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FORO PPQ
PEMEX Petroquimica
Ciudad de México 2014
23 Septiembre
Market Reporting
Consulting
illuminating the markets
Events
How will the methanol industry absorb expanding
US (shale driven) capacity?
Dave McCaskill
VP Methanol & Derivative Services
Argus JJ&A
Houston, TX
Copyright notice
Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence
from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any
form or for any purpose whatsoever without the prior written consent of Argus.
Trademark notice
ARGUS, ARGUS MEDIA, the ARGUS logo, DeWitt, FMB, FUNDALYTICS, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit www.argusmedia.com/trademarks for more information.
Disclaimer
All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any
particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.
Agenda
• Shale Gas Overview
◦ NGL’s, LPG’s, Ethane, Propane, Naphtha
• Methanol Industry Perspective/Relationship
◦ Global Overview
◦ North American Market Review
‐ Industry Perspective/Relationship
‐ US Methanol Demand/Supply
‐ Mexico Derivative Demand
◦ US Methanol Industry & Capacity “shake-up”
‐
‐
‐
‐
Demand/Supply
Capacity – Global and US
Drastic Change in the US Market
Methanol Industry Capacity Additions (US Focus)
• Methanol Industry Cost Structure
• Methanol Price Trends/Outlook
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
The Shale Revolution in the US has/is Changing Global
Market Dynamics
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
EIA projection for lower 48 states gas production, TCF/Y
• EIA, in their latest
Annual Energy Outlook,
sees lower 48 natural
gas production rising 44
% between 2011 and
2040
• Shale/Tight Gas
production is
responsible for all of
the growth, offsetting
the decline in the
conventional gas plays
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Oil Production is up 60% in 60 Months as a Result of
Increased Shale Oil Production
BAKKEN PRODUCTION Th B/d
1,200
1,000
800
600
400
200
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
EAGLE FORD PRODUCTION Th B/d
1,400
1,200
1,000
800
600
400
200
-
Jan-12
illuminating the markets
Apr-12
Jul-12
Oct-12
Jan-13
Copyright © 2014 Argus Media Ltd. All rights reserved.
Apr-13
Jul-13
Oct-13
Jan-14
Apr-13
Jul-13
Oct-13
Jan-14
NGL Supply from Natural Gas Forecast, Kbl/day
US NGL Balance, 000 bl/d
5000
4500
4000
3500
3000
C5+
2500
Butane
Propane
2000
Ethane
1500
1000
500
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
• Ethane supplies adequate, even with planned exports
• More than adequate propane to supply new PDH units
• Butane exports will need to increase
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
2023
Ethane will be plentiful….Propane is a Similar Story
US ethane supply
• Ethane supply estimates
vary widely
• Exports expected
• PDH units will be
plentiful
2000
1,000 bbls/day
• Steam cracker demand
could jump from 1 million
b/d to >1.6 million
2500
Available for export,
inventory, rejection ,etc
1500
1000
500
0
2013
SC Demand
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Overhang Low Case
2020
Overhang Possible
US NGL Supply/Demand – ‘000 Bbl/d
• Includes LPG from refineries
• Exports could top 800kbl/day on average; over 1mm bbl/d in summer
• With gasoline demand faltering, even more butane could be available
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Adding LPG Capacity….
• US now no. 1 exporter
• Announced projects will
result in almost 1.4
mmbl/day of capacity by
2016
• Utilization high in the
summer, but could hit low
70’s on average if all
projects are developed
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Crude Distillation Capacity is Expanding, and
Utilization Rates are High….
•
Valero and Marathon are adding distillation capacity to process more shale crudes
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
… and as a Consequence of the Quality of US Shale
Crudes, Much More Naphtha is being Produced
•
•
Based on replacing 1.6mmbbls per day of Brent/Bonny with Eagle Ford and Bakken
With forecast production growth of shale crudes (up to 4.0MM bbls per day by 2020)
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
The US has Sought to Manage this Naphtha Length by
Increasing its Exports of Gasoline
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Shale Gas/Oil Summary
• Shale Gas is the Topic of Discussion, but Shale Oil is
Perhaps More Important
• The US Moves to an Energy Exporter
◦
◦
◦
◦
NGL’s
Gasoline’s
Naphtha’s
Crude Oil ???
• Abundant Ethane/Propane
◦ Ethylene Production Soars
◦ Propylene Follows - PDH
• A Huge Mix of Petrochemicals Become Available for
Aggressive Export Opportunities
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Moving to the Methanol Industry
• With abundant shale gas….
• US methanol capacity could increase 10-fold by 2020.
• From today’s 2 million metric tons capacity to over 20
million metric tons of capacity
◦ MTO – Methanol to Olefins
◦ MTG – Methanol to Gasoline
• The US is on a pace to become a large net exporter of
methanol within the next 5 years
• Methanol price levels will come under pressure
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global Methanol Industry Demand – 2014
excluding CTO/CTP
66.5 mn metric tons
3.1, 5%
(2013 = 61.0 mn)
6.6, 10%
20.6, 31%
Formaldehyde
Acetic Acid
8.1, 12%
Other
Fuel Applications
MTBE
Dimethyl Ether
10.6, 16%
6.5, 10%
10.9, 16%
illuminating the markets
MTO/MTP - Merchant
Almost 40% “connected” to
crude oil values
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global Methanol Industry Demand
100
90
80
91
Million Metric Tons
AAGR – 8%
66.5
70
13%
52%
60
43%
50
40
4%
30
20
10
0
2010
2011
2012
2013
Traditional - GDP
illuminating the markets
2014
2015
2016
2017
Energy (includes MTO)
Copyright © 2014 Argus Media Ltd. All rights reserved.
2018
Global Methanol Industry Demand – with CTO/CTP
120
100
Million Metric Tons
116
AAGR – 13%
80
71.6
60
43%
21%
40
62%
4%
20
0
2010
2011
2012
Traditional - GDP
illuminating the markets
2013
2014
2015
2016
Energy (includes MTO)
Copyright © 2014 Argus Media Ltd. All rights reserved.
2017
2018
CTO/CTP
Global Methanol Industry Demand
100
90
Million Metric Tons
80
70
60
50
40
30
20
10
0
2010
2011
Formaldehyde
Fuel Blending
Others
illuminating the markets
2012
2013
2014
Acetic Acid
Dimethyl Ether
MTO/MTP
2015
2016
MTBE/TAME
MMA
Copyright © 2014 Argus Media Ltd. All rights reserved.
2017
2018
Biodiesel
Methyl Amines
Global Methanol Industry Production – 2014
9, 13%
3, 4%
6, 9%
30, 45%
South America
North America
EU/Russia
Middle East
Africa
Asia W/O China
China
12, 19%
5, 7%
illuminating the markets
2, 3%
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global Methanol Industry Supply
100
90
Million Metric Tons
80
45%
70
60
45%
50
40
30
20
10
0
2010
2011
S. America
Asia w/o China
illuminating the markets
2012
2013
EU/Russia
N. America
2014
2015
Middle East
China
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
Africa
2018
Global Methanol Capacity – w/o CTO/CTP
160
140
120
Million Metric Tons
Avg. Op Rates ‘13-’18 = 62%
or w/o China = 82%
China’s explosive
growth has kept
world expansion
“contained”
100
China
United States
Other
80
60
40
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global Methanol Capacity – w/o CTO/CTP
160
140
120
Million Metric Tons
Avg. Op Rates ‘13-’18 = 62%
or w/o China = 82%
China’s explosive
growth has kept
world expansion
“contained”
100
China
United States
Other
80
60
40
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global “Wrap-up”
• Methanol demand remains robust
◦ Core GDP products see 4% growth
◦ Fuel applications near 10%
◦ Near term capacity growth continues in China and the US
‐ Small additions elsewhere
• Methanol capacity additions will be absorbed
• The North America Market – US Capacity Explosion
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Global Methanol Industry Demand
100
90
Million Metric Tons
80
70
60
50
40
30
20
10
0
2010
2011
North America
Russia/CIS
Northeast Asia
illuminating the markets
2012
2013
2014
2015
South America
Middle East/Africa
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
Europe
SEA/Oceania
2018
North America Methanol Demand
12
Million Metric Tons
10
AAGR – 4.5%
8
Mexico
Canada
United States
6
4
2
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
North America Methanol Demand
12
10
Million Metric Tons
New capacity is unquestionably on the way,
but slower than once anticipated
8
Mexico
Canada
United States
Production
6
4
2
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
North America Methanol Demand
12
Million Metric Tons
10
8
Fuel
Mexico
Canada
United States
Production
6
4
2
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Methanol Industry Demand
10
9
Million Metric Tons
8
7
6
5
4
3
2
1
0
2010
2011
2012
Formaldehyde
Biodiesel
MMA
illuminating the markets
2013
2014
2015
Acetic Acid
Fuel Blending
Methyl Amines
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
2018
MTBE/TAME
Dimethyl Ether
Others
Mexico Methanol Industry Demand
0.5
Million Metric Tons
0.4
0.3
0.2
0.1
0
2010
2011
2012
2013
2014
2015
2016
2017
Formaldehyde
MTBE/TAME
Biodiesel
MMA
Methyl Amines
Others
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
2018
Mexico Methanol Industry Supply
0.5
Million Metric Tons
0.4
0.3
0.2
0.1
0
2010
2011
2012
2013
2014
2015
Domestic Production
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
Imports
2017
2018
North America Trade Flow
7
6
Million Metric Tons
5
4
3
Imports
Exports
Net
2
1
0
-1
-2
-3
-4
2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Methanol Industry Capacity Additions
• 2012: OCI
730 Kt
Mid year
• 2013: Lyondell/Basell
780 Kt
December
• 2014: Pampa Fuels LLC
65 Kt
Q4
185 Kt
Q4
1,000 Kt
Q1
1,300 Kt
Q3/Q4
• 2016: Methanex Geismar 2
1,000 Kt
Mid year
• 2017: OCI
1,600 Kt
1H
• 2018: South LA Methanol
1,600 Kt
OCI Debottleneck
• 2015: Methanex Geismar 1
Celanese/Mitsui
Lk Charles Clean Energy 1,000 Kt
Valero
illuminating the markets
1,600 Kt
Copyright © 2014 Argus Media Ltd. All rights reserved.
US Methanol Industry Capacity Additions
Certainly not to be counted out……….
• Celanese/Bishop
1,300 Kt
• G2X Energy - MTG
1,200 Kt Multiple units planned
• Mississippi Gasification
1,000 Kt
• NW Innovation
3,600 Kt
China
• Fund Connell
7,200 Kt
China
• Yuhuang Chemical
1,800 Kt
China
• TBD/Kentucky
1,000 Kt
Coal Based
• TBD/Northeast
1,800 Kt
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Just need partner
Methanol Capacity vs World Demand Growth (YOY)
14
Million Metric Tons
12
World Demand Growth
Excludes captive MTO/MTP
methanol demand
10
8
6
4
2
0
2010
2011
illuminating the markets
2012
2013
2014
2015
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
2018
Methanol Capacity vs World Demand Growth (YOY)
14
Million Metric Tons
US Capacity Additions
12
10
World Demand Growth
Excludes captive MTO/MTP
methanol demand
8
6
4
2
0
2010
2011
illuminating the markets
2012
2013
2014
2015
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
2018
Methanol Capacity vs World Demand Growth (YOY)
14
Million Metric Tons
ROW Additions
US Capacity Additions
World Demand Growth
12
Excludes captive MTO/MTP
methanol demand
10
8
6
4
2
0
2010
2011
illuminating the markets
2012
2013
2014
2015
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2017
2018
Methanol Industry Cash Cost Structure
600
Dollars per Metric Ton
400
Methanol product cash
cost – fob basis (85%
operating rates)
200
Year = 2013
0
0
20
40
60
80
100
120
Cumulative Methanol Production Capacity - Million Metric Tons
illuminating the markets
Copyright © 2013 Argus Media Ltd. All rights reserved.
Methanol Industry Cash Cost Structure
600
Dollars per Metric Ton
Methanol product cash
cost – fob basis (2014
performance)
400
Methanol product cash
cost – fob basis (85%
operating rates)
200
Year = 2014
0
0
20
40
60
80
100
120
Cumulative Methanol Production Capacity - Million Metric Tons
illuminating the markets
Copyright © 2013 Argus Media Ltd. All rights reserved.
Historic Methanol Pricing – Spot
600
Dollars per Metric Ton
400
200
USGC
Europe
China
0
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Methanol Pricing – 2014 Outlook
700
Dollars per Metric Ton – Spot basis
600
USGC
Europe
China
500
400
300
200
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Methanol Pricing – 2014 Outlook
700
Dollars per Metric Ton – Spot basis
600
Nominal €360
500
Nominal 150 cpg
400
300
USGC
Europe
China
200
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Methanol vs Crude Oil Pricing
140
Dollars per barrel
Dollars per metric ton
490
120
420
100
350
80
280
No reason to see methanol
values significantly deviating
from energy equivalence
60
40
0
2006
140
Dubai Crude Oil
20
210
China Spot Methanol
70
0
2008
illuminating the markets
2010
2012
2014
Copyright © 2014 Argus Media Ltd. All rights reserved.
2016
2018
Crude Oil Pricing History/Outlook
140
Dollars per barrel
120
100
80
Dubai
WTI
60
Brent/NSD
40
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Methanol Industry Spot Pricing Outlook
600
Dollars per metric ton
Dollars per barrel
175
150
500
125
400
100
300
US
Europe
China
Crude Oil Avg.
200
100
75
50
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Conclusions
• Methanol Demand Remains Robust – China Dominates
• US Capacity Returns – Easily Absorbed Globally
◦ US becoming a methanol surrogate for China
• US Production Costs are “Competitive”
• 5 Million Tons of US Imports Must Find a New Home
◦ But, the industry is growing in excess of 3 MM tons per year
• Methanol Pricing Will Come Under “Temporary” Pressure
◦ And could become more “region-centric”
◦ We look for “growing” fuel use applications
illuminating the markets
Copyright © 2014 Argus Media Ltd. All rights reserved.
Dave McCaskill
VP Methanol & Derivative Services
dave.mccaskill@argusmedia.com
+1 713 360 7524
Houston, TX
Copyright notice
Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence
from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any
form or for any purpose whatsoever without the prior written consent of Argus.
Trademark notice
ARGUS, ARGUS MEDIA, the ARGUS logo, DeWitt, FMB, FUNDALYTICS, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit www.argusmedia.com/trademarks for more information.
Disclaimer
All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any
particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.