Energy and commodity price benchmarking and market insights London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg illuminating the markets Condensates and aromatics growth Will it move in sync ? Anu Agarwal, VP Chemicals Tokyo October 2014 Executive Summary • • • • Condensate splitter-linked petchem capacities Condensate prices and splitter economics PX and benzene market update Outlook for aromatics Recent growth in aromatics capacity led by condensate splitters PETROCHEMICALS CAPACITY ('000 TONNES) ORTHOXYLE BENZENE PARAXYLENE NE COUNTRY LOCATION COMPANY START-UP YEAR SPLITTER CAPACITY (KB/D) JAPAN KASHIMA JX NIPPON OIL PRE-2009 63.5 220 600 - KOREA DAESAN SAMSUNG TOTAL PRE-2009 80 470 650 - KOREA DAESAN SAMSUNG TOTAL 2014 140 450 1000 - KOREA INCHON SK GLOBAL CHEMICAL 2014 140 292 1300 - KOREA ONSAN S-OIL 2011 89 300 900 - CHINA TIANJIN SINOPEC 2011 50 145 350 - CHINA SHANGHAI SINOPEC PRE-2009 65 360 800 - CHINA ZHANGZHOU DRAGON AROMATICS 2013 90 240 1600 240 THAILAND RAYONG PTT GLOBAL CHEMICAL PRE-2009 65 THAILAND RAYONG PTT GLOBAL CHEMICAL PRE-2009 75 355 560 66 INDONESIA TUBAN PT TPPI PRE-2009 100 360 550 100 SINGAPORE JURONG ISLAND JURONG AROMATICS 2014 100 438 800 200 illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Some more being planned • But the bulk of aromatics production still remains at refineries with CDUs PETROCHEMICALS CAPACITY ('000 TONNES) ORTHOXYLE BENZENE PARAXYLENE NE COUNTRY LOCATION COMPANY START-UP YEAR SPLITTER CAPACITY (KB/D) Brunei Muara Besar Henyi/Qatar Petroleum 2015-2016 70 500 1500 S Korea Daesan Lotte Hyundai 2016 140 120 800 Qatar Ras Laffan Qatar Petroleum 2018 146 500 1300 illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. - Asian splitter based PX, benzene capacity grows illuminating the markets So what is condensate and why the excitement • Natural Gas Liquids (NGLs, C5+), by-product of gas production, development • Light-API 50 and above, low sulphur • Liquids and can use the infrastructure for crude • Usually have 50% or more naphtha content • Traditionally lower cost - used to mix with crude for increasing light output/reduce sulphur • But high naphtha content makes it valuable for petchem producers in Asia Petchems increasingly value condensate more in this part of the world illuminating the markets Typical condensate specs and use Dubai DFC LPG 2 6 Naphtha 16 49 (L 19, H 30) Jet/Kero 16 27 Gasoil 25 12 Heavy Gasoil 26 6 Residue 15 0 illuminating the markets • Heavy naphtha of interest to petchem producers • Heavy naphtha can be reformed for making gasoline or aromatics • In Asia, more than 60% of reforming capacity used for producing aromatics • Asian condensate splitters primarily depend on aromatics margins and to some extent on gasoline, middle distillates A typical chemical linked condensate splitter LPG Condy Splitter Gasoline FR Naphtha Naphtha Splitter Light Naphtha Heavy Naphtha Reformer Reformate Condy Jet Kero Gasoil Heavy Gasoil illuminating the markets Hydrotreater Diesel Bz BTX Extraction PX Traditionally condensate prices below crude • • • • • illuminating the markets South Pars (Iran), NWS (Australia), DFC (Qatar) well known condensates DFC most liquid and largest volumes Large gas development plans in Mideast Gulf fuelled condensate supply Asian chemical producers wanted alternate to naphtha as feed PX demand growth and good economics spurred investment in splitters to produce mainly chemicals like PX, benzene Huge petchem investment pushes up condensate prices, making it unattractive to crude refiners and …putting splitter economics in jeopardy illuminating the markets Little correlation in PX and condensate illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Will US Condensates come to the rescue US condensate production • Consensus that current 2014 condensate production is about 700800 kbd • Most see that rising to 1.3mn -1.6mn b/d by 2020 EIA -- May 29, 2014 illuminating the markets Research courtesy of Darren Horowitz of Raymond James Copyright © 2014 Argus Media Ltd. All rights reserved. So, US Exports of C5+ and naphtha are rising rapidly • • • C5+ condensate going to Canada as diluent for heavy crude production More cargoes are leaving the USGC headed to customers in Asia But US condensates have higher residue and not used by Asian splitters yet Source: EIA and Argus DeWitt forecast illuminating the markets Copyright © 2012 Argus Media Ltd. All rights reserved. PX and Benzene market outlook PX capacity update PTA cap illuminating the markets 5400 Copyright © 2013 Argus Media Ltd. All rights reserved. 10700 6500 A review of the 2014 PX/PTA markets • • PX has been structurally long in 2014 – new capacity startup of 6.7 mnt and closures/rationalisation of around 2.3 mnt However, non-integrated PX makers have been quick to react to oversupply by actively cutting utilisation rates since March illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Asia PX Capacity Outages 2014 Feedstock base MX MX crude/ reformate reformer reformer reformer reformer reformer reformer reformer reformer reformer reformer MX MX MX reformer Condensate reformer reformer reformer reformer reformer Producer Location PX Capacity '000/yr Comments Cosmo Oil / Hyundai Oil Bank Daesan 800 Idled indefinitely June 2014 Lotte Chemicals Ulsan 250 Idled since Aug 2013 S-Oil Onsan Operating at 60-65pc capacity since March 900 JX Nippon Oil & Energy (naphtha) Chita (2 lines) 400 One line idled indefinitely 21st May 2014 JX Nippon Oil & Energy (crude) Kashima 180 Refinery shutdown 40-45 days from 11th May JX Nippon Oil & Energy (condensate) Kashima 420 JX Nippon Oil & Energy (Kyushu Oil) Oita, Kyushu 420 Indefinitely idled May 2013 Idemitsu Kosan Chiba 265 Aromatics' shutdown 77 days starts June Idemitsu Kosan Tokuyama 225 Aromatics' shutdown 50 days from late Sept Zhenhai Zhenhai Refining & Chemical (Ningbo) 530 Planned outage 4 weeks September Qingdao Lidong (GS Caltex) Qingdao 800-1000 restarted mid-Feb - rinning 70pc dur to weak margins Shanghai Petrochemical Shanghai 220 Idled indefinitely end-March 2014 Fujia Dahua (Dalian) Dalian 700 Output reduced to 70pc in May CPC Corp Kaohsiung 3 200 Indefinitely idled since Dec 2012 CPC Corp Kaohsiung 4 250 Indefinitely idled Feb 2014 CPC Corp Kaohsiung 6 250 Indefinitely idled June 2013 Formosa (FCFC) Mai Liao 3 870 planned shutdown Sept 40 days TPPI Tuban 550 Idled indefinitely end-May 2014 Kerteh, Aromatics Malaysia (Petronas) Malaysia 550 2 month planned shutdown May/June Cilacap, Pertamina Indonesia 270 50 day refinery shutdown Sept Exxon Mobil Sri Racha 500 planned shutdown Sept Thai PX Sri Racha 527 reduced rates 25-30pc Apr; planned shutdown 45 days June Aromatics Thailand (PTT) Map Ta Phut 560 planned shutdown 30 days Nov illuminating the markets Copyright © 2012 Argus Media Ltd. All rights reserved. Record year of “non-settlements” for PX ACP • “Record” five months of no ACP in 2013. • 8 out of 10 months with no ACP in 2014 • SKGC entry factor in 2015? Strengthen system or already too late? illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. The difficulty in ACP settlements was also because of severe PTA losses! illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Chinese PX imports have dropped • • • • PX imports have dropped from Jan’14 on lower PTA utilisations/ capacity rationalisations Dalian & Ningbo remains top 2 destinations Korea remains top exporter and will continue to be in the years to come Japan in decline & will continue so on refinery rationalisation leading to lower competitiveness illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. The 2014/2015 Outlook for PX/PTA • The PX market is seeing a supply glut in H2 2014 following the start-up of big projects in South Korea/Singapore/ India • Stand-alone PX units’ production margins will continue to get squeezed. Condensate-based/ stand-alone reformer producers will also be squeezed • Refinery operating rates dictated more by gasoil margins, if those deteriorate, some cut in PX production could happen • The glut in PTA supply will continue well into 2015. But will PTA makers practice more discipline in controlling utilisation rates • There could be pockets of supply tightness in 2015 for PX on more than 6mn t/yr of new PTA capacity and limited new PX capacity addition. But weakness in the downstream sector will continue to weigh on PX production margins illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Paraxylene and Benzene Growth rates World Paraxylene & Benzene Demand • • • Growth Rates for PX have been almost double those for Benzene for 30 years There is no reason to think this will change Benzene Pricing has always reflected its Status as a co- or byproduct – volatile and often weak 50000 PX Bz 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2008 illuminating the markets 2009 Copyright © 2012 Argus Media Ltd. All rights reserved. 2010 2011 2012 2013 2014 2015 Numerous Impacts on Benzene Supply/Price Gasoline Quality / Feed Slate Toluene BV Benzene Demand Reformate Pygas HDA Coal TDP PX Isom Toluene BV PX Demand illuminating the markets Olefin Demand/Feed Slate Copyright © 2013 Argus Media Ltd. All rights reserved. Coke/Steel Demand 2012 World Benzene Trade 180 130 300 1120 460 160 115 650 455 155 175 160 illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. 2014 World Benzene Trade 10 6 750 1566 328 189 48 105 6 59 3 15 0 • • • US benzene production dropping on lighter feed but derivatives good Europe benzene production dropping on refinery rationalisation, higher LPG in crackers Asia benzene production growing – refinery expansions, PX capacity growth, naphtha based production illuminating the markets Copyright © 2014 Argus Media Ltd. All rights reserved. US Benzene Imports '000t 1600 1400 EE 1200 1000 MEA 800 WE 600 Asia 400 SA 200 NA 0 illuminating the markets Copyright © 2012 Argus Media Ltd. All rights reserved. Chinese imports in H2 2014 expected to stay low illuminating the markets Copyright © 2012 Argus Media Ltd. All rights reserved. Conclusions • Significant Asian PX capacity now based on condensate splitters • Feedstock options to Asian splitters still limited. US condensates expected to be used by refiners • PX to remain structurally long in 2015 although pockets of tightness may develop on limited new PX capacity additions • On a shorter term - need to monitor PX production margins and subsequent output changes which have big impact on short term PX supply • Benzene supply growing in Asia, reducing in the US and Europe • Asian benzene depending on US and Europe deficits. China swing market illuminating the markets Thank you Anu Agarwal [email protected] Weakening gasoil cracks could limit PX o/r illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Weakening gasoil cracks on PX production • There has been more than 6mn t/yr of new PX capacities in 2014. More than half of these new PX capacities also has significant gasoil exposure • There was a recovery seen in gasoil cracks during Q3. But cracks are once again under pressure due to long supply and slowing demand. • PX production rates could once again be limited due to poor gasoil cracks illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. How big is the Mid-Distillates market as compared to PX? • In 2013, South Korea produced a total of 39.93m t/yr of diesel & 19.97m t/yr of jet/kero • In the same period, South Korea produced 5.822m t/yr of PX • Middle Distillate margins are at its worst since 2010 • Refinery operators have reduced runs since early-June and this could limited Parex utilisation even though new capacities would be added through August illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved. Asia Benzene Consumption Production '000t 30000 '000t 30000 25000 Coal 25000 20000 HDA 20000 Aniline 15000 Cyclohexane 10000 Cumene 5000 Ethyl Benzene Others TDP 15000 10000 5000 0 illuminating the markets MSTDP & MPX Reformate Pygas 0 Copyright © 2012 Argus Media Ltd. All rights reserved.
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