1. Iranian Petrochemical Feedstocks in the Global Scenario
Iran Petrochemical Forum, 2017
Stefano Zehnder
Vice President ICIS Analytics & Consulting

2. AGENDA Global Developments in Petrochemical Feedstocks
Iran Potential Developments
Conclusions & Key Implications

3. Global Developments in Petrochemical Feedstocks

4. Diverging trends
Global Petrochemical demand growth is much faster than oil’s…
and a target for Refiners!
Conflicting priorities emerge for CTO/MTO projects in China
Source: ICIS Supply and Demand Database

5. (Million Metric Tonnes)
US is at center stage for Ethane US Ethane Balances may get tighter, although ethane will not be short…
USA Ethane Exports
(Million Metric Tonnes)
2015
2018
2020
2025
Brazil -
-0.2
-0.3
Canada
-1.5
-1.7
-1.8
India
-1.2
-1.6
Sweden
-0.6 UK
0.0
-0.8
-1.1
Total USA Exports
1.5
4.5
5.3
5.4
Brazil
India UK
Norway
Canada
Sweden
Source: ICIS Supply and Demand Database

6. US Shale developments in a lower oil price scenario: not the original plan!
Rejection
Source: ICIS Consulting & ICIS Prices
A large amount of ethane remains “rejected”, waiting for the new demand. But once demand arrives, more production will be required and transport costs featured…Incremental production will come but ethane prices will be above those of natural gas...US ethane based ethylene will be competitive, but return on investments below the original plans…
Propane availability suggests ample supply is available, but seasonal factors remain in place. Steam-crackers’ feedstock flexibility will be a substantial competitive advantage

7. Asian Cost Comparisons: Imported Ethane vs Traditional Naphtha
The ‘easy decision’ window on ethane imports from the US has closed
Risk appetite, any hedging opportunities & infrastructure will be important considerations

8. Global Propane: Key Trade Flows (2016, million tonnes)
US Propane will remain long: flows to international markets rapidly increasing
The US is by now the largest country exporter of Propane in the World. It was a net importer of LPG just a few years ago.
US Exports are now flowing to Asia and Europe, where naphtha cracker flexibility is increasing
The Middle East remains the largest region in terms of exports
Ample avails in international markets have promoted Asian PDH developments
China imports are now exceeding those of Japan
Global Propane: Key Trade Flows (2016, million tonnes)
Former USSR
Europe
3.1
3.4
South Korea
1.4
North America
Japan
4.8
Middle East
3.4
3.2
7.1
China
to Japan
5.4
3.4
3.3
Africa
to China
1.2
India
Rest of South & SE Asia
to rest of S&SE Asia
2.2
South & Central
America
Balances: Surplus Deficit
*Volumes in Million tonne
Source: ICIS Supply and Demand Database

9. Naphtha, 2016 Key Trade Flows (Million Tonnes)
Europe
(8.7)
F. USSR
18.5
8.8
1.3
0.4
0.5
0.8
2.2
N. America
2.7
0.5
8.4
4.0
Middle East
40.7
Africa
8.6
Asia
(54.8)
0.8
1.6
3.9
from NAM
40.0
to Asia
1.6
2.8
L. America
(7.0)
1.5
Source: ICIS Supply and Demand Database
Balance Surplus Deficit

10. Naphtha is expected to remain comfortably available until 2020
Source: ICIS Supply and Demand Database

11. With the oil price crash, the ethylene cost curve flattened dramatically, reducing the ingrained competitive advantage of ethane crackers in North America or the Middle East strictly from C2= perspective, and China MTO moved to the top of the cost curve
Future $60/bbl Oil?
MTO is already setting the ethylene price. But it remains to be seen whether it is a pure coincidence or a trend to stay.

12. Gasoline, 2016 Key Trade Flows (Million Tonnes)
1.0
1.5
1.5
56.8
6.9
S.KOREA
8.3
F.USSR
7.6
NAM
(16.0)
1.0
3.0 21
1.0 EU
CHINA
2.5
JAP
7.3
0.5
2.0
INDIA
16.2
8.0
5.5 18 ME
2.4
Rest of NEA
1.6
(13.5) 13
SING
8.8
Rest of SAP &
Indonesia
(29.8)
2.8 AF
2.0
2.5
1.6
2.0
4.4
(19.2)
LAM
(14.5)
2.5
1.3
1.5
Australia
(4.7)
20.0
Source: ICIS Supply and Demand Database
Balance Surplus Deficit

13. Combining Naphtha and Gasoline creates a surplus
Source: ICIS Supply and Demand Database

14. Iran Potential Developments

15. Global Developments in Condensate Splitting Capacity increases by 50%
Iran will be the major Player
Conflicting priorities emerge for CTO/MTO projects in China
2015 = 2938 mbd
Post 2020 = 4385 mbd
Source: ICIS Supply and Demand Database

16. Naphthas from Iranian Condensate Splitters Could target Different Markets, including Petrochemicals
Steam Cracking
NGLs/Condensates
Naphtha
Light Naphtha
Heavy Naphtha
Aromatics
Gasoline
Condensate Splitters

17. Condensate Splitters have negligible fuel oil contribution
New IMO regulations will soon hit the Fuel Oil market…
Condensate Splitters have negligible fuel oil contribution
Implementation of IMO regulations for lower sulfur bunker fuels could be anticipated to 2020
This implies that the global refining industry could suddenly move from a surplus of conversion capacity, to a surplus of Fuel Oil
Conversion of Fuel Oil in conventional refineries could generate additional petrochemicals
Source: ICIS Supply and Demand Database

18. Fuel Oil, Key Trade Flows (Million Tons)
5.0
to LAM
9.5
1.2
to SAP
48.0
5.0
S.KOREA
(4.1)
1.1
2.9
68.0
F.USSR
NAM
5.1 EU
(3.8)
6.5
5.0
13.7
3.4
to Singapore
CHINA
(5.0)
to LAM
JAP
(2.2))
4.7
0.8 ME
1.4
1.0
INDIA
3.1
5.2
8.7
Rest of NEA
(7.4)
18.6
3.2
3.8
Rest of SAP & Indonesia
(0.2) AF
1.3
1.6
7.6
LAM
2.1
18.2
8.8
to China
SING
(42.2)
4.8
19.7
Australia
(1.1)
9.6
Source: ICIS Supply and Demand Database
Balance Surplus Deficit

19. Iranian “Liquid Feedstocks” opportunities
Via Naphthas
Via FCC/RCC
Others
(C4s, etc.)
TOTAL
FCC
Propylene
Condensate Splitters
Propylene
Ethylene
Crude Oil Refineries
Source: ICIS Supply and Demand Database

20. Conclusions & Key Implications

21. Conclusions
The global petrochemical industry is growing about 4 to 5 times faster than oil demand. Refiners will increasingly target petrochemicals.
In addition to Ethane, LPG and Methanol, Iran benefits from large heavy condensate potential. Integrated condensate access will be a competitive advantage for Iranian refining operations. Iran is also introducing conversion capacity at its refineries.
This translate in additional opportunities to invest in integrated refining and petrochemical capacity. Condensate splitters enable investment in base petrochemicals based on liquid feedstocks (derived from natural gas…)
Iranian development strategy should include the right mix of petrochemical feedstocks, but also consider following with investment in appropriated derivatives, to capture incremental value along the chain.

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