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Outlook for Petrochemical Spending
Trey Hamblet
VP of Research – Chemical Processing
March 31st, 2016
Presented by
Project Analysis Underlying Methodology
IIR Market Intelligence Core Service Offering
Our global research teams identify and monitor project
spending activity throughout the life cycle of an
industrial asset.
All our data is sourced and validated directly from Plant
Owners, Contractors and Equipment Vendors.
$
Our online data service helps our end-users stay
connected to the right people and right opportunities.
$
Maintenance, Repairs &
Overhaul Spending ($1mn
and above)
$
$
$
$
Annual MRO activity
$
$
Outages/
Turnarounds
Total Investment Value
Project Status (Planning, Engineering, Under Construction)
Project Milestones (AFE, RFQ, Bid Doc, KO, Completion)
Project Scope & Key Equipment Needs
Key Personnel Contacts – Plant Owners, Plant Operators & Contractors
Probability Factors (likely
versus unlikely)
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Outlook for Petrochemical Spending
Agenda
• Natural gas and NGL demand outlook
• Midstream investments
• Major chemical industry spending outlook
• Labor market outlook
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Natural Gas Midstream
US Natural Gas Cumulative Demand Growth 2015-2020
US Natural Gas Cumulative Demand Growth 2015-2020
Gas Demand
18
Natural Gas Supply Growth 25% 2015-2020
16
Demand Drivers
14
LNG exports – 9+ Bcf/d Under Construction
Coal displacement – Coal-to-Gas Switching
Gas power generation – New Construction
Gas-on-gas competition – Pushing out imports
Pipeline exports to Mexico
New industrial demand (Ammonia and Methanol)
12
10
BCF/d
8
6
$73 Billion Advanced Stage Industrial Projects scheduled for
startup in Gulf Coast States between now and late 2017.
4
2
NGL Demand
0
2015
2016
Power Gen
2017
2018
Industrial
2019
LNG Exports
Total US Gas Production
BCF/d
2010
2015
2020
61
72
89
2020
US Supply Growth 40+% 2015-2020
US is now the Largest Exporter of Propane in the World
US Ethane Crackers 495,000 BBL/d by 2018
US Propane Dehydrogenation(PDH )198,000 BB/d by
2018
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Oil & Gas – Midstream
US/Canada Oil & Gas Midstream Buildout
Midstream Projects
$60.00
1,500
1,300
$50.00
1,100
$40.00
900
$30.00
700
500
$20.00
300
$10.00
100
$0.00
-100
Oil & Gas Pipelines TIV
Gas Processing TIV
LNG TIV
Total Project Count
Terminals TIV
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada Chemical Industry
Expectations of continued low-cost feedstock
Natural Gas (Henry Hub Spot)
• Natural gas input costs
remain cheap
• Supports general CPI
growth
$5
$/mmBtu
$4
$3
$2
Historical Oil to N/G ratio
$1
Q1
Q2
Q3
Q4
Q1
2014
Q2
Q3
Q4
Dec 2012
27:1
Dec 2013
23:1
Dec 2014
17:1
Dec 2015
16:1
2015
Source: NYMEX
Natural Gas Liquids (NGL’s)
0.8
0.7
• Ethane remains flat
• Supports ethylene
and propylene
investments
$/gal
0.6
0.5
0.4
0.3
0.2
0.1
0
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15
Ethane
Propane
Butane
Source: Petrochem Wire
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada Chemical Industry
Beneficiaries of Cheap Natural Gas ($127 Billion)
Ethylene
$47.2 bn
42.9B Lbs/yr
Natural
Gas
Continued
expectation
of low n/g
prices
Ammonia
$20.1 bn
16.4M metric T/yr
Methanol
$25.3 bn
35.2M metric T/yr
Adipic acid
$47 Methyl Methacrylate (MMA)
$753
Adiponitrile
$42 Nitric acid
$352
Alcohols, alpha
$41 Phenol
Ammonium nitrate
$664 Polyethylene Terephthalate
Butadiene
$638 Polyethylene
Butanol, n-
$0 Polypropylene
Caprolactam
$27 Polystyrene
Cumene
$12 Polyvinyl alcohol
Ethylbenzene
$0 Polyvinyl Chloride
Ethylene oxide
$3,000 Propylene
Formaldehyde
$52 Styrene
$47
$507
$7,900
$803
$37
$214
$526
$10,076
$135
Formic acid
$0 Urea
Glycerine
$5 Vinyl acetate
$133
$111 Vinyl Chloride
$297
Maleic anhydride
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
$8,000
U.S. & Canada
Chemical
CPI Projects
byIndustry
Sector (USA & Canada)
Methanol capacity and spending outlook
Approved Capacity
45
Proposed Capacity
40
Million metric T/yr
35
5.6M metric T/yr
$8.3 billion
30
25
29.6M metric T/yr
$17 billion
20
15
Approved
Proposed
Project
Completions
New Capacity
10
5
1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 4Q21
Demand Drivers
• Chemical synthesis
• Methanol-to-Olefins – China
• Transportation fuels – Asia & Europe
• Gasoline blending
• Biodiesel
• Potential in marine industry as fuel
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada
Chemical
CPI Projects
byIndustry
Sector (USA & Canada)
Methanol capacity projects
Status
TIV $’s
M
Const
$2,200
Const
$350
Eng
$5,000
Eng
$750
Project Name
Project
Type
Capacity
T/yr
BEAUMONT METHANOL UNIT ADDITION
Addition
1,750,000
TX
GEISMAR METHANOL UNIT (GEISMAR 2 ) ADDITION
Addition
1,000,000
LA
LAKE CHARLES WESTLAKE G/R PET-COKE TO METHANOL
Grassroot
1,000,000
LA
SAINT JAMES GRASSROOT METHANOL PLANT PHASE 1
Grassroot
1,900,000
LA
State
Planning
$2,400
TACOMA GRASSROOT METHANOL PLANT
Grassroot
3,650,000
WA
Planning
$1,500
PORT ARTHUR METHANOL UNIT ADDITION
Addition
1,800,000
TX
Planning
$1,500
BELLE METHANOL UNIT ADDITION
Addition
1,000,000
WV
Planning
$1,300
SAINT JAMES G/R SOUTH LOUISIANA METHANOL PLT
Grassroot
1,825,000
LA
Planning
$1,000
TACOMA METHANOL PLANT LINES NO 3 & 4 ADDITION
Addition
3,650,000
WA
Planning
Planning
$1,000
$1,000
KALAMA GRASSROOT METHANOL PLANT
CLATSKANIE PORT WESTWARD G/R METHANOL PLT
Grassroot
Grassroot
1,825,000
1,825,000
WA
OR
Planning
$800
KALAMA METHANOL UNIT NO 2 ADDITION
Addition
1,825,000
WA
Planning
$800
CLATSKANIE PORT WESTWARD UNIT NO. 2 ADDITION
Addition
1,825,000
OR
Planning
$800
BISHOP METHANOL UNIT ADDITION
Addition
1,300,000
TX
Planning
$800
FREEPORT OPUS MMTP PROJECT - PART 1
Addition
1,000,000
TX
Planning
$750
LAKE CHARLES GRASSROOT METHANOL PLANT
Grassroot
1,400,000
LA
Planning
$700
NORCO SAINT CHARLES METHANOL UNIT ADDITION
Addition
1,600,000
LA
Planning
$500
SAINT JAMES METHANOL UNIT ADDITION (PHASE 2)
Addition
1,400,000
LA
Planning
$360
SAINT JAMES G/R METHANOL PLANT (PHASE 1)
Grassroot
500,000
LA
Planning
$350
GEISMAR METHANOL UNIT (GEISMAR 3) ADDITION
Addition
900,000
LA
Planning
$100
SAINT JAMES METHANOL PLANT EXPANSION (PHASE 2)
Expansion
200,000
LA
Planning
$100
LA PORTE SYNGAS AND METHANOL PLANT EXPANSION
Expansion
200,000
TX
Planning
$5
TUCUMCARI PLT CONVERSION TO WASTE-TO-FUEL
Conversion
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
5,955
NM
U.S. & Canada
Chemical
CPI Projects
byIndustry
Sector (USA & Canada)
Methanol capacity and spending outlook
45
Approved Capacity
29.6M metric T/yr
40
Million metric T/yr
35
30
Proposed Capacity
5.6M metric T/yr
$8.3 billion
$17 billion
25
Approved
20
Proposed
15
10
5
1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 4Q21
Constraints
• Cost per gallon has decreased in recent months
• Slowdown in China
• USA to become net exporter very soon
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Project
Completions
All New
Capacity
Most Likely
new capacity
U.S. & Canada Planned Ethylene Capacity
93 billion pounds of installed capacity by 4Q19
7,000
13.8 billion
pounds
15.2 billion
pounds
120,000
105,000
6,000
90,000
Millions of Lbs/yr
4,000
3,000
2,000
1,000
Lotte (LACC)
Shintech
Formosa,
Shell, Total,
Williams,
Badlands (2),
Aither, PTT,
Nova, Siluria
CP Chem,
Dow,
ExxonMobil,
Formosa,
Ingleside,
Sasol
75,000
60,000
45,000
30,000
15,000
0
0
Installed capacity
New capacity
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Installed Capacity in billions of pounds
5,000
U.S. Chemical Processing Industry
Olefin and Polymer pricing
Ethylene & Propylene
0.6
• Ethylene prices have
continued to fall
• New capacity in 2017
and 2018 will pressure
prices
0.5
$/lbs
0.4
0.3
0.2
0.1
0
Ethylene
Polymer Grade Propylene
Refinery Grade Propylene
$/lbs
Polymers
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
• Polymer prices have
remained strong
• Globally advantaged
against naphtha-based
polymers
• Export demand
remains positive
HDPE
LLDPE
PP
Source: Petrochem Wire
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada Chemical Industry
Petrochemicals
$12.5 Billion
in 2015
$10.6
billion in Propane
Dehydrogenation
(PDH) proposed, 13.7 million pounds
Approved
Capacity
Proposed Capacity
18,000
16,000
14,000
Million Lbs/yr
12,000
10,000
8,000
2.9M Lbs/yr
$1.7 billion
10.8M Lbs/yr
$8.9 billion
6,000
4,000
Approved
Proposed
Project
Completions
New Capacity
2,000
0
4Q16
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
• Lighter feeds in ethylene fleet supports PDH investments
• Propane prices more volatile, although they remain low
• Two (2) PDH units in development/construction, Enterprise
Products & Formosa
• Eight (8) additional capacity projects proposed
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada
Chemical
CPI Projects
byIndustry
Sector (USA & Canada)
Ammonia capacity and spending outlook
Approved
Capacity
Proposed Capacity
38
36
Million metric T/yr
34
32
30
28
6.2M
metric
T/yr
$7 billion
Approved
10.2M metric T/yr
$13.1 billion
26
24
22
20
1Q16
Challenges for
new capacity
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
• Large displacement of imported capacity
• Domestic demand for Ag chemicals
• Future of Corn-to-Ethanol [for fuel]
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Proposed
Project
Completions
New Capacity
U.S. & Canada Chemical Industry
Project Spending Gap Analysis
Proposed
Actual
Pending
Continued
n/g cost
advantage
drives
optimism
$70
$60
$40
$30
$21.1
$17.1
$46.5
$25.9
$46.7
$15.3
$48.9
$29.7
2010
2011
2012
2013
2014
2015
2016
$66.5
$57.8
$13.4
$10.7
$10
$14.9
$8.5
$20
$11.1
$5.8
$ Dollars in billions
$50
$15.9
bn
$0
Construction Kick-Off Year
Proposed:
Actual:
Pending:
What was initially scheduled to start construction in the calendar year
What actually started construction or was funded in the calendar year
Proposed spending for current and future years that remains active
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
2017
Most
Likely
spend
U.S. & Canada Chemical Industry
Project Delays – Schedule Assessment
Spending Delayed from a previous year
Spending Originated for that year
$70
$57.8
$ Dollars in billions
$60
$50
$40
$30
$29.7
$25.9
$15.3
$20
$10
$15.9
bn
$0
2014
2015
2016
Construction Kick-Off Year
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
2017
U.S. & Canada Chemical Industry
Projects currently On-Hold $10.7 billion
On-hold projects with an original Construction Kick-Off in 2016 and 2017
CPI Segments
TIV ($ in millions)
Market Region
TIV ($ in millions)
Petrochemicals
$5,828
Southwest
$5,683
Plastics/Rubbers
$1,677
Great Lakes
$1,540
Specialty Chemicals
$1,645
Mid Atlantic
$1,202
Ag Chemicals
$1,101
Quebec
$1,100
Cogen/Energy
$372
West Coast
$833
$138
Industrial Gases
$30
Rocky Mountains
Other
$16
Southeast
$97
Western Canada
$35
Ontario
$25
Northeast
$19
Chlor-Alkali
$3
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
CPI Projects
Sector (U.S.
& Canada)
CPIbyProjects
by Sector
(USA & Canada)
2015 vs 2016 Comparison
Rank
1
2
3
4
5
6
7
8
9
10
CPI Segments
Petrochemicals
Ag Chemicals
Cogen/Energy
Specialty Chemicals
Plastics/Rubbers
Industrial Gases
Other
Chlor-Alkali
Surfactants
Pigments
Grand Total
$ in millions; capital and maintenance
projects
2015 Actual
TIV ($ Millions)
2016 Planned
TIV ($ Millions)
Variance
$8,345
$1,596
$293
$675
$2,313
$1,099
$800
$55
$49
$51
$12,218
$1,045
$1,025
$502
$478
$388
$139
$97
$21
$18
$3,873
($551)
$731
($173)
($1,836)
($711)
($661)
$42
($29)
($33)
$15,277
$15,930
$653
Approved
$10.7 billion
(as of Jan’ 16)
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Gulf Coast Region
Labor Assessment – Forecast of Craft Labor Hours for Industrial Construction
Quarter/Quarter Change in Labor Demand (Hours MM)
200
150
173 million hours at peak
Revised down from
185 Million hours at peak.
100
4Q15
0
2010
1Q16
Reduction of 36.2 Million Hours
50
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0.0%
-2.0%
-4.0%
-6.0%
Change in Hours
Reduction in Hours
-8.0%
2015
2016
2017
2018
Source: Industrial Info Resources Labor Demand Forecast
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
2019
2020
0
-2
-4
-6
-8
-10
-12
-14
Gulf Coast Region
Project Spending Forecast Based on 70% + Confidence
Gulf Coast Spending Forecast
$52.1
$7.6
$53.3
$50.8
$8.0
$7.5
$7.9
$7.9
$33.8
$24.6
$8.0
$24.4
$8.1
$19.1
$7.9
$7.3 $16.8
$7.1 $14.8
$21.4
$0
$6.9
$10
2019
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
41.6%
11.8%
0.7%
20.5%
0.5%
-$2.0
2017
-$3.5
2016
-$1.9
-$0.6
$0.0
2013
4.2%
-0.4%
$0.0
-$4.0
-2.5%
-10.1%
-22.6%
2018
2014
27.7%
10.1%
-$0.7
2015
Gulf Coast Region - Project Spending Annual % Change
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-$1.1
$39.7
$32.6
$26.9
$24.1
$21.9
$20.7
$20
$32.5
$28.1 $28.3
2020
$44.2
$51.4
$40
$30
$59.7
$41.7
$7.4
$ in Billions
$50
$58.7
$32.2
$60
$61.2
$59.0
$7.5
Spending in the Gulf Region
will hit a record high in
2015
Brownsville to Pascagoula
Total
$36.9
$70
Capital
$7.3
Maintenance
-26.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
-$3.0
-$2.0
-$1.0
$ in Billions
$0.0
Gulf Coast Region
Labor Assessment
• Weakness in China reduces demand for
commodities (demand down 3.2% in 2016 and
5.7% in 2017)
• Labor pressure is relieved from the Oil Sector
fallout
• Quality workers remain in a shortage thru peak
years
• Wage rates leveled out in 2015 and will carry
forward in 2016
• Maintenance Turnarounds will cause conflicts
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
U.S. & Canada Chemical Industry
Maintenance T/A Comparison by Year
$2.0
800
$1.8
700
$ in Billions
$1.4
$1.2
$1.0
$1.9
$1.8
$1.6
$1.7
600
$1.6
$1.5
500
$1.3
400
$1.0
$0.8
300
$0.6
200
$0.4
$0.2
100
$0.0
0
2010
2011
2012
2013
TIV
2014
2015
2016
2017
Count
• Planned chemical plant t/a’s remain high
• Increased activity in response to high utilization and operating rates
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Projects
$1.6
U.S. & Canada Chemical Processing Industry
Conclusion
• The next significant uptick in NGL spending is
expected in 2018 to meet demand in 2020
• Petrochemicals will contribute over 75% of total
CPI spend in 2016
• Methanol projects will be the key to CPI growth in
2016
• Exports and emerging markets will largely
influence further investment spending
• Labor markets remain tight through 2018
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
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