ECONOMIC IMPACTS AND MARKET CHALLENGES FOR THE … · 2019-06-22 · MARKET CHALLENGES . FOR THE...
Transcript of ECONOMIC IMPACTS AND MARKET CHALLENGES FOR THE … · 2019-06-22 · MARKET CHALLENGES . FOR THE...
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ECONOMIC IMPACTS AND MARKET CHALLENGES
FOR THE METHANE TO DERIVATIVES PETROCHEMICAL SUB-SECTOR
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Canadian Energy Research InstituteOverviewFounded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors.
Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public.
CERI publications include:
• Market specific studies
• Geopolitical analyses
• Commodity reports (crude oil, electricity and natural gas)
In addition, CERI hosts an annual Petrochemicals Conference, and Energy Forum.
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Canadian Energy Research Institute
Core Funders:
In-kind Support:
Donors:
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Presentation Outline
NATURAL GAS MARKET OUTLOOK
PETROCHEMICAL INDUSTRY
METHANE-DERIVED PRODUCTS
ECONOMIC AND ENVIRONMENTAL ANALYSIS
ECONOMIC IMPACTS
CONCLUSIONS
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Natural Gas supply and demand forecasts
Canadian natural gas production forecast
Industrial use, oil sands, power generation, LNG, chemicals and petrochemicals production
0
5000
10000
15000
20000
25000
2005 2010 2015 2020 2025 2030 2035
mm
cfd
Pipeline Exports LNG Exports Supply Demand
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Global Petrochemical OutlookPetrochemicals markets and emerging trends
Source: IHS Chemical 2016
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North America Petrochemical OutlookLow cost feedstock advantage leading to investments in chemicals and derivatives
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Methanol OutlookMethanol demand is forecast to grow at 4% globally compound annual growth rate (CAGR)
Source: Argus 2017
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METHANE DERIVATIVES & EMERGING TECHNOLOGIES
Synthesis Gas (Syngas)
Hydrogen (H2)
AmmoniaNatural Gas (N.G)
Urea
Formaldehyde
Acetic Acid
Methyl tert-butyl ether (MTBE)
Dimethyl ether (DME)
Methylamine
Methanol to Olefins (MTO)
Methanol to Propylene (MTP)
Methanol to Gasoline (MTG)
METHYL METHACRYLATE (MMA)
Fischer-Tropsch Process
Methanol (MeOH)
Liquified Petroleum Gas
(LPG)
Methane (CH4)
CO2
Natural gas liquids(NGLs)
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Economic Assessment1. Assessment of 9 technologies:
Methanol, Hydrogen, MTP & MTO, Ammonia, Urea, Formaldehyde, Fischer Tropsch Gasoline,
2. Key Assumptions
3. Life Cycle Costs (LCC): NPV of CAPEX (ISBL- inside battery limits and OSBL – Outside Battery Limits), Natural Gas costs, taxes, etc.
4. Jurisdictional competitiveness comparison: AB, ON, USGC
5. Discounted NPV and Internal Rate of Return (IRR)
6. Direct and indirect economic impacts: GDP, Employment
7. Scenarios:
Tax policy incentives
Output-Based allocation
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Provincial CO2 Tax Assumptions
Alberta: Increase by 2% + inflation after 2018 (Climate Leadership Plan)Ontario: Mid-range CO2 Price Forecast (ICF Study for Ontario Energy Board)Canada ($/t-CO2): 10 (2018), 20 (2019), 30 (2020), 40 (2021), 50 (2022->)
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Price Assumptions
Derivative prices are kept constant
Where available 2016 are assumed
Otherwise, available prices are used $- $500 $1,000 $1,500
HydrogenMTOMTP
TIGASFTS Gasoline
AmmoniaFormaldehyde
MethanolUrea
Price US$/tonne
Natural Gas Price Assumption USGC AIH Sarnia Average 2016 Prices
Natural Gas (US$/ MMBTU) 2.34 1.56 2.38 Henry, AECO and DawnHubs Prices
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Results: IRR for 9 Methane Derivatives
Only methanol and Hydrogen meet the 10% expected rate of return
However, the economics is sensitive to natural gas and product prices
-5%
0%
5%
10%
15%
20%
25%
IRR
USGC AIH Sarnia
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Methanol NPV Jurisdictional Comparison
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Hydrogen NPV Jurisdictional Comparison
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MTO NPV Jurisdictional Comparison
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Carbon Tax Scenarios: Methanol
0%
2%
4%
6%
8%
10%
12%
14%
USG
C
AIH
Sarn
ia
USG
C
AIH
Sarn
ia
USG
C
AIH
Sarn
ia
Scenario 0 Scenario I Scenario II
IRR%
Better economics with current provincial tax policies than federal tax policy.
OBA has the best economic prospects.
For OBA scenario, plants assessed are considered best-in-class; thus, CO2 tax does not apply
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Corporate Tax Rebates Scenarios: Methanol
Provincial Tax RebateCould Increase IRR by:
1% in AB0.7% in ON
Corporate Tax RebateCould Increase IRR by:
2.2% in AB1.7% in ON
Assumes that a certain percentage of corporate tax is provided as rebate, for example towards capital recovery
10%
11%
12%
13%
14%
15%
16%
17%
0% 20%
40%
60%
80%
100% 0% 20
%
40%
60%
80%
100%
Scenario III Scenario IV
IRR%
AIH Sarnia
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Economic ImpactsInput-Output Modeling Results for A Methanol Plant in AB and ON
Direct and indirect impacts on GDP at provincial and federal levels
Significant economic impacts at provincial and national levels compared to the total capital invested (TCI)
-2000
-1000
0
1000
2000
3000
4000
5000
TCI Corp tax(NPV)
CO2 tax(NPV)
Cum NPV GDP(AB/ON)
GDP (CA)
C$ M
ill
MeOH
AB ON
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Concluding Remarks
• New capacity for ethylene, propylene and methanol followed energy and demand growth dynamics
• Results show that some opportunities exists for methane derivatives sub-sector in Alberta. This is driven principally by 10-15% low feedstock prices, OPEX and corporate taxes.
• CO2 tax can significantly impact the economics of Canadian jurisdictions. However, the Output-Based Allocation CO2 Tax Scenarios seems to sustain economic competitiveness against the USGC.
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Thank You for Your Time
WWW.CERI.CA
CANADIAN ENERGY RESEARCH INSITUTE
@CERI_CANADA
Allan Fogwill | President & CEO
403.220.2367