Although the trend of rising international oil prices has been reversed in July, high oil prices are still an important theme throughout the petrochemical industry in 2006. In the context of high oil prices, upstream oil companies have benefited a lot, while downstream petrochemical and chemical companies have had mixed effects. High oil prices have also stimulated the investment and development of alternative energy industries. What are the far-reaching effects these will have on the industry? What are the corporate countermeasures? What will happen to the petrochemical industry in 2007? Here, let us review the development trend of the world petrochemical industry in 2006 and look forward to the development of the industry in 2007.
——Inflection point in international oil prices
Throughout 2006, the price of oil rose and then fell and turned a corner, but still hovered at high levels. In 2006, the average price of WTI crude oil futures was approximately US$66/barrel, which was US$9 higher than in 2005. At the end of 2006, although the price of oil fell back, it still hovered around $60/barrel.
During this period, OPEC's package price has been higher than US$50/barrel for a long time, which has brought great benefits to OPEC members. At the same time, OPEC also hopes to maintain long-term stability in oil prices and a balance between supply and demand. Because excessive oil prices will stimulate the development of alternative energy industries, it will also affect the growth of the global economy, which will be detrimental to the long-term development of oil prices and OPEC organizations. In order to further increase its market share and influence in the international market, the organization has begun preparations for the absorption of new members, and applications for membership of OPEC include Angola, Sudan and Ecuador.
——The impact of oil prices on upstream and downstream industries varies
The high oil price operation has brought huge profits to upstream companies, while the non-integrated petrochemical and chemical companies that do not have upstream oil and gas resources have caused significant cost increases and severely damaged profits.
The average price of oil in 2006 increased by 16% compared with 2005, which brought huge profits to the upstream oil companies. In the 2006 Fortune 500 expulsion from the US "Fortune" magazine, the oil giants occupied an important position on the list. Among them, ExxonMobil ranked first in the world. The two domestic companies, Sinopec and PetroChina, have also improved their rankings.
The rise in oil prices has significantly increased the raw material costs of petrochemical companies, while the impact of integrated companies with oil and gas resources is relatively small. Take polyolefin manufacturers as an example. Most of these companies are integrated refining and chemical companies, which have strong market power and price transferability, and are therefore less affected. Other chemical production enterprises that do not have upstream resources have a greater impact, especially those manufacturing companies such as PVC and PS. A typical example is the decline in the performance of Shantou Ocean First Polybenzene Co., Ltd., a well-known PS manufacturer in China, and it was acquired by South Korean SK Group.
——Refining industry continues to develop steadily
In 2006, the global refining industry continued to develop steadily. As of the end of 2006, total refining capacity reached 42,600 Mt/a. Compared with 2005, it increased by 6.8 Mt/a. The once crude oil processing capacity reached a record high, and the total number of global refineries remained relatively stable.
As far as the region is concerned, the growth in the Asia Pacific region is relatively rapid, and the refining capacity has increased by 5.25 Mt/a. North America, Eastern Europe, and the Middle East also experienced slight growth, while refining capacity in other regions such as Africa, Western Europe, and South America declined.
Among major refinery companies, Exxon Mobil and Shell rank among the top two in refining capacity. Sinopec, the largest refiner in Asia, ranks third in the world, while another Chinese company, China National Petroleum Corporation, ranks ninth.
In December 2005, BP sold its subsidiary Billion Connell to Ineos for $9 billion. The transaction included BP's two refineries in Scotland and France, with a total capacity of nearly 20 Mt/a. In 2006, Sinopec Hainan Refinery's 8 Mt/a refinery went into operation, and Guangzhou Petrochemical and other subsidiaries also completed energy expansion in succession. In this shift, BP's refining capacity dropped from third to fourth in the world.
- The petrochemical industry boom drives related industries
The rise in oil prices and the increase in demand in recent years have greatly improved the prosperity of the petrochemical industry, and has also prospered the development of petrochemical-related transportation, warehousing and engineering construction industries. The growth of global trade in petroleum and chemical products has greatly driven the construction of large-scale shipping and oil and chemical storage facilities.
In addition, the prosperity of the petrochemical industry has stimulated investors to build a large number of chemical projects, making the engineering construction market enter its heyday. According to estimates, this trend will start from 2004 and will continue until around 2009. Due to the abundant cheap raw materials in the Middle East and the huge market in China, the world's oil and chemical companies have invested more and more in chemical projects in these two regions.
- High oil prices give birth to alternative strategies for oil
High oil prices have given rise to the development of alternative energy sources. In this context, wind power, solar energy, hydrogen energy, fuel cells, and biomass oil production have become hot topics. Among them, the most closely linked with the traditional petrochemical industry are natural gas synthetic oil (GTL), biomass oil (BTL) and coal-to-oil (CTL).
Countries such as the United States and Japan have begun to develop alternative energy technology industries. Japanese companies currently occupy a leading position in the hybrid power industry, while US companies are vigorously developing fuel ethanol.
The Chinese government has also started an alternative energy strategy. In Shanxi, Shandong, Yunnan, Sichuan and other places, pilot studies have been started on the use of methanol fuel as a substitute for gasoline. The use of vehicles has been promoted in all five provinces of Heilongjiang, Jilin, Liaoning, Henan, and Anhui, and in parts of Hebei, Shandong, Jiangsu, and Hubei. Gasoline gasoline. In addition, large-scale coal-based methanol, dimethyl ether, coal-to-liquids, and new-type coal chemical projects have also started to start.
China's coal resources are abundant. Compared with the current oil price level, it is economically feasible to develop coal-to-oil and coal-to-olefin projects. To this end, companies represented by Shenhua, Yankuang, Shanxi Panan, and China Coal have started projects.
- M&A and restructuring highlight three major features
In 2006, the global petrochemical industry was still active in mergers and acquisitions, and demonstrated three distinct characteristics: the direct participation of financial companies, the active participation of European companies, and the acceleration of the pace of Chinese companies.
Different from previous financing partners for M&A transactions, some financial companies have directly participated in mergers and acquisitions in the chemical industry in the past two years. In September 2006, GE announced that it had signed an agreement with Apollo Investment Corp. to sell its GE GE Advanced Materials Group, which includes silicone and quartz, with a transaction value of US$3.8 billion.
Europe is the most active region for mergers and acquisitions, among which Germany is the most prominent. The biggest deal in 2006 was Linde Gas Germany's acquisition of the British Oxygen Corporation (BOC) for $16.4 billion, consolidating its leading position in the industrial gas industry. Other important deals that German companies are involved in are BASF's purchase of catalyst company Engelhard, and BASF's acquisition of Degussa's construction chemicals business.
Since 2005, large Chinese companies have begun to accelerate the pace of “going global†and have entered the overseas oil and gas markets with mixed success. In 2006, ChemChina successfully completed the acquisition of three overseas chemical operations.
- EU REACH received final approval
On December 18, 2006, the EU formally signed the "Registration, Evaluation and Licensing of Chemicals" (REACH) in Brussels, which marked the final approval of the controversial EU chemicals policy in three years and will be adopted in June 2007. The formal implementation of the law. EU chemicals policy is actively and steadily progressing.
Although the EU’s chemicals policy has caused many worries in the industry, including the increase in the cost of chemical companies, the increase in the number of unemployed people in the chemical industry, and the increase in the prices of chemical products, the European Union’s attitude towards the implementation of this policy is unwavering. REACH will conduct safety monitoring on about 30,000 common chemicals through registration, evaluation and licensing. According to regulations, companies must register chemicals produced by their new competent authority in Helsinki, Finland and list their potential hazards. Related products can only enter the EU market after they are licensed.
——Increase in influence of Middle East and Chinese companies
The use of raw materials and the advantages of the market to attract foreign capital, respectively, has seen the development of the petrochemical industry in the Middle East and China in recent years. However, after entering 2006, the data shows that the scale and influence of local companies in these two regions have also been greatly improved. The ethylene production capacity in the Middle East has exceeded 10 Mt/a, making it one of the important petrochemical production centers in the world. In addition to local oil extraction and the construction of downstream installations, some Middle Eastern companies have also developed foreign investment projects. Saudi Aramco is the world's largest oil company. The company and Exxon Mobil jointly participated in a large-scale ethylene project in Fujian, China. The performance of Saudi Basic Industries Corporation (SABIC) in recent years shows its desire to expand globally.
China has become the second largest consumer of chemicals after the United States and the second largest ethylene producer in the world. Thanks to the demand driven by economic growth, China's large-scale petrochemical enterprises have achieved extremely rapid growth in recent years. PetroChina is the largest oil producer in Asia. Sinopec Corp. has become the largest refinery in Asia and the seventh largest chemical company in the world. CNOOC, through the construction of refineries and ethylene plants, is also expanding its scale to become an integrated petrochemical company. In addition, large companies including PetroChina, Sinopec, CNOOC, and China National Chemical Industry Group have accelerated the pace of overseas acquisitions and business restructuring, and their influence in the industry is increasing day by day.
——Inflection point in international oil prices
Throughout 2006, the price of oil rose and then fell and turned a corner, but still hovered at high levels. In 2006, the average price of WTI crude oil futures was approximately US$66/barrel, which was US$9 higher than in 2005. At the end of 2006, although the price of oil fell back, it still hovered around $60/barrel.
During this period, OPEC's package price has been higher than US$50/barrel for a long time, which has brought great benefits to OPEC members. At the same time, OPEC also hopes to maintain long-term stability in oil prices and a balance between supply and demand. Because excessive oil prices will stimulate the development of alternative energy industries, it will also affect the growth of the global economy, which will be detrimental to the long-term development of oil prices and OPEC organizations. In order to further increase its market share and influence in the international market, the organization has begun preparations for the absorption of new members, and applications for membership of OPEC include Angola, Sudan and Ecuador.
——The impact of oil prices on upstream and downstream industries varies
The high oil price operation has brought huge profits to upstream companies, while the non-integrated petrochemical and chemical companies that do not have upstream oil and gas resources have caused significant cost increases and severely damaged profits.
The average price of oil in 2006 increased by 16% compared with 2005, which brought huge profits to the upstream oil companies. In the 2006 Fortune 500 expulsion from the US "Fortune" magazine, the oil giants occupied an important position on the list. Among them, ExxonMobil ranked first in the world. The two domestic companies, Sinopec and PetroChina, have also improved their rankings.
The rise in oil prices has significantly increased the raw material costs of petrochemical companies, while the impact of integrated companies with oil and gas resources is relatively small. Take polyolefin manufacturers as an example. Most of these companies are integrated refining and chemical companies, which have strong market power and price transferability, and are therefore less affected. Other chemical production enterprises that do not have upstream resources have a greater impact, especially those manufacturing companies such as PVC and PS. A typical example is the decline in the performance of Shantou Ocean First Polybenzene Co., Ltd., a well-known PS manufacturer in China, and it was acquired by South Korean SK Group.
——Refining industry continues to develop steadily
In 2006, the global refining industry continued to develop steadily. As of the end of 2006, total refining capacity reached 42,600 Mt/a. Compared with 2005, it increased by 6.8 Mt/a. The once crude oil processing capacity reached a record high, and the total number of global refineries remained relatively stable.
As far as the region is concerned, the growth in the Asia Pacific region is relatively rapid, and the refining capacity has increased by 5.25 Mt/a. North America, Eastern Europe, and the Middle East also experienced slight growth, while refining capacity in other regions such as Africa, Western Europe, and South America declined.
Among major refinery companies, Exxon Mobil and Shell rank among the top two in refining capacity. Sinopec, the largest refiner in Asia, ranks third in the world, while another Chinese company, China National Petroleum Corporation, ranks ninth.
In December 2005, BP sold its subsidiary Billion Connell to Ineos for $9 billion. The transaction included BP's two refineries in Scotland and France, with a total capacity of nearly 20 Mt/a. In 2006, Sinopec Hainan Refinery's 8 Mt/a refinery went into operation, and Guangzhou Petrochemical and other subsidiaries also completed energy expansion in succession. In this shift, BP's refining capacity dropped from third to fourth in the world.
- The petrochemical industry boom drives related industries
The rise in oil prices and the increase in demand in recent years have greatly improved the prosperity of the petrochemical industry, and has also prospered the development of petrochemical-related transportation, warehousing and engineering construction industries. The growth of global trade in petroleum and chemical products has greatly driven the construction of large-scale shipping and oil and chemical storage facilities.
In addition, the prosperity of the petrochemical industry has stimulated investors to build a large number of chemical projects, making the engineering construction market enter its heyday. According to estimates, this trend will start from 2004 and will continue until around 2009. Due to the abundant cheap raw materials in the Middle East and the huge market in China, the world's oil and chemical companies have invested more and more in chemical projects in these two regions.
- High oil prices give birth to alternative strategies for oil
High oil prices have given rise to the development of alternative energy sources. In this context, wind power, solar energy, hydrogen energy, fuel cells, and biomass oil production have become hot topics. Among them, the most closely linked with the traditional petrochemical industry are natural gas synthetic oil (GTL), biomass oil (BTL) and coal-to-oil (CTL).
Countries such as the United States and Japan have begun to develop alternative energy technology industries. Japanese companies currently occupy a leading position in the hybrid power industry, while US companies are vigorously developing fuel ethanol.
The Chinese government has also started an alternative energy strategy. In Shanxi, Shandong, Yunnan, Sichuan and other places, pilot studies have been started on the use of methanol fuel as a substitute for gasoline. The use of vehicles has been promoted in all five provinces of Heilongjiang, Jilin, Liaoning, Henan, and Anhui, and in parts of Hebei, Shandong, Jiangsu, and Hubei. Gasoline gasoline. In addition, large-scale coal-based methanol, dimethyl ether, coal-to-liquids, and new-type coal chemical projects have also started to start.
China's coal resources are abundant. Compared with the current oil price level, it is economically feasible to develop coal-to-oil and coal-to-olefin projects. To this end, companies represented by Shenhua, Yankuang, Shanxi Panan, and China Coal have started projects.
- M&A and restructuring highlight three major features
In 2006, the global petrochemical industry was still active in mergers and acquisitions, and demonstrated three distinct characteristics: the direct participation of financial companies, the active participation of European companies, and the acceleration of the pace of Chinese companies.
Different from previous financing partners for M&A transactions, some financial companies have directly participated in mergers and acquisitions in the chemical industry in the past two years. In September 2006, GE announced that it had signed an agreement with Apollo Investment Corp. to sell its GE GE Advanced Materials Group, which includes silicone and quartz, with a transaction value of US$3.8 billion.
Europe is the most active region for mergers and acquisitions, among which Germany is the most prominent. The biggest deal in 2006 was Linde Gas Germany's acquisition of the British Oxygen Corporation (BOC) for $16.4 billion, consolidating its leading position in the industrial gas industry. Other important deals that German companies are involved in are BASF's purchase of catalyst company Engelhard, and BASF's acquisition of Degussa's construction chemicals business.
Since 2005, large Chinese companies have begun to accelerate the pace of “going global†and have entered the overseas oil and gas markets with mixed success. In 2006, ChemChina successfully completed the acquisition of three overseas chemical operations.
- EU REACH received final approval
On December 18, 2006, the EU formally signed the "Registration, Evaluation and Licensing of Chemicals" (REACH) in Brussels, which marked the final approval of the controversial EU chemicals policy in three years and will be adopted in June 2007. The formal implementation of the law. EU chemicals policy is actively and steadily progressing.
Although the EU’s chemicals policy has caused many worries in the industry, including the increase in the cost of chemical companies, the increase in the number of unemployed people in the chemical industry, and the increase in the prices of chemical products, the European Union’s attitude towards the implementation of this policy is unwavering. REACH will conduct safety monitoring on about 30,000 common chemicals through registration, evaluation and licensing. According to regulations, companies must register chemicals produced by their new competent authority in Helsinki, Finland and list their potential hazards. Related products can only enter the EU market after they are licensed.
——Increase in influence of Middle East and Chinese companies
The use of raw materials and the advantages of the market to attract foreign capital, respectively, has seen the development of the petrochemical industry in the Middle East and China in recent years. However, after entering 2006, the data shows that the scale and influence of local companies in these two regions have also been greatly improved. The ethylene production capacity in the Middle East has exceeded 10 Mt/a, making it one of the important petrochemical production centers in the world. In addition to local oil extraction and the construction of downstream installations, some Middle Eastern companies have also developed foreign investment projects. Saudi Aramco is the world's largest oil company. The company and Exxon Mobil jointly participated in a large-scale ethylene project in Fujian, China. The performance of Saudi Basic Industries Corporation (SABIC) in recent years shows its desire to expand globally.
China has become the second largest consumer of chemicals after the United States and the second largest ethylene producer in the world. Thanks to the demand driven by economic growth, China's large-scale petrochemical enterprises have achieved extremely rapid growth in recent years. PetroChina is the largest oil producer in Asia. Sinopec Corp. has become the largest refinery in Asia and the seventh largest chemical company in the world. CNOOC, through the construction of refineries and ethylene plants, is also expanding its scale to become an integrated petrochemical company. In addition, large companies including PetroChina, Sinopec, CNOOC, and China National Chemical Industry Group have accelerated the pace of overseas acquisitions and business restructuring, and their influence in the industry is increasing day by day.
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