Snapshots of the World Oil Summit - Paris, April 2018


 

  • The oil market seems to have come back to a certain balance, with the global 2014-2017 surplus being now wiped out. Prices have been multiplied by more than 2 from their lowest
  • The International Energy Agency envisages continued growth in demand and production at least until 2023, petrochemicals, India and China representing the staples of additional demand
  • The equivalent of a "North Sea" (3 million barrels/d) must be replaced every year to make up for the natural decline in conventional production and also to meet the additional demand (+ 1 million barrels per year). In this regard, the advent of non-conventional American producers is not generally regarded with much concern. The more uncertain situation of major producers such as Nigeria, Libya and Venezuela is, however, a major volatility factor on supply, despite the agreement between OPEC and Russia which has been extended
  • In the long run, after 2025, demand could level off, but a brutal decline is difficult to envisage by many players, because oil is - and will certainly remain for long - still little substitutable in transport and chemistry, despite the efforts currently being undertaken in biofuels, electric mobility and biosourced chemistry. The penetration of electric vehicles is proving in particular, slower than expected
  • Producers as a whole are committed to maintaining rigorous cost management in the future, despite the rise in oil prices
  • Many projects are becoming profitable from $50/barrel and could soon be revived (even offshore projects, from $70-80/barrel)
  • The oil production sector is becoming increasingly open and international, with players back in the limelight, like Pemex, after heavy investments, or Morocco, a new actor, who presented an impressive list of potential finds. Through LNG, flows of natural gas are also expanding on a global scale. Natural gas is thus increasingly being considered by many producers as an essential growth relay, alongside oil. Investments in natural gas from major companies such as Total or Shell, have been massive in recent years
  • OEMs, engineering and service companies (CGG, Subsea 7, Technip, Vallourec, Saipem...) have managed to get through this difficult phase at the expense of massive restructuring (a decrease of about 30% in costs) and the implementation of breakthrough working methods throughout the project development process, both internally and with their suppliers. Digitalization, even artificial intelligence, have been strongly used to achieve this « revolution » ; but some of the cost efforts were temporary and are not sustainable in the long run according to these companies, which are of the opinion that they can only survive if their prices now rise by about 25%. With the slow recovery underway, they could achieve this aim

 

 

Echoes from the Platts Petrochemicals Conference in Rotterdam - February 2018


 

  • More upbeat atmosphere than two years ago, for this conference which brought together many industrials and customers of the European and global petrochemical scene, at Platts' initiative
  • The reason for this optimism is simple: the vast majority of plastic-using sectors have restored their profitability and are now contemplating the future with confidence. In particular, they are considering solid sales growth in their respective markets. Consequence? The demand for polyethylene and polypropylene is expected to rise in the next five to ten years, particularly in China
  • This view has however to be mitigated, because announced industrial projects are a dime a dozen (especially in the USA) and could lead to overcapacity. This was the standpoint of many stakeholders, especially with respect to ethylene, whose prices could be depressed for a few years. Supply-demand balance and price prospects are on the other hand a priori more favorable for PP
  • Costs strongly compressed by a very abundant naphtha and above all, a boon of co-products of shale gas (ethane, propane). The United States should continue to ramp up its production of shale oil and gas, bringing about a glut of raw materials. The supply chains based on ethane and propane (particularly present in the US) should enjoy a significant competitive advantage over the naphtha-based plants (more numerous in Europe, in particular). Will the US keep all this resource for itself ? Probably not. As an illustration, the first export of ethane to Europe by freighter was noticed recently
  • China is the only major area to develop a large-scale coal-based chemical industry, on the grounds of sovereignty and the exploitation of local resources
  • End-customers are increasingly sensitive to three trends: the customization of plastic products to their needs (devising "solutions"); recycling intensity; and the use of renewable raw materials (green chemistry). Innovation and flexibility should remain the mainstays of the world petrochemical industry!