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Global Chemicals Quick Review
Changes in bunker fuel standards will significantly increase profits in middle distillate production
The 2020 global requirement for cleaner fuels for ships will double the profits of advanced refineries and affect producers that produce poor-quality crude
, including OPEC members.
In 2016~2020, ships worldwide need to significantly reduce sulphur emissions from the current 3.
5% to 0.
5%.
Ship owners have several options to adapt to the new regulations, the easiest being to use middle distillates as marine fuel, however middle distillates are more expensive
due to their low sulfur content.
FGE analysts, an energy consultancy, estimate that middle distillate demand for bunker fuel oil will increase to 700,000 bpd after the new regulations are implemented in 2020, while the International Energy Agency (IEA) predicts that up to 2 million b/d of bunker fuel oil demand could shift to middle distillate demand
.
Wood Mackenzie estimates that the average production profit for middle distillates will reach $25/b by 2020, compared to just $9/b
this year.
Middle Eastern petrochemical producers rethink their strategies
The collapse in crude oil prices, the dramatic expansion of petrochemical capacity from shale gas in the United States, and the growing shortage of cost-competitive ethane feedstocks have forced petrochemical producers in the Gulf Cooperation Council (GCC) countries of Bahrain, Kuwait, Oman, the United Arab Emirates, Qatar and Saudi Arabia to rethink their strategies
.
At present, the focus of global petrochemical investment is shifting to shale gas feedstock projects in the United States and coal-to-chemical projects in China
.
Abdulwahab al-Sadoun, secretary general of the Gulf Petrochemicals and Chemical Association (GPCA), said the new environment has forced petrochemical producers in the Middle East to adjust their plans, especially as falling oil prices are accelerating petrochemical producers to integrate their operations, restructure and transform production facilities to reduce variable costs
.
To maintain cost advantages, major petrochemical producers in the Middle East are focusing on improving resource utilization, asset production efficiency and supply chain performance
.
It also accelerates integration into the refining industry, builds local innovation capacity and seeks overseas investment opportunities
.
The rapid growth of production capacity in Asia has led to an oversupply of the global PET market
According to IHS chemical analysis, Asia's polyethylene terephthalate (PET) production capacity has accounted for more than 50%
of the world's total production capacity.
Wei Ding, director of IHS Chemicals, said most of the world's new PET plants have been completed in the past two years or are currently under construction, driven by rapid growth in Asian demand, and most of the new plants are located in the region
.
However, global PET capacity is already overcapacity, with Asia being the most serious
.
Ding said that the outlook for the global PET market from late 2016 to 2017 is not optimistic
as new capacity will continue to increase.
At present, China is building some new PET units, and its new capacity will exceed the demand of the Chinese market, which will lead its PET producers to seek export market opportunities, thereby putting pressure on the global market
.
According to IHS Chemical, China's current PET production is about 6.
4 million tons, and production is expected to increase to 6.
7 million tons in 2018, reaching about 7.
7 million tons in 2020, and excess production will be close to 2 million tons
.
Global oil majors have shifted their exploration strategies to live a "tight" life
For many years, large oil and gas companies have invested a lot of money in the discovery of huge oil and gas reserves in harsh environmental areas, but there are only a few major discoveries, the input-output ratio is completely asymmetrical, and oil prices have continued to fall
sharply since 2014.
These realities have forced large oil and gas companies to cut costs and stay away from costly and high-risk exploration areas
.
Andrew Latham, vice president of exploration research at Wood Mackenzie, said there has been a major change in exploration strategies for big oil companies, which in the past have been to find enough conventional oil and gas resources to replace all the reserves consumed by annual production
.
Now, conventional oil and gas exploration can only meet about 50% of the reserves it consumes per year, forcing it to rely on unconventional resources such as shale oil and gas, as well as acquiring resources from other companies to maintain production levels
.
