Asian Petrochemical Industry according to NEXANT

Clive Gibson, Vice President, Asia Energy & Chemicals Advisory and Johan Vandebeek, Senior Analyst NexantThinking, APAC from NEXANT share their views on the Asian Petrochemical Industry

Your company is widely known for providing independent & expert consulting services in a lot of industries, incl. Downstream Oil & Gas and Chemicals ones. Please share with us what are the company’s current industry projects focused on Asia region?

Nexant’s consulting expertise covers the entire Energy & Chemicals business via provision of strategic planning, technical, commercial and environmental advisory support to industry participants as well as financial institutions. Nexant continues to be involved in supporting several major new investment projects across the Asian region covering gas, refining and petrochemicals, whilst it is also actively involved in providing M&A transaction support to clients seeking to expand their businesses by acquisition.

Which are the main directions your company has chosen to focus on to navigate through the turbulent times the industry is going through at present?

Nexant has several decades experience within the Energy & Chemicals sector and hence, it is deeply familiar with trends of industry volatility and cyclicality. Leveraging this knowledge, Nexant is able to help its clients understand the potentials risks and opportunities that such trends offer. This may include areas such as strategic planning, investment evaluation and support, either in new projects or acquisition opportunities.

In your opinion, what are the main challenges industry players in Asia are facing nowadays?

Key industry challenges continue to be driven by market uncertainties which are generally outside the direct control of the industry itself. For example, global political and economic challenges such as BREXIT and its broader impact across Europe, U.S. elections, Chinese economic growth factors, etc. Meanwhile oil price volatility continues to create an uncertain business climate which has directly impacted cash flows available for ongoing investment amongst major global players, including prospects for some Asian projects.

One of NEXANT’s key areas of expertise in Chemicals industry include: Aromatics & Aromatic Derivatives. In your opinion, what does Asian expansion mean for the aromatics markets?

A major trend that the aromatics industry has witnessed over the past several years is self-sufficiency. Asian players have heavily invested in benzene and para-xylene derivatives, including styrene, phenol, caprolactam, adipic acid, MDI and PTA, to replace import requirements. This as a result puts some pressure on export-oriented facilities in other parts of the world.

You both are among the respected speakers at the upcoming ASIA-TECH: Asia Downstream Technology Forum. Which trends would you expect to drive development of the industry in Asia?

Fundamental industry growth drivers will continue to be linked to macro-economic growth, rising end use demand which is influenced by fundamentals such as growth in consumer wealth and population in developing economies.

- China will continue to be a major influence on industry dynamics given its size, particularly in terms of the impact of economic growth on domestic demand, and the balance between domestic industry investments versus reliance on imports;

- India, Indonesia and other emerging markets such as Vietnam will continue to offer investment opportunities based on local market dynamics;

- Meanwhile, oil price volatility and its impact on industry profitability and competitiveness will continue to drive business activities around the world. Although many Asian industry players tend to be impacted as buyers rather than producers, producer cash flows will also impact their appetite to jointly invest in future Asian projects;

- On the aromatics side there are two contrary evolutions. The benzene market is expected to tighten gradually due to limited supply from steam crackers inflicted by the change towards lighter feedstocks, whereas the paraxylene market is projected to experience another supply wave. New paraxylene capacity is coming onstream in the Middle East and Asia Pacific, together with the restart of world-scale production plants that experienced production problems in 2015-2016. It is anticipated that non-integrated players with sub-scale facility and high dependency on export markets will be in the most vulnerable position. The main challenge is that benzene is typically considered as by-product from steam crackers or paraxylene complexes.

What are the main issues you are going to address in your presentations at the ASIA-TECH 2016 conference?

Within the context of ongoing market volatility and uncertainty, we will take a look at recent market developments, its impact on profitability and competitiveness of the industry and prospects for the regional investment climate.

We will also have a closer look at the impact from the changing aromatics landscape on trade flows, production mix and the challenges lying ahead.

What are your expectations from NEXANT’s participation at the ASIA-TECH 2016?

ASIA-TECH2016 is a well-established event which has been regularly supported by NEXANT as it consistently brings together a diverse mix of industry operators, technical service providers and other industry participants. We very much look forward to supporting the event once again.