GCC Petrochemical Industry -...
Transcript of GCC Petrochemical Industry -...
GCC Petrochemical Industry
Strategies for Success in Downstream Chemicals
Dr Andrew Spiers – Vice President
Nexant Energy & Chemicals Advisory
3AIS\GPCA 11 Annual Conference November 2016
Nexant Training
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Nexant provides expertise across the energy andchemicals value chain
4AIS\GPCA 11 Annual Conference November 2016
Gas Monetization
LNG
Gas Pipelines
Regulatory
Frameworks
Petroleum Refining
Storage &
Distribution
Biofuels
Oxygenates
Coal to Liquids
Gas to Liquids
Base Oils
Lubricants
Ammonia
Urea
Melamine
Ammonium Nitrates
Phosphate & NPK
Fertilizers
Methanol
Formaldehyde
Acetyls
Other syngas
derivatives
POWER & RENEWABLES GASC1 CHEMICALS &
FERTILIZERSDOWNSTREAM OIL
BASE PETROCHEMICALS
& POLYMERS
INTERMEDIATE &
SPECIALITY CHEMICALS
Energy Chemicals
Nexant Capability
Olefins
Aromatics
Polyolefins
Vinyls
Styrenics
Polyesters
Polyamides
Acrylates
Rubbers
Other olefin and
aromatic derivatives
Surfactants
Oleochemicals
Engineering &
Speciality Polymers
Coatings,
Adhesives,
Sealants &
Elastomers (CASE)
Polyurethanes
Resins
Biochemicals
Speciality & Fine
Chemicals
Grid Management
Distribution Software
Energy Efficiency
Demand Side
Management
Renewables
• Solar
• Biomass
• Municipal Waste
• Wind
• Clean Coal
Recent global developments are influencing theopportunities for downstream diversification in the Middle East
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Impact
off RPI Changed relative competitiveness of upstream chemicals sector
Shift to heavier feedstock:
broader range of feedstocks
changed competitiveness
Increased refinery petrochemical integration focus
broader range of feedstocks
Shift to more sophisticated products:
pay for value
Increased end use sector demand:
reaching critical mass?
Issue
off RPI Lower Oil Price Environment
Limited GCC ethane availability
Economic growth in GCC
GCC Economic Growth will underpin demand fordownstream products as the market becomes more sophisticated
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2000 2020 Growth, %
Population (m) 29.3 59.0 101
GDP (current $bn) 403 1 644 308
Per Capita ($ 000) 14 28 100
PPP Basis ($bn) 976 2 189 124
Polyolefins Demand (kg per
capita)
GCC Region 22 43 95
US 67 67 0
WE 48 51 6
Two principal drivers for industry development – Push and Pull
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Pull
off RPI Downstream sector growth enables world-scale intermediates/specialties production – import substitution projects:
need domestic/regional market size
proximity to downstream consuming industry
Push
off RPI Sufficient competitive advantage to develop (largely/partly) export-oriented projects:
needs incentives
concern if not close to downstream consuming sector?
can be leveraged off increasing refinery-petrochemical integration
Lower oil price changes the relative competitiveness ofthe GCC feedstock base to the downstream sector
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Future global ethylene production cost curves at different crude oil scenarios
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500
1000
1500
2000
2500
3000
0 50 100 150 200
Eth
ylen
e C
ash
Cos
t (C
urre
nt U
S d
olla
rs p
er to
n et
hyle
ne)
Ethylene Cumulative Capacity (million tons)
Oil Price Scenario
(per barrel)
$140
$100
$70
$50
Ethane & Other lighter Feedstock cracking
Naphtha & Other Liquids feedstock cracking
PP47%Acrylonitrile
53%
Increased availability of a broader range of feedstocksis creating a greater Push opportunity than seen to date
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Middle East Propylene Demand (1990):
144 ktons
PP85%Acrylonitrile
3%
Acrylic Acid1%
Propylene Oxide
6%
2-Ethylhexanol
2%Butanols
1%
Cumene2%
Middle East Propylene Demand (2020):
10.1 million tons
November 2016 9
Case Study: Development of Thai Petrochemical Industry
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1st Phase
Import Substitution
(1990s)
2nd Phase
Diversify and Improve
Competitiveness
(2000s)
3rd Phase
Consolidate and Cluster
(2010 onwards)
Expand base
Diversify Product
Portfolio
Position for Export
Markets
Improve
Scale and
Competitiveness
“Fill in the gaps”
Focus on Clusters
Gas driven
development at
Map ta Phut –
ethane, propane
Replace Polymer
Imports –
substantial
domestic market
Increasing downstream Focus
Case Study: Singapore
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Has developed a world scale, export-oriented petrochemical industry with
significant downstream investment. How?
No natural resources, high cost labour, reclaimed land, little domestic market
Provided incentives for inward investment
EDB invested directly in projects for a number of years
Focussed on integration and cluster approach
Proactively managed the process – EDB (like Antwerp, Rotterdam)
Maintained customer focus as first priority
Constantly benchmarked itself – identified areas of concern/improvement
(like Antwerp, Rotterdam)
S = Strong M = Moderate W = Weak
Benchmarking helps identify the strengths and allows opportunity to address weaknesses – necessary to create a competitive cluster
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Key Success
FactorsRotterdam Antwerp ChemSite Infra Leuna Delfzijl
S M W S M W S M W S M W S M W
Feedstocks
Logistics to Main
Markets
Land Availability/
Labour Costs
Utilities/Services
Environmental
Permitting
Fiscal Incentives
Marketing
November 2016
There are many sectors of the wider energy & chemicalsvalue chain that could be developed in the GCC from a solid foundation
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Some of the most
prominent are
highlighted here
There are many sectors of the wider energy & chemicalsvalue chain that could be developed in the GCC from a solid foundation
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Some of the most
prominent are
highlighted here
Downstream competitive advantage has to be provided in someway; feedstock incentive is one although it should be recognisedthat primary industry competitiveness is changing
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Primary basic chemicals
Include urea, methanol, PE and MEG
Advantage of low-cost gas feedstock captured via easily transportable product
This is all changing under a lower oil price environment
Secondary derivatives advantage is less but can still be attractive if appropriate incentives are created
Feedstock at netback pricing
Cluster integration e.g. Rotterdam
Infrastructure and utilities e.g. Singapore
Low tax burden
Advantaged financing
Middle East Competitive Advantage
Local investors need to recognise the time of 1990s profitability is over
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Primary Secondary
Indi
cativ
e A
dvan
tage
Feedstock Energy CostInfrastructure TaxFinance
Downward
Pressure
GCC source of competitive advantage changes along thevalue chain - the right level of incentives is required at various stages
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Derivative Competitive Advantage
off RPI
Freight Influence
off RPIHigh
NegativeIncreasingDownstreamFocus
Freight toMarket$ per ton
Enabler
Required
IntermediatesBasePC
Downstream
Value Chains
Oil PriceEffect
1 King’s Arms Yard,
London, EC2R 7AF
Telephone: +44 20 7950 1600
Facsimile: +44 20 7950 1550
www.nexant.com
“This report (“Report”) was prepared by Nexant Ltd (“NEXANT”), for the use of GPCA (“CLIENT”) in its consideration of
whether and how to proceed with the subject of this Report.
Except where specifically stated otherwise in the Report, the information contained herein was prepared on the basis
of information that is publicly available or was provided by the CLIENT or by a third party, and the information has not
been independently verified or otherwise examined to determine its accuracy, completeness or financial feasibility.
Neither NEXANT, CLIENT nor any person acting on behalf of either assumes any liabilities with respect to the use of or
for damages resulting from the use of any information contained in this Report. NEXANT does not represent or warrant
that any assumed conditions will come to pass. This Report is current as of the date herein and NEXANT has no
responsibility to update this Report.
This Report is integral and must be read in its entirety.
The Report is submitted on the understanding that the CLIENT will maintain the contents confidential except for the
CLIENT’s internal use. The Report should not be reproduced, distributed or used without first obtaining prior written
consent by NEXANT. This Report may not be relied upon by others.”
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GCC Petrochemical Industry
Diversification – Specialty Chemicals
David Lines - Principal
Agenda
Section 1
Specialty Chemicals definition
Section 2
Specialty Chemicals in the GCC currently
Section 3
Potentials for GCC future diversification?
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Section 1
Specialty Chemicals Definition
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BASF – definition of commodity versus specialty
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Customer service to provide innovative technical solutions can be important component of the value
provided by specialty chemical producers. Products may be less capital intensive and cost sensitive,
although as competition increases then cost competitiveness may become more important
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Market differentiation for Specialty Chemicals
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Cost LeadershipAverage product offered at a low cost to the broadest possible market. Economies of scale result in cost savings
Cost FocusStrategy of offering average product at low cost to a specific customer group. Customer relationship depends on the cost of the product and a unique connection with a customer
Product DifferentiationStrategy focuses on offering a unique product to the broadest possible market. Product offering necessitates continuous innovation in light of the highly competitive market sources
Differentiation FocusStrategy focuses on offering unique product to specific customer groupCustomer relationship depends on the uniqueness of the product and the way the customer is served
Cost Differentiation
Basis
of
Ad
van
tag
e
Hig
her
Ben
efi
ts
E
qu
al
Ben
efi
tsScope of Activities
Broad Market Narrow Market
Section 2
Specialty Chemicals in the GCC Currently
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Intermediates and Specialty Chemicals in the GCC
currently, still vastly underdeveloped
Basic Chemicals
Isobutanol
Caustic Soda
Acetaldehyde
Calcium Chloride
Acetic Acid
Various Acids
Cumene
Phenol
VAM
LAO
2-EH
Ethylene Oxide
Propylene Oxide
Intermediate Chemicals
DMF
Hexamine
Paraformaldehyde
Pentaerythirtol
Sodium Formate
Detergent Alcohols
BDO/THF/GBO
Ethyl Acetate
Butyl Acetate
MMA
DMA
Maleic Anhydride
Acetic Anhydride
Acrylic Acid
Alkyl Chloride
Specialty Chemicals
DOP & DIOP
Ethylamine’s
SNF/SMF
BPA
Ethoxylates
Ethanolamines
TDI/MDI
Polyether Polyols
Butyl Glycol Ethers
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Uncertain times – but product differentiation & synergies
with facilities are robust within the specialty chemicals sectors
Size
Location
Configuration
Integration
Capture economies of scale
Cost advantage/product differentiation
PARAMETER KEY OBJECTIVES
Access to low cost feedstocks/ deficit
markets
Synergies with adjacent facilities
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Section 3
Potentials for GCC future diversification?
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Commitment from SABIC, Saudi Aramco, MEIM and others
are driving the development of the specialty chemicals industry in the GCC
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2000 2010 2015 2020 2030
Continued
substitution of
sophisticated
products
Export to
GCC
substitution
of Import
Export
to
MENA
Firm
Commitment
to Specialty
Chemicals
Export
Globally
29-Nov-16
RCJY Yanbu, Jubail I and Jubail II
need to be fully integrated/utilized
to attract further investment and
have a platform for maximising
efficiencies and profitability,
benchmarking against e.g.
BASF Ludwigshafen or
Jurong Island Singapore
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Sadara will be the first complex in the GCC to crack naphtha. The project will have a
differentiated product slate as 14 of the 26 products will be new to GCC. New products
streams from Sadara will provide opportunities for downstream industries
GPCA 11th Annual Conference (V04)
Saudi Aramco Shell
Refinery Company
(SASREF)
Saudi Aramco Total
Refining &
Petrochemical
Company (SATORP)
Single Mixed Feed
Cracker
Ethylene
Propylene
C4’s
Aromatics Hydrogenation
& Extraction
Sadara Clusters:
SABIC
Linde
Others
Ethane
C2
Naphtha
C5-C12
Benzene
Toluene
Plastics
LLDPE & HDPE
Elastomers
LDPE
Chemicals
Propylene Glycols (PG)
Polyols
Butyl Glycol Ethers (BGE)
Ethanolamines (EDA)
Ethyleneamines (EAE)
Isocyanates
Polymeric Methylene
Diphenyl Diisocyanate
(PMDI)
Toluene Diiosocyanate (TDI)
40%
60%
Saudi Aramco
Natural Gas Grid
SASREF
Hydrocarbons Dedicated Off-
takers* via
PlasChem Park
RO Membranes
PU formulation
systems house
Coating additives
Oil & Gas Field
chemicals
Brake fluids
Hygiene films for
diapers
Hydrocarbon
resins
PU insulation,
adhesives and
sealants
Chemical
intermediates
for; water
treatment, home
and personal
care,
construction and
detergents.
* These are publically announced projects by Sadara PlasChem Park
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Ethylene Oxide Value Chain – first availability of EO for
downstream projects in the GCC
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Primary Alcohol Ethoxylates
Ethylene Glycol and Higher Glycols
Ethanolamines
Glycol Ethers
Alkylalkanolamines
Alkyl Phenol Ethoxylates
Polyethylene Glycols
Polyols, Polyalkylene Glycols
1,3-Propanediol
PET Bottles, PET Film, PET Fiber, Antifreeze, Heat Transfer Fluids
Detergents, Gas Purification, Herbicide Intermediate, Textiles, Metal Cleaning
Coatings, Inks, Cleaners, Insecticides, Herbicides, Solvents
Pharmaceuticals, Water Treatment, Coatings, Gas Treatment
Surfactants, Detergents, Antioxidants, Emulsifiers
Surfactants, Cleaners, Laundry Detergents, Degreasers
Lubricants, Chemical Intermediates, Processing Aids, Surface Releases
Polyurethanes, Rigid/Flexible Foams, Adhesives, Elastomers
Coatings, Adhesives, Coolants, Heat Transfer Fluids, Polyurethanes, UPR
Water
Ammonia
Alcohols
Alkyl Amines
Alkyl Phenols
Primary Linear Alcohols
Ethylene Oxide
Propylene Oxide
H2, CO
Ethylene Oxide
PlasChem is located next to Sadara’s park and will have an
industrial park for chemical and conversion industriesPlasChem Park in Jubail
To promote downstream industries and
investment in Saudi, the Royal Commission for
Jubail and Yanbu (RCJY) cooperated with Sadara
to create a world-class industrial park for chemical
and conversion industries called “PlasChem
Park”.
The park has a total area of twelve square
kilometre and is located in Jubail Industrial City II
next to Sadara’s new manufacturing complex.
With complete focus on chemical and conversion
industries PlasChem will make direct or indirect
use of Sadara’s products and raw materials from
other suppliers.
PlasChem will consist of three main units: the
Sadara Value Park (ready 2017 and currently
20% full), the Chemical Park and the Conversion
Park (ready 2020).
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Continued low-oil price environment will undermine the level of investment in the
downstream development of the speciality chemicals industry in the GCC.
Increased refinery petrochemical integration focus with a broader range of feedstocks will be
a major area of focus for the GCC.
Economic growth in GCC, whilst still robust, will not reach critical mass for key industry
segments (e.g. automotive, consumer goods, FMGC, etc.).
Major government support will be required to attract both local and international investment.
Iincentives for inward investment will become more readily available.
Saudi Arabia for specialty chemicals and the U.A.E. for technology driven sectors are examples
for continued future support
Like the Singapore EDB, GCC governments will invest directly in projects (e.g. TAQA in Saudi
Arabia).
The GCC specialty chemicals sector will continue to be a ‘PUSH’ market, there will be risks
were products will have to be exported before the local industry development reaches critical
mass.
What can we expect to see in the GCC Specialty
Chemical industry over the next decade?
31GPCA 11th Annual Conference (V04) 29-Nov-16
1 King’s Arms Yard,
London, EC2R 7AF
Telephone: +44 20 7950 1600
Facsimile: +44 20 7950 1550
www.nexant.com
“This report (“Report”) was prepared by Nexant Ltd (“NEXANT”), for the use of GPCA (“CLIENT”) in its consideration of
whether and how to proceed with the subject of this Report.
Except where specifically stated otherwise in the Report, the information contained herein was prepared on the basis
of information that is publicly available or was provided by the CLIENT or by a third party, and the information has not
been independently verified or otherwise examined to determine its accuracy, completeness or financial feasibility.
Neither NEXANT, CLIENT nor any person acting on behalf of either assumes any liabilities with respect to the use of or
for damages resulting from the use of any information contained in this Report. NEXANT does not represent or warrant
that any assumed conditions will come to pass. This Report is current as of the date herein and NEXANT has no
responsibility to update this Report.
This Report is integral and must be read in its entirety.
The Report is submitted on the understanding that the CLIENT will maintain the contents confidential except for the
CLIENT’s internal use. The Report should not be reproduced, distributed or used without first obtaining prior written
consent by NEXANT. This Report may not be relied upon by others.”
Nexant, Inc.
San Francisco
New York
Houston
Washington
London
Frankfurt
Bahrain
Singapore
Bangkok
Shanghai
Kuala Lumpur