Methanol and DME - Key Petrochemicals For Tomorrow's...

Methanol and DME - Key Petrochemicals For Tomorrow's World

Prepared For:

2011 Japan DME Forum

By: Leo Wirawan

Methanol Market Services Asia Manhattan House, 151 Chin Swee Road

# 09-07 - Singapore 169876 Phone: +65 6465 2720

E-mail: [email protected]

Jim Jordan & Associates 12941 North Freeway Suite 226, Houston, Texas 77008, USA Tel: 281-877-7009 E-mail: [email protected]

mailto:[email protected]





MMSA (in Partnership with JJ&A) “Global Insight, Asian Perspective™”

• Strong, Multi Faceted Partnership between MMSA and JJ&A

• Multi-Client Services

– Methanol & Derivative Analysis – 2011 MDA Available Now

• Methanol, Acetic Acid, Formaldehyde, MMA in global detail

– Methanol Notes™

• Topics of relevance in brief 5X/month

– JJ&A Weekly Methanol & Fuels Reports

– China Monthly Methanol Analysis

• Project Services

– Market and Technical Due Diligence Support • Including derivatives: eg. Methanol-to-Olefins (MTO), DME, many others

– Bankable Project Assessments

– Valuation

– Many others

• IMPCA Asian Methanol Conference Co-organizer – 14th : November 2011 => Conference Proceedings Available – 15th : November 2012 => Details to be provided

• Petrochemical Training

– Tools to analyze values in Petrochemical industry

September-October 2011 © MMSA Pte. Ltd.

Today’s Agenda

• Global, Asian Methanol Markets - History and Outlook

• Methanol Demand by Derivative – Special Focus: DME contribution to growth in China, and "hidden" DME

demand in processes like MTO, MTP, and MTG

• Methanol Supply by Region

• Methanol Trade

• Methanol Pricing – Special Focus: DME's role as a price ceiling in China and ramifications

for the rest of the world

• MMSA View of Key Success Factors for Future DME Growth


Global Methanol Balance Appears to be in the “Long Position” at First Glance


60%

65%

70%

75%

80%

85%

90%

95%

100%

-

20,000

40,000

60,000

80,000

100,000

120,000

2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E

Th

ou

san

d T

on

nes

Methanol Supply and Demand - World4Q11 Update

Total Demand Production

Production Capacity (Actual) Production Capacity (Adjusted)

Op Rates (Based on Adj Capacity - Right Axis)

ForecastCAUTION: Significant “Phantom Capacities”

Exist

Asia, China Has Become an Important Part of the Global Methanol Market


0%

25%

50%

75%

100%

2010 2016E

Percentage of Methanol Use -Asia vs. Rest of the World

Rest of the World Asia

Today’s Agenda





• Methanol Trade





Methanol Demand Growth Remains Robust–With Asia is in the Driver’s Seat


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E

Methanol Demand By Derivative - WorldOthers

Methanol-to-Olefins

Fuel Cells

DME

Biodiesel

Gasoline Blending & Combustion

Methyl Chloride (Chloromethane)

Methylamines

Methanethiol (Methyl Mercaptan)

Dimethyl terephthalate (DMT)

Methyl Methacrylate

Methyl tert-Butyl Ether (MTBE)

Acetic Acid

Formaldehyde

Methanol Use - ChinaBy Derivative

Formaldehyde Acetic Acid Methyl tert-Butyl Ether (MTBE)

Methyl Methacrylate Dimethyl terephthalate (DMT) Methanethiol (Methyl Mercaptan)

Methylamines Methyl Chloride (Chloromethane) Gasoline Blending & Combustion

Biodiesel DME Fuel Cells

Methanol-to-Olefins Others

2016E33.88

million metrictons

201020.74

million metric tons

China MeOH Demand from BOTH Traditional and Alternative Energy (still) Expected to Grow Significantly in the Next Few Years


% MeOH as Energy in (incl. MTBE)

2016E

Asia 38

China 49

MTO/MTP Process Gaining More Interests – Both for Integrated and Non-Integrated Plants

Shenhua Baotou MeOH: 1800 ktpa

Ethylene / Propylene: 600 ktpa

Datang Duolun MeOH: 1670 ktpa

Propylene: 490 ktpa

Shenhua Ningxia MeOH: 1670 ktpa

Propylene: 490 ktpa

• Three integrated, coal-based MTO Projects in China have been commissioned recently, after some delays

• One non-integrated MTO project has

been started up – relatively small

MTO size

• Significant numbers are “still on the drawing board”

• Concerns on the overcapacity in the coal-to-chemicals sector remain, but support for “high value” applications continues (includes value of self-sufficiency)

• Interest in Methanol-to-Gasoline (MTG) has been noted, but with slower progress

Zhongyuan Petrochemical Sinopec Group

(Non-Integrated) Ethylene / Propylene: 200 ktpa

November 2011 © MMSA. All Rights Reserved.

Still Expanding Methanol Capacity, but Thinning Down Towards the End of Forecast

September 2010 © MMSA Pte. Ltd. and JJ&A

CAUTION: Significant “Phantom Capacities”

Exist

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10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E

-000-

ton

nes

Supply Capacity for Methanol by Region 2006 - 2016E

Asia North America South America Europe Rest of World Middle East

World Methanol Trade Alive and Well, Connecting Producers and Consumers


2008, 2009, 2010 Methanol Trade Flow(Bubble Size Proportional to Capacity to Produce Methanol)

* Americas Supply * Persian Gulf Supply * Other Supply

2, 2, 56

4,226, 4,065,

4,361

516, 400, 384

318, 477,

513

571, 307,

381

205, 68,

38

1,786, 1,376,

1,146

1,253, 933, 1,107

3,977, 6,299, 7,153

466, 722,

752

315, 402,

191

From

North

America

165, 28, 58

201, 10,

7

636, 647,

1,033

To

Northeast

Asia

From

Chile

Canada

Chile

Trinidad

&

Venezuela Equatorial

Guinea

China

Middle

EastLibya

Russia

Southeast

Asia

New

Zealand

171, 21, 38

1,711, 1,027,

1,486

765, 973,

1,257

3, 252,

9

34, 47,

0

1,147, 1,599,

1,047

Trade ME – Asia Can Be Expected to Grow Even More, Other Exporters are Looking for

Opportunities As Well


-15,000

-10,000

-5,000

0

5,000

10,000

15,000

2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E

-000-

ton

nes

Net Methanol Trade by Region2006- 2016E

Asia North America South America Europe Russia Middle East Africa

Today’s Agenda





• Methanol Trade





Cash Cost Curve: Important Tool for Competitive Situation Analysis


US

D p

er

me

tric

to

n

Cumulative Available Capacity*

MeOH Delivered Cash Cost (Using Sep-11 Data), Coastal China Main Ports, 2011 Net Avail. Capacity

High(est) cost Domestic China Coal-Based Methanol Production

Low(est) cost NG Based Imports

General Principle: Methanol Prices Bounded By Costs, Affordability

• Costs of Production in China all important as it forms the “Floor” for methanol prices.

– Largely tied to coal costs

• Price Increases Limited to Ability of Derivatives to Pay (“Affordability” or “Ceiling”)


Coal Prices in China Following Crude, with Less Volatility, Lifting Methanol Cost Floor


0

10

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160

US

D p

er M

MB

tu

US

D p

er

ton

or

per

bb

l

Premium Coal vs. Crude Oil (Price Comparison - Thru September 2011)

Crude Oil, Dubai, USD/bbl

Coal, Datong Premium Mix, FOB QHD Port

Crude Oil, Dubai, USDMMBtu

Coal, Datong Premium Mix, FOB QHD Port, USD/MMBtu

Natural Gas, NYMEX-Henry Hub

Methanol Price Ceiling in China is Strong – Demand Improvement Will Gradually Ease the Situation

(From: China Methanol Monthly Analysis)


0

500

1000

1500

2000

2500

0 5500 11000 16500 22000

Me

tha

no

l "A

ffo

rda

bilit

y,"

US

D/M

T

Cumulative Consumption of MeOH in China, 2011E (Sep-11 Update),-000- tons, Select

Methanol Volume vs. Value - ChinaMid to Late September'11

AAFormaldehyde

MTBE

Methyl-

amines

MMA DME

Average Price for East China, Ex-Tank,Average Sep-11; 1 USD = 6.38 CNY

Chloro-

methaneGasoline

Blending(equal energy)

Average Price for East China, Ex-Tank,Average Aug-11; 1 USD = 6.39 CNY

Methanol Affordability for DME Producers Affected by Methanol – LPG Spread


0

300

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900

1,200

1,500

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2,000

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9,000

10,000

Sau

di A

ram

co

Co

ntra

ct P

rice (U

SD

/ metric

ton

)

Ch

ina D

om

esti

c L

PG

, DM

E, a

nd

Meth

an

ol

Pri

ces (C

NY

/metr

ic to

n)

LPG, DME, and Methanol Weekly Average Prices - South China (Assessment by MMSA and JJ&A)

LPG Prices - Guangdong Province, South China - EXW

DME Price - Guangdong province, South China - EXW

Methanol Prices - South China - Ex-tank

Simple DME CC Est

Saudi Aramco CP (50% Propane : 50% Butane) - FOB Saudi Arabia

Viability of MTO vs. Olefins Steam Cracking – MTO Economics Have Improved Recently

(From MeOH Notes™)


-2000

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-500

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Ja

n-0

0M

ay-0

0S

ep

-00

Ja

n-0

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ay-0

1S

ep

-01

Ja

n-0

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ay-0

2S

ep

-02

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n-0

3M

ay-0

3S

ep

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n-0

4M

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ep

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n-1

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US

D/t

on

ne

Ethylene Cash Cost vs. Feed Type Hypothetical Asia, 1.75 tonnes propylene/tonne ethylene

CC via meOH CC via Naphtha CCmeOH-CCNaphtha

Prices Should Return to Marginal China Economics – Baring any Unforeseen Circumstances


0

100

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800

900J

an

-01

Ap

r-0

1J

ul-

01

Oc

t-0

1J

an

-02

Ap

r-0

2J

ul-

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Oc

t-0

2J

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-03

Ap

r-0

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ul-

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Oc

t-0

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-04

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r-0

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t-0

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-05

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t-0

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t-0

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t-0

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t-0

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r-1

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t-1

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r-11

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l-11

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Ja

n-1

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pr-

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Ju

l-1

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ct-

12

US

Do

llars

per

metr

ic t

on

Global Methanol Pricing

Delivered Cost Parity Imports to China

Methanol China Spot, Avg. CFR China Main Ports USD/metric ton

Methanol US Contract (JJ&A Index), Avg Realized Price FOB USGC USD/metric ton

Methanol West Europe Contract (T2), Avg Realized Price FOB Rotterdam USD/metric ton

Forecast

Today’s Agenda





• Methanol Trade





Key Success Factors – DME Growth

• Backward and/or forward integration will likely favor the DME economics, especially long term

– Eliminate the “sandwiched in between” effect

• Determine the best DME supply proposition, esp. considering feedstock availability and applications

Example from China:

– “Cheap” natural gas could be made available, especially at the remote location, quite far from China

– “Expensive” coal could be made available, especially within China’s inland provinces

• Government regulatory and supports is crucial, especially to move from the current “status quo”


Key Success Factors – DME Growth

• Future Demand Growth of DME: – In China, developmental applications of DME (esp. for Transportation

Fuel and Power Generation) hold important future to “revive” the growth momentum of DME usage in China

– Outside of China, DME can be positioned as an important tool to support energy independency

• Example: DME as an Important Tool to Support Kerosene to LPG Conversion Programme in Indonesia

– “Implied” DME growth into MTO, MTP, and MTG can also be expected

• MMSA/JJ&A is able to provide advisory services to assist in properly planning for DME, Methanol, or Other Petrochemical Projects


Global Insight, Asian Perspective™

Methanol and DME - Key Petrochemicals For Tomorrow's...

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