PetroChem Wire Building more crackers in Appalachia: Is there a there there? PetroChem Wire Samantha Hartke, Product Manager May 2017
Agenda PetroChem Wire: Who we are The alphabet soup of olefins: Ethylene, propylene and what comes after How we got here: The lure of the ethylene-ethane margin Current buildout of ethylene crackers Existing downstream demand from polymers Future buildouts that might boost domestic demand? Downstream export potential i.e. is it possible and is there a cost advantage to export ethylene or polyethylene/plastics from East Coast?
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 US olefins, polyolefins prices serve as benchmarks for physical and swap contracts on CME/NYMEX US benzene prices serve as benchmarks for ICE contract Spot prices cover the entire value chain: NGLs/ Naphtha Olefins/ Aromatics Plastics Crude Aromatics Refined products Our PCW Chemical Plants Database monitors all existing and upcoming petchems plants in North America
Ethylene: The alphabet soup of petchems LLDPE ETHANE ETHYLENE POLYETHYLENE LDPE HDPE
Propylene: The alphabet soup of petchems HoPP PROPANE, ETHANE, NAPHTHA PROPYLENE POLYPROPYLENE REFINERY GRADE PROPYLENE (RGP) CoPP
How we got here: Commodity margins 3 Spot NGL (PetroChem Wire prices) 2.5 2 $/gallon 1.5 1 0.5 0 3-Jan-12 3-Jan-13 3-Jan-14 3-Jan-15 3-Jan-16 3-Jan-17 Ethane Propane Butane ISOButane Natural Gasoline As a result of shale production, spot NGL prices have fallen 53-72% from 2012 until today
How we got here: Ethane/propane-Ethylene margins cents/pounds 60 50 40 30 20 10 0 Ethylene cash costs (PetroChem Wire assessments) -10 3-Jan-12 3-Jan-13 3-Jan-14 3-Jan-15 3-Jan-16 3-Jan-17 Ethane cash cost Propane cash cost Cheaper NGL prices = lower ethylene production costs Ethylene production cash costs fell 68-72% between 2012 until today
How we got here: Ethylene-PE margins 0.35 PE-ethylene margin (PetroChem Wire prices) 0.3 0.25 $/pound 0.2 0.15 0.1 0.05 0 Margins to produce polyethylene from ethylene are healthy (more than doubled since 2012)
Infrastructure plans: Ethylene Company Site State Start-up Downstream Dow Freeport TX 2017 MEG, PE ExxonMobil Baytown TX 2017 PE Indorama Lake Charles LA 2017 MEG ChevronPhillips Cedar Bayou TX 2018 PE Shintech Plaquemine LA 2018 VCM Formosa Point Comfort TX 2018 PE Westlake/Lotte Chem Lake Charles LA 2019 MEG, VCM Sasol Lake Charles LA 2019 PE Total/NOVA/Borealis Port Arthur TX 2020 PE Formosa St James Parish LA 2020 EG Marubeni/PTT Dilles Bottom OH 2020 MEG, EO, HDPE Shell Monaca PA 2021 PE ExxonMobil/SABIC San Patricio County TX 2020+ MEG, PE Braskem Wood County WV TBD PE North American ethylene production capacity will increase by 35.6 billion lb/yr (41% from current levels) by early next decade
Where is the downstream demand? 5.931 0.551 Existing downstream plant capacity (Billion lbs/yr) 0.9 2.927 0.17 0.9 0.377 2.91 0.44 0.1 0.4 0.5 0.4 0.155 1.04 0.425 51.5 31.3
Infrastructure plans: Derivatives demand billion pounds/yr 18 16 14 12 10 8 6 4 2 0 Future polyethylene capacity Future polymers production capacity Future polypropylene capacity TX LA Alberta PA OH WV ND Future EG/EO capacity THE DOWNSIDE: Future downstream capacity is already captive to upcoming and/or existing olefins plants THE OPPORTUNITY: What is the outlook for future derivatives/ converters?
Export potential US olefins/polymers exports by destination 7000 6000 5000 4000 3000 2000 Origination of US olefins/polymers exports 2% 1% 5% 3% 1% 0% 0% 6% 16% 66% Houston area Detroit Los Angeles Duluth San Diego NYC New Orleans Buffalo Seattle Norfolk 1000 0 Africa Asia Australia & Oceania Europe North America South/Central America 2013 2014 2015 2016 2017 YTD THE DOWNSIDE: Exports hogged by USGC THE OPPORTUNITY: Is it viable to increase exports of chemicals/plastics from the East Coast?
The value chain PIPELINE STORAGE STORAGE (??) CONVERTERS Rail, truck, barge Rail, truck, barge PIPELINE?
Key takeaways Whether Appalachia has sufficient supplies to support several crackers is a rhetorical question The key issues are demand and logistics (pipelines and storage) Future downstream demand is already captive QUESTION: Can this region attract new manufacturing opportunities? Exports to Europe/Mediterranean/Africa may be economically viable at times are the logistics supportive? Missing links: storage, storage, storage (maybe pipeline?)
Thank you! Samantha Hartke Product Manager PetroChem Wire samantha@petrochemwire.com www.petrochemwire.com Ph: (832) 330-3340 Critical market information for the entire petrochemical chain