Shale gas, naphtha & the petchems conundrum 2013

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Petchems market in review
–Fundamental changes
–US feedstock advantage
•Naphtha trade flows
–Where are the demand & supply centers
–Growth of US shale oil gives rise to LPG, naphtha exports to Asia
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Shale gas, naphtha & the petchems conundrum 2013

  1. 1. © 2013 Platts,McGrawHill Financial.All rightsreserved. Shale gas, naphtha & the petchems conundrum Shahrin Ismaiyatim Editorial Director, Petrochemical Analysis September 2013
  2. 2. Agenda • Petchems market in review – Fundamental changes – US feedstock advantage • Naphtha trade flows – Where are the demand & supply centers – Growth of US shale oil gives rise to LPG, naphtha exports to Asia 2
  3. 3. Agenda • Petchems market in review – Fundamental changes – US feedstock advantage • Naphtha trade flows • Where are the demand & supply centers • Growth of US shale oil gives rise to LPG, naphtha exports to Asia 3
  4. 4. Platts Mumbai conference Aug 2012 recap 4 • Shale gas to flood global markets with ethylene, ethylene derivatives while dramatically cutting certain co-products • Can lead to naphtha crackers becoming more competitive due to higher co-product credits • Falling ethane prices could lead to ethane rejection, leading to more oil exploration • New oil discoveriescould narrow crude-natural gas delta, improving naphtha’s profitability as a petrochemical feedstock • India’s naphtha surplus positions its petrochemical industry to take advantage of a dramatic shift to ethane cracker
  5. 5. Shale gas puts US back on petchems map Source: Platts Petrochemical Analytics
  6. 6. Strong ethane margins promotes US projects Source: Platts
  7. 7. US ethylene output to rise 30% in 10 years With six new worldscale crackers: • Ethylene surplus to hit 2.1 million mt in 2018 • Climb as high as 2.9 million mt in 2019 and 2020. With 10 new worldscale crackers: • Ethylene surplus to top 7 million mt through 2021 • Falling slightly in 2022 and 2023. Source: Platts Petrochemical Analytics
  8. 8. Asia sees better cracking margins in 2013 8 Source: Platts
  9. 9. Europe’s margins recover but lags US 9 Source: Platts
  10. 10. Agenda • Petchems market in review • Fundamental changes • US feedstock advantage • Naphtha trade flows – Where are the demand & supply centers – Growth of US shale oil gives rise to LPG, naphtha exports to Asia 10
  11. 11. Naphtha trade flows, old & new 11 Why US is exporting naphtha? • Flat gasoline demand • Cheap natgas feedstock
  12. 12. US ethylene output by feedstock forecast 12 BASE CASE Ethane Propane Butane Naphtha Full-range Naphtha Gas Oil Total Ethylene Produced Capacity Run Rate 2011 15826 4862 777 1955 1150 607 25177 26194 0.96 2012 15848 5549 823 1895 1168 575 25858 26226 0.99 2013 15612 5626 650 1849 1125 534 25396 27720 0.92 2014 17184 4493 715 1833 1022 502 25749 28105 0.92 2015 18005 4399 840 1800 926 466 26436 28219 0.94 2016 18316 4411 842 1714 896 433 26612 28219 0.94 2017 21099 4399 840 1604 863 417 29222 33208 0.88 2018 24402 4399 840 1594 845 406 32486 38493 0.84 2019 25315 4399 840 1562 863 395 33374 38493 0.87 2020 25384 4411 842 1518 869 381 33405 38493 0.87 2021 25314 4399 840 1469 826 363 33210 38493 0.86 2022 25313 4399 840 1385 791 331 33058 38493 0.86 2023 25313 4399 840 1377 763 342 33033 38493 0.86 • Ethane to account for 77% of all US ethylene produced in 2023, up from 61.5% in 2013 • Use of naphtha as petchems feedstock in the US to decline as a result Source: Platts Petrochemical Analytics
  13. 13. Asia naphtha premium attracts US cargoes 13 Source: Platts
  14. 14. 14 Price Reporting BreakingNews Assessments Market Reports 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Top 10 naphtha suppliers to Japan 2012 Source: Japan Customs Japan’s naphtha trading partners
  15. 15. Korea’s naphtha trading partners 15 Price Reporting BreakingNews Assessments Market Reports 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Top 10 naphtha suppliers to Korea 2012 Source:Korea Customs
  16. 16. Taiwan’s naphtha trading partners 16 Price Reporting BreakingNews Assessments Market Reports 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 Top naphtha suppliers to Taiwan 2012 Source:TaiwanCustoms
  17. 17. 17 India naphtha production volumes Price Reporting BreakingNews Assessments Market Reports 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 02-'03 03-'04 04-'05 05-'06 06-'07 07-'08 08-'09 09-'10 10-'11 11-'12 ‘000mt Source:PetroleumPlanning& Analysis Cell,fiscalyearApril 1-March 31
  18. 18. 18 Price Reporting BreakingNews Assessments Market Reports 0 2,000 4,000 6,000 8,000 10,000 12,000 02-'03 03-'04 04-'05 05-'06 06-'07 07-'08 08-'09 09-'10 10-'11 11-'12 '000 mt Source:PetroleumPlanning& Analysis Cell,fiscalyearApril 1-March 31 India naphtha export volumes
  19. 19. 19 Strong US NGL output leads to high stocks, exports NGLs production poised to grow by 1.5 million b/d in the next 6 years Spurt in ethane, propane output causes supply glut, stocks overhang Prices at historical lows toward end of 2012 US NGLs forecast Source: Bentek,a unit of Platts
  20. 20. Naphtha exports from US may increase too • Eagle Ford shale production to hit nearly 1 million b/d in 2013 • Of that, 30-50% of crude expected to be condensate • Naphtha production expected to outpace US domestic demand • More condensate splitters in the US = more naphtha • US domestic naphtha likely to be exported to world markets 20
  21. 21. US to become largest oil producer by 2020 21 Alberta Saskatchewan Alaska Bakken Utica Anadarko RockiesCalifornia Permian EagleFord
  22. 22. Asia dumping ground for naphtha • Asia traditionally short of 500,000-700,000 mt/month of naphtha • Have been able to absorb more than 1 million mt from NWE, the Med and US • Exact monthly volume of US naphtha to Asia on regularly remains hazy, restricted by long journey times • Naphtha needs to compete with LPG as petchems feedstock • NE Asian petrochemical producers regularly replaced naphtha with LPG when LPG price is less than 95% of naphtha • In Q2, Asia LPG prices around 90% of naphtha price • Similar situation in Europe – Dow Chemicals, BASF, Borealis and SABIC have all been regular importers of propane to use as feedstock 22
  23. 23. Co-products output via ethane forecast 23 Source: Platts Petrochemical Analytics 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 EthaneDemand(MT/year) 19,437,459 19,658,292 20,890,497 22,312,795 22,567,827 23,074,784 26,985,856 33,907,080 35,021,562 35,359,404 34,948,837 35,551,901 35,001,656 ETHYLENEPRODUCED 15,079,487 15,250,809 16,206,747 17,310,159 17,508,012 17,901,307 20,935,498 26,304,950 27,169,560 27,431,656 27,113,139 27,580,994 27,154,116 PROPYLENEPRODUCED 542,862 549,029 583,443 623,166 630,288 644,447 753,678 946,978 978,104 987,540 976,073 992,916 977,548 CRUDEC4PRODUCED 542,862 549,029 583,443 623,166 630,288 644,447 753,678 946,978 978,104 987,540 976,073 992,916 977,548 BUTADIENEPRODUCED 376,987 381,270 405,169 432,754 437,700 447,533 523,387 657,624 679,239 685,791 677,828 689,525 678,853 RAFFINATE-1PRODUCED 165,874 167,759 178,274 190,412 192,588 196,914 230,290 289,354 298,865 301,748 298,245 303,391 298,695 PYGASPRODUCED 331,749 335,518 356,548 380,823 385,176 393,829 460,581 578,709 597,730 603,496 596,489 606,782 597,391 BENZENEPRODUCED 165,874 167,759 178,274 190,412 192,588 196,914 230,290 289,354 298,865 301,748 298,245 303,391 298,695 TOLUENEPRODUCED 30,159 30,502 32,413 34,620 35,016 35,803 41,871 52,610 54,339 54,863 54,226 55,162 54,308 XYLENEPRODUCED - - - - - - - - - - - - - OTHERAROMATICSPRODUCED 135,715 137,257 145,861 155,791 157,572 161,112 188,419 236,745 244,526 246,885 244,018 248,229 244,387 GASOILPRODUCED - - - - - - - - - - - - - HYDROGEN/FUELPRODUCED 2,940,500 2,973,908 3,160,316 3,375,481 3,414,062 3,490,755 4,082,422 5,129,465 5,298,064 5,349,173 5,287,062 5,378,294 5,295,053 CRACKERCO-PRODUCTPRODUCTIONFROMETHANE With Pygas production accounting only 5% of the output, this will adversely impact US aromatics production
  24. 24. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NaturalgasolineDemand(MT/year) 9,179,312.70 6,316,011.57 6,876,230.01 7,067,731.46 6,861,241.87 6,844,338.45 6,876,804.75 6,850,040.95 6,882,687.97 6,850,685.27 6,878,359.18 6,855,592.48 6,875,582.02 ETHYLENEPRODUCED 3,176,232.77 2,185,471.13 2,379,318.34 2,445,581.82 2,374,132.14 2,368,283.20 2,379,517.22 2,370,256.38 2,381,552.93 2,370,479.33 2,380,055.08 2,372,177.33 2,379,094.12 PROPYLENEPRODUCED 1,467,419.54 1,009,687.66 1,099,245.07 1,129,858.80 1,096,849.05 1,094,146.84 1,099,336.95 1,095,058.45 1,100,277.45 1,095,161.45 1,099,585.45 1,095,945.93 1,099,141.49 CRUDEC4PRODUCED 828,996.75 570,407.97 621,002.09 638,296.85 619,648.49 618,121.92 621,053.99 618,636.92 621,585.31 618,695.11 621,194.38 619,138.28 620,943.57 BUTADIENEPRODUCED 431,967.66 297,224.07 323,587.29 332,599.13 322,881.97 322,086.52 323,614.34 322,354.87 323,891.20 322,385.19 323,687.49 322,616.12 323,556.80 RAFFINATE-1PRODUCED 397,029.10 273,183.89 297,414.79 305,697.73 296,766.52 296,035.40 297,439.65 296,282.05 297,694.12 296,309.92 297,506.88 296,522.17 297,386.77 PYGASPRODUCED 1,756,456.72 1,208,565.54 1,315,763.04 1,352,406.75 1,312,895.07 1,309,660.61 1,315,873.02 1,310,751.78 1,316,998.77 1,310,875.07 1,316,170.46 1,311,814.06 1,315,639.05 BENZENEPRODUCED 635,246.55 437,094.23 475,863.67 489,116.36 474,826.43 473,656.64 475,903.44 474,051.28 476,310.59 474,095.87 476,011.02 474,435.47 475,818.82 TOLUENEPRODUCED 314,447.04 216,361.64 235,552.52 242,112.60 235,039.08 234,460.04 235,572.20 234,655.38 235,773.74 234,677.45 235,625.45 234,845.56 235,530.32 XYLENEPRODUCED 165,164.10 113,644.50 123,724.55 127,170.25 123,454.87 123,150.73 123,734.90 123,253.33 123,840.75 123,264.93 123,762.86 123,353.22 123,712.89 OTHERAROMATICSPRODUCED 641,599.02 441,465.17 480,622.31 494,007.53 479,574.69 478,393.21 480,662.48 478,791.79 481,073.69 478,836.82 480,771.13 479,179.82 480,577.01 GASOILPRODUCED 177,869.04 122,386.38 133,241.83 136,952.58 132,951.40 132,623.86 133,252.96 132,734.36 133,366.96 132,746.84 133,283.08 132,841.93 133,229.27 HYDROGEN/FUELPRODUCED 1,772,337.89 1,219,492.89 1,327,659.63 1,364,634.66 1,324,765.73 1,321,502.03 1,327,770.61 1,322,603.06 1,328,906.54 1,322,727.47 1,328,070.73 1,323,674.95 1,327,534.52 CRACKERCO-PRODUCTPRODUCTIONFROMNAPHTHAandNATURALGASOLINE Co-products output via naphtha forecast 24 Source: Platts Petrochemical Analytics By comparison, aromatics output from naphtha trumps ethane
  25. 25. Conclusion • Naphtha remains a very viable alternative for petchem producers in Asia • Co-products like aromatics more yield from naphtha • US naphtha exports to rise on poor domestic demand, high stocks • NE Asian petrochemical producers have more cracking choices depending on price of naphtha versus LPGs 25
  26. 26. Thank you Shahrin Ismaiyatim Editorial Director,Petrochemical Analysis Tel:+44-207 176 6264 Email: shahrin@platts.com

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