensate fields

Gazproms Gas is too Dry to Support Petrochemicals


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While Russia invests very little in petrochemicals, Central Asia is becoming active

Kazakhstan and Uzbekistan have new plans for ethane based petrochemicals projects

Kazakhstan is proposing to use the wet gas from Tenghiz oil

Uzbekistan considers a new Ethane Cracker using wet gas from Aral Sea gas fields

Kazakhstan is also looking at propane based PP production

Turkmenistan is presently doing relatively little despite its very large reserves

CIS activities in Petrochemicals


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Global Petrochemicals Long Term Trends

Market Growth: driven by Asia, especially China and India

New Investments: centred around ME, Asia, LA Future Trade flow: largely ME to Asia and Rest-of-World

ME will be the main net exporter of basic Petrochemicals

Asia will continue to grow as net importer due to high regional demand

N. America will remain more or less in balance with shale gas/tight gas providing a newsource of cost competitive feedstock

Europe will experience significant onslaught of surplus exports from ME

Feedstock:

ME ethane supply will be limited

Increased use of mixed feed and heavier feeds such as LPG and naphtha

Producers with feedstock flexibility and ability to process heavier, but low cost, feeds will

have competitive advantage

Can Russia develop a role for itself in the globalPetrochemicals business same as ME?


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Associated Gas Flaring ME approach

In 1980s, Saudi Arabia constructed the Master Gas System (MGS)

Gathered and processed associated gas

Sales gas used for power and industrial uses

Recovered LPG and condensate was exported

Ethane was recovered for use in petrochemicals

Developed a world class Petrochemicals industry!

Other ME countries adopted similar gas recovery schemes

Gas Use in the GCC - 2008

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Kuwait KSA Qatar UAE

Mscm

Sales Gas Flaring Reinjection Shrinkage


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Qatar Petrochemicals is based on Moderately Wet Gas

Hydrocarbon reserves mainly as gas

North Field Gas is non-associated with alow liquids content (~6vol% ethane, ~3vol%LPG).

Qatar Government actively encouragesethane extraction for petrochemicals

A new 1.6Mt/yr Ethane cracker is in plan

Oman

Syria

Saudi Arabia

Yemen

13.5% World Total Reserves

3% Global Gas Production

1.3% Global Ethylene Production


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What Price Russian Ethane?

Ethane from Associated Gas - Russia is in a similar position to Saudi Arabia.

Associated gas is being flared

This gas is also remote from the existing gas export infrastructure

Associated gas yields a relatively large amount of liquids (LPG and condensate)

Recovered dry gas and ethane can therefore have a negative cost

Ethane is not a fungible commodity and cannot be readily exported

Wet Gas

GasProcessing

Plant

DryPipeline

Gas

NGLs

(by pipeline)NGL

FractionationPlant

Ethane, Propane,Butanes, Condensate

Wet Gas

GasProcessing

Plant

DryPipeline

Gas

NGLs

(by pipeline)NGL

FractionationPlant


GasProcessing

Plant

DryPipeline

Gas

NGLs

(by pipeline)NGL

FractionationPlant


Upgrading and monetisation of ethane from flared associated Russian gasrepresents a valuable opportunity


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Part 2 Project Development


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