The Potential for Gas Based Petrochemical Projects
John Page jpage@cmaiglobal.com October 12, 2011
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Presentation Agenda
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With 24% of Global Gas Reserves Russia Has 3% of Chemical Capacity
Capacity, Million Metric Tons 1000
% World Capacity 8%
875
7%
750
6%
625
5%
500
4%
375
3%
250
2%
125
1%
0
0% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Total CIS Capacity
Total Global Capacity
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Percent of Global Capacity
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Presentation Agenda
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Now N. America Ethane Has A Significant Advantage Due To Shale Gas Regional Ethylene Cash Costs
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Gas-Based Competitive Advantage Bubbles Up, Globally Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant 950 2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu 2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu
850
2009
750 650 2003
550 450 350 Asia
250 150 50
North America
West Europe
Middle East 0
25
50
75
Cumulative Ethylene Capacity (Million Tons)
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100
125
150
Gas-Based Competitive Advantage Bubbles Up, Globally Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant 950 2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu 2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu
850
2009
750 650 2003
550 RUSSIA
450 350
Asia
250 150 50
North America
West Europe
Middle East 0
25
50
75
Cumulative Ethylene Capacity (Million Tons)
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100
125
150
New crackers are competitive in Russia BUT lack of gas demand in remote locations restricts feedstocks until NOW and MTO 1,400 1,200
2015
Net Ethylene Price ($1236/Tonne) @ $90/bbl Brent Crude
1,000 800 (US$/Tonne)
600 400
Cash Cost Olefins
200 0
Ethylene Capacity (kta) Total Costs Capital Charge Fixed Costs Other Variable Costs Net Raw Materials
West Siberia PB 900 486 207 68 68 143
East Siberia PB 900 500 236 77 61 125
Caspian Sea - PB
Volga - N
600 784 217 71 164 332
600 791 266 79 92 354
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North West PBN 1,200 803 175 55 175 398
Far East N 1,200 858 216 64 143 435
Existing Volga PBN 360 508 87 128 293
Middle East - PB
West Europe - N
China - N
1,200 841 45 19 777
800 1,052 58 223 771
800 1,071 39 224 809
Presentation Agenda
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Announced Chinese MTO Projects
• Methanol-to-olefins is one of the most important development trends in China’s coal chemical
industry • In August 2010, Shenhua Baotou Chemical put the first methanol-to-olefins plant into
commercial production with 600 thousand metric tons of olefins. This plant was built integrated with a methanol unit of 1,800 thousand metric ton capacity. • 6.6 million tonnes of methanol will be consumed for MTO/MTP-based olefin production in
2014
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By 2015, MTO will be 48 percent of alternative ethylene supply. On-purpose ethylene will be 3.5% of total supply As a percentage of total supply
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Economics work in China but why only China? In Norway the olefins margin could be substantial but methanol may provide a better return due to a coastal location
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What is Secret to Success in Commodity Petrochemicals? It is not all about who has the best technology It is not all about who traded there first It is not all about who has the biggest plant It is about the cost of production And as much as 60% of integrated cash costs are hydrocarbon based
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What Does it Mean? • Russia has low cost feedstocks • Methanol to Olefins technology
creates a viable outlet for Natural Gas or Coal in remote locations • Creates demand for methane and this creates low cost byproducts such as: • Ethane /Propane Butane
• Russia can compete but …..
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....but can Russia be the next Middle East?
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