Australia Petrochemicals Report 2012
The Australian petrochemicals industry is being sidelined as investment pours into gas liquefaction, which is the focus of downstream developments over the next five years, according to BMI’s latest Australia Petrochemicals Report.
The future of the Australian petrochemical industry depends on exploiting its full potential in ethane feedstock, which can be achieved through increased output in the purification of gas for liquefication. Naphtha streams are unlikely to increase substantially due to the declining growth in oil production. We are assuming oil and gas liquids production peaking at about 620,000b/d in 2013 then falling to about 580,000b/d by 2017. Gas production growth will far outpace demand growth, however, and we see export potential rising from an estimated 18.1bcm in 2010 to nearly 80bcm by 2020, all in the form of liquefied natural gas (LNG).
Domestic and leading international companies are investing heavily in gas production and LNG exports to help offset declining oil output, but there is little interest in using the country’s ethane reserves and adding value to production through basic chemicals. The main downstream growth area is fertilisers.
India’s Deepak Fertilisers and Petrochemicals says it is working towards setting up a 300,000tpa technical ammonium nitrate (TAN) plant in the state of South Australia with completion in mid-2014 at the earliest. Yara International is planning a 330,000tpa TAN plant to be operated by Burrup Holdings in a 50:50 joint venture between the two partners; Yara is a minority shareholding the Burrup Holdings. However, this is likely to be delayed pending the outcome of the stake owned by Burrup Holdings’ majority shareholders, the businessman Pankaj Oswal and his wife who object to the joint venture.
Ethylene capacity is to remain at 515,000tpa, while PE and PP capacities are likely to remain static at 410,000tpa and 355,000tpa respectively. However, 2010 saw the end of polystyrene production in Australia following Huntsman’s decision in September 2009 to close its facilities, which included 30,000tpa of PS capacity.
The Australian petrochemicals industry is influenced by developments in China, Australia’s main export market for petrochemicals and petrochemicals-utilising products. BMI forecasts a slowdown in Chinese demand growth going into 2012 as a result of more sluggish demand in the automotive, consumer goods and construction industries in China and the domestic market. BMI now sees evidence of a bubble in the Chinese property market. If tightening of the credit market continues and the pace of construction abates, the slowdown will lead to zero growth in the PVC segment and slow growth in PE and PP. However, if the bubble bursts and China falls into recession, the consequences for the Australian petrochemicals industry will be more devastating than the 2009 contraction.
Carbon emissions pose a downside risk. Chemical and plastics manufacturers are set to receive 66% of their emissions permits for free during the initial stages of the scheme, with liquefied gas producers to receive 50%. However, the carbon tax has attracted opposition from petrochemicals producers and downstream processors. BMI believes that carbon taxes are unlikely to be a significant threat to Australian petrochemicals production as the costs will be manageable. The costs will vary across the sector according to the amount of carbon emitted, the compensation offered and the ability to pass on costs to consumers. Producers of advanced, speciality products will be the least affected, while basic chemicals will suffer increased costs.
The future of the Australian petrochemical industry depends on exploiting its full potential in ethane feedstock, which can be achieved through increased output in the purification of gas for liquefication. Naphtha streams are unlikely to increase substantially due to the declining growth in oil production. We are assuming oil and gas liquids production peaking at about 620,000b/d in 2013 then falling to about 580,000b/d by 2017. Gas production growth will far outpace demand growth, however, and we see export potential rising from an estimated 18.1bcm in 2010 to nearly 80bcm by 2020, all in the form of liquefied natural gas (LNG).
Domestic and leading international companies are investing heavily in gas production and LNG exports to help offset declining oil output, but there is little interest in using the country’s ethane reserves and adding value to production through basic chemicals. The main downstream growth area is fertilisers.
India’s Deepak Fertilisers and Petrochemicals says it is working towards setting up a 300,000tpa technical ammonium nitrate (TAN) plant in the state of South Australia with completion in mid-2014 at the earliest. Yara International is planning a 330,000tpa TAN plant to be operated by Burrup Holdings in a 50:50 joint venture between the two partners; Yara is a minority shareholding the Burrup Holdings. However, this is likely to be delayed pending the outcome of the stake owned by Burrup Holdings’ majority shareholders, the businessman Pankaj Oswal and his wife who object to the joint venture.
Ethylene capacity is to remain at 515,000tpa, while PE and PP capacities are likely to remain static at 410,000tpa and 355,000tpa respectively. However, 2010 saw the end of polystyrene production in Australia following Huntsman’s decision in September 2009 to close its facilities, which included 30,000tpa of PS capacity.
The Australian petrochemicals industry is influenced by developments in China, Australia’s main export market for petrochemicals and petrochemicals-utilising products. BMI forecasts a slowdown in Chinese demand growth going into 2012 as a result of more sluggish demand in the automotive, consumer goods and construction industries in China and the domestic market. BMI now sees evidence of a bubble in the Chinese property market. If tightening of the credit market continues and the pace of construction abates, the slowdown will lead to zero growth in the PVC segment and slow growth in PE and PP. However, if the bubble bursts and China falls into recession, the consequences for the Australian petrochemicals industry will be more devastating than the 2009 contraction.
Carbon emissions pose a downside risk. Chemical and plastics manufacturers are set to receive 66% of their emissions permits for free during the initial stages of the scheme, with liquefied gas producers to receive 50%. However, the carbon tax has attracted opposition from petrochemicals producers and downstream processors. BMI believes that carbon taxes are unlikely to be a significant threat to Australian petrochemicals production as the costs will be manageable. The costs will vary across the sector according to the amount of carbon emitted, the compensation offered and the ability to pass on costs to consumers. Producers of advanced, speciality products will be the least affected, while basic chemicals will suffer increased costs.
Contents
Executive SummarySWOT Analysis
Australian Petrochemicals Industry SWOT
Australia Political SWOT
Australia Economic SWOT
Australia Business Environment Swot
Global Petrochemicals Overview
Petrochemicals Market Overview
Table: World Ethylene Production By Country, 2011 And 2015 (‘000 tonnes capacity)
Financial Results
Table: Financial Results Of Major Petrochemicals Companies, 2010
Global Oil Products Price Outlook
Emerging Asia Petrochemicals Overview
Australia Market Overview
Table: Australia Petrochemicals Facilities 2008
Industry Trends and Developments
Feedstock Potential
Liquefied Natural Gas
Table: LNG Terminals In Australia
Petrochemicals Developments
Business Environment
Asia Pacific Petrochemicals Business Environment Ratings
Table: Asia Pacific Petrochemicals Business Environment Ratings
Limits of Potential Returns
Risks to Realisation Of Returns
Australia’s Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
TABLE: ASIA, ANNUAL FDI INFLOWS
Table: Trade And Investment Ratings
Table: Top Export Destinations, 2002-2009
Operational Risk
Industry Forecast Scenario
Table: Australia’s Petrochemicals Sector Data And Forecasts, 2008-2015 (‘000tpa, unless otherwise stated)
Macroeconomic Outlook
Australia - Economic Activity, 2006-2015
Company Monitor
MEO Australia
Qenos
Glossary Of Terms
Table: Glossary Of Petrochemicals Terms
Methodology
How We Generate Our Industry Forecasts
Chemicals And Petrochemicals Industry
Cross Checks
Business Environment Ratings
Table: Petrochemicals Business Environment Indicators And Rationale
Weighting
Table: Weighting Of Indicators Skip to top