The Impact of Feedstock:

Changes on Latin America

Prepared Exclusively for

Congreso Argentino de Petroquimica
Junio 14, 2016

Centro Costa Salguero

Buenos Aires, Argentina

1
 Latin America – 3 Regions on 2 Continents With
Significant Potential
• Large market with 640 Million of North
finished goods consumers America
• Mid America: MEX, VEN, COL

• East of Andes: BRA, ARG

• West of Andes: CHL, PER

% GDP Growth
12,5 Latin America
10,0
7,5 World
5,0
Brazil
2,5
0,0 Mexico
-2,5
-5,0 Argentina South
-7,5 Venezuela America
-10,0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Colombia

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Energy Flows in Petrochemicals
Most of the World Including Brazil

Fabricated Products
Oil  Naphtha  Ethylene

Derivatives & Other

North America/Mexico/Argentina & Middle East
Natural Gas  Ethane  Ethylene
Natural Gas  Electricity

China
Coal  Petrochemicals
Coal  Electricity

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 State of the Industry in Latin America

Demand Supply Earnings

Reacting to Competitive Feedstock in Mixed bag. Currency
swings and uneven NAM forces investment exchange favors
economic growth reconsideration –
delays/Cancellations. companies exporting
but erodes margins of
Lower crude Oil Prices those importing.
affects growth.
Shale continues to re-define the
Industry
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Oil and Gas - Winners and Losers
2015 - Oil and Gas Exports vs Total Exports
(Billion US$)
LA Production of Oil and NGL Liquids
Total Exports
All Others
9% Argentina Oil & Gas
6% 500
Mexico
381 400
Colombia 25%
10%
300

Venezuela 191
200
Brazil 25%
25%
43 100
57
36 41
21
2 14 15 7 18 4 9
0

Total in 2015: 10.30 MMBPD

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Oil and Gas - Winners and Losers

Electricity Generation by Sources 2015

Others Others Hydroelect

Nuclear 9,9% Nuclear 9,5% 11.4%
2,3% 3,6%
Oil
3,8%
Oil Coal
Gas 13,0%
Hydroelect 11,7%
9,6%
Coal 69,8%
3,4% Gas
50,2%

Brazil Mexico

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Oil and Gas - Winners and Losers
Brazil Naphtha Scenario in 2015

Brazil Ethylene Raw Materials Brazil Petrochemical Naphtha Imports in 2015

Ethanol Total of 4.92 MM-tons
Ref Gas 5%
3%
Algeria 7%
E/P
Venezuela
13% 4% 3%
United States
6%
Spain
41%
Argentina 7%
Mexico
Morocco 7%
Peru
Others 9%
Naphtha
79% 16%
Total Naphtha Demand in 2015 was close to 9 MM-tons
Total Ethylene Capacity: 3.95 MMTA Over 50% of this fulfilled with imported naphtha
© 2016 IHS. ALL RIGHTS RESERVED.
 Demand for Petrochemicals • Demand will continue to grow albeit
Latin America slower.
2016 • Import substitution will continue as
currencies weaken.
• Locally produced end use products
become attractive to export markets.
• Agriculture, AeroSpace, Automotive
will show robust growth in Mexico.
Pulp and Paper in Brazil, and E/P in
Argentina for Example.

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 State of the Industry
Latin America
2016

• Basic Petrochemical Overview

• Trade
• Self Sufficiency

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 Chemical Industry Trade Balance: Changed in 2016
Brazil & Mexico Trade Deficit

2007 2008 2009 2010 2011 2012 2013 2014 2015

0
-13,3 -15,7
-10 -23,2 -20,6
-26,5 -28,1 -25,4
-32,0 -31,2
Billions US$

-20 -8,9
-11,9
-30 -10,1
-17,1
-40 -16,5
-19,1 -20,5
-19,5 -21,4
-50

-60
Brazil Mexico
Source: IHS © 2016 IHS

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 Latin America Resins Consumption Potential
Kg. per Capita
Polyethylene Polypropylene
45 20
40 18
35 16
14
30
12
25 Argentina
10
20 Brazil
8
USA
15
6
10 4
5 2
- -
2014 2015 2014 2015

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 Latin America Plastics Net Trade

Plastics Net Trade (PE/PP/PVC/PS/EPS/PET)

7,0 48,0

Net Trade as a % of Prod.

6,0 46,0
Net Trade, MMT

5,0 44,0
4,0 42,0
3,0 40,0
2,0 38,0
1,0 36,0
0,0 34,0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Plastics Net Trade Net Trade as a % of Production
Source: IHS © 2016 IHS

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 Latin America PE Net Trade (Includes Mexico)

3,5 85,0

Net Trade as a % of Prod.

3,0 80,0
Net Trade, MMT

2,5 75,0
2,0 70,0
1,5 65,0
1,0 60,0
0,5 55,0
0,0 50,0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PE Net Trade Net Trade as a % of Production
Source: IHS © 2016 IHS

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 A Steady Decrease in Latin America Polyolefins Self-Sufficiency

Polyolefins Self-Sufficiency
100%
Percentage of Demand

80%
-15%
60%
5%
40%
Opportunity for more integrated
20% Americas net trade and
L. America investments
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PE Production as % of Demand PP Production as % of Demand
Source: IHS © 2016 IHS

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  Mexico, first to enjoy additional capacity with attractive feedsotck.
Take Away Braskem/Idesa start up of 1 million tons of ethylene in March 2016.
Growth in Agriculture/Aerosapce/Automotive industries.
Latin America 2016
 Argentina’s potential for additional ethane/propane/naphthas is
increasing with Vaca Muerta and new Political/Economic environment.
Will take time but it is moving in the right direction.

 Peru’s newly elected president will offer good business opportunities

to increase production capacity based on methane/ethane availability.

 Bolivia is expected to develop its natural gas reserves. PDH unit and
PP capacity should be the first to come on-stream. However, not
sooner than 2020.

 Colombia’s investment in refinery will allow for additional propylene

and in Venezuela: resolving political and economic debacle will take
priority over petrochemical expansions.

 Brazil’s economic recession and political turmoil will delay future

investments in Pre Sal and other expansions. Meanwhile, Investments
will adjust feedstock slate to improve competitiveness. Export oriented
business continues to grow.

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 Presentation Name / Month 2016

To Close

Each country will be affected in very different ways.

One common denominator: A Quest for a Competitive
Feedstock slate that will re-shape production to
supply the Region.
Thank You!
Rina Quijada
Sr. Director Latin America

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LAPPC 2016:
6th Annual Latin American Petrochemicals
& Polymers Conference
November 18-19, 2016
Sheraton Buenos Aires & Convention Center
Buenos Aires, Argentina
© 2016 IHS. ALL RIGHTS RESERVED. 17