Solution for the Feedstock Reshuffle: Technology & Economic Analyzer

Transcription

1 Solution for the Feedstock Reshuffle: Technology & Economic Analyzer Special Report Prospectus IHS Chemical Prospectus

2 Contents Contents 2 Study Objective 3 Study Scope 4 Sample questions the model can answer 8 Examples of investment options the model can evaluate 8 Deliverables 8 Qualifications 9 About IHS Chemical 10 About IHS 11 Contact Information 12 2

3 Study Objective As more geographical regions emerge with low cost feedstock and new technologies are developed to allow conversion of more feedstocks to basic chemicals, companies need to determine where to focus for future investments New technologies are developing for the production of ethylene and ethylene derivatives to capitalize on advantaged feedstocks More resources are emerging as possible feedstocks for production of ethylene and derivatives enabled by new technologies Over the last five years, coal has become a key feedstock for olefin production through the rapid commercialization of the coal to olefin technology (CTO) More recently, new technology developed by Siluria offers the potential to covert of methane to ethylene through oxidative coupling Feedstocks are also becoming more heavily traded Countries without low cost feedstock are considering importing feedstocks from countries that do Several companies have proposed ethane or methanol import projects IHS Chemical has a long history of using its knowledge and database to provide project optimization assessments, often leading to bankable project feasibility studies Our success is based on our multi disciplinary and independent approach as shown below Specifically, we draw on our deep and broad commercial, technical and economic data and forecast analytics to model and assess absolute and relative project performance 3

4 This special report aims to provide companies with a reliable, independent and efficient solution to evaluate the ever-increasing number of investment options for ethylene and ethylene derivatives This report will provide a live cash flow model fully populated with IHS data, analytics and methodology, which Captures the impact of feedstock/product price changes over the lifetime of the investment Takes into account the impact from capital investment Offers a direct and normalized view of a pro forma project returns on investments Provides the cornerstone for a preliminary feasibility study Study Scope The heart of the study is an interactive Excel cash flow model that will allow evaluation of various investment options along the ethylene value chain Customizable fields In the interactive Excel cash flow model, clients of this study will be able to make selections for the following fields Client can choose pre-set values for: Location Feedstock Technology Product Product Destination US Western Canada Western Europe Middle East Singapore Indonesia China East Coast China West India Russia West Africa Brazil Argentina Australia Methane Methanol (imported) Ethane Ethane (imported) Naphtha Coal Biomass Natural gas to olefins (integrated) Methane to Olefins direct synthesis MTO (Methanol to olefins) Ethane Cracking Naphtha Cracking CTO (Coal to Olefins) CTM (Coal to MEG) Biomass to ethylene Ethylene High Density Polyethylene (integrated) Ethylene Glycol (integrated) Export (one export destination designated for each location) Domestic 4

5 US W Canada W Europe Middle East Indonesia China - East China - West India Russia West Africa Brazil Argentina Australia IHS CHEMICAL The table below shows the feedstock/location combinations that will be available for selection in the model: Column1 Methane (Oxidative Coupling) x x x x x x x x Methane to methanol to olefins x x x x x x x x Methanol (imported) x Methanol (merchant market in China) x Ethane x x x x x Ethane (imported) x x x Naphtha x x x x x Coal x x Biomass x IHS Chemical will provide the data for the following fields based on extensive research by experts in several programs Users will also be able to input their own values as desired for more customized results - Feedstock price o Natural gas o Methanol o Ethane o Naphtha o Coal o Biomass - Product price o Ethylene o High-density Polyethylene (HDPE) o Ethylene Glycol (MEG) - Utility price o Electricity o Fuel o Water o Other - Capital cost - Debt Equity Ratio - Interest Rate - Plant Capacity 5

6 Fixed Fields The cash flow model will make the following assumptions: Yield factors for each technology Scale factors for each technology Operating life 15 years Operating rates 90 percent Start-up year 2020 Location factors Transportation costs per location Duties/Tariffs per location Construction Period of 4 years Tax rate by location Owners cost Working capital Depreciation 6

7 Cash Flow Model Output Internal rate of return (IRR) and Net Present Value (NPV) Calculations Cash flow statement for 4 years of construction and 15 years of operation (see below) Graphics for side by side comparison of multiple case (see below) Column Product Revenue Feedstock Costs Gross Margin Variable Operating Expense Fixed Operating Expense Total Operating Expenses Operating Income (EBITDA) Sustaining Capital Depr Capital Depeciation Total Depreciation EBIT Net Income Taxes Net Operating Cash flow Sustaining Capital Capital Spending Working Capital Change in WC Cumulative Cash Flow Note: all years will be provided in the actual model deliverable (years omitted here to improve readability) Detailed breakdown of each item in the cash flow statement is also provided For example, detailed feedstock costs calculations will be shown NGL: Returns (IRR, %) Investment vs Risk Option Comparison, %IRR 30% 25% 20% 15% 10% 5% 0% -5% -10% 24% 21% 13% 13% 11% -6% Source: IHS Ethylene - HDPE BDH - Selling BDE Ethylene - MEG BDH - Selling Isobutylene PDH - Selling Propylene BDH - MTBE 2014 IHS 7

8 Sample questions the model can answer Which chemicals feedstock will see the highest return on investment for producing ethylene using state-of-the-art technologies in the US? What is the IRR for an integrated ethylene to HDPE plant in Western China with coal as feedstock and product delivered to coastal China? For the countries with low cost ethane, which one will have the best return on investment for a polyethylene plant with product delivered to China? Which option provides the best IRR for a plant in Argentina? Examples of investment options the model can evaluate Polyethylene in east coast China through o MTO (methanol to olefins) using merchant methanol sourced locally o MTO (methanol to olefins) using imported methanol from US priced at US market price plus freight o Integrated CTO (coal to olefins) polyethylene plant in Western China product shipped by rail to East Coast China o Integrated ethane steam cracker polyethylene plant in the US shipped to East Coast China Polyethylene in Western Europe through o Integrated naphtha cracker polyethylene plant in Western Europe o US ethane shipped to Western Europe to feed ethane cracker in Western Europe o Polyethylene produced in the US with ethane product shipped to Western Europe o Integrated ethane cracker polyethylene plant in Russia product shipped to Western Europe Deliverables Each client to this study will receive the cash flow model in Excel A PowerPoint file containing the study objective, methodology, cash flow and financial basis, and key input data will also be included with this study Key cases studies will also be analyzed in this document User support will be available to help run this model 8

9 Qualifications The technology yield factors and capital costs used in the model will be based on the analysis by the IHS Process Economics Program (PEP) Process Economics Program (PEP) The Process Economics Program (PEP) is the core technology and cost analysis program for the chemical and related industries at IHS Chemical PEP provides thorough and up-to-date technical and economic evaluations of both state-of-the-art commercial processes and potentially promising processes under development The program s evaluations cover both commodity and specialty chemicals and polymers Within the PEP program olefin processes, naphtha, gas and fuel oil cracking processes, polymer processes, and almost all process for major derivatives of cracker complexes have been evaluated on many occasions PEP has a team of highly experienced engineers that study process economics (production and capital cost estimates) through: Fundamental process design Process simulation Full mass and energy balance Detailed equipment accounting Single-Client Consulting Work IHS Chemical has also performed various single-client consulting work that includes detailed financial analysis The following projects are a few examples of the single client work that IHS Chemical has conducted in the last couple years with cash flow analysis similar to what is proposed in this study Methanol Feasibility Study - a private equity firm sought the assistance of IHS to conduct a high-level feasibility study into a world scale methanol plant in Africa As part of this study, IHS provided a cash flow model that generated key financial indicators including IRR, NPV Year on year cash flow for the duration of the project was also provided All assumptions used in the calculations were explicitly stated Sensitivities in graphical output that included changes in input and finished product pricing, reduced demand and higher capex costs, were also included Refining and Petrochemical Complex Study IHS Chemical collaborated with IHS Energy to design the optimal refining and petrochemical complex based on the client s crude oil of choice Various refining and petrochemical configurations were analyzed through a cash flow model to determine the most optimal options Ethylene, propylene and derivatives were included in the analysis Overseas Investment Options Study A large integrated player in Asia looked for investment opportunities overseas to take advantage of low cost feedstock for production of methanol, ethylene, propylene and/or C4 s IHS Chemical developed a detailed cash flow model that analyzed over 100 options across four countries 9

10 About IHS Chemical Best-in-Class Brands IHS Chemical now combines the former CMAI and SRI Consulting groups together with Chemical Week Magazine, Harriman Chemsult, IntelliChem and PCI Acrylonitrile into one integrated business unit comprising its multiclient and single client services IHS Chemical s experts, analysts and researchers who are well respected throughout the industry for their deep-rooted analysis and forecasts, extends the value that IHS can now offer by connecting clients with the vast resource of insight and expertise that exists across IHS including energy, supply chain and economics Comprehensive Coverage IHS Chemical provides the most comprehensive chemical market content and industry expertise in the world The company has more than 200 dedicated chemical experts working together to create a consistent and integrated view across more than 300 industrial chemical markets and 2,000 chemical processes for 95 industries Ensure that your decisions are based on broad, comprehensive information, forecasts, intelligence, and analysis IHS has assembled a team of chemical experts that offers an unprecedented coverage level for core chemical markets and technologies Backing them is a larger IHS community of experts covering related markets, from energy and the macro economy to the world's largest chemical-using industries, such as automotive, construction and others IHS Chemical s intellectual capital is built on an operating model that utilizes over 1,800 consultants, researchers and economists to advance cross-disciplinary collaboration and analysis 10

11 About IHS IHS is the leading source of information, insight and analytics in critical areas that shape today s business landscape Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005 Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries speaking 50 languages around the world IHS serves businesses and all levels of governments worldwide ranging from 85% of Global Fortune 500 to small businesses IHS provides comprehensive content, software and expert analysis and forecasts to more customers in more than 180 countries worldwide Information, analytics, and expertise IHS offers must-have business information, advanced research and analytics, and deep expertise in core industry sectors, such as energy and natural resources, chemicals, electronics, and transportation We focus on business-critical workflows that support our customers needs, including: Strategy Planning & Analysis: Strategic Planning, Corporate Development, M&A, Investment Analysis, Risk Assessment Energy Technical: Exploration-Production, Geoscience, Engineering, Commercial Development Product Design: Engineering Design, Research and Development Supply Chain: Procurement, Logistics, Operations, Manufacturing Environmental Health, Safety & Sustainability: Sustainability, Regulatory, Environment Health and Safety This interconnected information, expertise, and analytics across industries and workflows allows IHS to provide best-in-class solutions that power growth and value for our customers 11

12 Contact Information To make an inquiry about this study, please reach out to the IHS Chemical Special Reports team at IHS Chemical Special Reports IHS Chemical Special Reports address topical issues in the chemicals industry Please find a list of available Special Reports below If you would like to learn more about any of these products, please contact the Special Reports team at ChemicalSpecialReports@ihscom Available Special Reports Light and Heavy Naphtha: International Market Review Methanol into Fuels Applications: New sources of growth? Natural Gas Monetization Options: A Global Economics Comparison China Coal Chemical Industry Analysis Propane Dehydrogenation in China Disruption on the horizon? North America Propylene Supply Study Chemical Building Blocks from Renewables Ammonia Value Chain Global Solvents: Opportunities for Greener Solvents Lubricants in Brazil 12