01 Gellrich Utica 2016 - cantonchamber.org · Ethylene Economics Source: NYMEX Feb 2nd 2015 2.3x...
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Shale Gas: changing the US chemicals industry Tom Gellrich TopLine Analy2cs © 2015 TopLine Analy2cs. All rights reserved. October 11 th , 2016 U2ca Summit IV – Canton Ohio
Transcript of 01 Gellrich Utica 2016 - cantonchamber.org · Ethylene Economics Source: NYMEX Feb 2nd 2015 2.3x...
ShaleGas:changingtheUSchemicalsindustry
TomGellrich
TopLineAnaly2cs
©2015TopLineAnaly2cs.Allrightsreserved.
October11th,2016U2caSummitIV–CantonOhio
ShaleGas:changingglobalindustries
TomGellrich
TopLineAnaly2cs
©2015TopLineAnaly2cs.Allrightsreserved.
October11th,2016U2caSummitIV–CantonOhio
1973EnergyShock
SourceEIA
3.2xIncrease
1979EnergyShock
SourceEIA
2.0xIncrease
Manufacturing
30%-
ShaleShock
MarcellusMillionscuPperdaynaturalgas
Source:EIA
2008–2012ShaleShock
3.8xDecrease
SourceEIANaturalGas
Manufacturing
30%+
NorthAmericanAdvantage
Source:WorldbankPinkSheetAveragenaturalgasprices$/MBtu
20162Q
$2.1 $4.1
$6.1$3.0
2008
$10.3 $11.4
$14.4$1.3
MENaturalGasSqueeze
MiddleEastnaturalgasinternalconsump2onrises– Rapidlygrowingpopula2ons– Subsidizedelectricity&desaliniza2onwater
KuwaitlooksforwayoutofadomesDcgasconundrumInterfaxEnergyOct7,2014
ShaleRevolu2on
“U.S.energylandscapeischangingonthebackofcheapnaturalgasfromshaledeposits,whichisturningproducersawayfrom“offshoring”energy-intensiveindustries.Thediscoveryofshalegasisperhapsthegreatestdevelopmentinthemodernera.Shalegasisahuge–andpoten2allylong-term–compe22veadvantageforU.S.-basedcompanies”
Andrew Liveris CEO Dow Chemical Company
Source:IHSCERAWeek2012HoustonTexas
ShaleGasdrivestheChemicalIndustry
0%
20%
40%
60%
80%
100%
ChemicalFeedstock
Methane
EthanePropane
Fuel
TypicalShalegas
Source: Typical Shale Gas: Western Marcellus Shale Gas: Chesapeake Investor Presentation 2011
GlobalChemicalShiP
• “Thefeedstockcostfornewcrackersin[SaudiArabia]willbearound$6/MBtuasthere’snotenoughethaneavailability…thiscostwillbemuchhigherthantheUSgasprice,whichiscurrentlyat$3.50-4.00/MBtu”
– JamalMalaikah,presidentandCOO,Na2onalPetrochemicalIndustrialCo(NATPET),Apr2013
• “Theshalegasrevolu2onini2atedintheUS…isnowreshapingnotonlytheenergyindustry,butglobaleconomyandgeopoli2csaswell.”Thiscouldcause“agreatdealofdiscomfort”toAsia’spetrochemicalsector.
– YoshimitsuKobayashi,chairmanoftheJapanesePetrochemicalIndustryAssocia2onatAPIC,May2013
• “Theshalegasrevolu2onintheUShasturnedtheglobalpetrochemicalindustryinsideout…BasicpetrochemicalscannowbemadeintheUnitedStatesforabouthalfthecostasinEurope”
– TomCropy,Ineosgroupdirector,ChemWeekInterviewOctober2013
• “Thesupplyoflow-pricedproductsthatarebasedoncoalandshalegaswillbecomeathreattotheexis2ngpetrochemicalindustryandwillbringasignificantchangeinitsstructure.”
– Han-HongBan,chairmanoftheKoreaPetrochemicalIndustryatAPIC,May2013
ChemicalIndustryU.S.Investments2012to2022
• $164billionincapitalinvestment– 264projects– 70millionmetrictonsofchemicals– 61%foreigninvestment
• Jobs:– 738,000permanent– 316,000temporary
• $301billionincreaseeconomicoutput• $106billionincreaseinchemicalshipments
Source:AmericanChemistryCouncilMarch2016
U.S.ChemicalConstruc2onInvestment
Source:ACCanalysisofCensusBureaudata
$Billions
ChangesinGlobalIndustry
• M&A:Axiall(GeorgiaGulf+PPGChlor-Alkali)• JV:PPTGlobalChem+MarubeniCorp• Doublingdownoninvestments:LyondellBasell• Reloca2ngexis2ngplantstoU.S.:USMethanol• MiddleEastinvestmentinU.S.:SABIC• Commercializa2onofnewtechnologies:PDHBDH• European+Asianshutdowns:TotalCarling• IncreasedNAinvestments:Formosa• Non–GulfCoastU.S.investment:Shell• U.S.Ethaneexports:Ineos• U.S.BackwardIntegra2on:BASF
EthyleneProduc2on
EthaneFeedstock
Ethylene Propylene
Butadiene FuelGas
Oil(naphtha)Feedstock
Ethylene Propylene Butadiene
FuelGas Aroma2cs
EthyleneEconomics
Source:NYMEXFeb2nd20152.3xDelta
EthyleneCost US ChinaNaturalGascosts $/MMBTU 2.6CrudeOilcosts $/BBL 54Equivalent $/ton 128 521Ra2oforonetonethylene 1.29 2.98EthaneFeedstockcosts $/ton 165 1552Catalyst+Other $/ton 2 2ByProductCredits $/ton 108 1102U2li2es $/ton 94 127DirectCosts $/ton 167 172TotalethyleneCost $/ton 321 750 Typicalethylenemargin 2.50% Transferpriceforethylene $/ton 329 769
Source:NYMEXSep2015
Drama2cCostShiPEthylene
1980-2010
MiddleEastNAmericaChinaWEuropeNWAsia
OldNormal:MiddleEasthalfthecostoftherestoftheworld
2015
NewNormal:• MiddleEastand
NAatparity• Restoftheworld
at>2xcost
PolyethyleneEconomics
1.9xDeltaSource:NYMEXSep2015
PolyethyleneCost US ChinaNaturalGascosts $/MMBTU 2.6CrudeOilcosts $/BBL 54Ethylenecost $/ton 329 769Ra2oforonetonofHDPE 1.025 1.025Ethylenecost $/ton 337 788U2li2es $/ton 10 13DirectCost $/ton 51 51OtherCosts $/ton 132 132TotalCosts $/ton 530 984 Typicalpolyethylenemargin 3.00% PotenDalHDPEsellingprice $/ton 546 1013
ChemicalIndustryDrivestheNextWave
Shal
e G
as
Ethane
Methane
Propane
Butane
Ammonia
Methanol
Ethylene
Propylene
N-Butylene
Isobutylene
MarketSectors
ApparelandAccessories
BeveragesandTobaccoProducts
Chemicals
ComputerandElectronics
FabricatedMetalProducts
FoodandKindredProducts
LeatherandAlliedProducts
Machinery,ExceptElectrical
NonmetalicMineralProducts
Paper
PetroleumandCoalProducts
Pharmaceu2cals
Plas2csandRubberProducts
PrimaryMetalManufacturing
PrintedMaperandRelatedProducts
Tex2leandFabrics
Tex2leMillProducts
Transporta2onEquipment
WoodProducts
ProductCategories
Fer2lizers
Adhesives/Sealants
AlkydResins
Solvents
CorrosionInhibitors
Tex2les
Inks,Adhesives
Shampoos,Detergents,Soaps
Paints
Coa2ngs
Pipes,Hoses,WireCoa2ng
Coolant,An2freeze
Films,Packaging,Boples
PaintRemover
Plas2cs
TiresandRubber
LubricantAddi2ves
Solvent,IndustrialCleaners
>98%
Source:PwCandTopLineAnaly2cs
Wherearethechemicalsgoing?
AsianMiddleClass
U.S.istheLandofOpportunity
• HighlyprofitableduetoShaleGas• Uniquemul2decadesadvantage• Lowpoli2calrisk• Chemicalindustryacceptance• Highmanufacturingproduc2vity• Growinglaborpool• Compe22on
ChemicalIndustryManufacturingJobs
• Full2mepermanentjobs• Averagesalaryforoperator$60k+benefits• Jobscon2nueyearaPeryear• Verydifficulttooff-shore• Skilledposi2ons–hightech• Communityfocused
AppalachianBasin
• Avoidtransporta2oncosts– LocalrawmaterialsfromShaleGas– Localcustomerdemand
• AvoidtheGulfCoastboplenecks– Landtoexpand– Railandtolesserextentroadinfrastructure– EPAnon-apainmentarea
AppalachianBasin
• Shellbroketheice– Valida2onofloca2on– Demonstratevaluetothepublic– Localcommunitysupport– Buildoutof‘ecosystem’
• SuppliersandLaborpool• Voca2onaland2yeardegreeprograms• Upgradeofroad,railandbargeinfrastructure
• Nextprojectwillbemucheasier
BasinStorageHub
• Keyenablinginfrastructure• Reducesriskfornewchemicalplants• Makesregionalinvestmentspossible• Publicprivatepartnership• $10Billionmegaproject• KeydriverbehindsuccessofU.S.GulfCoast
Déjàvu?
AppalachianStorageHubpoten2alreachesfromShellfacilitytoannouncedPTT/Braskemsites.ItcoverssamegeographicaldistancesastheTexas–LouisianaStorageHubwithkeystoragepointareainthesaltdomesofMontBelvieuTexas.
InvestmentPause
• UnprecedentedU.S.ChemicalInvestment– Isitreal?Willcondi2onscon2nue?
• Acceptanceofnewnorm– CrudeOilat$50barrel– NaturalGasinU.S.at$3withrestofworld2-3x
• Demandonsupplychainraisescostby30%• Megaprojectsares2ll:
– Betthecompany– Betyourcareer
NextWaveSh
ale
Gas
Ethane
Methane
Propane
Butane
Ammonia
Methanol
Ethylene
Propylene
N-Butylene
Isobutylene
Source:PwCandTopLineAnaly2cs
Polyethylene
EDC
EPDM
Ethanol
Alpha Olefins
Vinyl Acetate
Ethylene Glycol
Ethanolamine
Ethyl Oxylates
Glycol Ether
Chloro Ethanes
Polyvinyl Chloride
NextWaveSh
ale
Gas
Ethane
Methane
Propane
Butane
Ammonia
Methanol
Ethylene
Propylene
N-Butylene
Isobutylene
Source:PwCandTopLineAnaly2cs
40%Imported
50%Imported
ShaleGasConclusions
• TheNAShaleGasrevolu2onhascausedaGlobalChemicalIndustryrevolu2on
• ChemicalsandmanufacturedproductscanbeproducedcheaperinNA
• Implica2onsaredisrup2veandofferopportunity
• Newnormal,unconven2onalthinkingisrequired
• Leaderslead,isyourorganiza2onmobilized?
TopLineAnaly2csWeassistcompaniesinaddressingthechallengesandopportuni2estocompeteinthechanginglandscapebroughtonbytheshalegasrevolu2on
TomGellrich www.TopLineAnaly2cs.com 267-205-1263
Ques2ons?
