Platts Senior Analyst, Hetain Mistry, recently presented this slide deck at Platts Forum in Vienna during the EPCA conference. Key takeaways include: - The US to outweigh the Middle East in terms of cracker additions over the next ten years - The US will become a truly global PE export player - The Middle East will maintain its dominance in PE exports - CTO/MTO additions to add to global PE surpluses - Western Europe’s cracker industry will continue to suffer and options of sustainability are far and few between - Western Europe will see its PE import requirement rise

1. Is Ethylene Becoming The Bear
October 04, 2014
© 2014 Platts, McGraw Hill Financial. All rights reserved.
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2. • A shift to ethane
• A look at the US – How are the shale based
investments evolving?
• A look at the Middle East – How are the
dynamics changing?
• A look at China – How is MTO/CTO capacity
developing?
• What are the options for Europe?
2
Agenda

3. • The US to outweigh the Middle East in terms of cracker
additions over the next ten years
• The US will become a truly global PE export player
• The Middle East will maintain its dominance in PE exports
• CTO/MTO additions to add to global PE surpluses
• Western Europe’s cracker industry will continue to suffer and
options of sustainability are far and few between
• Western Europe will see its PE import requirement rise
3
Key Takeaways

4. Cheap US NGL Prices To Encourage
Investment
4

5. Plenty Of Ethane To Meet Demand, Use
Of Naphtha Declining
5
000 mt US Ethylene Output to Rise
40000
35000
30000
25000
20000
15000
10000
5000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Gas Oil Full‐range Naphtha Naphtha Butane Propane Ethane

6. 6
US Cracker Projects Update
Source: Platts Petrochemical Analytics

7. 7
Maybe Four More US Crackers
0
1
2
3
4
5
6
7
Jan‐14
May‐14
Sep‐14
Jan‐15
May‐15
Sep‐15
Jan‐16
May‐16
Sep‐16
Jan‐17
May‐17
Sep‐17
Jan‐18
May‐18
Sep‐18
Jan‐19
May‐19
Sep‐19
Jan‐20
May‐20
Sep‐20
Jan‐21
May‐21
Sep‐21
Jan‐22
May‐22
Sep‐22
Jan‐23
May‐23
Sep‐23
Jan‐24
May‐24
Sep‐24
b/d US Cracker Potential
Cracker Potential

8. There Will Be Surplus Polymers From The
Americas
8

9. 9
Gas Prices Remain Cheap In The Gulf
$/btu Regional Ethane Prices
4
3.5
3
2.5
2
1.5
1
0.5
0
Saudi Arabia Qatar UAE Iran

10. 10
The Middle East Will Remain The Global
Supplier

11. China CTO, What Is Already
Happening
Source: Platts Petrochemical Analytics

12. China Will Continue To Build‐ Aggressive
Plans For Asia CTO/MTO Additions
Coal based olefin
additions:
11.9 million mt of ethylene
12.8 million mt of propylene
Source: Platts Petrochemical Analytics

13. The Challenges And Issues
13

14. 14
China’s PE Gap Will Not Be Filled

15. The Ethylene Cost Curve‐ Europe Still Near
The Top
Source: Platts Petrochemical Analytics

16. 16
Cost Curve Is Dictating Investments

17. 17
As A Result, The Global Feedstock Is
Getting Lighter

18. 18
Everybody Building Around Europe
Source: Platts Petrochemical Analytics

19. 19
Europe Has High Feedstock Cost
Compared To Other Regions
1000
900
800
700
600
500
400
300
200
100
0
Middle East
Gas Price
European
Naphtha
Price
European
Propane
Price
European
Butane
Price
US Ethane
Price
Us Propane
Price
US Butane
Price
NE Asia
Naphtha
Price
$/ton
Annual Average 2013 Regional Petrochemical
Feedstock Prices

20. 20
Global Short‐Term PE Surpluses Will
Squeeze Out Europe‐ Lower Prices

21. 21
Western Europe To Move To Deficit

22. What Are the Options?‐ Will It Make
Much Of A Difference
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• Buy the Gas
• Drill for Gas
• Be Flexible
• Specialize
• Integrate
Source: Platts Petrochemical Analytics

23. Thank you!
© 2014 Platts, McGraw Hill Financial. All rights reserved.
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Hetain Mistry, Senior Analyst, Petrochemicals
hetain.mistry@platts.com