Middle East Investments

Transcription

1 Middle East Investments Local Strategies Driving Global Industry Change Patrick Rooney Managing Director Middle East and India May 14, 29 Seoul, South Korea Singapore Shanghai Houston New York London Düsseldorf Dubai

2 Middle East Investments Major Project Updates Near Term Longer Term The local investment climate Middle East trade impacts the global industry Middle East impacts not just base chemicals and plastics

3 Nine Million Tons of Ethylene in Two Years 28 view: 29 view: Middle East Ethylene Capacity Addition, MMT H1 '8 Q3 '8 Q4 '8 H1 '9 H2 '9

4 Middle East Ethylene Capacity Growth Will Continue Year-End Capacity, Million Metric Tons

5 Where Are the Ethylene Projects? Saudi Arabia Iran Other Middle East North Africa End '7 End '8 End ' Year-End Capacity, Million Metric Tons

6 The Market Changes in Saudi Arabia Ethylene Year-End Capacity, Million Metric Tons Sabic Affiliates Aramco Affiliates Other Crackers

7 Iran Progressing Ilam Tabriz Abadan Arak Gachsaran Bandar Assaluyeh Arya Sasol Jam Morvarid construction Kavyan construction Persian Gulf PC devel. Bandar Imam BIPC Amir Kabir Marun Bandar Imam Bandar Assaluyeh Existing Under Construction Under Development

8 Other Middle East/North Africa Projects Country Company Capacity (kt) Timing Total Capacity End Qatar RLOC 13 Q3 29 U.A.E Borouge 2 14 Q2 21 Algeria Total/Sonatrach /14 Qatar QP/ExxonMobil /14 Qatar QP/Honam 9 On hold Total Capacity End

9 Propylene Capacity Additions 28-1 Saudi Arabia Iran Israel Oman Turkey Libya Kuwait Egypt UAE End Additions Capacity, Million Metric Tons

10 Saudi Feedstocks Are Changing Ethane 73% Ethane 62% Naphtha 1% Butane 1% Propane 16% Others 1% Naphtha 8% Butane 6% Propane 23% KSA Ethylene Production = 7.4 Million Metric Tons KSA Ethylene Production = 14.8 Million Metric Tons

11 MDE Propylene is more than Crackers Propylene Capacity at Year-End, Million Metric Tons Steam Cracker FCC Propane Dehydro Metathesis End

12 Middle East Investments Major Project Updates Near Term Longer Term The local investment climate Middle East trade impacts the global industry Middle East impacts not just base chemicals and plastics

13 Middle East Investment Context & Drivers Oil Prices and Production Oil Production Desire to diversify away from just oil Country / National Interests Strong Balance Sheets Growing Populations / Job Creation Differing States / Policies / Politics Differing State of Industry Development Strong Chemical Industry Profitability / Attractiveness High Capital Costs The petrochemical industry remains profitable even at the bottom of the cycle.and at low oil prices

14 Comparative Profiles Oil & Gas Reserves & Production Selected Company Production MB / D XOM BP SHL CHV TOT SAO Selected Company Reserves 361 Billion BOE XOM BP SHL CHV TOT SAO

15 National GDP s Track Crude Oil Price GDP ($Billion) Oil Price - $/B 1,6 1 1,4 9 1, , Iran Kuwait Qatar Saudi UAE Crude Oil Dubai

16 Oil Revenue gives rise to Sovereign Wealth.and State Owned Chemical Capacity Billion Dollars Oil Revenues Ethylene Capacity, KTA Over 95% of MDE ethylene capacity has some portion of State Ownership KSA UAE KUWAIT IRAN Total Ethylene Capacity (KTA)

17 As an Investor, It Might be a Good Time to Wait... Cracker projects awarded in 26/7 were 7-8 % more expensive per ton ethylene than contracts in Capital costs are correcting downwards Steel prices are half of prices last year Engineering rates reducing Huge potential savings on $2 billion + complexes

18 Middle East Advantage Significantly Reduced at Lower Oil Prices Ethylene Production Cash Costs, $/MT 18 Brent Crude Prices: = 98 $/bbl = 45 $/bbl Average Feedstock Basis SEA NAM WEP NEA 8 $/t MDE 36 $/t Cumulative Ethylene Capacity, Million Metric Tons

19 But Middle East Returns Remain Attractive Compared to Other Regions % ROI for integrated Ethylene-HDPE Producer N. America W. Europe S.E. Asia M. East Ethane M. East E/P

20 Middle East Investments Major Project Updates Near Term Longer Term The local investment climate Middle East trade impacts the global industry Middle East impacts not just base chemicals and plastics

21 Ethylene Net Equivalent Trade, Million Metric Tons Asia Cannot Absorb Everything MDE Net Equivalent Exports Asia Net Equivalent Imports

22 Ethylene Net Equivalent Trade, Million Metric Tons 25 Exports Nowhere Is the World Immune Imports North America South America West Europe Middle East Indian Sub. Northeast Asia Southeast Asia Others

23 The Middle East Becomes A Major Propylene Player Propylene Net Equivalent Trade, Million Metric Tons 6 Exports Imports North America West Europe Middle East Asia Others

24 Middle East Investments Major Project Updates Near Term Longer Term The local investment climate Middle East trade impacts the global industry Middle East impacts not just base chemicals and plastics

25 Middle East Projects are Extending Well Beyond Basic Chemicals By 213, we expect world scale capacities for many derivatives far down the value chain Sabic Saudi Kayan Polycarbonate ExxonMobil C4 s joint venture ABS capacity in Jubail Saudi Aramco PO, MMA, PMMA at PetroRabigh Numerous derivatives at Dow Ras Tanura project Other projects in planning for Nylon, TDI, PO derivatives, PE & PP Downstream investments

26 Industry has lost significant market value.creating opportunities Asset utilizations low due to: Increased Middle East supply Durable goods demand drop due to global economy Price - $/Share 45 4 Permanent facility shutdowns announced at several sites in the US and Europe Transactions facing difficulty K-Dow Dow / Rohm & Haas Hexion / Huntsman Market valuations down significantly LyondellBasell in Chapter 11 Bankruptcy 1 5 Nova sold to IPIC of Abu Dhabi Dow Chemical Feb-28 Jun-28 Oct-28 Feb-29 Dow Jones Industrial Average (rebased)

27 Situation Analysis Middle East View Track Record of Large Acquisitions Sabic: DSM / GE Plastics / Huntsman Olefins IPIC: Borealis / OMV / Nova Tasnee: Millenium TiO2 Low Asset Values in the Stock Markets Reinvestment level economics for Middle East based assets Need for Technology / Marketing expertise Particularly in Asia

28 Conclusions Some cracker project delays, but these are mostly past. Large new capacity impacts global balances. Middle East profitability reduced at lower oil prices, but the region remains profitable Several projects underway to push downstream Expect Middle East producers to be acquisitive The Middle East is shaping global industry changes