left margin column width of 3 column layout column width ......nexant provides global knowledge and...
TRANSCRIPT
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Impacts of feedstocks on the surfactants value chain –
what’s new?
Eric Hudson, Managing Consultant
Caleb Chong, Consultant
6th February 2019
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Agenda
1. Introduction to Nexant
2. Feedstock prices and impact on the Surfactants value chain
3. Ethylene Oxide issues/ changes in perspective
4. Bio-EO – is this the future?
5. Summary
1 King’s Arms Yard
London
EC2R 7AF
United Kingdom
T: +44 20 7950 1593
Energy & Chemicals Advisory
Caleb Chong
Consultant
2
1 King’s Arms Yard
London
EC2R 7AF
United Kingdom
T: +44 20 7950 1564
M. +44 77 8627 6317
Energy & Chemicals Advisory
Eric W Hudson
Managing Consultant
February 2019
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1. Introduction
3
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Nexant provides expertise across the energy and chemicals value chain
Grid Management
Distribution
Software
Energy Efficiency
Demand Side
Management
Renewables
• Solar
• Biomass
• Municipal Waste
• Wind
• Clean Coal
Gas Monetization
LNG
Gas Pipelines
Regulatory
Frameworks
Petroleum Refining
Storage &
Distribution
Biofuels
Oxygenates
Coal to Liquids
Gas to Liquids
Base Oils
Lubricants
Ammonia
Urea
Melamine
Ammonium
Nitrates
Phosphate & NPK
Fertilizers
Methanol
Formaldehyde
Acetyls
Other syngas
derivatives
POWER &
RENEWABLES GAS
C1 CHEMICALS &
FERTILIZERS DOWNSTREAM OIL
PETROCHEMICALS
& POLYMERS
INTERMEDIATE &
SPECIALITY CHEMICALS
Energy Chemicals
Olefins
Aromatics
Polyolefins
Vinyls
Styrenics
Polyesters
Polyamides
Acrylates
Rubbers
Other olefin and
aromatic
derivatives
Surfactants
Oleochemicals
Engineering &
Speciality
Polymers
Coatings,
Adhesives,
Sealants &
Elastomers
(CASE)
Polyurethanes
Resins
Biochemicals
Speciality & Fine
Chemicals
4 February 2019
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Nexant provides global knowledge and regional expertise in Energy and
Chemicals Industry
5 February 2019
Nexant E&CA has over 120 knowledgeable and responsive consultants that focus
on energy and chemicals, providing global coverage and regional expertise
San Francisco
Houston
London
Bahrain
Tokyo
Seoul
Kuala Lumpur
Bangkok
White Plains, N.Y.
Buenos Aires
La Paz
Rio de Janeiro
Washington, DC
Headquarters
Main Offices
Representative Offices
Project Offices
Pretoria
Pune
Beijing
Shanghai
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2. Feedstock prices and impact on the Surfactants value chain
6
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Feedstocks for Surfactants
Versus
Formulators Synthetic
Detergent Alcohol
Ethylene
Synthetic Alcohol
Sulfates (AS)
Alcohol Ether
Sulfates
(AES) Coconut Oil
Palm Kernel
Oil
Fatty Alcohol
Sulfates
Fatty Alcohol
Ethoxylates
n-Paraffin
& Benzene
Kerosene LAB Linear Alkylbenzene
Sulfonates (LAS)
Fatty
Alcohol
Synthetic Feedstock Natural Feedstock
+EO
7 February 2019
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Consumption of crude oil products into chemicals has increased
gradually, but remains a minor application compared to energy use
Global Consumption of Crude Oil Products by Application
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
Mill
ion
tons
of o
il eq
uiva
lent
Energy use Chemical/petrochemical Other non-energy use
Source: IEA Energy Balances & Statistics 2015
11%
5%
85%
8 February 2019
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Palm Kernel Oil (PKO), the main feedstock for natural surfactants in the personal care business,
is essentially a by-product of palm oil production and is a relatively small end-use (~10%)
Global Demand for Palm Fruit
9
Used in Detergent Alcohols
Mainly edible oils and biofuels
February 2019
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Crude Oil Price Volatility – what is the new norm?
Global benchmark crude oil pricing
2019/20 ??
10
“Forecasting is a
complicated thing.
Especially when it
comes to forecasting
future.” Viktor Chernomyrdin
February 2019
0
20
40
60
80
100
120
140
2003 2005 2007 2009 2011 2013 2015 2017 2019
Do
llars
pe
r ba
rrel
Brent FOB Sullom Voe Dubai FOB Fateh WTI FOB Cushing
N:\00235\9.1.5\QBAT4
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Many diverse factors influence supply and demand for crude oil, consolidating
to drive price reductions
Weak economic environment – Brexit impact?
Strengthening US dollar
Slowing demand growth and accelerated supply
(Iran)
Lack of adherence to OPEC production quotas
Energy efficiency initiatives
Switch to renewable, low carbon fuels
Substitution by low cost gas or coal
Subsidy removal in key markets (e.g. Arab Gulf)
Strong economic environment
US dollar weakness
Low inventories
Political uncertainty, year of supply disruption
Limited spare capacity
Growing need for OPEC oil supplies
Disciplined adherence to OPEC production
quotas
Higher Prices
Lower Prices
Weakening Demand
or Lengthening Supply
Strengthening Demand
or Shortening Supply
11 February 2019
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Each feedstock to formulators has its pressures
12
Supply/demand of palm oil
Price of competing vegetable oils
Weather patterns
Import policies
Taxation/ import duty changes
Consumer pressures
February 2019
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3. Ethylene Oxide issues
13
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Simplified Typical Surfactants Value Chain
14
ALCOHOLS\
SULFONATED
FEEDSTOCK SUPPLIERS
INTEGRATED PRODUCERS
SULFONATORS
SOAPERS
HOUSEHOLD
FORMULATIONS DISTRIBUTION
RETAILERS
CRUDE OIL
NATURAL GAS Ethylene Oxide (EO)
LINEAR
ALCOHOLS
ETHOXYLATED
ALCOHOLS
Natural or Synthetic
NATURAL OILS
February 2019
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15
The Chemical Producer is caught between the oil/petchems players and the big
brand consumer marketers
EO Case Study
Crude Oil Refinery Cracker Chemical
Producer Formulators
Branded
Seller
Crude Oil
Refinery
Cracker
Branded Seller Continual downward
pressure from consumers
based on “green” factors,
Climate Change, Carbon
footprint
-Experience curve
- Macro Economic conditions
Ingredient
Supplier Cost pressure -
producers moving
to China. Use of
inventory to
anticipate price
increases and
declines, to
maintain margins
Price Pass Through Achievable ? Resistance to Price Pass Through?
Consumer
There are many
factors at play,
including green,
sustainability,
RSPO, massive
resistance from
retailers,
formulator’s
flexibility and
consumer trends
Chemical Producers are increasingly influenced by consumer pressures
February 2019
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Currently synthetic producers are gaining market share from natural producers. Naturals still
dominate personal care applications due to end user consumer pressure
16 February 2019
Synthetic
Natural
Synthetic
Natural
Idle Capacity
Personal Care
Synthetic
Natural
Globally installed capacity is split 75/25 between natural and
synthetic based plants
25 percent of detergent alcohol demand is consumed by
the personal care sector
Supply: 4.5 million tons Demand: 2.4 million tons
No
n –
per
son
al c
are
EO Case Study – Detergent Alcohols – Inter-material competition
Detergent alcohol producers
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17 February 2019
The relative pricing between natural and synthetic feedstocks dictates the formulator’s demand,
except where the end-use applications are dependent on consumer pressures
EO Case Study – Detergent Alcohols
Market Demand
0
20
40
60
80
100
120
140
160
0
200
400
600
800
1000
1200
1400
1600
1800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Cru
de, d
olla
rs p
er b
arre
l
PK
O, d
olla
rs p
er to
n on
the
day
Palm kernel oil ($/ton) Crude oil ($/bbl)
Synthetic Natural
1.8 million tons
Performance is often the key differentiator, not just the price
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Others
Ethanolamines
Ethoxylates
Mono-ethyleneglycol (MEG)
Global Ethylene Oxide and Downstream Markets by end-use
18 February 2019
Ethylene
Ethylene
Oxide
(EO)
Coatings,
Lubricants,
Pharmaceuticals
etc.
Gas scrubbing
Surfactants
PET
Fibre / Bottle
Major application
CO2, H2S
Global Ethylene Oxide Demand, 2018
(volume – 30.6 million tons)
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Global ethylene oxide demand (2018)
In Western Europe and America, demand for EO is more varied unlike other
regions which are heavily focused on MEG
19 February 2019
Areas with access to relatively cheap feedstock (the Middle East) or high PET demand (Asia Pacific) have
sparked new construction
0%
20%
40%
60%
80%
100%
North America (4.8 million tons)
0%
20%
40%
60%
80%
100%
South America (0.4 million tons)
0%
20%
40%
60%
80%
100%
Western Europe (2.9 million tons)
0%
20%
40%
60%
80%
100%
C&E Europe (0.5 million tons)
0%
20%
40%
60%
80%
100%
Asia (14.5 million tons)
0%
20%
40%
60%
80%
100%
Middle East & Africa (7.5 million tons)
0%100%
2017
Others
Glycol ethers
Ethanolamines
Ethoxylates
MEG
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Global Ethylene Oxide Capacity Additions by region, 2015-2020
No EO capacity additions in Europe in recent years but this is likely
to change with INEOS and BASF announcements
20 February 2019
0.0
0.5
1.0
1.5
2.0
2.5
2015 2016 2017 2018 2019 2020
Mill
ion
tons
North America South America Western Europe Central Europe
Eastern Europe Middle East Africa Asia Pacific
EO recent capacity addition announcements by INEOS and BASF in
Western Europe are not shown in the above list.
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Capacity additions in Western Europe will be brownfield and likely
to continue to be so in the near term
21 February 2019
BASF
In September 2018, BASF announced a stepwise capacity increase of its production plant
at Verbund, Antwerp for alkoxylation. The first additional capacities will be available from
as early as the 3rd quarter of 2018. Overall, the company plans to step up their alkoxylation
capacities at the Antwerp site by up to 25 % by 2021.
INEOS
Increasing ethylene supply from INEOS supports the outlook for EO production in Western
Europe. The is made possible because of their $2 billion investment in their shipping
program for importing ethane and LPG from the U.S. in large quantities.
In the same month, INEOS also announced EO capacity expansions in Antwerp and
Lavera in WE (total €200 million) and in North America (270 000 tons per year).
A sixth alkoxylation unit in Antwerp was scheduled to start up at the end of 2018, along
with a 2,000 tonne expansion of ethylene oxide (EO) storage capacity at the site.
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Global Ethylene Oxide Capacity Additions by region, 2018-2023
(000 tons per year)
Beyond 2020, interest in bringing new EO capacity appears to continue to be
focused in North America, Middle East and Western Europe
22 February 2019
2017 2018 2019 2020 2021 2022 2023 Process
North America
Lotte Chemical Corporation Lake Charles, LA - - - - 560 560 560 Integrated EO/MEG
MEGlobal Freeport, TX - - 302 600 600 600 600 Integrated EO/MEG
Sasol Lake Charles, LA - 25 300 300 300 300 300 Direct oxidation
Asia Pacific
CSPC Huizhou, Guangdong - 505 505 505 505 505 505 Integrated EO/MEG
Sinopec Zhanjiang Zhanjiang, Guangdong - - - 250 250 250 250 Direct oxidation
Sinopec Zhanjiang Zhanjiang, Guangdong - - - 320 320 320 320 Integrated EO/MEG
Petronas Pengerang - - - 480 480 480 480 Integrated EO/MEG
Middle East
Bushehr Petrochemical Co Bandar Assaluyeh - - - - 440 440 440 Integrated EO/MEG
NPC (Iran) Hamadan - - - - 120 120 120 Direct oxidation
SABIC Al Jubail - - - - - 560 560 Integrated EO/MEG
Western Europe
BASF Antwerp - - * * 112 112 112 Direct oxidation
INEOS Antwerp and Lavera - - * * * * * Direct oxidation
*Capacity size addition not announced
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So where will ethylene oxide supply be based?
23 February 2019
Ethylene
Oxide
Close to
Cheap
Ethylene?
Close to
Derivative
Plants /
Markets?
Key benefits
Low cost
ethylene
Key downsides
Likely situated
far away from
certain markets
Key benefits
More responsive
to market
changes
Key downsides
High EO freight
costs
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0 20000 40000 60000 80000 100000 120000 140000 160000 180000
North America Western Europe Middle East Rest of the World China
EO capacity additions are attractive in regions with low cost
ethylene feedstock OR….
24 February 2019
Source: Nexant
Global Ethylene Cumulative Capacity (tons)
Eth
yle
ne C
ash
Co
st
($ p
er
ton
)
Global Ethylene Cost Curve (2018)
0
1st quartile
0
Western Europe
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Global PET Demand, 2018
(volume – 87.3 million tons)
In regions where the key market, PET, is located – i.e. Asia Pacific
25 February 2019
Asia Pacific 83%
North America
7%
Western Europe
4%
Middle East 3%
South America
2%
Eastern Europe
1%
Central Europe 0.3%
Regional PET Demand Growth
(percent volume growth)
0 2 4 6 8 10
Western Europe
Asia Pacific
Middle East
North America
South America
Global Average
2000-2018 2018-2025
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4. Alternative Sources of EO –
Is Bio-EO the future?
26
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Location of some Ethylene Oxide Plants in the USGC – Croda being
an exception as bio-based and not in USGC
27 February 2019
* Ongoing investment decisions
Formosa Plastics
Point Comfort
Dow/DuPont
Seadrift
Dow/DuPont
Taft
Huntsman
Port Neches
Lotte / Sasol*
Lake Charles
Eastman
Longview, TX
Croda,
Delaware
Equistar
Bayport
BASF
Geismar
Indorama
Clear Lake
Petrochemical-based
Bio-based
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Not all EO producers and ethoxylators in the U.S. are integrated and
thus face increasing freight costs for EO delivery
28 February 2019
Alkoxylator’s
Competitive
Arena
EO is increasingly difficult to ship by rail
Flammable and highly reactive, therefore
costly to ship
EO railcars require special safety precautions
Supply of railcars is limited and regulations
have become more restrictive
EO transportation cost from US Gulf to NE
EO transportation costs have increased 10-
20% every 6 months
For non-US Gulf players, freight represents
around 30% of the EO cost
Average EO content in an ethoxylated product
is ~65%
100
300 440
2002 2014 2017
Freight rate
US$/ton of EO
EO Stranded ethoxylators
USGC EO production
EO
EO Transportation
Source: Oxiteno
Specialty surfactants – what strategy could they adopt?
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Producers that focus more on personal care market such as Croda
have a high incentive to go fully bio-based
29 February 2019
Ethoxylates
Ethylene
Bio
Ethanol
Ethylene
Oxide
+O2
+O2 -H2O
Naphtha/ Natural gas
Biomass
Bio
Ethylene
Bio-based EO means ethoxylation can now increase the renewable content of materials
Bio-based EO is equivalent in performance to synthetic material
No sacrifice in performance for choosing the more renewable material!
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“Green EO” has some long-commercialized steps with low
technical risks
30 February 2019
CO2
Sugarcane* uses
sun’s energy to
metabolize
CO2
CH3-CH2OH
CH2=CH2 Green EO
In the distillery,
sugar juice is
fermented and
distilled
Dehydration
transforms ethanol to
ethylene
Ethylene is
oxidised to EO
EO to surfactants
*Sugarcane is shown, but any ethanol
will suffice — fermentation, algae based,
or thermochemical
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100% renewable
100% bio-based*
Performance identical to petro-based options
Lower carbon footprint than petro chemically derived
ingredients
USDA BioPreferred Program 3rd party certification
RSPO Supply Chain Certified via Mass Balance**
* Calculated using prEN16785-2 which is to be validated by carbon 14 testing (ASTM D6866)
** Products containing palm derivatives
New ECO Ethoxylates
31 February 2019
Source: Croda
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Impacts of Feedstocks on Surfactants value chain
Conclusions
32 February 2019
Western Europe
United States
Bio EO
Global
Developments
- Some investments for in-house majors are being made for EO/Ethoxylation
- Plenty of activity on “shale gas” ethane crackers – will this continue?
Many could invest in MEG and EO derivatives such as Sasol, Oxiteno and
several others
- Business case to make a Bio EO plant in situ, is this specific to the speciality
nature of the Croda business? Could others follow?
- Ethoxylates remain the key non-MEG EO derivative, leading investment in
almost all areas.
- Higher crude oil prices, and falling prices for natural oils impacted on the
synthetic versus natural ethoxylates equation in 2018.
- US producers still benefit from low-cost ethylene, while select synthetic
alcohol ethoxylators in Europe are building for internal use. The bulk of natural
alcohol production in Asia became more competitive.
Regulatory/
Consumer
Pressures
Consumer
preferences for
“greener” alternatives
bio based
transparency, RSPO,
sustainability issues
may cause a rethink to
portfolio management
for EO suppliers
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Nexant, Inc.
San Francisco
New York
Houston
Washington
London
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