oil demand and chemicals feedstocks · october 9, 2020 4 13 million bd of oil demand (18%) lost in...

Oil Demand and Chemicals FeedstocksIncreasing risk and uncertainty

Stefano Zehnder, Vice President, ConsultingMichael Connolly, Senior Consultant, Analytics

9th October 2020

COVID-19 and Post – COVID-19 Oil Product Demand01

Petrochemical Feedstocks Market02

NGL Feedstocks Globalisation04

Energy Transition Effects03

Agenda

Conclusions05

2

COVID-19 and Post-COVID-19 Oil Product Demand

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October 9, 2020 4

13 Million bd of Oil Demand (18%) lost in 1st Half of 2020

• Preliminary statistics are incomplete, and developments still subject to change.

• Most affected (% of demand lost) are transportation fuels for “personal mobility”.

• Jet Kero demand is drastically down and full re-opening of intercontinental passenger flights within the year is questionable. A global issue, even if some regional activity resumes.

• Trends in Gasoline demand strongly driven by developments in North America (still 40% of global demand…). Size of global market (3.5 times that of Jet Kero) makes it the biggest sensitivity area.

• Freight transportation less affected than personal mobility, with impact on Diesel relatively lower. Demand loss varies by Region.

Jet Kero (40-50%)

Road Diesel (10-15%)

Heating & Cooking (8%)

Heavier - incl. Bitumen/Bunkers (12%)Base Oil (30%)

Others (10%)

World Oil Demand Loss in Jan –Jun 2020due to COVID-19 (Million bd)

TOTAL LOSS13 MmbdFigures in parenthesis indicate % of 2020 demand lost by product

Source: ICIS Consulting

Gasoline(15-20%)

Petchem Feeds (5%)

COVID-19 has not only affected the short term demand but will impact the long term too

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ICIS Revisions in Demand

Gasoline Jet Diesel

G - Post Covid J - Post Covid D - Post Covid

A combination of behavioural change and stimulus packages will help drive the energy transition.

5October 9, 2020 Source: ICIS Consulting, ICIS Analytics

Petrochemical Feedstocks Market

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Gasoline Jet Diesel

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Range 2015- 2019 Average 2015-2019 2020

Transportation Fuels: Demand & Values

Demand in transportation fuels has hurt cracks in gasoline, jet and diesel apart from a period of very low crude prices.

Crude Price Recovery

Continued to pressure the already weak jet and gasoline cracks.

Weaker

Gasoline / Jet / Diesel: Global Demand in 2020

Source: Various Gov’t data, ICIS analytics, ICIS Pricing

Key Transportation Fuels “Cracks”

October 9, 2020 7

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Differential Naphtha Crack Gasoline Crack

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Range 2015- 2019 Average 2015-2019 2020

Have reduced runs to balance fuels supply, reducing total naphtha supply, despite shifting some gasoline to naphtha.

DemandFrom petrochemicals has been propped up by lower oil prices, increasing competitiveness relative to non crude sourced feedstocks.

Refiners

Naphtha Demand in 2020

Gasoline-Naphtha Differential

October 9, 2020 8Source: Various Gov’t data, ICIS analytics, ICIS Pricing

Feedstocks vs Fuels: Naphtha & Gasoline

Dem

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(K

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Range 2015- 2019 Average 2015-2019 2020

Feedstocks vs Fuels: LPGs & Naphtha

Reduced due to reduced crude runs in refineries to balance fuels supply and demand.

DemandHas been strong for total LPG, particularly in China and India, supporting LPG price.

Supply

Total LPG: Global Demand in 2020


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Differential Propane Crack Naphtha Crack

Propane-Naphtha Differential

Historical perspective on Propane & Naphtha price relationships

LPGs attractiveness versus Naphtha was a growing albeit seasonal factor in ethylene production.

Increased US supplies…

In recent years..

October 9, 202010


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Historical perspective on Propane & Naphtha price relationships

LPGs attractiveness versus Naphtha was a growing albeit seasonal factor in ethylene production.

Increased US supplies…

In recent years..

October 9, 202011


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Differential Propane Crack Naphtha Crack Crude (rgt scale)


…in spring 2020The drop in crude prices and fear of supply-chain disruptions combined in making Propane a more expensive option.

Temporarily…?

Dem

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Range 2015- 2019 Average 2015-2019 2020

Feedstocks Comparisons: Propane vs Naphtha

Demand has dropped for LPG as a reflection of relative closing of competitiveness against naphtha compared to recent historical trends.

DemandLPG “energy” demand remains the key driver in pricing.

Feedstock

LPG for Petrochemicals Demand in 2020


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Energy Transition Effects

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World N. Amr. S & CAmr.

Eur. FUSSR Afr. M.E. N.E.A. A. & P.

Non Refinery Sources C2/C3 ex NGL C2 / C3 ex Refinery PX

Refiners Are Becoming Increasingly Involved In Petrochemicals

Asia additions are overwhelming, with China dominating. A number of projects are now being delayed or cancelled due to the uncertainty from COVID-19 and the push for the energy transition.

14October 9, 2020

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N. Amr. S & CAmr.

Eur. FUSSR Afr. M.E. N.E.A. A. & P.

Refiner involvement in New Petrochemical Capacity Additions

Relative Absolute (Million T /yr.)

Renewables Announcements In Recent Months

15October 9, 2020

Country Company Site Project Capacity Related

US HollyFrontier Cheyenne Conversion to renewable diesel 13 kbd Closure of existing refinery (45kbd)

US Marathon Martinez Potential conversion to renewable fuels 48 kbd Closure of existing refinery (166kbd)

US Phillips 66 Rodeo Conversion to renewable fuels 52 kbd Closure of existing refinery (76kbd)

US REG Geismar Expanded renewables unit 16 kbd Addition to 6kbd facility

France Total Grandpuits Conversion to renewable fuels 12 kbd Closure of existing refinery (101kbd)

Sweden Preem Gothenburg New renewables unit 16 kbd New unit

Sweden Preem Lyskeil New renewables unit ? kbd Cancellation of refinery upgrade

Indonesia Pertamina Cilicap New renewables unit 6 kbd Part of refinery upgrade

Indonesia Pertamina Plaju New renewables unit 20 kbd Dedicated site

Renewables offer an simpler step to stay in a traditional space, limit investment and fit into the environmental shift. COVID-19 has helped to spur a number of refiners to make this step.

NGL Feedstocks Globalisation

More light NGLs from the US could also flow to International Feedstocks Trade

17October 9, 2020

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2020 US averageExports

Additional Exp toAsia, Short Term

Additional Exp toEurope, Mid Term

New US ExpTerminal Capacity

US Ethane Flows, Million tonnes of Ethylene Equivalent

Canada

EU

Asia

EthaneDespite over 5 MMt of rapidly materializing domestic demand, US ethane export remained stable so far, on a 2020 average.

New production streams, new export terminals and ample rejection in the US should provide ample incremental volumes

Other

Asia

More light NGLs from the US could also flow to International Feedstocks Trade

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2020 US averageExports

Additional Exp toAsia, Short Term

Additional Exp toEurope, Mid Term

New US ExpTerminal Capacity

US Ethane Flows, Million tonnes of Ethylene Equivalent

Canada

EU

Asia

LPGs

EthaneDespite over 5 MMt of rapidly materializing domestic demand, US ethane export remained stable so far, on a 2020 average.

New production streams, new export terminals and ample rejection in the US should provide ample incremental volumes

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2019 US Exports Incremental 2020 USavge exports

2025 Incrementalpotential imports for

PDH

2025 Incrementalpotential imports for

Ethylene

US LPG Exports, Million tonnes of Propane US LPG exports account for about 40% of global trade, growing also in 2020, 11% to date

New trade opportunities for propane as feedstock to PDH and Ethylene in Europe and Asia are emerging in the mid term.

The US can further capture market for its LPGs, but competition may grow.

EU

Other

Asia

Conclusions

Conclusions

• COVID-19 has impacted oil demand in the long term, contributing to increase the pace of the energy transition. Private transportation has been most affected, whilst petrochemical feedstocks proved more resilient.

• Refiners still consider petrochemicals as an attractive alternative to the traditional transportation fuels, but more options are considered along the decarbonisation path.

• The incremental availability of petrochemical feedstocks from global refineries is combined with expectations for comfortable supplies of competitively priced light NGLs in international markets. A diversified and ample availability of hydrocarbons should support petrochemical developments.

20October 9, 2020

Thank You

Stefano Zehnder

Vice President, Consulting

ICIS

[email protected]

Michael Connolly

Senior Consultant, Analytics

ICIS

[email protected]

oil demand and chemicals feedstocks · october 9, 2020 4 13 million bd of oil demand (18%) lost in...

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