Slide 1
Shift To Import Parity
Market—Case Study of
Europe’s Chemical Industry
Theo Jan Simons
Partner—Global Chemicals
Practice
The Future of Gulf Coast Petrochemical Industry
University of Houston—Conference 29 April 2005
(version 1 May 2005)
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 2
Proposed Agenda
• Europe versus US Competitiveness
• High Performance in Petrochemicals
• Wrap—Up
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 3
European Petrochemical Industry
2
1
3
4
5
6
1’000 km
7
13
10
12
8
9
Main Petrochemical Complexes
1. Mosmorran/Fife, Grangemouth
2. Stenungsund
3. Wilton
4. Stade, Willemshaven
5. Rotterdam, Antwerp
6. NDG
7. Rurh area
8. Ludwigshaven
9. Porto Maghera/Ferrara
10. Med(Lavera Fos Berre)
11. Taragona
12. Leuna
13. Carling
11
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 4
Europe versus USGC
Comparing Europe and US Chemicals
North America
Europe
Historical Development
Private Companies
National and Private
Companies
Feedstock
Gas
Some Liquids
Liquids
Some Gas
Location
Gulf Coast
Across Europe
Infrastructure
Pipe Line
Storage
Some Pipe Line
Limited Storage
Logistics
Rail
Truck
Integration Focus
Refining/Feedstock
End Market
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 5
Capacity
Very Similar Trends in Capacity Growth
INSTALLED CAPACITY
Million Tons
CAGR
2005
1995
2%
25
20
Ethylene
29
23
2%
2%
18
14
Propylene
4%
20
14
12
16
3%
16
2%
PE
13
6
10
6%
9
7%
PP
5
US
WE
US
WE
Reference: data Parpinelli TECHNON, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 6
Scale
Europe is closing the gap with US on scale—slowly
AVERAGE PLANT SCALE
KTA
2005
1995
375
Growth
30%
475
Ethylene
500
625
140
25%
180
Propylene
160
35%
210
70
100
40%
PE
120
140
130
20%
200
55%
PP
125
180
US
WE
25%
50%
US
WE
Reference: data Parpinelli TECHNON, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 7
Closures and Start Ups
Closures drive up average scale
US
Capacity (kta)
Capacity (kta)
200
200
PP
WE
PP
PE
Typical 2005
Typical 1995
100
PP
PP
PE
100
PE
PE
0
0
0
Plant Closures (number)
30
0
Plant Start Ups (#)
30
Reference: data Parpinelli TECHNON, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 8
Logistics and Infrastructure
US more effective than Europe
European Observations
• High Reliance on Road
Logistics
7%
Rail
23%
88%
Road
54%
• Europe will be investing in
further Pipe Line
infrastructure
• EC has launched program to
upgrade Rail Infrastructure
5%
Water
22%
• Refinery Integration—will it
grow or go away …
US
Europe
Reference: Excludes Pipe Line movements. Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 9
Ethylene Economics
Overall: Change in Ethylene Economics driven by
Natural Gas price increase not structural factors
ETHYLENE CASH COST
US$/ton
465
365
250
200
WE Liquid
USGC Gas
1995
2004
Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 10
Foreign Policy
US leads Europe in Foreign Investments
Middle East
Ethylene—10 M tons
PE—6.6 M tons
US
24%
Others
75%
Others
92%
Others
75%
US
21%
US
4%
Europe
4%
Europe
8%
Others
75%
Europe
4%
PP—5.2 M tons
PE—7.4 M tons
US
22%
Asia
US
4%
US
18%
Europe
7%
Europe
1%
Ethylene—9 M tons
Other
70%
PP—3.5 M tons
Others
85%
Europe
11%
Reference: data Parpinelli TECHNON, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 11
Role of Middle East
Middle East is highly competitive but limited impact
with about 10% of volume
ETHYLENE GLOBAL SUPPLY CURVE (2004)
US$/ton
Asia
LA (4M $400/ton)
WE
(20M $360/ton)
US
(30M $470/ton)
(30M $300/ton)
ME
(10M
$150/ton)
Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 12
Chemical Industry Performance
US performance appears stronger than Europe
CHEMICAL COMPANY TRS
1995—2005
WE 2.3
US 3.6
Petrochemicals
5.2
3.8
Diversified
Specialty
2.5
1.3
2.2
2.3
Gases
3.8
3.0
Scale Operators
Differentiated
Operators
4.3
1.8
2.2
US
WE
Reference: Accenture Analysis. Companies include Air Liquide, Air Products, Akzo Nobel, Bayer, BASF, BOC, Ciba, Clariant, CYTEC, DOW, DSM, DuPont, Eastman
Chemicals, ICI, Lyondell, Nova, Praxair, Rohm & Haas
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 13
High Performance Business
Performance gap suggests that there is further room
for restructuring in Europe
Market Focus
and Position
Distinctive
Capabilities
Defining Road
Map for
Differentiation
Creating New
Direction
•
•
•
Business Model
Selection
Active Portfolio
Management
Articulating the Vision
© 2005 Accenture. All rights reserved.
Performance
Anatomy
•
•
•
Innovation
Customer Focus
Operations
Management
Out-Executing
Competition
•
•
•
Effective Governance
and Financial Flexibility
Strong Performance
Culture
Information Technology
as a Strategic Asset
28-Jun-16
Slide 14
Case Study
Borealis is completing impressive transformation
Past
Future
Direction
Road Map
Execution
(Market Focus and Position)
(Distinctive Capabilities)
(Performance Anatomy)
Statoil
NESTE
EXIT
Borealis
Neste
1998
OMV
New Borealis
IPIC
Sales Euro Bn
4.6
3.7
3.7
3.5
3.7
9%
3%
2%
3%
3%
11%
1999
2000
2001
2002
2003
2004
3.0
ROIC %
© 2005 Accenture. All rights reserved.
28-Jun-16
Slide 15
European Industry Restructuring
The jury is still out on a number of other “ventures”
Past
Future
Direction
Road Map
Execution
(Market Focus and Position)
(Distinctive Capabilities)
(Performance Anatomy)
ENI
EVC
INEOS
ICI
New DSM
DSM
DSM
SABIC
VEBA
Sabic EuroPetrochemicals
Advantaged Portfolio
A&A
BP Chem
Innovene
Total Petrochemicals
???
???
Total
Arkema
© 2005 Accenture. All rights reserved.
???
28-Jun-16
Slide 16
Way Forward
Becoming High Performance Petrochemicals
Business—Focus Areas for Differentiation
Ongoing
•
•
•
Refinery Integration
and Envelop
Optimization
Improving Scale
and Reliability
Upgrading Industry
Infrastructure
© 2005 Accenture. All rights reserved.
“New”
Accelerating
•
•
•
Leverage
Advantaged
Feedstock
Focus on Growth
Markets
Technology and
Innovation and
Commercialization
•
•
•
Insight To Action—
leveraging investments in
business process and IT
Winning Chains—Market,
Customer, Supply Chain,
Manufacturing, Procurement
working together
Join not Beat—Leveraging
Global Supply Network
28-Jun-16
Slide 17
Wrap—Up
In Closing
• Nothing Wrong With USGC—
implementing select lessons from
Europe
• Restructuring in Europe continues—the
challenge is differentiation
• Wrap—Up
© 2005 Accenture. All rights reserved.
28-Jun-16