SOUTHEAST ASIA

PETROCHEMICALS

A Rapid Evolution in Progress

CHOMMANAD

THAMMANAYAKATIPMANAGING 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

Rea

l GD

P G

row

th

ASEAN World

0%

2%

4%

6%

8%

2013 2014 2015 2016 2017

Man

ufac

turin

g V

alue

A

dded

Gro

wth

ASEAN World

0%

1%

2%

3%

2013 2014 2015 2016 2017

Gro

wth

in A

SE

AN

Urban Population Total Population

0%

2%

4%

6%

2012 2013 2014 2015 2016

Rea

l Inc

ome

per

Cap

ita G

row

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

Dem

and

CA

GR

in 2

017-

2027

Consumption per Capita in 2017 (kg)

Asia Polymer Demand Growth

0%

2%

4%

6%

8%

2011 2012 2013 2014 2015 2016 2017

Gro

wth

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

IndonesiaMalaysia

Vietnam

Thailand

Philippines

0%

2%

4%

6%

8%

10%

0 50 100 150

Dem

and

CA

GR

in 2

017-

2027

Consumption per Capita in 2017 (kg)

Higher growth potential

PE

PPPVC

ABS

PS & EPS

SBR & BRPET

PC

0%

2%

4%

6%

0 100 200 300 400 500

Dem

and

CA

GR

in 2

017-

2027

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

Mill

ion

Tons

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

CAGRVolume 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

Olefins64%

Aromatics36%

Olefins77%

Aromatics23%

Olefins66%

Aromatics34%

Olefins60%

Aromatics40%

Olefins100%

Aromatics0%

Olefins98%

Aromatics2%

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

Mill

ion

Tons

Ethylene Propylene

Thailand38%

Singapore32%

Malaysia15%

Indonesia10%

Philippines4%

Vietnam1%

Olefins Capacity in SE Asia, 2017

Malaysia46%

Vietnam34%

Thailand15%

Philippines4%

Indonesia1%

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

Development Trends in Major Firm Projects

0%

25%

50%

75%

100%

2012 2017 2022

Per

cent

of T

otal

Cap

acity

Refinery Steam Cracker PDH Metathesis

?????

Firm capacity additions based on steam cracker

and refinery-based project

No firm projects involving on-purpose propylene

production

Development Trends in Major Firm Projects

12APIC 2018 August 2018

Major new aromatics investments are tied to refinery developments in Vietnam and Brunei

Aromatics Net Capacity Additions in SE Asia

(1)

0

1

2

3

4

5

2015 2016 2017 2018 2019 2020

Mill

ion

Tons

Benzene PX China83%

SE Asia15%

Others2%

Aromatics Net Capacity Additions in Asia,

2017-2020

?????

TPPI shutdown &

restart in Indonesia

Shell shutdown &

restart in Singapore

JAC shutdown &

restart in Singapore

Major Events ?????

NSRP in Vietnam

PCG (benzene from

cracker) in Malaysia

Zhejiang Hengyi in

Brunei

Major Additions

Note: Aromatics include benzene and PX.

Thailand43%

Singapore40%

Malaysia10%

Indonesia7%

Philippines0.3%

Aromatics Capacity in SE Asia, 2017

13APIC 2018 August 2018

Net trade volumes of derivative products in Southeast Asia will be impacted by new capacity additions

SE Asia Net Exports in Intermediates and Polymers

(0.5)

0.0

0.5

1.0

1.5

2.0

2.5

EDC VCM MEG Styrene Phenol &Acetone

PO PE PP PVC PS SBR &PBR

PETBottle

Mill

ion

Tons

2017 2020

The region’s net trade flows of major intermediates and polymers are not expected to change over

the next few years, with the exception of PP

Intermediates Polymers

14APIC 2018 August 2018

Intra-regional trade will continue to be important, facilitated by market proximity and the ASEAN Free Trade Area

SE Asia Net Exports in Intermediates

(2)

(1)

0

1

2

3

2014 2017 2020

Mill

ion

Tons

Singapore Thailand Malaysia

Indonesia Vietnam Philippines

Note: Intermediates include EDC, VCM, MEG, styrene, phenol/acetone and PO. Polymers include PE, PP, PVC, PS, SBR/PBR and PET bottle.

In particular, Vietnam and Indonesia are expected to continue requiring significant imports of

intermediates and polymers. Indeed, new projects are progressing in these countries.

SE Asia Net Exports in Polymers

(8)

(4)

0

4

8

2014 2017 2020

Mill

ion

Tons

Singapore Thailand Malaysia

Indonesia Vietnam Philippines

15APIC 2018 August 2018

Summary and concluding comments

High Demand Growth Potential

Naphtha & Refinery Integration

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

opportunities

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

▪However, demand growth trends remain highly sensitive to overall economic performance

▪New petrochemical investments are still heavily based on naphtha feedstock but increasingly

integrated with refinery developments to capture synergies, enhance competitiveness and ensure

feedstock supply security

▪However, the relative competitiveness of naphtha-based petrochemical production will also remain

impacted by crude oil pricing

Prospects for Further Development

▪Despite the start-up of firm projects, multiple countries in Southeast Asia are expected to sustain net

deficits in intermediates and polymers

▪ Further projects (e.g. in Indonesia) are continuing to progress and are expected join the current phase

of industry development in Southeast Asia

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