october 2016 olefins and methanol - ihs markit · © 2016 ihs. all rights reserved. ethylene the...

© 2016 IHS. ALL RIGHTS RESERVED.

OLEFINS AND METHANOL

34th IHS World Methanol Conference

OCTOBER 2016

Steve Lewandowski, Vice President - Olefins

+1 281 752 3230

[email protected]

mailto:[email protected]


Agenda • On purpose olefins production becomes an

important segment of the capacity picture.

• Ethylene operating rates are high globally so on

purpose supply becomes critical to close

balance. Less so the case for propylene.

• Many methanol projects, in China, at different

stages of operations, construction, and

planning. Little activity in rest of the world on

methanol to olefins and derivatives.

• Coal to olefins/derivative margins in positive

territory.

• Merchant methanol based assets are more

challenged on margins. Will olefins move up or

methanol prices/margins have to adapt? 2

34th Annual World Methanol Conference/ Oct 2016


Ethylene

The Market



Primary Ethylene Production Routes Feed Mix and Co-products key to cracker Metrics

Natural Gas

Syn Gas Coal

MTO/MTP Ethylene

Propylene

MTO

CTO

Natural

Gasoline

Propane Butanes

Naphtha

Gas Oil Propylene

Pygas

Benzene

Toluene/Xylene

Heavy Aromatics

C5/C6 Non Aromatics

Crude C4

Butadiene

Mixed Butylenes

Fuel Oil

Ethane

Crude

Oil

Refinery

Gas Extraction plant NGL

Fractionator

Ethylene

Methane/Hydrogen

Ethylene

Unit

4



0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021N. America S. America CIS & Baltics

W. Europe C. Europe SE Asia

NE Asia Indian Subc. Middle East

Africa Total Capacity Percent from Non Steam Cracker

16-pt - IHS clustered column - 2016

© 2016 IHS Source: IHS

World: Ethylene Production by Region

Global Ethylene Supply

Four main production regions. Non-traditional sources on the rise

Millio

n M

etr

ic T

on

s

5



Global Ethylene Feed Type (China Break Down) Volumes by type up across the board driven by ethane and other (CTO/MTO)

Ethylene China by Feed

Type, MMTA

2011 2016 2021

Naphtha plus 14.1 15.6 17.9

Ethane - LPG 0.8 1.6 2.9

CTO 0.2 1.6 4.9

MTO 0.0 1.4 2.7

Ethane 36.3%

LPG 14.8%

Other 6.4%

Naphtha 42.6%

2016 Global

© 2016 IHS

Notes: Production = 146 Million Metric Tons

Source: IHS

Ethane 40.1%

LPG 13.3%

Other 8.6%

Naphtha 38.0%

2021 Global

© 2016 IHS

Notes: Production = 175 Million Metric Tons

Source: IHS

6



Ethylene Demand and Demand Growth Dominated by Polyethylene

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

20

40

60

80

100

120

PE EO/EG EDC EB Other LAO VAM

GD

P E

las

tic

ity

2015 2020 GDP Elasticity

Ethylene Demand Growth by Derivative

Source: IHS © 2016 IHS

Millio

n M

etr

ic T

on

s

7



77

79

81

83

85

87

89

91

93

95

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Global Op Rate Global Op Rate (Steam Cracker)

NEA Op Rate WEP Op Rate

Global Ethylene Operating Rates

© 2016 IHS

Pe

rce

nt

Source: IHS

Global Ethylene NAMEPLATE Capacity Operating Rates 2015 peak not seen since early 2000’s, outlook stronger, effective operating rates

are high – are they sustainable at this level?

8



Ethylene Equivalent Trade Flow

9

2010

2015

2020 *Others: Africa, Indian Sub., CIS & Baltic, Central Europe

North America

South America

West Europe

Middle East

Northeast Asia

Southeast Asia

Others*

4,924 5,331

11,079

-2,583 -2,912 -3,696

-172 -244 -1,563

12,269

17,365 19,628 -7,212

-9,445

-13,470

-457 -318 -806

-7,094

-10,013 -11,080



Propylene

The Market


© 2016 IHS

Key Routes to Produce Propylene

Crude Oil

Natural

Gas

Crude

Unit

Nat Gas

Processing

FCC

Unit

Refinery

Grade

Propylene

Polymer/

Chemical

Grade

Propylene

Steam Cracker

Propylene

Splitter

Propane

Dehydrogenation

Methanol-to-Olefins

Methanol-to-Propylene

Coal-to-Olefins

Coal-to-Propylene

Ethane,

Propane,

Butane

Propane

LPG, Naphtha,

Gas Oil

Coal

Nat Gas


Ethane

© 2016 IHS

0.0

50.0

100.0

150.0

11 12 13 14 15 16 17 18 19 20 21

Stm. Crackers FCC Splitters Dehydro MetathesisMethanol to Olefins Coal to Olefins Coal to Propylene HS FCCOthers On-Purpose Total Capacity

World: PG/CG Propylene Prod. by Feedstock

Source: IHS

Millio

n M

etr

ic

To

ns

© 2016 IHS

Global Propylene Supply by Technology On-Purpose production needed to enhance supply to meet strong demand

By-Product /

Co-Product

12



Global Propylene Capacity Growth (China Break Down) PDH and CTO lead the On-Purpose build

China Propylene 2011 2016 2021

Cracker 7,995 9,609 11,253

FCC 5,559 8,097 8,682

PDH - 3,017 6,550

Methanol 10 1,652 3,465

Coal Methanol 422 2,843 6,780

Metathesis 128 233 803


Cracker 50%

FCC 33%

Methanol 1%

PDH 9%

Coal 3%

Other 4%

2016 Global Supply


Cracker 48%

FCC 31%

Methanol 3%

PDH 8%

Coal 6%

Other 4%

2021 Global Supply



Propylene Demand and Demand Growth Dominated by Polypropylene

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

0

0.5

1

1.5

2

2.5

3

3.5

4

0

10

20

30

40

50

60

70

80

GD

P E

las

tic

ity

2015 2020 GDP Elasticity

Propylene Demand Growth by Derivative


Millio

n M

etr

ic T

on

s

14



Propylene Equivalent Trade Flow

15

2010

*Others: Africa, Indian Sub., CIS & Baltic, Central Europe

North America

South America

West Europe

Middle East

Northeast Asia

Southeast Asia

2015

2020

1,912

1,032

1,757

-391 -432 -628

-88

132

-132

1,605

3,024

3,739

-1,534

-2,344

-4,169

Others*

-2,930

-2,408

-229


1,489 1,066

-263


China and Methanol



Coal-to-Olefin Doubling of Capacity More projects in the planning stage but many have been shelved.

Capacity (C2, C3)

In Production

Under Construction

China

Mongolia


Production

Construction

Planning

0

5

10

15

20

25

30

Millio

n T

on

s

2015 2018 2025

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwif_NnAr_nKAhUHX5QKHcp8BOoQjRwIBw&url=http://torcoracefuel.net/pro-fuels.html&psig=AFQjCNGi9k0EVJNDg28M5pT5VDj_TyKQeA&ust=1455611628350865

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjxiPS46fvKAhXEGqYKHcR6Ai4QjRwIBw&url=https://en.wikipedia.org/wiki/Outline_of_China&bvm=bv.114195076,d.dGo&psig=AFQjCNF2f0seRJcwgtvJN205PdF3-3xGRg&ust=1455696191317411


Many merchant methanol-based MTO projects But like CTO/CTP, many have been shelved

Capacity (C2, C3)

Ethylene

Propylene

Derivatives

Import Domestic

Under Construction In Production


Millio

n T

on

s

Production

Construction

Planning

0

2

4

6

8

10

12

2015 2018 2025

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwif_NnAr_nKAhUHX5QKHcp8BOoQjRwIBw&url=http://torcoracefuel.net/pro-fuels.html&psig=AFQjCNGi9k0EVJNDg28M5pT5VDj_TyKQeA&ust=1455611628350865

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwimtbWsw_vKAhVBt5QKHSD5CXsQjRwIBw&url=http://maritime-connector.com/ship/stellar-orchid-9594157/&bvm=bv.114195076,d.dGo&psig=AFQjCNGYj_wsI_CoJQVk9dIznqT_xUkpVQ&ust=1455685905198118

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiaiOeCxvvKAhUKp5QKHc4hBz8QjRwIBw&url=https://yolanoclimateaction.wordpress.com/2014/01/12/annotated-reference-list-of-crude-by-rail-articles-january-11-2014/&bvm=bv.114195076,d.dGo&psig=AFQjCNGd4ibb-zSmy8BLvSxeqNrqoQefiA&ust=1455686430730764

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjxiPS46fvKAhXEGqYKHcR6Ai4QjRwIBw&url=https://en.wikipedia.org/wiki/Outline_of_China&bvm=bv.114195076,d.dGo&psig=AFQjCNF2f0seRJcwgtvJN205PdF3-3xGRg&ust=1455696191317411


Stranded Western Canada Gas to China Options to serve China demand – Could be any of a number of gas producers.

19

Methanol Plant

Methanol Plant

MTO/PO plant

MTO/PO Plant

Ship

Methanol

Ship Pellets

Stranded gas: Trinidad, Russia, Iran, US, Canada, etc.


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=0ahUKEwiY1b2Vl8bMAhXDKGMKHRLSBMoQjRwIBw&url=http://maritime-connector.com/wiki/dry-cargo/&psig=AFQjCNE_rXTV7y59-AngBUmHjkEJ1lQ_aQ&ust=1462649223003122

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjFjbyrl8bMAhVO8WMKHbKWAxkQjRwIBw&url=http://paula-maritime-english.blogspot.com/2011/03/types-of-merchant-ship.html&psig=AFQjCNE_rXTV7y59-AngBUmHjkEJ1lQ_aQ&ust=1462649223003122

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjR3Yr1msbMAhUGzmMKHVONCzIQjRwIBw&url=http://www.enchantedlearning.com/school/Canada/Flagcolor.shtml&psig=AFQjCNFVa4O1aI6U9GUkejruXzKzvcHogg&ust=1462650237324206

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj3os6Km8bMAhUBymMKHXtNDb4QjRwIBw&url=http://www.worldatlas.com/webimage/flags/countrys/asia/china.htm&psig=AFQjCNHG0fBJ1YEq1JwxBfAuo1TtRyCJGA&ust=1462650287564946


World Cash Costs US loses some cost advantage but maintains about $400/ton.

0

200

400

600

800

1000

1200

1400

1600

U.S. Ethane NortheastAsia Naphtha

West EuropeNaphtha

China CTO China MTO China MTP China CTP China PDH

2013 2016 2019 SAR @1.75/Mmbtu

World Ethylene Cast Cost Comparison


US

Do

lla

r P

er

Me

tric

To

n

Notes: CTO/MTO : Cash costs based on one ton of total olefin basis (50/50 ethylene/propylene)

20



Coal-to-Olefins / Polyolefins Outlook on Margins Positive margins for all of the coal-to-olefins units.

21

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017 2018

Int CTO Margins CTO Margins Int CTP Margins CTP Margins

Int and Non-Int Margins

Do

lla

rs P

er

Me

tric

To

n




Merchant Methanol-to-Olefins and Derivatives Outlook on Margins Will these assets run with negative margins? Product slate for ethylene less PE

driven more by MEG/vinyls. Propylene slate better aligned with global average

22

-400

-300

-200

-100

0

100

200

2010 2011 2012 2013 2014 2015 2016 2017 2018

Int MTO Margins MTO Margins Int MTP Margins MTP Margins

Int and Non-Int Margins

Do

lla

rs P

er

Me

tric

To

n




China’s Ethylene Self-Sufficiency Approaches 60%

23

0

20

40

60

80

100

0

10

20

30

40

50

60

11 12 13 14 15 16 17 18 19 20 21

Domestic Derivative Equivalent Demand Net Equivalent Import Self-sufficiency

Million Metric Tons Percent, % China’s Ethylene Balance

© 2016 IHS

Millio

n M

etr

ic T

on

s

Source: IHS

Pe

rce

nt



0

20

40

60

80

100

0

10

20

30

40

50

60

11 12 13 14 15 16 17 18 19 20 21

Domestic Derivative Equivalent Demand Net Equivalent Import Self-sufficiency

Million Metric Tons Percent, % China’s Propylene Balance


Millio

n M

etr

ic T

on

s

Perc

en

t

China’s Propylene Self-Sufficiency above 80%

24



MTO/CTO Ethylene Derivatives CTO is PE based, MTO more non-PE builds


Merchant 20%

EDC 10%

Ethylene

Oxide 27%

HDPE 43%

MTO-Ethylene Derivative


EDC 4%

HDPE 96%

CTO- Ethylene Derivatives




CTO/CTP


CTO/CTP- Propylene Derivatives

Polypropylene

100%

Merchant 28%

MTO/MTP- Propylene Derivatives


Propylene

Oxide

3%

Polypropylene

63%

Acrylonitrile

6%

MTO-MTP/CTO-CTP Propylene Derivatives CTO is PP based, MTO aligned with global mix of products.


0%

5%

10%

15%

20%

25%

30%

35%

10

20

30

40

50

60

Ethane + PDH CTO MTE + PDH Hvy. Nap + PDH GTO

Base Capex Base IRR

US Ethylene Producer Investment Scenarios


$ B

illi

on

IRR

20

18

-2035

Relative Capex / return Returns okay for Methanol chemistry, capital outlay is extremely high.

© 2015 IHS, Inc. No portion of this presentation may be reproduced, reused, or otherwise

distributed in any form without prior written consent.

C2= 6 units 20 units 6 units 6 units 20 units 6 MMTA

C3= 5.33 units LONG 5.33 units 0.68 units LONG 4 MMTA

27



Take Away • Global ethylene gets tight and on purpose methanol

chemistry will play and an important role.

• Global propylene will be better supplied and less

stress on system to close the balance.

• Trade trends for contained ethylene and propylene

trade are completely opposite for China, ethylene

shorter – propylene balanced.

• Margins will be more challenged for methanol plants

on merchant methanol purchases. Will methanol drop

or olefins move up in price to keep margins in the

black?

• Investment cost for methanol chemistry to supply

ethylene/propylene needs should require a risk

premium due to the overall level of investment, even

with a cash cost advantage.


IHS Customer Care:

Americas: +1 800 IHS CARE (+1 800 447 2273); [email protected]

Europe, Middle East, and Africa: +44 (0) 1344 328 300; [email protected]

Asia and the Pacific Rim: +604 291 3600; [email protected]

COPYRIGHT NOTICE AND DISCLAIMER

© 2016 IHS. All rights reserved. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent of IHS. Content reproduced or redistributed with IHS permission must display IHS legal

notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions and analyses which that are based upon it, and to the extent

permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or warranty is given as to the

achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events and results may differ materially from forecasts and statements

of belief noted herein. This presentation is not to be construed as legal or financial advice, and use of or reliance on any information in this publication is entirely at your own risk. IHS and the IHS logo are trademarks of IHS.

october 2016 olefins and methanol - ihs markit · © 2016 ihs. all rights reserved. ethylene the...

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