Oportunidades para la Industria
Petroquímica Mexicana
Stephen Zinger
Vicepresidente de Químicos
ANIQ XLVII Foro de la Industria Química 2015
15 y 16 de Octubre 2015
Ciudad de México
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naturally along the energy value chain to capture all
the key components affecting global markets.
Our integrated approach allows us
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Upstream
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Markets
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Oil Products
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NGL Chemicals
Macro
Economics
Metals & Mining
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Agenda – Opportunities for the Mexican Petrochemical Industry “Viable chemical industries connect hydrocarbon sources to strong economies”
How does Mexico’s petrochemical industry
compare globally?
How does Energy Reform and Shale Gas
change hydrocarbon supplies?
What growth factors in the Mexican economy
are supportive of the petrochemical industry?
What are the opportunities & ideal examples
for future petrochemical industry growth?
Hydrocarbons Petrochemicals Economy
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Mexico = #14
Mexico = #26
0 10 20 30 40 50
ChinaUnited States
RussiaSaudi Arabia
CanadaIndonesiaAustralia
IndiaIran
QatarIraq
UAENorwayMexico
KazakhstanKuwait
South AfricaNigeria
BrazilVenezuela
AlgeriaColombiaMalaysia
AngolaUK
TurkmenistanEgyptLibyaOman
Azerbaijan
Crude Oil
Nat Gas
Coal
*kboe/d, 2015 Base Hydrocarbon Production
0 25 50 75 100
ChinaUnited States
KoreaSaudi Arabia
JapanIndia
GermanyTaiwan
ThailandSingapore
IranNetherlands
RussiaBrazil
CanadaFrance
UAEBelgium
UKSpain
MalaysiaItaly
KuwaitIndonesia
QatarMexicoPoland
South AfricaArgentina
Oman
Ethylene
Propylene
Benzene
Paraxylene
Million Tons, 2015 Base Chemical Capacity
How does Mexico’s petrochemical industry compare globally? Given the size of the hydrocarbon production, a larger chemical industry is possible
Top 30 Base Chemical Producers Top 30 Base Hydrocarbon Producers
*Kboe = thousand barrel per day of oil equivalents
Source: Wood Mackenzie Chemical Service Source: Wood Mackenzie Energy Market Service
15 Countries with Hydrocarbon
Production Smaller than Mexico
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Mexico = #26
0 25 50 75 100
ChinaUnited States
KoreaSaudi Arabia
JapanIndia
GermanyTaiwan
ThailandSingapore
IranNetherlands
RussiaBrazil
CanadaFrance
UAEBelgium
UKSpain
MalaysiaItaly
KuwaitIndonesia
QatarMexicoPoland
South AfricaArgentina
Oman
Ethylene
Propylene
Benzene
Paraxylene
Million Tons, 2015 Base Chemical Capacity
13 Countries with Economies
smaller than Mexico
Mexico = #13
How does Mexico’s petrochemical industry compare globally? Given the size of the economy, a larger Mexico chemical industry is possible
Top 30 Base Chemical Producers Top 30 Economies (GDP)
Source: Wood Mackenzie Chemical Service Source: World Bank
0 5 10 15 20
United StatesChinaJapan
GermanyUK
FranceItaly
IndiaCanada
South KoreaSpainBrazil
MexicoRussia
AustraliaNetherlands
TurkeySaudi Arabia
TaiwanIndonesia
SwitzerlandSwedenPoland
BelgiumAustriaNorway
ArgentinaSouth Africa
DenmarkHong Kong
US$Trillion, 2015 GDP
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Agenda – Opportunities for the Mexican Petrochemical Industry “Viable chemical industries connect hydrocarbon sources to strong economies”
How does Mexico’s petrochemical industry
compare globally?
How does Energy Reform and Shale Gas
benefit the petrochemical industry?
What growth factors in the Mexican economy
are supportive of the petrochemical industry?
What are the ideal examples & opportunities
for future petrochemical industry growth?
Hydrocarbons Petrochemicals Economy
Trusted commercial intelligence www.woodmac.com
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How Does Energy Reform Change Crude Oil? Large focus is on developing more oil production to secure private investment,
capital and technology
Industry
feedback on
assets
Deepwater
and heavy-oil
Nov
2014
Feb
2015
May
2015 Oct
2015
Shallow-water
exploration
Shallow-water
development
Onshore
conventional
opportunities
Release of
preliminary
contracts
Dec
2014
Dec
2013
Constitution-
al Reform
Aug
2014
Secondary
Legislation
approved
Initial Round
Zero results
Energy
Reform
Secondary
legislation
approved
Initial Round
Zero results
Start of Round
One
Qualification
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2000 2005 2010 2015 2020 2025
Future ProductionOther Existing FieldsKu-Maloob-ZaapSamaria-LunaLitoral de TabascoAbkatun-Pol-ChucCantarell
Source: Wood Mackenzie Oil Supply Tool
Mil
lio
n B
arr
els
Pe
r D
ay
Mexico Oil Supply
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How Does Energy Reform Change Refining? Even with large refined product deficits and reversal of crude production
declines, Mexico refinery additions will be dependent upon the transition to
market prices for refined products
Mexico Refined Products Demand
0.0
1.0
2.0
3.0
2000 2005 2010 2015 2020 2025
OtherFuel OilDistillatesGasoline/NaphthaCapacity
Million Barrels/Day, Mexico
Source: Wood Mackenzie Refined Product Market Service
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How Does Energy Reform Change Natural Gas? Additional natural gas production grows associated with crude oil
production, but imports satisfy rapid demand growth into power sector
0
4
8
2010 2015 2020 2025
bc
fd
Production LNG Imports Net Piped Imports
0
4
8
2010 2015 2020 2025
bcfd
Local Distribution Industrial Power Other
Mexico Natural Gas Supply Mexico Natural Gas Demand
Source: Wood Mackenzie North America Gas Service – 1H 2015
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How Does Shale Gas Change Natural Gas? Shale gas has significantly changed US supply; LNG export (to world) and
pipeline export (to Mexico) are most important for US demand growth
0
60
120
2010 2015 2020 2025
bcfd
Conventional AssociatedCBM TightShale
0
60
120
2010 2015 2020 2025b
cfd
Residential CommercialIndustrial PowerLNG Exports Net Mexican ExportsTransport Other
US Natural Gas Supply US Natural Gas Demand
Source: Wood Mackenzie North America Gas Service – 1H 2015
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How Does Shale Gas Change Natural Gas? Pipeline infrastructure developments – both cross border and internal to
Mexico - are critical to bring cheap US shale gas to Mexico
US-to-Mexico Gas Pipeline Export Capacity Developing Mexico Natural Gas Infrastructure
0
2
4
6
8
10
12
2010 2015 2020 2025
bcfd
South Texas California West Texas Arizona
Source: Wood Mackenzie North America Gas Service
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How Does Energy Reform Change Power? Gas dominates existing and growth in power supply due to oil conversions
and gas imports; lower power costs allow for rapid growth in industry sector
0
100
200
300
400
2005 2010 2015 2020 2025
Te
raw
att
-ho
urs
(T
Wh
)
Coal Oil Gas
Nuclear Hydro Renewables
Source: Historical Data: IEA; Forecast: Wood Mackenzie Energy Markets
0
100
200
300
400
2005 2010 2015 2020 2025Te
raw
att
-ho
urs
(T
Wh
)
Other Losses & Gains Transport
Residential/Commercial Industry & Non-Energy Use
Mexico Power Supply Mexico Power Demand
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How Does Energy Reform Change Power? Lower power supply costs (natural gas) and increased competition are just
now starting to reduce end-user power prices
Mexico Power Supply Production Costs Mexico Power Prices
0
2
4
6
8
10
12
14
0
20
40
60
80
100
120
140
160
180
200
US
¢/k
Wh
Cen
tavo
s/k
Wh
Medium industry
Large industry
Source: Wood Mackenzie, SENER
50
100
150
200
250
300
350
400
450
500
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
US
$/M
Wh
(re
ali
ze
d)
MW bid into market
2012
2013
2014
2015
Source: Wood Mackenzie, CFE
0
Average daily load for
H1 has increased 11%
from 2012-2015,
but average realized
costs have decreased
by 39%
2012 2015
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Agenda – Opportunities for the Mexican Petrochemical Industry “Viable chemical industries connect hydrocarbon sources to strong economies”
How does Mexico’s petrochemical industry
compare globally?
How does Energy Reform and Shale Gas
benefit the petrochemical industry?
What growth factors in the Mexican economy
are supportive of the petrochemical industry?
What are the ideal examples & opportunities
for future petrochemical industry growth?
Hydrocarbons Petrochemicals Economy
Trusted commercial intelligence www.woodmac.com
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Mexico Economy Mexico has the strongest economic growth prospects in the Americas,
but slower than the manufacturing powerhouses of China and India
Mexico GDP Growth vs. Other Key Economies
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
1990 1995 2000 2005 2010 2015 2020 2025
Mexico Brazil Canada China India United States
Y/Y Growth Rate
Source: World Bank; Wood Mackenzie
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Mexico Demographics Mexico’s working population continues to grow with manufacturing costs
well below largest export target market in the US
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013 2014 2015
Canada
US
Mexico
US$/hour, Average Manufacturing Wages
Mexico Population Age Distribution North America Manufacturing Wages
0
50
100
150
1990 1995 2000 2005 2010 2015 2020 2025
Population by Age (65+)
Population by Age (15 - 64)
Population by Age (0 - 14)
Millions
Source: Thomson Reuters Datastream, Wood Mackenzie
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Mexico Manufacturing Outlook Mexico’s rapid automotive industry growth is a great example of
manufacturing opportunities that provide more petrochemical demand
(2014) Honda plant in
Celaya, Guanajuato
(2014) Mazda plant in
Salamanca, Guanajuato
(2013) Renault-Nissan plant in
Aguascalientes
(2017) Daimler and Renault-
Nissan plant in Aguascalientes
(2016) Audi plant in San Jose
Chiapa, PUE
(2019) BMW plant in San
Luis Potosi
(2016) Kia plant in Monterrey,
Nuevo Leon
0
5
10
15
20
25
2000 2005 2010 2015 2020 2025
Mil
lio
n u
nit
s
Mexico
Canada
USA
N America Automobile Production
0
50
100
150
200
250
300
2007 2009 2011 2013 2015
3 m
on
th m
ovin
g a
vg
, th
ou
sa
nd
un
its
Mexico internalOther regionsAsiaEuropeSouth AmericaNorth America (except Mexico)
Source: Thomson Reuters Datastream, Wood Mackenzie
Mexico Automobile Exports
New Mexico Automobile Manufacturing Plants
Trusted commercial intelligence www.woodmac.com
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Agenda – Opportunities for the Mexican Petrochemical Industry “Viable chemical industries connect hydrocarbon sources to strong economies”
How does Mexico’s petrochemical industry
compare globally?
How does Energy Reform and Shale Gas
benefit the petrochemical industry?
What growth factors in the Mexican economy
are supportive of the petrochemical industry?
What are the opportunities & ideal examples
for future petrochemical industry growth?
Hydrocarbons Petrochemicals Economy
Trusted commercial intelligence www.woodmac.com
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Opportunities for Future Petrochemical Industry Growth?
Production of basic petrochemicals has been stagnant for decades,
while imports continue to grow to over $30 billion per year
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014
Other
C6 Chemistry
C3 Chemistry
C2 Chemistry
C1 Chemistry
Source: INEGI, Includes PEMEX Petrochemical Production Only
Million Tons
Mexico Chemical Industry Production Mexico Chemical Industry Imports
0
10
20
30
40
2000 2002 2004 2006 2008 2010 2012 2014
Inorganic Chemicals
Organic Chemicals
Polymers
$Billions
Source: INEGI
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0
16
32
48
64
80
96
112
128
144
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China Coal Range Brent Crude Oil
US Henry Natural Gas Middle East Natural Gas Range
$ p
er
mil
lio
n
$ p
er b
arre
l (cru
de
oil)
$ p
er to
n (c
oa
l)
0
40
79
119
159
198
238
278
318
357
Emergence of the North America
Gas-based & China Coal-based Chemical Industry Advantage
Opportunities for Future Petrochemical Industry Growth? The “rollercoaster” of volatility of regional energy valuations has caused
opportunities and threats across the chemical industry
Source: ArgusMedia, NYMEX, SXCoal
Key Global Energy Benchmarks
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Opportunities for Future Petrochemical Industry Growth? North American now has a $100+ billion gas chemical renaissance
Source: Wood Mackenzie; American Chemistry Council http://chemistrytoenergy.com/shale-125-billion
natural gas & natural gas liquids
ethylene methanol ammonia others propylene
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0
30
60
2005 2010 2015 2020 2025
Existing Capacity Firm Projects
Likely Projects Hypothetical Projects
Million tons, Ethylene Capacity
Ideal Examples for Future Petrochemical Industry Growth? The North America ethylene industry is expanding initially through
debottlenecks and then through new world-scale plants
Debottlenecks of Existing Capacity
» BASF/Total, CP Chem, Dow, Eastman, Equistar,
INEOS, Westlake, Williams
Firm/Likely Projects Underway
(Before 2020)
» Braskem Idesa (end-2015)
» Oxy/Mexichem JV (2017)
» Chevron Phillips (2017)
» ExxonMobil Chemical (2017)
» Dow Chemical (2017)
» Formosa Plastics (2018)
» Sasol (2018)
» Shintech (2019)
Other Projects Under Study
» Aither, Appalachian Resins, Axiall/Lotte, Badlands
NGL, Braskem, CP Chem, Formosa, Hanwha,
Indorama, NOVA, PTT/Marubeni, Sabic, Shell, Total,
Williams, Others
North America Ethylene Capacity
Source: Wood Mackenzie Long Term Ethylene Service (1H 2015)
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Ideal Examples for Future Petrochemical Industry Growth? Braskem-Idesa Etileno XXII $5 Billion Project – Largest Petrochemical Project
0.0
0.5
1.0
1.5
2.0
2005 2010 2015 2020 2025
LDPE
LLDPE
HDPE
Million Tons
Source: Wood Mackenzie Long-term Polyethylene Service
Mexico Polyethylene Capacity
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Ideal Examples for Future Petrochemical Industry Growth? Braskem-Idesa Etileno XXII Project Keys to Competitive Success:
Feedstock, Technology, Market Competitive Feedstock
» 20-year ethane feedstock contract (66
mb/d) with PEMEX
» Ethane priced relative to USGC
Latest Technology
» World-scale size economies of scale
» Latest technologies for cracker
(Technip), HDPE (Ineos), LDPE
(LyondellBasell)
Viable Market Access
» Access to local market over 300
customers – strong technical
assistance and available inventories
» Some exports initially due to
competition from US PE producers
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2005 2010 2015 2020 2025
LLDPE ExportsLDPE ExportsHDPE Exports
LLDPE ImportsLDPE ImportsHDPE ImportsNet PE Imports
Million Tons
Source: Wood Mackenzie Long-term Polyethylene Service
Mexico Polyethylene Trade Balance
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25
0
16
32
48
64
80
96
112
128
144
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China Coal Range Brent Crude Oil
US Henry Natural Gas Middle East Natural Gas Range
$ p
er
mil
lio
n
$ p
er b
arre
l (cru
de
oil)
$ p
er to
n (c
oa
l)
0
40
79
119
159
198
238
278
318
357
North America gas-based
chemistry renaissance
now at risk
Opportunities for Future Petrochemical Industry Growth? The “rollercoaster” of volatility of regional energy valuations has caused
opportunities and threats across the chemical industry
Source: ArgusMedia, NYMEX, SXCoal
Key Global Energy Benchmarks
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Opportunities for Future Petrochemical Industry Growth? A flatter global production cost curve still keeps North America ethylene
competitive at $50/bbl crude; investment returns will be lower than expected
Source: Wood Mackenzie
Aug 2015 Ethylene Costs (Brent=$47/bbl; Henry Hub=$2.80) Sep 2014 Ethylene Costs (Brent=$98/bbl; Henry Hub=$3.90
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C1 Chemistry (Imported Natural Gas, Later Domestic Gas)
» Methanol / Ammonia / Urea
» Methanol conversion (Methanol to Ethylene/Propylene, Methanol to Gasoline)
C2 Chemistry (Further PEMEX Ethane supply, Later Domestic Gas)
» Ethylene – LLDPE, Ethylene Oxide/Glycol, Vinyls
C3 Chemistry (Later Refinery recovery and Propane-based PDH)
» Propylene – Polypropylene, Acrylonitrile, Acrylates
C4 / C5 / C6+ Chemistry (Existing refinery recovery, Later Expansions & New builds)
Opportunities for Future Petrochemical Industry Growth? C1/C2 Chemistry first, then other chains later
Hydrocarbons Petrochemicals Economy
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Conclusions Opportunities for the Mexican Petrochemical Industry
» 13th largest economy; 14th largest hydrocarbon producer
» Mexico has further opportunities to grow chemical industry
beyond the 26th largest petrochemical producer
» Reform & shale gas will transform the energy industry
» Immediate focus on crude oil production, natural gas imports
and electricity costs,
» Longer term benefits to natural gas production and refinery
construction
» Well-positioned for economic and manufacturing growth
» Population demographics, export access to US market
» Rapidly growing Automobile industry is positive for chemistry
» Yesterday’s chemical industry = stagnant
» Stagnant production and increasing imports
» Tomorrow’s chemical industry = growth
» Braskem-Idesa project transforms Mexico PE
industry
» Focus on gas-based chemistries now
» Oil/refinery based chemistries will follow later
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Steve Zinger
Steve Zinger joined Wood Mackenzie in 2012 to develop a global chemical research team to compliment
Wood Mackenzie’s existing capabilities in energy, metals, and mining. In 2013, he coordinated the
launch of a comprehensive package of chemical research analyses, including the “Short-term Ethylene &
Propylene Market Service” and the “Long-term Ethylene & Propylene Market Service”.
Steve currently contributes to research, multi-client, and private consulting studies using his expertise in
the markets for ethylene, propylene, and butadiene. He regularly provides executive presentations about
the outlook for the chemical industry for his customers’ private meetings as well as for key chemical
industry events.
Steve has 25 years of international experience in the chemical industry. Previous to Wood Mackenzie, he
worked for a boutique chemical consulting firm, in various roles including Managing Director of Asia
(Singapore) and Global Olefins Business Director (USA). Steve also worked for Shell Oil Company
(USA) as a process engineer and planning manager within several olefin plants and refineries.
Steve has a chemical engineering degree from Virginia Tech (USA) and a masters degree in business
administration from Tulane University (USA).
Wood Mackenzie
Vice President – Chemicals
T +1 713 470 1878
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Disclaimer
This presentation has been prepared for the ANIQ XLVII Foro de la Industria Química
on 16 October 2015 In Mexico City, Mexico by Wood Mackenzie Limited. The
presentation is intended solely for the benefit of attendees and its contents and
conclusions are confidential and may not be disclosed to any other persons or
companies without Wood Mackenzie’s prior written permission.
The information upon which this presentation comes from our own experience,
knowledge and databases. The opinions expressed in this presentation are those
of Wood Mackenzie. They have been arrived at following careful consideration and
enquiry but we do not guarantee their fairness, completeness or accuracy.
The opinions, as of this date, are subject to change. We do not accept any liability
for your reliance upon them.
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