Wood Mackenzie Downstream Seminar - Moscow, 9th April 2019 - Al-Attiyah Foundation
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Wood Mackenzie Downstream Seminar Moscow, 9th April 2019 Trusted Intelligence woodmac.com
Wood Mackenzie – Moscow Downstream Seminar
Putting together the global downstream puzzle and what it means for Russia
Tuesday 9th April 2019
13:00 – 14:00 Registration and Refreshments
14:00 – 14.10 Welcome Address Elena Borisova
Senior Manager
14:10 – 14:50 Global Oil & Gas Outlook Alan Gelder
VP Refining, Chemicals and Oil Markets
14:50 – 15:30 Global Refining Outlook Alan Gelder
VP Refining, Chemicals and Oil Markets
15:30 – 16:00 Coffee Break
16:00 – 16:45 Global Petrochemical Outlook Patrick Kirby
Principal Analyst, EMEARC Olefins
16:45 – 17:00 Closing Remarks Elena Borisova
Senior Manager
EVENT
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woodmac.com
Global Oil & Gas Outlook
Moscow, 9th April 2019
Trusted Intelligence woodmac.com
4
woodmac.com
Global demand reached 100 million b/d in Q4 2018. Growth in 2018
averaged 1.1 million b/d
Recovery in OECD demand has been a key feature since 2015. OECD growth to soften
by 2020.
Global liquids demand Growth in global oil demand
OECD nonOECD OECD nonOECD global
120 3.0
100
2.0
year-on-year change, million b/d
80
1.0
million b/d
60
0.0
40
-1.0
20
0 -2.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Wood Mackenzie Source: Wood Mackenzie
Source: IEA MODS, EIA, local statistics Forecast: Wood Mackenzie 5
woodmac.com
Global supply growth to slow to 1.1 million b/d in 2019: non-OPEC
growth offset by OPEC declines in Iran and Venezuela
Demand gains for 2019 match those of oil supply making 2019 tighter than expected early this year
and reflecting the impact of geopolitical risk on the supply/demand balance
Global liquids supply Global liquids demand
3.5 106 3.5 China Rest Asia US Europe
Other* Global previous
3.0 104 3.0 * Other includes Middle East,
Africa, Russia/ Caspian, and
Latin America
Year-on-year change (million b/d)
2.5 102 2.5
Global supply (million b/d)
Annual change million b/d
2.0 100 2.0
1.6
1.5 98 1.5
1.1 1.1
1.0 96 1.0
0.5 94 0.5
0.5 2.5 1.1 2.3
0.0 92 0.0
2015 2016 2017 2018 2019 2020
Global supply change Mar-19 Global supply (rhs) -0.5
2015 2016 2017 2018 2019 2020
Source: Wood Mackenzie 6
woodmac.com
Brent forecast to remain broadly stable, with 2020 supported by IMO
Strong global oil demand growth in 2020 adds support to price
Brent price outlook (nominal)
Surge of demand growth in 2020
Strong OPEC+ production adds upward pressure to price.
$90 restraint, and lower supply from
Prices fell as fears ramped up at end 2018
Iran and Venezuela adds price View reflects moderate OPEC+
about weakening global economic growth.
support into Q3 2019 production restraint
$80 Signs of easing in trade tensions between US
and China has helped spark recovery since
early 2019
$70
$60 IMO regulations going into
effect in Jan 2020 boost
refining crude runs sharply
US$ per bbl
$50 for the year
A tight Q3 2019 supply and demand That lifts prices as refiners
$40 balance combined with peak summer seek to meet surge in
demand season in US lifts prices. distillate demand
$30 IMO offsets price impact of
Political risk, in Venezuela especially,
continues to have an upward price potential oversupply in
impact 2020, especially with
$20 political risk continuing
Global demand growth: Global demand growth: Global demand growth: Global demand growth:
$10 1.3 million b/d 1.1 million b/d 1.1 million b/d 1.6 million b/d
$54 $71 $66 $68
$0
Jan-17
Jan-18
Jan-19
Jan-20
Source: Argus, Wood Mackenzie forecast 7
woodmac.com
Longer term, global liquids demand growth rate to slow. Demand to
reach around 110 million b/d in 2040
Excluding biofuels, LPG and ethane, oil demand grows 5 million b/d between now and
2040. Annual growth decelerates steadily through mid-2030s
Global liquids* demand Annual growth in global liquids demand
oil demand LPG
Ethane demand met by biofuels 2,000
Global GDP growth eases from 3.1% in
actual Linear (actual) 2017 to 2.5% by 2021 as China, Europe
120 and US lose momentum. Risk to GDP is
to the downside from US/China trade war
1,500
100 2020 growth includes one-time 100 kbd
increase in total demand caused by
IMO-related shift from marine fuel oil to
1,000 gasoil (when measured in volume terms)
80
000 b/d
million b/d
Oil demand increasingly
displaced by electrified
60 Global liquids demand vehicles and natural gas
grows 11 million b/d to 2040 500 in transport
40
-
20
-500
-
2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: Wood Mackenzie
Source: Wood Mackenzie * liquids includes oil products, NGLs, and biofuels 8
woodmac.com
Growth in gasoline demand loses momentum post-2020 as fuel
efficiency kicks in, followed by rising penetration of EVs
Europe and North America lead the decline in global demand, but growth rate also
slows in Asia
Global demand by main product Global demand by region
Gasoline Diesel/Gasoil Fuel Oil North America Europe Asia Pacific FSU
Jet/Oth Kero Eth/LPG/Nap Other Latin America Mid East Africa
50
35
45 Asian demand growth slows
as China demand peaks;
30 40 India continues to surge
ahead but from low base
35
25
30
million b/d
20
million b/d
25
Europe’s oil demand enters terminal decline by the
15 20 end of this decade, while US demand continues to
grow until the mid 2020s
15
10
10
5
5
0 0
2000 2010 2020 2030 2040 2000 2010 2020 2030 2040
Source: Wood Mackenzie
Source: Wood Mackenzie
Source: IEA Energy Statistics, Local Statistics Forecast: Wood Mackenzie 9
woodmac.com
Global stock of EVs is expected to grow to 290 million passenger
cars by 2040. AEVs reach 3 mil by 2035, 24 mil by 2040.
Europe and the US lead with 60-70% of sales by 2040, while China leads the developing
world at half that level of penetration
EVs as a share of total light vehicle sales Global electric vehicle stock
Europe US China India Global
80% 300 China
EV sales accelerate in Europe and Other Asia
the US post 2035 due to AEVs.
70% AEV share reaches 20% in the US Europe
250
and 17% in Europe by 2040. United States
60% Rest of the world
share of light vehicle sales
200
Million units
50%
40% 150
China EV sales lose momentum
30% as subsidies fade by 2020.
Sales accelerate once 100
technology no longer is a
stumbling block
20%
50
10%
0% 0
2015 2020 2025 2030 2035 2040 2015 2020 2025 2030 2035 2040
Note: ‘Electric vehicles’ include autonomous electric vehicles (AEVs), battery electric vehicles (BEVs), and plug-in hybrid electric vehicles (PHEVs)
Europe defined as OECD Europe plus Albania, Bosnia, Bulgaria, Croatia, Cyprus, Lithuania, Macedonia, Malta, Montenegro, Romania and Serbia
Source: Wood Mackenzie 10woodmac.com
In road transport, electrification and autonomous technology
disrupt oil demand in the long-run
While the shift in car sales to EVs is rapid post-2030, the impact on the car parc is gradual. By 2040,
EVs account for 37% of new car sales and 17% of total cars in operation.
Global passenger car sales by type Global passenger car stock by type
140 2,000
Globally, the share of conventional cars Total EV stock reaches
falls to 50% by 2040. 296 million in 2040.
1,800
120 Post 2035, the rise of AEVs leads to a AEVs reach 4 mil units by 2035 and
decline in global car sales 24 mil units by 2040
1,600
100 1,400
1,200
80
million
million
1,000
60
800
40 600
400
20
200
0 0
2015 2020 2025 2030 2035 2040 2015 2020 2025 2030 2035 2040
Others AEVs EVs/PHEVs HEVs Conventional
Source: Wood Mackenzie
Conventional: Gasoline, Diesel and LPG internal combustion engine vehicles, HEVs: Hybrid Electric Vehicles,
PHEVs: Plug-in Hybrid Electric Vehicles, EVs: Battery Electric Vehicles; AEVs: Autonomous Electric Vehicles 11woodmac.com
Acceleration of EV adoption post-2030 leads to ~5.3 million b/d of oil
demand displaced by 2040
The US, China and Europe, in particular, will see the most oil demand displaced
Global liquids demand displaced by EVs Global liquids demand
6 E-trucks 115
Lost to E-trucks
AEVs
Lost to AEVs
5 ROW
Lost to EVs
China 110
4 Europe Base case
US
Million b/d
Million b/d
3 105
2
100
1
- 95
Source: Wood Mackenzie 12woodmac.com
Non-OPEC countries dominate near term supply increases…
…but OPEC capacity additions strengthen through the mid-to-late 2020s
Year-on-year change in OPEC capacity and non-OPEC production*
3.0 OPEC Capacity
Stronger non-OPEC growth forecast through the near Non-OPEC
term, primarily driven by upgrades to US supply
2.5 OPEC Capacity H1 2018
Non-OPEC H1 2018
2.0
Million b/d change
1.5
1.0 OPEC capacity additions drive increases through mid-
to-late 2020s
OPEC capacity continues to grow through to the end of
the forecast period
0.5
0.0
-0.5
Non-OPEC production turns to decline post-2030
-1.0
Source: Wood Mackenzie *Excludes unconventionals (biofuels, gas-to-liquids and coal-to-liquids) and processing gains 13woodmac.com
US lower 48 crude oil: production coming in higher and faster
The peak occurs in 2025 at 12 million b/d compared to 11.7 million b/d in 2031 in our H1
2018 outlook. This is supported by stronger than expected short-term growth
US Lower 48 crude and condensate production
14 Reserves Growth Bakken Eagle Ford Niobrara
Permian SCOOP-STACK-Cana Other H1 2018
Crude oil and field condensate production (million b/d)
12
10
8
6
4
2
0
Source: Wood Mackenzie 14woodmac.com
The level of supply outages remains highly unpredictable
Iran sanctions and Venezuelan economic and political turmoil help push unplanned supply
losses back to 4 million b/d in 2019
Global unplanned supply outages
5.0 Historical Forecast
Other
4.5
Venezuela
Kuwait
Visible unplanned outages (million b/d)
4.0
Saudi Arabia
3.5 China
Azerbaijan
3.0 Canada Oil Sands
US GoM
2.5
Colombia
UK/Norway
2.0
South Sudan
1.5 Yemen
Iraq
1.0 Syria
Iran
0.5
Libya
Nigeria
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Wood Mackenzie 15woodmac.com
Geopolitical risk remains a critical driver of the supply outlook
Russia: increased brownfield drilling/ continued
Canada: delays in expansion of takeaway development of greenfield projects; despite recent
capacity will hinder investment in oil sands and production increases, an extra ~250 kb/d could be available
conventional heavy crude. through projects like Messoyakhaneftegaz, Severnaya Neft,
Trebs and Titov, or Yurubcheno-Tokhomskoye.
Iraq: upside risk from resumption of Kirkuk volumes in the North, and
strong growth from southern fields, with recent uptick in project FIDs.
Iran: US sanctions have a greater effect on exports
US: alleviation of infrastructure Libya: supply wildcard - upside potential from as waivers expire. Impact on fresh IOC investment
constraints, inventory upgrades, streamlined security improvements and increases in service sector
delays field expansions.
operations, technological innovation and higher oil activity; but threats to infrastructure remain.
prices all provide upside risk.
UAE: new developments and expansions at Upper
Zakum, Satah al-Razboot, Umm al-Lulu and Nasr push
capacity higher, quicker.
Nigeria: as predicted, militant activity has Saudi Arabia/ Kuwait: resumption of Neutral Zone
Venezuela: downside risk if no political been low in the run up to the presidential elections. Stability is production could bring back 0.5 million b/d of
or economic improvement in the early 2020s; production
falls below our base case view of 1 mb/d in 2020 and no
dependant on election results and adopted policy. potential capacity.
medium-term recovery.
Brazil: slower pace of development of pre-salt Santos Basin fields and
higher declines in mature Campos Basin limits production growth.
Global upside: resilience of mature producers (such as China, Mexico, North
Global downside: rising geopolitical tensions pose significant risk to
Sea, Egypt) to period of weaker prices lifts near-term supply above expectations.
the supply outlook beyond the visible horizon.
Source: Wood Mackenzie 16woodmac.com
The oil ‘supply gap’ to 2030 will be met by US crude, OPEC capacity
growth and more expensive conventional production
Over 25 million b/d liquids supply must be met by new drilling by 2030
The 2030 supply gap Filling the ‘supply gap’ to 2030
110
30
The 2030 supply gap
10m
25
100
26m 20
Million b/d
90 15
21m
OPEC Capacity Growth
10
Non-OPEC Other Sources
80 4m
Conventional Pre-FID
5 US Lower 48 Future Drilling
Supply Gap
70 0
2018 Demand Non-OPEC Non-OPEC, Supply gap $90
Demand growth by decline, projects
2030 onstream under dev
fields -5
Source: Wood Mackenzie 17
Non-OPEC other sources includes reserves growth, contingent resources, yet-to-find and unconventionals (biofuels, CTL and GTL)woodmac.com
Fundamentals downward price pressure in the short-term gives way
to higher price pressure as supply-demand balance tightens
Oil demand peaks in the late-2030s but total liquids capacity plateaus from the early
2030s
Global liquids capacity plateaus from 2030. About 6 years later global oil demand
Brent price outlook (real) peaks, implying a tightening supply/ demand balance through the mid-2030s.
Improved fuel efficiency curbs growth in oil demand, while EVs and natural gas
Prices fall through 2020 as supply growth, driven by the US, outpaces
penetration into bunkering and trucking cause oil demand destruction of almost 8
$140 demand growth. Since H1 2018 we have revised US supply growth higher,
million b/d by 2040. The full impact of this is partially offset by growing petchem
and global demand growth lower to 2020. But OPEC and Russia will step in
feedstock demand, softening the pace of global oil demand decline after the peak.
and restrain production to keep prices above $70/ bbl.
$120 Prices come under downward pressure as conventional
US$ per bbl, constant 2018 prices
production sanctioned during the run up in prices to
2023 enters the market. OPEC spare capacity also
increases, with growth in Iraq, the UAE and Kuwait.
Meanwhile, oil demand growth decelerates markedly as $100
$100 the impact of fuel efficiency mandates take effect.
$80
$80 $74 $76
While prices come off
around the peak in oil
Prices rise as higher cost supply is required to meet
demand, industry reduces
continued growth in demand and replace significant
$60 conventional and increasingly unconventional declines.
its exposure to long-lead
projects in advance of the
peak in oil demand, and
US onshore producers move to marginal acreage and
global supply growth is
work hard to maintain production as core tight oil
$40 slowing. Together this
inventory is drilled out.
prevents a crash in prices.
Brent prices reach $80/ bbl in 2023 as: For conventional non-OPEC supply, attention is
(i) onshore US breakevens increase due to service cost inflation and stalling switching to reserves growth and yet-to-find, as
$20 well productivity growth as drilling moves away from the core of the core; pipeline of new field developments diminishes. OPEC
(ii) Iranian sanctions remain in place; and spare capacity begins to drop off post-2030.
(iii) more expensive conventional production is required to fill the supply gap,
exacerbated by rising declines from US tight oil wells
$0
2010 2015 2020 2025 2030 2035 2040
H1 2018 H2 2018
Source: Wood Mackenzie 18woodmac.com
Asian LNG demand growth will start to slow next decade and pace
of future growth is uncertain
Asian LNG demand growth to 2030 • Increased domestic production
and pipe import competition in
China
400
• Coal and nuclear competition in
350
South Korea and Japan
300
• Renewable developments
250
• Economic slowdown
mmtpa
CAGR 0%
200
150
100
• Increased concern about
50 pollution and backlash against
coal
0
• Infrastructure and demand
creation in emerging markets
Japan Other Asia South Korea
• LNG prices remain competitive
Taiwan India Sub Cont South East Asia against oil
China
Source: Wood Mackenzie 19woodmac.com
…however resilient demand and declining indigenous production
are making Europe increasingly import dependent
Europe will require 70 bcm of additional imports by 2025
European Supply-Demand Gap Europe Import Dependency from Russia or LNG
350 70
600
bcm
300
500
Import Dependency
from Russia or LNG
60
Russia and LNG
supplies required to bcm
bcm (@40 MJ/m³)
bcm (@40 MJ/m³)
400 meet growing gap 250
300 200
200 150
100
100
-
50
Europe North Africa Southern Corridor -
Russia LNG Demand
Source: Wood Mackenzie European Energy Service 20woodmac.com
Europe will be a “sink” for the global LNG market in the short-term but
it will need to compete post-2020 as the global market tightens
We now see market tightening in 2023, a year earlier than our previous update
Russia pipe and LNG imports into Europe TTF price
250 10.00
Pipe/LNG Europe in need of
Softening of Prices trade in
competiti 200 bcm of Russian 9.00 prices excess of oil
on gas despite LNG
towards indexed
imports >100bcm 8.00
US$/mmBtu, Real (2018)
US$5/mmbtu contracts
200
7.00
bcm(@40MJ/M3)
6.00
150 -20 bcm +30 bcm 5.00
4.00
3.00
100
2.00
+40 bcm
1.00
50 0.00
2015 2016 2017 2018 2019 2020 2021 2022 2023
2015 2016 2017 2018 2019 2020 2021 2022 2023
Russia Pipe LNG Europe Indigenous supply TTF Europe Proxy Oil Indexed Contract
Source: Argus Media, NYMEX, Wood Mackenzie
Source: Wood Mackenzie 21woodmac.com
2019 is set to be a record year for new LNG project sanctions….
FID taken in 2019 Expected FID in 2019 Wildcard FID in 2019 Targeted FID in 2020
WM
Golden Pass: Arctic LNG-2: Busy signing Forecast
Announced FID on 05- Woodfibre LNG: engineering contracts early in
70
Feb on 16.0 mmtpa, Has HoAs for most of the capacity ; 2019. Significant global interest
Capacity Sanctioned (mmtpa)
$10 billion project. needs to finalise EPC costs and with more partner announcements
SPAs expected soon 60
Partners expect start up
in 2024
50
40
Tortue Phase 2 & 3:
Partners pushing to take 30
FID on additional
phase(s) in 2020,
supported by cost 20
Calcasieu Pass:
Venture Global has efficiencies from Phase
line of sight on FID in 1 10
2019 after successful
marketing campaign in 0
2018 and obtaining
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
FERC approval.
Financing the final NLNG 7: Partners
hurdle pushing for FID
but financing, Rest of World Qatar Australia
marketing and
country elections Qatar Megatrains: Partner USA West Canada Mozambique
could hamper announcements expected Russia
progress mid 2019 with FID
planned for late
Sabine Pass T6: Cheniere 2019/early 2020
state FID is imminent on
PNG LNG Train 3 /
sixth train (4.5 mmtpa)
Papua LNG: Partners in
both projects signed MOU
with government at end of
2018 defining key terms of
Gas Agreement. Working
on Gas Agreement,
Other North America: engineering and offtake
Many projects moving agreements in 2019
through legislative, Mozambique LNG
(Area 1): Signed Pluto Expansion:
environmental, marketing and Rovuma LNG (Area 4): Woodside selected Bechtel as
financing milestones. numerous SPAs at
Partners announced offtake agreements end EPC contractor. FID target of
Driftwood, Costa Azul and the start of 2019
of 2018. Targeting FID mid 2019 but H1 2020, but looking to farm
Freeport Train 4 all targeting sufficient to secure
requires progress on government approval down in upstream asset
FID before end of 2019. financing. FID target
and clarity on financing to make FID this (Scarborough)
is H1 2019.
year
22woodmac.com
woodmac.com
Crude Trade
Oil Supply Tool Macro Oils Product Market
Service Global oil supply
forecast by grade
Benchmark crude
price forecast
Service/Refinery
Evaluation Model
offers a
Refinery investments
and crude runs,
Crude price
historical crude slate
holistic view
of global
crude trade Crude supply Crude demand
Crude Trade Service
Crude trade flows
and crude price
differentials by
quality 6
23woodmac.com
woodmac.com
Why will global crude trade see significant changes?
Although, growth in US light crude exports is the single biggest reason, there are several other
important reasons that will change global crude trade flows
North America Europe Russia
• Rising US crude exports: where will it • Lower European crude runs, increased • Lower Urals, higher ESPO supply: how
go and why? US light crude imports: how will will Russia balance between Europe
• Canadian oil sands exports to Asia: European crude market balance? and Asia crude exports?
when and how much?
• Sharp declines in Mexico’s production:
what is the impact on exports?
Latin America Middle East/Africa Asia Pacific
• Sharp declines in Latin America heavy • Large grassroots condensate splitters • Rising crude demand, declining
crude production: what does it mean and refineries coming online: what is domestic production: how will Asia
for US and Asian heavy crude refiners? the impact on exports? meet its crude import demand?
• Heavy crude supply growth in Iran • Will Asia meet its heavy crude
and Iraq: will it be enough to offset requirements?
declines elsewhere?
• What is the impact of US sanctions on
Iran crude exports?
24
24Medium crude trade changes due to competition from US grades
woodmac.com
US and Europe cut back Africa and Middle East imports. Asia pulls in these barrels to
meet rising crude demand
Key changes to medium crude trade (2025 minus 2017), kb/d
Russia cuts back Urals
exports to Europe due to
Europe cuts Africa and the declining production. ESPO
Middle East imports with exports to China rises with
rising US light crude amid expanded pipelines
falling crude runs
Russia and
Caspian -750
Europe
US cuts back US
Middle
medium crude
+80 East
imports from the Asia
Middle East and
Africa with rising Asia pulls in large volumes
domestic crude -2110 of Africa and Brazil crudes
processing Africa to meet its rising import
Latin demand
America -95
Trade increase
Trade decrease +1100
Exports Exports
increase, decrease,
500 kb/d 500 kb/d
Exports = domestic supply – domestic demand
25
Source: Wood Mackenziewoodmac.com
woodmac.com
Crude Trade Service deliverables
Excel data and PowerPoint updated
Data tables
six-monthly
Global crude supply (2016 to 2025 – annual)
Trade flows
• By country/region matrices
• By quality (Condensates/Light/Medium/Heavy)
Crude oil demand for refining
(2016 to 2025 – annual)
• Refinery investments
• Crude capacity
• Crude intake by region/country
• Crude intake by quality
• Crude imports/exports/domestic
Trade flows matrices (2016 to 2025 – annual)
• Condensates/Light/Medium/Heavy PowerPoint
slides
Crude price forecasts for 90+ benchmark and key
crude grades
PowerPoint slides to explain the key messages
2626woodmac.com
Global Refining Outlook
Moscow, 9th April 2019
Trusted Intelligence woodmac.com
27woodmac.com
Refinery capacity additions accelerate in 2019 and 2020, with 2020
capacity additions outpacing oil demand growth
Spare capacity increases in 2020 but IMO distillate demand growth limits the downside for
utilisation
Global CDU capacity changes Refining capacity and products demand
Major refined products demand
Capacity and demand (million b/d)
2.5 108 95
Annual CDU change (million b/d)
Asia Middle East
2.0 Russia & Caspian Europe 103 90
Africa North America
Latin America
1.5 98 85
1.0 93 80
0.5 88 75
0.0 83 70
Jan-18 Sep-18 May-19 Jan-20 Sep-20
-0.5 CDU capacity LHS
2016 2017 2018 2019 2020 Total demand LHS
Naphtha thru fuel oil demand RHS
Source: Wood Mackenzie 28woodmac.com
IMO is getting closer - there are now over 2,000 confirmed orders for
scrubbers as the uptake from shippers starts to accelerate
The volume of scrubbed HSFO is expected to grow steadily after 2020, rising to
around 1.3 million b/d by 2025
Outlook for scrubber installations Scrubbed HSFO outlook by vessel type
30% 7,000
1.4 Containers
Number of vessels
Crude tankers
6,000
25% % of marine fuels 1.2 Cruise and passenger ferries
Dry bulk vessels
Number of vessels
5,000
% of marine fuels
20% 1.0
Product tankers
million b/d
4,000
0.8
15%
3,000 0.6
10%
2,000 0.4
5%
1,000 0.2
0% 0 0.0 2020
2021
2022
2023
2024
2025
2019
2020
2021
2022
2023
2024
2025
Source: Wood Mackenzie Product Markets Service 29woodmac.com
Improving crude and stream segregation at refineries, combined
with VGO blending, should support increasing VLSFO production
VLSFO supply reaches 1.7 million b/d by 2024
Global VLSFO supply forecast, kb/d Global VLSFO supply forecast by region, kb/d
VGO diversion Asia Pacific Greater Europe
Latin America Middle East
Low sulphur resid components - existing and from North America Russia & Caspian
2,000 investment Sub-Saharan Africa
2,000
1,800 1,800
1,600 1,600
1,400 1,400
1,200 1,200
1,000 1,000
800 800
600 600
400 400
200 200
0 -
2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025
Source: Wood Mackenzie 30woodmac.com
VLSFO component availability varies by region
This may present shippers with fuel compatibility challenges when refuelling in different
regions
Regional VLSFO component “blends”*
Vac Resid - Cracked Vac Resid - Straight Run Slurry Oil Hydrocracker Bottoms Atmospheric Resid
Light Cycle Oil Vacuum Gasoil Distillates Potential Supply, kb/d
100% 500
90% 450
potential supply, kb/d
80% 400
70% 350
component %
60% 300
50% 250
40% 200
30% 150
20% 100
10% 50
0% -
North America Latin America North West Med Europe Russia & Sub-Saharan Middle East India North Asia SE Asia
Europe Caspian Africa
Source: Wood Mackenzie Refinery Evaluation Model/PetroPlan
*availability of components from refineries deemed likely to supply to the marine fuels market. Based on 2017 output 31woodmac.com
Refiners cannot make enough VLSFO to meet demand so gasoil
will have to make up the gap of low S fuels
There are some concerns about quality but we assume most shippers will buy the
cheapest compliant fuel while refiners will look to get best value for their residues
Global marine bunker demand by fuel Nearly 2.1 million b/d of HSFO is
displaced by low sulphur fuels in 2020
4.0 2019 2020
MGO sales rise by nearly 1.1 million b/d
3.5 in 2020
3.0 VLSFO displaces the remaining LSFO
market by 2020, as well as a sizable
Million b/d
2.5 amount of HSFO, amounting to total sales
of ~1.4 million b/d in 2020
2.0
LNG use rises by over 70% between
1.5 2019 and 2020, but this only displaces a
further 40 kb/d of marine fuels, as LNG
1.0
bunker infrastructure is still in its infancy
0.5
0.0
HSFO LSFO VLSFO Distillate LNG*
Source: Wood Mackenzie 32woodmac.com
There is spare capacity in upgrading units to process additional
volumes of feedstock
And refiners are investing in more resid upgrading capacity
Global resid upgrading unit capacity and Global supply of vac res from crude production
average utilisation, 2017 versus capacity to upgrade it
9.0 82% 1.6
8.0 1.4
80%
7.0 1.2
million b/d
78%
million b/d
6.0
1.0
5.0 76%
0.8
4.0 74%
0.6
3.0
72%
0.4
2.0
70% 0.2
1.0
0.0 68% 0.0
Coker RHT/RFCC RHCU SDA VSB 2019 2020 2021 2022 2023 2024 2025
Cumulative vac res supply potential
Capacity Average Utilisation Cumulative upgrading capacity (COK + 50% RCC)
* in refineries with CDU capacity above 50 kb/d
Source: Wood Mackenzie 33woodmac.com
Gasoline cracks remain under pressure in 2019 but there is a new
floor in 2020
Gasoil cracks to get a boost in Q4 2019 and average $20/bbl in 2020
NWE gasoline crack vs Brent NWE gasoil 0.1%S crack vs Brent
25 25
20 20
15 15
$/bbl
$/bbl
10 10
5 5
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
5-yr range 2018 5-yr range 2018
2019 2020 5-yr avg 2019 2020 5-yr avg
Source: History Argus, Forecast Wood Mackenzie 34woodmac.com
HSFO has to lose its recent strength as demand collapses
VLSFO price is midway between diesel and LSFO and so could price higher than shown
NWE HSFO 3.5%S crack vs Brent NWE VLSFO 0.5%S crack vs Brent
0 12
10
-5
8
-10
6
$/bbl
$/bbl
-15 4
2
-20
0
-25
-2
-30 -4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
5-yr range 2018 5-yr range 2018
2019 2020 5-yr avg 2019 2020 5-yr avg
Source: History Argus, Forecast Wood Mackenzie 35woodmac.com
Increased use of distillate bunker fuel will support gasoil crack
spreads over the medium term
Product crack spread profile, 2001-2025 Refineries will have to increase crude throughputs in
order to produce sufficient distillate fuel for the bunker
sector
Gasoline 95R Gasoil
40 0.5%S VLSFO 3.5 wt%S HSFO There is limited flexibility for refiners to shift yields
between products meaning that there will be excess
30 production of other products
Crack spread vs Brent $/bbl
Gasoline crack spreads are expected to weaken in
20
2020 as production increases beyond demand.
10 The reduction in demand for HSFO means that it will
need to price lower relative to crude to encourage
0 increased upgrading and to compete in other markets
As HSFO cracks get much weaker in 2020, gasoil
-10 cracks have to strengthen in order to provide a strong
enough margin for refiners to increase runs and meet
-20 the extra demand for gasoil
VLSFO pricing methodology is assessed as the floor
-30
price to make the assumed VLSFO volumes available.
-40 LSFO crack spreads are likely to get some support
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
from demand for blending into VLSFO
Source: Product Markets Service 36woodmac.com
The biggest windfall in 2020 is for deep conversion refineries with a
distillate orientation
Gross refinery margins for selected reference Stronger crack spreads for middle distillates and
assets weaker HSFO cracks will result in a steep increase in
USGC Maya Coking margins for complex refiners
Singapore Dubai Hydrocracking/coking Coking refineries will see the biggest advantage as
NWE Brent Cracking they will be able to process widely discounted crudes
25
Gross refining margin $/bbl
while not producing loss-making fuel oil
Refineries based on the US Gulf Coast are particularly
20 advantaged, due to their residue import capabilities
There is an incentive for refiners with high
naphtha/gasoline/fuel oil yields to maximise the switch
15
to distillates
The impact is much more muted for more simple FCC
10 refineries focused on producing gasoline, and a
sizeable proportion of fuel oil
The overall increase in margins in 2020 should be
5
sufficient to incentivise refiners to increase crude
throughputs enough to meet the extra distillate
demand
0
2020
2015
2016
2017
2018
2019
2021
2022
2023
2024
2025
Source: Wood Mackenzie Product Markets Service 37woodmac.com
Heavier sour crudes will fall in value relative to lighter sweeter
crudes and the relative value of very sweet crudes will rise
Crude differentials to Brent, 2015-2025
Crack spreads for middle distillates are expected to
Urals NWE Bonny Light strengthen while high sulphur fuel oil cracks are
forecast to weaken
4
As a result, refiners will make more profit from crudes
Price differential to Dated Brent $/bbl .
3 with high middle distillate yields and the value of these
2 crudes is expected to strengthen relative to crudes
with a high gasoline yield
1
0
A weaker HSFO crack would result in heavier sour
crudes becoming less attractive to refiners and falling
-1 in value relative to light sweet crudes
-2
Less complex refiners, in particular, will seek out light
-3 sweet crudes in order to reduce their HSFO yields and
-4 maximise middle distillate output
-5 More complex refiners, with coking and hydrocracking
facilities, will enjoy wide discounts for their target
-6
crudes
-7
Medium/heavy sweet crudes could be in strong
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
demand to produce VLSFO
Source: Wood Mackenzie Product Markets Service 38woodmac.com
China, the Middle East and other developing Asia to build more than
70% of the new grassroots capacity additions by 2025
Kuwait: China:
Al-Zour,
615kbd, 2020 Hengli refinery,
400kbd, 2020
Zhoushan
Nigeria: (Zhejiang)
Dangote refinery, 400kbd,
refinery, 2020
Global net CDU additions (kbd) 650kbd, 2022
Caojing refinery,
300kbd, 2023
Rest of the Zhanjiang
World 2019 2020 refinery, 200kbd,
2021 2022 2020
2023 2024
Middle East Saudi Arabia: Iran:
2025 Jazan, 400 kbd, Persian Gulf, Vietnam:
2019 360kbd, 2017- Nghi Son
Asia Pacific
2019 refinery,
200kbd, 2018
Oman:
World Duqm refinery, Malaysia:
230 kbd, 2023 RAPID project,
300kbd, 2019
0 5000 10000
Source: Wood Mackenzie – Product Markets Long Term Outlook 39woodmac.com
Global refining capacity additions start to outpace global demand
growth
Average global utilisation is forecast to fall
Global refining capacity versus demand
Capacity & non-refinery supply Demand Average utilisation (right-hand axis)
3.5 83%
Forecast
3.0 82%
2.5 81%
2.0 80%
1.5 79%
million b/d
1.0 78%
0.5 77%
0.0 76%
-0.5 75%
-1.0 74%
-1.5 73%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Wood Mackenzie 40woodmac.com
Refining margins are forecast to fall from 2020, particularly in
Europe
Margins return to closure threat levels by 2024
NWE reference gross refining margins (US$/bbl)
$/bbl
14
12
10
8
6
4
2
0
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
NWE Brent Cracking $/bbl (Real) NWE Urals Cracking $/bbl (Real) NWE Urals Hydrocracking $/bbl (Real)
Source: Wood Mackenzie
41woodmac.com
Crude-to-chemicals projects in China are gaining momentum, as a
means to add value to light distillate streams
China’s new “crude to chemicals” projects are delivering materially higher
petrochemicals integration – at ~40 – 50wt% yield
Panjin (300, NORINCO, unclear)
LIAONING
Yingkou (70, CNOOC, 2019)
Caofeidian (300, Risun, unclear) Dalian (400, Hengli, 2020)
HEBEI Huabei (100, Sinopec, 2018)
SHANDONG Dongying (70, CNOOC, 2019)
Senchi (100, Zibo Senchi, 2019)
HENAN
"Firm" crude-to-chemicals Luoyang (200, Sinopec, 2020) Lianyungang (320, Shenghong, unclear)
Mb/d
Proposed crude-to-chemicals
Jingmen (80, Sinopec, 2020)
2.5 "Firm" grassroots refineries HUBEI Caojing (300, Sinopec, 2022)
"Firm" Expansions ZHEJIANG Zhejiang (400, Rong Sheng, 2020)
2.0 Zhejiang - 2 (400, Rong Sheng, unclear)
1.5
GUANGDONG Quanzhou (60, Sinochem, 2019)
1.0 Zhanjiang (200, Sinopec/KPI/Total, 2020)
Zhuhai Baota (100, Ningxia Baota, 2021)
HAINAN
0.5 Hainan (100, Sinopec, 2022)
0.0
“Firm” mega grassroots crude-to-chemicals
-0.5 sites
2018 2019 2020 2021 2022 2023 2024+ Proposed grassroots crude-to-chemicals sites
“Firm” grassroots refineries
“Firm” Expansions
42
Source: Wood Mackenzie Product Markets Service Numbers in the brackets represents CDU capacity in kb/dwoodmac.com
Value-add from petrochemical integration can be significant
China’s new “crude to chemicals” projects are delivering materially higher
petrochemicals integration and value addition
Hengli margins and value build-up (2020), Hengli integrated site net margins, US$/bbl
US$ for every barrel of crude
Hengli margins design crudes
Chemicals uplift
100 Refinery Hengli margins non design crudes
25
12.7
80
8.1
55.6 20
60 40.4 40.4
92.4
40 77.2 15
58.2
20 36.8 36.8
10
0
Chemical margin
Site crude cost
Refinery margin
OPEX
Fuels value split
Fuels+Chemicals
Fuels revenue
Incremental OPEX
Site product revenue
Fuels to chemicals
Design feed Non design feed*
5 API ~27.8 API ~31.5
revenue
S = 2.8 wt% S = 1 wt%
0
2016 2017 2018 2019 2020 2021 2022 2023
Crude-to-chemicals
• Margin loss because of sub-optimal feed varies from
• Location will be a key driver in overall project economics $2/bbl to $4/bbl, based on market environment
• Relative fuels/chemicals pricing, utility fuel costs, relative
crude freight, will all impact relative project economics in
various locations of these mega projects
* Non design feed assumed at similar levels to average
Source: Wood Mackenzie Product Markets Service, PetroPlan 43
Sinopec/Petrochinawoodmac.com
Weaker refiners will struggle to compete when over-capacity returns to
the sector, as first quartile sites achieve high utilisation
A key challenge is that slowing global demand growth reduces the capability to absorb
world-scale refineries, which are getting larger and more competitive
2017 Regional Net Cash Margin profile for North America, Asia, Russia, Middle East and Europe
30
Crude to chemical projects are large
25 and will occupy a first quartile
position
20
NCM 2017, US$/bbl
15
10
5
0
-5
-10
North America Latin America Europe FSU Africa Middle East Asia Pacific
Source: Wood Mackenzie
Source: Wood Mackenzie Refinery Evaluation Model
44woodmac.com
Longer-term gasoline demand trends will challenge refiners in the
US and Europe
Gasoline & naphtha
Cumulative change in regional demand Middle distillates
0.0 2.5
-0.5 2.0
-1.0 1.5
-1.5 1.0
-2.0 0.5
-2.5 0.0
2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034
2.5
West of Suez 2.5 East of Suez
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.0 0.5
-0.5 0.0
2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034
45woodmac.com/chemical
woodmac.com
s
OPEC+ has a supply dilemma for at least the next 2 years
Longer term, OPEC’s role grows in the medium term as US tight
oil growth slows
The Energy Transition slows demand growth, but the Upstream
sector is less impacted than refining
IMO remains uncertain, but it supports refining margins in 2020
Over-capacity is returning to the refining sector, so lowering
utilisation and margins. Threat of closure returns to Europe
Exports of crude and products to Europe will become more
challenging
Refinery/petrochemical integration is a key theme to develop
structurally sustainable refining assets
Alan Gelder
VP Refining, Chemicals and Oil Markets
Refining Global Content Lead
46woodmac.com
Global Petrochemicals Outlook
Moscow, 9th April 2019
Trusted Intelligence woodmac.com
47The petrochemical industryacross the entire energy to
woodmac.com/chemicals
woodmac.com
petrochemical value chain
Coal Syngas Ethylene Ethylene Ethylene EODs Recyclate
Oxide Glycol
Coal
Gasification Propylene Phthalic Plasticizer
Butanol O-xylene
Anhydride Alcohols
Ethane
Steam
Cracker Butadiene Polyethylene PVC All Films
Propane
Natural Polypropylene HMD All Fibres
Gas
Butane
Gas Derivative
Processing & Benzene Styrene Adiponitrile Polyamide
Conversion
Fractionation
Condensate
Cumene PBT PET
Toluene Caprolactam
Phenol
Reformer &
LPG Aromatics Xylene m-Xylene Paraxylene PTA Polyester
Extraction
Crude Oil
Naphtha
Oil Refinery
48
48woodmac.com
Agenda
1 Global petrochemical trends
What is driving the focus on chemicals?
2 Ethylene market outlook
Latest forecast for the biggest petrochemical market
3 Ethylene economics
What is next for costs and margins
49woodmac.com
Global petrochemicals
50woodmac.com
Megatrend 1 – small part of the barrel, but increasing focus
Liquid hydrocarbon use
Hydrocarbon liquids used in chemical production 2019 Global oil demand by key segments
Million tons
per year
Others
500 LPG Naphtha 13%
Distillates Others/NGL
400 Industry
13%
Estimated 4.2
300 billion tons Transport
RCA 55%
10%
200
chemicals
9%
100
0
2005 2010 2013 2015 2020
51woodmac.com
Megatrend 2 – emerging and growing plastics concern
Although chemicals are integral to every day life
Polyethylene Polystyrene / ABS
PVC PET / Polyester
Polypropylene Methyl Methacrylate
Synthetic Rubber Fertilizer
52woodmac.com
Global commodities outlook – focus on ethylene
The growth of ethylene is expected to continue to be significant through the long-term forecast
Global commodities outlook – demand growth relative to 2005 base
2.5
2.2
1.9
1.6
1.3
1.0
2005 2010 2015 2020 2025 2030 2035
Oil Steel Ethylene GDP
Source: Wood Mackenzie
53woodmac.com
Global base chemical demand outlook
Global market for base chemicals is expected to grow by over 50% through to 2035
Global base chemical demand outlook
Million tons
600
500
400
300
200
100
-
2008 2011 2014 2017 2020 2023 2026 2029 2032 2035
Paraxylene Benzene Butadiene Propylene Ethylene
Source: Wood Mackenzie Chemicals
54woodmac.com
Ethylene market outlook
55woodmac.com
Global ethylene demand by major derivative
Polyethylene is the engine of long-term ethylene volume growth. Growth is present across all
derivative chains, with ethylene oxide showing strong growth driven by MEG/polyester chain.
Global ethylene demand by major derivative
Million Tons
300
250
200
150
100
50
0
2005 2010 2015 2020 2025 2030 2035
Polyethylene Ethylene Dichloride Ethylene Oxide Styrene All Others
Source: Wood Mackenzie Chemicals
56woodmac.com
Global ethylene supply by feedstock
Naphtha and ethane remain the workhorses of long-term ethylene supply. Ethane overtook naphtha in
2018 and maintains a higher share through the forecast period.
Global ethylene supply by feedstock
Million Tons
300
250
200
150
100
50
0
2005 2010 2015 2020 2025 2030 2035
Refinery Ethylene Ethane Propane Butane
Light Naphtha Full Range Naphtha Gas Oil Condensate
Hydrowax Coal Methanol Renewables
Source: Wood Mackenzie Chemicals
57woodmac.com Ethylene “gold rush” underway – strong profitability attracted many Ethylene investments planned from upstream through refiners to pure chemical players Source: Wood Mackenzie 58
woodmac.com
Global ethylene capacity developments
The world needs to continue to invest in ethylene capacity in order to meet future demand. The
rate of capacity additions relative to demand is key to setting industry cycle and profitability.
Global ethylene capacity developments
Million Tons
300
250
200
150
100
50
0
2005 2010 2015 2020 2025
Existing Capacity Firm Projects Likely Projects Hypothetical Projects
Source: Wood Mackenzie Chemicals
59woodmac.com
Global ethylene capacity additions by major region
Global ethylene capacity additions surge by 50% in 2020-2025 outlook. China and the Middle East
drive forward largest regional growth. North America sustained but lower than 2015 – 2020 period.
Global ethylene capacity additions by Global ethylene capacity additions by
major region (2015 – 2020) major region (2020 – 2025)
Million tons Million tons
55 55 51
45 45
34
35 35
25 25 21
15 13 15
9 10 8 8
6
5 3 3 3
-1 5 1
-5 -5
China
North America
Rest of world
Europe
Global
Middle East
Asia ex-China
China
North America
Middle East
Rest of world
Global
Europe
Asia ex-China
Source: Wood Mackenzie Chemicals
Source: Wood Mackenzie Chemicals
60woodmac.com
Global ethylene capacity additions by major region
Asia accounts for over 50% of ethylene project capacity in the forecast, with China over 40% alone.
Supply driven investments in North America and the Middle East account for most other projects.
Global ethylene capacity additions versus global ethylene demand by year
Million tons
16
14
12
10
8
6
4
2
0
-2
2010 2013 2016 2019 2022 2025
Rest of world Europe Middle East North America
Asia ex-China China Global demand
Source: Wood Mackenzie Chemicals
61woodmac.com
Global ethylene supply/demand balance
Global ethylene industry is entering a supply driven downturn, driven by good margins and an
increasing trend of oil/refining players further focussing on petrochemicals.
Global ethylene supply/demand balance
Million Tons Nameplate Op. Rate
300 94%
92%
250
90%
200
88%
150 86%
84%
100
82%
50
80%
0 78%
2005 2010 2015 2020 2025 2030
Capacity Production Op Rate
Source: Wood Mackenzie Chemicals
62woodmac.com
Global / regional ethylene operating rates
Global operating rates to pass below 85% in 2023 – 2025 period driven by large and sustained
ethylene capacity additions in this period following a prior easing in the global ethylene balance.
Global / regional ethylene operating rates
Nameplate Op. Rate
100%
95%
90%
85%
80%
75%
70%
2005 2010 2015 2020 2025
Global op rate Europe op rate Asia op rate US op rate
Source: Wood Mackenzie Chemicals
63woodmac.com
Ethylene economics
64woodmac.com
Chemical Feedstocks – NGLs
Integrated flow into a steam cracker for ethylene production
Ethylene
Ethane
Propylene
Steam
NGLs Fractionation Propane
Cracker
C4s
Butane
Pygas
Naphtha
Benzene
Reformer
Condensates &
Oil Refinery Reformate Toluene
Crude Oil Aromatic
Extraction
Xylenes
65woodmac.com
Oil and ethane price outlook comparison
Oil price rises more quickly than US ethane price, widening gas-based advantage for North America.
United States ethane price (Mont Belvieu)
Brent crude oil price outlook ($US/bbl)
and Henry Hub Gas Price
$/bbl $ per ton
120 700
100 600
80 500
400
60
300
40
200
20
100
- 0
2005 2010 2015 2020 2025 2005 2010 2015 2020 2025
United States Ethane (Mont Belvieu)
Brent Crude Oil Price (Nominal $/bbl) Henry Hub Gas Price
Source: Wood Mackenzie Source: Wood Mackenzie
66woodmac.com
Global ethylene cost curve (2018 / 2023)
Ethylene production cost curve widens with new supply and overall cost structure (shape) is set to
steepen with increasing crude oil price (2018 = $71/bbl, 2023 = $89/bbl).
2018 Global Ethylene Cost Curve 2023 Global Ethylene Cost Curve
$/ton, Global Ethylene Cash Cost $/ton, Global Ethylene Cash Cost
1,800 1,800
1,600 1,600
1,400 1,400
1,200 1,200
1,000 1,000
800 800
600 600
400 400
200 200
0 0
0 40,000 80,000 120,000 160,000 200,000 0 40,000 80,000 120,000 160,000 200,000
Thousand Tons, 2018 Ethylene Production Thousand Tons, 2023 Ethylene Production
Source: Wood Mackenzie Chemicals Ethylene Asset Cost Tool (December 2018). Values in Nominal Dollars. 67woodmac.com
Ethylene pricing outlook
Weakness in United States ethylene prices expected for several years, as regional overcapacity situation
persists. Global ethylene prices in long-term forecast to be set by Asian polyethylene economics.
Ethylene market prices by region
Nominal dollars per ton
1,600
1,400
1,200
1,000
800
600
400
200
0
2005 2010 2015 2020 2025
US Gulf Coast - Ethylene Contract Transaction Price, Delivered
West Europe - Ethylene Discounted Contract Price, Delivered
China - Ethylene Spot Price, CFR
Source: Argus Media, PetroChem Wire, Wood Mackenzie Chemicals
68woodmac.com
Ethylene production margins and return on investment
Ethylene margins in Asia Pacific and Europe perform better than United States through to 2021. From
this point, the United States advantage is set to be restored as ethylene prices in the United States
move higher, alongside crude oil prices rising faster than ethane prices.
Integrated Ethylene-HDPE Return on
Ethylene Production Margins, by Region
Investment, by Region
Nominal dollars per ton %
1,000 60
50
800
40
600
30
400
20
200 10
0
0
2005 2010 2015 2020 2025
-10
West Europe - Region 'Leader Plant, Naphtha Feed' 2005 2010 2015 2020 2025
Margin
United States Gulf Coast - US 'World Scale Plant, West Europe, Naphtha to HDPE
Ethane Feed' Margin US Gulf Coast, Ethane to HDPE
China - 'World Scale Plant Size, Naphtha Feed' Margin China, Naphtha to HDPE
Source: Wood Mackenzie Chemicals
Source: Wood Mackenzie Chemicals
69woodmac.com
ZapSibNeftekhim (SIBUR) due online this year – what is potentially
next for ethylene investments?
Methanol-to-
olefins cluster.
Feasibility
studies in
Uzbekistan and
Kazakhstan
Source: Wood Mackenzie Ethylene Global Supply/Demand Analytics Service 70woodmac.com/chemical
woodmac.com
s
Petrochemical industry is gaining increased focus as a long-
term oil demand driver.
The overall industry is moving from top-of-cycle profitability to a
period of lower utilisation and margins – predominantly driven
by large investments exceeding near-term demand.
Ethylene is the biggest petrochemical by volume and value and
is driven by scale and costs. Strong underlying demand still
remains for major ethylene derivatives like polyethylene.
Increasing oil price coupled with lower global utilisation will
change global cost and margin structure. Large pressure will be
felt in some regions towards the middle of next decade.
The Global ethylene industry presents huge opportunities for
Russia. 4-5 world-scale ethylene plants needed on average to
keep pace with long-term demand growth.
Monetisation of both gas-based and refinery-based streams are
a possibility. Advantaged feedstock positon allows Russia to
compete on global stage in terms of product exports.
71woodmac.com/chemicals
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Chemicals, Polymers & Fibres Solutions
Short-term Long-term
Market Market Asset
Services Services Services
• Monthly/Weekly Reports • Semi-Annual Reports • Semi-Annual Reports
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• Regular Insights • Regular Insights • Regular Insights
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• Training & Workshops
72
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Ethylene
Gain essential insight into supply/demand,
capacity developments and price forecasts to
understand today’s markets and tomorrow’s
trends.
Global supply demand analytics and Americas monthly
market reports
• Long-term capacity and trade data and price forecasts with
comprehensive ethylene production capacities itemized by operator,
location, technology and size
• Listing of all announced projects, including our assessment of the
projects’ timing and likelihood
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outages and new capacities for 18-36 months
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curve market expectations and inventory trends for actionable insight
• Complete volumetric and economic analysis for every regional
producing asset
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outlook
73
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Ethylene Asset
Cost Tool
Asset-by-asset evaluation of cost and key
production metrics can be viewed for key ethylene
technologies - not available from other providers.
• Dataset covers approximately 350 assets and projects
• Granular data on feedstocks, production volumes, costs and margins
updated twice per year
• Analyse ethylene supply using trusted price forecasts and rigorous data files
• Benchmark performance of competitor assets
• Manage risk of supply chain disruptions by understanding the position of
current and potential suppliers
• Compare your own data against our analysis for project evaluations
• Run scenarios to develop optimum business plans
74
74woodmac.com/chemicals
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Propylene
Use our suite of propylene research to understand
the feedstock trends and build a picture of supply/
demand of propylene’s key derivatives.
Global supply demand analytics and Americas monthly
market report
• Annual capacity, supply by technology and feedstock, demand by end-use,
trade and other key indicators for each producing/consuming country from
2005 – 2040
• Propylene prices, production costs and cash margins for US, Europe and
Asia annually from 2005 – 2040
• Propylene production assets by site, operator, capacity and technology
• Monthly overview of short term supply/demand
• Current issues and trends discussion
• Detailed commercial analysis for North American propylene, including
polypropylene outlook
75
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Polyethylene
Gain a comprehensive view of global supply
and demand, price forecasts and petrochemical
feedstock trends.
Global supply demand analytics
• Economic and energy outlook
• Price forecasts and production economics
• Global capacity, production, demand and trade outlook
• Key end-use outlook: film, sheet, injection moulding, fibre and other processes
• Existing polyethylene production assets by site, operator, capacity and
technology
• Announced production projects by site, operator, capacity, technology,
anticipated timing and likelihood
• Annual capacity, supply by technology and feedstock, demand by end-use,
trade and other key indicators from 2005 – 2040
• Prices, production costs, cash margins and key assumptions for US,
Europe and Asia annually from 2005 – 2040
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76woodmac.com/chemicals
woodmac.com
Polypropylene
Confidently forecast and plan ahead with
proprietary data and integrated analysis on the
polypropylene market.
Global supply demand analytics
• Economic and energy outlook
• Price forecasts and production economics
• Global capacity, production, demand and trade outlook
• Key end-use outlook: film, sheet, injection moulding, fibre, raffia and other
processes
• Current production assets by site, operator, capacity and technology
• Announced projects by site, operator, capacity, technology, anticipated
timing and likelihood
• Annual capacity, supply by technology and feedstock, demand by
end-use, trade and other key indicators for each producing/consuming
country from 2005 – 2040
• Polypropylene prices, production costs, cash margins and key
assumptions for the US, Europe and Asia annually from 2005 – 2040
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