Petrochemicals ethylene

SECTOR UPDATE

OIL AND GAS
Ethylene Global Demand-Supply Scenario
India Equity Research | Oil, Gas and Services

Global demand for ethylene to grow at a healthy rate of 4.8% CAGR over
2010-15, compared to a growth rate of 1.5% over the last 5 years. In spite
of healthy demand, there is likely to be an oversupply situation during
2010-11 due largely to huge capacity addition in the Middle East and
China – leading to decreased ethylene prices and margins. The situation is
expected to improve after 2011 due to limited capacity addition. Global
capacity utilization decreased to around 80% during 2010, but is expected
to increase substantially till 2015 to reach a high of 95%.

Global ethylene oversupply scenario not as bad
Though there is concern that the new capacities coming up in the Middle East and
China are going to flood the world market, depressing ethylene prices and margins, we
believe that most of the scheduled projects, amounting to 10 mtpa (million tonnes per
annum), have already come online by 2010. Only marginal new capacity of 9 mtpa is
expected to come online till 2015. Large projects totaling 12 mtpa, which are delayed
because of a number of reasons, such as, feedstock availability, impact of financial
crisis, regulatory approval and environmental impact, are not expected to come online
anytime soon.

Healthy demand growth led by polymer demand in China and India
Demand for ethylene is expected to grow at a healthy rate of 4.8% CAGR between
2011-15 driven by strong polyethylene (PE) demand from developing economies in
Asia. PE demand per capita in India is very low at 2kg against a world average of 10.3
kg. We expect the PE demand per capita in developing countries like China and India to
grow in line with their high GDP growth rate, consuming the added capacity.

Asian crackers have bi-product netback; Middle East (ME) crackers
short of feedstock
Most of the crackers that are coming up in China are Naphtha based. Though Naphtha
costs more than Ethane, it gives 17x more bi-product netback than ethane based
crackers.
On the other hand, large projects planned in the Middle East are delayed or cancelled
because of concerns of natural gas availability – thus tightening ethylene supply
situation. The two factors together are expected to contribute positively to cracker
operators’ bottom lines.

Ethylene margins to grow in line with higher capacity utilization
We expect that the utilization rates of the crackers will reach a trough in 2010-11, and
then the demand scenario will tighten till 2015 – primarily driven by healthy demand
growth in line with rebound in global economy and less capacity addition. This will drive
Alin Dev
better 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 Update

Contents
Ethylene Supply.................................................................................................................................................................. 5
Middle East: ................................................................................................................................................................... 6
Asia: ............................................................................................................................................................................... 7
US and Europe: .............................................................................................................................................................. 7
Ethylene Demand ............................................................................................................................................................... 8
Ethylene Economics ........................................................................................................................................................... 9
Feedstock Slate: ........................................................................................................................................................... 10
Ethylene Margin & Utilization Rate .................................................................................................................................. 12
APPENDIX – I .................................................................................................................................................................... 14
What is Ethylene? ........................................................................................................................................................ 14
Ethylene Value Chain ................................................................................................................................................... 14
Feedstocks ............................................................................................................................................................... 15
Intermediates .......................................................................................................................................................... 15
Derivatives ............................................................................................................................................................... 16
APPENDIX – II ................................................................................................................................................................... 19
How is Ethylene Produced? ......................................................................................................................................... 19
APPENDIX – III .................................................................................................................................................................. 21
Middle East Feedstock concerns: ................................................................................................................................. 21
Saudi Arabia: ........................................................................................................................................................... 22
Iran: ......................................................................................................................................................................... 23
Qatar: ...................................................................................................................................................................... 23
APPENDIX – IV .................................................................................................................................................................. 24
Existing and expected cracker capacities all over the world ........................................................................................ 24
APPENDIX – V ................................................................................................................................................................... 40
Sensitivity Analysis ....................................................................................................................................................... 40


Oil and Gas


Sector Update

Ethylene Supply

Global ethylene capacity has dramatically increased between 2005 and 2010 from 115.2 million tonnes per annum to
144 mtpa, growing at a CAGR 4.6%. During the same period China has added 14.2 mtpa of ethylene cracker capacity,
while Middle Eastern
Chart 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 research

We believe that most of the scheduled projects, amounting to 10 mtpa, have already come online by 2010. Only
marginal new capacity of 9 mtpa is expected to come online till 2015. Large projects totaling 12 mtpa, which are
delayed because of a number of reasons, such as, feedstock availability, impact of financial crisis, regulatory approval
and environmental impact, are not expected to come online anytime soon.


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Chart 2: Most of the incremental capacity has already been added by 2010


Middle East:
Availability of cheap crude oil and high dependence of the kingdoms on oil revenue have driven the kingdoms and
governments to diversify into manufacturing commodity chemicals and capture more value from the commodity
nature of crude oil. Middle Eastern countries are also better positioned to transport petrochemicals at a lower cost to
developed markets in Europe, as well as high growth markets in Asia. This being a labor intensive industry, the
governments are also able to generate meaningful employment for its people by developing the petrochemical
industry. To bring about rapid growth in the petrochemicals industry, Middle Eastern countries provide different
incentives 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.


Sector Update

Asia:
Chart 3: Asia & ME will account for 50% of the cracker
Capacity growth in Asia has been largely led by capacity
large scale projects in China. Chinese state-
owned players like Sinopec and PetroChina are
rapidly building new ethylene capacity, aided by
favorable government policies for joint ventures
with foreign majors. But, environmental worries,
economically unviable size of scattered
petrochemicals plants and the potential threat of
overcapacity could delay the commercial start of
production. In the long term, China could be a
potential competitor to Middle Eastern
petrochemicals players as petrochemical imports
from the Kingdoms are replaced by local Chinese
output.


US 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 research

High 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.


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Ethylene Demand
Chart 6: Demand for ethylene is highly correlated to GDP and population

Demand for ethylene
is strongly correlated
with both GDP
growth rate and
growth in population
with correlation of
87% and 90%
respectively.

Source: CMAI Global, IMF, Edelweiss research

Chart 7: Ethylene demand per capita is expected
to grow at CAGR 4.8% till 2015
Demand per capita for ethylene has historically grown at
an average growth rate of 3% Y-o-Y since 2000, barring the
past few years of global economic slowdown and a dip in
2005 when most of the PE plants in North America were
shut down following hurricane Katrina. We expect the
demand to grow at CAGR 4.8% till 2015 to reach 146 mtpa
driven by strong demand growth and rapid urbanization in
high growth emerging economies of China and India.


Chart 8: Ethylene demand – GDP elasticity to be
1.1x
Demand for ethylene has historically grown with GDP
with an elasticity of 1.06x since 2000, with exceptions in
the past couple of years due to the financial crisis and in
2005 due to the rampage of hurricane Katrina. We expect
the elasticity to gradually increase to 1.1x in 2015 due to
strong demand growth from countries such as China and
India driven by rapid urbanization and industrialization.



Sector Update

Demand for ethylene is expected to Chart 9: Ethylene demand to grow at CAGR 4.8% while little new
capacity will come up after 2011
grow at a healthy rate of 4.8% CAGR
till 2015, while the capacity is
expected to grow at a minimal rate
of 1.2% CAGR during the same
period with very little capacities
expected to come online after 2011.

PE demand per capita in developing
economies is very low compared to
world average of 10.3 kg. We expect
the PE demand per capita in
developing countries like China and
India to grow in line with their high
GDP growth rates, consuming the
added capacity.


Ethylene Economics
Due to the commoditized nature of the basic chemicals business, price is the single most important factor in
determining the competitiveness of players in the market place as there is only marginal differentiation between the
products of different suppliers.
Chart 10: ME producers enjoy the lowest cost of production
riding on cheap ethane
It is not all about who has the biggest
plant - the next plant built will be the
Biggest Plant; it is also not about who has
the best technology - technology has
become readily available; it is not even
about 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 cost
producer, feedstock cost is the most
important factor in determining the
ethylene margins across different
geography.
Source: CMAI Global


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Feedstock Slate:
Chart 11: Olefins Feedstock vs. Crude Oil Prices
Petrochemicals are produced by cracking Naphtha or
ethane.

Since 2008, the relative price of U.S. ethane (as a
percent of crude oil price) has been trending down,
due to cheaper U.S. natural gas. This benefits the
petrochemical producers using natural gas as feed
stock, but there is always a trade off as naphtha
unlocks more sophisticated derivatives.

Cracking ethane generates a large proportion of
ethylene (95%) while cracking naphtha gives better
byproduct credit. A typical cracker output is given
below:
Source: Lyondell Basell Investor Day 2010

Table 1: Cracker output slate

Chart 12: Napththa vs ethane cracker margin widens

Source: Platts, ICIS pricing, Edelweiss Research

Ethane crackers enjoy a higher margin as
naphtha prices rallied with crude oil price,
while natural gas price remained stable.

Middle Eastern countries which provide natural
gas at an average subsidized rate of USD
4/mmBtu, enjoys still higher margins though
the gap narrowed in the recent years driven by
a fall in natural gas prices in the international
market.

Source: Platts, ICIS pricing, Edelweiss Research


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 widens
Meanwhile, propylene / ethylene price ratio
continues to increase as ethylene production
from ethane increases driven by higher
cracker margin realization and propylene
production from steam naphtha crackers
declines owing to large ethane cracker
capacity addition in the ME. The effect is even
more pronounced in the case of butadiene
which is used as a substitute for natural
rubber.

Source: Bloomberg, Edelweiss Research


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Ethylene Margin & Utilization Rate
Chart 15: Beginning of a new cycle of profitability

The cracker industry is cyclical in nature and
historically operated in a 7-8 year cycle. We
believe that the ROCE cycle of the industry
based on replacement cost of a steam cracker
will hit trough in 2011, and will see the
beginning of new cycle starting 2011-12.

Source: CERA Downstream Index, Edelweiss Research

Chart 16: Operating rate follows gross margin

Historically operating rates of crackers have closely
followed ethylene margin as the operators have
more incentive to run the plant at a higher
operating rate when the margins are higher, and
lower the rate when the margins are declining.

Source: Edelweiss Research


Sector Update

Chart 17: Ethylene-Naphtha crack is expected to
grow in line with higher operating rate

We believe that the gross ethylene margin will start
strengthening in line with higher ethylene prices and
gradually increase to USD 460 per tonne, along with
higher operating rates of the crackers though the
crackers will not see high margins of 2004-06 anytime
soon partly because of higher crude oil prices.


Chart 18: Cracker margin is expected to grow along
with higher bi-product prices

At the same time the net cracker margin realized will
gradually strengthen to USD 383 per tonne by the
year 2015, riding on higher bi-product netbacks.



Oil and Gas

APPENDIX – I
What is Ethylene?

Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyethylene
terephthalate (PET), polyvinyl chloride (PVC) and polystyrene (PS) as well as fibers and other organic chemicals. These
products 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 is
sensitive to both economic and energy cycles. It is often seen as a barometer to the performance of the petrochemical
industry 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 is
estimated 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


Sector Update

Feedstocks
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 oxide's 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.


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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 world's 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.


Sector Update

HDPE is defined by a density of greater or equal to 0.941 g/cm3. It has
a low degree of branching and thus stronger intermolecular forces and
tensile strength. HDPE is used in products and packaging such as milk
jugs, detergent bottles, margarine tubs, garbage containers and water
pipes. One third of all toys are manufactured from HDPE.


LDPE is defined by a density range of 0.910–0.940 g/cm3. It has a
high degree of short and long chain branching, which means that
the chains do not pack into the crystal structure as well. This results
in a lower tensile strength and increased ductility. The high degree
of branching with long chains gives molten LDPE unique and
desirable flow properties. LDPE is used for both rigid containers and
plastic film applications such as plastic bags and film wrap.



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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 PVC's 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.


Sector Update

APPENDIX – II
How is Ethylene Produced?

Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Europe and
Asia, 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 plants
cheaper 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


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but 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 this
technology 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 converts
them into lighter olefins, more specifically into propylene. A pilot plant has been built at Feluy, Belgium, to assess this
olefin 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 this
technology, called oxidative coupling of methane (OCM), is the low per-pass yield of ethylene and the high yield of
unwanted carbon oxide by-products such as carbon monoxide and carbon dioxide. Most attempts to increase product
yield have been through new catalyst formulations. Research is also focusing on making further use of the carbon
oxides by producing methanol or methane.


Sector Update

APPENDIX – III
Middle 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.


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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.


Sector Update

Iran: Iran has ethane cracker Chart A3-4: Sanctions continue to delay Iran

capacity of 3.7 mtpa while the
largest non-associated gas field,
South Pars, can produce enough
ethane to support 1.35 mtpa.
The country has plans to
produce additional natural gas
from South Pars over the next
five years that can support upto
4.5 mtpa of cracker capacity.

Qatar: Qatar has put a
moratorium on any new projects
requiring natural gas till 2012. Source: CMAI Global
Depending on the outcome of its
ongoing study of the natural gas reserve in the country, even if the moratorium is lifted in 2012, no new
capacity can come up before 2016.

Bottom line: The demand for natural gas has exponentially grown throughout the Middle East riding on cheap
pricing. This puts a risk of feedstock availability in the new multi million tonne projects.


Oil and Gas

APPENDIX – IV
Existing and expected cracker capacities all over the world

Country 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 Bahia
ARGENTINA Chemical Blanca 275,000 2010 100
Co. (BB1)
Dow Bahia
ARGENTINA Chemical Blanca 490,000 2010 100
Co. (BB2)
Huntsman San
pARGENTINA 21,000 2010 25 75
Corp. Lorenzo
Petrobras Puerto San
ARGENTINA 32,500 2010 100
Energia Martin
Petrobras San
ARGENTINA 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. NSW

AUSTRIA OMV AG Schwechat 500,000 2010 15 23 62

Azerichimi
AZERBAIJAN Sumgait 30,000 2010
a
Azerichimi
AZERBAIJAN Sumgait 300,000 2010
a
Production
Novopolots
BELARUS Associatio 73,000 2010
k
n Polymir
Production
Novopolots
BELARUS Associatio 120,000 2010
k
n Polymir
BASF
BELGIUM Antwerpen Antwerp 1,080,000 2010 5 95
NV
Benelux
BELGIUM Antwerp 255,000 2010 16 16 18 50
FAO
Benelux
BELGIUM Antwerp 610,000 2010 16 16 18 50
FAO
Benelux
BELGIUM Antwerp 550,000 2010 16 16 18 50
FAO


Sector Update
Braskem Camacari,
BRAZIL 600,000 2010 5 95
SA Bahia
Braskem Camacari,
BRAZIL 680,000 2010 100
SA Bahia

BRAZIL Copesul Triunfo, RS 700,000 2010 100

BRAZIL Copesul Triunfo, RS 500,000 2010 100

Petroquimi Santo
BRAZIL ca Uniao Andre, Sao 700,000 2010 100
SA Paulo
Rio Duque de
BRAZIL 520,000 2010 100
Polimeros Caxias
Lukoil
Neftochim
BULGARIA Bourgas 250,000 2010 3.4 10 86.6
Bourgas
JSC
Lukoil
Neftochim
BULGARIA Bourgas 150,000 2010 100
Bourgas
JSC
Dow Fort
CANADA 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
Quebec

CHILE Petrox SA Concepcion 60,000 2010 8 16 76

BASF-YPC
CHINA Nanjing 600,000 2010 100
Co. Ltd.
China
National Daya Bay,
CHINA 800,000 2010 100
Offshore Guangdong
Oil Co.


Oil and Gas

China
National
CHINA Dushanzi 140,000 2010 100
Offshore
Oil Co.
China
Petrochem
CHINA ical Daqing 320,000 2010 100
Industrial
Corp.
Dalian
CHINA Petrochem Dalian 4,000 2010 100
ical Co.
Fujian
Petrochem
CHINA Quanzhou 800,000 2010 100
ical Co.
Ltd.
Fushun
Petrochem
CHINA Fushun 115,000 2010 100
ical
Complex
Fushun
Petrochem
CHINA Fushun 685,000 2011 100
ical
Complex
Gaoqiao
CHINA Petrochem Gaoqiao 14,000 2010 100
ical Co.
Guangzhou
CHINA Petrochem Guangzhou 150,000 2010 100
ical Co.
Jilin
Chemical
CHINA Jilin 700,000 2010 100
Industrial
Co. Ltd.
Lanzhou
Chemical
CHINA Lanzhou 600,000 2010 100
Industrial
Co.
Lanzhou
Chemical
CHINA Lanzhou 320,000 2011 100
Industrial
Co.
Norinco/Zh
CHINA Panjin 450,000 2010 100
enhua
Panjin
Ethylene
CHINA 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


Sector Update

CHINA Sinopec Shanghai 605,000 2014 60 40

Maoming,
CHINA Sinopec 1,000,000 2010 100
Guangdong

CHINA Sinopec Neijing 650,000 2010 60 40

Puyang,
CHINA Sinopec 180,000 2010 100
Henan

CHINA Sinopec Qilu 720,000 2010 80 20

CHINA Sinopec Tianjin 200,000 2010 100

CHINA Sinopec Tianjin 1,000,000 2010 100

Wuhan,
CHINA Sinopec 800,000 2013 100
Hubei

CHINA Sinopec Zhenhai 1,000,000 2010 100

PetroChina
Sichuan Chengdu,
CHINA Petrochem Quanzhou 800,000 2011 100
ical City
Co. Ltd
BASF-YPC
CHINA Nanjing 150,000 2010 100
Co. Ltd.
Daqing
Petroleum
Heilongjian
CHINA & 600,000 2012 100
g Province
Chemical
Co.
Shenhua
Baotou,
Baotou
CHINA Inner 300,000 2010 100
Coal
Mongolia
Chemical
Chinese
Kaohsiung
TAIWAN Petroleum 500,000 2010 100
Linyuan
Corp.
Chinese
TAIWAN Petroleum Linyuan 230,000 2010 100
Corp.
Chinese
TAIWAN Petroleum Linyuan 380,000 2010 100
Corp.
Formosa
TAIWAN Petrochem Mailiao 700,000 2010 7.3 92.7
ical Corp.
Formosa
TAIWAN Petrochem Mailiao 1,035,000 2010 6.6 0.3 93.1
ical Corp.
Formosa
TAIWAN Mailiao 1,200,000 2010 9 91
Petrochem


Oil and Gas

ical Corp.

CPC Corp. Kaohsiung,
TAIWAN 600,000 2013 100
Taiwan Linyuan
Empresa
Colombian Barrancabe
COLOMBIA 100,000 2010 80 20
a de rmeja
Petroleos

CROATIA Polimeri Zagreb 90,000 2010 100

CZECH REPUBLIC Unipetrol Litvinov 544,000 2010 2 6 56 1 35

Sidi Kerir
EGYPT Petrochem Alexandria 300,000 2010 100
icals Co.
Borealis
FINLAND Porvoo 390,000 2010 100
OY

FRANCE A. P. Feyzin Feyzin 250,000 2010 100

Notre
ExxonMobi Dame de
FRANCE 400,000 2010 100
l Corp. Gravencho
n
Naphthach
FRANCE Lavera 740,000 2010 50 50
imie
Polimeri
FRANCE Europa Dunkerque 430,000 2010 0.5 3.5 20 76
France SAS
Societe du
Craqueur
Berre
FRANCE 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
Gonfreville
FRANCE Petrochem 520,000 2010 100
l’Orcher
icals
Basell
GERMANY Polyfine Wesseling 738,000 2010 10 90
GMBH
Basell
GERMANY Polyfine Wesseling 305,000 2010 100
GMBH
Ludwigshaf
GERMANY BASF AG 620,000 2010 5 5 90
en
BP
Gelsenkirch
GERMANY Gelsenkirc 580,000 2010 2 8 78 12
en
hen
BP
Gelsenkirch
GERMANY Gelsenkirc 480,000 2010 9 65 26
en
hen


Sector Update

GERMANY INEOS Dormagen 550,000 2010 100

GERMANY INEOS Dormagen 544,000 2010 100

LyondellBa Munchsmu
GERMANY 400,000 2010 13 17 17 53
sell nster
Dow
GERMANY Chemical Bohlen 560,000 2010 100
Co.
OMV
Burghause
GERMANY 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
Thessalonik
GREECE Chemicals 20,000 2010 65 35
i
Co. AE
Tiszai
Vegyi Tiszaujvaro
HUNGARY 370,000 2010 1 4 90 5
Kombinat s
Ltd.
Tiszai
Vegyi Tiszaujvaro
HUNGARY 290,000 2010 7 16 75 2
Kombinat s
Ltd.
Gas
Authority Pata, Uttar
INDIA 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,
Petrochem
INDIA Maharashtr 400,000 2010 42.5 57.5
icals Corp.
a
Ltd.
National Thane,
INDIA 75,000 2010 100
Organic Maharashtr


Oil and Gas

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 Kabir
IRAN Petrochem Amir Kabir 520,000 2010 24 4 12 58 2
ical Co.
Arak
IRAN Petrochem Arak 247,000 2010 100
ical
Arya Sasol
Assaluyeh
IRAN Polymer 1,000,000 2010 100
Bushehr
Co.
Bandar
Imam Bandar
IRAN 550,000 2010 20 3 10 67
Petrochem Imam
ical Co.
Jam
Assaluyeh
IRAN Petrochem 1,320,000 2010 100
Bushehr
ical Co.
Marun
Bandar
IRAN Petrochem 1,100,000 2010 100
Assaluyeh
ical Co.
Tabriz
IRAN Petrochem Tabriz 136,000 2010 4 8 8 80
ical Co.
Carmel
ISRAEL Haifa 240,000 2010 10 10 80
Olefins Ltd.
Polimeri
ITALY Brindisi 440,000 2010 100
Europa
Polimeri
ITALY Gela 245,000 2010 25 5 70
Europa
Polimeri Porto
ITALY 490,000 2010 100
Europa Marghera
Polimeri
ITALY Priolo 745,000 2010 2 1 65 32
Europa
Porto
ITALY Syndial 250,000 2010 70 30
Torres
Asahikasei Kurasiki,
JAPAN 500,000 2010 100
Chemicals Okayama

Sector Update
Corp.

Idemitsu
Petrochem
JAPAN Chiba 374,000 2010 2 98
ical Co.
Ltd.
Idemitsu
Petrochem
JAPAN Tokuyama 623,000 2010 100
ical Co.
Ltd.
Keiyo Ichihara,
JAPAN 740,000 2010 100
Ethylene Chiba
Maruzen
JAPAN Petrochem Chiba 520,000 2010 100
icals
Mitsubishi
Kashima
JAPAN Chemical 375,000 2010 10 20 55 15
(Unit 1)
Corp.
Mitsubishi
Kashima
JAPAN Chemical 453,000 2010 10 20 55 15
(Unit 2)
Corp.
Mitsubishi
JAPAN Chemical Mizushima 500,000 2010 5 5 80 10
Corp.
Mitsui
Ichihara,
JAPAN Chemicals 617,000 2010 10 90
Chiba
Inc.
Mitsui
Takaishi
JAPAN Chemicals 450,000 2010 100
City, Osaka
Inc.
Nippon
JAPAN Petrochem Kawasaki 460,000 2010 100
ical
Showa
JAPAN Oita 675,000 2010 100
Denko KK
Sanyo
JAPAN Petrochem Mizushima 500,000 2010 100
ical Co. Ltd
Sumitomo
JAPAN Chemical Chiba 415,000 2010 100
Co. Ltd.
Tonen
JAPAN Chemical Kawasaki 515,000 2010 100
Corp.
Tosoh
JAPAN Yokkaichi 527,000 2010 100
Corp.

KAZAKHSTAN Akpo Aktau 100,000 2010

Governme
KAZAKHSTAN Atyrau 30,000 2010
nt
Equate
KUWAIT Shuaiba 850,000 2010 100
Petrochem


Oil and Gas

ical Co.
(Equate II)
National
LIBYA Ras Lanuf 350,000 2010 100
Oil Co.
Ethylene
MALAYSIA Malaysia Kertih 400,000 2010 100
Sdn. Bhd.
Optimal
MALAYSIA Olefins Kertih 600,000 2010 100
Sdn. Bhd.
Titan
Pasir
Petrochem
MALAYSIA Gudang, 442,000 2010 10 10 80
icals Sdn.
Johor
Bhd.
Titan
Pasir
Petrochem
MALAYSIA Gudang, 667,000 2010 10 10 80
icals Sdn.
Johor
Bhd.
La
Petroleos
MEXICO 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
Terneuzen
NETHERLANDS Chemical 580,000 2010 15 85
(No. 1)
Co.
Dow
Terneuzen
NETHERLANDS Chemical 585,000 2010 15 85
(No. 2)
Co.
Dow
Terneuzen
NETHERLANDS Chemical 635,000 2010 100
(No. 3)
Co.
SABIC Geleen
NETHERLANDS 595,000 2010 100
Europe (No. 3)
SABIC Geleen
NETHERLANDS 670,000 2010 100
Europe (No. 4)
Shell
NETHERLANDS Nederland Moerdijk 900,000 2010 100
Chemie BV
Eleme
Petrochem Eleme
NIGERIA 550,000 2010 33 33 34
ical Co. River
Ltd.
Namhung
Anju, South
Youth
NORTH KOREA P’yong’an 60,000 2010
Chemical
Province
Complex
Rafnes,
NORWAY Noretyl AS 550,000 2010 30 45 25
Bamble
PKN Orlen
POLAND Plock 700,000 2010 5 5 90
SA


Sector Update
Repsol YPF
PORTUGAL Sines 570,000 2010 100
SA
Qatar
QATAR Petrochem Mesaieed 720,000 2010 100
ical Co.

QATAR Q-Chem I Mesaieed 500,000 2010 80 20

Ras Laffan
QATAR 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

Petromidia
ROMANIA 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
Nizhnekam
RUSSIA skneftekhi 600,000 2010
sk
m

RUSSIA Norsy Norsy 300,000 2010 100

Omskykau Omsk,
RUSSIA 90,000 2010
chuyk Siberia

RUSSIA Orgsintez Kazan 445,000 2010 100

RUSSIA Oxosyntez Orsk 45,000 2010

Novopolots
RUSSIA Polimir 150,000 2010 100
k
Salavatneft
RUSSIA Salavat 300,000 2010
orgsintez
Sibur
RUSSIA Perm 30,000 2010
Himprom
Sibur- Nizhny
RUSSIA 300,000 2010 20 80
Neftechim Novgorod
Sintezkauc
RUSSIA Samara 300,000 2010
huk
Stavrapolp
RUSSIA Prikumsk 350,000 2010
olymer

RUSSIA Tomsk PCC Tomsk 300,000 2010

Uraorgsint
RUSSIA Ufa 235,000 2010
es
Al Jubail
SAUDI ARABIA Petrochem Jubail 800,000 2010 50 50
ical Co.
Arabian
SAUDI ARABIA Jubail 800,000 2010 100
Petrochem


Oil and Gas

ical Co.

Arabian
SAUDI ARABIA Petrochem Jubail 800,000 2010 50 50
ical Co.
Arabian
SAUDI ARABIA Petrochem Jubail 650,000 2010 100
ical Co.
Chevron
Phillips
SAUDI ARABIA Jubail 300,000 2010 50 50
Chemical
Co. LP
Eastern
SAUDI ARABIA Petrochem Jubail 1,300,000 2010 50 50
ical Co.
Jubail
United
SAUDI ARABIA Jubail 1,450,000 2010 50 50
Petrochem
ical Co.
Saudi Basic
SAUDI ARABIA Industries Yanbu 1,380,000 2010 50 50
Corp.
Saudi
SAUDI ARABIA Petrochem Jubail 1,350,000 2010 100
ical Co.

SAUDI ARABIA Tasnee Jubail 1,000,000 2010 25 25 25 25

Yanbu
SAUDI ARABIA Petrochem Yanbu 875,000 2010 100
ical Co.
Yanbu
SAUDI ARABIA Petrochem Yanbu 830,000 2010 16 16 18 50
ical Co.
Saudi
SAUDI ARABIA Al-Jubail 1,200,000 2011
Polymers
SERBIA AND Chemi
Pancevo 200,000 2010
MONTENEGRO Industria
ExxonMobi
Jurong
SINGAPORE l Chemical 900,000 2010 33 33 34
Island
Co.
Petrochem
ical Corp.
Pulau Ayer
SINGAPORE of 465,000 2010 100
Merbau
Singapore
Pte. Ltd.
Petrochem
ical Corp.
Pulau Ayer
SINGAPORE of 615,000 2010 100
Merbau
Singapore
Pte. Ltd.
Shell
Eastern Bukom
SINGAPORE 800,000 2010 100
Petroleum Island
Ltd.


Sector Update
ExxonMobi
Jurong
SINGAPORE l Chemical 1,000,000 2013 100
Island
Corp.
Slovnaft
SLOVAKIA Petrochem Bratislava 210,000 2010 8 11 26 55
icals
Sasol
SOUTH AFRICA Sasolburg 110,000 2010 80 20
Polymers
Sasol
SOUTH AFRICA Secunda 475,000 2010 75 5 20
Polymers
Honam
SOUTH KOREA Petrochem Yeochun 750,000 2010 100
ical
Korea
Petrochem
SOUTH KOREA ical Ulsan 470,000 2010 100
Industries
Co. Ltd.
LG Daesan
SOUTH KOREA Petrochem Daesan 760,000 2010 100
ical
LG
Petrochem
SOUTH KOREA Yeosu City 900,000 2010 100
ical Co.
Ltd.
Lotte
Daesan
SOUTH KOREA Daesan 650,000 2010 100
Petrochem
ical
Samsung
SOUTH KOREA General Daesan 850,000 2010 100
Chemicals

SOUTH KOREA SK Corp. Ulsan 545,000 2010 100

SOUTH KOREA SK Corp. Ulsan 185,000 2010 100

SOUTH KOREA Yeochon Yeochun 857,000 2010 100



Dow
SPAIN Chemical Tarragona 660,000 2010 100
Co.
Repsol YPF
SPAIN Puertollano 250,000 2010 100
SA
Repsol YPF
SPAIN Tarragona 660,000 2010 100
SA
Stenungsun
SWEDEN Borealis AB 625,000 2010 40 20 40
d


Oil and Gas


SWITZERLAND Lonza Ltd. Visp 33,000 2010 30 60 10

Map Ta Map Ta
THAILAND Phut Phut, 900,000 2010 100
Olefins Co. Rayong
Map Ta
PTT
THAILAND Phut, 400,000 2010 80 6 14
Chemical
Rayong
Map Ta
PTT
THAILAND Phut, 515,000 2010 5 18 28 49
Chemical
Rayong
Map Ta
PTT
THAILAND Phut, 461,000 2010 100
Chemical
Rayong
Map Ta
PTT
THAILAND Phut, 1,000,000 2010 100
Chemical
Rayong
Map Ta
Rayong
THAILAND Phut, 800,000 2010 100
Olefins Ltd.
Rayong
PTT
Map Ta
THAILAND 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 100

UKRAINE Oriana 180,000 2010

UKRAINE TNK-BP Lisichansk 300,000 2010 100

Borouge
UNITED ARAB Abu Dhabi Ruwais,
2,100,000 2010 100
EMIRATES Polymers Abu Dhabi
Co. Ltd.
Abu Dhabi
UNITED ARAB Polymers Ruwais,
1,500,000 2013 100
EMIRATES Co. Ltd. Abu Dhabi
(Borouge)
UNITED Grangemo
INEOS 730,000 2010 100
KINGDOM uth
UNITED Grangemo
INEOS 340,000 2010 100
KINGDOM uth
ExxonMobi
UNITED
l Chemical Fawley 120,000 2010 9 8 8 25 25 25
KINGDOM
Co.
ExxonMobi
UNITED Mossmorra
l Chemical 830,000 2010 100
KINGDOM n Fife
Co.
UNITED SABIC
Wilton 865,000 2010 20 10 70
KINGDOM Europe

Sector Update
BASF Fina
UNITED STATES Petrochem Port Arthur 907,000 2010 100
icals
Chevron
Phillips Cedar
UNITED STATES 803,000 2010 30 20 25 25
Chemical Bayou
Co. LP
Chevron
Phillips
UNITED STATES Port Arthur 861,000 2010 70 25 5
Chemical
Co. LP
Chevron
Phillips
UNITED STATES Sweeny 907,000 2010 38 37 25
Chemical
Co. LP
Chevron
Phillips
UNITED STATES Sweeny 676,000 2010 75 25
Chemical
Co. LP
Chevron
Phillips
UNITED STATES Sweeny 295,000 2010 85 15
Chemical
Co. LP
Dow
Freeport
UNITED STATES Chemical 633,000 2010 50 50
(LHC 7)
Co.
Dow
Freeport
UNITED STATES Chemical 1,024,000 2010 10 20 70
(LHC 8)
Co.
Dow
Plaquemin
UNITED STATES Chemical 522,000 2010 75 25
e (LHC 2)
Co.
Dow
Plaquemin
UNITED STATES Chemical 740,000 2010 70 10 20
e (LHC 3)
Co.
Dow
UNITED STATES Chemical Taft 1 612,000 2010 20 40 40
Co.

UNITED STATES DuPont Orange 681,000 2010 100

Eastman
UNITED STATES Chemical Longview 140,000 2010 25 67 7 1
Co.
Eastman
Co.
Eastman
Co.
Eastman
Co.


Oil and Gas

Equistar
Chemicals
Channelvie
UNITED STATES LP 875,000 2010 5 95
w
(LyondellB
asell)
Equistar
Chemicals
Channelvie
UNITED STATES LP 875,000 2010 5 95
w
(LyondellB
asell)
Equistar
Chemicals
Chocolate
UNITED STATES LP 544,000 2010 100
Bayou
(LyondellB
asell)
Equistar
Chemicals
UNITED STATES LP Clinton 500,000 2010 80 20
(LyondellB
asell)
Equistar
Chemicals
Corpus
UNITED STATES LP 771,000 2010 10 30 60
Christi
(LyondellB
asell)
Equistar
Chemicals
UNITED STATES LP LaPorte 789,000 2010 60 20 20
(LyondellB
asell)
Equistar
Chemicals
UNITED STATES LP Morris 590,000 2010 80 20
(LyondellB
asell)
ExxonMobi
Baton
UNITED STATES l Chemical 975,000 2010 9 8 8 25 25 25
Rouge
Co.
ExxonMobi
UNITED STATES l Chemical Baytown 2,197,000 2010 58 8 9 25
Co.
ExxonMobi
UNITED STATES l Chemical Beaumont 816,000 2010 8 8 9 75
Co.
ExxonMobi
UNITED STATES l Chemical Houston 102,000 2010 100
Co.
Flint Hills
UNITED STATES Port Arthur 617,000 2010 60 40
Corp.
Formosa
Point
UNITED STATES Plastics 816,000 2010 45 15 40
Comfort
Corp. USA
Formosa
Point
UNITED STATES Plastics 680,000 2010 45 15 40
Comfort
Corp. USA


Sector Update
Huntsman Port
UNITED STATES 180,000 2010
Corp. Neches
INEOS
Olefins and Chocolate
UNITED STATES 1,746,000 2010 50 35 15
Polymers Bayou
USA
Javelina Corpus
UNITED STATES 102,000 2010 100
Co. Christi
Sasol
North Lake
UNITED STATES 454,000 2010 100
America Charles
Inc.
Shell
UNITED STATES Chemicals Deer Park 1,406,000 2010
Ltd.
Shell
UNITED STATES Chemicals Norco 1,556,000 2010 5 35 60
Ltd.
Westlake
UNITED STATES Petrochem Calvert City 204,000 2010 100
icals Corp.
Westlake
UNITED STATES Petrochem Sulphur #1 567,000 2010 100
icals Corp.
Westlake
UNITED STATES Petrochem Sulphur #2 522,000 2010 70 30
icals Corp.
Williams
UNITED STATES Geismar 626,000 2010 92 8
Olefins
Uzbekneft
UZBEKISTAN 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


Oil and Gas

APPENDIX – V
Sensitivity 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%

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

Demand elasticity

Our sensitivity analysis of cracker margin based on demand projection based on 1) demand per capita growth rate and
GDP growth rate
2) demand elasticity with GDP growth shows that the margin will be higher than USD 188 per mt in 2011 and will grow
to more than USD 383 per mt by 2015.
Demand elasticity

Demand per capita growth rate

Demand elasticity


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-09

Distribution of Ratings / Market Cap
20-Jun-11 Torrent
Growth drivers intact; 642 Buy
Edelweiss 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 Buy
Rating 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 period
Market 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. The investment 642 Buy
and our affiliates, group companies, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of
Pharma Visit Note
company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or
15-Jun-11 Dr. Reddys USFDA issues warning letter 1,555 Buy
lender/borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. This information
Lab. for Mexico facility;
is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in
EdelFlash
any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity
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regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirementsBuy
08-Jun-11 Dr. Reddys Gauging upsides from 1,577 within such jurisdiction. The distribution of this
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whose possession
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Company there can
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