How short will ethylene get
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How short will ethylene get?. Peter Frenken Fourth Global PVC Conference 18-19 November 2003. SABIC: “a new kid in town”? Global competitiveness and who are the locals? Enough mega plant addittions to supply ethylene? Conclusions and answers!. SABIC : Facts and Figures. SABIC strategy.

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How short will ethylene get

How short will ethylene get?

Peter Frenken

Fourth Global PVC Conference

18-19 November 2003


How short will ethylene get

SABIC: “a new kid in town”?

Global competitiveness and who are the locals?

Enough mega plant addittions to supply ethylene?

Conclusions and answers!


How short will ethylene get

SABIC : Facts and Figures


Sabic strategy

SABIC strategy

  • Growth total products capacity from 35 million mt/year in 2001, 40 million mt/year in 2002 and to 48 mt/year in 2010.

  • For Petrochemicals SABIC has a global strategy.

  • Share of Petrochemicals :

    14.5 million mt/year Basic Chemicals (ethylene, propylene, methanol, MTBE, butadiene etc.)

    4.8 million ton of Polyolefins.

  • Strengthen positions in Petrochemicals by acquisitions and autonomous growth.

  • Constantly exploring overseas opportunities for acquisition.


How short will ethylene get

Basic facts SABIC

Established in 1976

16,800 employees in 23 countries (EU 2,300)

Sales € 11.4 bln in 2002

Net profit: 2003 Q1/Q2 850 mln $

Total production in 2002 were 40 mln tonnes (EU 6 mln)

70% shares by KSA government

Joint Ventures with a.o. Shell, Exxon and Mitsubishi


Sabic feedstocks major products excl metals

Ethane

Methane

Butane

Styrene

Propane

Naphtha

Benzene

Salt

Air

Limestone

Natural Gas

Phosphate Rock

Aluminium

Potash

Basic Chemicals

Ethylene

Propylene

Butadiene

Butene-1

Methanol (MEOH)

Crude Industrial Ethanol (CIE)

Methyl Tertiary Butyl Ether (MTBE)

Benzene

Styrene

ParaXylene

SABIC Feedstocks/Major Products (excl Metals)

Sourced

PRODUCED

Intermediate Chemicals

  • Ethylene Glycol

  • Vinyl Chloride Monomer

  • Caustic Soda

  • 2-Ethyle Hexanol

  • Dioctyl Phthalate

  • Ammonia

  • PTA

  • Oxygen

  • Nitrogen

  • Argon

  • Fertilizers

  • Ammonia

  • Urea

  • Sulphuric Acid

  • Polymers

  • Polyester

  • Polystyrenes

  • Melamine

  • PVC

  • HDPE

  • LDPE

  • LLDPE

  • PP


Sabic s european acquisition

SABIC’s European acquisition……

  • First important step outside KSA towards leading global manufacturing position in petrochemicals

  • Closer to European customers and expansion of customer base

  • European production sites

  • Experienced Marketing and R&D staff in Europe

  • Springboard for further growth in Europe

  • Building on SABIC’s knowledge and know-how in the field of polymers and hydrocarbons


How short will ethylene get

……of an allready growing affiliate……

(Kton)


How short will ethylene get

…. resulted in a #4 global ranking for ethylene….

KTa


How short will ethylene get

…. and for poly-olefins as well. (#4 in EU)

Kton


How short will ethylene get

Houston

Yanbu

Summarising SABIC Manufacturing and R&D sites

4 highly integrated sitesdirect access to low cost feedstock

world-scale facilitiesdirect market access

Gelsenkirchen

Geleen

Al Jubail

Vadodara

Riyadh

Kerteh


How short will ethylene get

Global competitiveness developments:

Europe has become a local-for-local producer,

USGC will get one


What about cycles in the global petrochemical industry

What about cycles in the global petrochemical industry ?


Which drivers to manage in a cyclical business

Which drivers to manage in a cyclical business?

  • Access to feedstock

  • Large scale

  • Site integration

  • Close to markets


How short will ethylene get

#1: Cheap gas feedstock only in the Middle East

Can

Nor

Russia

UK

Ukr.

USA

Neth.

Turkm.

Kaz.

Uzb.

China

Mex

Iraq

Iran

India

Lib.

Bangl

Alg.

Kuw

Mal

Pak.

Ven

UAE

Indon.

Saudi

Qatar

Nig.

Aus


How short will ethylene get

Impact of cheap feeds on derivatives will be ….

Take into consideration:

Cracker feedstock

License cost

Infrastructure

Marketing and Sales cost

Research and Development

Other business cost

Working capital

LLDPE gasphase

350 kta

HDPE slurry

300 kta

Europe

PP gasphase

2*200 kta

Co-products

extensionnaphtha

cracker650 kta

HDPE gasphase

350 kta

LLDPE gasphase

2*350 kta

Middle East

Ethane cracker

1050 kta


How short will ethylene get

…. a major cash costs advantage for the ME

ME producer

NWE producer

Typical ranges for

gas and naphtha

Structural

delta

in cash cost

Low High Low High

Gas price ($/mmBTU)

Naphtha (EUR/t)

On a delivered cost basis this advantage will remain!


2 middle east will have scale advantage as well

#2: Middle East will have scale advantage as well


How short will ethylene get

Strong cracker sites are concentrated in the ARG region

#3: Integration

Strong sites:

Current ethylene capacity around 1mio tonnes

Potential to grow to 1.5 mio tonnes

High integration cracker/derivatives

Strong cost position

ARG area: good ethylene logistics, not yet for propylene.

USGC: good logistic integration


How short will ethylene get

#4: a market means population, wealth and/or growth.

Population is shown here.

China

Can

Rus

UK

D

S.K.

USA

F

Ukr

Jp

Tky

I

Es

Iran

Pak

Mex

India

Ban

Eg

Vie

Phil

Nig

Bir

Co

Braz

Eth

Th

Indon

Za

S.A.

Ar


How short will ethylene get

Conclusions

In the ’90s EU became a local for local for EU producer

USGC will loose export position to Asia to the Middle East because of the structural increase of natural gas based ethane feedstock to the crackers

Only local cost leaders will be able to compete against Middle East delivered costs


How short will ethylene get

Ethylene part1:

How has European ethylene been doing?


Observations

Observations

  • Europe consolidated (to be shown)

  • Europe did not build much new capacity (to be shown)

  • Capacity: 24 mln ton, modest recent historic growth of 3%/y

  • Demand: 22 mln ton, only marginally higher than in 2002

  • Production: 94% of CTP


Here it is european consolidation

Here it is: European consolidation……..


Which resulted in a higher share top5 players

...which resulted in a higher share top5 players.


How short will ethylene get

Ethylene part 2:

Ethylene will be short because of capacity growth is behind demand growth/economic growth scenario


Delayed economic recovery in 2003 but recovery to come

Delayed economic recovery in 2003 but recovery to come


Global ethylene demand growth of 4 4 in 2004 2008

Global ethylene demand growth of 4.4 % in 2004-2008


How short will ethylene get

A.A.I PE demand 4.4% in 2004-2008PVC 4.5%, styrene 4.2%, MEG 6.0%


Ethylene supply gap in 2003 2004 and speculations on 2005 delays

Ethylene supply gap in 2003-2004and speculations on 2005 delays


Major capacity developments will be in iran china ksa

Major capacity developments will be in Iran, China, KSA


How short will ethylene get

ME capacity share will further increase from 9 to 17%

By 2008 Europe and USA will no longer have a dominant position


Resulting high global utilisation rates will not be sustainable

Resulting high global utilisation rates will not be sustainable


How short will ethylene get

Conclusions


Conclusions

Conclusions

  • Global GDP recovery in 2004+

  • Gap in Ethylene supply in 2003-2004

  • Recovery of global utilisation rates in 2004+

  • New projects in 2005-2006 no big impact YET

  • New and still unknown projects will come up in 2004

  • Impact only in 2006 and beyond

  • SABIC ethylene capacity share to increase from 4.9% in 2003 to 6.1% in 2008.


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