Transcript Competitiveness of the chemicals industry

Competitiveness of the Chemicals Industry
Energy, Feedstock, Infrastructure and Logistics
Contribution to the work of the High Level group,
for the European Commission
Input from Total Petrochemicals, 15 Jan 2008
Pres EC, Bxl, 15 Jan 08
The oil price - A new, uncertain, environment
Since 2005, we are living a new
energy transition period…
Demand is
not satisfied
How will they adapt ?
150
Oil price,
$/bbl
A new balance ?
1. The petrochemical market
100
World
adapts
50
2007 Value
Money of the day
0
1970
1980
2 - Pres EC, Bxl, 15 Jan 08
1990
2000
2010
2020
2. The feedstocks
The production chains
3. Regions of the world,
Europe
World demand
Sustained growth for petrochemicals
Aagr 1980-2005
Aagr 2005-2015
700
Index global demand (1980=100)
+ 4.2%
600
PE+PP+PS
500
400
GDP
+ 6.1%
300
200
Crude Oil
+ 3.5%
100
+ 1.7%
+ 1.0%
2015
2010
2005
2000
1995
1990
1985
1980
0
Polymers: PE + PP + PS + PVC + Polyesters incl. fibers
Based on IEA, PTM 07Q2
3 - Pres EC, Bxl, 15 Jan 08
Demand for
petrochemical products
should continue to grow.
World demand / feedstocks – 2020 View
Demand
Shows very little elasticity vs price
Feedstocks
No major changes in the chains
Feedstock requirements (net)
Million tonnes
Demand
Million tonnes
COAL
NAT. GAS
800
Methanol
800
600
Xylene
600
400
Benzene
400
200
Propylene
200
ETHANE
LPG
REFORMATE
FCC extract.
HEAVY COND.
MIDDLE DIST.
Ethylene
0
2007
2010
2020
-
NAPHTA
2007
2010
2020
Feedstocks « nets » = volumes calculés après déduction des byproducts retournés vers des raffineries / distributeurs
Olefins / aromatics:
- very low cost ratio plastic / final product
- competitors are energy-intensive (glass, alu, paper)
- bio difficult to develop (ethanol ?)
Methanol -> energy (bio-diesel, DME, direct fuel)
- Elasticity depends on inter-energies competition
4 - Pres EC, Bxl, 15 Jan 08
New technologies being studied will not change
the industry drastically, and will take time to
develop, due to tough competition + huge capital
intensity of the industry.
World demand / feedstocks – 2020 View
Demand
Shows nearly no elasticity vs price
Growth will continue
Feedstock requirements (net)
Million tonnes
Demand
Million tonnes
COAL
NAT. GAS
800
Methanol
800
600
Xylene
600
400
Benzene
400
200
Propylene
200
ETHANE
LPG
REFORMATE
FCC extract.
HEAVY COND.
MIDDLE DIST.
Ethylene
0
2007
2010
2020
-
NAPHTA
2007
2010
2020
Feedstocks « nets » = volumes calculés après déduction des byproducts retournés vers des raffineries / distributeurs
Olefins / aromatics:
- very low cost ratio plastic / final product
- competitors are energy-intensive (glass, alu, paper)
- bio difficult to develop (ethanol ?)
Methanol -> energy (bio-diesel, DME, direct utilisation)
-- Elasticity depends on inter-energies competition
5 - Pres EC, Bxl, 15 Jan 08
Ethane will remain a limited contributor
Beyond 2010, the Middle East
« advantage bubble » will become
constrained
Fundamentals on energy and logistic issues
Ethane-based
petrochemicals
Ethane
100%
Ethylene
0.8 t/t
PE
Cracker
Not
transportable
Fuel gas
methane
0.15-0.20 t/t
0.05 – 0.2 t/t
• Ethane can only produce ethylene.
• Ethane availability is very limited.
• Must be located next to gas fields.
Gas is expensive to transport.
Hence, in the Middle East, ethane is far cheaper than oilequivalent.
Strong cost advantage for gas-based petrochem.
But no energy advantage as such.
6 - Pres EC, Bxl, 15 Jan 08
Liquid-based
petrochemicals
Liquids
100%
Cracker
Reformer
FCC
…
Fuel gas
Ethylene /PE
Propylene / PP
aromatics
LPG and liquid fuels
methane
0.15-0.25 t/t
0 – 0.15 t/t
• Liquid-based petrochem
can deliver ALL products
• Feedstock available from refineries.
• Better to be located next to the markets
Oil is cheap to transport. Finished products are expensive to
transport.
Modern liquid-based units are nearly self-sufficient in energy.
Hence, liquid-based petrochem is far more competitive next to
the market. (also: capex, oper.costs, duties…)
Ethylene chain – Impact of the Middle East
Ethane in the Middle East is indeed very competitive,
but it is very much resource-constrained (2-6% content in natural gas).
Hence it will take 15%-20% only of the ethylene downstream markets
Future sources
of ethylene (capacity)
Profitability
Miot
250
Bio, new routes
200
Q1 on naphtha
150
OTHERS
100
NAPHTHA
Refineries
50
0
1990
0%
0
ETHANE North America
1995
2000
2005
2010
2015
2020
ETHANE Middle East
Crude Price ($/bbl)
Petrochemical chains in the Middle East based on liquids have investment and operation costs
higher than in the rest of the world.
• Hence, fairly poor profitabilities, hence developments will be limited.
• Some projects are moving ahead, driven by political, employment or other considerations.
• But major local players tend now rather to reinvest profits abroad (e.g. Sabic -> DSM+GE, KPI ->
Dow, IPIC -> Borealis), including in Europe…
7 - Pres EC, Bxl, 15 Jan 08
« Bio » polymers – What is their future ?
Studies are underway
Production costs for "bio"-routes
(Typical / tentative)
Think green ?
Ethanol
Capex
Feedstock
Other bio
Sugar / starch
Cash
Feed
?
Other bio
PE
conv
PE
Ethanol
Close to
conventional
High
Scope for
improvement
Limited
Yes
Incentive
required
None ?
High
Large
Specific
No
Yes
Cost
Market
Degradability
40$/bbl
100$/bbl
Ethanol route should be studied in more detail.
For others, cost/energy competitiveness
is not obvious
8 - Pres EC, Bxl, 15 Jan 08
Range of applications
need to be assessed carefully
Prices, logistics, competitive advantages
A fairly predictible world balance
IMPORTS
75
+ import taxes
BALANCED
100
+ import taxes
IMPORTS
EXPORTS
40
+ import taxes
IMPORTS
120
In the future, Middle East will produce and export 5 – 25% of+ world
production on most products.
import taxes
They will always arbitrate prices between the different regions by trying to maximize their net-backs.
There are marginal producers located in all main importing regions.
In low cycles, world prices will decrease and marginal producers in all market regions will be impacted in a
similar way.
5. The positive / negative differentiating factors between the regions will then be, by decreasing order:
1. trade barriers,
2. local taxes (incl. CO2),
3. level of integration and efficiency,
The EU must optimize these parameters
4. energy efficiency,
5. 15 Jan
local
9 - Pres EC, Bxl,
08 salaries.
1.
2.
3.
4.
Competitive advantages in the EU
How can we win ?
Value for PE ($/t)
(typical)
40
Plant size
Upstream and
downstream integration
50
Operational
performance
30
Location,
logistics
50
Sales, marketing
30
0
20
40
$/t product
10 - Pres EC, Bxl, 15 Jan 08
European producers are
generally able to develop
significant competitivity
factors,
if the right environment is in
place.
60
Integration in Europe remains essential
> 50$ / t loss
on exports
> 100$ / t over-cost
on imports
Imports
Imports
European
Industries
European
refineries
European
refineries
European
Petrochems
Packaging
for distribution
Very strong and efficient
integration today in Europe
- Concentrated market
- Large multi-industry sites
- Infrastructures adapted
- European petrochem feeds EU
11 - Pres EC, Bxl, 15 Jan 08
European
Petrochems
European
Industries
Packaging
for distribution
Dis-integration would be
- very expensive
- energy-consuming
- disastrous for all other
industries (domino-effect)
European and Asian plants lead the way in steam cracker energy
efficiency.
But 20% of the world capacity is consuming 50% more energy as the others.
These are due to improve or to close, sooner or later.
Consumption, kBtu/lb of HVC
13
12
North America
11
10
9
8
Europe
7
Asia
6
5
4
0
25
50
Study Participation, %
Ref : Solomon 2005 benchmarking data
12 - Pres EC, Bxl, 15 Jan 08
75
100
Energy Consumption ( BTU/LB HVC )
Energy performance improvements since
1989 for European steamcrackers.
The worst players are improving,
through investments, but mostly closures
10000
9000
8000
7000
6000
5000
1989
Quartile 1 : -3.5%
2005
1997
Quartile 2 : -13.5 %
Quartile 3 : - 20.5 %
The best players are improving,
but the remaining potential is fairly small (< 10% ?)
13 - Pres EC, Bxl, 15 Jan 08
Ref : Solomon Multiple year benchmarking data
New feedstocks in Europe ??
Bio-mass
Priority route to investigate:
 Sugar cane -> ethanol -> ethylene
Some limited potential from vegetable oil,
but probably mostly attracted into biofuels.
Speciality-type bio applications
(degradable, plastic bag substitutes…)
appear today to be as energy consuming /
CO2 emitting as petrochem products, and
more expensive.
At present, the bio-mass route is able to
bring fairly limited possibility for energy /
CO2 savings to petrochemicals.
14 - Pres EC, Bxl, 15 Jan 08
Coal
Some technologies allow / may allow
production of petrochems from coal at
competitive conditions in today’s/ future
environment.
Coal is abundant, cheap to produce, and
may be forced to be an energy of the future
if nuclear is not relaunched fast enough.
But coal-based petrochemicla produces
approx. 3 times (!) more CO2 than oil &
gas-based petrochems.
Hence, coal should not be seen as an
acceptable alternative in Europe until a
viable solution can be found for CO2
storage.
Restructuring
Europe and the US are in a restructuring mode…
Number of Players
Number of players
Increasing concentration in EU & NA
41
26
18
22
'90
1990
'07
2007
Average site size (kt/y)
Number of producers reduced by 30% but
limited industrial restructuring
'90
1990
'07
2007
Average site size (kt/y)
1990: 12 producers having 75% combined market share
2007: 6 producers having 75% combined market share
434
551
234
278
1990
'90
2007
'07
1990
'90
Average site size has doubled
NA: from 65 sites down to 55
EU: from 69 sites to 64
Source: PTM 07Q2 – PE, PP, PS
15 - Pres EC, Bxl, 15 Jan 08
2007
'07
Conclusion : 5 - 10 year vision
The next down-cycle will affect all marginal producers worldwide, in the
US, WE, NEA
10% of them may close, which is normal in a low cycle
WE is neither in a best or worst position
Advantages of Europe :
 Concentrated market,
 Integrated industry,
 Mature infrastructures,
 Mature and robust companies,
 More remote from ME than Asia
16 - Pres EC, Bxl, 15 Jan 08
Disadvantages of EU - Areas for EC action:
 No / limited trade barriers
 All markets should have equal trade barriers, in order to maintain equal
opening to the Middle East products, which would avoid concentration
towards Europe.
 Delicate worldwide balance costs/prices -> Any over-costs in Europe,
even small, can lead to significant closures in the industry
 Develop / incentivise CO2 reductions without penalising costs.
 Maintain fair balance between burdens imposed to European companies,
compared to other areas of the world.
 Strong integration -> huge domino effect upstream and downstream if the
petrochemical link of the chain had to close / reduce
 Favour and protect integrated schemes
Thereby preserving employment where it is most competitive
17 - Pres EC, Bxl, 15 Jan 08