Shale revolution & chemicals industry (ennovance capital)
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~PERSPECTIVE~ ENNOVANCE CAPITAL LLC WWW .ENNOVANCE.COM 1880 JOHN F KENNEDY BLVD. #701 PHILADELPHIA, PA 19103, USA +1(800) 901-1006 INFO@ENNOVANCE.COM www.ennovance.com
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PERSPECTIVE: SHALE GAS’S IMPACT ON CHEMICAL INDUSTRY [ By Ennovance Capital - Chemicals, energy, water, healthcare and chemistry related industry focused private equity and other alternative assets investors www.ennovance.com ] We believe that the Shale Revolution presents a once-in-a-lifetime opportunity unique to the United States that will have a profound impact on the chemicals industry. Nearly 100 projects announced as of Q1-2013, $72 billion in potential chemical industry capital investments, $67 billion in additional output by 2020 (with new & permanent federal, state, and local tax revenue of $14 billion from increased chemical industry output by 2020, according to ACC)! The Shale Revolution will create 17,000 new high-paying and knowledge-intensive positions in the chemical industry, will result in a $32.8 billion increase in United States chemical production, will cause $16.2 billion in capital investments to build new petrochemical and derivatives capacity, and will lead to $132.4 billion in United States economic output related to increased chemical production and capital investment. The Energy Information Administration estimates that shale gas production will grow 113% from 2011 to 2040 and that its share of United States natural gas production will grow from 34% to 50%. The primary end market consumers during this period will be the electric power generation end market and the industrial end market. The input cost advantage in North America that is being led by an increasing abundance of nat gas and helping both organic chemical producers through NGLs as well as the inorganics through lower energy costs (Middle East being the one exception), the North American chemicals landscape looks to be the most promising world-wide for years to come, justifying the heavy domestic investment that the industry is set to see. There is the potential for a raw material cost advantage of up to 60% for products in the ethane-ethylene value chain. Key questions would remain in our ability to manage typical risks for a complex industry, such as environmental, regulatory, specialized credits and equity investment approach, proper tax treatments, infrastructure and access to realize the Shale gas driven potentials. What are your thoughts? http://ennovance.com/blog/ www.ennovance.com
Transcript of Shale revolution & chemicals industry (ennovance capital)
~PERSPECTIVE~
ENNOVANCE CAPITAL LLC
WWW.ENNOVANCE.COM
1880 JOHN F KENNEDY BLVD. #701
PHILADELPHIA, PA 19103, USA
+1(800) 901-1006
www.ennovance.com
17,000 new high-paying jobs in the industry
$32.8 billion increase in US chemical production
$16.2 billion in capital investments to build new petrochemical and derivatives capacity
$83.4 billion in US economic output related to increased chemical production
$49.0 billion in US economic output related to US chemical industry capital investment
www.ennovance.com
Source: Energy Information Administration www.ennovance.com
Source: Energy Information Administration www.ennovance.com
55 gigawatt reduction in coal-generated electricity between 2010 and 2020 resulting from EPA regulations
Between 2000 and 20011, natural gas use for electric power generation grew from 5 trillion cubic feet (Tcf) to 7 Tcf
Natural gas share of electricity generation grew from 22% in 2009 to approximately 30% today
Coal generation declined from 45% in 2009 to 35% today
The Energy Information Administration estimates that roughly 9 Tcf will be used for electric power generation by 2025
Source: Energy Information Administration www.ennovance.com
Manufacturing Industry 2012 2015 2020 2025
Basic Organic Chemical 1.2% 4.9% 7.1% 9.5%
Basic Inorganic Chemical 0.8% 2.4% 3.9% 4.8%
Resins & Synthetic Material 1.7% 4.4% 6.0% 8.1%
Agricultural Chemical 1.2% 3.0% 6.9% 7.7%
Plastics & Rubber Products 1.5% 3.5% 4.1% 4.6%
Pharmaceutical & Medicine 0.8% 2.5% 2.4% 2.0%
Paints, Soaps, Toiletries & Misc. 1.8% 2.8% 3.4% 3.8%
Paper 0.6% 2.8% 3.0% 3.4%
Source: IHS Chemical www.ennovance.com
Sources: CMAI, TopLine , Alembic, PwC www.ennovance.com
US becoming one of world’s lowest cost ammonium producers due to increased shale gas
Production capacity in US rose from 60% in 2006 to 90% in 2013
New or expanded production facilities between 2016 and 2018 will produce 6 million metric tons of ammonia, and US presently imports 7 million metric tons of ammonia
www.ennovance.com
Fracking involves 99.5% water and sand and 0.5% chemicals per well
Typical well requires 2.5 million gallons of water, 1.5 million pounds of sand
Types of chemicals include: acids, biocides, corrosion inhibitors, friction reducers, gelling agents, oxygen scavengers
Chemicals used include: methanol, benzene, toluene, xylene, ethyl benzene, hydrogen fluoride, sulfuric acid, and hundreds of others
www.ennovance.com
Natural gas is used as a feedstock to make methanol
China currently accounts for more than half of the global methanol demand and will double because of increased Chinese investment in methanol-to-olefins production
US capacity is expected to rise from a low of 750,000 tons in 2007 to 7.6 million tons by 2017 because of increased shale production
The US could become a net exporter when the new domestic capacity becomes active
www.ennovance.com
Ethane cracking leads to higher proportion of ethylene compared to propylene, butadiene, and heavier aromatics than naphtha-based cracking
Domestic naphtha-based crackers are being converted to natural gas liquid crackers
Projects directly synthesizing heavier derivatives now experiencing greater returns
www.ennovance.com
Thousands of new jobs, billions in increased production, capital investment, and production
Cheaper energy costs
US cost-advantages in ethylene production, reducing input costs for manufacturers
Nitrogen fertilizer capacity increasing and production becoming domesticized
Methanol export opportunity to China
Fracking requires substantial water treatment
Greater margins on heavier derivatives
www.ennovance.com
Source: ACC www.ennovance.com
Source – ACC, ihs www.ennovance.com
$20 B - in NEW federal, state, and local tax
revenue during investment phase(2010-2020)
$14 B - in NEW, PERMANENT federal, state, and
local tax revenue from increased chemical
industry output (by 2020)
Source: ACC www.ennovance.com
Environmental and human risk
Credit and equity investment cycle
Unsophisticated participant in a complex industry (…gold rush)
Technology improvement needs
Regulatory framework
Infrastructure
Access
…..
www.ennovance.com
