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Life after shale gas: A race for marketshare

Life after shale gas: A race for marketshare. Prema Viswanathan, Associate Editorial Director, Petrochemicals, Platts IPF, Tehran, 7-8 June 2014. Introducing Platts.

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Life after shale gas: A race for marketshare

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  1. Life after shale gas: A race for marketshare Prema Viswanathan, Associate Editorial Director, Petrochemicals, Platts IPF, Tehran, 7-8 June 2014

  2. Introducing Platts Platts is a commodity information and data provider founded by Warren Platt over 100 years ago, and owned by McGraw Hill Financial, a leading provider of ratings, benchmarks and analytics. $ ! Price Reporting Assessments Breaking News Market Reports

  3. Becoming a Global Leader – Office Locations Moscow, RU London, UK Boston, MA Pittsburgh, PA Beijing, CN Denver, CO Lausanne, CH Hightstown, NJ Tokyo, JP New York, NY Shanghai, CN Washington, DC Houston, TX Dubai, UAE Hong Kong, CN Singapore São Paulo, BR Buenos Aires, AR Melbourne, AUS Close to 1,000 staff around the world

  4. The purpose of a transparent methodology Increases confidence in price benchmarks Encourages responsible behaviour Simplifies participation in the price discovery process Establishes high quality information for decision-making

  5. Platts Market On Close (MOC) is not an Average Time Market on close assessment Average

  6. PX: Bid July at $1,220/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, T/T 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX:Jun/Jul bid heard at $13/mt CFR TND, Asia origin (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Offer Any July at $1,238/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) ---------after MOC peg PX: Offer Any July at $1,240/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Bid 1H July at $1,220/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) ---------after morning peg PX: Jul bid heard at $1,215/mt CFR TND, Asia origin, T/T 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Bid 1H July at $1,210/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H1 Jun offer heard at $1,238/mt CFR Ningbo, Asia origin, if form e, +1.75% return (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H1 Jul bid heard at $1,220/mt CFR Ningbo/Dalian/Jiangyin, Asia origin(exluding India/China/ME and Iran), L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX :  1h June offer at 1236 cfr NB, asia, if form e, +1.75% return  (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) Heards system propels market interface May 21, 2014 PX: Bid July at $1,220/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, T/T 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX:Jun/Jul bid heard at $13/mt CFR TND, Asia origin (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Offer Any July at $1,238/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Offer Any July at $1,240/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days, valid for 5 min (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Bid 1H July at $1,220/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: Jul bid heard at $1,215/mt CFR TND, Asia origin, T/T 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px)  PX: Bid 1H July at $1,210/mt, CFR nb/tw/dl, Asia origin,  origin excluding all ME, India and China, L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H1 Jun offer heard at $1,238/mt CFR Ningbo, Asia origin, if form e, +1.75% return (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H1 Jul bid heard at $1,220/mt CFR Ningbo/Dalian/Jiangyin, Asia origin(exluding India/China/ME and Iran), L/C 30 days (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX: H2 Jun bid heard at $1,225/mt CFR TND, Asia origin, 5kt (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px) PX :  1h June offer at 1236 cfr NB, asia, if form e, +1.75% return  (for details contact Michelle Kim at mihee.kim@platts.com or +65-6530-6425;   yahoo IM: platts_asia_px)

  7. Agenda • US shale boom and impact on aromatics • Production shifts to Middle East, Asia • Middle East shift away from light feeds • China’s opportunities & challenges • India’s unmet potential • Conclusion

  8. Chemical companies profit from growth Dow Chemical (NYSE:DOW)Historical Stock Chart 1 Year : From Apr 2013 to Apr 2014 • Despite narrowing margins the global chemical industry accounts for $3 trillion • Stocks of US chemical companies (eg. Dow Chemical) have been doing well

  9. US projects capitalise on ethane surplus

  10. Ethane use to grow for next decade • Ethane consumption in US crackers has climbed from 41% of total feedstock in 2005 to 58% of total feedstock in 2013 • Ethane is expected to account for 76% of US cracker feedstock by 2024 • Cut in propane use is necessitating PDH development • Aromatics output at the cracker has diminished, contributing to a tighter benzene market Source: Platts

  11. Cheap ethane driving the boom Source: Platts

  12. US cracker margins – never better Source: Platts • Since early 2011, margins for US ethane and E/P Mix have climbed from $500/mt to $1,000/mt • Naphtha margins, though, fluctuate from negative to $500/mt

  13. Greenfields: Producers are “all-in” Source: Company announcements, Platts

  14. Brownfield projects: Good barometers Source: Company announcements, Platts

  15. The abundance of ethane Is encouraging investment Ethane demand will struggle to keep pace with supply growth Short balance in 2018 indicates ethane needs to flow from the Williston to supply crackers in the Gulf Coast Source: Bentek Market Call: North American NGLs

  16. But investments based on imported ethane may not be cost-effective

  17. Regional PE net trade overview Source: Platts Petrochemical Analytics

  18. Propylene squeezed at the cracker

  19. Propylene will see a much larger impact • During the next decade, propylene produced by US crackers will fall 30% to 3.5 million metric tons in 2023 – down from just below 5 million metric tons in 2013 • Such a drop is forcing industry to adopt on-purpose processes

  20. Shale gas will yield less aromatics

  21. US shift to light feeds expected to sink aromatics output • 69% growth in ethane based output • 32% decrease in naphtha based output • Pygas to decrease 40% • Crude C4 to decrease 20% • Propylene to decrease 20% Source: Platts Petrochemical Analytics

  22. Middle East adds petchem capacity Source: GPCA

  23. Gas shortage to intensify in Middle East • Depleting supply of ethane in the GCC has forced producers to look • at refinery-petchem integration and production of aromatics • Government push towards job creation has also led to downstream • expansion and diversification into aromatics In billion cubic meters Source: Booz & Co

  24. Middle East opts for aromatics, adds value Source: Platts Source: GPCA

  25. Iran is the wild card which could bolster Middle East advantage Iranian PE exports prior to sanctions • Iran exports continue despite sanctions • China is now Iran’s No1 trading partner • Major exporter of PE and methanol to China Source: UN Comtrade, Platts Petrochemical Analytics

  26. Asia leads in chemicals capacity growth • US, Europe. Japan have been the major production hubs in the past • But Asia and the Middle East are fast catching up Source: American Chemistry Council (ACC)

  27. China: Opportunities • Chemical production in China seen rising 8.5% in 2015 versus 8.8% in 2014, 8.5% in 2013: ACC • China moving towards self-sufficiency, new methanol-to-aromatics and coal-to-benzene projects to help boost competitiveness • But China expected to continue importing petchems, including aromatics in the next decade

  28. China’s shale gas ambitions • China targeting shale gas output of 6.5 billion cubic meters/year by 2015, 60 billion-100 billion cu m/year by 2020 • China’s shale gas output in 2013 was just 200 million cu m, according to the Ministry of Land and Resources • Sinopec, CNPC leading the way • By 2015, 110 new wells likely at Changning-Weiyuan

  29. New CTO/MTO projects

  30. CTO/MTO could flood global PE market • CTO and MTO projects in China could add up to 10 million mt of new PE capacity in the country by 2020 – nearly equal to China’s forecast demand growth.

  31. China’s coal advantage • While coal CFR China has averaged just over $7/MMBtu, naphtha has averaged just over $20/MMBtu and JKM or spot LNG price just over $18/MMBtu. So a ratio of 1:2.8:2.6. Source: Platts

  32. India: Unfulfilled Potential • New optimism with business-friendly government at the helm, promise to prioritise infrastructure projects • IMF said in April that India’s GDP is set to grow 5.4% in FY 2013-2014, and 6.4% in 2015-2016 • Forecast based on strengthening global growth, improving export competitiveness, recently approved projects, stabilising currency

  33. India’s petchems imports to increase • Inflation, policy delays, regulatory logjam, high interest rates curbing growth • But low per capita consumption an opportunity for petchem players Source: 12th Five Year Plan report, Government of India

  34. Global oil markets: Stable on the surface Source: Platts Dated Brent assessments

  35. Petchems don’t always track crude Source: Platts Petchem markets are increasingly driven by supply-demand factors

  36. Conclusion • US petchem industry set to revive on shale gas boom • But US will be short of aromatics, may need to import more • Europe set for consolidation on uncompetitive feedstocks • Middle East diversifying from gas based petchems to liquids, may meet the US shortfall • China growth moderates, but imports to continue despite move towards self-sufficiency • India’s growth story yet to unfurl, but demand set to improve

  37. Thank you! Prema.Viswanathan@Platts.com

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