ECONOMIC IMPACTS OF VALUE-ADDED USES OF OIL AND NATURAL GAS Evar - - PowerPoint PPT Presentation

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ECONOMIC IMPACTS OF VALUE-ADDED USES OF OIL AND NATURAL GAS Evar - - PowerPoint PPT Presentation

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ECONOMIC IMPACTS OF VALUE-ADDED USES OF OIL AND NATURAL GAS Evar Umeozor, Ph.D. Senior Research Engineer June 20, 2020 www.ceri.ca WEBINAR PARTICIPATION Audio Your microphone has been muted for the duration of this presentation. To hear

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SLIDE 1

ECONOMIC IMPACTS OF VALUE-ADDED USES OF OIL AND NATURAL GAS

Evar Umeozor, Ph.D. Senior Research Engineer June 20, 2020

www.ceri.ca

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SLIDE 2

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WEBINAR PARTICIPATION

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Allan Fogwill

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SLIDE 3

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OVERVIEW

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable

  • rganization specializing in the analysis of energy

economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and

  • bjective economic research of energy and environmental

issues to benefit business, government, academia and the public. CERI publications include:

  • Market specific studies
  • Geopolitical analyses
  • Quarterly commodity reports (crude oil, electricity

and natural gas) In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.

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SLIDE 4

CORE FUNDERS FUNDING SUPPORT

IVEY FOUNDATION

IN-KIND SUPPORT

Alberta Energy Regulator | Bow Valley College | CEPA Foundation JWN Energy | Northern Alberta Institute of Technology Petroleum Services Association of Canada

S.M. BLAIR FAMILY FOUNDATION

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SLIDE 5

AGENDA

  • Background
  • Methodology
  • Results
  • Conclusions
  • Questions?

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SLIDE 6

BACKGROUND – Global Feedstocks

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100 200 300 400 500 600 700 2015 2020 2025 2030 2035 2040 2045 2050

Mtoe

Year

Coal Oil Gas Biomass Source: Data by IEA, Figure by CERI

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SLIDE 7

BACKGROUND – Regional Feedstocks

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71% 11% 66% 37% 11% 78% 15% 84% 56% 18% 11% 19% 16% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

North America Europe Middle East China Other Asia

% of Feedstock used

Ethane Naphtha Other

Source: Data by Deloitte, Figure by CERI

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SLIDE 8

BACKGROUND – Feedstocks and Products

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Source: IEA 2018

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SLIDE 9

BACKGROUND – Study Focus

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Feedstock Product Assessment Methods

  • Gas-based
  • Oil-based
  • Gas-based (Natural

gas): Ammonia, Methanol

  • Oil-based (Naphtha):

Ethylene, Propylene

  • Process (amounts of

feedstocks, products and GHG emissions)

  • Microeconomic (FOB

supply cost)

  • Macroeconomic

(employment, salary/wage, tax revenue, GDP impacts)

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SLIDE 10

METHODOLOGY – IPEM Workflow

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SLIDE 11

METHODOLOGY – Business Cases & Attributes

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Attribute Reference Business Case (RBC) Competitive Business Case (CBC) Facility Size Smaller Bigger Process Efficiency Lower Higher Project Funding Debt Equity Carbon Tax Yes No

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SLIDE 12

METHODOLOGY – Product Supply Scenarios

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  • Business As Usual (BAU) Scenario;

𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝐸𝑓𝑛𝑏𝑜𝑒 + 𝐹𝑦𝑞𝑝𝑠𝑢𝑡 = 𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧 + 𝐽𝑛𝑞𝑝𝑠𝑢𝑡

  • Medium Supply Growth (MSG) Scenario;

𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝐸𝑓𝑛𝑏𝑜𝑒 + 𝐹𝑦𝑞𝑝𝑠𝑢𝑡 = 𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧

𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧 = 𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧𝐶𝐵𝑉 + 𝐽𝑛𝑞𝑝𝑠𝑢𝑡𝐶𝐵𝑉 + 1% 𝐻𝑚𝑝𝑐𝑏𝑚 𝐹𝑦𝑞𝑝𝑠𝑢 𝑁𝑏𝑠𝑙𝑓𝑢

  • High Supply Growth (HSG) Scenario;

𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝐸𝑓𝑛𝑏𝑜𝑒 + 𝐹𝑦𝑞𝑝𝑠𝑢𝑡 = 𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧

𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧 = 𝐸𝑝𝑛𝑓𝑡𝑢𝑗𝑑 𝑇𝑣𝑞𝑞𝑚𝑧𝐶𝐵𝑉 + 𝐽𝑛𝑞𝑝𝑠𝑢𝑡𝐶𝐵𝑉 + 3% 𝐻𝑚𝑝𝑐𝑏𝑚 𝐹𝑦𝑞𝑝𝑠𝑢 𝑁𝑏𝑠𝑙𝑓𝑢

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SLIDE 13

RESULTS – Supply Costs

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200 400 600 800 1000 1200 1400 1600 1800

AB SK NL AB SK NL Reference Business Case (RBC) Competitive Business Case (CBC)

$/t

Ammonia Ethylene Methanol Propylene

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SLIDE 14

RESULTS – Cash Costs

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400 800 1,200 1,600

Ammonia Methanol Ethylene/Propylene Ammonia Methanol Ethylene/Propylene Ammonia Methanol Ethylene/Propylene AB SK NL

$/t

RBC CBC

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SLIDE 15

RESULTS – Carbon Tax (Additional to Costs)

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37.36 31.93 44.74 39.64 33.03 27.42 44.74 39.64

10 20 30 40

RBC CBC RBC CBC RBC CBC RBC CBC Ammonia Ethylene Methanol Propylene

$/t

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SLIDE 16

RESULTS – Cash Flows and Pay Back Periods

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SLIDE 17

RESULTS – Cash Flows and Pay Back Periods

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SLIDE 18

RESULTS – Regional Price Competitiveness

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100 200 300 400 500 600 700

North America Europe Asia RBC CBC Price Range (US$/t)

Ammonia Price

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SLIDE 19

RESULTS – Regional Price Competitiveness

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100 200 300 400 500 600 700

North America Europe Asia RBC CBC Price Range (US$/t)

Ammonia Price

$37 $32

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SLIDE 20

RESULTS – Regional Price Competitiveness

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50 100 150 200 250 300 350 400 450 500

North America Europe Asia RBC CBC Price Range (US$/t)

Methanol Price

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SLIDE 21

RESULTS – Regional Price Competitiveness

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50 100 150 200 250 300 350 400 450 500

North America Europe Asia RBC CBC Price Range (US$/t)

Methanol Price

$33 $27

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SLIDE 22

RESULTS – Regional Price Competitiveness

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200 400 600 800 1000 1200 1400 1600 1800

North America Europe Asia RBC CBC Price Range (US$/t)

Ethylene Price

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SLIDE 23

RESULTS – Regional Price Competitiveness

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200 400 600 800 1000 1200 1400 1600 1800

North America Europe Asia RBC CBC Price Range (US$/t)

Ethylene Price

$45 $40

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SLIDE 24

RESULTS – Regional Price Competitiveness

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200 400 600 800 1000 1200 1400 1600 1800

North America Europe Asia RBC CBC Price Range (US$/t)

Propylene Price

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SLIDE 25

RESULTS – Regional Price Competitiveness

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200 400 600 800 1000 1200 1400 1600 1800

North America Europe Asia RBC CBC Price Range (US$/t)

Propylene Price

$45 $40

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SLIDE 26

RESULTS – Economic Impacts of Scenarios

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Economic Impacts BAU Total GDP Increase (USD Million) Total Tax Increase (USD Million) Jobs created Total Pay Increase (USD Million) Methanol 2020

  • 2030

5.69 0.88 16 0.46 2040 44.30 9.30 64 0.75 2050 107.02 28.27 103 1.21 Ammonia 2020

  • 2030

68.99 4.70 199 2.04 2040 261.22 20.49 376 3.83 2050 574.02 48.96 551 5.81 Ethylene 2020

  • 2030

134.10 53.41 386 4.27 2040 604.83 280.04 870 10.21 2050 1,528.16 777.57 1,466 18.35 Propylene 2020

  • 2030

15.77 5.38 45 0.61 2040 79.67 33.09 115 1.37 2050 204.22 96.83 196 2.50

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RESULTS – Economic Impacts of Scenarios

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Economic Impacts MSG Total GDP Increase (USD Million) Total Tax Increase (USD Million) Jobs created Total Pay Increase (USD Million) Methanol 2020 4.01 0.62 115 0.63 2030 50.34 10.90 145 0.97 2040 131.79 35.50 190 1.57 2050 262.99 82.57 252 2.52 Ammonia 2020 7.45 0.37 214 1.17 2030 122.33 8.31 352 2.69 2040 357.91 28.05 515 4.54 2050 718.59 61.18 689 6.59 Ethylene 2020 26.63 8.31 766 4.17 2030 426.14 171.52 1,226 9.40 2040 1,288.35 593.25 1,854 17.25 2050 2,748.08 1,384.92 2,636 28.00 Propylene 2020 15.08 4.76 434 2.36 2030 194.07 76.83 559 3.80 2040 513.16 231.80 738 6.13 2050 1,019.11 504.83 978 9.62

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RESULTS – Economic Impacts of Scenarios

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Economic Impacts HSG Total GDP Increase (USD Million) Total Tax Increase (USD Million) Jobs created Total Pay Increase (USD Million) Methanol 2020 6.39 1.23 184 1.00 2030 80.03 20.29 230 1.54 2040 208.95 62.80 301 2.48 2050 415.99 140.99 399 3.98 Ammonia 2020 14.91 0.85 429 2.34 2030 200.35 14.35 577 3.97 2040 522.11 41.95 751 5.96 2050 977.99 84.34 938 8.15 Ethylene 2020 48.62 15.66 1,399 7.62 2030 680.57 275.87 1,959 13.98 2040 1,891.42 871.36 2,722 23.52 2050 3,828.88 1,924.97 3,673 36.59 Propylene 2020 26.90 8.71 774 4.22 2030 336.63 135.50 969 6.46 2040 868.79 396.73 1,250 10.10 2050 1,693.17 844.49 1,624 15.56

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SLIDE 29

CONCLUSIONS

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  • Tariffs on imports is a major driver of whether to import or produce

locally (relatively higher in Asian countries)

  • In terms of global trading opportunity, decreasing order would be:

methanol, ethylene, propylene, and ammonia

  • Lower emissions transportation is a major driver of methanol demand

growth

  • Many countries are going for self-sufficiency in ammonia production

due to its ties to agricultural sector for fertilizer production

  • A lot of countries with negative olefins trade balance, indicate

potential export opportunities

  • Export-focused olefins production might need to be in polymer form

for ease of movement to destination markets

  • Oil-based pathways may not be viable in Canada, still crude oil

access to market needed and future refinery-petrochemical investments integration maybe way forward

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SLIDE 30

QUESTIONS?

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Please submit your text questions and comments using the Questions panel. A recording of the presentation will be sent to you following the event.

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SLIDE 31

UPCOMING EVENTS

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Register at www.ceri.ca/events CERI 2020 Petrochemical Conference Petrochemicals and the Energy Evolution

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THANK YOU

Canadian Energy Research Institute ceri_canada Visit www.ceri.ca for the latest research

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SLIDE 33

Addendum – General Model Assumptions

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Input Value OPEX inflation 2% Feedstock price inflation 2% Discount rate 10% Interest rate 3.5% Utilization factor 70% (Year 1), 80% (Year 2), 95% (Other) CAPEX allocation 20% (Year 1), 50% (Year 2), 30% (Year 3) Construction period 3 Years Operating period 27 Years Corporate tax AB (11%, 10%, 9%, 8% - all other years), SK (10%), NL (15%), Canada (15%)

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SLIDE 34

Addendum – Canadian Refining Capacity

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479 67 318 130 392 402 130 100 200 300 400 500 600 Alberta British Columbia New Brunswick Newfoundland and Labrador Ontario Quebec Saskatchewan

Capacity Mb/d

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Addendum – Major Methanol Importers

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500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Thousand USD

Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019

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Addendum – Major Ammonia Importers

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500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 India USA South Korea Morocco China Belgium Turkey Germany Ukraine Taipei, Chinese France Mexico Norway Thailand Spain

Thousand USD

Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019

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SLIDE 37

Addendum – Major Ethylene Importers

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500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Thousand USD

Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019

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Addendum – Major Propylene Importers

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500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Thousand USD

Imported value in 2015 Imported value in 2016 Imported value in 2017 Imported value in 2018 Imported value in 2019