WPC’18 Keynotes at World Petrochemical Conference 2018

IHS Markit’s World Petrochemical Conference 2018 was held in Houston March 21-22 with workshops and seminar sessions before and after the conference. It is their largest annual event to date, with over 1,300 registered. Wednesday featured single track Executive sessions, each concluding with a Q&A panel of the session speakers. Thursday has four breakout tracks:

     • Inorganics & Derivatives
     • Intermediates & Specialty Chemicals
     • Olefins, Feedstocks & Derivatives
     • Refining & Aromatics

The event opened with a keynote from Nariman Behravesh, Chief Economist, IHS Markit, titled “The Global Economic Outlook: How Long Can the Good Times Roll?”

His opening was an attention-getter. It used to be that politics overtook economics, but now economics is overtaking politics, apparently shrugging off the vicissitudes of the round-the-clock news cycle. The one thing that may mess up everything is a trade war: more jobs are lost than gained by a protectionism approach, such as unilateral imposition of tariffs. Business is quite robust and is sustained, with Europe and Japan doing much better, and emerging markets coming our of a downturn. We are seeing the strongest back-to-back years since the mid-2000s.

In the US, there have been two helpful stimuli: tax cuts and federal spending. Europe and Japan are now starting to improve, helped by adoption of quantitative easing. China is, by central government policy, slowing its growth. Looking ahead, they have a rapidly aging demographic. So, even though they have focused on domestic self-sufficiency and domestic consumption, China looking out a decade sees per capita product demand shrinking. China has also adopted a tough anti-pollution campaign, and many small companies have had to close, unable to afford the upgrades required.

Globally, commodity prices are topping out, which reduces inflation pressures. In the US, inflation could become an issue with unemployment forecasted to reduce even lower to 3.5%.

The second keynote IHS Markit speaker was Kurt Barrow, Vice President, Oil Markets, Midstream and Downstream Insights, on “Global Crude Oil Outlook”.

His initial slide illustrated how slowly the share of energy supply sources changes. But in recent years there have been forces that may change the mix more rapidly

      • Pace of technology disruption e.g. shale extraction
      • Societal influences – emerging global middle class
      • Global environmental policy and regulation forces

We have seen significant technology disruption to develop shale fields: sensors, analytics, digitalization. Much of this shale crude oil goes to Asia as petrochemical feedstock, ad it has a high proportion of light naphtha. This feedstock is in demand to meet the cracker-derived plastic products for the middle class.

With decades of shale gas available, the US may become the world’s largest LNG exporter. Yet another disrupter is the IMO2020 regulation that is effective January 1, 2020, dropping the allowable sulfur in fuel oil from 3.5% to 0.5%. Shippers have only a few options:

     • Buying lower-sulfur blended fuel oil
     • LNG fuel – only seen on new vessels
     • Install scrubbers: they are delaying

The immediate impact of IMO 2020 will be to the 3MMbpd heavy fuel oil market, also with an increases demand of 1MMbpd for gasoil: there is not enough uncommitted gasoil to meet all the demand. What is yet to be seen is how low the bottom of the barrel fuel products will have to go in price to make blended liquid fuel competitive.

The final disruptor is mobility: human-operated vs driver-less cars, personally-owned vs mobility services, gasoline/diesel vs electric powertrain. One reason for drivetrain diversity is meeting fleet emission goals. This topic has its own special session, in addition to others added to the workshop days.

The future for refining growth is in refinery-petrochemical integration. Note at present one-third of the growth in petrochemical supply is from natural gas liquids. E.g. the US is the largest propane exporter and China is the largest propane importer – for petrochemicals, not fuel.

 

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