Southeast Asia SE Asia Polymer Demand Outlook, 2017-2027 Note: Equivalent olefin consumption volumes

SOUTHEAST ASIA

PETROCHEMICALS

A Rapid Evolution in Progress

CHOMMANAD

THAMMANAYAKATIP MANAGING CONSULTANT

NEXANT

A Rapid Evolution in Progress

Southeast Asia

Petrochemicals

August 2018

3APIC 2018 August 2018

The petrochemical industry in Southeast Asia is entering a new phase of further development

Petrochemical Industry in Southeast Asia

Demand-side Characteristics

Supply-side Characteristics

▪Market is generally demand driven, due to absence of ample low-cost

feedstock supply

▪Urbanisation wave and growth of consuming class offer significant

demand growth potential, also considering relatively low consumption per

capita levels

▪Each country’s petrochemical industry is generally dominated by 1-2 key

players

▪Project implementation may involve longer timelines compared to other

locations with more developed industries

▪ Feedstock supply may depend on refinery development or imports

New Phase of Further Development

▪ Largest single construction project in Malaysia

▪Vietnam’s first steam cracker complex and Brunei’s first aromatics facility

4APIC 2018 August 2018

Southeast Asia has continued to enjoy significant economic and social progress in recent years

Strong GDP Growth

Continued Urbanisation

Developments in Manufacturing

Increased Consumer Wealth

0%

2%

4%

6%

2013 2014 2015 2016 2017

R ea

l G D

P G

ro w

th

ASEAN World

0%

2%

4%

6%

8%

2013 2014 2015 2016 2017

M an

uf ac

tu rin

g V

al ue

A

dd ed

G ro

w th

ASEAN World

0%

1%

2%

3%

2013 2014 2015 2016 2017

G ro

w th

in A

S E

A N

Urban Population Total Population

0%

2%

4%

6%

2012 2013 2014 2015 2016

R ea

l I nc

om e

pe r

C ap

ita G

ro w

th

ASEAN World

Source: IMF Source: World Bank

Source: World Bank Source: World Bank

5APIC 2018 August 2018

This continues to support petrochemical and polymer demand growth in Southeast Asia

SE Asia Polymer Demand & GDP Growth

SE Asia

China

India

Japan, Korea & Taiwan0%

2%

4%

6%

8%

10%

0 50 100 150

D em

an d

C A

G R

in 2

01 7-

20 27

Consumption per Capita in 2017 (kg)

Asia Polymer Demand Growth

0%

2%

4%

6%

8%

2011 2012 2013 2014 2015 2016 2017

G ro

w th

SE Asia Polymer Demand SE Asia GDP

Bubble size indicates

demand volume in 2017

Polymer demand includes HDPE,

LLDPE, LDPE, PP, PET, PVC, PS, EPS,

ABS, SBR, BR and PC

?????

 As a whole, currently third-largest economy in Asia

 Expanding labour force and shift from agriculture

to manufacturing

SE Asia Economy ?????

 As a whole, currently similar market size as India

 Key end-use sectors include manufacturing,

construction, transportation and agriculture

SE Asia Polymer Market

6APIC 2018 August 2018

Emerging markets offer strong potential for growth, while polyolefins and polyesters represent the key growth drivers in polymers

SE Asia Polymer Demand Growth

Singapore

Indonesia Malaysia

Vietnam

Thailand

Philippines

0%

2%

4%

6%

8%

10%

0 50 100 150

D em

an d

C A

G R

in 2

01 7-

20 27

Consumption per Capita in 2017 (kg)

Higher growth potential

PE

PP PVC

ABS

PS & EPS

SBR & BR PET

PC

0%

2%

4%

6%

0 100 200 300 400 500

D em

an d

C A

G R

in 2

01 7-

20 27

Average Annual Demand Growth in 2017-2027 (kt)

Note: Polymer demand represents total demand for HDPE, LLDPE, LDPE, PP, PET, PVC, PS, EPS, ABS, SBR, BR and PC. Bubble size indicates demand volume in 2017.

Key growth drivers

High polymer demand growth rates are supported by GDP growth, urbanisation, increased consumer

wealth, growth in finished good exports, as well as substitution of traditional materials

SE Asia Polymer Demand Growth

7APIC 2018 August 2018

Polymer demand growth in Southeast Asia is expected to allow for significant domestic market opportunities

SE Asia Polymer Market – Present Capacity & Future Demand

0

2

4

6

8

10

12

Vietnam Indonesia Malaysia Philippines Thailand Singapore

M ill

io n

To ns

Capacity in 2017 Demand in 2027

Note: Polymer capacity and demand includes HDPE, LLDPE, LDPE, PP, PET melt phase, PVC, PS, EPS, ABS, SBR, BR and PC.

In some Southeast Asian countries, the additional domestic capacity requirement to meet

projected demand growth is quite significant

8APIC 2018 August 2018

Projected polymer demand growth volumes equate to considerable volumes of olefin requirements

SE Asia Polymer Demand Outlook, 2017-2027

Note: Equivalent olefin consumption volumes are shown

for illustrative purposes only. Actual polymer demand

growth may also be met by additional polymer imports.

Over the next decade, ethylene requirements from PE and PVC demand growth in Southeast Asia are

expected to be equivalent to ethylene production from 3-4 worldscale steam crackers

0 2 4 6 8 10

PP

PVC

LDPE

LLDPE

HDPE

Million tons

2017 2027

4.7% 1.8

5.5% 1.5

3.2% 0.4

5.0% 1.4

4.8% 3.1

CAGR Volume Growth

(million tons)

Equivalent Olefin Consumption

(million tons of olefin)

~ 4 (ethylene)

~ 3 (propylene)

9APIC 2018 August 2018

The olefins and aromatics industries are still in a relatively early development stage in several countries

Overview of Olefins and Aromatics Capacity in SE Asia, 2017

?????

 10.1 mtpa total capacity

 Mainly based on naphtha

Singapore – Most Developed

?????

 3.8 mtpa total capacity

 Based on naphtha and

NGLs

Malaysia

?????

 11.8 mtpa total capacity

 Based on naphtha and

NGLs

Thailand – Most Developed

?????

 3.3 mtpa total capacity

 Based on naphtha and

refinery FCC

Indonesia

?????

 150 ktpa total capacity

 Based on refinery FCC

Vietnam

?????

 Less than 1 mtpa total

capacity

 Based on naphtha and

refinery FCC

Philippines

Olefins 64%

Aromatics 36%

Olefins 77%

Aromatics 23%

Olefins 66%

Aromatics 34%

Olefins 60%

Aromatics 40%

Olefins 100%

Aromatics 0%

Olefins 98%

Aromatics 2%

Note: Olefins include ethylene and propylene. Aromatics include benzene and PX.

* Including TPPI

10APIC 2018 August 2018

Major new olefins investments are taking place in Malaysia, Vietnam and Thailand

Olefins Net Capacity Additions in SE Asia

(1)

0

1

2

3

4

5

6

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

M ill

io n

To ns

Ethylene Propylene

Thailand 38%

Singapore 32%

Malaysia 15%

Indonesia 10%

Philippines 4%

Vietnam 1%

Olefins Capacity in SE Asia, 2017

Malaysia 46%

Vietnam 34%

Thailand 15%

Philippines 4%

Indonesia 1%

Olefins Net Capacity Additions in

SE Asia, 2017-2023

?????

 ExxonMobil in

Singapore

 JG Summit in

Philippines

 CAPC expansion in

Indonesia

 Shell restart in

Singapore

Major Additions ?????

 PCG in Malaysia

 PTTGC in Thailand

 NSRP and LSP in

Vietnam

Major Additions

Note: Net capacity additions in forecast only reflect firm projects.

11APIC 2018 August 2018

These new olefins projects in the region are based on a range of different feedstocks

SE Asia Ethylene Feedstock Slate

?????

 Limited volumes of ethane cracked in Malaysia

and Thailand

 Other NGLs (e.g. propane and LPG) also used

across SE Asia

 However, naphtha consumed as major feedstock

Current Trends

SE Asia Propylene Capacity by Process

?????

 PCG – naphtha and LPG from new refinery

 PTTGC – naphtha and LPG from existing refinery

 LSP – domestic ethane and imported propane and

naphtha