Petrochemical Industry - Key Geographies Experiencing Change in Feedstock Scenario

The study provides an in-depth analysis of the petrochemical feedstock supply scenario in the key geographies.  It explains the reasons for decrease in supply of ethane feedstock in geographies such as the Middle East and Canada. It also explains the impact of new oil and gas discoveries on the petrochemicals industries in the countries such as the US, Brazil and Canada. The study provides the basic petrochemicals (ethylene, propylene, butadiene, benzene, toluene, xylenes and methanol) capacity split by feedstock for all the five regions. The report highlights the change in the supply trend of petrochemical feedstock sources such as natural gas and crude oil. The report is built using data and information sourced from proprietary databases, primary and secondary research and in-house analysis by GlobalData’s research team of industry experts.

The petrochemicals feedstock supply trend in the major geographies has change in the recent past. While the Middle East countries and Canada are facing lower ethane supplies, the US and Brazil have benefited from the discovery of shale gas and pre-salt reserves respectively. The petrochemicals industry in the Middle East is concentrated in Saudi Arabia, Iran and Qatar and use ethane as the petrochemicals feedstock. Securing new ethane supply contract in the Middle East has become increasingly difficult due to high demand from existing petrochemical plants and the power sector. Due to this many planned petrochemical plants in the region are based on naphtha feedstock.

The natural gas production in Saudi Arabia, Iran and Qatar is increasing at a rapid pace but it is not sufficient o fulfill the requirement from petrochemicals industry. The natural gas production in Saudi Arabia and Iran increased at a Compound Annual Growth Rate (CAGR) of 5.4% and 8.7% respectively. However ethylene capacity in Saudi Arabia and Iran increased at CAGR of 8.1% and 23.1% respectively. Qatar has already imposed a moratorium on its North Dome gas field which has restricted ethane production. Canada is also facing lower ethane production due to lower natural gas supply from Western Canadian Sedimentary Basin (WCSB). The Canadian petroleum industry, however, has also discovered bituminous oil reserve which accounted for more than 50% of its crude oil production in 2010. The Canadian petrochemical industry is now focusing on meeting its future feedstock requirement from these bituminous reserves.

Contrary to the Middle East, where ethane feedstock is becoming scarcer, the US, Brazil and a few European countries have discovered new feedstock sources. The US holds a huge natural gas reserve in the shale rocks which has increased the natural gas supply in the country in the last five years. Many of these reserves contain wet natural gas which would enhance the ethane supply in the country. Brazil has also started the crude oil production from the newly discovered pre-salt reserves and expects to become one of the largest producers of crude oil in the future. Increased crude oil supply will simultaneously enhance naphtha production from Brazil. Shale reserves have been identified in Europe also but there is not significant progress in developing these reserves except in Poland where the commercial production is expected to start in 2015.

Scope
The report provides an in-depth analysis, market opportunities and challenges for manufacturers of petrochemicals, worldwide. It contains detailed information about major feedstock used for petrochemical production and their advantage. Its scope includes -

• Feedstock used in various petrochemical industries including Asia Pacific, North America, Europe, Middle East and, South and Central America
• Historical and forecasted basic petrochemical capacity in the Middle East
• Basic petrochemical capacity share by region
• Natural gas production in Saudi Arabia, Iran, Qatar and the US
• Ethylene capacity growth and ethane supply scenario in major Middle East countries such as Saudi Arabia, Iran and Qatar
• Crude oil production in Canada and share of bituminous reserve in total crude oil production
• Crude oil production forecast from the Brazilian pre salt reserves
• Details of Europe shale gas development

Reasons to Buy
The report will enhance your decision making capability in a more rapid and time sensitive manner. It will allow you to -

• Understand the impact of feedstock usage on the petrochemicals production in various geographies
• Develop business strategies with the help of specific insights on feedstock supply scenario in the global petrochemicals industry
• Identify opportunities in the Middle East, European, the US, Canadian and Brazilian petrochemical industries
• Identify prospective investment targets through updates on petrochemicals feedstock usage and discussion on newer feedstock sources
• Increase future revenue and profitability with the help of insights on the future opportunities and critical success factors in the global petrochemical industry

Additional Information

Petrochemical Feedstock Supply in the Middle East Affected by the Natural Gas Scarcity

Securing natural gas feedstock in the Middle East has become increasingly difficult in the last few years, threatening the region’s dominance as the most economical petrochemicals producer, according to a new report by business intelligence company GlobalData.

This report  found that the Middle East is now facing a natural gas scarcity due to increasing demand  and inefficient utilization of subsidized natural gas by the energy intensive industries, which has led to the restriction of supplies and posed a subsequent threat to the global petrochemical market.

Huge natural gas resources and cheaper feedstock availability turned the Middle East into the hub of the global petrochemical industry over the last decade by making the region the most competitive in the world. Middle Eastern petrochemical producers use natural gas as a key feedstock due to the availability of subsidies. This means that natural gas in Middle Eastern countries can be as much as 60-70% cheaper than natural gas found in Europe and North America.

However, the subsidies on natural gas production offered by countries such as Saudi Arabia, Iran and Qatar has led to the inefficient utilization of the available resources, leading to a decline in the supply of ethane feedstock. Feedstock costs determine the success of petrochemical producers, as they represent the majority of production costs. As natural gas is the primary feedstock used in the Middle East, its scarcity will affect the petrochemical producers significantly.

In addition, the Organization of Petroleum Exporting Countries (OPEC) quota limits crude oil production, thereby also limiting associated natural gas production. Despite all Gulf countries producing more than their allotted quota, production is insufficient to meet burgeoning demand from the power, transportation and petrochemical sectors.

Saudi Aramco, the sole supplier of ethane in Saudi Arabia, stopped allocating ethane to new petrochemical projects in 2006, and pre-existing supply agreements have not received their allocated limits since 2009. Lack of development of Iranian non-associated gas reserves has also led to the scarcity in ethane supplies, and Qatar have imposed a moratorium upon further development of gas reserves, in order to assess sustainable rates of gas production, halting allocation of the country’s gas for industrial projects until 2014.

1 Table of Contents 3
1.1 List of Tables 5
1.2 List of Figures 6

2 Introduction 7
2.1 Overview 7
2.2 GlobalData Report Guidance 8

3 Crude Oil and Natural Gas Fractions are the Major Source of Petrochemicals and Control the Feedstock Supply Dynamics 9
3.1 Steam Cracking is the Dominant Technology Used for the Production of Basic Petrochemicals Worldwide 9
3.2 Naphtha Derived Petrochemicals are Sensitive to Crude Oil Price Fluctuations 11
3.3 Natural Gas Liquids (NGLs) are Fractionated from Natural Gas and Used as Feedstock 11
3.4 Coal Usage as Petrochemical Feedstock is Concentrated in China 12

4 The Global Petrochemical Industry is Dominated by Naphtha Followed by Natural Gas 13
4.1 Development of Crude Oil Refineries Resulted in Naphtha-Based Petrochemical Industry in Asia Pacific 14
4.2 Natural Gas Reserves in North America Provide Ethane Feedstock for the Petrochemical Industry 15
4.3 Europe Petrochemical Industry Relies on Crude Oil Imports for Naphtha Feedstock 16
4.4 Natural Gas is a Dominant Feedstock in the Middle East Due to its Easy Availability and Lower Cost 17
4.5 The South and Central American Petrochemical Industry Uses Diversified Feedstock Slate 19

5 Middle East Petrochemical Industry is Losing the Cheaper Ethane Feedstock Advantage and Shifting to Naphtha Feedstock 20
5.1 Cheaper Ethane Feedstock Led to Rapid Development of the Middle East Petrochemical Industry in the Last Decade 20
5.2 Middle East is Facing Feedstock Supply Constraint due to Inadequate Natural Gas 24
5.3 Increased Ethylene Capacity, OPEC Quota and Underdeveloped Non-Associated Gas Reserves are Creating Scarcity of Ethane in Saudi Arabia 24
5.3.1 OPEC Quota is Limiting the Natural Gas Production in Saudi Arabia 24
5.3.2 Ethane Production is Limited from Non-Associated Gas Reserves Due to High Cost of Production 26
5.3.3 Ethylene Crackers are Driving the Demand for Ethane in Saudi Arabia 27
5.3.4 Increase in the Domestic Demand has Brought Down Saudi Arabia’s Ethane Exports 29
5.4 Natural Gas Production is Unable to Support the Flourishing Petrochemical Industry in Iran 31
5.4.1 Cracker Capacity has Increased at a Faster Pace than Natural Gas Production 31
5.4.2 Mega Petrochemical Complexes in Iran Utilize Gaseous Feedstock 32
5.5 Qatar Natural Gas Production is Restricted Due to Moratorium on Gas-based Industrial Projects 34
5.6 Increasing Demand from Power Sector is Creating Short Supply of Natural Gas for Petrochemical Industry in the Region 36
5.6.1 Power Sector Account for Bulk of the Natural Gas Consumption in the Middle East 36
5.6.2 Increase in Power Consumption is Creating Shortage for Petrochemical Feedstock 37
5.7 Many of the Planned Projects are Utilizing Naphtha as a Major Feedstock Due to Uncertainty over Ethane Supply 41

6 North America Petrochemical Industry is Aligning Itself to Utilize Newer Feedstock Sources 44
6.1 The US Petrochemicals Industry is Anticipating Cheaper Feedstock Supply from Shale Gas Development 44
6.1.1 Natural gas Production in the US is Driven by the Addition of Capacity from Shale Gas Reserves 44
6.1.2 Ethane Rich Shale Formations are Useful from Petrochemicals Industry’s Perspective 46
6.1.3 Marcellus Shale is Emerging as a Petrochemical Feedstock Source 46
6.2 Declining Ethane Production from Traditional Gas Reserves is Forcing Canada to Explore Oil Sand Reserves 47
6.2.1 Lower Price Made Ethane the Dominant Petrochemical Feedstock in Canada 47
6.2.2 Ethane Availability has Declined in the Recent Past due to Lower Natural Gas Production from Western Canada 47
6.2.3 Canada Petrochemical Industry is Awaiting to Utilize Bituminous Reserves as a Feedstock Source 48

7 Discovery of Pre-Salt Reserves in Brazil is Expected to Provide More Economically Available Petrochemical Feedstock 53
7.1 Brazilian Petroleum and Petrochemical Industry is Set to Expand with the Increased Oil Production 53
7.2 Government is Promoting the Development of Pre-Salt Reserve by Implementing Regulatory Reform 54

8 Europe is Making Strides in Shale Gas Exploration and Reducing the Dependancy on Russian Gas Reserves 55
8.1 Europe is Making Efforts to Develop its Shale Gas Resources Aiming to Decrease its Dependence on Russian Gas 55
8.2 Higher Cost and Lower Water Availability is Delaying the European Shale Gas Development 55
8.3 Quality of Gas will Decide the Feedstock Supply Scenario in Europe 55

9 Appendix 56
9.1 Definitions 56
9.1.1 Installed Plant Capacity 56
9.1.2 Key Feedstock 56
9.1.3 Process 56
9.1.4 Technology 56
9.2 Abbreviations 56
9.3 GlobalData’s Research Methodology 56
9.3.1 Coverage 57
9.3.2 Secondary Research 57
9.3.3 Primary Research 57
9.3.4 Expert Panel Validation 58
9.4 Contact Us 58
9.5 Disclaimer 58

1.1 List of Tables
Table 1: Basic Petrochemicals Output from Naphtha, % 11
Table 2: Basic Petrochemicals Output from Natural Gas, % 11
Table 3: Basic Petrochemical Industry, Global, Coal Based Capacity by Country, %, 2010 12
Table 4: Global Petrochemical Industry, Basic Petrochemical Capacity by Feedstock, %, 2010 13
Table 5: Asia Pacific Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 14
Table 6: North America Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 15
Table 7: Europe Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 16
Table 8: Global Petroleum Industry, Countries with Largest Natural Gas Reserves, tcf, 2011 17
Table 9: Middle East and Africa Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 18
Table 10: South and Central America Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 19
Table 11: Petrochemical Industry, the Middle East, Basic Petrochemicals Capacity, MMtpa, 2000-2015 21
Table 12: Global Petrochemical Industry, Basic Petrochemicals Capacity Share by Region, 2000-2010 22
Table 13: The Middle East Basic Petrochemicals Industry, Major Plants Start up, 2005-2010 23
Table 14: Saudi Arabia Petroleum Industry, Proven Gas Reserves, %, 2010 25
Table 15: Saudi Arabia Natural Gas Industry, Production, bcf/d, 2000-2010 26
Table 16: Saudi Arabia Petrochemical Industry, Ethane Production and Ethylene Capacity, 2002-2010 28
Table 17: Saudi Arabia Petrochemical Industry, Ethane Production and Exports, Trillion BTU, 2002-2010 29
Table 18: Saudi Arabia Petrochemical Industry, NGLs Production and Exports, MMbbl, 2000-2010 30
Table 19: Iran Petrochemical Industry, Ethylene Capacity and Natural Gas Production, 2000-2010 32
Table 20: Iran Ethylene Industry, Ethane Based Ethylene Plant Details, 2010 32
Table 21: Iran Petrochemical Industry, Major Ethane Plant Details, 2010 33
Table 22: Qatar Petrochemical Industry, Ethylene Capacity and Natural Gas Production, 2000-2010 35
Table 23: Middle East Natural Gas Industry, Consumption Split by Sectors, %, 2008 36
Table 24: Middle East Power Industry, Consumption by Country, Gigawatt Hour, 2000-2010 37
Table 25: The Middle East Power Industry, Generation Capacity by Key Countries, MW, 2010 38
Table 26: The Middle East Power Industry, Major Gas-Based Active Plant Details in Key Countries, 2010 39
Table 27: The Middle East Power Industry, Major Gas-Based Active Plant Details in Key Countries, 2010 (Contd.) 40
Table 28: Middle East Petrochemical Industry, Planned Projects Based on Naphtha, 2012-2016 42
Table 29: Middle East Petrochemical Industry, Planned Projects Based on Naphtha, 2012-2016 (Contd.) 43
Table 30: The US Natural Gas Industry, Production, bcf/d, 2000-2010 45
Table 31: The US Petrochemical Industry, Companies Utilising Ethane from Marcellus Shale 46
Table 32: Canada Petrochemical Industry, Ethane Production, MMcf/d, 2000-2010 48
Table 33: Canada Petroleum Industry, Crude Oil Production, MMbbl/d, 2010-2025 48
Table 34: Canada Oil Sand Industry, Major Bituminous Fields Details, 2010 49
Table 35: Canada Oil Sand Industry, Major Bituminous Fields Details, 2010 (Contd.) 50
Table 36: Canada Oil Sand Industry, Major Bituminous Fields Details, 2010 (Contd.) 51
Table 37: Canada Oil Sand Industry, Major Bituminous Fields Details, 2010 (Contd.) 52
Table 38: Petrobras, Crude Oil Production Forecast, MMbbl/d, 2011–2020 54

1.2 List of Figures
Figure 1: Basic Petrochemical Industry, Production Process 10
Figure 2: Basic Petrochemical Industry, Global, Coal-Based Capacity by Country, %, 2010 12
Figure 3: Global Petrochemical Industry, Basic Petrochemical Capacity by Feedstock, %, 2010 13
Figure 4: Asia Pacific Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 14
Figure 5: North America Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 15
Figure 6: Europe Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 16
Figure 7: Middle East Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 18
Figure 8: South and Central America Petrochemical Industry, Basic Petrochemicals Capacity by Feedstock, %, 2010 19
Figure 9: Petrochemical Industry, the Middle East, Basic Petrochemicals Capacity, MMtpa, 2000-2015 20
Figure 10: Global Petrochemical Industry, Basic Petrochemicals Capacity Share by Region, 2000-2010 22
Figure 11: Saudi Arabia Petroleum Industry, Proven Gas Reserves, %, 2010 25
Figure 12: Saudi Arabia Natural Gas Industry, Production, bcf/d, 2000-2010 26
Figure 13: Saudi Arabia Petrochemical Industry, Ethane Production and Ethylene Capacity, 2002-2010 27
Figure 14: Saudi Arabia Petrochemical Industry, Ethane Production and Exports, Trillion BTU, 2002-2010 29
Figure 15: Saudi Arabia Petrochemical Industry, NGLs Production and Exports, MMbbl, 2000-2010 30
Figure 16: Iran Petrochemical Industry, Ethylene Capacity and Natural Gas Production, 2000-2010 31
Figure 17: Qatar Petrochemical Industry, Ethylene Capacity and Natural Gas Production, 2000-2010 34
Figure 18: Middle East Natural Gas Industry, Consumption Split by Sectors, %, 2008 36
Figure 19: Middle East Power Industry, Consumption by Country, Gigawatt Hour, 2000-2010 37
Figure 20: The US Natural Gas Industry, Production, bcf/d, 2000-2010 45
Figure 21: Canada Petrochemical Industry, Ethane Production, MMcf/d, 2000-2010 47
Figure 22: Petrobras, Crude Oil Production Forecast, MMbbl/d, 2011–2020 53