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INVESTOR PRESENTATION “SET Thai Corporate Day 2015” - Maybank Kim Eng
January 27, 2015
DISCLAIMER
This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. PTTGC has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and PTTGC does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
2
AGENDA
3
PTTGC’s BUSINESS OVERVIEW
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
RECENT UPDATE
AGENDA
4
PTTGC’s BUSINESS OVERVIEW
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
RECENT UPDATE
4,509 mil
shares
Overview of PTTGC
5
PTT Group’s Chemical Flagship Thailand’s largest ethane-base cracker with integrated aromatics and refining business Highly competitive cost structure with pricing arrangement for gas feedstock based
upon equitable return on investment for both PTT and PTTGC Fully integrated petrochemical and refinery operations with diversified product
portfolio covering full hydrocarbon chain Committed to operational excellence targeting best in class/ first quartile business
efficiency Ranked in Dow Jones Sustainability Indices’ Chemicals Sector for 2nd Consecutive
Year
PTTGC at a Glance
Strong footprint in fast growing regions with
6 operating countries
Shareholding
Structure
Historical Dividend
Payment
Dividend Policy >=30% Foreign Limit <=37%
• Incorporated on October
19, 2011 from the
amalgamation of PTTAR
and PTTCH
• 2013 Sales : $17.9 bn;
EBITDA: $1.8 bn
• Asset size: $13.7 bn (as of
Dec 31, 13)
• Number of employees:
3,660 persons
Our Business Structure 7 Business Units
6
LPG Light Naphtha Reformate Jet A1 Diesel Fuel Oil
Benzene Toluene Paraxylene Orthoxylene Mixed Xylenes Cyclohexane
Ethylene Propylene Mixed C4 Pyrolysis
Gasoline Butadiene Butene-1
HDPE LLDPE LDPE Polystyrene
Ethylene Oxide ( Ethylene Glycol Ethanolamines Ethoxylate
Methyl Ester Fatty Acid Fatty Alcohol Grycerin Specialty
Oleochemicals Bioplastics
Phenol Bisphenol A Toluene
Dilsocyanate
Hexamethylene Diisocynate and Derivatives
280 KBD (1) 2,259 KTA 2,988 KTA 1,590 KTA 495 KTA 863 KTA 556 KTA
Capacity & Key Products
Aromatics Olefins Polymers EO-Based Performance
Green Chemicals
High Volume Specialties Refinery
Thailand’s Largest Petrochemical Player
8.75 (Million Tons per Annum)
Petrochemical Capacity 280 (Thousand Barrels per Day)
Petroleum Distillation Capacity (1)
(1) Refinery = 145 KBD, Condensate Splitter Units = 135 KBD
Aromatics Olefins Refinery
1 2 7 3 4 5 6
(1) Refinery = 145 KBD, Condensate Splitter Units = 135 KBD
Key Competitive Strengths
7
Fully Integrated Operations with
Flexible Feedstock, Enhanced
Optimization and Diversified
Product Portfolio
Strategic location creates
proximity to suppliers and
customers
Experienced Management with
Strong Track Record Highly Competitive Cost Structure
Strategic Relationship with PTT
with Secured Feedstock Position
and Offtake Agreements
1
2
3 4
4
Domestic / Export Volume Portion Flexible Feedstock and By-Product Enhancement
PTTGC's refinery is one of the most complex refineries in Thailand, with Nelson Index of 10.17 and refining capacity accounting for 13% of country’s total capacity
Value enhancement from by-product exchange among Olefins, Aromatics and Refinery units highlights operational integration and efficiency:
- CR from Aromatics units sent to Refinery to produce middle distillates
- Pygas from Olefins unit sent to Aromatics for BTX - Offgas from Refinery sent to Cracker for Olefins products
Feedstock Supply Product Marketing
Refinery
Aromatics
Olefins & Derivatives
Others
Condensate
Crude Oil
Others
Ethane,
Propane, LPG
C5-C9
C10-C25
C2-C4
66%
(1)
46%
54%
Feedstock Supply Commercial Agreements Product Marketing Commercial Agreements
Customers
Others
70%
30%
(1) PTT owns 50%, PTTGC and IRPC each owns 25% in PTTPM
8
Others 34%
Captive Use EO Based
Polymers 79%
21%
Strategic Relationship with PTT with Flexible Feedstock and Secured Product Offtake
1
Domestic 70% Domestic
60% Domestic 40%
Export 30% Export
40% Export 60%
Refinery Aromatics Polymers
Domestic 70%
Import 30%
Highly Competitive Cost Structure &
Performance mainly driven by Olefins and Derivatives
9
94
244
1019 1030 1039 1107
1177 1199 1228
0
200
400
600
800
1000
1200
1400
MDEEthane
NAMEthane
WEPNaphtha
MDENaphtha
NAMNaphtha
MDELPG
NEANaphtha
SEANaphtha
NEA LPG
2013 Global Ethylene Cash Cost by Region USD/Ton
Source: IHS (formerly CMAI) average 2013. PTTGC cash cost takes into account the effect of the renewal of gas price agreement
Note: MDE = Middle East, NAM = North America, NEA = Northeast Asia, SEA = Southeast Asia, WEP = Western Europe. MDE cash costs are average values of Iran and Saudi Arabia.
48%
20%
21%
5%
5% 1%
Typical Adj. EBITDA Breakdown
16%
16%
56%
3%
3% 5%
Typical Revenue Breakdown
% Adj. EBITDA Margin
3 8
27
5 7 10
2
10
27
8 2
10
Refinery Aromatics Olefins andDerivatives
Green HVS PTTGC
2012 2013
s
s
2
Natural Gas
Crude Palm Oil
Crude
Condensate
Cracker
Aromatics Plants
Refinery
Ethylene
HDPE
LLDPE
LDPE
MEG
Propylene
Oleochemicals
Paraxylene
Benzene
PTAPET Fiber / Resin
EO
Ethanolamine
Ethoxylate
Cyclohexane
CumenePhenol
Acetone
EB / SM
PS
BPA
Methyl Ester( B - 100 )
PC
Caprolactam Nylon 6
Fatty Alcohol
MMA PMMA
Epoxy Resins
ABS
SBR
PP
PTT Phenol
Petroleum Products
- LPG- Reformate- Light Naptha- Jet Fuel- Diesel- Fuel Oil
Reformate , Heavy
Naphtha
Pygas
Condensate Residue ,
Hydrogen
Light Naphtha
C 3 ,C 4
OffGas Mixed C 4 Butadiene
PO
PUTDI / HDI
Toluene
Polyols
Orthoxylene
Cracker Bottom ,
Hydrogen
PA Plasticizer
REFINERY & SHARED
FACILITIES AROMATICS OLEFINS POLYMERS
EO-BASED
PERFORMANCE GREEN CHEMICALS
HIGH VOLUME
SPECIALTIES
Feedstock Upstream Intermediates Downstream
Proximity to Suppliers and Customers
Exchange Stream Products By-Products
10
1st Screen for Further Feasibility Study PTTGC does not currently produce these products
Not qualify for 1st Screen
PLA
Succinic Acid Succinic Acid
Plant
PLA Plant Agricultural
Products
PTA
PA
EB/SM
Nylon 6
HDI
TDI
Nylon 6,6
PU
Polyester Fiber/
PET Resin
Plasticizer
Nylon 6 Caprolactam
Epoxy Resin
System
House
Adipic Acid Phenol
HDMA
Oleochemicals
Fully Integrated Petrochemical and Refinery Operations
with Diversified Product Portfolio 3
Strategic location of each plant in Map Ta Phut Industrial
Complex creates proximity to suppliers and customers
11
4
Experienced Management with Strong Track Record and
Organization Structure to support Growth
12 * Effective October 1, 2014
5
PTTGC Board of Directors
VP – Internal Audit
EVP – Polymers Business
Unit
EVP – EO Based
Performance Business
Unit
EVP – Marketing, Commercial and
Supply
EVP – Finance and Accounting
EVP – Corporate Strategy
EVP – Strategic Execution and
Excellence
EVP – Corporate Affairs
EVP – Organizational Effectiveness
EVP – Project Executive Director
Head – Science and Innovation
EVP – GPC Olefins
EVP – GPC Refinery
and Shared Facilities
EVP – GPC Aromatics
EVP – Engineering
and Maintenance
SVP – Quality, Safety,
Occupational Health and
Environment
Audit Committee CG Committee Risk Management
Committee Nomination and
Remuneration Committee
President and CEO
COD – Down Stream Petrochemical Business COU – Up Stream Petrochemical Business
Mr. Supattanapong Punmeechaow
Mr. Prasert Bunsumpun Chairman
Mr. Patiparn Sukorndhaman
EVP – Green
Chemicals Business
Unit
SVP - High Volume Specialties Business
Unit
EVP – International
Business Operation
AGENDA
13
PTTGC’s BUSINESS OVERVIEW
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
RECENT UPDATE
14
Impact on PTTGC
1
LPG RESOLUTION Energy Reform resolved on positive end for PTTGC
2
3
Cost reduction from not having to pay for 1 baht/kg oil fund, approximately 850 MB/year
No change to LPG bought from PTT on profit sharing formula.
• NEPC approved the new formula for LPG prices for all LPG user to buy at the same price. • The new LPG price is derived from using a median cost of LPG from three major sources:
imported LPG, local gas separation plants and oil refineries. • NEPC has lifted contribution to oil fund for all LPG bought of 1 baht/kg for petrochemical
National Energy Policy Counsel's Resolution
Old LPG New LPG
Formula Formula
24% @ 333 $/t
76% @ CP-20CP-20
Change in formula of LPG price from refinery
Average 2014 LPG =800$/ton
Old LPG New LPG
Formula Formula
688 780
Average Jan 2015 LPG =443$/ton
AGENDA
15
PTTGC’s BUSINESS OVERVIEW
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
RECENT UPDATE
S-Term Strategies
L-Term Strategies
16
50
60
70
80
90
100
110
120
130
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/b
bl
2012 2013 2014
A PLUNGE IN OIL PRICE : OVERSUPPLY
Polar Vortex: lowest temperature in decades
Ukraine evolved into full scaled civil war as Russia seized control of Crimea
Iraq civil war burst as ISIL taking control of big cities Libya resume oil export
terminals
OPEC kept its target production at 30 MMBD
Libya production increased
from 0.5 MMBD to 0.8 MMBD
US production surged to the highest since 1980
Q1 Q2 Q3 Q4
Dubai Crude 63.5 $/bbl
HDPE Price 1,161 $/ton
PX – naphtha 307 $/ton BZ- naphtha 108 $/ton
IHS 2015 Forecast
Significant drop from the peak price in late Jun’14 Dubai: -$58.27/BBL (52.42%)
Dated Brent: -$60.34/BBL (-52.32%)
Morning War Room – meeting to monitor and react to the situation in timely manner • Closely monitor production optimization’s economic to ensure low cost feedstock
usage, high margin production, and synchronize production with selling plan • Closely communicate and response to customers’ demand • Consider bonded warehouse in China to be able to deliver the goods in “just in time”
manner • Keep inventory in a lowest level with cost that reflects current price the most
17
Decline of Crude Oil and Product Prices MITIGATING THE RISKS
Feedstock Sourcing • Efficiently manage crude sourcing • Switch crude and condensate purchase method to reduce
crude price difference while transport Expense Budgeting • Decrease unnecessary expenses that have no impact to
safety, plant reliability, and company’s growth Hedging • Closely monitor to arrive at prudent hedging method and
implement accordingly within the Company’s policy
COMPETITIVENESS REMAINS
WITH HIGHER ETHANE FLOW
18
PTTGC gas cracker is still more cost competitive over naphtha cracker
Feed
Products
Typical Cracking Yield • Naphtha bases cracker yield around 53% by product, while ethane based cracker yield only 22% by product
• Today’s value of by product has declined. The premium over naphtha of by product has decreased to a very slight premium level.
• Conversion cost of naphtha cracker is higher than ethane based cracker
22% 53%
Higher ethane flow
219 229 242 271
0
50
100
150
200
250
300
1Q/14 2Q/14 3Q/14 4Q/14
Ton/Hr
AGENDA
19
PTTGC’s Business Overview
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
S-Term Strategy
L-Term Strategy
ON GOING STRATEGIC DIRECTION
20
GREEN
CORE UPLIFT PROJECTS
1-STEP ADJACENCIES
Marketing Excellence
Debottlenecking
Operational Excellence
Synergy Excellence
NEW GEOGRAPHIES NEW PRODUCTS
ASEAN: Pertamina
CHINA: Sinochem
US: Shale Gas
System House
Compounding
PC, PU, Nylon 6-6
Oleochemical
PLA
Succinic Acid
PLA/PBS Compound
EXCELLENCE
EXECUTION EBITDA Uplift
15-30% (2012-2017)
1st Quartile
Performance
ROIC > 14%
Listed in Globally
Sustainability Index
CORE UPLIFTS: ROADMAP
21
Pure H2 via New PSA
PTTPE Cracker Debottlenecking
12% Olefins Increase
New LLDPE +300 KTA
SYNERGY
TO BE FINALIZED
Phenol 2 Project
Target COD: 3Q/15
TOCGC Plant Improvement Project
Target COD: 3Q/15
Aromatics 2 Debottlenecking
Project (PX Expansion)
Target COD: 4Q/15
EOE +90 KTA
PX +115 KTA BZ + 35 KTA OX + 20 KTA
Phenol +250 KTA Acetone +155 KTA
DEBOTTLENECKING & EXPANSION
CAPACITY PROGRESS
86%
71%
54%
LLDPE Expansion
Off Gas upgrading at Olefins
Delay to 1Q/15 from Target: 4Q/14
CONSTRUCTION PROGRESS
98%
BV Project
Butadiene 75 KTA Butene-1 25 KTA
COMPLETED PROJECTS
285
272
DEBOTTLENECKING & EXPANSION
CAPACITY CAPEX (M.USD)
Updated as of November 2014
TARGET CORE UPLIFT BENEFIT
* Debottleneck EBITDA uplift includes 1Q/14 BV project starts up 3Q/15 TOCGC Plant Improvement Project 4Q/15 PX Expansion starts up Not Including PTTPE Cracker Debottlenecking and LLDPE Expansion
(MUSD)
CAPEX 345 M$
CAPEX 94.2 M$
CAPEX 128.8 M$
2015 COMPLETING PROJECTS
ASSET RECONFIGURATION
As of Sep 30, 2014
Revisit feedstock alternative usage i.e. • Reconsider naphtha currently sold to
customer for internal use • Capture longer chain value • Diversify product portfolio
UNDER CONSTRUCTION PROJECTS
1-STEP ADJACENCIES: NEW GEOGRAPHIES Pride of Indonesia
22
Existing Balongan Refinery
(125 KBD)
Potential Partners
New World Scale
Naphtha Based Cracker Expansion
Refinery
New Downstream
Petrochemical
2014
FID
• Continues to Increase Polymer Sales in Indonesia via ITT according to targets
2015 2016-2019 2020
Construction COD New Cracker + Downstream Petrochemical
Basic Engineering Design
Expected Project Timeline
Customers
• PTTGC will mainly focus on Petrochemical
LPG, (938 KTA) Naphtha (1,796 KTA)
Pertamina Refinery Unit VI Balongan
23
1-STEP ADJACENCIES: NEW PRODUCTS Completing the Jigsaw of PU Chain
TDI
HDI
1
PO / Polyols
System House
2
Formulation Isocyanate
Propylene
EO
156 KTA
8 KTA
100-150 KTA
50-100 KTA PO Plant 200 KTA
PTTGC 100% or JV
Joint Venture
Project Scope Feedstock
160 KTA
Polyols & System
house 100-150 KTA
Automotive
E&E
Construction
End Used
Applications
VENCOREX Thailand New HDI derivatives plant in Thailand • Capacity: 12 KTA • CAPEX : 40 M.EU • Expected IRR > 15% • Target COD : 3Q/15
PO / POLYOL Project • To complete the jigsaw and pursue
forward to PTTGC’s strategy of PU business.
• Joint study with potential partner and expect to conclude by 2Q/15
Project Scope • Location : Rayong, Thailand • Capacities PO : 200 KTA Polyols & System house : 100-150 KTA • CAPEX ~ 1 billion USD • Target COD : 4Q/18
100-150 KTA
24
• Access to abundant and competitive feedstock • Serving N. America and S. America demand • Geographic diversification • International partner with global reach
Product Offtake
Local Connection & Practice
Marketing
Operation
Strategic location creates competitive position in domestic market
55% of total HDPE N .America demand
(US Demand = 6,600 KTA)
65% of total MEG N. America demand
(US Demand = 2,700 KTA)
1-STEP ADJACENCIES Shale Gas Project
Type Ethane cracker complex
Capacity 1 MTA Ethylene
Product HDPE and MEG
Location NE of USA
Site Selection Considerations
- Limited number of player in the area
- Tax Scheme
- Incentives/ Grants
- Availability and quality workforce
CAPEX $ 5 billion
Marcellus is the largest shale play in US with 64.9 TCF of
Proved reserves (7 times over Thai Natural Gas Reserves)
Type : Ethane cracker complex
Capacity : 1 MTA Ethylene
Product : HDPE, Hight Purity EO, and MEG
Location : NE of USA
Site Selection Considerations
- Limited number of player in the area
- Tax Scheme
- Incentives/ Grants
- Availability and quality workforce
CAPEX : Approx. $ 5 billion
Feedstock :
- US Shale gas is plentiful and accessible
- Ethane price is compeitive, even at
naphtha price at USD$ 400/Ton
ASPIRATION Continues to Strive for Strong Profitable Growth
~800-900
~620-650
Green
563
Actual
2012
Target
2017
Target
2022
Expected EBITDA Benefit
Uplift 15-30%
Phase 1 : Foundation for Growth Phase 2: The Growth Mode
Green
HVS
New Global Hub
Debottleneck
Synergy Project Excellence
Operational Excellence Marketing Excellence Capital Expenditure Excellence
We aim to grow ~5 percent p.a. in the next ten years
Sales in THB Bn Based on constant Dubai crude year 2012 at USD 109 per bbl
25
CAPEX to Support Growth Approved and Uncommitted CAPEX Plan for year 2014 - 2018
26
5 Years Investment CAPEX Approved CAPEX Plan 2014 -2018
$ 4.5 Bn
$ 2.5 Bn Cash Flow
From Operation
$ 2 Bn Debt
Financing
$1 Bn secured from USD Bond issued in Sep’12
Green 5%
64% 1-Step Adjacencies
31%
Core Uplift
193 246 247 256 234 234
175 59 35
325 410
103
3
19 49
46
95
15 25
26 25
32
4
738 790
463
357
249 260
545 544
216
101 15 25
2013A 2014 2015 2016 2017 2018
Green1-stepCore upliftPhenolAnnual MaintenanceTotalTotal Growth Project
Unit: USD mn
AGENDA
27
PTTGC’s Business Overview
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
Financial Highlights
28
2013 Impacted by 3 incidents :
- Unplanned Shutdown of LDPE
- Oil spill (1,059 MB)
- PTT’s GSP#5 shutdown, lack of gas feedstock for
PTTGC
9M/14 Impacted by :
- Unplanned Shutdown of an olefins plant I4-1
- Unstable gas feedstock from PTT
- PX price going through bottom of the cycle
- Restructuring provision of Vencorex (1,142MB)
9M/14 Revenue and Adj. EBITDA Structure 9M/14 Adj. EBITDA Margin
Business Unit %
Refinery 3
Aromatics 3
Olefins 26
Green 3
HVS 5
PTTGC's Average 9
(Unit: MB) FY2012 FY2013 9M/2013 9M/2014
Sale Revenue 562,811 549,189 394,590 444,587 EBITDA 57,168 58,362 44,273 34,335 EBITDA Margin (%) 10% 11% 11% 8% Net Profit 34,001 33,277 25,857 19,971 EPS (THB/share) 7.54 7.38 5.73 4.43
Adj. EBITDA * 56,993 55,333 42,570 38,810
Adj. EBITDA Margin (%) 10% 10% 11% 9%
18%
8%
67%
2% 3% 3% Refinery
Aromatics
Olefins and Derivative
Green
HVS
Others
Revenue
444,587 MB 46%
19%
23%
6% 6%
Adj. EBITDA
38,810 MB
STRONG FINANCIAL POSITION
Interest Rate Currencies
61 % Fixed 50 % THB
39 % Float 50 % USD & Others
Loan Type
• Cost of long term debts ~ 4.54% (Include W/H Tax)
• Average loan life after refinancing - 5.19Years
Treasury policy Net IBD to Equity ratio of ≤ 0.7x Net IBD to EBITDA ratio of ≤ 2.4x
THB 116 Bn
THB Bn
* After Refinance
Maturity of Financial Debt* as at Sep. 30, 2014 Key Financial Ratios
Statements of Financial Position
As of Dec. 31, 2013 As of Sep. 30, 2014
THB 433 Bn THB 426 Bn Cash +ST Investment
CA
Non CA
PPE
Liab.
IBD
Share Holder’s Equity
14.44% 11.51% 12.51% 11.52%
9.42% 7.97% 8.64% 7.95%
5%
10%
15%
20%
31 Dec. 13 31 Mar. 14 30 Jun. 14 30 Sep. 14
ROE ROA
1.30 1.34 1.41 1.52
0.31 0.28 0.30 0.30
0
0.3
0.6
0.9
1.2
1.5
31 Dec. 1331 Mar. 1430 Jun. 14 30 Sep. 14
Net IBD/EBITDA NET IBD/Equity
29
AGENDA
30
PTTGC’s Business Overview
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
MARKET OUTLOOK
31
Crude oil price sharp decline • Strength of US supply amid weak global demand that led to 2015 lower oil price. The 1.2 MBD
oversupply expected for 2015 will be cut to just 0.6 MBD with the lower prices.
• OPEC will let markets decide the clearing price for oil for the time being, keeping markets oversupplied.
• US shale oil investment will slow in 2015, so the impact on production growth will likely be less severe.
Refining global capacity addition outpaces demand growth
• Global additional supply of 1.9 MBD and additional demand of 1.1 MBD in 2015, mostly from ME and India
• US refineries run at high operating rate
Aromatics : PX and BZ still under pressure from oversupply situation
• PX is still oversupply even though there will be higher demand from new PTA in 2015
• BZ additional demand growth is expected at 1.5 MTA while additional supply is expected at 1.2 MTA in 2015, however naphtha cracker is back in operation as naphtha price decreased, hence, more pyrolysis gasoline, a feedstock of BZ production.
Polyethylene continue with strong margin
• Balanced supply and demand as more plants closure in Europe and CTO plants in China still face production problems.
MEG downstream product demand is depending on Chinese economy
• Coal based MEG’s quality and run rate is still a problem
• MEG margin is likely to improves as ethylene price declined
CONCLUSION
32
4Q Performance is driven by Olefins business
• Refinery crack spread improved from seasonal demand and lower crude price while punished by stock loss
• Aromatics is supported by BZ price while PX price is still in difficulty
• Better gas supply for from PTT for Olefins business unit, expect strong performance
• HDPE price declined during the quarter following the decrease of crude oil price
2015 Expansion and value creation
• Completion of 3 debottlenecking/expansion projects adding 8.7% of petrochemical capacities
• TOCGC Plant Improvement Project • PX Expansion • Phenol 2
• Clarity on new investment including PU chain project, US shale gas, and petrochemical complex in Indonesia
• Operational and Marketing Excellence continues and expect an uplift of 154 MUSD
• All Synergy Projects completes in 2015 and expected benefit of approx. 149 MUSD
AGENDA
33
PTTGC’s Business Overview
STRATEGY & EXECUTION
FINANCIAL HIGHLIGHTS
MARKET OUTLOOK
APPENDIX
DETAIL MARKET OUTLOOK
50
60
70
80
90
100
110
120
130
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/b
bl
2012 2013 2014
A Plunge in Oil Prices – Oversupply or Conspiration
34
Polar Vortex: lowest temperature in decades
Ukraine evolved into full scaled civil war as Russia seized control of Crimea
Iraq civil war burst as ISIL taking control of
big cities Libya resume oil export terminals
OPEC kept its target production at 30 MMBD
Libya production increased from 0.5 MMBD to 0.8 MMBD
US production surged to the highest since 1980
[USD/BBL] 2013 2014
DUBAI 105.45 96.69
DATED BRENT 108.66 99.08
WTI 97.99 93.29
Significant drop from the peak price in late Jun’14 Dubai: -$58.27/BBL (52.42%)
Dated Brent: -$60.34/BBL (-52.32%)
Q1
Q2 Q3 Q4
• Exceptional growth in non-OPEC production especially in US-and the recent increase in Libyan production
• Large supply gains eclipse geopolitical tension (Ukraine, Iraq, etc)
• Global oil supply growth is now running at more than double the pace of demand growth
2015 Price Outlook
35
80
77
72.5
70
77
75.25
72
64
0 20 40 60 80 100
Citigroup
BNP Paribas
Deutshe Bank
Morgan Stanley
BofA Merrill
Credit Suisse
Barclays
PRISM
$/bbl
2015 Brent Forecast
Key messages :
• Strength of US and non-OPEC supply amid weak global demand that exacerbated effect to 2015 lower oil price. The 1.2 MMb/d oversupply expected for 2015 will be cut to just 0.6 MMb/d with the lower prices.
• OPEC will let markets decide the clearing price for oil for the time being, keeping markets oversupplied.
• US shale oil investment will slow in 2015, but the impact on production growth will likely be less severe.
36
North America
Europe
FSU
Asia
Middle East
Asia Oceania Africa
Latin America
4.64 MMBD
8.02 MMBD
23.14 MMBD
4.10 MMBD
6.91 MMBD
24.13 MMBD 14.10 MMBD
8.32 MMBD
93.35 MMBD
2015
Growth (MMBD)
Source: IEA Monthly Market Outlook Report Dec. 2014
1.23
0.67 0.90
2013 2014 2015
0.49
-0.06
0.10
-… -… -…
0.13 0.10
-0.21
0.20 0.17 0.12
0.05 0.09 0.17
-0.19
-0.20
-0.11
0.15 0.20 0.22
0.54 0.52 0.66
Oil Demand Grows Moderately in 2015
Refining Business: Fierce Competition with U.S. and M.E. Refiners
37
2015 Global Capacity Addition Outpaces Demand Growth
2012 2013 2014 2015
Net CapacityAddition
2015 Major Addition (KBD) • Yanbu (Saudi) +400 • IOC (India) +300 • Petrobas (Brazil) +230 • CNOOC (China) +140 • NOCL (India) +125 • PetroChina +100 • Ruwais (UAE) +417 (Shift from 2016)
2015 Major Shutdown (KBD) • BP (Australia) -102
-10-8-6-4-202468
101214161820
2011 2012 2013 2014 (YTD) 2015 (F)
Diesel - Dubai
Gasoiline - Dubai
Fuel Oil - Dubai
2015 Margin Tends to be Softer than 2014
USD/BBL
14.80
12.00
-7.20
Source: PRISM, Oct 14
Factors to be Watched
Asia Has More Surplus Gasoil to Export in 2015
1,921
188
689
-294
899
1,205
650
1,130
LPG Naphtha Gasoline Jet/Kero Gasoil Fuel Oil
UNIT: KBD UNIT: KBD
Import from U.S./M.E.
Import from M.E./West
Export to Europe/Africa
Export to Europe/M.E. Export to
M.E./Africa
-1,195 -1,120
+164 +356
+750
-1,176
Import from the West
PRODUCT BALANCE IN ASIA 2015
REFINING CAPACITY GROWTH VS. DEMAND GROWTH
PRODUCT SPREAD VS. DUBAI CRUDE
Source: IEA, JBC (Oct 14)
15.85
14.57
-8.87
17.86
13.66 14.37
17.12 18.27
13.50
-8.00
-3.30 -4.03
• U.S. refineries run high operating rate and export products to Europe
• Narrower clean/dirty product spread
• Euro/China’s economy slow down
• European refineries permanently shut down or lower operating rates
• New refining capacity start-ups delay from plan
Source: JBC (Nov 14)
Gasoil
38
Paraxylene Still in Down Cycle but Backed by Vigorous Benzene
604 554 552 338 380 166 264 380 350 320
1,104 1,207 1,301
1,212
864
1,542 1,497 1,474
1,201
924
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2011 2012 2013 2014 2015 (F)
$/MT
PX-MOPJ BZ-MOPJBZ (Korea) PX (Korea)
Source : PRISM, Dec 14
PX Outlook
Outlook Slightly improve
Bull Factors
• PX producers may reduce OR a& T/A • Due to an end of bullish benzene, reformer OR may
decline • Improving US macro-economy may support PX price • Start up of PTA plants about 13 million tons
Bear Factors
• Surplus PX from various sources due to good PX/Naphtha margin, good olefins margin
• Non-settlement of ACP may add extra spot PX • Slowing down of China economy may weaken PX
demand • Strong USD may pull down energy & commodities
prices
Lighter Feedstock Reduces Benzene Supply Growth in 2015
50%
55%
60%
65%
70%
75%
80%
-0.50.00.51.01.52.02.53.03.54.04.55.0
2012 2013 2014 2015
Capacity Addition
Demand Growth
Global Operating Rate
MT Operating Rate
2014 2015
N. America - 1,612 - 1,579
Europe - 454 - 400
N.E. Asia 189 - 378
S.E. Asia 651 789
S. Asia 603 907
Middle East 261 229 -293
2,541
1,185
92
1,406
1,474 1,010
72.4 72.7 71.3
72.3
BZ Balance of Each Region
1,175
Source: IHS (Oct 14)
MARKET SIZE 45.9 MTA
Shale Gas Utilization Strengthens Benzene Margin
166 264 380 350 320
1,104 1,207 1,301
1,212
864
0
200
400
600
800
1,000
1,200
1,400
2011 2012 2013 2014 2015 (F)
$/MT
BZ-MOPJ BZ (Korea)
Source : PRISM, Dec 14
AROMATICS BUSINESS: Paraxylene Still in Down Cycle but Backed by Vigorous Benzene and Cyclohexane
Polyethylene –Northeast and Southeast Asia
39
Polyethylene and China Coal In a declining price market, Chinese consumers have been caution in holding stocks
China Main Ports PE Inventory
Demand • China PE demand to grow at a moderate rate of
7% in 2014. Other NEA countries have mature markets growing below 3%
Production • Domestic production growth have picked up
during Q3, the trend continues in Q4. Inventories • Inventories in China have remained range bound
since mid-year due to caution buying.
NEA Key Takeaways Demand • Sluggish during Q4 due to weak price outlook Production • Few new capacity addition during 2014 • Operational challenges in a few cracker. Inventories • Market participants are extremely cautions
resulting in below avg. inventory • Producers’ stocks have risen rapidly due to sharp
slowdown in demand.
SEA Key Takeaways
Ethylene/PE: Continue in Uptrend, U.S. Crackers to be Delay
40
2015 Ethylene Demand Growth Outpaces Capacity Addition Polyethylene Operating Rate Remains High in 2015
85.6
85.8
87.6
88.2 88.0
83
84
85
86
87
88
89
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2012 2013 2014 2015 2016Americas W.Europe Middle East/AfricaAsia Others Demand GrowthGlobal OR
MT % Operating Rate
83.6 83.2
84.9 84.9
83.9
80
81
82
83
84
85
86
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2012 2013 2014 2015 2016Americas W.Europe Middle East/Africa
Asia Others Demand Growth
Global OR
MT % Operating Rate
2.3 3.9
5.8
6.0
6.1
1.8 2.9
3.6
4.2 4.2
Source: IHS (Oct 14) Source: IHS (Oct 14)
MARKET SIZE 145.0 MTA MARKET SIZE 89.1 MTA
• Ethylene/PE capacity growth concentrates in low-cost/high-demand regions i.e. North America, Middles East, and China
• Nearly 2.1 million ton of naphtha crackers will be permanent shutdown by 2016
• U.S. greenfield capacity is likely to be delayed, then no capacity additions before 2017
10 greenfield ethane projects announced, but only four companies (Chevron Philips, Exxon Mobil, Dow Chemical and Occidental Chem/Mexichem) has been commenced construction.
• China’s CTO/MTO projects still have several challenges such as low profitability of MTO projects, technical issues, environmental issues
Ethylene/PE in Uptrend
70%
75%
80%
85%
90%
95%
2012 2013 2014 2015 2016
%O
R
NAM OR WE OR NEA OR SEA OR Global OR
Global PE Net Capacity Additions and Global Operating
Rates
41
Polyethylene Operating Rate Remains High in 2015
• High-cost producers in Asia and Europe plan to shut down permanently in 2015
• Sumitomo Chemical, Japan 415 KTA in May • CPC No.5, Taiwan 500 KTA (uncertain schedule
due to shutdown since Apr 14) • Total, France 400 KTA in H2 • Ineos, UK 330 KTA in H2
• However, higher export volume from Middle East will be key challenge
• Startup of Saudi Arabia’s Sadara Chemical in H2/15 (1.5-MT ethylene, LDPE 350 KTA, LLDPE 375 x 2 KTA)
Ethylene/PE in Uptrend Tight Ethylene Supports HDPE Price
249 287 431 533 490 179 141
135 149 175
1187 1230
1352 1395
1034
1366 1371 1488
1544
1209
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2011 2012 2013 2014 2015
$/MT HDPE-Ethylene Ethylene-MOPJ
Ethylene HDPE
Source : PRISM, Dec 14
PROPYLENE/BUTADIENE BUSINESS: Moderate Margins as a Result of Excess Capacity
42
New On-purpose Propylene Capacity Brings O/R Down
Margins to be Pressured by Excess Capacity Factors to be Watched
New Butadiene Capacity Pressures O/R in 2015
Source: PRISM, Oct 14 USD/MT
80.1 80.3
80.7
79.5
78.6
76
77
78
79
80
81
82
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2012 2013 2014 2015 2016Others Asia Middle East/AfricaW.Europe Americas Demand GrowthGlobal OR
MT % Operating Rate 79.8
78.0 76.4
75.0 75.9
69
71
73
75
77
79
81
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2012 2013 2014 2015 2016Americas W.Europe Middle East/AfricaAsia Others Demand GrowthGlobal OR
MT % Operating Rate
0
400
800
1,200
1,600
2,000
2,400
2,800
2011 2012 2013 2014 2015
Propylene-MOPJ Butadiene-MOPJ
Butadiene Propylene
• Constraints CTO/PDH plants in China
• High operating rate of ethylene increases propylene supply
• Falling natural rubber price lower butadiene demand
• Slow growth of vehicle sales
448 324 405 394 372
1,804 1,244
550 410 420
2,742
2,188
1,471 1,296
1,216
1,168 1,280
1,326
1,267 1,386
1.7
2.9
4.4 4.5
4.2
0.1
0.3 0.6
0.5
0.4
Source: IHS (Oct 14) Source: IHS (Oct 14)
MARKET SIZE 92.7 MTA MARKET SIZE 11.6 MTA
300
400
500
600
700
800
900
1,000
1,100
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2014 2015
USD/MT
MONOETHYLENE GLYCOL BUSINESS: Demand and Supply are Well Balanced but Price Depends on PTA
43
Capacity Grows Balanced with Demand
2015 Margin Tends to Improve from 2014 Factors to be Watched
Price will Rebound as Inventory Declines
MT
438
253 204
34
80
1,185
1,028 1,055
929 890
0
100
200
300
400
500
600
700
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
2011 2012 2013 2014 2015
MEG Margin (0.63xEthylene)
MEG Price
PTA Price
78%
80%
82%
84%
86%
88%
90%
0.0
0.5
1.0
1.5
2.0
2.5
2012 2013 2014 2015
Capacity Addition
Demand Growth
Global Operating Rate
MT Operating Rate
Source: PRISM, Oct 14 USD/MT
961
1,225
1,538
421
86.7
88.1 88.4
845
1,466
• Low production from coal-based due to quality
• Improved PTA price as high-cost producers cut run
• Slow polyester demand growth if China’s economy cools down
• Strong ethylene cost squeezes margin
• 840 KTA of coal-based MEG will start up in 2015
• But expect to be unable to run at high rate due to low quality
INVENTORY IN CHINA
MEG Demand
MEG Price (ASP)
1,286
88.3
1,101
Source: ICIS (Oct 14) Source: IHS (Oct 14)
MARKET SIZE 25.5 MTA
Low Season
PHENOL/BPA BUSINESS: Downward Pressure on Phenol Margin but BPA is OK
44
Two New Phenol Plants will Start up by End of 2014
Phenol Margin to be Softer but BPA will Improve Factors to be Watched
Little New More BPA Capacity in 2015 Makes OR Increase
55%
60%
65%
70%
75%
80%
85%
90%
95%
0
200
400
600
800
1,000
1,200
1,400
1,600
2012 2013 2014 2015
Capacity Addition
Demand Growth
Global Operating Rate
KT Operating Rate
45%
50%
55%
60%
65%
70%
75%
80%
85%
0
100
200
300
400
500
600
700
800
2012 2013 2014 2015
Capacity Addition
Demand Growth
Global Operating Rate
KT Operating Rate
698 407 338 428 358
373
168 196 171 218
2,084
1,675 1,710 1,718 1,612 1,663
1,443 1,416 1,462
1,313
1,069 1,010 1,125 1,099
1,002
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2011 2012 2013 2014 (E) 2015 (F)
BPA Margin Phenol Margin BPA
Phenol Acetone
Source: PRISM, Oct 14 USD/MT
615
160
725
204
Start up by end of 2014 • CEPSA Chemical
Shanghai (250 KTA)
• FCFC Ningbo (300 KTA)
Start up mid of 2015 • PTTGC 250 KTA
Start up 2015 • Nan Ya Plastics (150
KTA)
• Changchun Plastic (135 KTA)
385
55
306
258
87.8 80.0
285
91
182
55
286 148
78.8 72.1 74.4
210
• Strong benzene price squeezes phenol margin
• Market adaptability to deal with biggest oversupply situation
• Phenol-based caprolactam switch from cyclohexane
• Polycarbonate maintains high price and margin
845
75.5
77.2
Source: IHS (Oct 14) Source: IHS (Oct 14)
82.9
MARKET SIZE 5.4 MTA MARKET SIZE 10.0 MTA
45
For further information & enquiries, please contact our Investor Relations Team at [email protected]
1 Thitipong Jurapornsiridee VP - Corporate Finance & IR [email protected] +662-265-8574
2 Puvadol Vasudhara IR Manager [email protected] +662-140-8712
3 Panugorn Puengpradit IR Analyst [email protected] +662-140-8714
4 Prang Chudasring IR Analyst [email protected] +662-265-8327
5 Supika Charudhanes IR Analyst [email protected] +662-265-8533
6 Chutima Jarikasem IR Coordinator [email protected] +662-140-8713
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