US ExxonMobil bullish on global chem demand – Aguiar

GALVESTON, Texas (ICIS)–ExxonMobil remains optimistic about  long-term global chemical demand growth, a senior executive for the US-based international energy and petrochemicals major said on Wednesday.

In fact, demand growth will be so strong that the world requires four new petrochemical complexes each year in order to keep up, Matt Aguiar, senior vice president of ExxonMobil Chemical, said in a speech at the IHS World Petrochemical Conference.

This long-term demand growth was “the bigger picture” for the chemical industry – rather than the decline and volatility in oil prices since mid-2014, he said.

“ExxonMobil sees global ethylene-production volumes reaching about twice today’s levels by 2040,” Aguiar said.

“That growth is faster than energy demand,” he said.

Nearly two-thirds of chemical demand growth will come from developing countries, he said, with 50% coming from China alone.

“More than anything, demand for chemicals will be driven by rising living standards and middleclass growth in developing countries,” Aguiar said.

In the coming decades, an estimated 3bn people are expected to move out of poverty and into the middle class, he said.

“This middle-class growth will drive demand for products such as cars, appliances and other consumer goods, which increasingly require plastics and other chemicals,” he said.

A part of this increased global demand would be met through exports from the new petrochemicals complexes currently being built on the US Gulf coast – including ExxonMobil’s new 1.5m cracker at Baytown, Texas, which is due to be completed in 2017, he said.

Furthermore, with the demand growth, the production of chemicals would play an ever larger role in the global energy sector, he said.

Chemicals accounted for only a relatively small share of the global energy market 30 years ago, he said.

Now, the production of chemicals accounts for about 15% of global oil demand and 10% of natural gas demand – and includes more than 45% of the demand for natural gas liquids (NGLs), he said.

“To put that in perspective, the amount of energy used by the chemical industry is now equal to the energy used by all the world’s cars and other light-duty vehicles,” he said.

“This means that now more than ever, energy and chemical markets are inextricably linked. What affects one, affects the other,” he said.

As for the current oil price volatility, Aguiar said: “Volatility and uncertainty are not the exception, they are the norm” in the petrochemical industry.

“We must look past short-term volatility in energy markets to see the bigger picture,” he added.

At the same time, the industry could not assume that today’s advantaged feedstock will maintain that advantage forever – even a feedstock as game-changing as shale gas, he said.

Nevertheless, shale was clearly an advantage for the US petrochemicals industry, and the “changing oil prices have not changed the fact that shale production technologies have unlocked an abundant long-term supply of natural gas in the region”, he said.

US gas production has grown by 45% over the past six years, and the country has a nearly 100-year natural gas supply – a supply base that is still growing, he said.

Also, shale-drilling technologies are applied to tight oil, he added.

“Because of the rising tide of tight oil, natural gas and NGLs, ExxonMobil sees North America’s feedstock and energy costs remaining among the lowest in the world,” he said.

Meanwhile, demand for NGLs as feedstock for chemical production should rise by about 125% through 2040, compared with 70% demand growth for naphtha, he said.