Staying Competitive in a Feedstock Driven Market Oct15.pdf · Staying Competitive in a Feedstock...

Staying Competitive in a Feedstock Driven Market

Prepared for: NY Metro Section of AIChEOctober 19, 2015

2

Agenda

Nexant Presentation to NY Metro Section of AIChE

� Nexant Overview� Changes in the Global Petrochemical Landscape� Global Industry Dynamics

- Ethylene- Propylene- Butadiene

� Conclusions

Nexant Overview

Nexant is a global strategic, financial and technical advisory firm

Corporate Overview Business Divisions

Energy & Chemicals Advisory

Energy Demand Management

Energy Software & Grid Management

� Founded in 2000 as a spinoff of Bechtel’s Technology and Consulting Group; ChemSystems established in 1964 and purchased by Nexant in 2001 from IBM

� Nexant provides high value-added services and products for the global energy and chemicals industries

� Over 700 employees globally

� Have completed over 3,000 client assignments in over 100 countries

� Principal investors include Telesoft Partners, Symphony Technology, Oak Investment Partners, Intel Capital, and The Beacon Group

� Organized into three business units

� Business advisory services integrated across the entire energy value chain

� Technical, strategic, market, financial (new build, M&A, IPO) and project feasibility consulting services

� Advanced clean energy technology consulting services for development and commercialization

� Clients are oil, gas and chemical companies, financial companies, investors and governments

� Design/management services for the largest U.S. energy efficiency incentive programs

� Demand-side management and carbon management services for end-users, government and energy services

� Advanced software for electric utilities, U.S. ISOs, grid operators, and energy market participants

� Automated systems for electric power grids� Application service provider for energy market

participants and energy producers�

4Nexant Presentation to NY Metro Section of AIChE

Nexant’s Energy and Chemical Advisory team provides expertise across the energy value chain

POWER GAS CHEMICALSDOWNSTREAM OIL GREEN CHEMICALS RENEWABLE ENERGY

Energy Chemicals and Clean-tech

Renewable/Traditional Product Interface

5

� Electric Power� Grid

Management � Distribution

Software� Energy

Efficiency� Demand Side

Management

� Gas Market Analysis and Forecasts

� Gas Monetization

� Gas Regulation� LNG & Pipeline

Projects

� Petroleum Refining

� Petroleum Logistics

� Product Market� Forecasts � Coal to liquids� Gas to liquids

� Biomass � Gasification� Solar (Thermal

& PV)� Wind Power� Clean Coal� Capture and

Sequestration� Fuel Cells &

Hydrogen� Geothermal

� C1 Chemicals and Fertilizers

� Olefins� Aromatics� Polymers� Inorganics� Specialty

Chemicals� Advanced

Materials

� Syngas� Biopolymers� Olefins� Alcohols� Aromatics� Sourced from

Biomass, Algae, Wastes, and Agricultural Sources


Leading global advisory to the energy and chemical industries with a proven track record

� Nexant has been advising clients in the energy and chemicals industries for 50 years

� We have completed over 3,000 client assignments including market assessments, technology evaluations, valuations/appraisals and due diligence

Proven Track Record

Global Footprint� Nexant has offices in the major energy and chemical producing and consuming

regions of the world

� Strong international presence allows us to provide valuable insights through our consultants’ local market knowledge and our vast network of sector specialists

� Over 150 consultants worldwide in Energy and Chemical Advisory

� Our consultants blend strategic consulting, operational and technical expertise with deep energy and chemical sector knowledge

� Nexant’s consultants are typically Chemical Engineers, Economists, and MBA Graduates who have significant prior experience working at energy and chemical producers

Our People

Headquarters Main Offices

Representative Offices

San Francisco Washington,

DC

White Plains

London Frankfurt

Bahrain

TokyoSeoul

Shanghai

Singapore

Kuala LumpurBangkok

Buenos Aires

La Paz Rio de

Janeiro

Project Offices

New Delhi

Pretoria

Abuja

6Nexant Presentation to NY Metro Section of AIChE

Changes in the Global Petrochemical Landscape

8

What a difference a year makes


Brent Crude Oil Price Decline, monthly average

Source: Nexant

40

60

80

100

120

140

Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015

US$ p

er B

arre

l

9

What a difference a year makes…..


Q2 2014

0

50

100

150

Bren

t Cru

de O

il US$

/bbl

0

500

1,000

1,500

USA

Prod

ucts

US$

per

Ton

Q2 2015

10

The fall in oil prices has dramatically altered the investment landscape


� Cancellation or delay of projects in major regions� Decrease in planned ethane exports from the United States� Reduced availability of investment funds by oil producing countries such as

Venezuela� Reduced emphasis on renewables into fuel, though significant emphasis on

renewables into chemicals remain

Source: Nexant/EIA

40

60

80

100

120

140

Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015

US$ p

er B

arre

l

Iran

Venezuela

LibyaRussiaSaudi Arabia

KuwaitUAE

NigeriaIraq

Government FiscalBreak Even - 2014

11

Impact of oil prices on economies results in winners and losers


(6)(5)(4)(3)(2)(1)0123

Estim

ated

Cha

nge i

n GD

P, Pe

rcen

t

$40 Crude Oil $10 Decline in Crude OilSource: UBS/Oxford Economics

12

Uncertain times – but sources of competitive advantage remain clear and robust in refining and chemicals sectors


PARAMETER KEY OBJECTIVES

Size

Location

Process Technology

Integration

Capture economies of scale

Access to low cost feedstocks/deficit markets

Cost advantage/product differentiation

Synergies with adjacent facilities

Global Ethylene Industry Dynamics

14

Regional petrochemicals trends – changing dynamics but familiar themes� United States� Lighter feedstocks� Export markets� Capital costs� Product differentiation

� Middle East� Heavier feedstocks� Export markets� Integration� Product differentiation

� China� Diversified feedstocks� Economic growth� Environmental issues� Product differentiation

Ethylene Capacity Drivers

0

50

100

150

200

2014 2020

Millio

n To

ns

North America

22%

Middle East21%

China35%

Other22%

Ethylene Capacity Additions by Region

40


Naphtha share is forecast to decline as a result of increase light feedstock consumption in U.S., Europe, and M. East and CTO/MTO in China

Nexant Presentation to NY Metro Section of AIChE2014 2015 2020

Coal Gas Oil

2014 2015 2020

Naphtha

2014 2015 2020

Ethane

2014 2015 2020

Butane Propane +4

+9

+10

+16

Millions tons per year of ethylene Global Ethylene Capacity by Feedstock

0%

25%

50%

75%

100%

2014 2015 2020

Naphtha Ethane ButanePropane Gas Oil CTO/MTO

15

Oil prices have had a radical effect on feedstock prices since late 2014, but the effects on competitiveness are less well definedU.S. Ethylene Costs (U.S.$ per ton)

U.S. Ethylene Feedstock Consumption (Million tons)

Source AFPM

0

500

1,000

1,500

2,000

2,500

3,000

3,500

EthaneQ2 2014

NaphthaQ2 2014

EthaneQ2 2015

NaphthaQ2 2015

Net Materials Utilities Fixed Costs

0

10

20

30

40

50

60

2014 2015 2020Naphtha Ethane Butane Propane

Nexant Presentation to NY Metro Section of AIChE 16

Over 50 Coal based projects focused in China

Phase 1: Coke Based Phase 3: New TechnologyPhase 2: Syngas

o Acetylene based VCM

o Benzene

o Methanol/Ammoniao MTO/MTP

o MEG via DMOo Acetyl to ethanolo Methanol to PX

17

Many projects in implementation phase but facing increasing challenges

CTO CTMEG MTOMajor Development Trends� Opportunity to valorize

“stranded coal”.� Coastal projects importing

methanol

18

Sector Challenges� Environmental issues� Capital cost� Production cost

competitiveness


Gas Oil40%

Naphtha48%

Methanol12%

China Ethylene Feedstock Consumption – 2015

19

Petrochemicals feedstock cost advantages remain at lower oil prices but are substantially reduced


Global Ethylene Production Cost Curves versus Brent Crude Oil Price

0

1,000

2,000

3,000

0 50 100 150 200

Ethy

lene C

ash

Cost

(C

urre

nt U

.S. D

ollar

s per

Ton

Ethy

lene)

Ethylene Cumulative Capacity (million tons)

Oil Price (US$ per bbl)

140

100

70

50

Lighter Feedstocks Liquids Cracking

The cost curve is much steeper with higher oil prices

Global Propylene Industry Dynamics

21

There are three primary routes to on-purpose propylene


…metathesis of ethylene feedstock from ethane, methanol conversion from coal or natural gas, and PDH from propane

Steam cracking and refinery FCCs currently account for a majority of propylene supply. On-purpose production is still relatively modest


Global Propylene Capacity by Feedstock (2015)

Global Propylene Capacity by Feedstock (Volume Basis, 2015)

05

101520253035404550

NorthAmerica

WesternEurope

MiddleEast

AsiaPacific

Millio

n To

ns

Cracker Refinery PDHMTO/MTP Others

22

0%10%20%30%40%50%60%70%80%90%

100%

NorthAmerica

WesternEurope

MiddleEast

AsiaPacific

Cracker Refinery PDHMTO/MTP Others

Going forward, a greater need for on-purpose production capacity is emerging to meet future propylene demand requirements


2014 2015 2020

Cracker

2014 2015 2020

Refinery

2014 2015 2020

On-Purpose+21

+4

+3

Millions Tons per Year of Propylene Global Propylene Capacity by Feedstock

0%

25%

50%

75%

100%

2014 2015 2020Cracker Refinery On-Purpose

23

05,000

10,00015,00020,00025,00030,00035,00040,00045,000

2014 2015 2020

Thou

sand

Tons

Refinery CrackerCTO/MTO On-Purpose

24

China’s propylene expansion driving non-conventional technology routes


China Propylene Capacity by Feedstock China Propylene Capacity

0%10%20%30%40%50%60%70%80%90%

100%

2014 2015 2020

Tech

nolo

gy

Refinery CrackerCTO/MTO On-Purpose

Global Butadiene Industry Dynamics

Butane/butene dehydrogenation is an alternative route for butadiene production


C4 Stream

ButadieneIsobutylene

Refinery FCCU DehydrogenationButane/Butene

Dehydrogenation

Styrene Butadiene Rubber,Polybutadiene Rubber,

Styrene Butadiene Latex,etc.

Mixed Butanes Butadiene DerivativesMixed Butenes Butene-1

n-Butane Derivatives,Acetic Acid,

etc.

Butan-2-ol,Higher Oxo-

Alcohols,etc.

LLDPE comononer,

HDPE comonomer,

etc.

High Purity:� Butyl rubber� etc.

Contained:� MTBE� ETBE� etc.

26

There is increased investment in alternative sources, with a step change in 2012-2014Global Butadiene Production by Process(Million tons)

0

5

10

15

20

2010 2012 2014 2016 2018 2020

Extractive Distillation On-Purpose

� Global butadiene production in 2014 was 10.7 million tons where approximately 3 percent of butadiene was produced from dehydrogenation

� Chinese companies reacted quickly to the peak pricing in 2011-2012 and are implementing numerous butenedehydrogenation projects using new (and proven) Chinese technology

� By 2020, more than 6 percent of butadiene will be produced from dehydrogenation globally

Nexant Presentation to NY Metro Section of AIChE 27

Feedstock costs main driver of butadiene economics


U.S. Butadiene Costs (U.S.$ per ton)

� Historically, extractive distillation has been the low cost route to butadiene

� As the market requires on-purpose butadiene (OPBD), new sources of marginally cost effective butadiene supply (i.e., bio-based butadiene) are being explored

0200400600800

1,0001,2001,4001,6001,8002,000

ExtractiveDistillation

Q2 2014

On-PurposeQ2 2014

ExtractiveDistillation

Q2 2015

On-PurposeQ2 2015

Net Materials Utilities Fixed Costs

28

Conclusions

In summary…


� The fall in oil prices has dramatically altered the investment landscape� In order to ensure competitive feedstock positions, major regions are changing to

alternative feedstocks� Lower oil prices have narrowed the gap between high and low cost olefins

producers, but Middle East and U.S. NGL-based producers remain the most competitive

� The United States has moved toward light feedstocks due to their cost advantages

� The Middle East is focusing on integration with refineries to obtain sources of competitive advantage and capture them through the value chain

� Coalfield methanol-to-olefins (MTO) in China remains highly competitive, although MTO plants based on purchased methanol face a more challenging situation

30

Nexant Inc.44 South BroadwayWhite Plains, NY 10601Telephone: + 1 914 609 0391Facsimile: + 1 914 609 0399

www.nexant.com

“This presentation was prepared by Nexant Inc. (“Nexant”). Except where specifically stated otherwise in the presentation, the information contained herein was prepared on the basis of information that is publicly available and has not been independently verified or otherwise examined to determine its accuracy, completeness or financial feasibility. Neither NEXANT, nor any person acting on behalf of NEXANT assumes any liabilities with respect to the use of or for damages resulting from the use of any information contained in this presentation. NEXANT does not represent or warrant that any assumed conditions will come to pass. This presentation is integral and must be read in its entirety. The presentation is given on the understanding that the recipient will maintain the contents confidential except for internal use. The presentation should not be reproduced, distributed or used without first obtaining prior written consent by NEXANT. This presentation may not be relied upon by others.This notice must accompany every copy of this presentation.”

Nexant, Inc.

San Francisco

New York

Houston

Washington

London

Frankfurt

Bahrain

Singapore

Bangkok

Shanghai

Kuala Lumpur

T: + 1 914 609 0342E. [email protected]

Energy & Chemicals Advisory

Marisabel DolanSenior Consultant

Staying Competitive in a Feedstock Driven Market Oct15.pdf · Staying Competitive in a Feedstock...

Documents

Transcript of Staying Competitive in a Feedstock Driven Market Oct15.pdf · Staying Competitive in a Feedstock...