US petrochemical renaissance: Hype vs. Reality. Samantha Hartke, Product Manager PetroChem Wire

Transcription

1 US petrochemical renaissance: Hype vs. Reality Samantha Hartke, Product Manager PetroChem Wire

2 Agenda PetroChem Wire: Who we are Ethylene & propylene: The Alphabet Soup of petrochemicals Build, baby, build! The driving forces behind the US petchems renaissance Petchems infrastructure plans Look for the silver lining? Key takeaways

3 PetroChem Wire: Who we are Daily, independent publisher creating global awareness of the US NGLs, olefins, polymers, aromatics and refined products markets by providing useful and clear information at the close of each business day Formed in 2007 Olefins, polyolefins prices serve as benchmarks for physical and swap contracts on CME/NYMEX Benzene prices serve as benchmarks for ICE contract Spot prices cover the entire value chain: NGLs/ Naphtha Olefins/ Aromatics Plastics Crude Aromatics Refined products

4 Ethylene & propylene: The alphabet soup of petchems LLDPE ETHANE ETHYLENE POLYETHYLENE LDPE HDPE

5 Ethylene & propylene: The alphabet soup of petchems HoPP PROPANE, ETHANE, NAPHTHA PROPYLENE POLYPROPYLENE CoPP

6 Ethylene & propylene: The alphabet soup of petchems HoPP PROPANE, ETHANE, NAPHTHA PROPYLENE POLYPROPYLENE REFINERY GRADE PROPYLENE (RGP) CoPP

7 Build, baby, build! The driving forces behind the US petchems renaissance,000 barrels EIA Jan-2006 May-2006 Sep-2006 Jan-2007 May-2007 Sep-2007 Jan-2008 May-2008 US natural gas liquids production Sep-2008 Jan-2009 May-2009 Sep-2009 Jan-2010 May-2010 Sep-2010 Natural gasoline Ethane Propane Normal butane Isobutane Jan-2011 May-2011 Sep-2011 Jan-2012 May-2012 Sep-2012 Jan-2013 May-2013 Sep-2013 Jan-2014 May-2014 Sep-2014 Jan-2015 May-2015 Sep % increase in US NGL production in the space of a decade (40% jump alone since 2012)

8 Build, baby, build! The driving forces behind the US petchems renaissance $/gallon US natural gas liquids prices (PetroChem Wire) End result: 68-87% decrease in US Gulf Coast NGL prices between 2008 until today 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Ethane Propane Butane ISOButane Natural Gasoline

9 Build, baby, build! The driving forces behind the US petchems renaissance cents /pound Ethylene cash costs: PetroChem Wire prices Ethane Propane N-Butane Natural Gasoline Cheaper NGL prices = lower ethylene production costs Ethylene production cash costs fell 70-79% between 2011 until today

10 Petchems infrastructure plans: Ethylene PRE-SHALE Ethylene plants in Texas: 28 Ethylene plants in Louisiana: 12 Annual production of TX & LA ethylene = 60 billion lbs SHALE BOOM Planned ethylene plants in Texas: 5 Planned ethylene plants in Louisiana: 6 Planned ethylene plants in Appalachia: 4 Proposed US annual production by 2020: 29.4 billion lbs (49% increase)

11 Petchems infrastructure plans: Ethylene $/pound US Gulf Coast ethylene (PetroChem Wire prices) Chemical companies opted to increase existing capacity through debottlenecking Oil prices crashed Crackers ran at historically high rates for most of 2015 into this year Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 END RESULT: Spot ethylene prices fell nearly 51% in five years (lost 44% of value since Feb 2015 alone)

12 Petchems infrastructure plans: Ethylene COMPANY WHERE WHEN NOTES B lbs/yr ExxonMobil TX 1Q 2017 under construction Oxy/Mexchem TX 1Q 2017 under construction ChevronPhillips TX Mid-2017 under construction Dow LA 2Q 2017 on schedule Formosa TX 2017 under construction Indorama Ventures LA end 2017 brownfield Sasol LA 2018 on schedule Axiall/Lotte Chem LA 2018 early Appalachian Resins OH 2019 ON HOLD Total TX 2019 conducting FEED PTTGC/ Marubeni OH 2020 FID in Odebrecht/Braskem WV TBD FID expected end 2015 TBD Shintech LA TBD FID expected Formosa LA 2020 FID expected mid Shell PA TBD TOTAL PROPOSED NEW ETHYLENE CAPACITY = Still left with an increase of 22.6 billion lb/yr of new ethylene production capacity (38% increase)

13 Ethylene: Look for the silver lining? $/pound Polyethylene-ethylene margins (PetroChem Wire prices) Jan Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Margins to produce polyethylene from ethylene are still healthy (up 19% since the beginning of 2011) -0.2 HDPE-Ethylene differential Ethylene Mt. B-Wms HDPE Blow Mold - FOB Houston

14 Petchems infrastructure plans: Propylene SHALE BOOM Planned PDH plants in US: 6 (5 in Texas, 1 in PA) Planned PDH plants in Canada: 1 WHO B lbs/yr WHAT WHERE WHEN Dow 1.65 new Freeport, TX ONLINE Enterprise 1.65 new Mont Belvieu, TX late 2016 Williams 1.10 new Alberta 2019 Formosa 1.30 new Point Comfort, TX 2019 Ascend 2.00 new Alvin TX 2019 REXtac 0.66 new Odessa???? Sunoco TBD new Marcus Hook, PA??? TOTAL 8.36

15 Propylene: Look for the silver lining? $/pound Polypropylene-propylene margins: PetroChem Wire prices Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Margins to produce polypropylene from propylene also still healthy (up more than fourfold since the beginning of 2011) Polypropylene-propylene differential PGP Mt. B-EPC HoPP Inj - Domestic

16 Key takeaways Shale supplies have ushered in a US petrochemicals renaissance by: (1) enhancing competitive price advantage (2) offering secure, long-term supplies of feedstock (3) offering stable environment for foreign companies looking to diversify their geographical portfolio Will the buildout continue? YES... but... expect more delays, deferrals, cancellations going forward as petchems sector faces lower oil prices, softening consumer demand, M&A environment

17 Critical market information for the entire petrochemical chain Thank you! Samantha Hartke Product Manager PetroChem Wire