Petrochemicals - Ethylene

SECTOR UPDATE
OIL AND GAS

Ethylene Global Demand-Supply Scenario
India Equity Research | Oil, Gas and Services
Global demand for ethylene to grow at a healthy rate of 4.8% CAGR over 2010-15, compared to a growth rate of 1.5% over the last 5 years. In spite of healthy demand, there is likely to be an oversupply situation during 2010-11 due largely to huge capacity addition in the Middle East and China leading to decreased ethylene prices and margins. The situation is expected to improve after 2011 due to limited capacity addition. Global capacity utilization decreased to around 80% during 2010, but is expected to increase substantially till 2015 to reach a high of 95%.
Global ethylene oversupply scenario not as bad

Though there is concern that the new capacities coming up in the Middle East and China are going to flood the world market, depressing ethylene prices and margins, we believe that most of the scheduled projects, amounting to 10 mtpa (million tonnes per annum), have already come online by 2010. Only marginal new capacity of 9 mtpa is expected to come online till 2015. Large projects totaling 12 mtpa, which are delayed because of a number of reasons, such as, feedstock availability, impact of financial crisis, regulatory approval and environmental impact, are not expected to come online anytime soon.
Healthy demand growth led by polymer demand in China and India

Demand for ethylene is expected to grow at a healthy rate of 4.8% CAGR between 2011-15 driven by strong polyethylene (PE) demand from developing economies in Asia. PE demand per capita in India is very low at 2kg against a world average of 10.3 kg. We expect the PE demand per capita in developing countries like China and India to grow in line with their high GDP growth rate, consuming the added capacity.
Asian crackers have bi-product netback; Middle East (ME) crackers short of feedstock
Most of the crackers that are coming up in China are Naphtha based. Though Naphtha costs more than Ethane, it gives 17x more bi-product netback than ethane based crackers. On the other hand, large projects planned in the Middle East are delayed or cancelled because of concerns of natural gas availability thus tightening ethylene supply situation. The two factors together are expected to contribute positively to cracker operators bottom lines.
Ethylene margins to grow in line with higher capacity utilization

We expect that the utilization rates of the crackers will reach a trough in 2010-11, and then the demand scenario will tighten till 2015 primarily driven by healthy demand growth in line with rebound in global economy and less capacity addition. This will drive better margin for the cracker operators.
Alin Dev
+1-617-504-3157 alin.dev@edelcap.com
August 29, 2011

Edelweiss Research is also available on www.edelresearch.com, 1 Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
Oil and Gas
Sector Update
Contents
Ethylene Supply.................................................................................................................................................................. 5 Middle East: ................................................................................................................................................................... 6 Asia: ............................................................................................................................................................................... 7 US and Europe: .............................................................................................................................................................. 7 Ethylene Demand ............................................................................................................................................................... 8 Ethylene Economics ........................................................................................................................................................... 9 Feedstock Slate: ........................................................................................................................................................... 10 Ethylene Margin & Utilization Rate .................................................................................................................................. 12 APPENDIX I .................................................................................................................................................................... 14 What is Ethylene? ........................................................................................................................................................ 14 Ethylene Value Chain ................................................................................................................................................... 14 Feedstocks ............................................................................................................................................................... 15 Intermediates .......................................................................................................................................................... 15 Derivatives ............................................................................................................................................................... 16 APPENDIX II ................................................................................................................................................................... 19 How is Ethylene Produced? ......................................................................................................................................... 19 APPENDIX III .................................................................................................................................................................. 21 Middle East Feedstock concerns: ................................................................................................................................. 21 Saudi Arabia: ........................................................................................................................................................... 22 Iran: ......................................................................................................................................................................... 23 Qatar: ...................................................................................................................................................................... 23 APPENDIX IV .................................................................................................................................................................. 24 Existing and expected cracker capacities all over the world ........................................................................................ 24 APPENDIX V ................................................................................................................................................................... 40 Sensitivity Analysis ....................................................................................................................................................... 40
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Sector Update
Ethylene Supply
Global ethylene capacity has dramatically increased between 2005 and 2010 from 115.2 million tonnes per annum to 144 mtpa, growing at a CAGR 4.6%. During the same period China has added 14.2 mtpa of ethylene cracker capacity, while Middle Eastern Chart 1: World ethylene capacity has grown at CAGR 3% from 2004-15 countries have nearly doubled their capacity to 23.6 mtpa. At the same time, during 2006-10 the cumulative capacity share of Western Europe and North America dropped from 53% to 42.5%. Total ethylene capacity is expected to continue increasing, though at a subdued rate, till 2015 when the capacity will reach 152.7 mtpa representing a CAGR of 1.2% from 2010-15 with Asia, mainly China, and Middle East, mainly Saudi Arabia adding major portion of the new capacity.
Source: Oil & Gas Journal, Edelweiss research
We believe that most of the scheduled projects, amounting to 10 mtpa, have already come online by 2010. Only marginal new capacity of 9 mtpa is expected to come online till 2015. Large projects totaling 12 mtpa, which are delayed because of a number of reasons, such as, feedstock availability, impact of financial crisis, regulatory approval and environmental impact, are not expected to come online anytime soon.
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Chart 2: Most of the incremental capacity has already been added by 2010
Middle East:
Availability of cheap crude oil and high dependence of the kingdoms on oil revenue have driven the kingdoms and governments to diversify into manufacturing commodity chemicals and capture more value from the commodity nature of crude oil. Middle Eastern countries are also better positioned to transport petrochemicals at a lower cost to developed markets in Europe, as well as high growth markets in Asia. This being a labor intensive industry, the governments are also able to generate meaningful employment for its people by developing the petrochemical industry. To bring about rapid growth in the petrochemicals industry, Middle Eastern countries provide different incentives to investors. Some of the incentives typically provided in Saudi Arabia include: Subsidized natural gas at $ 0.75 per Mmbtu. A complex discount system for domestic users with NGLs garnering a 30 percent discount on the export price of naphtha and naphtha itself receiving an 11 percent discount on its export price. Costs therefore fluctuate in line with global oil prices, though Saudi producers using liquids still retain a competitive advantage.
Sector Update
Asia:
Capacity growth in Asia has been largely led by large scale projects in China. Chinese stateowned players like Sinopec and PetroChina are rapidly building new ethylene capacity, aided by favorable government policies for joint ventures with foreign majors. But, environmental worries, economically unviable size of scattered petrochemicals plants and the potential threat of overcapacity could delay the commercial start of production. In the long term, China could be a potential competitor to Middle Eastern petrochemicals players as petrochemical imports from the Kingdoms are replaced by local Chinese output.
Chart 3: Asia & ME will account for 50% of the cracker capacity
US and Europe:
Chart 4: North America median age of a plant is 32 years Chart 5: Western Europe median age of a plant is 30 years
Source: Edelweiss research
Source: Edelweiss research
High feedstock costs coupled with stagnant demand have depressed capacity growth in the developed markets. Cheaper imports from ME have forced many economically unviable and older producers to shutdown.
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Ethylene Demand
Chart 6: Demand for ethylene is highly correlated to GDP and population
Demand for ethylene is strongly correlated with both GDP growth rate and growth in population with correlation of 87% and 90% respectively.
Source: CMAI Global, IMF, Edelweiss research
Demand per capita for ethylene has historically grown at an average growth rate of 3% Y-o-Y since 2000, barring the past few years of global economic slowdown and a dip in 2005 when most of the PE plants in North America were shut down following hurricane Katrina. We expect the demand to grow at CAGR 4.8% till 2015 to reach 146 mtpa driven by strong demand growth and rapid urbanization in high growth emerging economies of China and India.
Chart 7: Ethylene demand per capita is expected to grow at CAGR 4.8% till 2015
Demand for ethylene has historically grown with GDP with an elasticity of 1.06x since 2000, with exceptions in the past couple of years due to the financial crisis and in 2005 due to the rampage of hurricane Katrina. We expect the elasticity to gradually increase to 1.1x in 2015 due to strong demand growth from countries such as China and India driven by rapid urbanization and industrialization.
Chart 8: Ethylene demand GDP elasticity to be 1.1x
Source: CMAI Global, IMF, Edelweiss research 8 Edelweiss Securities Limited
Sector Update
Demand for ethylene is expected to grow at a healthy rate of 4.8% CAGR till 2015, while the capacity is expected to grow at a minimal rate of 1.2% CAGR during the same period with very little capacities expected to come online after 2011. PE demand per capita in developing economies is very low compared to world average of 10.3 kg. We expect the PE demand per capita in developing countries like China and India to grow in line with their high GDP growth rates, consuming the added capacity.
Chart 9: Ethylene demand to grow at CAGR 4.8% while little new capacity will come up after 2011
Ethylene Economics
Due to the commoditized nature of the basic chemicals business, price is the single most important factor in determining the competitiveness of players in the market place as there is only marginal differentiation between the products of different suppliers. It is not all about who has the biggest plant - the next plant built will be the Biggest Plant; it is also not about who has the best technology - technology has become readily available; it is not even about who traded there first competitive conditions dictate decisions. It is literally about the cost. With price of ethylene fixed on a costplus basis based on the highest cost producer, feedstock cost is the most important factor in determining the ethylene margins across different geography.
Source: CMAI Global
Chart 10: ME producers enjoy the lowest cost of production riding on cheap ethane
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Feedstock Slate:
Petrochemicals are produced by cracking Naphtha or ethane. Since 2008, the relative price of U.S. ethane (as a percent of crude oil price) has been trending down, due to cheaper U.S. natural gas. This benefits the petrochemical producers using natural gas as feed stock, but there is always a trade off as naphtha unlocks more sophisticated derivatives. Cracking ethane generates a large proportion of ethylene (95%) while cracking naphtha gives better byproduct credit. A typical cracker output is given below:
Source: Lyondell Basell Investor Day 2010
Chart 11: Olefins Feedstock vs. Crude Oil Prices
Table 1: Cracker output slate
Chart 12: Napththa vs ethane cracker margin widens

Source: Platts, ICIS pricing, Edelweiss Research
Ethane crackers enjoy a higher margin as naphtha prices rallied with crude oil price, while natural gas price remained stable. Middle Eastern countries which provide natural gas at an average subsidized rate of USD 4/mmBtu, enjoys still higher margins though the gap narrowed in the recent years driven by a fall in natural gas prices in the international market.
Source: Platts, ICIS pricing, Edelweiss Research 10 Edelweiss Securities Limited
Sector Update
Chart 13: Regional feedstock slate of steam crackers
Feedstock-related costs account for over 50% of the total cash costs of the final output of petrochemical companies. Most of the crackers in Asia and Europe are Naphtha based while those in the Middle East and North America are ethane based. Though Naphtha costs more than Ethane, Naphtha gives 17x more bi-product netback than ethane based crackers.
Source: OGJ, Edelweiss Research
Chart 14: Propylene-ethylene spread widens
Meanwhile, propylene / ethylene price ratio continues to increase as ethylene production from ethane increases driven by higher cracker margin realization and propylene production from steam naphtha crackers declines owing to large ethane cracker capacity addition in the ME. The effect is even more pronounced in the case of butadiene which is used as a substitute for natural rubber.
Source: Bloomberg, Edelweiss Research
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Oil and Gas
Ethylene Margin & Utilization Rate

Chart 15: Beginning of a new cycle of profitability
The cracker industry is cyclical in nature and historically operated in a 7-8 year cycle. We believe that the ROCE cycle of the industry based on replacement cost of a steam cracker will hit trough in 2011, and will see the beginning of new cycle starting 2011-12.
Source: CERA Downstream Index, Edelweiss Research
Chart 16: Operating rate follows gross margin
Historically operating rates of crackers have closely followed ethylene margin as the operators have more incentive to run the plant at a higher operating rate when the margins are higher, and lower the rate when the margins are declining.
Source: Edelweiss Research
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Sector Update
Chart 17: Ethylene-Naphtha crack is expected to grow in line with higher operating rate
We believe that the gross ethylene margin will start strengthening in line with higher ethylene prices and gradually increase to USD 460 per tonne, along with higher operating rates of the crackers though the crackers will not see high margins of 2004-06 anytime soon partly because of higher crude oil prices.
Chart 18: Cracker margin is expected to grow along with higher bi-product prices
At the same time the net cracker margin realized will gradually strengthen to USD 383 per tonne by the year 2015, riding on higher bi-product netbacks.
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APPENDIX I
What is Ethylene?
Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyethylene terephthalate (PET), polyvinyl chloride (PVC) and polystyrene (PS) as well as fibers and other organic chemicals. These products are used in a wide variety of industrial and consumer markets such as the packaging, transportation, electrical/electronic, textile and construction industries as well as consumer chemicals, coatings and adhesives. Ethylene is one of the largest-volume petrochemicals. With a diverse range of end-uses, demand for ethylene is sensitive to both economic and energy cycles. It is often seen as a barometer to the performance of the petrochemical industry as whole. According to CMAI, global production and consumption of ethylene in 2010 were both approximately 115m tonnes. Global capacity utilization (demand / capacity) was 83.1% in 2010, down from 88% in 2009. Ethylene consumption is estimated to have increased by 2.1% in 2010; it is forecast to grow an average 4.9% per year up to 2015.
Ethylene Value Chain

Chart A1-1: Ethylene value chain
Source:Edelweiss research 14 Edelweiss Securities Limited
Sector Update
Feedstocks
Ethane: Ethane is isolated on an industrial scale from natural gas, and as a byproduct of petroleum refining. Its chief use is as petrochemical feedstock for ethylene production. Naphtha: Naphtha is obtained in petroleum refineries as one of the intermediate products from the distillation of crude oil. It is a liquid intermediate between the light gases in the crude oil and the heavier liquid kerosene. The generic name 'naphtha' describes a range of different refinery intermediate products used in different applications. Naphtha is used primarily as feedstock for producing high octane gasoline (via the catalytic reforming process). It is also used in the bitumen mining industry as a diluent, the petrochemical industry for producing olefins in steam crackers, and the chemical industry for solvent (cleaning) applications.
Intermediates
Ethylene Oxide: Because of its special molecular structure, ethylene oxide easily participates in the addition reaction and thus easily polymerizes. Although it is a vital raw material with diverse applications, including the manufacture of products like polyethylene glycol that are often more effective and less toxic than alternative materials, ethylene oxide itself is a very hazardous substance: at room temperature it is a flammable, carcinogenic, mutagenic, irritating, and anesthetic gas with a misleadingly pleasant aroma. Therefore, it is commonly handled and shipped as a refrigerated liquid. The chemical reactivity that is responsible for many of ethylene oxide's hazards has also made it a key industrial chemical that supports the living standards of advanced societies. Ethylene oxide (EO) is primarily used to make ethylene glycol. Other EO derivatives include ethyoxylates (for use in shampoo, kitchen cleaners, etc), glycol ethers (solvents, fuels, etc) and ethanol amines (surfactants, personal care products, etc). Ethylene Glycol: Ethylene glycol is an organic compound widely used as automotive antifreeze and a precursor to polymers. Ethylene glycol is produced from ethylene, via the intermediate ethylene oxide. Ethylene oxide reacts with water to produce ethylene glycol.
Chart A1-2: Global Ethylene Derivatives
Source:Edelweiss research
Most monoethylene glycol (MEG) is used to make polyester fibers for textile applications, PET resins for bottles and polyester film. MEG is also used in antifreeze applications. Ethyl Benzene: This aromatic hydrocarbon is important in the petrochemical industry as an intermediate in the production of styrene, which in turn is used for making polystyrene, a common plastic material. Although often present in small amounts in crude oil, ethylbenzene is produced in bulk quantities by combining benzene and ethylene in an acid-catalyzed chemical reaction.
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Styrene: Styrene, also known as vinyl benzene, is a colorless oily liquid that evaporates easily. The presence of the vinyl group allows styrene to polymerize. Commercially significant products include polystyrene, ABS, styrene-butadiene (SBR) rubber, styrene-butadiene latex and other products. Ethylene dichloride: Ethylene dichloride (EDC) is a chlorinated hydrocarbon, mainly used to produce vinyl chloride monomer (VCM), the major precursor for PVC production. Production is primarily achieved through the iron (III) chloride-catalyzed reaction of ethylene and chlorine. Vinyl chloride: VCM is an important industrial chemical chiefly used to produce the polymer polyvinyl chloride (PVC). It can be produced by two methods - hydrochlorination of acetylene and dehydrochlorination of ethylene dichloride. Due to the relatively low cost of ethylene, compared to acetylene, most vinyl chloride has been produced via dehydrochlorination of EDC, despite lower yields (50-60%), lower product purity and higher costs for waste treatment.
Derivatives
PET: Polyethylene terephthalate is a thermoplastic polymer resin of the polyester family and is used in synthetic fibers; beverage, food and other liquid containers; thermoforming applications; and engineering resins often in combination with glass fiber. The majority of the world's PET production is for synthetic fibers (in excess of 60%) with bottle production accounting for around 30% of global demand. In discussing textile applications, PET is generally referred to as simply "polyester" while "PET" is used most often to refer to packaging applications. The polyester industry makes up about 18% of world polymer production. Polystyrene: PS is an aromatic polymer made from the monomer styrene. Polystyrene is one of the most widely used plastics, the scale being several billion kilograms per year. Solid polystyrene is used, for example, in disposable cutlery, plastic models, CD and DVD cases, and smoke detector housings. Products made from foamed polystyrene are nearly ubiquitous, for example packing materials, insulation, and foam drink cups. Polyethylene: The largest outlet, accounting for 60% of ethylene demand globally, is polyethylene. Polyethylene is a thermoplastic polymer consisting of long chains produced by combing the ingredient monomer ethylene. PE is classified into several different categories based mostly on its density and branching. The mechanical properties of PE depend significantly on variables such as the extent and type of branching, the crystal structure and the molecular weight. With regard to sold volumes, the most important polyethylene grades are HDPE, LLDPE and LDPE.
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Sector Update
HDPE is defined by a density of greater or equal to 0.941 g/cm3. It has a low degree of branching and thus stronger intermolecular forces and tensile strength. HDPE is used in products and packaging such as milk jugs, detergent bottles, margarine tubs, garbage containers and water pipes. One third of all toys are manufactured from HDPE.
LDPE is defined by a density range of 0.9100.940 g/cm3. It has a high degree of short and long chain branching, which means that the chains do not pack into the crystal structure as well. This results in a lower tensile strength and increased ductility. The high degree of branching with long chains gives molten LDPE unique and desirable flow properties. LDPE is used for both rigid containers and plastic film applications such as plastic bags and film wrap.
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LLDPE is defined by a density range of 0.9150.925 g/cm3. It is a substantially linear polymer with significant numbers of short branches. LLDPE has higher tensile strength than LDPE and exhibits higher impact and puncture resistance; thus lower thickness (gauge) films can be blown, compared with LDPE, with better environmental stress cracking resistance but is not as easy to process. LLDPE is used in packaging, particularly film for bags and sheets. Lower thickness may be used compared to LDPE for use in cable covering, toys, lids, buckets, containers and pipe. While other applications are available, LLDPE is used predominantly in film applications due to its toughness, flexibility and relative transparency. Product examples range from agricultural films, saran wrap, and bubble wrap, to multilayer and composite films.
PVC: Polyvinyl chloride is a thermoplastic polymer. PVC is the third most widely produced plastic, after polyethylene and polypropylene. It is widely used in construction because it is cheap, durable, and easy to assemble. A number of PVC's properties recommend it for a wide variety of applications. It is biologically and chemically resistant, making it the plastic of choice for most household sewerage pipes and other pipe applications where corrosion would limit the use of metal. With the addition of impact modifiers and stabilizers, it becomes a popular material for window and door frames. By adding plasticizers, it can become flexible enough to be used in cabling applications as a wire insulator. It is also used to make vinyl records. PVC is a controversial material in that during its production, useful life and incineration, especially in accidental and uncontrolled circumstances, it may liberate persistent toxins, which the manufacture, use and destruction of suitable alternative plastics, such as, polypropylene do not. Other ethylene derivatives include alpha olefins which are used in LLDPE production, detergent alcohols and plasticizer alcohols; vinyl acetate monomer (VAM) which is used in adhesives, paints, paper coatings and barrier resins; and industrial ethanol which is used as a solvent or in the manufacture of chemical intermediates such as ethyl acetate and ethylacrylate.
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Sector Update
APPENDIX II
How is Ethylene Produced?
Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Europe and Asia, ethylene is obtained mainly from cracking naphtha, gasoil and condensates with the coproduction of propylene, C4 olefins and aromatics (pyrolysis gasoline). The cracking of ethane and propane, primarily carried out in the US, Canada and the Middle East, has the advantage that it only produces ethylene and propylene, making the plants cheaper to construct and less complicated to operate.
Chart A2-1: Steam Cracking Process
Olefin cracking and interconversion processes are being developed to boost light olefins output. Typically, they can convert C4-C8 olefins and light pyrolysis gasoline into ethylene and propylene. Newer catalytic processes are under development that provide enhanced control of the cracking process or permit catalytic dehydrogenation of ethane. Small quantities of dilute ethylene can also be obtained from refinery streams. In South Africa, ethylene is produced by the Fisher-Tropsch process from gases obtained by coal gasification. Efforts have been made to develop processes which can crack crude or residual oil
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Oil and Gas

but they suffer from high operating costs. Processes are available that use lower alcohols as feedstocks. Norsk Hydro and UOP have developed a MTO (methanolto-olefins) technology that converts methanol to ethylene and propylene. There is considerable interest in using this technology in China with methanol produced via the gasification of coal. Working with UOP, Total has developed a technology which takes the heavier olefins from the MTO unit and converts them into lighter olefins, more specifically into propylene. A pilot plant has been built at Feluy, Belgium, to assess this olefin cracking process (OCP) in conjunction with the MTO process. Much research is being conducted into the direct conversion of methane to ethylene. However, the problem with this technology, called oxidative coupling of methane (OCM), is the low per-pass yield of ethylene and the high yield of unwanted carbon oxide by-products such as carbon monoxide and carbon dioxide. Most attempts to increase product yield have been through new catalyst formulations. Research is also focusing on making further use of the carbon oxides by producing methanol or methane.
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Sector Update
APPENDIX III
Middle East Feedstock concerns:
Gas demand in the Middle East has been rising by around 7% per annum and it has outpaced the growth in regional gas production. Domestic demand growth is fuelled by economic expansion, low gas prices, the switch from oil to gas for power generation and the injection of gas into oil reservoirs to enhance oil recovery.
Chart A3-1: Electricity demand in the ME countries have grown 8.7% CAGR from 1980
In the Middle East, there is tension between the requirement to supply domestic markets to fuel economic growth and the desire to achieve higher revenues via export sales agreements. 73% of the Middle Source: U.S. Energy Information Administration East gas reserves are concentrated in just two countries: Iran and Qatar. Qatar, which is the worlds largest LNG producer and exporter, has a moratorium on new North Field developments and export sales agreements until 2012. Outside of Iran and Qatar, a significant proportion of the regions gas reserves are in associated oil deposits, and so gas production is not flexible. Much of the gas in the region is also sour, which makes it more difficult and costly to extract and process. Domestic sales prices, which are subsidized to varying degrees, may need to rise to cover the additional processing costs and investment required in gas infrastructure.
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Oil and Gas

Price subsidies, political differences and more lucrative export opportunities have reduced the availability of gas produced in the Middle East for consumption in the region. As a result, there is limited intra-regional infrastructure in place for the transportation of natural gas. Individual countries in the Middle East have developed independent strategies to address their rising demand for natural gas. Saudi Arabia is looking to substantially increase gas production to meet growing domestic demand and UAE has been actively looking at unconventional gas reserves. The emirates associated gas is increasingly being used for reinjection. Rapid economic development and high domestic power subsidies have prompted UAE to take alternative measures to meet future demand. Chart A3-2: Saudi ethane will be more dependent on oil
production
Saudi Arabia: The current capacity of ethane crackers in the country is 6.1 mtpa while it is expected to increase to 6.4 mtpa over the next five years. Saudi Arabia currently produces enough ethane to supply to the crackers; however, electricity production is also expected to grow at more than 8%. As most of the natural gas produced in Saudi Arabia is associated gas (hence the production is capped by OPEC crude oil production quota of 8.4 million bpd), and lower regulated price ($0.75 per mmBtu) does not provide any incentive for drilling non-associated gas, ethane supply is expected to tighten in the future. Though the government is planning to increase the gas price to $1.2 per mmBtu from 2012, this may not be practically possible in the near term, given the tense socio political situation throughout the Middle East.
Source: CMAI Global
Chart A3-3: KSA ethane deliveries may turn below allocations
Source: CMAI Global
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Sector Update
Iran: Iran has ethane cracker capacity of 3.7 mtpa while the largest non-associated gas field, South Pars, can produce enough ethane to support 1.35 mtpa. The country has plans to produce additional natural gas from South Pars over the next five years that can support upto 4.5 mtpa of cracker capacity. Qatar: Qatar has put a moratorium on any new projects requiring natural gas till 2012. Source: CMAI Global Depending on the outcome of its ongoing study of the natural gas reserve in the country, even if the moratorium is lifted in 2012, no new capacity can come up before 2016. Bottom line: The demand for natural gas has exponentially grown throughout the Middle East riding on cheap pricing. This puts a risk of feedstock availability in the new multi million tonne projects.
Chart A3-4: Sanctions continue to delay Iran
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Oil and Gas
APPENDIX IV
Existing and expected cracker capacities all over the world
Country Company Location Capacity, tonnes/ year 2010 Existing 133,000 Capacity, tonnes/ year New Year of Completion (Existing capacity=2010) 2010
Feedstock Slate (%)

C2 C3 C4 Naphtha Gasoil Other
ALGERIA
Sonatrach Dow Chemical Co. Dow Chemical Co. Huntsman Corp. Petrobras Energia Petrobras Energia Huntsman Chemical Co. Australia Ltd. Qenos Pty. Ltd. Qenos Pty. Ltd. OMV AG Azerichimi a Azerichimi a Production Associatio n Polymir Production Associatio n Polymir BASF Antwerpen NV Benelux FAO Benelux FAO Benelux FAO
Skikda Bahia Blanca (BB1) Bahia Blanca (BB2) San Lorenzo Puerto San Martin San Lorenzo
100
ARGENTINA
275,000
2010
100
ARGENTINA
490,000
2010
100
pARGENTINA ARGENTINA ARGENTINA
21,000 32,500 20,000
2010 2010 2010
25 100 100
75
AUSTRALIA
Melbourne, Vic.
32,000
2010
100
AUSTRALIA AUSTRALIA AUSTRIA AZERBAIJAN AZERBAIJAN
Altona, Vic. Botany, NSW Schwechat Sumgait Sumgait Novopolots k Novopolots k Antwerp
180,000 250,000 500,000 30,000 300,000
2010 2010 2010 2010 2010
80 80 15
15 20 23 62
BELARUS
73,000
2010
BELARUS
120,000
2010
BELGIUM
1,080,000
2010
95
BELGIUM BELGIUM BELGIUM
Antwerp Antwerp Antwerp
255,000 610,000 550,000
2010 2010 2010
16 16 16
16 16 16
18 18 18
50 50 50
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Sector Update
Country Company Location Capacity, tonnes/ year 2010 Existing 600,000 680,000 700,000 500,000 Capacity, tonnes/ year New Year of Completion (Existing capacity=2010) 2010 2010 2010 2010
Feedstock Slate (%)

BRAZIL BRAZIL BRAZIL BRAZIL
Braskem SA Braskem SA Copesul Copesul Petroquimi ca Uniao SA Rio Polimeros Lukoil Neftochim Bourgas JSC Lukoil Neftochim Bourgas JSC Dow Chemical Co. Imperial Oil Products & Chemicals Nova Chemicals Corp. Nova Chemicals Corp. Nova Chemicals Corp. Nova Chemicals Corp. Petromont Petrox SA BASF-YPC Co. Ltd. China National Offshore Oil Co.
Camacari, Bahia Camacari, Bahia Triunfo, RS Triunfo, RS Santo Andre, Sao Paulo Duque de Caxias
95 100 100 100
BRAZIL
700,000
2010
100
BRAZIL
520,000
2010
100
BULGARIA
Bourgas
250,000
2010
3.4
10
86.6
BULGARIA
Bourgas
150,000
2010
100
CANADA
Fort Saskatchew an, Alberta Sarnia, Ontario
1,100,000
2010
100
CANADA
300,000
2010
33
33
34
CANADA
Corunna, Ontario Joffre, Alberta (E1) Joffre, Alberta (E2) Joffre, Alberta (E3) Varennes, Quebec Concepcion Nanjing
839,002
2010
10
15
30
40
CANADA
725,624
2010
100
CANADA
816,327
2010
100
CANADA
1,269,841
2010
100
CANADA CHILE CHINA
295,000 60,000 600,000
2010 2010 2010 8
10
25 16
50 76 100
15
CHINA
Daya Bay, Guangdong
800,000
2010
100
25
Oil and Gas

Feedstock Slate (%)

CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
China National Offshore Oil Co. China Petrochem ical Industrial Corp. Dalian Petrochem ical Co. Fujian Petrochem ical Co. Ltd. Fushun Petrochem ical Complex Fushun Petrochem ical Complex Gaoqiao Petrochem ical Co. Guangzhou Petrochem ical Co. Jilin Chemical Industrial Co. Ltd. Lanzhou Chemical Industrial Co. Lanzhou Chemical Industrial Co. Norinco/Zh enhua Panjin Ethylene Industry Corp. Petrochina Sinopec Sinopec
Dushanzi
100
Daqing
320,000
2010
100
Dalian
4,000
2010
100
Quanzhou
800,000
2010
100
Fushun
115,000
2010
100
Fushun
685,000
2011
100
Gaoqiao
14,000
2010
100
Guangzhou
150,000
2010
100
Jilin
700,000
2010
100
Lanzhou
600,000
2010
100
Lanzhou
320,000
2011
100
CHINA
Panjin
450,000
2010
100
CHINA
Panjin
130,000
2010
100
CHINA CHINA CHINA
Dushanzi Caojing, Shanghai Caojing, Shanghai
1,000,000 145,000 700,000 26
2010 2010 2010 30 60
100 70 40
Sector Update
Country Company Location Capacity, tonnes/ year 2010 Existing Capacity, tonnes/ year New 605,000 1,000,000 650,000 180,000 720,000 200,000 1,000,000 800,000 1,000,000 Year of Completion (Existing capacity=2010) 2014 2010 2010 2010 2010 2010 2010 2013 2010
Feedstock Slate (%)

CHINA CHINA CHINA CHINA CHINA CHINA CHINA CHINA CHINA
Sinopec Sinopec Sinopec Sinopec Sinopec Sinopec Sinopec Sinopec Sinopec PetroChina Sichuan Petrochem ical Co. Ltd BASF-YPC Co. Ltd. Daqing Petroleum & Chemical Co. Shenhua Baotou Coal Chemical Chinese Petroleum Corp. Chinese Petroleum Corp. Chinese Petroleum Corp. Formosa Petrochem ical Corp. Formosa Petrochem ical Corp. Formosa Petrochem
Shanghai Maoming, Guangdong Neijing Puyang, Henan Qilu Tianjin Tianjin Wuhan, Hubei Zhenhai
60 100 60 100 80 100
40
40
20
100 100 100
CHINA
Chengdu, Quanzhou City
800,000
2011
100
CHINA
Nanjing
150,000
2010
100
CHINA
Heilongjian g Province
600,000
2012
100
CHINA
Baotou, Inner Mongolia Kaohsiung Linyuan Linyuan
300,000
2010
100
TAIWAN
500,000
2010
100
TAIWAN
230,000
2010
100
TAIWAN
Linyuan
380,000
2010
100
TAIWAN
Mailiao
700,000
2010
7.3
92.7
TAIWAN
Mailiao
1,035,000
2010
6.6
0.3
93.1
TAIWAN
Mailiao
1,200,000
2010
91
27
Oil and Gas

Country Company Location Capacity, tonnes/ year 2010 Existing Capacity, tonnes/ year New Year of Completion (Existing capacity=2010)
Feedstock Slate (%)

ical Corp. CPC Corp. Taiwan Empresa Colombian a de Petroleos Polimeri Unipetrol Sidi Kerir Petrochem icals Co. Borealis OY A. P. Feyzin Kaohsiung, Linyuan Barrancabe rmeja
TAIWAN
600,000
2013
100
COLOMBIA
100,000
2010
80
20
CROATIA CZECH REPUBLIC
Zagreb Litvinov
90,000 544,000
2010 2010
100 2 6 56 1 35
EGYPT
Alexandria
300,000
2010
100
FINLAND FRANCE
Porvoo Feyzin Notre Dame de Gravencho n Lavera
390,000 250,000
2010 2010
100 100
FRANCE
ExxonMobi l Corp. Naphthach imie Polimeri Europa France SAS Societe du Craqueur de L Aubette SCA Total Petrochem icals Total Petrochem icals Basell Polyfine GMBH Basell Polyfine GMBH BASF AG BP Gelsenkirc hen BP Gelsenkirc hen
400,000
2010
100
FRANCE
740,000
2010
50
50
FRANCE
Dunkerque
430,000
2010
0.5
3.5
20
76
FRANCE
Berre lEtang Carling-St. AvoldMarienau Gonfreville lOrcher
450,000
2010
12
75
13
FRANCE
320,000
2010
100
FRANCE
520,000
2010
100
GERMANY
Wesseling
738,000
2010
10
90
GERMANY
Wesseling Ludwigshaf en Gelsenkirch en Gelsenkirch en 28
305,000
2010
100
GERMANY
620,000
2010
90
GERMANY
580,000
2010
78
12
GERMANY
480,000
2010
65
26
Sector Update
Country Company Location Capacity, tonnes/ year 2010 Existing 550,000 544,000 400,000 Capacity, tonnes/ year New Year of Completion (Existing capacity=2010) 2010 2010 2010 13 17 17
Feedstock Slate (%)

GERMANY GERMANY GERMANY
INEOS INEOS LyondellBa sell Dow Chemical Co. OMV Deutschlan d GMBH Shell & DEA Oil GMBH Shell & DEA Oil GMBH EKO Chemicals Co. AE Tiszai Vegyi Kombinat Ltd. Tiszai Vegyi Kombinat Ltd. Gas Authority of India Ltd. Haldia Petrochem icals Ltd. Indian Oil Corp. Ltd. Indian Petrochem icals Corp. Ltd. Indian Petrochem icals Corp. Ltd. Indian Petrochem icals Corp. Ltd. National Organic
Dormagen Dormagen Munchsmu nster Bohlen
100 100 53
GERMANY
560,000
2010
100
GERMANY
Burghause n, Bavaria
450,000
2010
2.5
84
1.5
GERMANY
Heide
110,000
2010
100
GERMANY
Wesseling Thessalonik i
500,000
2010
100
GREECE
20,000
2010
65
35
HUNGARY
Tiszaujvaro s
370,000
2010
90
HUNGARY
Tiszaujvaro s
290,000
2010
16
75
INDIA
Pata, Uttar Pradesh Haldia, West Bengal Haryana, New Delhi Baroda, Gujarat
300,000
2010
33
33
34
INDIA
670,000
2010
100
INDIA
800,000
2010
100
INDIA
156,000
2010
100
INDIA
Gandhar, Gujarat
400,000
2010
42.5
57.5
INDIA
Nagothane, Maharashtr a Thane, Maharashtr
400,000
2010
42.5
57.5
INDIA
75,000
2010
100
29
Oil and Gas

Feedstock Slate (%)

INDIA
INDIA
INDIA
INDONESIA
IRAN
IRAN
IRAN
IRAN
IRAN
IRAN
IRAN
Chemical Industries Ltd. Reliance Industries Ltd. Brahmaput ra Cracker and Polymer Ltd. ONGC Petroadditions Ltd. (OPAL) PT Chandra Asri Amir Kabir Petrochem ical Co. Arak Petrochem ical Arya Sasol Polymer Co. Bandar Imam Petrochem ical Co. Jam Petrochem ical Co. Marun Petrochem ical Co. Tabriz Petrochem ical Co. Carmel Olefins Ltd. Polimeri Europa Polimeri Europa Polimeri Europa Polimeri Europa Syndial Asahikasei Chemicals
Hazira, Gujarat
840,000
2010
100
Lepetkata, Assam
280,000
2013
33
33
34
Dahej, Gujarat
1,100,000
2013
50
50
Cilegon, West Java Amir Kabir
600,000
2010
100
520,000
2010
24
12
58
Arak
247,000
2010
100
Assaluyeh Bushehr Bandar Imam
1,000,000
2010
100
550,000
2010
20
10
67
Assaluyeh Bushehr Bandar Assaluyeh
1,320,000
2010
100
1,100,000
2010
100
Tabriz
136,000
2010
80
ISRAEL ITALY ITALY ITALY ITALY ITALY JAPAN
Haifa Brindisi Gela Porto Marghera Priolo Porto Torres Kurasiki, Okayama 30
240,000 440,000 245,000 490,000 745,000 250,000 500,000
2010 2010 2010 2010 2010 2010 2010 2 25
10
10
80 100
70 100 1 65 70 100 Edelweiss Securities Limited 32 30
Sector Update
Feedstock Slate (%)

Corp. Idemitsu Petrochem ical Co. Ltd. Idemitsu Petrochem ical Co. Ltd. Keiyo Ethylene Maruzen Petrochem icals Mitsubishi Chemical Corp. Mitsubishi Chemical Corp. Mitsubishi Chemical Corp. Mitsui Chemicals Inc. Mitsui Chemicals Inc. Nippon Petrochem ical Showa Denko KK Sanyo Petrochem ical Co. Ltd Sumitomo Chemical Co. Ltd. Tonen Chemical Corp. Tosoh Corp. Akpo Governme nt Equate Petrochem
JAPAN
Chiba
374,000
2010
98
JAPAN
Tokuyama
623,000
2010
100
JAPAN
Ichihara, Chiba Chiba
740,000
2010
100
JAPAN
520,000
2010
100
JAPAN
Kashima (Unit 1) Kashima (Unit 2)
375,000
2010
10
20
55
15
JAPAN
453,000
2010
10
20
55
15
JAPAN
Mizushima
500,000
2010
80
10
JAPAN
Ichihara, Chiba Takaishi City, Osaka
617,000
2010
10
90
JAPAN
450,000
2010
100
JAPAN
Kawasaki
460,000
2010
100
JAPAN
Oita
675,000
2010
100
JAPAN
Mizushima
500,000
2010
100
JAPAN
Chiba
415,000
2010
100
JAPAN
Kawasaki
515,000
2010
100
JAPAN KAZAKHSTAN KAZAKHSTAN KUWAIT
Yokkaichi Aktau Atyrau Shuaiba
527,000 100,000 30,000 850,000
2010 2010 2010 2010 100
100
31
Oil and Gas

Feedstock Slate (%)

ical Co. (Equate II) LIBYA National Oil Co. Ethylene Malaysia Sdn. Bhd. Optimal Olefins Sdn. Bhd. Titan Petrochem icals Sdn. Bhd. Titan Petrochem icals Sdn. Bhd. Petroleos Mexicanos Petroleos Mexicanos Petroleos Mexicanos Dow Chemical Co. Dow Chemical Co. Dow Chemical Co. SABIC Europe SABIC Europe Shell Nederland Chemie BV Eleme Petrochem ical Co. Ltd. Namhung Youth Chemical Complex Noretyl AS PKN Orlen SA Ras Lanuf 350,000 2010 100
MALAYSIA
Kertih
400,000
2010
100
MALAYSIA
Kertih Pasir Gudang, Johor Pasir Gudang, Johor La Cangrejera, Veracruz Morelos, Veracruz Pajaritos, Veracruz Terneuzen (No. 1) Terneuzen (No. 2) Terneuzen (No. 3) Geleen (No. 3) Geleen (No. 4) Moerdijk
600,000
2010
100
MALAYSIA
442,000
2010
10
10
80
MALAYSIA
667,000
2010
10
10
80
MEXICO
600,000
2010
100
MEXICO MEXICO
600,000 184,000
2010 2010
100 100
NETHERLANDS
580,000
2010
15
85
NETHERLANDS
585,000
2010
15
85
NETHERLANDS
635,000
2010
100
NETHERLANDS NETHERLANDS
595,000 670,000
2010 2010
100 100
NETHERLANDS
900,000
2010
100
NIGERIA
Eleme River
550,000
2010
33
33
34
NORTH KOREA
Anju, South Pyongan Province Rafnes, Bamble Plock
60,000
2010
NORWAY POLAND
550,000 700,000
2010 2010
30
45 5
25 5 90
32
Sector Update
Feedstock Slate (%)

PORTUGAL
Repsol YPF SA Qatar Petrochem ical Co. Q-Chem I Ras Laffan Olefins Co. Petrom SA Petromidia SA Angarsknef torgsintez Angarsknef torgsintez Nizhnekam skneftekhi m Norsy Omskykau chuyk Orgsintez Oxosyntez Polimir Salavatneft orgsintez Sibur Himprom SiburNeftechim Sintezkauc huk Stavrapolp olymer Tomsk PCC Uraorgsint es Al Jubail Petrochem ical Co. Arabian Petrochem
Sines
100
QATAR
Mesaieed
720,000
2010
100
QATAR QATAR ROMANIA ROMANIA RUSSIA RUSSIA
Mesaieed Ras Laffan Pitesti Navodari Angarsk, Siberia Angarsk, Siberia Nizhnekam sk Norsy Omsk, Siberia Kazan Orsk Novopolots k Salavat Perm Nizhny Novgorod Samara Prikumsk Tomsk Ufa
500,000 1,300,000 170,000 200,000 60,000 240,000
2010 2010 2010 2010 2010 2010
80 80 19.5
20 20 8.5 23.7 48.4 100 5.2 5.2 89.2 89.2 5.6 5.6
RUSSIA
600,000
2010
RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA RUSSIA
300,000 90,000 445,000 45,000 150,000 300,000 30,000 300,000 300,000 350,000 300,000 235,000
2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 100
100
100
20
80
SAUDI ARABIA
Jubail
800,000
2010
50
50
SAUDI ARABIA
Jubail
800,000
2010
100
33
Oil and Gas

Feedstock Slate (%)

ical Co. Arabian Petrochem ical Co. Arabian Petrochem ical Co. Chevron Phillips Chemical Co. LP Eastern Petrochem ical Co. Jubail United Petrochem ical Co. Saudi Basic Industries Corp. Saudi Petrochem ical Co. Tasnee Yanbu Petrochem ical Co. Yanbu Petrochem ical Co. Saudi Polymers Chemi Industria ExxonMobi l Chemical Co. Petrochem ical Corp. of Singapore Pte. Ltd. Petrochem ical Corp. of Singapore Pte. Ltd. Shell Eastern Petroleum Ltd.
SAUDI ARABIA
Jubail
800,000
2010
50
50
SAUDI ARABIA
Jubail
650,000
2010
100
SAUDI ARABIA
Jubail
300,000
2010
50
50
SAUDI ARABIA
Jubail
1,300,000
2010
50
50
SAUDI ARABIA
Jubail
1,450,000
2010
50
50
SAUDI ARABIA
Yanbu
1,380,000
2010
50
50
SAUDI ARABIA
Jubail
1,350,000
2010
100
SAUDI ARABIA
Jubail
1,000,000
2010
25
25
25
25
SAUDI ARABIA
Yanbu
875,000
2010
100
SAUDI ARABIA
Yanbu
830,000
2010
16
16
18
50
SAUDI ARABIA SERBIA AND MONTENEGRO SINGAPORE
Al-Jubail Pancevo Jurong Island 200,000
1,200,000
2011 2010
900,000
2010
33
33
34
SINGAPORE
Pulau Ayer Merbau
465,000
2010
100
SINGAPORE
Pulau Ayer Merbau
615,000
2010
100
SINGAPORE
Bukom Island
800,000
2010
100
34
Sector Update
Country Company Location Capacity, tonnes/ year 2010 Existing Capacity, tonnes/ year New 1,000,000 Year of Completion (Existing capacity=2010) 2013
Feedstock Slate (%)

SINGAPORE
SLOVAKIA
ExxonMobi l Chemical Corp. Slovnaft Petrochem icals Sasol Polymers Sasol Polymers Honam Petrochem ical Korea Petrochem ical Industries Co. Ltd. LG Daesan Petrochem ical LG Petrochem ical Co. Ltd. Lotte Daesan Petrochem ical Samsung General Chemicals SK Corp. SK Corp. Yeochon Yeochon Yeochon Dow Chemical Co. Repsol YPF SA Repsol YPF SA Borealis AB
Jurong Island
100
Bratislava
210,000
2010
11
26
55
SOUTH AFRICA SOUTH AFRICA
Sasolburg Secunda
110,000 475,000
2010 2010
80 75
20 5 20
SOUTH KOREA
Yeochun
750,000
2010
100
SOUTH KOREA
Ulsan
470,000
2010
100
SOUTH KOREA
Daesan
760,000
2010
100
SOUTH KOREA
Yeosu City
900,000
2010
100
SOUTH KOREA
Daesan
650,000
2010
100
SOUTH KOREA
Daesan
850,000
2010
100
SOUTH KOREA SOUTH KOREA SOUTH KOREA SOUTH KOREA SOUTH KOREA
Ulsan Ulsan Yeochun Yeochun Yeochun
545,000 185,000 857,000 555,000 400,000
2010 2010 2010 2010 2010
100 100 100 100 100
SPAIN
Tarragona
660,000
2010
100
SPAIN SPAIN SWEDEN
Puertollano Tarragona Stenungsun d
250,000 660,000 625,000
2010 2010 2010 40 20 100 40
100
35
Oil and Gas

Feedstock Slate (%)

SWITZERLAND
Lonza Ltd. Map Ta Phut Olefins Co. PTT Chemical PTT Chemical PTT Chemical PTT Chemical Rayong Olefins Ltd. PTT Polyethyle ne Co. Ltd. Petkim Petrochem icals Holding Co. Chlorvinyl Oriana TNK-BP Borouge Abu Dhabi Polymers Co. Ltd. Abu Dhabi Polymers Co. Ltd. (Borouge) INEOS INEOS ExxonMobi l Chemical Co. ExxonMobi l Chemical Co. SABIC Europe
Visp Map Ta Phut, Rayong Map Ta Phut, Rayong Map Ta Phut, Rayong Map Ta Phut, Rayong Map Ta Phut, Rayong Map Ta Phut, Rayong Map Ta Phut
30
60
10
THAILAND
900,000
2010
100
THAILAND
400,000
2010
80
14
THAILAND
515,000
2010
18
28
49
THAILAND
461,000
2010
100
THAILAND
1,000,000
2010
100
THAILAND
800,000
2010
100
THAILAND
1,000,000
2010
100
TURKEY
Aliaga, Izmir
520,000
2010
100
UKRAINE UKRAINE UKRAINE
Kalush
250,000 180,000
2010 2010 2010 100
100
Lisichansk
300,000
UNITED ARAB EMIRATES
Ruwais, Abu Dhabi
2,100,000
2010
100
UNITED ARAB EMIRATES UNITED KINGDOM UNITED KINGDOM UNITED KINGDOM UNITED KINGDOM UNITED KINGDOM
Ruwais, Abu Dhabi Grangemo uth Grangemo uth Fawley
1,500,000
2013
100
730,000 340,000
2010 2010
100 100
120,000
2010
25
25
25
Mossmorra n Fife Wilton 36
830,000
2010
100
865,000
2010
20
10
70
Sector Update
Feedstock Slate (%)

UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
BASF Fina Petrochem icals Chevron Phillips Chemical Co. LP Chevron Phillips Chemical Co. LP Chevron Phillips Chemical Co. LP Chevron Phillips Chemical Co. LP Chevron Phillips Chemical Co. LP Dow Chemical Co. Dow Chemical Co. Dow Chemical Co. Dow Chemical Co. Dow Chemical Co. DuPont Eastman Chemical Co. Eastman Chemical Co. Eastman Chemical Co. Eastman Chemical Co.
Port Arthur
100
Cedar Bayou
803,000
2010
30
20
25
25
Port Arthur
861,000
2010
70
25
Sweeny
907,000
2010
38
37
25
Sweeny
676,000
2010
75
25
Sweeny
295,000
2010
85
15
Freeport (LHC 7) Freeport (LHC 8) Plaquemin e (LHC 2) Plaquemin e (LHC 3) Taft 1
633,000
2010
50
50
1,024,000
2010
10
20
70
522,000
2010
75
25
740,000
2010
70
10
20
612,000
2010
20
40
40
UNITED STATES
Orange
681,000
2010
100
UNITED STATES
Longview
140,000
2010
25
67
UNITED STATES
Longview
140,000
2010
25
67
UNITED STATES
Longview
140,000
2010
25
67
UNITED STATES
Longview
360,000
2010
25
67
37
Oil and Gas

Feedstock Slate (%)

UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) Equistar Chemicals LP (LyondellB asell) ExxonMobi l Chemical Co. ExxonMobi l Chemical Co. ExxonMobi l Chemical Co. ExxonMobi l Chemical Co. Flint Hills Corp. Formosa Plastics Corp. USA Formosa Plastics Corp. USA
Channelvie w
875,000
2010
95
Channelvie w
875,000
2010
95
Chocolate Bayou
544,000
2010
100
Clinton
500,000
2010
80
20
Corpus Christi
771,000
2010
10
30
60
LaPorte
789,000
2010
60
20
20
Morris
590,000
2010
80
20
Baton Rouge Baytown
975,000
2010
25
25
25
2,197,000
2010
58
25
Beaumont
816,000
2010
75
Houston
102,000
2010
100
UNITED STATES
Port Arthur Point Comfort Point Comfort 38
617,000
2010
60
40
UNITED STATES
816,000
2010
45
15
40
UNITED STATES
680,000
2010
45
15
40 Edelweiss Securities Limited
Sector Update
Feedstock Slate (%)

UNITED STATES
Huntsman Corp. INEOS Olefins and Polymers USA Javelina Co. Sasol North America Inc. Shell Chemicals Ltd. Shell Chemicals Ltd. Westlake Petrochem icals Corp. Westlake Petrochem icals Corp. Westlake Petrochem icals Corp. Williams Olefins Uzbekneft egaz PequivenPetroquimi ca de Venezuela SA PequivenPetroquimi ca de Venezuela SA
Port Neches Chocolate Bayou Corpus Christi Lake Charles
UNITED STATES
1,746,000
2010
50
35
15
UNITED STATES
102,000
2010
100
UNITED STATES
454,000
2010
100
UNITED STATES
Deer Park
1,406,000
2010
UNITED STATES
Norco
1,556,000
2010
35
60
UNITED STATES
Calvert City
204,000
2010
100
UNITED STATES
Sulphur #1
567,000
2010
100
UNITED STATES
Sulphur #2
522,000
2010
70
30
UNITED STATES UZBEKISTAN
Geismar Shurtan
626,000 140,000
2010 2010
92 100
VENEZUELA
El Tablazo, Zulia
250,000
2010
30
70
VENEZUELA
El Tablazo, Zulia
350,000
2010
100
Source: Oil & Gas Journal, Downstream Today, Edelweiss research
39
Oil and Gas
APPENDIX V
Sensitivity Analysis
Table A5-1: Cracker margin based on demand per capita growth rate and population growth rate Table A5-2: Cracker margin based on GDP growth rate and demand elasticity
2011 188
population growth rate
Demand per capita growth rate
2011 198
Demand elasticity Demand elasticity
GDP growth rate
2.90% 187 188 190 191 192
3.40% 192 194 195 196 198
3.90% 198 199 200 202 203
4.40% 203 205 206 207 208
4.90% 209 210 211 213 214
3.80% 187 189 191 193 195
4.10% 190 193 195 197 199
4.40% 193 196 198 201 203
4.70% 197 199 202 204 207
5.00% 200 202 205 208 210
0.77% 0.89% 1.00% 1.12% 1.23%
0.96 1.01 1.06 1.11 1.16
2015
Demand elasticity population growth rate
2015
Demand elasticity Demand elasticity Demand elasticity
GDP growth rate
382
2.90% 358 360 361 363 364
3.40% 365 366 368 369 371
3.90% 371 372 374 375 377
4.40% 377 379 380 382 383
4.90% 383 385 386 388 389
388
3.80% 369 372 374 377 379
4.10% 373 376 378 381 383
4.40% 377 379 382 385 388
4.70% 380 383 386 389 392
5.00% 384 387 390 393 396
0.77% 0.89% 1.00% 1.12% 1.23%
0.96 1.01 1.06 1.11 1.16
Our sensitivity analysis of cracker margin based on demand projection based on 1) demand per capita growth rate and GDP growth rate 2) demand elasticity with GDP growth shows that the margin will be higher than USD 188 per mt in 2011 and will grow to more than USD 383 per mt by 2015.
Demand elasticity Demand elasticity

40
Demand elasticity
Sector Update
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098. Board: (91-22) 4009 4400, Email: research@edelcap.com
Vikas Khemani Nischal Maheshwari Head Institutional Equities Head Research vikas.khemani@edelcap.com nischal.maheshwari@edelcap.com +91 22 2286 4206 +91 22 6623 3411
Coverage group(s) of stocks by primary analyst(s): Oil and Gas, Petrochemicals
Bharat Petroleum Corporation, Cairn India, Chennai Petroleum Corp., Hindustan Petroleum Corporation, Indian Oil Corporation, Indraprastha Gas, ONGC, Reliance Industries, Aban Offshore, Petronet LNG, Essar Oil, GAIL, Shivvani Oil & Gas Exploration
Recent Research Date
01-Jul-11
Company
Aban Offshore Cairn India Petronet Buy LNG Buy
Title
Price (INR)
524 312
Recos
Hold Hold
1,150 950 750 550

350
Stake sale: Turning the heat on; Edel Flash Deal approved, but royalty cost recoverable; Edel Flash Strong LNG volume visibility; Visit Note
Buy
30-Jun-11
(INR)
29-Jun-11
138
Buy
150
Distribution of Ratings / Market Cap 20-Jun-11 Edelweiss Research Coverage Universe
Buy
Rating Distribution* * 2 stocks under review

> 50bn
J ul-08 Aug-08 Se p-08 Oc t-08 Nov-08 De c -08 J a n-09 Feb-09 Ma r-09 Apr-09 Ma y-09 J un-09 J ul-09
Torrent Pharma
132
Growth drivers intact; 642 Buy Rating Interpretation Visit Note Rating Expected to Hold Reduce Total 15-Jun-11 Dr. Reddys USFDA issues warning letter 1,555 Buy for 51 18 Lab. 203 Mexico facility; EdelFlash Buy appreciate more than 15% over a 12-month period 1,577 appreciate up Buy to 15% over a 12-month period
08-Jun-11 Dr. Reddys Gauging upsides from Hold Lab. current level; Between 10bn and 50 bn < 10bn Company Update
Market Cap (INR)
117
65 16-May-11 Shiv-vani 21 Robust results on full asset Oil & Gas deployment; Result Update
Reduce
depreciate more than 5% over a 12-month period

275 Buy
India long-term investment case; This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated investment Result Update banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investment banking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial price hikeor as an official confirmation of any transaction. Specifically, this document does 05-May-11 Oil & Gas Diesel instrument factored in; not constitute an offer to or solicitation from any U.S. person for the purchase it quits; any financial instrument or as an official confirmation of any transaction to any U.S. Call or sale of person. 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Petrochemicals - Ethylene

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SECTOR UPDATE

OIL AND GAS

Global ethylene oversupply scenario not as bad

Healthy demand growth led by polymer demand in China and India

Ethylene margins to grow in line with higher capacity utilization

August 29, 2011

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Source: Oil & Gas Journal, Edelweiss research

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Source: Oil & Gas Journal, Edelweiss research

Source: Edelweiss research

Source: Edelweiss research

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Source: CMAI Global, IMF, Edelweiss research

Source: CMAI Global, IMF, Edelweiss research

Chart 8: Ethylene demand GDP elasticity to be 1.1x

Source: CMAI Global, IMF, Edelweiss research 8 Edelweiss Securities Limited

Source: CMAI Global, IMF, Edelweiss research

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Chart 11: Olefins Feedstock vs. Crude Oil Prices

Table 1: Cracker output slate

Chart 12: Napththa vs ethane cracker margin widens

Chart 14: Propylene-ethylene spread widens

Source: Bloomberg, Edelweiss Research

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Ethylene Margin & Utilization Rate

Source: CERA Downstream Index, Edelweiss Research

Chart 16: Operating rate follows gross margin

Source: Edelweiss Research

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Source: Edelweiss Research

Source: Edelweiss Research

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Oil and Gas

Ethylene Value Chain

Source:Edelweiss research 14 Edelweiss Securities Limited

Chart A1-2: Global Ethylene Derivatives

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Source: CMAI Global

Chart A3-3: KSA ethane deliveries may turn below allocations

Source: CMAI Global

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