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    Petrochemicals   ethylene Petrochemicals ethylene Document Transcript

    • SECTOR UPDATEOIL AND GASEthylene Global Demand-Supply ScenarioIndia Equity Research | Oil, Gas and ServicesGlobal demand for ethylene to grow at a healthy rate of 4.8% CAGR over2010-15, compared to a growth rate of 1.5% over the last 5 years. In spiteof healthy demand, there is likely to be an oversupply situation during2010-11 due largely to huge capacity addition in the Middle East andChina – leading to decreased ethylene prices and margins. The situation isexpected to improve after 2011 due to limited capacity addition. Globalcapacity utilization decreased to around 80% during 2010, but is expectedto increase substantially till 2015 to reach a high of 95%.Global ethylene oversupply scenario not as badThough there is concern that the new capacities coming up in the Middle East andChina are going to flood the world market, depressing ethylene prices and margins, webelieve that most of the scheduled projects, amounting to 10 mtpa (million tonnes perannum), have already come online by 2010. Only marginal new capacity of 9 mtpa isexpected to come online till 2015. Large projects totaling 12 mtpa, which are delayedbecause of a number of reasons, such as, feedstock availability, impact of financialcrisis, regulatory approval and environmental impact, are not expected to come onlineanytime soon.Healthy demand growth led by polymer demand in China and IndiaDemand for ethylene is expected to grow at a healthy rate of 4.8% CAGR between2011-15 driven by strong polyethylene (PE) demand from developing economies inAsia. PE demand per capita in India is very low at 2kg against a world average of 10.3kg. We expect the PE demand per capita in developing countries like China and India togrow in line with their high GDP growth rate, consuming the added capacity.Asian crackers have bi-product netback; Middle East (ME) crackersshort of feedstockMost of the crackers that are coming up in China are Naphtha based. Though Naphthacosts more than Ethane, it gives 17x more bi-product netback than ethane basedcrackers.On the other hand, large projects planned in the Middle East are delayed or cancelledbecause of concerns of natural gas availability – thus tightening ethylene supplysituation. The two factors together are expected to contribute positively to crackeroperators’ bottom lines.Ethylene margins to grow in line with higher capacity utilizationWe expect that the utilization rates of the crackers will reach a trough in 2010-11, andthen the demand scenario will tighten till 2015 – primarily driven by healthy demandgrowth in line with rebound in global economy and less capacity addition. This will drive Alin Devbetter margin for the cracker operators. +1-617-504-3157 alin.dev@edelcap.com August 29, 2011 Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited 1 Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
    • Oil and Gas 2 Edelweiss Securities Limited
    • Sector UpdateContentsEthylene Supply.................................................................................................................................................................. 5 Middle East: ................................................................................................................................................................... 6 Asia: ............................................................................................................................................................................... 7 US and Europe: .............................................................................................................................................................. 7Ethylene Demand ............................................................................................................................................................... 8Ethylene Economics ........................................................................................................................................................... 9 Feedstock Slate: ........................................................................................................................................................... 10Ethylene Margin & Utilization Rate .................................................................................................................................. 12APPENDIX – I .................................................................................................................................................................... 14 What is Ethylene? ........................................................................................................................................................ 14 Ethylene Value Chain ................................................................................................................................................... 14 Feedstocks ............................................................................................................................................................... 15 Intermediates .......................................................................................................................................................... 15 Derivatives ............................................................................................................................................................... 16APPENDIX – II ................................................................................................................................................................... 19 How is Ethylene Produced? ......................................................................................................................................... 19APPENDIX – III .................................................................................................................................................................. 21 Middle East Feedstock concerns: ................................................................................................................................. 21 Saudi Arabia: ........................................................................................................................................................... 22 Iran: ......................................................................................................................................................................... 23 Qatar: ...................................................................................................................................................................... 23APPENDIX – IV .................................................................................................................................................................. 24 Existing and expected cracker capacities all over the world ........................................................................................ 24APPENDIX – V ................................................................................................................................................................... 40 Sensitivity Analysis ....................................................................................................................................................... 40 3 Edelweiss Securities Limited
    • Oil and Gas 4 Edelweiss Securities Limited
    • Sector UpdateEthylene SupplyGlobal ethylene capacity has dramatically increased between 2005 and 2010 from 115.2 million tonnes per annum to144 mtpa, growing at a CAGR 4.6%. During the same period China has added 14.2 mtpa of ethylene cracker capacity, while Middle EasternChart 1: World ethylene capacity has grown at CAGR 3% from 2004-15 countries have nearly doubled their capacity to 23.6 mtpa. At the same time, during 2006-10 the cumulative capacity share of Western Europe and North America dropped from 53% to 42.5%. Total ethylene capacity is expected to continue increasing, though at a subdued rate, till 2015 when the capacity will reach 152.7 mtpa representing a CAGR of 1.2% from 2010-15 with Asia, mainly China, and Middle East, mainly Saudi Arabia adding major portion of the new capacity. Source: Oil & Gas Journal, Edelweiss researchWe believe that most of the scheduled projects, amounting to 10 mtpa, have already come online by 2010. Onlymarginal new capacity of 9 mtpa is expected to come online till 2015. Large projects totaling 12 mtpa, which aredelayed because of a number of reasons, such as, feedstock availability, impact of financial crisis, regulatory approvaland environmental impact, are not expected to come online anytime soon. 5 Edelweiss Securities Limited
    • Oil and GasChart 2: Most of the incremental capacity has already been added by 2010 Source: Oil & Gas Journal, Edelweiss researchMiddle East:Availability of cheap crude oil and high dependence of the kingdoms on oil revenue have driven the kingdoms andgovernments to diversify into manufacturing commodity chemicals and capture more value from the commoditynature of crude oil. Middle Eastern countries are also better positioned to transport petrochemicals at a lower cost todeveloped markets in Europe, as well as high growth markets in Asia. This being a labor intensive industry, thegovernments are also able to generate meaningful employment for its people by developing the petrochemicalindustry. To bring about rapid growth in the petrochemicals industry, Middle Eastern countries provide differentincentives to investors. Some of the incentives typically provided in Saudi Arabia include: Subsidized natural gas at $ 0.75 per Mmbtu. A complex discount system for domestic users with NGLs garnering a 30 percent discount on the export price of naphtha and naphtha itself receiving an 11 percent discount on its export price. Costs therefore fluctuate in line with global oil prices, though Saudi producers using liquids still retain a competitive advantage. 6 Edelweiss Securities Limited
    • Sector UpdateAsia: Chart 3: Asia & ME will account for 50% of the crackerCapacity growth in Asia has been largely led by capacitylarge scale projects in China. Chinese state-owned players like Sinopec and PetroChina arerapidly building new ethylene capacity, aided byfavorable government policies for joint ventureswith foreign majors. But, environmental worries,economically unviable size of scatteredpetrochemicals plants and the potential threat ofovercapacity could delay the commercial start ofproduction. In the long term, China could be apotential competitor to Middle Easternpetrochemicals players as petrochemical importsfrom the Kingdoms are replaced by local Chineseoutput. Source: Oil & Gas Journal, Edelweiss researchUS and Europe: Chart 4: North America – median age of a plant is Chart 5: Western Europe – median age of a plant 32 years is 30 years Source: Edelweiss research Source: Edelweiss researchHigh feedstock costs coupled with stagnant demand have depressed capacity growth in the developed markets.Cheaper imports from ME have forced many economically unviable and older producers to shutdown. 7 Edelweiss Securities Limited
    • Oil and GasEthylene Demand Chart 6: Demand for ethylene is highly correlated to GDP and populationDemand for ethyleneis strongly correlatedwith both GDPgrowth rate andgrowth in populationwith correlation of87% and 90%respectively. Source: CMAI Global, IMF, Edelweiss research Chart 7: Ethylene demand per capita is expected to grow at CAGR 4.8% till 2015Demand per capita for ethylene has historically grown atan average growth rate of 3% Y-o-Y since 2000, barring thepast few years of global economic slowdown and a dip in2005 when most of the PE plants in North America wereshut down following hurricane Katrina. We expect thedemand to grow at CAGR 4.8% till 2015 to reach 146 mtpadriven by strong demand growth and rapid urbanization inhigh growth emerging economies of China and India. Source: CMAI Global, IMF, Edelweiss research Chart 8: Ethylene demand – GDP elasticity to be 1.1xDemand for ethylene has historically grown with GDPwith an elasticity of 1.06x since 2000, with exceptions inthe past couple of years due to the financial crisis and in2005 due to the rampage of hurricane Katrina. We expectthe elasticity to gradually increase to 1.1x in 2015 due tostrong demand growth from countries such as China andIndia driven by rapid urbanization and industrialization. Source: CMAI Global, IMF, Edelweiss research 8 Edelweiss Securities Limited
    • Sector UpdateDemand for ethylene is expected to Chart 9: Ethylene demand to grow at CAGR 4.8% while little new capacity will come up after 2011grow at a healthy rate of 4.8% CAGRtill 2015, while the capacity isexpected to grow at a minimal rateof 1.2% CAGR during the sameperiod with very little capacitiesexpected to come online after 2011.PE demand per capita in developingeconomies is very low compared toworld average of 10.3 kg. We expectthe PE demand per capita indeveloping countries like China andIndia to grow in line with their highGDP growth rates, consuming theadded capacity. Source: CMAI Global, IMF, Edelweiss researchEthylene EconomicsDue to the commoditized nature of the basic chemicals business, price is the single most important factor indetermining the competitiveness of players in the market place as there is only marginal differentiation between theproducts of different suppliers. Chart 10: ME producers enjoy the lowest cost of production riding on cheap ethaneIt is not all about who has the biggestplant - the next plant built will be theBiggest Plant; it is also not about who hasthe best technology - technology hasbecome readily available; it is not evenabout who traded there first -competitive conditions dictate decisions.It is literally about the cost.With price of ethylene fixed on a cost-plus basis based on the highest costproducer, feedstock cost is the mostimportant factor in determining theethylene margins across differentgeography. Source: CMAI Global 9 Edelweiss Securities Limited
    • Oil and GasFeedstock Slate: Chart 11: Olefins Feedstock vs. Crude Oil PricesPetrochemicals are produced by cracking Naphtha orethane.Since 2008, the relative price of U.S. ethane (as apercent of crude oil price) has been trending down,due to cheaper U.S. natural gas. This benefits thepetrochemical producers using natural gas as feedstock, but there is always a trade off as naphthaunlocks more sophisticated derivatives.Cracking ethane generates a large proportion ofethylene (95%) while cracking naphtha gives betterbyproduct credit. A typical cracker output is givenbelow: Source: Lyondell Basell Investor Day 2010 Table 1: Cracker output slate Chart 12: Napththa vs ethane cracker margin widens Source: Platts, ICIS pricing, Edelweiss ResearchEthane crackers enjoy a higher margin asnaphtha prices rallied with crude oil price,while natural gas price remained stable.Middle Eastern countries which provide naturalgas at an average subsidized rate of USD4/mmBtu, enjoys still higher margins thoughthe gap narrowed in the recent years driven bya fall in natural gas prices in the internationalmarket. Source: Platts, ICIS pricing, Edelweiss Research 10 Edelweiss Securities Limited
    • Sector Update Chart 13: Regional feedstock slate of steam crackers Feedstock-related costs account for over 50% of the total cash costs of the final output of petrochemical companies. Most of the crackers in Asia and Europe are Naphtha based while those in the Middle East and North America are ethane based. Though Naphtha costs more than Ethane, Naphtha gives 17x more bi-product netback than ethane based crackers. Source: OGJ, Edelweiss Research Chart 14: Propylene-ethylene spread widensMeanwhile, propylene / ethylene price ratiocontinues to increase as ethylene productionfrom ethane increases driven by highercracker margin realization and propyleneproduction from steam naphtha crackersdeclines owing to large ethane crackercapacity addition in the ME. The effect is evenmore pronounced in the case of butadienewhich is used as a substitute for naturalrubber. Source: Bloomberg, Edelweiss Research 11 Edelweiss Securities Limited
    • Oil and GasEthylene Margin & Utilization Rate Chart 15: Beginning of a new cycle of profitabilityThe cracker industry is cyclical in nature andhistorically operated in a 7-8 year cycle. Webelieve that the ROCE cycle of the industrybased on replacement cost of a steam crackerwill hit trough in 2011, and will see thebeginning of new cycle starting 2011-12. Source: CERA Downstream Index, Edelweiss Research Chart 16: Operating rate follows gross marginHistorically operating rates of crackers have closelyfollowed ethylene margin as the operators havemore incentive to run the plant at a higheroperating rate when the margins are higher, andlower the rate when the margins are declining. Source: Edelweiss Research 12 Edelweiss Securities Limited
    • Sector Update Chart 17: Ethylene-Naphtha crack is expected to grow in line with higher operating rateWe believe that the gross ethylene margin will startstrengthening in line with higher ethylene prices andgradually increase to USD 460 per tonne, along withhigher operating rates of the crackers though thecrackers will not see high margins of 2004-06 anytimesoon partly because of higher crude oil prices. Source: Edelweiss Research Chart 18: Cracker margin is expected to grow along with higher bi-product pricesAt the same time the net cracker margin realized willgradually strengthen to USD 383 per tonne by theyear 2015, riding on higher bi-product netbacks. Source: Edelweiss Research 13 Edelweiss Securities Limited
    • Oil and GasAPPENDIX – IWhat is Ethylene?Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyethyleneterephthalate (PET), polyvinyl chloride (PVC) and polystyrene (PS) as well as fibers and other organic chemicals. Theseproducts are used in a wide variety of industrial and consumer markets such as the packaging, transportation,electrical/electronic, textile and construction industries as well as consumer chemicals, coatings and adhesives.Ethylene is one of the largest-volume petrochemicals. With a diverse range of end-uses, demand for ethylene issensitive to both economic and energy cycles. It is often seen as a barometer to the performance of the petrochemicalindustry as whole.According to CMAI, global production and consumption of ethylene in 2010 were both approximately 115m tonnes.Global capacity utilization (demand / capacity) was 83.1% in 2010, down from 88% in 2009. Ethylene consumption isestimated to have increased by 2.1% in 2010; it is forecast to grow an average 4.9% per year up to 2015.Ethylene Value Chain Chart A1-1: Ethylene value chain Source:Edelweiss research 14 Edelweiss Securities Limited
    • Sector UpdateFeedstocks Ethane: Ethane is isolated on an industrial scale from natural gas, and as a byproduct of petroleum refining. Its chief use is as petrochemical feedstock for ethylene production. Naphtha: Naphtha is obtained in petroleum refineries as one of the intermediate products from the distillation of crude oil. It is a liquid intermediate between the light gases in the crude oil and the heavier liquid kerosene. The generic name naphtha describes a range of different refinery intermediate products used in different applications. Naphtha is used primarily as feedstock for producing high octane gasoline (via the catalytic reforming process). It is also used in the bitumen mining industry as a diluent, the petrochemical industry for producing olefins in steam crackers, and the chemical industry for solvent (cleaning) applications.Intermediates Ethylene Oxide: Because of its special molecular structure, ethylene oxide easily participates in the addition reaction and thus easily polymerizes. Although it is a vital raw material with diverse applications, including the manufacture of products like polyethylene glycol that are often more effective and less toxic than alternative materials, ethylene oxide itself is a very hazardous substance: at room temperature it is a flammable, carcinogenic, mutagenic, irritating, and anesthetic gas with a misleadingly pleasant aroma. Therefore, it is commonly handled and shipped as a refrigerated liquid. The chemical reactivity that is responsible for many of Chart A1-2: Global Ethylene ethylene oxides hazards has also made it a key industrial Derivatives chemical that supports the living standards of advanced societies. Ethylene oxide (EO) is primarily used to make ethylene glycol. Other EO derivatives include ethyoxylates (for use in shampoo, kitchen cleaners, etc), glycol ethers (solvents, fuels, etc) and ethanol amines (surfactants, personal care products, etc). Ethylene Glycol: Ethylene glycol is an organic compound widely used as automotive antifreeze and a precursor to polymers. Ethylene glycol is produced from ethylene, via the intermediate ethylene oxide. Ethylene oxide reacts with Source:Edelweiss research water to produce ethylene glycol. Most monoethylene glycol (MEG) is used to make polyester fibers for textile applications, PET resins for bottles and polyester film. MEG is also used in antifreeze applications. Ethyl Benzene: This aromatic hydrocarbon is important in the petrochemical industry as an intermediate in the production of styrene, which in turn is used for making polystyrene, a common plastic material. Although often present in small amounts in crude oil, ethylbenzene is produced in bulk quantities by combining benzene and ethylene in an acid-catalyzed chemical reaction. 15 Edelweiss Securities Limited
    • Oil and Gas Styrene: Styrene, also known as vinyl benzene, is a colorless oily liquid that evaporates easily. The presence of the vinyl group allows styrene to polymerize. Commercially significant products include polystyrene, ABS, styrene-butadiene (SBR) rubber, styrene-butadiene latex and other products. Ethylene dichloride: Ethylene dichloride (EDC) is a chlorinated hydrocarbon, mainly used to produce vinyl chloride monomer (VCM), the major precursor for PVC production. Production is primarily achieved through the iron (III) chloride-catalyzed reaction of ethylene and chlorine. Vinyl chloride: VCM is an important industrial chemical chiefly used to produce the polymer polyvinyl chloride (PVC). It can be produced by two methods - hydrochlorination of acetylene and dehydrochlorination of ethylene dichloride. Due to the relatively low cost of ethylene, compared to acetylene, most vinyl chloride has been produced via dehydrochlorination of EDC, despite lower yields (50-60%), lower product purity and higher costs for waste treatment.Derivatives PET: Polyethylene terephthalate is a thermoplastic polymer resin of the polyester family and is used in synthetic fibers; beverage, food and other liquid containers; thermoforming applications; and engineering resins often in combination with glass fiber. The majority of the worlds PET production is for synthetic fibers (in excess of 60%) with bottle production accounting for around 30% of global demand. In discussing textile applications, PET is generally referred to as simply "polyester" while "PET" is used most often to refer to packaging applications. The polyester industry makes up about 18% of world polymer production. Polystyrene: PS is an aromatic polymer made from the monomer styrene. Polystyrene is one of the most widely used plastics, the scale being several billion kilograms per year. Solid polystyrene is used, for example, in disposable cutlery, plastic models, CD and DVD cases, and smoke detector housings. Products made from foamed polystyrene are nearly ubiquitous, for example packing materials, insulation, and foam drink cups. Polyethylene: The largest outlet, accounting for 60% of ethylene demand globally, is polyethylene. Polyethylene is a thermoplastic polymer consisting of long chains produced by combing the ingredient monomer ethylene. PE is classified into several different categories based mostly on its density and branching. The mechanical properties of PE depend significantly on variables such as the extent and type of branching, the crystal structure and the molecular weight. With regard to sold volumes, the most important polyethylene grades are HDPE, LLDPE and LDPE. 16 Edelweiss Securities Limited
    • Sector UpdateHDPE is defined by a density of greater or equal to 0.941 g/cm3. It hasa low degree of branching and thus stronger intermolecular forces andtensile strength. HDPE is used in products and packaging such as milkjugs, detergent bottles, margarine tubs, garbage containers and waterpipes. One third of all toys are manufactured from HDPE. Source:Edelweiss researchLDPE is defined by a density range of 0.910–0.940 g/cm3. It has ahigh degree of short and long chain branching, which means thatthe chains do not pack into the crystal structure as well. This resultsin a lower tensile strength and increased ductility. The high degreeof branching with long chains gives molten LDPE unique anddesirable flow properties. LDPE is used for both rigid containers andplastic film applications such as plastic bags and film wrap. Source:Edelweiss research 17 Edelweiss Securities Limited
    • Oil and Gas LLDPE is defined by a density range of 0.915–0.925 g/cm3. It is a substantially linear polymer with significant numbers of short branches. LLDPE has higher tensile strength than LDPE and exhibits higher impact and puncture resistance; thus lower thickness (gauge) films can be blown, compared with LDPE, with better environmental stress cracking resistance but is not as easy to process. LLDPE is used in packaging, particularly film for bags and sheets. Lower thickness may be used compared to LDPE for use in cable covering, toys, lids, buckets, containers and pipe. While other applications are available, LLDPE is used predominantly in film applications due to its toughness, flexibility Source:Edelweiss research and relative transparency. Product examples range from agricultural films, saran wrap, and bubble wrap, to multilayer and composite films. PVC: Polyvinyl chloride is a thermoplastic polymer. PVC is the third most widely produced plastic, after polyethylene and polypropylene. It is widely used in construction because it is cheap, durable, and easy to assemble. A number of PVCs properties recommend it for a wide variety of applications. It is biologically and chemically resistant, making it the plastic of choice for most household sewerage pipes and other pipe applications where corrosion would limit the use of metal. With the addition of impact modifiers and stabilizers, it becomes a popular material for window and door frames. By adding plasticizers, it can become flexible enough to be used in cabling applications as a wire insulator. It is also used to make vinyl records. PVC is a controversial material in that during its production, useful life and incineration, especially in accidental and uncontrolled circumstances, it may liberate persistent toxins, which the manufacture, use and destruction of suitable alternative plastics, such as, polypropylene do not. Other ethylene derivatives include alpha olefins which are used in LLDPE production, detergent alcohols and plasticizer alcohols; vinyl acetate monomer (VAM) which is used in adhesives, paints, paper coatings and barrier resins; and industrial ethanol which is used as a solvent or in the manufacture of chemical intermediates such as ethyl acetate and ethylacrylate. 18 Edelweiss Securities Limited
    • Sector UpdateAPPENDIX – IIHow is Ethylene Produced?Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Europe andAsia, ethylene is obtained mainly from cracking naphtha, gasoil and condensates with the coproduction of propylene,C4 olefins and aromatics (pyrolysis gasoline). The cracking of ethane and propane, primarily carried out in the US,Canada and the Middle East, has the advantage that it only produces ethylene and propylene, making the plantscheaper to construct and less complicated to operate.Chart A2-1: Steam Cracking Process Olefin cracking and inter- conversion processes are being developed to boost light olefins output. Typically, they can convert C4-C8 olefins and light pyrolysis gasoline into ethylene and propylene. Newer catalytic processes are under development that provide enhanced control of the cracking process or permit catalytic dehydrogenation of ethane. Small quantities of dilute ethylene can also be obtained from refinery streams. In South Africa, ethylene is produced by the Fisher-Tropsch process from gases obtained by coal gasification. Efforts have been made to develop processes which can crack crude or residual oil 19 Edelweiss Securities Limited
    • Oil and Gasbut they suffer from high operating costs.Processes are available that use lower alcohols as feedstocks. Norsk Hydro and UOP have developed a MTO (methanol-to-olefins) technology that converts methanol to ethylene and propylene. There is considerable interest in using thistechnology in China with methanol produced via the gasification of coal.Working with UOP, Total has developed a technology which takes the heavier olefins from the MTO unit and convertsthem into lighter olefins, more specifically into propylene. A pilot plant has been built at Feluy, Belgium, to assess thisolefin cracking process (OCP) in conjunction with the MTO process.Much research is being conducted into the direct conversion of methane to ethylene. However, the problem with thistechnology, called oxidative coupling of methane (OCM), is the low per-pass yield of ethylene and the high yield ofunwanted carbon oxide by-products such as carbon monoxide and carbon dioxide. Most attempts to increase productyield have been through new catalyst formulations. Research is also focusing on making further use of the carbonoxides by producing methanol or methane. 20 Edelweiss Securities Limited
    • Sector UpdateAPPENDIX – IIIMiddle East Feedstock concerns: Gas demand in the Chart A3-1: Electricity demand in the ME countries have grown 8.7% Middle East has been CAGR from 1980 rising by around 7% per annum and it has outpaced the growth in regional gas production. Domestic demand growth is fuelled by economic expansion, low gas prices, the switch from oil to gas for power generation and the injection of gas into oil reservoirs to enhance oil recovery. In the Middle East, there is tension between the requirement to supply domestic markets to fuel economic growth and the desire to achieve higher revenues via export sales agreements. 73% of the Middle Source: U.S. Energy Information Administration East gas reserves are concentrated in just two countries: Iran and Qatar. Qatar, which is the world’s largest LNG producer and exporter, has a moratorium on new North Field developments and export sales agreements until 2012. Outside of Iran and Qatar, a significant proportion of the region’s gas reserves are in associated oil deposits, and so gas production is not flexible. Much of the gas in the region is also sour, which makes it more difficult and costly to extract and process. Domestic sales prices, which are subsidized to varying degrees, may need to rise to cover the additional processing costs and investment required in gas infrastructure. 21 Edelweiss Securities Limited
    • Oil and Gas Price subsidies, political differences and more lucrative export opportunities have reduced the availability of gas produced in the Middle East for consumption in the region. As a result, there is limited intra-regional infrastructure in place for the transportation of natural gas. Individual countries in the Middle East have developed independent strategies to address their rising demand for natural gas. Saudi Arabia is looking to substantially increase gas production to meet growing domestic demand and UAE has been actively looking at unconventional gas reserves. The emirate’s associated gas is increasingly being used for reinjection. Rapid economic development and high domestic power subsidies have prompted UAE to take alternative measures to meet future demand. Chart A3-2: Saudi ethane will be more dependent on oil production Saudi Arabia: The current capacity of ethane crackers in the country is 6.1 mtpa while it is expected to increase to 6.4 mtpa over the next five years. Saudi Arabia currently produces enough ethane to supply to the crackers; however, electricity production is also expected to grow at more than 8%. As most of the natural gas produced in Saudi Arabia is associated gas (hence the Source: CMAI Global production is capped by OPEC Chart A3-3: KSA ethane deliveries may turn below allocations crude oil production quota of 8.4 million bpd), and lower regulated price ($0.75 per mmBtu) does not provide any incentive for drilling non-associated gas, ethane supply is expected to tighten in the future. Though the government is planning to increase the gas price to $1.2 per mmBtu from 2012, this may not be practically possible in the near term, given the tense socio political situation throughout the Source: CMAI Global Middle East. 22 Edelweiss Securities Limited
    • Sector UpdateIran: Iran has ethane cracker Chart A3-4: Sanctions continue to delay Irancapacity of 3.7 mtpa while thelargest non-associated gas field,South Pars, can produce enoughethane to support 1.35 mtpa.The country has plans toproduce additional natural gasfrom South Pars over the nextfive years that can support upto4.5 mtpa of cracker capacity.Qatar: Qatar has put amoratorium on any new projectsrequiring natural gas till 2012. Source: CMAI GlobalDepending on the outcome of itsongoing study of the natural gas reserve in the country, even if the moratorium is lifted in 2012, no newcapacity can come up before 2016.Bottom line: The demand for natural gas has exponentially grown throughout the Middle East riding on cheappricing. This puts a risk of feedstock availability in the new multi million tonne projects. 23 Edelweiss Securities Limited
    • Oil and GasAPPENDIX – IVExisting and expected cracker capacities all over the worldCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010)ALGERIA Sonatrach Skikda 133,000 2010 100 Dow BahiaARGENTINA Chemical Blanca 275,000 2010 100 Co. (BB1) Dow BahiaARGENTINA Chemical Blanca 490,000 2010 100 Co. (BB2) Huntsman SanpARGENTINA 21,000 2010 25 75 Corp. Lorenzo Petrobras Puerto SanARGENTINA 32,500 2010 100 Energia Martin Petrobras SanARGENTINA 20,000 2010 100 Energia Lorenzo Huntsman Chemical Melbourne,AUSTRALIA Co. 32,000 2010 100 Vic. Australia Ltd. Qenos Pty.AUSTRALIA Altona, Vic. 180,000 2010 80 5 15 Ltd. Qenos Pty. Botany,AUSTRALIA 250,000 2010 80 20 Ltd. NSWAUSTRIA OMV AG Schwechat 500,000 2010 15 23 62 AzerichimiAZERBAIJAN Sumgait 30,000 2010 a AzerichimiAZERBAIJAN Sumgait 300,000 2010 a Production NovopolotsBELARUS Associatio 73,000 2010 k n Polymir Production NovopolotsBELARUS Associatio 120,000 2010 k n Polymir BASFBELGIUM Antwerpen Antwerp 1,080,000 2010 5 95 NV BeneluxBELGIUM Antwerp 255,000 2010 16 16 18 50 FAO BeneluxBELGIUM Antwerp 610,000 2010 16 16 18 50 FAO BeneluxBELGIUM Antwerp 550,000 2010 16 16 18 50 FAO 24 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Braskem Camacari,BRAZIL 600,000 2010 5 95 SA Bahia Braskem Camacari,BRAZIL 680,000 2010 100 SA BahiaBRAZIL Copesul Triunfo, RS 700,000 2010 100BRAZIL Copesul Triunfo, RS 500,000 2010 100 Petroquimi SantoBRAZIL ca Uniao Andre, Sao 700,000 2010 100 SA Paulo Rio Duque deBRAZIL 520,000 2010 100 Polimeros Caxias Lukoil NeftochimBULGARIA Bourgas 250,000 2010 3.4 10 86.6 Bourgas JSC Lukoil NeftochimBULGARIA Bourgas 150,000 2010 100 Bourgas JSC Dow FortCANADA Chemical Saskatchew 1,100,000 2010 100 Co. an, Alberta Imperial Oil Sarnia,CANADA 300,000 2010 33 33 34 Products & Ontario Chemicals Nova Corunna,CANADA Chemicals 839,002 2010 10 15 30 40 5 Ontario Corp. Nova Joffre,CANADA Chemicals Alberta 725,624 2010 100 Corp. (E1) Nova Joffre,CANADA Chemicals Alberta 816,327 2010 100 Corp. (E2) Nova Joffre,CANADA Chemicals Alberta 1,269,841 2010 100 Corp. (E3) Varennes,CANADA Petromont 295,000 2010 10 25 50 15 QuebecCHILE Petrox SA Concepcion 60,000 2010 8 16 76 BASF-YPCCHINA Nanjing 600,000 2010 100 Co. Ltd. China National Daya Bay,CHINA 800,000 2010 100 Offshore Guangdong Oil Co. 25 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) China NationalCHINA Dushanzi 140,000 2010 100 Offshore Oil Co. China PetrochemCHINA ical Daqing 320,000 2010 100 Industrial Corp. DalianCHINA Petrochem Dalian 4,000 2010 100 ical Co. Fujian PetrochemCHINA Quanzhou 800,000 2010 100 ical Co. Ltd. Fushun PetrochemCHINA Fushun 115,000 2010 100 ical Complex Fushun PetrochemCHINA Fushun 685,000 2011 100 ical Complex GaoqiaoCHINA Petrochem Gaoqiao 14,000 2010 100 ical Co. GuangzhouCHINA Petrochem Guangzhou 150,000 2010 100 ical Co. Jilin ChemicalCHINA Jilin 700,000 2010 100 Industrial Co. Ltd. Lanzhou ChemicalCHINA Lanzhou 600,000 2010 100 Industrial Co. Lanzhou ChemicalCHINA Lanzhou 320,000 2011 100 Industrial Co. Norinco/ZhCHINA Panjin 450,000 2010 100 enhua Panjin EthyleneCHINA Panjin 130,000 2010 100 Industry Corp.CHINA Petrochina Dushanzi 1,000,000 2010 100 Caojing,CHINA Sinopec 145,000 2010 30 70 Shanghai Caojing,CHINA Sinopec 700,000 2010 60 40 Shanghai 26 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010)CHINA Sinopec Shanghai 605,000 2014 60 40 Maoming,CHINA Sinopec 1,000,000 2010 100 GuangdongCHINA Sinopec Neijing 650,000 2010 60 40 Puyang,CHINA Sinopec 180,000 2010 100 HenanCHINA Sinopec Qilu 720,000 2010 80 20CHINA Sinopec Tianjin 200,000 2010 100CHINA Sinopec Tianjin 1,000,000 2010 100 Wuhan,CHINA Sinopec 800,000 2013 100 HubeiCHINA Sinopec Zhenhai 1,000,000 2010 100 PetroChina Sichuan Chengdu,CHINA Petrochem Quanzhou 800,000 2011 100 ical City Co. Ltd BASF-YPCCHINA Nanjing 150,000 2010 100 Co. Ltd. Daqing Petroleum HeilongjianCHINA & 600,000 2012 100 g Province Chemical Co. Shenhua Baotou, BaotouCHINA Inner 300,000 2010 100 Coal Mongolia Chemical Chinese KaohsiungTAIWAN Petroleum 500,000 2010 100 Linyuan Corp. ChineseTAIWAN Petroleum Linyuan 230,000 2010 100 Corp. ChineseTAIWAN Petroleum Linyuan 380,000 2010 100 Corp. FormosaTAIWAN Petrochem Mailiao 700,000 2010 7.3 92.7 ical Corp. FormosaTAIWAN Petrochem Mailiao 1,035,000 2010 6.6 0.3 93.1 ical Corp. FormosaTAIWAN Mailiao 1,200,000 2010 9 91 Petrochem 27 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) ical Corp. CPC Corp. Kaohsiung,TAIWAN 600,000 2013 100 Taiwan Linyuan Empresa Colombian BarrancabeCOLOMBIA 100,000 2010 80 20 a de rmeja PetroleosCROATIA Polimeri Zagreb 90,000 2010 100CZECH REPUBLIC Unipetrol Litvinov 544,000 2010 2 6 56 1 35 Sidi KerirEGYPT Petrochem Alexandria 300,000 2010 100 icals Co. BorealisFINLAND Porvoo 390,000 2010 100 OYFRANCE A. P. Feyzin Feyzin 250,000 2010 100 Notre ExxonMobi Dame deFRANCE 400,000 2010 100 l Corp. Gravencho n NaphthachFRANCE Lavera 740,000 2010 50 50 imie PolimeriFRANCE Europa Dunkerque 430,000 2010 0.5 3.5 20 76 France SAS Societe du Craqueur BerreFRANCE de L’ 450,000 2010 12 75 13 l’Etang Aubette SCA Total Carling-St.FRANCE Petrochem Avold- 320,000 2010 100 icals Marienau Total GonfrevilleFRANCE Petrochem 520,000 2010 100 l’Orcher icals BasellGERMANY Polyfine Wesseling 738,000 2010 10 90 GMBH BasellGERMANY Polyfine Wesseling 305,000 2010 100 GMBH LudwigshafGERMANY BASF AG 620,000 2010 5 5 90 en BP GelsenkirchGERMANY Gelsenkirc 580,000 2010 2 8 78 12 en hen BP GelsenkirchGERMANY Gelsenkirc 480,000 2010 9 65 26 en hen 28 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010)GERMANY INEOS Dormagen 550,000 2010 100GERMANY INEOS Dormagen 544,000 2010 100 LyondellBa MunchsmuGERMANY 400,000 2010 13 17 17 53 sell nster DowGERMANY Chemical Bohlen 560,000 2010 100 Co. OMV BurghauseGERMANY Deutschlan 450,000 2010 2.5 6 6 84 1.5 n, Bavaria d GMBH Shell &GERMANY DEA Oil Heide 110,000 2010 100 GMBH Shell &GERMANY DEA Oil Wesseling 500,000 2010 100 GMBH EKO ThessalonikGREECE Chemicals 20,000 2010 65 35 i Co. AE Tiszai Vegyi TiszaujvaroHUNGARY 370,000 2010 1 4 90 5 Kombinat s Ltd. Tiszai Vegyi TiszaujvaroHUNGARY 290,000 2010 7 16 75 2 Kombinat s Ltd. Gas Authority Pata, UttarINDIA 300,000 2010 33 33 34 of India Pradesh Ltd. Haldia Haldia,INDIA Petrochem West 670,000 2010 100 icals Ltd. Bengal Indian Oil Haryana,INDIA 800,000 2010 100 Corp. Ltd. New Delhi Indian Petrochem Baroda,INDIA 156,000 2010 100 icals Corp. Gujarat Ltd. Indian Petrochem Gandhar,INDIA 400,000 2010 42.5 57.5 icals Corp. Gujarat Ltd. Indian Nagothane, PetrochemINDIA Maharashtr 400,000 2010 42.5 57.5 icals Corp. a Ltd. National Thane,INDIA 75,000 2010 100 Organic Maharashtr 29 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Chemical a Industries Ltd. Reliance Hazira,INDIA Industries 840,000 2010 100 Gujarat Ltd. Brahmaput ra Cracker Lepetkata,INDIA and 280,000 2013 33 33 34 Assam Polymer Ltd. ONGC Petro- Dahej,INDIA 1,100,000 2013 50 50 additions Gujarat Ltd. (OPAL) PT Cilegon,INDONESIA Chandra 600,000 2010 100 West Java Asri Amir KabirIRAN Petrochem Amir Kabir 520,000 2010 24 4 12 58 2 ical Co. ArakIRAN Petrochem Arak 247,000 2010 100 ical Arya Sasol AssaluyehIRAN Polymer 1,000,000 2010 100 Bushehr Co. Bandar Imam BandarIRAN 550,000 2010 20 3 10 67 Petrochem Imam ical Co. Jam AssaluyehIRAN Petrochem 1,320,000 2010 100 Bushehr ical Co. Marun BandarIRAN Petrochem 1,100,000 2010 100 Assaluyeh ical Co. TabrizIRAN Petrochem Tabriz 136,000 2010 4 8 8 80 ical Co. CarmelISRAEL Haifa 240,000 2010 10 10 80 Olefins Ltd. PolimeriITALY Brindisi 440,000 2010 100 Europa PolimeriITALY Gela 245,000 2010 25 5 70 Europa Polimeri PortoITALY 490,000 2010 100 Europa Marghera PolimeriITALY Priolo 745,000 2010 2 1 65 32 Europa PortoITALY Syndial 250,000 2010 70 30 Torres Asahikasei Kurasiki,JAPAN 500,000 2010 100 Chemicals Okayama 30 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Corp. Idemitsu PetrochemJAPAN Chiba 374,000 2010 2 98 ical Co. Ltd. Idemitsu PetrochemJAPAN Tokuyama 623,000 2010 100 ical Co. Ltd. Keiyo Ichihara,JAPAN 740,000 2010 100 Ethylene Chiba MaruzenJAPAN Petrochem Chiba 520,000 2010 100 icals Mitsubishi KashimaJAPAN Chemical 375,000 2010 10 20 55 15 (Unit 1) Corp. Mitsubishi KashimaJAPAN Chemical 453,000 2010 10 20 55 15 (Unit 2) Corp. MitsubishiJAPAN Chemical Mizushima 500,000 2010 5 5 80 10 Corp. Mitsui Ichihara,JAPAN Chemicals 617,000 2010 10 90 Chiba Inc. Mitsui TakaishiJAPAN Chemicals 450,000 2010 100 City, Osaka Inc. NipponJAPAN Petrochem Kawasaki 460,000 2010 100 ical ShowaJAPAN Oita 675,000 2010 100 Denko KK SanyoJAPAN Petrochem Mizushima 500,000 2010 100 ical Co. Ltd SumitomoJAPAN Chemical Chiba 415,000 2010 100 Co. Ltd. TonenJAPAN Chemical Kawasaki 515,000 2010 100 Corp. TosohJAPAN Yokkaichi 527,000 2010 100 Corp.KAZAKHSTAN Akpo Aktau 100,000 2010 GovernmeKAZAKHSTAN Atyrau 30,000 2010 nt EquateKUWAIT Shuaiba 850,000 2010 100 Petrochem 31 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) ical Co. (Equate II) NationalLIBYA Ras Lanuf 350,000 2010 100 Oil Co. EthyleneMALAYSIA Malaysia Kertih 400,000 2010 100 Sdn. Bhd. OptimalMALAYSIA Olefins Kertih 600,000 2010 100 Sdn. Bhd. Titan Pasir PetrochemMALAYSIA Gudang, 442,000 2010 10 10 80 icals Sdn. Johor Bhd. Titan Pasir PetrochemMALAYSIA Gudang, 667,000 2010 10 10 80 icals Sdn. Johor Bhd. La PetroleosMEXICO Cangrejera, 600,000 2010 100 Mexicanos Veracruz Petroleos Morelos,MEXICO 600,000 2010 100 Mexicanos Veracruz Petroleos Pajaritos,MEXICO 184,000 2010 100 Mexicanos Veracruz Dow TerneuzenNETHERLANDS Chemical 580,000 2010 15 85 (No. 1) Co. Dow TerneuzenNETHERLANDS Chemical 585,000 2010 15 85 (No. 2) Co. Dow TerneuzenNETHERLANDS Chemical 635,000 2010 100 (No. 3) Co. SABIC GeleenNETHERLANDS 595,000 2010 100 Europe (No. 3) SABIC GeleenNETHERLANDS 670,000 2010 100 Europe (No. 4) ShellNETHERLANDS Nederland Moerdijk 900,000 2010 100 Chemie BV Eleme Petrochem ElemeNIGERIA 550,000 2010 33 33 34 ical Co. River Ltd. Namhung Anju, South YouthNORTH KOREA P’yong’an 60,000 2010 Chemical Province Complex Rafnes,NORWAY Noretyl AS 550,000 2010 30 45 25 Bamble PKN OrlenPOLAND Plock 700,000 2010 5 5 90 SA 32 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Repsol YPFPORTUGAL Sines 570,000 2010 100 SA QatarQATAR Petrochem Mesaieed 720,000 2010 100 ical Co.QATAR Q-Chem I Mesaieed 500,000 2010 80 20 Ras LaffanQATAR Ras Laffan 1,300,000 2010 80 20 Olefins Co.ROMANIA Petrom SA Pitesti 170,000 2010 19.5 8.5 23.7 48.4 PetromidiaROMANIA Navodari 200,000 2010 100 SA Angarsknef Angarsk,RUSSIA 60,000 2010 5.2 89.2 5.6 torgsintez Siberia Angarsknef Angarsk,RUSSIA 240,000 2010 5.2 89.2 5.6 torgsintez Siberia Nizhnekam NizhnekamRUSSIA skneftekhi 600,000 2010 sk mRUSSIA Norsy Norsy 300,000 2010 100 Omskykau Omsk,RUSSIA 90,000 2010 chuyk SiberiaRUSSIA Orgsintez Kazan 445,000 2010 100RUSSIA Oxosyntez Orsk 45,000 2010 NovopolotsRUSSIA Polimir 150,000 2010 100 k SalavatneftRUSSIA Salavat 300,000 2010 orgsintez SiburRUSSIA Perm 30,000 2010 Himprom Sibur- NizhnyRUSSIA 300,000 2010 20 80 Neftechim Novgorod SintezkaucRUSSIA Samara 300,000 2010 huk StavrapolpRUSSIA Prikumsk 350,000 2010 olymerRUSSIA Tomsk PCC Tomsk 300,000 2010 UraorgsintRUSSIA Ufa 235,000 2010 es Al JubailSAUDI ARABIA Petrochem Jubail 800,000 2010 50 50 ical Co. ArabianSAUDI ARABIA Jubail 800,000 2010 100 Petrochem 33 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) ical Co. ArabianSAUDI ARABIA Petrochem Jubail 800,000 2010 50 50 ical Co. ArabianSAUDI ARABIA Petrochem Jubail 650,000 2010 100 ical Co. Chevron PhillipsSAUDI ARABIA Jubail 300,000 2010 50 50 Chemical Co. LP EasternSAUDI ARABIA Petrochem Jubail 1,300,000 2010 50 50 ical Co. Jubail UnitedSAUDI ARABIA Jubail 1,450,000 2010 50 50 Petrochem ical Co. Saudi BasicSAUDI ARABIA Industries Yanbu 1,380,000 2010 50 50 Corp. SaudiSAUDI ARABIA Petrochem Jubail 1,350,000 2010 100 ical Co.SAUDI ARABIA Tasnee Jubail 1,000,000 2010 25 25 25 25 YanbuSAUDI ARABIA Petrochem Yanbu 875,000 2010 100 ical Co. YanbuSAUDI ARABIA Petrochem Yanbu 830,000 2010 16 16 18 50 ical Co. SaudiSAUDI ARABIA Al-Jubail 1,200,000 2011 PolymersSERBIA AND Chemi Pancevo 200,000 2010MONTENEGRO Industria ExxonMobi JurongSINGAPORE l Chemical 900,000 2010 33 33 34 Island Co. Petrochem ical Corp. Pulau AyerSINGAPORE of 465,000 2010 100 Merbau Singapore Pte. Ltd. Petrochem ical Corp. Pulau AyerSINGAPORE of 615,000 2010 100 Merbau Singapore Pte. Ltd. Shell Eastern BukomSINGAPORE 800,000 2010 100 Petroleum Island Ltd. 34 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) ExxonMobi JurongSINGAPORE l Chemical 1,000,000 2013 100 Island Corp. SlovnaftSLOVAKIA Petrochem Bratislava 210,000 2010 8 11 26 55 icals SasolSOUTH AFRICA Sasolburg 110,000 2010 80 20 Polymers SasolSOUTH AFRICA Secunda 475,000 2010 75 5 20 Polymers HonamSOUTH KOREA Petrochem Yeochun 750,000 2010 100 ical Korea PetrochemSOUTH KOREA ical Ulsan 470,000 2010 100 Industries Co. Ltd. LG DaesanSOUTH KOREA Petrochem Daesan 760,000 2010 100 ical LG PetrochemSOUTH KOREA Yeosu City 900,000 2010 100 ical Co. Ltd. Lotte DaesanSOUTH KOREA Daesan 650,000 2010 100 Petrochem ical SamsungSOUTH KOREA General Daesan 850,000 2010 100 ChemicalsSOUTH KOREA SK Corp. Ulsan 545,000 2010 100SOUTH KOREA SK Corp. Ulsan 185,000 2010 100SOUTH KOREA Yeochon Yeochun 857,000 2010 100SOUTH KOREA Yeochon Yeochun 555,000 2010 100SOUTH KOREA Yeochon Yeochun 400,000 2010 100 DowSPAIN Chemical Tarragona 660,000 2010 100 Co. Repsol YPFSPAIN Puertollano 250,000 2010 100 SA Repsol YPFSPAIN Tarragona 660,000 2010 100 SA StenungsunSWEDEN Borealis AB 625,000 2010 40 20 40 d 35 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010)SWITZERLAND Lonza Ltd. Visp 33,000 2010 30 60 10 Map Ta Map TaTHAILAND Phut Phut, 900,000 2010 100 Olefins Co. Rayong Map Ta PTTTHAILAND Phut, 400,000 2010 80 6 14 Chemical Rayong Map Ta PTTTHAILAND Phut, 515,000 2010 5 18 28 49 Chemical Rayong Map Ta PTTTHAILAND Phut, 461,000 2010 100 Chemical Rayong Map Ta PTTTHAILAND Phut, 1,000,000 2010 100 Chemical Rayong Map Ta RayongTHAILAND Phut, 800,000 2010 100 Olefins Ltd. Rayong PTT Map TaTHAILAND Polyethyle 1,000,000 2010 100 Phut ne Co. Ltd. Petkim Petrochem Aliaga,TURKEY icals 520,000 2010 100 Izmir Holding Co.UKRAINE Chlorvinyl Kalush 250,000 2010 100UKRAINE Oriana 180,000 2010UKRAINE TNK-BP Lisichansk 300,000 2010 100 BorougeUNITED ARAB Abu Dhabi Ruwais, 2,100,000 2010 100EMIRATES Polymers Abu Dhabi Co. Ltd. Abu DhabiUNITED ARAB Polymers Ruwais, 1,500,000 2013 100EMIRATES Co. Ltd. Abu Dhabi (Borouge)UNITED Grangemo INEOS 730,000 2010 100KINGDOM uthUNITED Grangemo INEOS 340,000 2010 100KINGDOM uth ExxonMobiUNITED l Chemical Fawley 120,000 2010 9 8 8 25 25 25KINGDOM Co. ExxonMobiUNITED Mossmorra l Chemical 830,000 2010 100KINGDOM n Fife Co.UNITED SABIC Wilton 865,000 2010 20 10 70KINGDOM Europe 36 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) BASF FinaUNITED STATES Petrochem Port Arthur 907,000 2010 100 icals Chevron Phillips CedarUNITED STATES 803,000 2010 30 20 25 25 Chemical Bayou Co. LP Chevron PhillipsUNITED STATES Port Arthur 861,000 2010 70 25 5 Chemical Co. LP Chevron PhillipsUNITED STATES Sweeny 907,000 2010 38 37 25 Chemical Co. LP Chevron PhillipsUNITED STATES Sweeny 676,000 2010 75 25 Chemical Co. LP Chevron PhillipsUNITED STATES Sweeny 295,000 2010 85 15 Chemical Co. LP Dow FreeportUNITED STATES Chemical 633,000 2010 50 50 (LHC 7) Co. Dow FreeportUNITED STATES Chemical 1,024,000 2010 10 20 70 (LHC 8) Co. Dow PlaqueminUNITED STATES Chemical 522,000 2010 75 25 e (LHC 2) Co. Dow PlaqueminUNITED STATES Chemical 740,000 2010 70 10 20 e (LHC 3) Co. DowUNITED STATES Chemical Taft 1 612,000 2010 20 40 40 Co.UNITED STATES DuPont Orange 681,000 2010 100 EastmanUNITED STATES Chemical Longview 140,000 2010 25 67 7 1 Co. EastmanUNITED STATES Chemical Longview 140,000 2010 25 67 7 1 Co. EastmanUNITED STATES Chemical Longview 140,000 2010 25 67 7 1 Co. EastmanUNITED STATES Chemical Longview 360,000 2010 25 67 7 1 Co. 37 Edelweiss Securities Limited
    • Oil and GasCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Equistar Chemicals ChannelvieUNITED STATES LP 875,000 2010 5 95 w (LyondellB asell) Equistar Chemicals ChannelvieUNITED STATES LP 875,000 2010 5 95 w (LyondellB asell) Equistar Chemicals ChocolateUNITED STATES LP 544,000 2010 100 Bayou (LyondellB asell) Equistar ChemicalsUNITED STATES LP Clinton 500,000 2010 80 20 (LyondellB asell) Equistar Chemicals CorpusUNITED STATES LP 771,000 2010 10 30 60 Christi (LyondellB asell) Equistar ChemicalsUNITED STATES LP LaPorte 789,000 2010 60 20 20 (LyondellB asell) Equistar ChemicalsUNITED STATES LP Morris 590,000 2010 80 20 (LyondellB asell) ExxonMobi BatonUNITED STATES l Chemical 975,000 2010 9 8 8 25 25 25 Rouge Co. ExxonMobiUNITED STATES l Chemical Baytown 2,197,000 2010 58 8 9 25 Co. ExxonMobiUNITED STATES l Chemical Beaumont 816,000 2010 8 8 9 75 Co. ExxonMobiUNITED STATES l Chemical Houston 102,000 2010 100 Co. Flint HillsUNITED STATES Port Arthur 617,000 2010 60 40 Corp. Formosa PointUNITED STATES Plastics 816,000 2010 45 15 40 Comfort Corp. USA Formosa PointUNITED STATES Plastics 680,000 2010 45 15 40 Comfort Corp. USA 38 Edelweiss Securities Limited
    • Sector UpdateCountry Company Location Capacity, Capacity, Year of Feedstock Slate (%) tonnes/ tonnes/ Completion year 2010 year (Existing C2 C3 C4 Naphtha Gasoil Other Existing New capacity=2010) Huntsman PortUNITED STATES 180,000 2010 Corp. Neches INEOS Olefins and ChocolateUNITED STATES 1,746,000 2010 50 35 15 Polymers Bayou USA Javelina CorpusUNITED STATES 102,000 2010 100 Co. Christi Sasol North LakeUNITED STATES 454,000 2010 100 America Charles Inc. ShellUNITED STATES Chemicals Deer Park 1,406,000 2010 Ltd. ShellUNITED STATES Chemicals Norco 1,556,000 2010 5 35 60 Ltd. WestlakeUNITED STATES Petrochem Calvert City 204,000 2010 100 icals Corp. WestlakeUNITED STATES Petrochem Sulphur #1 567,000 2010 100 icals Corp. WestlakeUNITED STATES Petrochem Sulphur #2 522,000 2010 70 30 icals Corp. WilliamsUNITED STATES Geismar 626,000 2010 92 8 Olefins UzbekneftUZBEKISTAN Shurtan 140,000 2010 100 egaz Pequiven- Petroquimi El Tablazo,VENEZUELA ca de 250,000 2010 30 70 Zulia Venezuela SA Pequiven- Petroquimi El Tablazo,VENEZUELA ca de 350,000 2010 100 Zulia Venezuela SA Source: Oil & Gas Journal, Downstream Today, Edelweiss research 39 Edelweiss Securities Limited
    • Oil and GasAPPENDIX – VSensitivity Analysis Table A5-1: Cracker margin based Table A5-2: Cracker margin based on demand per capita growth rate on GDP growth rate and demand and population growth rate elasticity 2011 Demand per capita growth rate 2011 GDP growth rate 188 2.90% 3.40% 3.90% 4.40% 4.90% 198 3.80% 4.10% 4.40% 4.70% 5.00% population growth rate Demand elasticity 0.77% 187 192 198 203 209 Demand elasticity 0.96 187 190 193 197 200 0.89% 188 194 199 205 210 1.01 189 193 196 199 202 1.00% 190 195 200 206 211 1.06 191 195 198 202 205 1.12% 191 196 202 207 213 1.23% 192 198 203 208 214 1.11 193 197 201 204 208 1.16 195 199 203 207 210 2015 Demand per capita growth rate 2015 GDP growth rate 382 2.90% 3.40% 3.90% 4.40% 4.90% Demand elasticity Demand elasticity 388 3.80% 4.10% 4.40% 4.70% 5.00% population growth rate 0.77% 358 365 371 377 383 Demand elasticity 0.96 369 373 377 380 384 Demand elasticity 0.89% 360 366 372 379 385 1.01 372 376 379 383 387 1.00% 361 368 374 380 386 1.06 374 378 382 386 390 1.12% 363 369 375 382 388 1.23% 364 371 377 383 389 1.11 377 381 385 389 393 Demand per capita growth rate 1.16 379 383 388 392 396 population growth rate Demand elasticityOur sensitivity analysis of cracker margin based on demand projection based on 1) demand per capita growth rate and GDP growth rate2) demand elasticity with GDP growth shows that the margin will be higher than USD 188 per mt in 2011 and will growto more than USD 383 per mt by 2015. Demand elasticity Demand per capita growth rate population growth rate Demand elasticity 40 Edelweiss Securities Limited Demand per capita growth rate
    • Sector Update Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: research@edelcap.com Vikas Khemani Head Institutional Equities vikas.khemani@edelcap.com +91 22 2286 4206 Nischal Maheshwari Head Research nischal.maheshwari@edelcap.com +91 22 6623 3411 Coverage group(s) of stocks by primary analyst(s): Oil and Gas, Petrochemicals Bharat Petroleum Corporation, Cairn India, Chennai Petroleum Corp., Hindustan Petroleum Corporation, Indian Oil Corporation, Indraprastha Gas, ONGC, Reliance Industries, Aban Offshore, Petronet LNG, Essar Oil, GAIL, Shivvani Oil & Gas Exploration Recent Research Date Company Title Price (INR) Recos 01-Jul-11 Aban Stake sale: Turning the heat 524 Hold 1,150 Offshore on; Edel Flash 950 30-Jun-11 Cairn Deal approved, but royalty 312 Hold Buy India cost recoverable; 750 (INR) Edel Flash 550 29-Jun-11 Petronet Buy Strong LNG volume visibility; 138 Buy 350 LNG Buy Visit Note 150 Aug-08 Se p-08 Nov-08 De c -08 Oc t-08 J a n-09 J un-09 J ul-08 J ul-09 Feb-09 Ma y-09 Ma r-09 Apr-09Distribution of Ratings / Market Cap 20-Jun-11 Torrent Growth drivers intact; 642 BuyEdelweiss Research Coverage Universe Pharma Visit Note Rating Interpretation Buy Hold Reduce Total Rating Expected to 15-Jun-11 Dr. Reddys USFDA issues warning letter 1,555 BuyRating Distribution* 132 51 18 Lab. 203 Mexico facility; for EdelFlash Buy appreciate more than 15% over a 12-month period* 2 stocks under review 08-Jun-11 Dr. Reddys Gauging upsides from Hold appreciate up Buy 1,577 to 15% over a 12-month period > 50bn Lab. Between 10bn and 50 bn < 10bncurrent level; Company Update Reduce depreciate more than 5% over a 12-month periodMarket Cap (INR) 117 16-May-11 Shiv-vani 21 65 Robust results on full asset 275 Buy Oil & Gas deployment; Result Update Access the entire repository of Uncertainties cloud attractive www.edelresearch.com 12-May-11 Cairn Edelweiss Research on 336 Hold India long-term investment case; This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated investment Result Update banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investment banking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial price hikeor as an official confirmation of any transaction. Specifically, this document does 05-May-11 Oil & Gas Diesel instrument factored in; not constitute an offer to or solicitation from any U.S. person for the purchase it quits; any financial instrument or as an official confirmation of any transaction to any U.S. Call or sale of person. The information contained herein is from publicly available data orSector Update other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. Edelweiss or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from 03-May-11 Oil & Gas GRMs robust despite high any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the Monthly crude prices; basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it Monthly Update deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of suchGrowth drivers intact; discussed or views expressed may not be suitable for all investors. We 20-Jun-11 Torrent investment. 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