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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This winter, natural gas prices have been at their lowest levels in decades. On Monday, February 10, the near-month natural gas futures price at the New York Mercantile Exchange (NYMEX) closed at $1.77 per million British thermal units (MMBtu). This price was the lowest February closing price for the near-month contract since at least 2001, in real terms, and the lowest near-month futures price in any month since March 8, 2016, according to Bloomberg, L.P. and FRED data.
In addition, according to Natural Gas Intelligence data, the daily spot price at the Henry Hub national benchmark was $1.81/MMBtu on February 10, 2020, the lowest price in real terms since March 9, 2016. Henry Hub spot prices have ranged between $1.81/MMBtu and $2.84/MMBtu this winter heating season (since November 1, 2019), generally because relatively warm winter weather has reduced demand for natural gas for heating. Natural gas production growth has outpaced demand growth, reducing the need to withdraw natural gas from underground storage.
Dry natural gas production in January 2020 averaged about 95.0 billion cubic feet per day (Bcf/d), according to IHS Markit data. IHS Markit also estimates that in January 2020 the United States saw the third-highest monthly U.S. natural gas production on record, down slightly from the previous two months.
IHS Markit estimates that U.S. natural gas consumption by residential, commercial, industrial, and electric power sectors averaged 96 Bcf/d for January, which was about 4.4 Bcf/d less than the average for January 2019, largely because of decreases in residential and commercial consumption as a result of warmer temperatures.
However, IHS Markit estimates that overall consumption of natural gas (including feed gas to liquefied natural gas (LNG) export facilities, pipeline fuel losses, and net exports by pipeline to Mexico) averaged about 117.5 Bcf/d in January 2020, an increase of about 0.2 Bcf/d from last year. This overall increase is largely a result of an almost doubling of LNG feed gas to about 8.5 Bcf/d.
Because supply growth has outpaced demand growth, less natural gas has been withdrawn from storage withdrawals this winter. Despite starting the 2019–20 heating season with the third-lowest level of natural gas inventory since 2009, by January 17, 2020, working natural gas inventories reached relatively high levels for mid-winter. The U.S. Energy Information Administration’s (EIA) data on natural gas inventories for the Lower 48 states as of February 7, 2020, reflect a 215 Bcf surplus to the five-year average. In EIA’s latest short-term forecast, more natural gas remains in storage levels than the previous five-year average through the remainder of the winter.
According to the National Oceanic and Atmospheric Administration (NOAA), January 2020 was the fifth-warmest in its 126-year climate record. Heating degree days (HDDs), a temperature-based metric for heating demand, have been relatively low this winter, which is consistent with a warmer winter. During some weeks in late December and early January, the United States saw 25% to 30% fewer HDDs than the 30-year average. This winter, through February 8, residential natural gas customers in the United States have seen 11% fewer HDDs than the 30-year average.
Source: U.S. Energy Information Administration, based on National Oceanic and Atmospheric Administration Climate Prediction Center data
Headline crude prices for the week beginning 10 February 2020 – Brent: US$53/b; WTI: US$49/b
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