Role of PDH in Asian Propylene Supply Market

Transcription

1 Role of PDH in Asian Propylene Supply Market Chul-Jin (CJ) Kim CEO April 19, 2017

2 Agenda 1. SK Introduction 2. Asian Propylene Market 3. PDH as on-purpose process 4. Our Values to Customers 5. Key takeaways

3 SK Group 1. SK Introduction Consists mainly of 3 Business Areas and Revenue for 15 was $ 125 Billion SK Group accounts for 9% of Korean GDP ENERGY & CHEMICALS (37 Co.) U$ 57 Billion Sales in 2015 INFORMATION & TELECOMMUNICATIONS (19 Co.) U$ 37 Billion Sales in 2015 MARKETING & LOGISTICS, SERVICES, etc. (30 Co.) U$ 31 Billion Sales in 2015 E&P, future energy, R&D Oil refining & marketing Petrochemicals Lubricants Holding co. of LNG distributors Chemicals & electronic materials Fine chemicals, life science LPG marketing & trading Petrochemicals Mobile service provider Platform services Wired/wireless telecom, broadcasting services International call & VoIP service IT solutions & consulting Internet portal, SNS /messaging Communication equipment Semiconductor memories Energy distribution, trade, consumer goods business Engineering, plant, construction Marine transportation Brokerage house Hotel, duty free, F&B

4 SK Advanced/ SK Gas 1. SK Introduction Business overview Partnership Structure Business Location Production of propylene from propane (Integrated with existing Ulsan Complex) Ulsan, Korea JV SK Gas : 45% Saudi Arabia s APC : 30% Product & Capacity Propylene 600 KTA (Stand-alone) - Feed stock : Propane 700 KTA By-products: Hydrogen, Steam, etc. Kuwait s PIC : 25% SK Gas HQ 130KT SK Gas LPG Storage 60KT Propane Butane Ulsan SK Advanced HQ SK Gas LPG Storage 140KT 130KT SK Gas Biz Performance ( 16) LPG Volume (MMT) Revenue ($MM) EBITDA ($MM) ,

5 Propylene Market Trend 2. Asian Propylene Market Demand for propylene in Asia has been and will be growing at a fast rate, outpacing the conventional(ncc/fcc) process capacity additions, giving rise to the OPP(On-purpose production) Asian Propylene Supply/Demand Trend (Unit : Thousand Metric Ton) 60,000 50,000 40,000 30,000 20,000 10,000 - Imports ETC FCC NCC Demand On-purpose ( 19 ~ 22%) ( 23 ~ 25%) ( 23 ~ 26%) (39 ~ 42%) 44 ~ 51% 53 ~ 61% 29 ~ 37% 13 ~ 24% 8 ~ 11% CAGR ( 10~ 20) Demand : 6% 4% 2% 23% Implications Strong demand growth driven by urbanization in Asian countries NCC additions in Asia stifled by the growth in ECC project in North America (Shale gas) FCC additions constrained by low gasoline demand growth [Unit : Thousand Metric Ton] Processes '16 '20 CAGR NCC/FCC 30,672 31,860 1% On-purpose 10,939 20,518 17% On-purpose process has risen to fill the gap Source: IHS Markit

6 Asian Propylene Supply by PDH PDH process will become more important as its share of total production increase by Asian Propylene Market 16 Propylene Supply by Process 20 Propylene Supply by Process 4% 4% 10% 3% 1% 0% 0% 3% 2% 0% 48% (20,052) Steam Crackers FCC Dehydro HS FCC Methanol to Olefins (MTO) 5% 8% 3% 1% 0% 1% 0% Steam Crackers 3% 41% (21,476) FCC Dehydro HS FCC Methanol to Olefins (MTO) (4,309) Coal to Olefins (CTO) 4% Coal to Olefins (CTO) Metathesis Metathesis Coal to Propylene (CTP) Olefin Cracking Refinery Grade Direct 15% (7,768) Coal to Propylene (CTP) Olefin Cracking Refinery Grade Direct 25% (10,620) Source: IHS Markit Total Supply : 41,950 KT Methanol to Propylene (MTP) Other On-Purpose Almost Doubling of PDH Supply 2016 Propylene supply by PDH to be increased by 3.4 MM ton % (10,384) Total Supply : 52,873 KT Methanol to Propylene (MTP) Other On-Purpose

7 On-purpose propylene process units 3. PDH as On-Purpose Process There are several options for on-purpose propylene production and each have its pros and cons which make them attractive for different reasons Process Feedstock Raw material cost CAPEX OPEX Challenges PDH Propane Moderate Low Moderate CTO/CTP Coal Low High High MTO/MTP Methanol High Moderate Moderate Metathesis Ethylene/ Butylene Moderate - High Low Low HS-FCC Crude Moderate Moderate Low Plant reliability & stable operation High CAPEX / Environmental & water issue Raw material cost and sourcing Availability & economics of feedstock Disposal and economics of gasoline

8 Competitiveness Analysis of PDH 3. PDH as On-Purpose Process The competitive of PDH will be dependent on the various factors like propane/naphtha price ratio, E/P price ratio, price of methanol and butylene, etc. 17(E) : Average E/P Price ratio 130% assumption ($/t) NEA demand MTP ($/t) 16 : Average E/P Price ratio 144% NEA demand OCU OCU MTP MTP CTO & CTP FCC Large NCC NCC (Med) Small NCC PDH MTO MTP OCU OCU CTO & CTP FCC NCC (Large) NCC (Small) NCC PDH (Med) MTO ($/t) E/P Ratio 100% Case Buffer NEA demand MTP Buffer MTO MTP CTO & CTP FCC Large NCC NCC (Med) PDH PDH OCU MTO Small NCC Source : Internal analysis (Propane/Naphtha price ratio : 90%) Buffer

9 World PDH Project Status 3. PDH as On-Purpose Process There has been a surge in the PDH plant production capacity in the past few years around the world, especially in NEA, and it s expected to continue in the foreseeable future. North East Asia North America CIS 660 1,400 2, West Europe Middle East 1, ,650 9, (49%) ((23%)((36%) Africa 1,770 1,770 2,270 South East Asia Unit : Thousand Metric Ton (000MT) 13 : 5,040 KMT 16 : 11,170 KMT 20 : 17,00 KMT Source: IHS Markit & internal analysis

10 Global LPG Production by region Middle East Far East Asia SEA India Oceania Europe Africa South America North America 4% 21~23% 12~13% 5~6% 24~30% % Source : IHS Global NGL Long-Term Market Outlook 2% 14~16% 7~9% CAGR ('10-'20) 3.0% 2.9% 1.8% 1.8% 4.3% 1.4% 1.4% 0.4% 4.7% 3. PDH as On-Purpose Process Global LPG Supply in 17 will be 301 MM Tons (increase of 7 MM Tons compared to 16). In 20, Supply is estimated 328 MM Tons (CAGR 2.8%) due to development of NAM shale Gas and Russia/ME Gas well Unit: MM tons/yr North America Middle East Asia Europe South America/ Africa Key Drivers NGL Production increase by Shale gas & Tight Oil Development Oil Price is the Key Variable Factor Increase Production : Saudi Shaybah Gas Project Initiate Production : Saudi Wasit Gas Project Kuwait North Field, Refinery increase Production Release Iran Sanction Refinery Production increase in China and India Ichthys/Prelude LNG Operation in Australia (LPG 1.6 MM tons/yr Production) Russia Production increase by NG development North Sea Oil/Gas Production decrease Europe Refinery Production decrease Angola Soyo LNG Project restart in 2 nd Half 16

11 Global LPG Demand by region 3. PDH as On-Purpose Process Global LPG Demand in 17 will be 285 MM Tons (increase 11 MM Tons compared to 16). In 20, Demand is estimated 307 MM Tons mainly due to increase of R&C & petrochemical demand In Asia Unit: MM tons/yr Middle East Far East Asia SEA India Oceania Europe Africa South America North America 9~11% 21~28% 7% 6~9% 1% CAGR ('10-'20) 2.9% 5.0% 3.5% 6.5% 0.2% 0.4% Asia Middle East South America Key Drivers NEA Petrochem demand increase - China PDH Increase - Price sensitive demand increase R&C Kerosene Replacement demand increase in SEA/India C4 for MTBE Demand increase Demand increase for New Cracker, PDH R&C Demand increase by Economic and Population growth Power Generation Demand growth in Caribbean ~16% 5% 1.5% 1.6% Africa R&C Demand increase in Egypt, Morocco 11~12% 50 18~22% Source : IHS Global NGL Long-Term Market Outlook 0.2% Europe/ North America R&C Demand increase are limited In 18, NAM PDH Demand increase by 3 MM tons/yr. NAM Ethylene Demand is Core Variable Factor

12 LPG Export/Import Flow Forecast 3. PDH as On-Purpose Process Exporting volume from NA will increase more than 6MMT by 20 and most of it will flow into Asia (Unit: MMT) North America ( 16) Europe ( 16) Asia Pacific ( 16) Export Import Balance Export Import Balance 36.4 Middle East ( 16) Export Import Balance Latin America ( 16) Africa/Med ( 16) 1.3 Export Import Balance Export Import Balance Export Import Balance * Asia Pacific volume includes Oceania Source : FGE LPG Forecast

13 LPG Price Trend 3. PDH as On-Purpose Process Glut in global LPG supply will be cleared by the price-sensitive demand, and it will lead to stabilization of Propane/ Naptha ratio in Asia in the long-term Global LPG Demand Growth Forecast Propane / Naptha Ratio Unit: MM tons (48%) 49 (20%) 24 (10%) 12 (5%) 19 (8%) 22 (9%) (48%) 20 (7%) 24 (9%) 61 (22%) 22 (8%) 20 (7%) (49%) 21 (6%) 24 (7%) 78 (24%) 22 (7%) Price- 21 sensitive (6%) Demand Residential / Commercial Industrial Autogas Petrochemicals Others CAGR ('10-'20) 3% 0.8% 0.8% 4.2% -0.9% ($/MT) FEI MOPJ FEI/MOPJ 1,200 1, Avg. 92% 102% 98% 96% 98% 87% 120% 100% 80% 60% 40% 20% 0% Source: IHS Markit

14 Challenges of PDH process unit 3. PDH as On-Purpose Process With the ample supply of propane, PDH is one of the most attractive on-purpose processes if all of the following conditions can be met Stable/ competitive sourcing of propane Secure propylene demand & integration for by-product utilization Capability of EPC project execution (cost/ schedule/ quality management) Plant reliability and stable plant operation

15 SK Gas as Global Top-tier LPG Player 4. SK Values to Customers 1,400 KT Middle East China South Korea 3,920 KT North America India/ Indonesia Singapore Terminal 1,800 KT Tangible Asset Intangible Asset Storage Capa. 460KT Domestic Demand (Captive) Captive Demand : 4MMT Global offices Vessel ownership Seoul, Singapore, Dubai, Houston 5 own vessels (+2 in 18) Network w/ Oil Exporting Countries SK group Synergy 20+ yrs. of biz. partnership Sharing know-hows & information LPG Sales ( 16) Systematic Risk Mgmt. Middle/Back Office for trading

16 SK Advanced/SK E&C PDH competitiveness 4. SK Values to Customers SK Advanced is pursuing to be the most competitive PDH plant in the world through its operation excellency Making history in PDH plant operation through its operation stability - World-best plant operation stability On-Spec production in 9 hours, 100% Load in 15 days after Feed-In (Current Load over 110% and On-Stream Factor over 99%) Accident Zero, Export Demurrage Zero, Throughput Reduction by Sales Trouble Zero [Monthly Operation in 16] Unit 2016 Apr May June July Aug Sept Oct Nov Dec Avg. Available Days day Operation Load rate % 100.4% 104.4% 104.1% 98.8% 105.8% 106.2% 108.7% 110.4% 111.8% 105.6% On Stream Factor* % 100.0% 100.0% 100.0% 98.9% 100.0% 100.0% 100.0% 100.0% 100.0% 99.9% * On stream Factor : operation days / available days Providing a competitive edge through successful EPC project execution - Early mechanical completion (5 months earlier than the original projection) - Investment cost savings ($100 MM)

17 Our Mission & Vision 4. SK Values to Customers Mission We create the future of energy (Beyond the Limits Discover, Connect, Create) Vision Global Top Tier Eco Energy Total Solution Provider Middle East South Korea China North America Singapore Terminal Core Competency LPG Trader (World Top-tier Trading Capabilities utilizing existing assets) 1 Handling LPG 10 MM ton, Operating own 5 VLGC, Time Charter 1 VLGC and 2 New VLGC in 18 2 Singapore Office & Terminal (w/vopak) for EoS and Houston Office & Virtual Terminal for WoS 3 LPG storage caverns 270,000 tons for Propane and 190,000 tons for Butane in Korea Higher Value Proposition to Petrochemical Customers 4 Better understanding on petrochemical industry and customers requirement & needs by operating PDH plant 5 Supply feedstock (LPG) and propylene to petrochemical customers with NCC and PDH plants Total Solution Provider 6 Pursuing Total Solution Provider to various Customers by Utilizing experience as Domestic LPG provider, Worldwide LPG Trader and Propylene Manufacturer. Delivering Solution for Customers Needs like Relative Price, Quality and Fuel Efficiency, etc.

18 Summary 5. Key Takeaways [Asian Propylene Market] Firm demand growth of propylene driven by urbanization in the developing countries in Asia On-purpose process units are necessary in order to fill the gap between growth in conventional process supply and propylene demand [On-purpose process unit] Each on-purpose process unit can be attractive, depending on the stand-point w/ different challenges to overcome Supply growth from CTO/PDH are outpacing all the other processes [PDH] Increased global LPG liquidity will lead to stabilization of propane price, resulting in better economics for PDH Four key factors for successful PDH : 1) LPG sourcing 2) Secure demand outlet and by-product utilization 3) EPC project execution capability 4) Plant reliability & stable operation

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