downstream: refining & petrochemical markets · market reporting consulting events downstream:...
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Market Reporting
Consulting
Events
Downstream: Refining & Petrochemical Markets
THEC – Houston, TX - January 28, 2020
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• Population: Chinese – Global – without energy
• Global oil demand vs US demand?
• NGL – LPG – C3 and C4
• What IMO 2020 – LCFS – RFS – Carbon sequestration mean?
• Vehicle park: Global – US – China – EV
• Who produces and what is petroleum coke used for?
Energy Price Reporting Agency?
Argus Media?
Did You Know:
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What is a Price Reporting Agency (PRA)
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• PRAs validate the data and create price assessments according to
methodology.
• Indices are used in:
- Term contracts - Financial derivatives
- Financial reporting - Internal transfer pricing, etc.
• Globally recognized energy PRAs:
- Argus - ICIS - OPIS - Platts
• Also, CME and Ice’s trading platforms and third parties like Thomson
Reuters, The Wall Street Journal, Bloomberg, Global View, etc.
How Does the PRA System Work?
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Argus Media: Integrated Global PRA, Conference & Consulting Company
• Headquartered in London
• 22 offices
• 1,000+ staff
• 500+ journalists
• 80+ consultants
• 25,000 price assessments
• Over 160 publications
• 70+ conferences annually
• 300 consulting projects annually
London
Moscow
Dubai
New York
Portland
Calgary
Santiago
Rio de Janeiro
Mexico City
Beijing
Shanghai
Tokyo
Sydney
Astana
Kiev
Cape Town
Riga
Mexico City
San Francisco
Washington, DC
Global reach
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Petrochemical markets
Petroleum markets
Unintended consequences
Current disrupters
What to look out for
US Downstream Outlook
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$0
$20
$40
$60
$80
$100
$120
$140
$160
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2005 2007 2009 2011 2013 2015 2017 2019
US Conventional Oil Production US Tight Oil Production
– Argus, EIA2019 data through October
$/bl’000 b/d • 2010 shale
revolution
• Tight light oil now
major US oil product
• Feedstock quality
changing
• US consumes
around 10mn b/d…
now a net exporter
• US is world’s largest
oil producer
US Oil Production and Price
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45,000
50,000
55,000
60,000
65,000
70,000
75,000
80,000
85,000
mn cf/d
Consumption Production
Production
Consumption
• Increased demand
from industry and
electricity
• US went from
import to export
• Regasification to
liquification (LNG)
US Natural Gas Production and Demand
– EIA
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• Crude oil relatively
low relatively and
stable
• NG prices
extremely low –
being rejected
• Feedstock
preference
changing; to NG
and ethane, with
propane following
US Natural Gas and Ethane Prices at All Time Lows
0
20
40
60
80
100
120
140
160
Jan
-07
May-0
7
Sep
-07
Jan
-08
May-0
8
Sep
-08
Jan
-09
May-0
9
Sep
-09
Jan
-10
May-1
0
Sep
-10
Jan
-11
May-1
1
Sep
-11
Jan
-12
May-1
2
Sep
-12
Jan
-13
May-1
3
Sep
-13
Jan
-14
May-1
4
Sep
-14
Jan
-15
May-1
5
Sep
-15
Jan
-16
May-1
6
Sep
-16
Jan
-17
May-1
7
Sep
-17
Jan
-18
May-1
8
Sep
-18
Jan
-19
May-1
9
Sep
-19
Jan
-20
May-2
0
Sep
-20
Jan
-21
(barrel of oil equivalent), $/bl
Propane Ethane Natural gas Crude oil-Argus Consulting Services
Forecast
Crude
Ethane
Propane
Natural Gas
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Continued Production Optimization: Feedstock and Products
Feedstock
- Demand
- Quality
- Price
Products
- Demand (GDP)
- Regulations
- Technology
- Price
- Logistics
- Alternatives
Offshore & Onshore
Crude
LPG
Gasoline
Naphtha
Jet
Diesel
Fuel oil
Asphalt
Base oil
PetcokeCoker
VGO
Petrochemicals
• Ethylene
• Propylene
• Butylene
• ….
Gas
NGLs
Fertilizers
LNG
Methanol
Power
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0
500
1000
1500
2000
1998 2001 2004 2007 2010 2013 2016 2019
TW
h
Wind, Solar, Biomass Nuclear and Hydro Coal Natural Gas
US Power Generation • Plentiful cheap gas supplies increase NG share and allows cleaner power supply
• US coal demand is plummeting
• Tax support and improved technology allows penetration of alternative power supply
Cheap Gas Displaces Coal
Coal
Natural gas
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US Ethane Being Monetized
0
10
20
30
40
50
60
2008 2018 2025
mn tEthylene production
34%
40%
0
10
20
30
40
50
60
2008 2018 2025
mn t Polyethylene production
31%39%
0
10
20
30
40
50
60
2008 2018 2025
mn t Ethane production
106%
34%
• 42 crackers in the US
• 30-35 years old, from the 1960s
• 2 new crackers in 2017
• 2 new crackers in 2018
• 4 new crackers in 2019
• 2 new crackers in 2020
• 3 still under construction, and
more being considered
• 4 new units in 2017
• 3 new units in 2018
• 6 new units in 2019
• 2 new units in 2021
– Argus Consulting Services – Argus Consulting Services – Argus Consulting Services
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US Ethane being Monetized, but Also Attractive for Export
0
2
4
6
8
10
12
14
2008 2018 2025
mn t Ethane export
41%
0
0.2
0.4
0.6
0.8
1
2008 2018 2025
mn tEthylene export
160%
65%
0
2
4
6
8
10
12
14
2008 2018 2025
mn t Polyethylene export
20%
97%
– Argus Consulting Services
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• Recent infrastructure buildout –terminals, storage and ships ensured export
• Exports started in 2018
• US largest LPG exporter in the world
• Increasingly used for petchemsand residential
• Continued growth expected, as the combination of ample supply and robust logistics should keep prices low relative to crude and naphtha
US LPG Market Transformed to World’s Largest Export Market
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2010 2015 2020 2025
mn tTotal Consumption Total Production Net position
– Argus Consulting Services
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0
100
200
300
400
500
600
700
800
900
1,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Peru
Honduras
Chile
Brazil
Venezuela
Colombia
Costa Rica
Canada
Guatemala
Ecuador
Panama
Mexico
Total
2019 data through October
’000 bpd
– Argus Consulting Services, EIA
0
200
400
600
800
1,000
1,200
1,400
1,600
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
United Kingdom
Ecuador
Argentina
Gibraltar
Peru
Panama
Colombia
Brazil
France
Chile
Netherlands
Mexico
Total
2019 data through October
’000 bpd
– Argus Consulting Services, EIA
• US exports gasoline and diesel
• US benefits from Latin America’s growing demand for products
• 2019 levels down due to high levels of maintenance activity in PADD 3
US Becoming Gasoline and Diesel Exporter
Gasoline Diesel
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Regulations Drive Changes, e.g. Renewables/Biofuels
US Ethanol, Cellulosic, Renewable Diesel
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
2011 2013 2015 2017 2019
mm
Btu
California CNG and LNG consumption
RNG (CARB) Total (CARB) Total (EIA)
– CARB, EIA data, Argus Consulting Services
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0
10
20
30
40
2000 2004 2008 2012 2016 2020
mn
t
US petcoke exports
USGC USWC Other– Argus Consulting Services
• US refiners invested in cokerstwo decades ago to handle the growing amount of heavy crude oil
• Continued utilization due to price differential (light vs heavy crudes)
• Continued global demand for cement and power (gasifier)
Additional Coker Capacity Expanding Petcoke Push in Seaborne Markets
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Market behavior and
unintended consequences
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0
100
200
300
400
500
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
TW
h
China power generation
Thermal power generation Hydro and Nuclear Wind and solar
– NBS, Argus Consulting Services
• Asean imports of coal rising
as fast as Europe is
declining
• Chinese power demand
outpacing expansion of
non-coal generation
capacity for now
• Indian power demand
currently very weak, but
long-term growth likely
Coal Generation Still Expanding in High-Growth Economies
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Lighter Feedstock Produces Lighter Products
GAS
Offshore & Onshore
NGL
Fertilizers
CRUDE
LPG
Gasoline
Naphtha
Jet
Diesel
Fuel Oil
Asphalt
Base oil
PetcokeCoker
VGO
LNG
Petrochemicals• ethylene• propylene• butylene• pygas• C5+• benzene• toluene
Methanol
Power
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18%11%
9%8%
6%
7%
6%
5%
3%
17%
17%
16%
16%
78%42%
40%
30%
26%
15%
30%24%
17% 12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ethane Propane Butane Full Naphtha Atm Gas Oil
Fuel gas
Ethylene
Propylene
Butadiene
Butylene/butane
Benzene
Toluene
Other Pygas
Fuel Oil
Shift in Feedstock has Critical Impact on Supply
– Argus Consulting Services
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• Not only US made investments
• 2020 China capacity additions –
High impact… 154% growth
• Malaysia, Russia, Oman and
others also impact 2020
• Will US ethane end up as
feedstock for Chinese crackers?
• What is the effect of ethylene
export?
Overcapacity is Developing in Ethylene
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267527 587 654
8531,007 1,132 1,099 1,174 1,178
1,380 1,288 1,337
144
189 210335
526506
507 549617
764
826 940 870
366
377391
449
499503
524 541539
573
592 588 546
425388
362 364327
298
309 321
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
’000 b/d
US Refined Products Exports Asphalt & Misc.
Oxygenates
Lubes & Waxes
Unfinished oils
Jet fuel
Resid fuel oil
Pet. coke
Gasoline &
Blendstocks
Distillate
-Argus Consulting Services, EIA2019 data through October
• 2018, PADD 3 at all-time capacity utilization.
• 2019 levels down due to maintenance activity in PADD 3
• Unlikely further growth beyond 2018 levels until early 2023
• Asia and Europe will supply the incremental growth in Latin America
US Products Exports are Near Limits of Refining Capacity
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• Ethanol blending plateau at 10vol%.
• No demand growth due to stagnant gasoline demand and regulations.
• Renewable diesel feedstock – What is the life cycle?
• Open loop scrubbers – Where does the sulfur go?
Regulations: Costs, Limitations and Opportunities
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Key
developments
to watch…
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Local, global and geopolitics issues• Hurricanes/storms, increased labor and insurance costs, regulations, taxes, currency
• OPEC, Iran, Iraq and political environment
• Tariffs, war, health and anti-fracking
Sustainability, environment and decarbonized economy• Negative public awareness, industry image
• Regulations and finance
Financial and trading companies taking ownership in energy companies
Technology breakthrough… looooong term• When will China explore shale gas?
• Heavy crude oil upgrading, crude to petrochemical
• Electric vehicles, batteries, power storage, carbon sequestration…
Global Trends: Opportunities and Threats
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In Conclusion
consulting services
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o Crude
o Power
o Natural gas
o Biomass
o Biofuel/Biochems
o Refined Products
o Petroleum Coke
o Coal
o Sulfur
o Asphalt
o Metals
o Logistics/Freight
o Fertilizers
o Oil products
o LPG / NGL / LNG
o Petrochemicals
Argus Consulting Services product-set
Near-term outlooks
Series of 2-year outlooks,
and Argus fundamentals
Long-term analysis
20+ years forecasts included in
analytics and multiclient products
Bespoke projects
Assignments structured
around a particular client need
Multiclient off-the-shelf Single client tailored support
Argus’ fundamental
market understanding
and global, complete
data
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