Tecnon OrbiChem Marketing Seminar at APIC 2008 The World Chemical Industry Focuses on AsiaCoal-based Methanol Helps China to Independence for Acetic Acid and a Leading Position in DME Victor Peng, Consultant Acetyls & Methanol Singapore, May 27, 2008 AGENDA • China’s Importance In The Global Methanol Market • Composition of Coal And Natural Gas-based Methanol Production In China • China’s Independence of Acetic Acid Production • China’s Leading Position In DME GLOBAL METHANOL MARKET Everyone anticipating a “flood of methanol” as more projects come online in Middle East and China Figure 1 GLOBAL METHANOL CAPACITY ADDITIONS 2007-2010 Thousand Tons 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 2008 2009 2010 China RoW Source: Tecnon OrbiChem Figure 2 METHANOL CONTRACT PRICES – 2005-2008 Dollars/ton 900 800 700 600 500 400 300 200 100 Jan- Apr05 05 Jul05 Oct05 Jan- Apr06 06 Jul06 Oct- Jan- Apr06 07 07 Jul07 Oct07 Jan- Apr08 08 Asia N America West Europe Source: Tecnon OrbiChem Figure 3 METHANOL SPOT PRICES – 2005-2008 Dollars/ton 1,000 900 800 700 600 500 400 300 200 100 Jan- Apr05 05 Jul05 Oct- Jan- Apr05 06 06 Jul06 Oct- Jan- Apr06 07 07 Jul07 Oct- Jan- Apr07 08 08 Asia N America West Europe Source: Tecnon OrbiChem AGENDA • China’s Importance In The Global Methanol Market • Composition of Coal And Natural Gas-based Methanol Production In China • China’s Independence of Acetic Acid Production • China’s Leading Position In DME Figure 4 COMPOSITION OF CHINA’S ENERGY PRODUCTION AND CONSUMPTION IN 2006 12% 21% 6% 1% 3% 1% 5% Hydroelectric Nuclear Coal Natural Gas Oil 3% 78% 70% Production Source: BP Statistical Review of World Energy June 2007 Consumption Figure 5 COMPOSITION OF COAL AND NATURAL GAS-BASED METHANOL CAPACITY ADDITIONS IN CHINA Thousand Tons 12,000 10,000 8,000 6,000 4,000 2,000 0 Natural Gas-based Coal-based 2007 2008 2009 2010 Plan Source: Tecnon OrbiChem AGENDA • China’s Importance In The Global Methanol Market • Composition of Coal And Natural Gas-based Methanol Production In China • China’s Independence of Acetic Acid Production • China’s Leading Position In DME ACETIC ACID CAPACITY BY PROCESS Capacity, ktpa 14,000 2015 12,000 10,000 8,000 6,000 4,000 2,000 0 Methanol Carbonylation Acetaldehyde Based Butane Oxidation By-Product Coal Gasification Ethylene Oxidation Naphtha Oxidation Others 2010 2005 Source: Tecnon OrbiChem Figure 6 GLOBAL ACETIC ACID CAPACITY TO PRODUCE – 2006 BY REGION East Europe 4% South & Southeast Asia 14% Middle East & Africa 1% North America 28% South America 0% West Europe 14% Northeast Asia 17% China 22% Source: Tecnon OrbiChem Total = 11,054 kMT Figure 7 GLOBAL ACETIC ACID CAPACITY TO PRODUCE – 2007 BY REGION East Europe 4% South & Southeast Asia 13% Middle East & Africa 2% North America 25% South America 0% West Europe 12% Northeast Asia 16% China 28% Source: Tecnon OrbiChem Total = 12,105 kMT Figure 8 CHINA’S ACETIC ACID NET TRADE 2005-2015 Thousand Tons 200 100 0 -100 -200 -300 -400 -500 -600 -700 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Tecnon OrbiChem Figure 9 ACETIC ACID CAPACITIES IN CHINA (2007) CMC=Coal-based Methanol Carbonylation GMC=Natural Gas-based Methanol Carbonylation Daqing Petroleum Administration: 200k (CMC) Ji’an Shenghua: 200k (ethanol-based) Jilin Petchem: 210k (ethylene-based) Tianjin Guanda: 40k (ethanol-based) Xinyu Sanyang: 100k (ethanol-based) Jinyimeng: 100k (ethanol-based) Yankuang Cathay: 300k (CMC) Jiangsu Sopo: 600k (CMC) Nantong Acetic Acid: 20k (ethanol-based) Yangzi Petchem: 90k (ethylene-based) Wujing: 230k (CMC) Henan Nanyang Tianguan: 15k (ethanol-based) Nanning Chemical: 20k (ethanol-based) Shanghai Petchem: 100k Celanese: 600k (CMC) (ethylene-based) Yaraco: 400k (GMC) Source: Tecnon OrbiChem Figure 10 ACETIC ACID CAPACITIES IN CHINA (2008-2012) CMC=Coal-based Methanol Carbonylation GMC=Natural Gas-based Methanol Carbonylation Daqing Petroleum Administration: Shandong Mingshui Great Chemical: 100k (CMC) Shandong Hualu Hengsheng: 200k (CMC) Shaanxi Yulin: 150k (GMC) Yanchang Group: 200k (CMC) Shaanxi Weihe: 35k (CMC) 200k (CMC) Ji’an Shenghua: 200k (ethanol-based) Jilin Petchem: 210k (ethylene-based) Tianjin Guanda: 40k (ethanol-based) Xinyu Sanyang: 100k (ethanol-based) Jinyimeng: 100k (ethanol-based) Yankuang Cathay: 300k (CMC) Jiangsu Sopo: 600k (CMC) Nantong Acetic Acid: 20k (ethanol-based) Yangzi Petchem: 90k Jiangsu Sopo: 600k (CMC) Henan Shunda: 200k (CMC) Yunnan Yunwei: 200k (CMC) Yaraco: 400k (GMC) Guizhou Crystal: 36k (CMC) Yaraco: 650 (GMC) Nanning Chemical: 20k (ethanol-based) BP YPC: 500k (GMC) Celanese: 600k (CMC) (ethylene-based) Wujing: 230k (CMC) Henan Nanyang Tianguan: 15k (ethanol-based) Shanghai Petchem: 100k (ethylene-based) Wujing: 300k (CMC) Source: Tecnon OrbiChem AGENDA • China’s Importance In The Global Methanol Market • Composition of Coal And Natural Gas-based Methanol Production In China • China’s Independence of Acetic Acid Production • China’s Leading Position In DME WHAT IS DME • DME is the simplest ether having the chemical formula of CH3OCH3 • DME is a colourless gas at ambient temperature, chemically stable, and can be easily liquefied. • The physical properties of liquid DME are so similar to those of LPG that DME can be distributed, stored, etc. using LPG handling technology. • DME’s low auto ignition temperature makes it a promising fuel candidate for diesel engines. • DME is being used as an aerosol propellant in hair spray and other personal care products to replace CFC and LPG propellants HOW IS DME BEING MADE Dehydration Methanol DME Source: Tecnon OrbiChem Figure 11 DME AS A COOKING FUEL Picture Courtesy of Shandong Jiutai Figure 12 DME AS A AUTOMOBILE FUEL Picture Courtesy of Shandong Jiutai Figure 13 DME AS AN AEROSOL PROPELLANT Picture Courtesy of Shandong Jiutai Figure 14 DME AS A WELDING AND CUTTING FUEL Picture Courtesy of Shandong Jiutai Figure 15 DME AS A REFRIGERANT Picture Courtesy of Shandong Jiutai Figure 16 DME CAPACITIES - CHINA Thousand Tons per Annum 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Tecnon OrbiChem Figure 17 DME vs PROPANE Bulk Propane or DME, $/ton LPGequivalent 1,200 1,000 800 600 A2 B1 Plots of propane price Plots of propane price month by month month by month 1996-2008 1996-2008 A1 A2 B1 B2 Total ex plant cost - 200 ktpa coal-based DME plant Cash cost - 200 ktpa coal-based DME plant Total ex plant cost - 1000 ktpa coal-based DME plant Cash cost - 1000 ktpa coal-based DME plant A1 400 200 0 0 B2 20 40 60 80 100 Brent Crude Oil $/bbl Source: Tecnon OrbiChem Figure 18 DME vs DIESEL Bulk Diesel or DME, $/ton Dieselequivalent 1,200 1,000 800 600 A1 A2 Plots of diesel price Plots of diesel price month by month month by month 1996-2008 1996-2008 A1 A2 B1 B2 Total ex plant cost - 200 ktpa coal-based DME plant Cash cost - 200 ktpa coal-based DME plant Total ex plant cost - 1000 ktpa coal-based DME plant Cash cost - 1000 ktpa coal-based DME plant 400 B2 B1 200 0 0 20 40 60 80 100 Brent Crude Oil $/bbl Source: Tecnon OrbiChem CONCLUSIONS • The “virtual flood” of methanol from Middle East and China is not yet so severe as expected. But China helped improve the methanol industry balance. • About 80% of the new methanol capacities that will come on stream in China from 2008 to 2010 are coal-based. 94% of the planned capacities in China are coal-based. • China became the world’s largest acetic acid producer in 2007, and will gradually achieve self-sufficiency of acetic acid production through to 2012, and become a net exporter from 2014. • DME produced from cheap coal in China is competitive with hydrocarbon fuels derived from crude oil at present, and likely to be competitive in the foreseeable future. • Final Conclusion: Increasing domestic methanol capacities, mainly coal-based, helps China achieve self-sufficiency of acetic acid and a leading position in DME as a new fuel. …..your source of expert chemical industry knowledge