With “Creating Value through Collaboration” as its theme, the Asia Petrochemical Industry Conference (APIC) 2018 puts the spotlight on the imperative of collaboration and cooperation in paving the way for a prosperous and robust petrochemical industry.
Rising optimism in the oil & gas industry
With 2017 deemed by many as the year of recovery, 2018 brings about a sense of optimism as the oil and gas industry continues its slow and steady recovery from the 2014 downturn. Global oil prices are rising gradually from around $30 per barrel in early 2016 to around $53 per barrel in 2017. There is also an increase in upstream and downstream activities which is a positive indicator of the health of the industry.
Robust global economic growth has led to a steady increase in oil and gas demand. In its latest report, International Energy Agency (IEA) forecasted that global oil demand will rise from 97.8 million barrels per day (bpd) to 104.7 million bpd from 2018 to 2023 with China and India contributing half of the increase in demand.
Non-OPEC countries is forecasted to dominate the global oil supply contributing 59.26 million bpd of crude oil this year, with the US contributing the largest supply growth amounting to 1.4 million bpd for 2018. Apart from the surging output from the US, rising production from Canada, Brazil and Norway is expected to support and drive global demand, while the Middle East continues to remain as Asia’s biggest supplier.
Asia as the key driver of global petrochemical industry
Asia’s robust economic growth supported by megatrends; rapid urbanisation, growing population and rising middle class income will lead to higher demand of petrochemicals. This will increase the potential for continuous growth of the industry in the region.
One of the bright stars in Asia is China. Availability of coal resources and imported LPG from the US, and the development of integrated refinery and petrochemical complexes have made the availability of feedstock for the development of the petrochemical industry.
India is also expanding its petrochemical capacities and increasing its flexibility in petrochemical production. The government is planning to develop petrochemical complexes around India to meet the increasing demand for polymers and speciality chemicals across the diverse industrial segments. In 2017, India’s Reliance Industries Limited (RIL) has successfully commissioned the world’s largest ethane importing plant and has now begun to import ethane from the US for its crackers in Dahej and Hazira.
Growing capacity expansion in the US
The shale revolution brought about a robust petrochemical capacity expansion in the US. According to an analysis by Independent Chemical Information Service (ICIS) eight new ethane crackers are expected to commence production from 2017 to 2018, producing a total of 9.2 million tonnes/year of ethylene capacity.
The US polyethylene capacity is projected to rise by 6.5 million tonnes/year, accounting for about 42% of global polyethylene capacity expansion up till 2020. The US polyethylene production will mostly be meant for export to key regions such as Latin America and Europe. The increased expansion has opened arbitrage opportunities to Asia, competing with the regional producers as well as producers from the Middle East.
The need for collaboration for the sustainability of the industry
With intensifying competition from other regions, collaboration plays a prominent role in enhancing the robustness of the Asian petrochemical industry. Strong cooperation between manufacturer and consumer is needed to develop new markets for differentiated products. The focus on creating high-value specialty chemicals which are customised to cater for the niche market will help propel the industry further in positioning the Asian petrochemical producers as solution providers.
Akbar Md Thayoob, President, Malaysian Petrochemicals Association (MPA) said, “Today, Petrochemicals are regarded as the key engine of growth as we move into the future. Shaped by the megatrends of urbanisation, ageing population, rising middle income, energy efficiency, just to name a few. Against this backdrop, there is a need for the petrochemicals fraternity to come together and collaborate to offer sustainable solutions demanded by these megatrends.”
Malaysia’s petrochemical industry landscape
Malaysia’s petrochemical industry began in the early 1990s with the development of three major petrochemical facilities strategically located in Gebeng, Kertih and Pasir Gudang. Since then, Malaysia has been among the key petrochemical players in the region with a wide range of petrochemicals being produced and exported from the country such as olefins, aromatics, ethylene oxides and glycols, among many others. These world-scale plants have also contributed significantly to the production of the local plastic processing activities in the country by providing a steady supply of feedstock material for the plastic industry.
PETRONAS’ largest downstream project, Pengerang Integrated Complex (PIC), is currently on track for overall start up by early 2019. This bold move by PETRONAS is expected to push the Malaysian Oil and Gas downstream sector into a new frontier of technology and economic development. During the construction period, PIC employed up to 60,000 workers and created spin-off from economic activities to its surrounding areas. Its proximity to the world’s busiest shipping lane and international trading hub makes it the most strategic regional downstream hub.
The Malaysian government’s support in providing a conducive ecosystem has also helped the petrochemical industry to thrive in the country. This includes the development of infrastructure and offering of incentives to attract foreign companies to invest in Malaysia and boost local manufacturing sector activities.
APIC 2018: Creating Value through Collaboration
Against the backdrop of these opportunities, APIC 2018 will gather key business players, leading market analysts and industry experts in Kuala Lumpur from 9th to 10th May to provide insights and critical analysis from across the chemical value chain to enhance the growth of the industry.
Notable speakers for the event includes Dave Witte, Senior Vice President, Division Head – Energy & Chemicals, IHS Markit, Clive Gibson, Vice President, Asia, Energy & Chemicals Advisory, Nexant, Vipul S Shah, COO – Petrochemicals, Reliance Industries Ltd and Dr Andrea Frenzel, President, South & East Asia, ASEAN, Australia and New Zealand, BASF.
For more information about Asia’s most premier petrochemical industry event, APIC 2018, visit www.apic2018.org.my
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Headline crude prices for the week beginning 11 March 2019 – Brent: US$66/b; WTI: US$56/b
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GEO ExPro Vol. 16, No. 1 was published on 4th March 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.
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In 2017, Norway’s Government Pension Fund Global – also known as the Oil Fund – proposed a complete divestment of oil and gas shares from its massive portfolio. Last week, the Norwegian government partially approved that request, allowing the Fund to exclude 134 upstream companies from the wealth fund. Players like Anadarko Petroleum, Chesapeake Energy, CNOOC, Premier Oil, Soco International and Tullow Oil will now no longer receive any investment from the Fund. That might seem like an inconsequential move, but it isn’t. With over US$1 trillion in assets – the Fund is the largest sovereign wealth fund in the world – it is a major market-shifting move.
Estimates suggest that the government directive will require the Oil Fund to sell some US$7.5 billion in stocks over an undefined period. Shares in the affected companies plunged after the announcement. The reaction is understandable. The Oil Fund holds over 1.3% of all global stocks and shares, including 2.3% of all European stocks. It holds stakes as large as of 2.4% of Royal Dutch Shell and 2.3% of BP, and has long been seen as a major investor and stabilising force in the energy sector.
It is this impression that the Fund is trying to change. Established in 1990 to invest surplus revenues of the booming Norwegian petroleum sector, prudent management has seen its value grow to some US$200,000 per Norwegian citizen today. Its value exceeds all other sovereign wealth funds, including those of China and Singapore. Energy shares – specifically oil and gas firms – have long been a major target for investment due to high returns and bumper dividends. But in 2017, the Fund recommended phasing out oil exploration from its ‘investment universe’. At the time, this was interpreted as yielding to pressure from environmental lobbies, but the Fund has made it clear that the move is for economic reasons.
Put simply, the Fund wants to move away from ‘putting all its eggs in one basket’. Income from Norway’s vast upstream industry – it is the largest producing country in Western Europe – funds the country’s welfare state and pays into the Fund. It has ethical standards – avoiding, for example, investment in tobacco firms – but has concluded that devoting a significant amount of its assets to oil and gas savings presents a double risk. During the good times, when crude prices are high and energy stocks booming, it is a boon. But during a downturn or a crash, it is a major risk. With typical Scandinavian restraint and prudence, the Fund has decided that it is best to minimise that risk by pouring its money into areas that run counter-cyclical to the energy industry.
However, the retreat is just partial. Exempt from the divestment will be oil and gas firms with significant renewable energy divisions – which include supermajors like Shell, BP and Total. This is touted as allowing the Fund to ride the crest of the renewable energy wave, but also manages to neatly fit into the image that Norway wants to project: balancing a major industry with being a responsible environmental steward. It’s the same reason why Equinor – in which the Fund holds a 67% stake – changed its name from Statoil, to project a broader spectrum of business away from oil into emerging energies like wind and solar. Because, as the Fund’s objective states, one day the oil will run out. But its value will carry on for future generations.
The Norway Oil Fund in a Nutshell