Petrochemical Feedstock Outlook –

A Tale Of Two Markets

7 November 2019 | Singapore

Premasish Das
Executive Director, IHS Markit
Premasish.Das@ihsmarkit.com

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 2

Naphtha data is often incomplete, so detailed supply and demand is key (and is the
basis of our analysis)
Comprehensive modeling of naphtha supply and demand
PRODUCTION SUPPLY UPGRADE DEMAND
Exp-Imp
NGL Natural Diluent
Gas plants LN market
gasoline
Solvent
GTL Hydrogen
LN-based
Condensate Et=
Condensate Steam
splitter cracking Pr=
Bu==
Crude Light Exp-Imp
Crude LN
naphtha Isomerization
distilling
(LN) Mogas and
Hydro- Reformer avgas pools
FCC Exp-Imp HN-based
cracking gasoline
Heavy Exp-Imp Raf
Alkylation Coking HN Benzene
naphtha Reformer
Aromatics Toluene
(HN) BTX-PX Mx
Hydro-
treating A9+
Refinery Exp-Imp
HN market
Note: Exp-Imp is export-import; LN is light naphtha; HN is heavy naphtha; Et= is ethylene; Pr= is propylene;
Bu== is butadiene; Mx is mixed xylenes; A9 is A9+ aromatics; Raf is raffinate. Exp-Imp
Source: IHS Markit © 2019 IHS Markit

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 Demand drivers

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 4

Olefins demand will grow at robust pace with increasing use of light naphtha as
feedstock, particularly in long term
Global Ethylene Production By Feedstock
300 60

250 50

% Share of naphtha
200 40
MMt/a

150 30

100 20

50 10

0 0
2010 2018 2025 2030 2035 2040

Naphtha Ethane Propane Butane Other % Share of naphtha

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 5

More reformate (heavy naphtha) will be required to meet aromatics demand but its
share will decline with increasing alternative sources
Global Aromatics Production by Key Sources
250 60

% Share of Reformate
200 55

150 50
MMt/a

100 45

50 40

0 35
2010 2018 2025 2030 2035 2040

Reformate Extraction/Distillation Pygas Extraction Toluene Transalkylation Others % Share of Reformate Ext./Dist.
Source: IHS Markit © 2019 IHS Markit

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 6

While reformate demand for gasoline will be capped by future peak demand & use of
other high octane components, light naphtha blending will reduce
Global Gasoline Demand Global Gasoline Blending - Rivalry
35 100%

30 80%
25
60%
20
MMb/d

40%
15
20%
10
0%
5 2010 2018 2025 2030 2035 2040
0 Others Oxygenates
2010 2015 2020 2025 2030 2035 2040 Return streams from Chemicals Isomerate/ Alkylate
Light Naphtha Cat. Gasoline
Rivalry Autonomy Reformate
Source: IHS Markit © 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit

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 7

Reformate demand for aromatics production will be the key driver for growth in the
coming years, while the requirements for gasoline production will decline
Global Reformate demand by end use
600 70

65
500

% Share of Aromatics
60
400
55
MMt/a

300 50

45
200
40
100
35

0 30
2010 2018 2025 2030 2035 2040
Aromatics Gasoline % Share of Aromatics
Notes:
Source: IHS Markit © 2018 IHS Markit

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 Supply drivers - Refining

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 9

Refinery crude runs will grow but at slower rate—tracking refined products demand
trend—thus reducing naphtha supply growth potential
Global Refined Product Demand by Sector
100 60%

% Share of Transportation
80 58%

60 56%
MMb/d

40 54%

20 52%

0 50%
2010 2018 2025 2030 2035 2040

Transformation Energy Industry Transportation International bunkers Other % Share of Transportation

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 10

Crude slate is getting lighter over next few years, but in the long term light crude
share likely to decline, resulting in lower naphtha supply
World Crude Production by Type
100 60%

Crude/Condensate
80 58%

Share of Light
60 56%
MMb/d

40 54%

20 52%

0 50%
2010 2018 2025 2030 2035 2040
Light Sweet Medium Sweet
Light Sour Medium Sour
Heavy Sour Heavy Sweet
Segregated Condensate % Share of Total Light Crude/Condensate
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 11

Large number of hydrocracking projects are expected to help meet distillate

demand growth and add to naphtha supply
World: Capacity Additions, 2018-2040

12

10

8
MMb/d

0
Crude Distillation Condensate Splitter Hydrocracker Coker Reformer

Announced Hypothetical
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 12

Increased production of natural gas liquids will directly or indirectly partially offset
growing naphtha requirements from refinery operation
Global NGL Supply By Product
700

600

500

400
MMt/a

300

200

100

0
2010 2018 2025 2030 2035 2040

Ethane Propane Butane Natural gasoline

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 Implications

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 14

Refinery will remain be the main source of naphtha but “business as usual” refining
operation will not be enough to meet demand growth in the long run
Global Light+Heavy Naphtha Supply
1600 Tight Supply 30%
1400 Oversupply 27%
1200 24%

% Naphtha Yield
1000 21%
800 18%
MMt/a

600 15%
400 12%
200 9%
0 6%
2010 2018 2020 2022 2024 2026 2030 2035 2040
Refinery - CDUs Refinery - Conv units Natural gasoline
Return from Aromatics Others % Naphtha yield from CDU
% Naphtha yield (for Chemicals)
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 15

Higher level of integration, changes in operating mode and new technologies would
be required to increase naphtha and chemicals yields
• COTC represents “ultimate” integration by merging refinery &
COTC petrochemical plants into one.
• COTC elevates petrochemical production to refinery scale.
Yield~40-80%

FULL Refining + Steam Cracking + PX Complex

Yield~25-40%

SINGLE Refining + Steam Cracking or Refining + PX Complex

Yield~15-25%

REFINING PLUS Refining + BTX + Propylene

Yield<15%

Refining
REFINING

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 16

As new large integrated refineries come onstream, existing facilities need to be

more competitive to avoid being marginalized
ILLUSTRATION
East-of-Suez Refinery Margin Analysis

4th Quartile
Net Cash Margins, $/Barrel of

1st Quartile 2nd Quartile 3rd Quartile

Crude

All refineries in the 1st quartile

are highly integrated with
petrochemicals

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Cumulative crude capacity, thousand b/d
Fully Integrated Ethylene Integrated Paraxylene Integrated Non Integrated
Source: IHS Markit © 2019 IHS Markit

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 17

Key takeaways

Naphtha demand will While refinery will still be Significant changes in

continue to rise supported the main source of naphtha operation - both for
by strong demand growth of supply, its supply growth refining and petrochemical
petrochemicals but lower will move in tandem with manufacturers, trade,
demand from gasoline slowing or declining refined pricing and even in the
production in the long term products demand growth in business models are
will offset some the long term expected in the long term

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Thank you

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