© 2014 Platts, McGraw Hill Financial. All rights reserved.

Bull Run Or Bear Pit:Will Shale Gas Shorten The Global Aromatics Market? 

Maria Tsay, Petrochemicals Editor

Europe In Its Global ContextUS-Europe link

Shale Gas Impact: The US, EuropeBenzene Case-Study

East Of Suez

Q&A

Key Takeaways

• European aromatics are intrinsically linked to the US aromatics markets

• Benzene Atlantic basin market set to tighten, but global capacity is likely to be sufficient to cover the shortfall

W. Europe Balanced->Short

BenzeneAsia

Long->LongerUS

Short->Shorter

EU Net Trade Of Aromatics

4

‐300,000

‐200,000

‐100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Toluene Benzene PX MX Isomers OX BTX

2010 2011

2012 2013

mt

Net imports

Net exports

Source: Eurostat

EU Benzene Trade Flows 2013

267kt

Source: Eurostat

Imports fromIndia 155,128Israel 136,931Turkey 129,717US 83,777Total 706,009

Exports toUS 173,059Total 193,336

90%

12%

EU Toluene Trade Flows 2013

Source: Eurostat

55kt

36kt

Exports toUS 49,187Turkey 45,709Switzerland 31,630South Africa 16,071Total 225,671

Imports fromIsrael 6,446Serbia 1,749Total 9,815

6kt

22%

Source: Eurostat

EU Xylenes Trade Flows 2013

Source: Eurostat

8kt

20+61kt39+21kt

25%

9%55%

PX Exports PX ImportsUS 58,067 Israel 47,380Pakistan 10,009 Russia 21,382China 9,520 Turkey 13,197Total 105,172 Total 91,968

MX ExportsUS 27,904South Africa 14,117Total 113,761

OX Exports OX ImportsSouth Africa 11,853 Russia 38,513Brazil 6,144 Israel 15,611US 5,378 Turkey 4,190Total 58,050 Total 58,408

8

Profitability Of Benzene Production

 5.40

 5.60

 5.80

 6.00

 6.20

 6.40

 6.60

 6.80

 7.00

 7.20

 7.40

 ‐

 1.00

 2.00

 3.00

 4.00

 5.00

 6.00

 7.00

 8.00

 9.00

2009 2010 2011 2012 2013

Revenue from benzeneProfit from benzeneProduction

Bln $ Mln mt

Source: Eurostat, Platts

Shale Gas Impact: US

US Shifts To Light Feeds

10Source: Bentek, Platts Petrochemical Analytics0

10

20

30

40

50

60

70

80

90

100

Gasoil Full naphtha Natural gasoline Butane Propane Ethane

Other pygas

Mixed xylenes

Toluene

Benzene

Butylene

Butadiene

Propylene

Fuel gas

Ethylene

%

US Shifts To Light Feeds

Source: Bentek, Platts Petrochemical Analytics

• Pygas to decrease by 38%

8%

US Cracker Output Today

Ethylene

Propylene

Crude C4

Pygas

5%

US Cracker Output in 2023

US Benzene Dependence On Imports To Rise

12Source: Platts Petrochemical

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

000 mt US Benzene Supply/Demand Balance

Benzene Production Benzene Demand

Source: Platts Petrochemical Analytics

4400

1500

Shale Gas Impact: Europe

European Crackers Are Less Competitive

Source: Platts

Crackers Maximize Use of LPG

15Source: Platts

500

600

700

800

900

1000

1100

1200

1300

Jan‐20

12Feb‐20

12Mar‐201

2Ap

r‐20

12May‐201

2Jun‐20

12Jul‐2

012

Aug‐20

12Sep‐20

12Oct‐201

2Nov

‐2012

Dec‐20

12Jan‐20

13Feb‐20

13Mar‐201

3Ap

r‐20

13May‐201

3Jun‐20

13Jul‐2

013

Aug‐20

13Sep‐20

13Oct‐201

3Nov

‐2013

Dec‐20

13Jan‐20

14Feb‐20

14Mar‐201

4Ap

r‐20

14May‐201

4Jun‐20

14Jul‐2

014

Aug‐20

14Sep‐20

14

ARA Naphtha and Propane Spot Prices 2012‐2014

Propane

Naphtha

Source: Platts

Average Max Min2012 96.4% 114.8% 78.7%2013 90.1% 108.0% 78.9%2014 83.6% 97.2% 77.0%

$/mt

Production Margins Soar

16

0

200

400

600

800

1000

1200

1400

1600

1800

CIF ARA Benzene/Naphtha Spread 2012‐2014$/mt

Source: Platts

Average Max Min2012 355 632 942013 407 615 2192014 483 637 344

Incremental Production Restarts

17Source: Platts

900

1000

1100

1200

1300

1400

1500

1600

Jan‐20

12Feb‐20

12Mar‐201

2Ap

r‐20

12May‐201

2Jun‐20

12Jul‐2

012

Aug‐20

12Sep‐20

12Oct‐201

2Nov

‐2012

Dec‐20

12Jan‐20

13Feb‐20

13Mar‐201

3Ap

r‐20

13May‐201

3Jun‐20

13Jul‐2

013

Aug‐20

13Sep‐20

13Oct‐201

3Nov

‐2013

Dec‐20

13Jan‐20

14Feb‐20

14Mar‐201

4Ap

r‐20

14May‐201

4Jun‐20

14Jul‐2

014

Aug‐20

14Sep‐20

14

ARA Benzene/TDI Grade Toluene Spread 2012‐2014

Source: Platts

Average Max Min2012 54 263 ‐1812013 163 282 82014 278 401 163

$/mt

Europe Benzene Deficit To Rise

18

6000

6500

7000

7500

8000

8500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

000 mt WE Benzene Supply/Demand Balance

Benzene Production Benzene Demand

1300

0

Source: Platts Petrochemical Analytics

Expansions East Of Suez

BZ/PX Expansions

20Source: Platts

Company Location Country BZ, kt PX, kt StartSATORP Jubail Saudi Arabia 140 750 2013

Yasref Yanbu Saudi Arabia 140 700 Sep‐14

Sinopec Zhenhai China 1600 2014ONGC  Mangalore India 270 900 Aug‐14

SK Innovation  Incheon  South Korea 450 1300 Jul‐14Samsung Total  Daesan South Korea 420 1000 Jul‐14

Jurong Aromatics  Singapore Singapore 400 800 Aug‐14

SK Energy/JX Nippon Oil  Ulsan South Korea 300 1000 Jun‐14

Sinopec Hainan China 600 2013‐2014PetroChina Yangzhou China 400 1000 2015

Saudi Aramco Ras Tanura Saudi Arabia 285 1200 2015Petro Rabigh Rabigh Saudi Arabia 170 1350 2015Reliance Dahej, Gujarat India 200 1500 2015

Indian Oil Group Vadodara, Gujarat India 370 2015PetroViet Vietnam 240 700 2015

GS Caltex/Taiyo Oil/Showa Shell Yeosu South Korea

400 1000 2016

Chemaweyaat Ruwais UAE 860 1370 2017Saudi Aramco Jazan Saudi Arabia 85 650 2017

Orpic Sohar Oman 46 2018Source: Platts

Global Benzene Projections

Source: Platts

The US W Europe Asia/MEAccumulated Global Net

2014 ‐283 ‐255 1,980 1,4412015 ‐352 ‐97 1,295 2,2872016 ‐367 ‐109 400 2,2112017 ‐339 ‐115 945 2,7032018 ‐278 ‐120 46 2,351

BZ: 2.1 mln mt

‐1000 ‐500 0 500 1000 1500 2000

2014

2015

2016

2017

2018 The US Europe Asia/ME

Conclusions

• Shale gas use will tighten supply of aromatics, esp. of benzene, on both sides of the Atlantic, BUT:

• Potential rationalization downstream and squeezed margins will cap regional demand AND 

• Capacity additions east of Suez will cover the shortfall, depending on run rates

22

W. Europe Balanced->Short

BenzeneAsia

Long->LongerUS

Short->ShorterBenzene

© 2014 Platts, McGraw Hill Financial. All rights reserved.

Maria TsayEditor, PetrochemicalsPlatts

+44 (0)20 7176 6763maria.tsay@platts.com