Upload
alindev
View
998
Download
7
Embed Size (px)
Citation preview
1 Edelweiss Securities Limited
Global demand for ethylene to grow at a healthy rate of 4.8% CAGR over 2010-15, compared to a growth rate of 1.5% over the last 5 years. In spite of healthy demand, there is likely to be an oversupply situation during 2010-11 due largely to huge capacity addition in the Middle East and China – leading to decreased ethylene prices and margins. The situation is expected to improve after 2011 due to limited capacity addition. Global capacity utilization decreased to around 80% during 2010, but is expected to increase substantially till 2015 to reach a high of 95%.
Global ethylene oversupply scenario not as bad Though there is concern that the new capacities coming up in the Middle East and
China are going to flood the world market, depressing ethylene prices and margins, we
believe that most of the scheduled projects, amounting to 10 mtpa (million tonnes per
annum), have already come online by 2010. Only marginal new capacity of 9 mtpa is
expected to come online till 2015. Large projects totaling 12 mtpa, which are delayed
because of a number of reasons, such as, feedstock availability, impact of financial
crisis, regulatory approval and environmental impact, are not expected to come online
anytime soon.
Healthy demand growth led by polymer demand in China and India Demand for ethylene is expected to grow at a healthy rate of 4.8% CAGR between
2011-15 driven by strong polyethylene (PE) demand from developing economies in
Asia. PE demand per capita in India is very low at 2kg against a world average of 10.3
kg. We expect the PE demand per capita in developing countries like China and India to
grow in line with their high GDP growth rate, consuming the added capacity.
Asian crackers have bi-product netback; Middle East (ME) crackers short of feedstock
Most of the crackers that are coming up in China are Naphtha based. Though Naphtha
costs more than Ethane, it gives 17x more bi-product netback than ethane based
crackers.
On the other hand, large projects planned in the Middle East are delayed or cancelled
because of concerns of natural gas availability – thus tightening ethylene supply
situation. The two factors together are expected to contribute positively to cracker
operators’ bottom lines.
Ethylene margins to grow in line with higher capacity utilization We expect that the utilization rates of the crackers will reach a trough in 2010-11, and
then the demand scenario will tighten till 2015 – primarily driven by healthy demand
growth in line with rebound in global economy and less capacity addition. This will drive
better margin for the cracker operators.
Alin Dev
+1-617-504-3157
August 29, 2011
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Edelweiss Securities Limited
OIL AND GAS Ethylene Global Demand-Supply Scenario
SECTOR UPDATE
India Equity Research | Oil, Gas and Services
2 Edelweiss Securities Limited
Oil and Gas
3 Edelweiss Securities Limited
Sector Update
Contents
Ethylene Supply .................................................................................................................................................................. 5
Middle East: ................................................................................................................................................................... 6
Asia: ............................................................................................................................................................................... 7
US and Europe: .............................................................................................................................................................. 7
Ethylene Demand ............................................................................................................................................................... 8
Ethylene Economics ........................................................................................................................................................... 9
Feedstock Slate: ........................................................................................................................................................... 10
Ethylene Margin & Utilization Rate .................................................................................................................................. 12
APPENDIX – I .................................................................................................................................................................... 14
What is Ethylene? ........................................................................................................................................................ 14
Ethylene Value Chain ................................................................................................................................................... 14
Feedstocks ............................................................................................................................................................... 15
Intermediates .......................................................................................................................................................... 15
Derivatives ............................................................................................................................................................... 16
APPENDIX – II ................................................................................................................................................................... 19
How is Ethylene Produced? ......................................................................................................................................... 19
APPENDIX – III .................................................................................................................................................................. 21
Middle East Feedstock concerns: ................................................................................................................................. 21
Saudi Arabia: ........................................................................................................................................................... 22
Iran: ......................................................................................................................................................................... 23
Qatar: ...................................................................................................................................................................... 23
APPENDIX – IV .................................................................................................................................................................. 24
Existing and expected cracker capacities all over the world ........................................................................................ 24
APPENDIX – V ................................................................................................................................................................... 40
Sensitivity Analysis ....................................................................................................................................................... 40
4 Edelweiss Securities Limited
Oil and Gas
5 Edelweiss Securities Limited
Sector Update
Ethylene Supply
Global ethylene capacity has dramatically increased between 2005 and 2010 from 115.2 million tonnes per annum to
144 mtpa, growing at a CAGR 4.6%. During the same period China has added 14.2 mtpa of ethylene cracker capacity,
while Middle Eastern
countries have nearly
doubled their capacity to
23.6 mtpa. At the same
time, during 2006-10 the
cumulative capacity share
of Western Europe and
North America dropped
from 53% to 42.5%.
Total ethylene capacity is
expected to continue
increasing, though at a
subdued rate, till 2015
when the capacity will reach
152.7 mtpa representing a
CAGR of 1.2% from 2010-15
with Asia, mainly China, and
Middle East, mainly Saudi
Arabia adding major portion
of the new capacity.
We believe that most of the scheduled projects, amounting to 10 mtpa, have already come online by 2010. Only
marginal new capacity of 9 mtpa is expected to come online till 2015. Large projects totaling 12 mtpa, which are
delayed because of a number of reasons, such as, feedstock availability, impact of financial crisis, regulatory approval
and environmental impact, are not expected to come online anytime soon.
Chart 1: World ethylene capacity has grown at CAGR 3% from 2004-15
Source: Oil & Gas Journal, Edelweiss research
6 Edelweiss Securities Limited
Oil and Gas
Middle East:
Availability of cheap crude oil and high dependence of the kingdoms on oil revenue have driven the kingdoms and
governments to diversify into manufacturing commodity chemicals and capture more value from the commodity
nature of crude oil. Middle Eastern countries are also better positioned to transport petrochemicals at a lower cost to
developed markets in Europe, as well as high growth markets in Asia. This being a labor intensive industry, the
governments are also able to generate meaningful employment for its people by developing the petrochemical
industry. To bring about rapid growth in the petrochemicals industry, Middle Eastern countries provide different
incentives to investors. Some of the incentives typically provided in Saudi Arabia include:
Subsidized natural gas at $ 0.75 per Mmbtu.
A complex discount system for domestic users with NGLs garnering a 30 percent discount on the export price of
naphtha and naphtha itself receiving an 11 percent discount on its export price. Costs therefore fluctuate in line
with global oil prices, though Saudi producers using liquids still retain a competitive advantage.
Chart 2: Most of the incremental capacity has already been added by 2010
Source: Oil & Gas Journal, Edelweiss research
7 Edelweiss Securities Limited
Sector Update
Asia:
Capacity growth in Asia has been largely led by
large scale projects in China. Chinese state-
owned players like Sinopec and PetroChina are
rapidly building new ethylene capacity, aided by
favorable government policies for joint ventures
with foreign majors. But, environmental worries,
economically unviable size of scattered
petrochemicals plants and the potential threat of
overcapacity could delay the commercial start of
production. In the long term, China could be a
potential competitor to Middle Eastern
petrochemicals players as petrochemical imports
from the Kingdoms are replaced by local Chinese
output.
US and Europe:
High feedstock costs coupled with stagnant demand have depressed capacity growth in the developed markets.
Cheaper imports from ME have forced many economically unviable and older producers to shutdown.
Chart 3: Asia & ME will account for 50% of the cracker
capacity
Chart 5: Western Europe – median age of a plant is 30 years
Chart 4: North America – median age of a plant is 32 years
Source: Oil & Gas Journal, Edelweiss research
Source: Edelweiss research Source: Edelweiss research
8 Edelweiss Securities Limited
Oil and Gas
Ethylene Demand
Demand for ethylene
is strongly correlated
with both GDP
growth rate and
growth in population
with correlation of
87% and 90%
respectively.
Demand per capita for ethylene has historically grown at
an average growth rate of 3% Y-o-Y since 2000, barring the
past few years of global economic slowdown and a dip in
2005 when most of the PE plants in North America were
shut down following hurricane Katrina. We expect the
demand to grow at CAGR 4.8% till 2015 to reach 146 mtpa
driven by strong demand growth and rapid urbanization in
high growth emerging economies of China and India.
Demand for ethylene has historically grown with GDP
with an elasticity of 1.06x since 2000, with exceptions in
the past couple of years due to the financial crisis and in
2005 due to the rampage of hurricane Katrina. We expect
the elasticity to gradually increase to 1.1x in 2015 due to
strong demand growth from countries such as China and
India driven by rapid urbanization and industrialization.
Chart 6: Demand for ethylene is highly correlated to GDP and population
Chart 7: Ethylene demand per capita is expected
to grow at CAGR 4.8% till 2015
Chart 8: Ethylene demand – GDP elasticity to be 1.1x
Source: CMAI Global, IMF, Edelweiss research
Source: CMAI Global, IMF, Edelweiss research
Source: CMAI Global, IMF, Edelweiss research
9 Edelweiss Securities Limited
Sector Update
Demand for ethylene is expected to
grow at a healthy rate of 4.8% CAGR
till 2015, while the capacity is
expected to grow at a minimal rate
of 1.2% CAGR during the same
period with very little capacities
expected to come online after 2011.
PE demand per capita in developing
economies is very low compared to
world average of 10.3 kg. We expect
the PE demand per capita in
developing countries like China and
India to grow in line with their high
GDP growth rates, consuming the
added capacity.
Ethylene Economics
Due to the commoditized nature of the basic chemicals business, price is the single most important factor in
determining the competitiveness of players in the market place as there is only marginal differentiation between the
products of different suppliers.
It is not all about who has the biggest
plant - the next plant built will be the
Biggest Plant; it is also not about who has
the best technology - technology has
become readily available; it is not even
about who traded there first -
competitive conditions dictate decisions.
It is literally about the cost.
With price of ethylene fixed on a cost-
plus basis based on the highest cost
producer, feedstock cost is the most
important factor in determining the
ethylene margins across different
geography.
Chart 9: Ethylene demand to grow at CAGR 4.8% while little new capacity will come up after 2011
Chart 10: ME producers enjoy the lowest cost of production riding on cheap ethane
Source: CMAI Global, IMF, Edelweiss research
Source: CMAI Global
10 Edelweiss Securities Limited
Oil and Gas
Feedstock Slate:
Petrochemicals are produced by cracking Naphtha or
ethane.
Since 2008, the relative price of U.S. ethane (as a
percent of crude oil price) has been trending down,
due to cheaper U.S. natural gas. This benefits the
petrochemical producers using natural gas as feed
stock, but there is always a trade off as naphtha
unlocks more sophisticated derivatives.
Cracking ethane generates a large proportion of
ethylene (95%) while cracking naphtha gives better
byproduct credit. A typical cracker output is given
below:
Ethane crackers enjoy a higher margin as
naphtha prices rallied with crude oil price,
while natural gas price remained stable.
Middle Eastern countries which provide natural
gas at an average subsidized rate of USD
4/mmBtu, enjoys still higher margins though
the gap narrowed in the recent years driven by
a fall in natural gas prices in the international
market.
Chart 11: Olefins Feedstock vs. Crude Oil Prices
Source: Lyondell Basell Investor Day 2010
Chart 12: Napththa vs ethane cracker margin widens
Source: Platts, ICIS pricing, Edelweiss Research
Table 1: Cracker output slate
Source: Platts, ICIS pricing, Edelweiss Research
11 Edelweiss Securities Limited
Sector Update
Feedstock-related costs account for
over 50% of the total cash costs of
the final output of petrochemical
companies.
Most of the crackers in Asia and
Europe are Naphtha based while
those in the Middle East and North
America are ethane based. Though
Naphtha costs more than Ethane,
Naphtha gives 17x more bi-product
netback than ethane based crackers.
Meanwhile, propylene / ethylene price ratio
continues to increase as ethylene production
from ethane increases driven by higher
cracker margin realization and propylene
production from steam naphtha crackers
declines owing to large ethane cracker
capacity addition in the ME. The effect is even
more pronounced in the case of butadiene
which is used as a substitute for natural
rubber.
Chart 13: Regional feedstock slate of steam crackers
Chart 14: Propylene-ethylene spread widens
Source: OGJ, Edelweiss Research
Source: Bloomberg, Edelweiss Research
12 Edelweiss Securities Limited
Oil and Gas
Ethylene Margin & Utilization Rate
The cracker industry is cyclical in nature and
historically operated in a 7-8 year cycle. We
believe that the ROCE cycle of the industry
based on replacement cost of a steam cracker
will hit trough in 2011, and will see the
beginning of new cycle starting 2011-12.
Historically operating rates of crackers have closely
followed ethylene margin as the operators have
more incentive to run the plant at a higher
operating rate when the margins are higher, and
lower the rate when the margins are declining.
Chart 15: Beginning of a new cycle of profitability
Chart 16: Operating rate follows gross margin
Source: CERA Downstream Index, Edelweiss Research
Source: Edelweiss Research
13 Edelweiss Securities Limited
Sector Update
We believe that the gross ethylene margin will start
strengthening in line with higher ethylene prices and
gradually increase to USD 460 per tonne, along with
higher operating rates of the crackers though the
crackers will not see high margins of 2004-06 anytime
soon partly because of higher crude oil prices.
At the same time the net cracker margin realized will
gradually strengthen to USD 383 per tonne by the
year 2015, riding on higher bi-product netbacks.
Chart 17: Ethylene-Naphtha crack is expected to
grow in line with higher operating rate
Chart 18: Cracker margin is expected to grow along with higher bi-product prices
Source: Edelweiss Research
Source: Edelweiss Research
14 Edelweiss Securities Limited
Oil and Gas
APPENDIX – I
What is Ethylene?
Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyethylene
terephthalate (PET), polyvinyl chloride (PVC) and polystyrene (PS) as well as fibers and other organic chemicals. These
products are used in a wide variety of industrial and consumer markets such as the packaging, transportation,
electrical/electronic, textile and construction industries as well as consumer chemicals, coatings and adhesives.
Ethylene is one of the largest-volume petrochemicals. With a diverse range of end-uses, demand for ethylene is
sensitive to both economic and energy cycles. It is often seen as a barometer to the performance of the petrochemical
industry as whole.
According to CMAI, global production and consumption of ethylene in 2010 were both approximately 115m tonnes.
Global capacity utilization (demand / capacity) was 83.1% in 2010, down from 88% in 2009. Ethylene consumption is
estimated to have increased by 2.1% in 2010; it is forecast to grow an average 4.9% per year up to 2015.
Ethylene Value Chain
Chart A1-1: Ethylene value chain
Source:Edelweiss research
15 Edelweiss Securities Limited
Sector Update
Feedstocks
Ethane: Ethane is isolated on an industrial scale from natural gas, and as a byproduct of petroleum refining. Its
chief use is as petrochemical feedstock for ethylene production.
Naphtha: Naphtha is obtained in petroleum refineries as one of the intermediate products from the distillation
of crude oil. It is a liquid intermediate between the light gases in the crude oil and the heavier liquid kerosene.
The generic name 'naphtha' describes a range of different refinery intermediate products used in different
applications. Naphtha is used primarily as feedstock for producing high octane gasoline (via the catalytic
reforming process). It is also used in the bitumen mining industry as a diluent, the petrochemical industry for
producing olefins in steam crackers, and the chemical industry for solvent (cleaning) applications.
Intermediates
Ethylene Oxide: Because of its special molecular structure, ethylene oxide easily participates in the addition
reaction and thus easily polymerizes. Although it is a vital raw material with diverse applications, including the
manufacture of products like polyethylene glycol that are often more effective and less toxic than alternative
materials, ethylene oxide itself is a very hazardous substance: at room temperature it is a flammable,
carcinogenic, mutagenic, irritating, and anesthetic gas with a misleadingly pleasant aroma. Therefore, it is
commonly handled and shipped as a refrigerated liquid.
The chemical reactivity that is responsible for many of
ethylene oxide's hazards has also made it a key industrial
chemical that supports the living standards of advanced
societies. Ethylene oxide (EO) is primarily used to make
ethylene glycol. Other EO derivatives include ethyoxylates
(for use in shampoo, kitchen cleaners, etc), glycol ethers
(solvents, fuels, etc) and ethanol amines (surfactants,
personal care products, etc).
Ethylene Glycol: Ethylene glycol is an organic compound
widely used as automotive antifreeze and a precursor to
polymers. Ethylene glycol is produced from ethylene, via
the intermediate ethylene oxide. Ethylene oxide reacts with
water to produce ethylene glycol.
Most monoethylene glycol (MEG) is used to make polyester fibers for textile applications, PET resins for bottles
and polyester film. MEG is also used in antifreeze applications.
Ethyl Benzene: This aromatic hydrocarbon is important in the petrochemical industry as an intermediate in the
production of styrene, which in turn is used for making polystyrene, a common plastic material.
Although often present in small amounts in crude oil, ethylbenzene is produced in bulk quantities by
combining benzene and ethylene in an acid-catalyzed chemical reaction.
Chart A1-2: Global Ethylene Derivatives
Source:Edelweiss research
16 Edelweiss Securities Limited
Oil and Gas
Styrene: Styrene, also known as vinyl benzene, is a colorless oily liquid that evaporates easily. The presence of
the vinyl group allows styrene to polymerize. Commercially significant products include polystyrene, ABS,
styrene-butadiene (SBR) rubber, styrene-butadiene latex and other products.
Ethylene dichloride: Ethylene dichloride (EDC) is a chlorinated hydrocarbon, mainly used to produce vinyl
chloride monomer (VCM), the major precursor for PVC production. Production is primarily achieved through
the iron (III) chloride-catalyzed reaction of ethylene and chlorine.
Vinyl chloride: VCM is an important industrial chemical chiefly used to produce the polymer polyvinyl chloride
(PVC). It can be produced by two methods - hydrochlorination of acetylene and dehydrochlorination of
ethylene dichloride. Due to the relatively low cost of ethylene, compared to acetylene, most vinyl chloride has
been produced via dehydrochlorination of EDC, despite lower yields (50-60%), lower product purity and higher
costs for waste treatment.
Derivatives
PET: Polyethylene terephthalate is a thermoplastic polymer resin of the polyester family and is used in
synthetic fibers; beverage, food and other liquid containers; thermoforming applications; and engineering
resins often in combination with glass fiber. The majority of the world's PET production is for synthetic fibers
(in excess of 60%) with bottle production accounting for around 30% of global demand. In discussing textile
applications, PET is generally referred to as simply "polyester" while "PET" is used most often to refer to
packaging applications. The polyester industry makes up about 18% of world polymer production.
Polystyrene: PS is an aromatic polymer made from the
monomer styrene. Polystyrene is one of the most widely
used plastics, the scale being several billion kilograms per
year. Solid polystyrene is used, for example, in disposable
cutlery, plastic models, CD and DVD cases, and smoke
detector housings. Products made from foamed
polystyrene are nearly ubiquitous, for example packing
materials, insulation, and foam drink cups.
Polyethylene: The largest outlet, accounting for 60% of
ethylene demand globally, is polyethylene. Polyethylene is
a thermoplastic polymer consisting of long chains
produced by combing the ingredient monomer ethylene.
PE is classified into several different categories based
mostly on its density and branching. The mechanical properties of PE depend significantly on variables such as
the extent and type of branching, the crystal structure and the molecular weight. With regard to sold volumes,
the most important polyethylene grades are HDPE, LLDPE and LDPE.
17 Edelweiss Securities Limited
Sector Update
HDPE is defined by a density of greater or equal to 0.941 g/cm3. It has
a low degree of branching and thus stronger intermolecular forces and
tensile strength. HDPE is used in products and packaging such as milk
jugs, detergent bottles, margarine tubs, garbage containers and water
pipes. One third of all toys are manufactured from HDPE.
LDPE is defined by a density range of 0.910–0.940 g/cm3. It has a
high degree of short and long chain branching, which means that
the chains do not pack into the crystal structure as well. This results
in a lower tensile strength and increased ductility. The high degree
of branching with long chains gives molten LDPE unique and
desirable flow properties. LDPE is used for both rigid containers and
plastic film applications such as plastic bags and film wrap.
Source:Edelweiss research
Source:Edelweiss research
18 Edelweiss Securities Limited
Oil and Gas
LLDPE is defined by a density range of 0.915–0.925 g/cm3. It is a
substantially linear polymer with significant numbers of short
branches. LLDPE has higher tensile strength than LDPE and
exhibits higher impact and puncture resistance; thus lower
thickness (gauge) films can be blown, compared with LDPE, with
better environmental stress cracking resistance but is not as
easy to process. LLDPE is used in packaging, particularly film for
bags and sheets. Lower thickness may be used compared to
LDPE for use in cable covering, toys, lids, buckets, containers
and pipe. While other applications are available, LLDPE is used
predominantly in film applications due to its toughness, flexibility
and relative transparency. Product examples range from
agricultural films, saran wrap, and bubble wrap, to multilayer and composite films.
PVC: Polyvinyl chloride is a thermoplastic polymer. PVC is the third most widely produced plastic, after
polyethylene and polypropylene. It is widely used in construction because it is cheap, durable, and easy to
assemble. A number of PVC's properties recommend it for a wide variety of applications. It is biologically and
chemically resistant, making it the plastic of choice for most household sewerage pipes and other pipe
applications where corrosion would limit the use of metal. With the addition of impact modifiers and
stabilizers, it becomes a popular material for window and door frames. By adding plasticizers, it can become
flexible enough to be used in cabling applications as a wire insulator. It is also used to make vinyl records.
PVC is a controversial material in that during its production, useful life and incineration, especially in accidental
and uncontrolled circumstances, it may liberate persistent toxins, which the manufacture, use and destruction
of suitable alternative plastics, such as, polypropylene do not.
Other ethylene derivatives include alpha olefins which are used in LLDPE production, detergent alcohols and
plasticizer alcohols; vinyl acetate monomer (VAM) which is used in adhesives, paints, paper coatings and
barrier resins; and industrial ethanol which is used as a solvent or in the manufacture of chemical
intermediates such as ethyl acetate and ethylacrylate.
Source:Edelweiss research
19 Edelweiss Securities Limited
Sector Update
APPENDIX – II
How is Ethylene Produced?
Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Europe and
Asia, ethylene is obtained mainly from cracking naphtha, gasoil and condensates with the coproduction of propylene,
C4 olefins and aromatics (pyrolysis gasoline). The cracking of ethane and propane, primarily carried out in the US,
Canada and the Middle East, has the advantage that it only produces ethylene and propylene, making the plants
cheaper to construct and less complicated to operate.
Olefin cracking and inter-
conversion processes are
being developed to boost
light olefins output.
Typically, they can
convert C4-C8 olefins and
light pyrolysis gasoline
into ethylene and
propylene. Newer
catalytic processes are
under development that
provide enhanced control
of the cracking process or
permit catalytic
dehydrogenation of
ethane.
Small quantities of dilute
ethylene can also be
obtained from refinery
streams. In South Africa,
ethylene is produced by
the Fisher-Tropsch
process from gases
obtained by coal
gasification. Efforts have
been made to develop
processes which can
crack crude or residual oil
Chart A2-1: Steam Cracking Process
20 Edelweiss Securities Limited
Oil and Gas
but they suffer from high operating costs.
Processes are available that use lower alcohols as feedstocks. Norsk Hydro and UOP have developed a MTO (methanol-
to-olefins) technology that converts methanol to ethylene and propylene. There is considerable interest in using this
technology in China with methanol produced via the gasification of coal.
Working with UOP, Total has developed a technology which takes the heavier olefins from the MTO unit and converts
them into lighter olefins, more specifically into propylene. A pilot plant has been built at Feluy, Belgium, to assess this
olefin cracking process (OCP) in conjunction with the MTO process.
Much research is being conducted into the direct conversion of methane to ethylene. However, the problem with this
technology, called oxidative coupling of methane (OCM), is the low per-pass yield of ethylene and the high yield of
unwanted carbon oxide by-products such as carbon monoxide and carbon dioxide. Most attempts to increase product
yield have been through new catalyst formulations. Research is also focusing on making further use of the carbon
oxides by producing methanol or methane.
21 Edelweiss Securities Limited
Sector Update
APPENDIX – III
Middle East Feedstock concerns: Gas demand in the
Middle East has been
rising by around 7%
per annum and it has
outpaced the growth
in regional gas
production.
Domestic demand
growth is fuelled by
economic expansion,
low gas prices, the
switch from oil to gas
for power generation
and the injection of
gas into oil reservoirs
to enhance oil
recovery.
In the Middle East,
there is tension
between the
requirement to
supply domestic
markets to fuel
economic growth
and the desire to
achieve higher
revenues via export
sales agreements.
73% of the Middle
East gas reserves are
concentrated in just two countries: Iran and Qatar. Qatar, which is the world’s largest LNG producer and
exporter, has a moratorium on new North Field developments and export sales agreements until 2012.
Outside of Iran and Qatar, a significant proportion of the region’s gas reserves are in associated oil deposits,
and so gas production is not flexible. Much of the gas in the region is also sour, which makes it more difficult
and costly to extract and process. Domestic sales prices, which are subsidized to varying degrees, may need to
rise to cover the additional processing costs and investment required in gas infrastructure.
Chart A3-1: Electricity demand in the ME countries have grown 8.7%
CAGR from 1980
Source: U.S. Energy Information Administration
22 Edelweiss Securities Limited
Oil and Gas
Price subsidies, political differences and more lucrative export opportunities have reduced the availability of
gas produced in the Middle East for consumption in the region. As a result, there is limited intra-regional
infrastructure in place for the transportation of natural gas. Individual countries in the Middle East have
developed independent strategies to address their rising demand for natural gas. Saudi Arabia is looking to
substantially increase gas production to meet growing domestic demand and UAE has been actively looking at
unconventional gas reserves. The emirate’s associated gas is increasingly being used for reinjection. Rapid
economic development and high domestic power subsidies have prompted UAE to take alternative measures
to meet future demand.
Saudi Arabia: The current
capacity of ethane crackers in the
country is 6.1 mtpa while it is
expected to increase to 6.4 mtpa
over the next five years. Saudi
Arabia currently produces enough
ethane to supply to the crackers;
however, electricity production is
also expected to grow at more
than 8%. As most of the natural
gas produced in Saudi Arabia is
associated gas (hence the
production is capped by OPEC
crude oil production quota of 8.4
million bpd), and lower regulated
price ($0.75 per mmBtu) does
not provide any incentive for
drilling non-associated gas,
ethane supply is expected to
tighten in the future. Though the
government is planning to
increase the gas price to $1.2 per
mmBtu from 2012, this may not
be practically possible in the near
term, given the tense socio
political situation throughout the
Middle East.
Chart A3-2: Saudi ethane will be more dependent on oil production
Chart A3-3: KSA ethane deliveries may turn below allocations
Source: CMAI Global
Source: CMAI Global
23 Edelweiss Securities Limited
Sector Update
Iran: Iran has ethane cracker
capacity of 3.7 mtpa while the
largest non-associated gas field,
South Pars, can produce enough
ethane to support 1.35 mtpa.
The country has plans to
produce additional natural gas
from South Pars over the next
five years that can support upto
4.5 mtpa of cracker capacity.
Qatar: Qatar has put a
moratorium on any new projects
requiring natural gas till 2012.
Depending on the outcome of its
ongoing study of the natural gas reserve in the country, even if the moratorium is lifted in 2012, no new
capacity can come up before 2016.
Bottom line: The demand for natural gas has exponentially grown throughout the Middle East riding on cheap
pricing. This puts a risk of feedstock availability in the new multi million tonne projects.
Chart A3-4: Sanctions continue to delay Iran
Source: CMAI Global
24 Edelweiss Securities Limited
Oil and Gas
APPENDIX – IV
Existing and expected cracker capacities all over the world
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
ALGERIA Sonatrach Skikda 133,000
2010 100
ARGENTINA
Dow
Chemical
Co.
Bahia
Blanca
(BB1)
275,000
2010 100
ARGENTINA
Dow
Chemical
Co.
Bahia
Blanca
(BB2)
490,000
2010 100
pARGENTINA Huntsman
Corp.
San
Lorenzo 21,000
2010
25
75
ARGENTINA Petrobras
Energia
Puerto San
Martin 32,500
2010
100
ARGENTINA Petrobras
Energia
San
Lorenzo 20,000
2010
100
AUSTRALIA
Huntsman
Chemical
Co.
Australia
Ltd.
Melbourne,
Vic. 32,000
2010 100
AUSTRALIA Qenos Pty.
Ltd. Altona, Vic. 180,000
2010 80 5 15
AUSTRALIA Qenos Pty.
Ltd.
Botany,
NSW 250,000
2010 80
20
AUSTRIA OMV AG Schwechat 500,000
2010 15
23 62
AZERBAIJAN Azerichimi
a Sumgait 30,000
2010
AZERBAIJAN Azerichimi
a Sumgait 300,000
2010
BELARUS
Production
Associatio
n Polymir
Novopolots
k 73,000
2010
BELARUS
Production
Associatio
n Polymir
Novopolots
k 120,000
2010
BELGIUM
BASF
Antwerpen
NV
Antwerp 1,080,000
2010
5
95
BELGIUM Benelux
FAO Antwerp 255,000
2010 16 16 18 50
BELGIUM Benelux
FAO Antwerp 610,000
2010 16 16 18 50
BELGIUM Benelux
FAO Antwerp 550,000
2010 16 16 18 50
25 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
BRAZIL Braskem
SA
Camacari,
Bahia 600,000
2010 5
95
BRAZIL Braskem
SA
Camacari,
Bahia 680,000
2010
100
BRAZIL Copesul Triunfo, RS 700,000
2010
100
BRAZIL Copesul Triunfo, RS 500,000
2010
100
BRAZIL
Petroquimi
ca Uniao
SA
Santo
Andre, Sao
Paulo
700,000
2010
100
BRAZIL Rio
Polimeros
Duque de
Caxias 520,000
2010
100
BULGARIA
Lukoil
Neftochim
Bourgas
JSC
Bourgas 250,000
2010 3.4
10 86.6
BULGARIA
Lukoil
Neftochim
Bourgas
JSC
Bourgas 150,000
2010
100
CANADA
Dow
Chemical
Co.
Fort
Saskatchew
an, Alberta
1,100,000
2010 100
CANADA
Imperial
Oil
Products &
Chemicals
Sarnia,
Ontario 300,000
2010 33 33 34
CANADA
Nova
Chemicals
Corp.
Corunna,
Ontario 839,002
2010 10 15 30 40 5
CANADA
Nova
Chemicals
Corp.
Joffre,
Alberta
(E1)
725,624
2010 100
CANADA
Nova
Chemicals
Corp.
Joffre,
Alberta
(E2)
816,327
2010 100
CANADA
Nova
Chemicals
Corp.
Joffre,
Alberta
(E3)
1,269,841
2010 100
CANADA Petromont Varennes,
Quebec 295,000 2010
10 25 50 15
CHILE Petrox SA Concepcion 60,000
2010 8
16 76
CHINA BASF-YPC
Co. Ltd. Nanjing 600,000
2010
100
CHINA
China
National
Offshore
Oil Co.
Daya Bay,
Guangdong 800,000
2010
100
26 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
CHINA
China
National
Offshore
Oil Co.
Dushanzi 140,000
2010
100
CHINA
China
Petrochem
ical
Industrial
Corp.
Daqing 320,000
2010
100
CHINA
Dalian
Petrochem
ical Co.
Dalian 4,000
2010
100
CHINA
Fujian
Petrochem
ical Co.
Ltd.
Quanzhou 800,000
2010
100
CHINA
Fushun
Petrochem
ical
Complex
Fushun 115,000
2010
100
CHINA
Fushun
Petrochem
ical
Complex
Fushun
685,000 2011
100
CHINA
Gaoqiao
Petrochem
ical Co.
Gaoqiao 14,000
2010
100
CHINA
Guangzhou
Petrochem
ical Co.
Guangzhou 150,000
2010
100
CHINA
Jilin
Chemical
Industrial
Co. Ltd.
Jilin 700,000
2010
100
CHINA
Lanzhou
Chemical
Industrial
Co.
Lanzhou 600,000
2010
100
CHINA
Lanzhou
Chemical
Industrial
Co.
Lanzhou
320,000 2011
100
CHINA Norinco/Zh
enhua Panjin 450,000
2010 100
CHINA
Panjin
Ethylene
Industry
Corp.
Panjin 130,000
2010 100
CHINA Petrochina Dushanzi 1,000,000
2010
100
CHINA Sinopec Caojing,
Shanghai 145,000
2010
30 70
CHINA Sinopec Caojing,
Shanghai 700,000
2010
60 40
27 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
CHINA Sinopec Shanghai
605,000 2014
60 40
CHINA Sinopec Maoming,
Guangdong 1,000,000
2010
100
CHINA Sinopec Neijing 650,000
2010
60 40
CHINA Sinopec Puyang,
Henan 180,000
2010
100
CHINA Sinopec Qilu 720,000
2010
80 20
CHINA Sinopec Tianjin 200,000
2010
100
CHINA Sinopec Tianjin 1,000,000
2010
100
CHINA Sinopec Wuhan,
Hubei 800,000 2013
100
CHINA Sinopec Zhenhai 1,000,000
2010
100
CHINA
PetroChina
Sichuan
Petrochem
ical
Co. Ltd
Chengdu,
Quanzhou
City
800,000 2011
100
CHINA BASF-YPC
Co. Ltd. Nanjing 150,000
2010
100
CHINA
Daqing
Petroleum
&
Chemical
Co.
Heilongjian
g Province 600,000 2012
100
CHINA
Shenhua
Baotou
Coal
Chemical
Baotou,
Inner
Mongolia
300,000
2010
100
TAIWAN
Chinese
Petroleum
Corp.
Kaohsiung
Linyuan 500,000
2010 100
TAIWAN
Chinese
Petroleum
Corp.
Linyuan 230,000
2010 100
TAIWAN
Chinese
Petroleum
Corp.
Linyuan 380,000
2010 100
TAIWAN
Formosa
Petrochem
ical Corp.
Mailiao 700,000
2010
7.3
92.7
TAIWAN
Formosa
Petrochem
ical Corp.
Mailiao 1,035,000
2010
6.6 0.3 93.1
TAIWAN Formosa
PetrochemMailiao 1,200,000
2010
9 91
28 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
ical Corp.
TAIWAN CPC Corp.
Taiwan
Kaohsiung,
Linyuan 600,000 2013
100
COLOMBIA
Empresa
Colombian
a de
Petroleos
Barrancabe
rmeja 100,000
2010 80 20
CROATIA Polimeri Zagreb 90,000
2010 100
CZECH REPUBLIC Unipetrol Litvinov 544,000
2010
2 6 56 1 35
EGYPT
Sidi Kerir
Petrochem
icals Co.
Alexandria 300,000
2010 100
FINLAND Borealis
OY Porvoo 390,000
2010
100
FRANCE A. P. Feyzin Feyzin 250,000
2010
100
FRANCE ExxonMobi
l Corp.
Notre
Dame de
Gravencho
n
400,000
2010
100
FRANCE Naphthach
imie Lavera 740,000
2010
50 50
FRANCE
Polimeri
Europa
France SAS
Dunkerque 430,000
2010 0.5 3.5 20 76
FRANCE
Societe du
Craqueur
de L’
Aubette
SCA
Berre
l’Etang 450,000
2010
12 75 13
FRANCE
Total
Petrochem
icals
Carling-St.
Avold-
Marienau
320,000
2010
100
FRANCE
Total
Petrochem
icals
Gonfreville
l’Orcher 520,000
2010
100
GERMANY
Basell
Polyfine
GMBH
Wesseling 738,000
2010
10 90
GERMANY
Basell
Polyfine
GMBH
Wesseling 305,000
2010
100
GERMANY BASF AG Ludwigshaf
en 620,000
2010
5 5 90
GERMANY
BP
Gelsenkirc
hen
Gelsenkirch
en 580,000
2010
2 8 78 12
GERMANY
BP
Gelsenkirc
hen
Gelsenkirch
en 480,000
2010
9 65 26
29 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
GERMANY INEOS Dormagen 550,000
2010
100
GERMANY INEOS Dormagen 544,000
2010
100
GERMANY LyondellBa
sell
Munchsmu
nster 400,000
2010 13 17 17 53
GERMANY
Dow
Chemical
Co.
Bohlen 560,000
2010
100
GERMANY
OMV
Deutschlan
d GMBH
Burghause
n, Bavaria 450,000
2010 2.5 6 6 84 1.5
GERMANY
Shell &
DEA Oil
GMBH
Heide 110,000
2010
100
GERMANY
Shell &
DEA Oil
GMBH
Wesseling 500,000
2010
100
GREECE
EKO
Chemicals
Co. AE
Thessalonik
i 20,000
2010
65
35
HUNGARY
Tiszai
Vegyi
Kombinat
Ltd.
Tiszaujvaro
s 370,000
2010
1 4 90 5
HUNGARY
Tiszai
Vegyi
Kombinat
Ltd.
Tiszaujvaro
s 290,000
2010
7 16 75 2
INDIA
Gas
Authority
of India
Ltd.
Pata, Uttar
Pradesh 300,000
2010 33 33 34
INDIA
Haldia
Petrochem
icals Ltd.
Haldia,
West
Bengal
670,000
2010
100
INDIA Indian Oil
Corp. Ltd.
Haryana,
New Delhi 800,000
2010
100
INDIA
Indian
Petrochem
icals Corp.
Ltd.
Baroda,
Gujarat 156,000
2010
100
INDIA
Indian
Petrochem
icals Corp.
Ltd.
Gandhar,
Gujarat 400,000
2010 42.5 57.5
INDIA
Indian
Petrochem
icals Corp.
Ltd.
Nagothane,
Maharashtr
a
400,000
2010 42.5 57.5
INDIA National
Organic
Thane,
Maharashtr75,000
2010
100
30 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
Chemical
Industries
Ltd.
a
INDIA
Reliance
Industries
Ltd.
Hazira,
Gujarat 840,000
2010
100
INDIA
Brahmaput
ra Cracker
and
Polymer
Ltd.
Lepetkata,
Assam 280,000 2013 33 33 34
INDIA
ONGC
Petro-
additions
Ltd. (OPAL)
Dahej,
Gujarat 1,100,000 2013 50 50
INDONESIA
PT
Chandra
Asri
Cilegon,
West Java 600,000
2010
100
IRAN
Amir Kabir
Petrochem
ical Co.
Amir Kabir 520,000
2010 24 4 12 58 2
IRAN
Arak
Petrochem
ical
Arak 247,000
2010
100
IRAN
Arya Sasol
Polymer
Co.
Assaluyeh
Bushehr 1,000,000
2010 100
IRAN
Bandar
Imam
Petrochem
ical Co.
Bandar
Imam 550,000
2010 20 3 10
67
IRAN
Jam
Petrochem
ical Co.
Assaluyeh
Bushehr 1,320,000
2010 100
IRAN
Marun
Petrochem
ical Co.
Bandar
Assaluyeh 1,100,000
2010 100
IRAN
Tabriz
Petrochem
ical Co.
Tabriz 136,000
2010 4 8 8 80
ISRAEL Carmel
Olefins Ltd. Haifa 240,000
2010
10 10 80
ITALY Polimeri
Europa Brindisi 440,000
2010
100
ITALY Polimeri
Europa Gela 245,000
2010 25 5
70
ITALY Polimeri
Europa
Porto
Marghera 490,000
2010
100
ITALY Polimeri
Europa Priolo 745,000
2010 2
1 65 32
ITALY Syndial Porto
Torres 250,000
2010
70 30
JAPAN Asahikasei
Chemicals
Kurasiki,
Okayama 500,000
2010
100
31 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
Corp.
JAPAN
Idemitsu
Petrochem
ical Co.
Ltd.
Chiba 374,000
2010
2 98
JAPAN
Idemitsu
Petrochem
ical Co.
Ltd.
Tokuyama 623,000
2010
100
JAPAN Keiyo
Ethylene
Ichihara,
Chiba 740,000
2010
100
JAPAN
Maruzen
Petrochem
icals
Chiba 520,000
2010
100
JAPAN
Mitsubishi
Chemical
Corp.
Kashima
(Unit 1) 375,000
2010
10 20 55
15
JAPAN
Mitsubishi
Chemical
Corp.
Kashima
(Unit 2) 453,000
2010
10 20 55
15
JAPAN
Mitsubishi
Chemical
Corp.
Mizushima 500,000
2010
5 5 80
10
JAPAN
Mitsui
Chemicals
Inc.
Ichihara,
Chiba 617,000
2010
10 90
JAPAN
Mitsui
Chemicals
Inc.
Takaishi
City, Osaka 450,000
2010
100
JAPAN
Nippon
Petrochem
ical
Kawasaki 460,000
2010
100
JAPAN Showa
Denko KK Oita 675,000
2010
100
JAPAN
Sanyo
Petrochem
ical Co. Ltd
Mizushima 500,000
2010
100
JAPAN
Sumitomo
Chemical
Co. Ltd.
Chiba 415,000
2010
100
JAPAN
Tonen
Chemical
Corp.
Kawasaki 515,000
2010
100
JAPAN Tosoh
Corp. Yokkaichi 527,000
2010
100
KAZAKHSTAN Akpo Aktau 100,000
2010
KAZAKHSTAN Governme
nt Atyrau 30,000
2010
KUWAIT Equate
PetrochemShuaiba 850,000
2010 100
32 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
ical Co.
(Equate II)
LIBYA National
Oil Co. Ras Lanuf 350,000
2010
100
MALAYSIA
Ethylene
Malaysia
Sdn. Bhd.
Kertih 400,000
2010 100
MALAYSIA
Optimal
Olefins
Sdn. Bhd.
Kertih 600,000
2010 100
MALAYSIA
Titan
Petrochem
icals Sdn.
Bhd.
Pasir
Gudang,
Johor
442,000
2010
10 10 80
MALAYSIA
Titan
Petrochem
icals Sdn.
Bhd.
Pasir
Gudang,
Johor
667,000
2010
10 10 80
MEXICO Petroleos
Mexicanos
La
Cangrejera,
Veracruz
600,000
2010 100
MEXICO Petroleos
Mexicanos
Morelos,
Veracruz 600,000
2010 100
MEXICO Petroleos
Mexicanos
Pajaritos,
Veracruz 184,000
2010 100
NETHERLANDS
Dow
Chemical
Co.
Terneuzen
(No. 1) 580,000
2010
15
85
NETHERLANDS
Dow
Chemical
Co.
Terneuzen
(No. 2) 585,000
2010
15
85
NETHERLANDS
Dow
Chemical
Co.
Terneuzen
(No. 3) 635,000
2010
100
NETHERLANDS SABIC
Europe
Geleen
(No. 3) 595,000
2010
100
NETHERLANDS SABIC
Europe
Geleen
(No. 4) 670,000
2010
100
NETHERLANDS
Shell
Nederland
Chemie BV
Moerdijk 900,000
2010
100
NIGERIA
Eleme
Petrochem
ical Co.
Ltd.
Eleme
River 550,000
2010 33 33 34
NORTH KOREA
Namhung
Youth
Chemical
Complex
Anju, South
P’yong’an
Province
60,000
2010
NORWAY Noretyl AS Rafnes,
Bamble 550,000
2010 30 45 25
POLAND PKN Orlen
SA Plock 700,000
2010
5 5 90
33 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
PORTUGAL Repsol YPF
SA Sines 570,000
2010
100
QATAR
Qatar
Petrochem
ical Co.
Mesaieed 720,000
2010 100
QATAR Q-Chem I Mesaieed 500,000
2010 80 20
QATAR Ras Laffan
Olefins Co. Ras Laffan 1,300,000
2010 80 20
ROMANIA Petrom SA Pitesti 170,000
2010 19.5 8.5 23.7 48.4
ROMANIA Petromidia
SA Navodari 200,000
2010
100
RUSSIA Angarsknef
torgsintez
Angarsk,
Siberia 60,000
2010
5.2 89.2 5.6
RUSSIA Angarsknef
torgsintez
Angarsk,
Siberia 240,000
2010
5.2 89.2 5.6
RUSSIA
Nizhnekam
skneftekhi
m
Nizhnekam
sk 600,000
2010
RUSSIA Norsy Norsy 300,000
2010
100
RUSSIA Omskykau
chuyk
Omsk,
Siberia 90,000
2010
RUSSIA Orgsintez Kazan 445,000
2010 100
RUSSIA Oxosyntez Orsk 45,000
2010
RUSSIA Polimir Novopolots
k 150,000
2010
100
RUSSIA Salavatneft
orgsintez Salavat 300,000
2010
RUSSIA Sibur
Himprom Perm 30,000
2010
RUSSIA Sibur-
Neftechim
Nizhny
Novgorod 300,000
2010
20 80
RUSSIA Sintezkauc
huk Samara 300,000
2010
RUSSIA Stavrapolp
olymer Prikumsk 350,000
2010
RUSSIA Tomsk PCC Tomsk 300,000
2010
RUSSIA Uraorgsint
es Ufa 235,000
2010
SAUDI ARABIA
Al Jubail
Petrochem
ical Co.
Jubail 800,000
2010 50 50
SAUDI ARABIA Arabian
PetrochemJubail 800,000
2010
100
34 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
ical Co.
SAUDI ARABIA
Arabian
Petrochem
ical Co.
Jubail 800,000
2010 50 50
SAUDI ARABIA
Arabian
Petrochem
ical Co.
Jubail 650,000
2010 100
SAUDI ARABIA
Chevron
Phillips
Chemical
Co. LP
Jubail 300,000
2010
50 50
SAUDI ARABIA
Eastern
Petrochem
ical Co.
Jubail 1,300,000
2010 50 50
SAUDI ARABIA
Jubail
United
Petrochem
ical Co.
Jubail 1,450,000
2010 50 50
SAUDI ARABIA
Saudi Basic
Industries
Corp.
Yanbu 1,380,000
2010 50 50
SAUDI ARABIA
Saudi
Petrochem
ical Co.
Jubail 1,350,000
2010 100
SAUDI ARABIA Tasnee Jubail 1,000,000
2010 25 25 25 25
SAUDI ARABIA
Yanbu
Petrochem
ical Co.
Yanbu 875,000
2010 100
SAUDI ARABIA
Yanbu
Petrochem
ical Co.
Yanbu 830,000
2010 16 16 18 50
SAUDI ARABIA Saudi
Polymers Al-Jubail
1,200,000 2011
SERBIA AND
MONTENEGRO
Chemi
Industria Pancevo 200,000
2010
SINGAPORE
ExxonMobi
l Chemical
Co.
Jurong
Island 900,000
2010
33 33 34
SINGAPORE
Petrochem
ical Corp.
of
Singapore
Pte. Ltd.
Pulau Ayer
Merbau 465,000
2010
100
SINGAPORE
Petrochem
ical Corp.
of
Singapore
Pte. Ltd.
Pulau Ayer
Merbau 615,000
2010
100
SINGAPORE
Shell
Eastern
Petroleum
Ltd.
Bukom
Island 800,000
2010
100
35 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
SINGAPORE
ExxonMobi
l Chemical
Corp.
Jurong
Island 1,000,000 2013
100
SLOVAKIA
Slovnaft
Petrochem
icals
Bratislava 210,000
2010 8 11 26 55
SOUTH AFRICA Sasol
Polymers Sasolburg 110,000
2010 80 20
SOUTH AFRICA Sasol
Polymers Secunda 475,000
2010 75 5
20
SOUTH KOREA
Honam
Petrochem
ical
Yeochun 750,000
2010
100
SOUTH KOREA
Korea
Petrochem
ical
Industries
Co. Ltd.
Ulsan 470,000
2010
100
SOUTH KOREA
LG Daesan
Petrochem
ical
Daesan 760,000
2010
100
SOUTH KOREA
LG
Petrochem
ical Co.
Ltd.
Yeosu City 900,000
2010
100
SOUTH KOREA
Lotte
Daesan
Petrochem
ical
Daesan 650,000
2010
100
SOUTH KOREA
Samsung
General
Chemicals
Daesan 850,000
2010
100
SOUTH KOREA SK Corp. Ulsan 545,000
2010
100
SOUTH KOREA SK Corp. Ulsan 185,000
2010
100
SOUTH KOREA Yeochon Yeochun 857,000
2010
100
SOUTH KOREA Yeochon Yeochun 555,000
2010
100
SOUTH KOREA Yeochon Yeochun 400,000
2010
100
SPAIN
Dow
Chemical
Co.
Tarragona 660,000
2010
100
SPAIN Repsol YPF
SA Puertollano 250,000
2010
100
SPAIN Repsol YPF
SA Tarragona 660,000
2010
100
SWEDEN Borealis AB Stenungsun
d 625,000
2010 40 20
40
36 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
SWITZERLAND Lonza Ltd. Visp 33,000
2010
30 60 10
THAILAND
Map Ta
Phut
Olefins Co.
Map Ta
Phut,
Rayong
900,000
2010 100
THAILAND PTT
Chemical
Map Ta
Phut,
Rayong
400,000
2010 80 6
14
THAILAND PTT
Chemical
Map Ta
Phut,
Rayong
515,000
2010 5 18 28 49
THAILAND PTT
Chemical
Map Ta
Phut,
Rayong
461,000
2010 100
THAILAND PTT
Chemical
Map Ta
Phut,
Rayong
1,000,000
2010 100
THAILAND Rayong
Olefins Ltd.
Map Ta
Phut,
Rayong
800,000
2010
100
THAILAND
PTT
Polyethyle
ne Co. Ltd.
Map Ta
Phut 1,000,000
2010 100
TURKEY
Petkim
Petrochem
icals
Holding
Co.
Aliaga,
Izmir 520,000
2010
100
UKRAINE Chlorvinyl Kalush 250,000
2010
100
UKRAINE Oriana
180,000
2010
UKRAINE TNK-BP Lisichansk 300,000
2010
100
UNITED ARAB
EMIRATES
Borouge
Abu Dhabi
Polymers
Co. Ltd.
Ruwais,
Abu Dhabi 2,100,000
2010 100
UNITED ARAB
EMIRATES
Abu Dhabi
Polymers
Co. Ltd.
(Borouge)
Ruwais,
Abu Dhabi 1,500,000 2013 100
UNITED
KINGDOM INEOS
Grangemo
uth 730,000
2010
100
UNITED
KINGDOM INEOS
Grangemo
uth 340,000
2010
100
UNITED
KINGDOM
ExxonMobi
l Chemical
Co.
Fawley 120,000
2010 9 8 8 25 25 25
UNITED
KINGDOM
ExxonMobi
l Chemical
Co.
Mossmorra
n Fife 830,000
2010 100
UNITED
KINGDOM
SABIC
Europe Wilton 865,000
2010
20 10 70
37 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
UNITED STATES
BASF Fina
Petrochem
icals
Port Arthur 907,000
2010
100
UNITED STATES
Chevron
Phillips
Chemical
Co. LP
Cedar
Bayou 803,000
2010 30 20 25 25
UNITED STATES
Chevron
Phillips
Chemical
Co. LP
Port Arthur 861,000
2010 70 25 5
UNITED STATES
Chevron
Phillips
Chemical
Co. LP
Sweeny 907,000
2010 38 37 25
UNITED STATES
Chevron
Phillips
Chemical
Co. LP
Sweeny 676,000
2010 75 25
UNITED STATES
Chevron
Phillips
Chemical
Co. LP
Sweeny 295,000
2010 85 15
UNITED STATES
Dow
Chemical
Co.
Freeport
(LHC 7) 633,000
2010 50 50
UNITED STATES
Dow
Chemical
Co.
Freeport
(LHC 8) 1,024,000
2010 10 20
70
UNITED STATES
Dow
Chemical
Co.
Plaquemin
e (LHC 2) 522,000
2010 75 25
UNITED STATES
Dow
Chemical
Co.
Plaquemin
e (LHC 3) 740,000
2010
70 10 20
UNITED STATES
Dow
Chemical
Co.
Taft 1 612,000
2010 20 40
40
UNITED STATES DuPont Orange 681,000
2010 100
UNITED STATES
Eastman
Chemical
Co.
Longview 140,000
2010 25 67 7 1
UNITED STATES
Eastman
Chemical
Co.
Longview 140,000
2010 25 67 7 1
UNITED STATES
Eastman
Chemical
Co.
Longview 140,000
2010 25 67 7 1
UNITED STATES
Eastman
Chemical
Co.
Longview 360,000
2010 25 67 7 1
38 Edelweiss Securities Limited
Oil and Gas
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Channelvie
w 875,000
2010 5
95
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Channelvie
w 875,000
2010 5
95
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Chocolate
Bayou 544,000
2010
100
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Clinton 500,000
2010 80 20
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Corpus
Christi 771,000
2010 10 30
60
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
LaPorte 789,000
2010 60 20
20
UNITED STATES
Equistar
Chemicals
LP
(LyondellB
asell)
Morris 590,000
2010 80 20
UNITED STATES
ExxonMobi
l Chemical
Co.
Baton
Rouge 975,000
2010 9 8 8 25 25 25
UNITED STATES
ExxonMobi
l Chemical
Co.
Baytown 2,197,000
2010 58 8 9 25
UNITED STATES
ExxonMobi
l Chemical
Co.
Beaumont 816,000
2010 8 8 9 75
UNITED STATES
ExxonMobi
l Chemical
Co.
Houston 102,000
2010
100
UNITED STATES Flint Hills
Corp. Port Arthur 617,000
2010
60
40
UNITED STATES
Formosa
Plastics
Corp. USA
Point
Comfort 816,000
2010 45 15
40
UNITED STATES
Formosa
Plastics
Corp. USA
Point
Comfort 680,000
2010 45 15
40
39 Edelweiss Securities Limited
Sector Update
Country Company Location Capacity,
tonnes/
year 2010
Existing
Capacity,
tonnes/
year
New
Year of
Completion
(Existing
capacity=2010)
Feedstock Slate (%)
C2 C3 C4 Naphtha Gasoil Other
UNITED STATES Huntsman
Corp.
Port
Neches 180,000
2010
UNITED STATES
INEOS
Olefins and
Polymers
USA
Chocolate
Bayou 1,746,000
2010 50 35
15
UNITED STATES Javelina
Co.
Corpus
Christi 102,000
2010
100
UNITED STATES
Sasol
North
America
Inc.
Lake
Charles 454,000
2010 100
UNITED STATES
Shell
Chemicals
Ltd.
Deer Park 1,406,000
2010
UNITED STATES
Shell
Chemicals
Ltd.
Norco 1,556,000
2010 5
35 60
UNITED STATES
Westlake
Petrochem
icals Corp.
Calvert City 204,000
2010
100
UNITED STATES
Westlake
Petrochem
icals Corp.
Sulphur #1 567,000
2010 100
UNITED STATES
Westlake
Petrochem
icals Corp.
Sulphur #2 522,000
2010 70 30
UNITED STATES Williams
Olefins Geismar 626,000
2010 92 8
UZBEKISTAN Uzbekneft
egaz Shurtan 140,000
2010 100
VENEZUELA
Pequiven-
Petroquimi
ca de
Venezuela
SA
El Tablazo,
Zulia 250,000
2010 30 70
VENEZUELA
Pequiven-
Petroquimi
ca de
Venezuela
SA
El Tablazo,
Zulia 350,000
2010 100
Source: Oil & Gas Journal, Downstream Today, Edelweiss research
40 Edelweiss Securities Limited
Oil and Gas
APPENDIX – V
Sensitivity Analysis
Our sensitivity analysis of cracker margin based on demand projection based on 1) demand per capita growth rate and
2) demand elasticity with GDP growth shows that the margin will be higher than USD 188 per mt in 2011 and will grow
to more than USD 383 per mt by 2015.
2011
198 3.80% 4.10% 4.40% 4.70% 5.00%
0.96 187 190 193 197 200
1.01 189 193 196 199 202
1.06 191 195 198 202 205
1.11 193 197 201 204 208
1.16 195 199 203 207 210Dem
and e
lasticity
GDP growth rate
Dem
and e
lasticity
GDP growth rate
popula
tion g
row
th r
ate
Demand per capita growth rate
Dem
and e
lasticity
Dem
and e
lasticity
Dem
and e
lasticity
Demand per capita growth rate
2015
388 3.80% 4.10% 4.40% 4.70% 5.00%
0.96 369 373 377 380 384
1.01 372 376 379 383 387
1.06 374 378 382 386 390
1.11 377 381 385 389 393
1.16 379 383 388 392 396Dem
and e
lasticity
GDP growth rate
popula
tion g
row
th r
ate
Demand per capita growth rate
Dem
and e
lasticity
Dem
and e
lasticity
Dem
and e
lasticity
Dem
and e
lasticity
popula
tion g
row
th r
ate
Demand per capita growth rate
2011
188 2.90% 3.40% 3.90% 4.40% 4.90%
0.77% 187 192 198 203 209
0.89% 188 194 199 205 210
1.00% 190 195 200 206 211
1.12% 191 196 202 207 213
1.23% 192 198 203 208 214
popula
tion g
row
th r
ate
Demand per capita growth rate
Dem
and e
lasticity
Dem
and e
lasticity
Dem
and e
lasticity
Dem
and e
lasticity
popula
tion g
row
th r
ate
Demand per capita growth rate
2015
382 2.90% 3.40% 3.90% 4.40% 4.90%
0.77% 358 365 371 377 383
0.89% 360 366 372 379 385
1.00% 361 368 374 380 386
1.12% 363 369 375 382 388
1.23% 364 371 377 383 389 Dem
and e
lasticity
popula
tion g
row
th r
ate
Demand per capita growth rate
Table A5-1: Cracker margin based on demand per capita growth rate and population growth rate
Table A5-2: Cracker margin based on GDP growth rate and demand elasticity
41 Edelweiss Securities Limited
Sector Update
Buy
BuyBuy
150
350
550
750
950
1,150
Ju
l-0
8
Au
g-0
8
Se
p-0
8
Oc
t-0
8
No
v-0
8
De
c-0
8
Ja
n-0
9
Fe
b-0
9
Ma
r-0
9
Ap
r-0
9
Ma
y-0
9
Ju
n-0
9
Ju
l-0
9
(INR
)
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]
Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206
Nischal Maheshwari Head Research [email protected] +91 22 6623 3411
Coverage group(s) of stocks by primary analyst(s): Oil and Gas, Petrochemicals
Bharat Petroleum Corporation, Cairn India, Chennai Petroleum Corp., Hindustan Petroleum Corporation, Indian Oil Corporation,
Indraprastha Gas, ONGC, Reliance Industries, Aban Offshore, Petronet LNG, Essar Oil, GAIL, Shivvani Oil & Gas Exploration
Recent Research
01-Jul-11 Aban
Offshore
Stake sale: Turning the heat
on; Edel Flash
524 Hold
30-Jun-11 Cairn
India
Deal approved, but royalty
cost recoverable; Edel Flash
312 Hold
29-Jun-11 Petronet LNG
Strong LNG volume visibility; Visit Note
138 Buy
20-Jun-11 Torrent
Pharma
Growth drivers intact;
Visit Note
642 Buy
15-Jun-11 Dr. Reddys
Lab.
USFDA issues warning letter
for Mexico facility; EdelFlash
1,555 Buy
08-Jun-11 Dr. Reddys Lab.
Gauging upsides from current level;
Company Update
1,577 Buy
16-May-11 Shiv-vani Oil & Gas
Robust results on full asset deployment; Result Update
275 Buy
12-May-11 Cairn India
Uncertainties cloud attractive long-term investment case;
Result Update
336 Hold
05-May-11 Oil & Gas Diesel price hike factored in;
Call it quits; Sector Update
03-May-11 Oil & Gas Monthly
GRMs robust despite high crude prices;
Monthly Update
20-Jun-11 Torrent
Pharma
Growth drivers intact;
Visit Note
642 Buy
15-Jun-11 Dr. Reddys
Lab.
USFDA issues warning letter
for Mexico facility; EdelFlash
1,555 Buy
08-Jun-11 Dr. Reddys
Lab.
Gauging upsides from
current level; Company Update
1,577 Buy
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 132 51 18 203
* 2 stocks under review
Market Cap (INR) 117 65 21
> 50bn Between 10bn and 50 bn < 10bn
Date Company Title Price (INR) Recos
Buy Hold Reduce Total
This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated investment banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investment banking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Specifically, this document does not constitute an offer to or solicitation from any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. Edelweiss or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. We and our affiliates, group companies, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. Edelweiss reserves the right to make modifications and alterations to this statement as may be required from time to time. However, Edelweiss is under no obligation to update or keep the information current. Nevertheless, Edelweiss is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither Edelweiss nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Past performance is not necessarily a guide to future performance. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. Edelweiss Securities Limited generally prohibits its analysts, persons reporting to analysts and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved
Access the entire repository of Edelweiss Research on www.edelresearch.com
Rating Interpretation
Buy appreciate more than 15% over a 12-month period
Hold appreciate up to 15% over a 12-month period
Reduce depreciate more than 5% over a 12-month period
Rating Expected to