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.
20-Sep-18

2. Proposed Agenda Europe versus US Competitiveness
High Performance in Petrochemicals
Wrap—Up
© 2005 Accenture. All rights reserved.
20-Sep-18

3. European Petrochemical Industry2 1
Main Petrochemical Complexes
Mosmorran/Fife, Grangemouth
Stenungsund
Wilton
Stade, Willemshaven
Rotterdam, Antwerp
NDG
Rurh area
Ludwigshaven
Porto Maghera/Ferrara
Med(Lavera Fos Berre)
Taragona
Leuna
Carling 3 4 5 6 7 12
1’000 km 8 13 9 10 11
© 2005 Accenture. All rights reserved.
20-Sep-18

4. Comparing Europe and US Chemicals
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.
20-Sep-18

5. Very Similar Trends in Capacity Growth
INSTALLED CAPACITY
Million Tons
1995
2005
CAGR 2% 2% 2% 4% 3% 2% 6% 7%
© 2005 Accenture. All rights reserved.
Reference: data Parpinelli TECHNON, Accenture Analysis
20-Sep-18

6. Europe is closing the gap with US on scale—slowly
AVERAGE PLANT SCALE
KTA
1995
2005
Growth
30%
25%
25%
35%
40%
20%
55%
50%
© 2005 Accenture. All rights reserved.
Reference: data Parpinelli TECHNON, Accenture Analysis
20-Sep-18

7. Closures drive up average scale
Closures and Start Ups
Closures drive up average scale US WE
Capacity (kta)
Capacity (kta) PP PP
200
200 PE
Typical 2005 PE
Typical 1995
100
100 PP PE PP PE
Plant Closures (number) 30
Plant Start Ups (#) 30
Reference: data Parpinelli TECHNON, Accenture Analysis
© 2005 Accenture. All rights reserved.
20-Sep-18

8. US more effective than Europe
Logistics and Infrastructure
US more effective than Europe
European Observations
High Reliance on Road Logistics
Europe will be investing in further Pipe Line infrastructure
EC has launched program to upgrade Rail Infrastructure
Refinery Integration—will it grow or go away …
Reference: Excludes Pipe Line movements. Accenture Analysis
© 2005 Accenture. All rights reserved.
20-Sep-18

9. Ethylene Economics
Overall: Change in Ethylene Economics driven by Natural Gas price increase not structural factors
ETHYLENE CASH COST
US$/ton
© 2005 Accenture. All rights reserved.
Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis
20-Sep-18

10. US leads Europe in Foreign Investments
Foreign Policy
US leads Europe in Foreign Investments
Ethylene—10 M tons
PE—6.6 M tons
PP—3.5 M tons
Europe 1%
Others
75% US
24% US
18%
Europe 7%
Others
75%
Others
92%
Europe 4% US
Middle East
PE—7.4 M tons
PP—5.2 M tons
Ethylene—9 M tons
Europe 8%
Other
70% US
22% US US
21% 4%
Asia
Europe
Europe 4%
11%
Others
Others
85%
75%
© 2005 Accenture. All rights reserved.
Reference: data Parpinelli TECHNON, Accenture Analysis
20-Sep-18

11. Role of Middle East
Middle East is highly competitive but limited impact with about 10% of volume
ETHYLENE GLOBAL SUPPLY CURVE (2004) US
(30M $470/ton)
US$/ton
LA (4M $400/ton) WE
(20M $360/ton)
Asia
(30M $300/ton) ME
(10M $150/ton)
© 2005 Accenture. All rights reserved.
Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis
20-Sep-18

12. US performance appears stronger than Europe
Chemical Industry Performance
US performance appears stronger than Europe
CHEMICAL COMPANY TRS
1995—2005
US 3.6
WE 2.3
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.
20-Sep-18

13. High Performance Business
Performance gap suggests that there is further room for restructuring in Europe
Market Focus and Position
Distinctive Capabilities
Performance Anatomy
Creating New Direction
Defining Road Map for Differentiation
Out-Executing Competition
Business Model Selection
Active Portfolio Management
Articulating the Vision
Innovation
Customer Focus
Operations Management
Effective Governance and Financial Flexibility
Strong Performance Culture
Information Technology as a Strategic Asset
© 2005 Accenture. All rights reserved.
20-Sep-18

14. Borealis is completing impressive transformation
Case Study
Borealis is completing impressive transformation
Past
Future
Direction
(Market Focus and Position)
Road Map
(Distinctive Capabilities)
Execution
(Performance Anatomy)
Statoil
NESTE
EXIT
Borealis
Neste
1998
OMV
New Borealis
IPIC
Sales Euro Bn
3.7
4.6
3.7
3.0
3.5
3.7
ROIC % 9%
11% 3% 2% 3% 3%
1999
2000
2001
2002
2003
2004
© 2005 Accenture. All rights reserved.
20-Sep-18

15. The jury is still out on a number of other “ventures”
European Industry Restructuring
The jury is still out on a number of other “ventures”
Past
Future
Direction
(Market Focus and Position)
Road Map
(Distinctive Capabilities)
Execution
(Performance Anatomy)
ENI
INEOS
EVC
ICI
New DSM
DSM
SABIC
DSM
Sabic EuroPetrochemicals
VEBA
Advantaged Portfolio
A&A
BP Chem
???
Innovene
???
Total Petrochemicals
Total
???
Arkema
© 2005 Accenture. All rights reserved.
20-Sep-18

16. Way Forward
Becoming High Performance Petrochemicals Business—Focus Areas for Differentiation
Ongoing
Accelerating
“New”
Refinery Integration and Envelop Optimization
Improving Scale and Reliability
Upgrading Industry Infrastructure
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
© 2005 Accenture. All rights reserved.
20-Sep-18

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.
20-Sep-18