I. Current Status of Shale Gas Development in the United States In recent years, with the breakthrough of shale gas mining technology, the US shale gas industry has achieved vigorous development. From the proven reserves, the total reserves of shale gas resources in the United States is about 30.41 trillion cubic meters, and the technology developable capacity is more than 24 trillion cubic meters. Currently, more than 20 shale gas has been discovered and implemented in the United States. Block. In terms of shale gas production, US shale gas production increased from 36.614 billion cubic meters in 2007 to 118.647 billion cubic meters in 2011, an increase of about 2 times, and shale gas accounted for 6.7% of total North American natural gas production. Increase to 18%. On the other hand, the proportion of shale gas in the US natural gas consumption has increased from 1% in 2000 to around 30% in 2011, and has increased nearly 30 times in 11 years. The success of the US shale gas revolution has caused the absolute price level of natural gas and the relative price relative to oil to fall, and the natural gas/oil price ratio has fallen from 12% a few years ago to the current 2%. The US Energy Information Administration predicts that shale gas will continue to develop and play a more important role in the next 30 years, accounting for 47% of total natural gas production. Figure 1: US natural gas annual production and demand (1 billion cubic feet) The US shale gas industry has achieved such a successful record, not only with its technical factors, but also with its shale gas structure characteristics. US shale gas has moderate burial depth (mostly 180-2000 m), large single layer thickness (30-50 m), total thickness over 500 m, high matrix permeability (greater than 100 mD), and moderate maturity (Ro 1.4%~3.5%), large organic carbon content (greater than 2%), good shale brittleness (silicon content greater than 35%), and most of the shale gas rich areas in the United States are distributed in the central plains, which are sparsely populated and far away. The economic development of the coastal areas and the concentrated population of the population will facilitate the construction of a series of mining activities such as roads, motorized transportation and drilling, and large-scale land occupation, which is convenient for developers to enter. These features provide good natural conditions for the development of shale gas. With the success of the US shale gas revolution, its effects have gradually penetrated into various industries in the United States, which has had a profound impact on the high-energy chemical industry. We believe that with the explosive growth of shale gas production in the United States, its industry for the chemical industry is mainly reflected in two aspects. One is that the chemical industry, which is mainly composed of methane and ethane in shale gas, will be low-priced raw materials. The establishment of a strong cost advantage; the second is due to the substitution effect of low-cost natural gas on coal, resulting in a decline in electricity prices, which will create a strong cost advantage for the high-energy chemical industry. The production of ethane gas in North America has also experienced explosive growth in the past few years. The production of ethane gas has increased from 51.9 million tons in 2008 to 64.38 million tons in 2011, and the compound growth rate has reached 5.53% in four years. In the next five years, ethane supply will continue to grow at a high rate due to the increased production capacity of the ethane fractionation unit and the enhancement of NGL pipeline transportation capacity. Most of the new production capacity of the ethylene cracker will be concentrated after 2017, so in the future. The pattern of oversupply of ethane in the past five years will exist for a long time, which will continue to maintain the cost advantage of the US ethylene industry. From the current global distribution of ethylene production costs, Northeast Asia naphtha-based ethylene producers are at the upper end of the global ethylene production cost curve, and its production cost is about $1330/ton; while the US ethane-based ethylene producer is cheap because of its low cost. The ethane price has formed a huge cost advantage, and its production cost is only about US$500/ton, which is about 62% of the cost of naphtha-based ethylene production in Northeast Asia. Therefore, in the next few years, with the exploitation and production of rich shale gas in North America, the United States will continue to benefit from the significant low cost advantage of ethane dehydrogenation to ethylene, which makes the ethane cracking process in North America highly competitive. Advantage. Figure 3: North American ethane production (thousands of barrels per day) At the same time, the shale gas revolution accelerated the pace of replacing low-cost natural gas in the United States as a raw material for power generation. The share of coal-electricity fell sharply from 52% in 2005 to 2011. At 43.3% of the year, the proportion of gas and electricity increased gradually from 19% in 2005 to 25% in 2011. And this situation continues. In the 2011-2015 US newly planned power plants, coal-fired fuels accounted for 19.03%, 18.31%, 2.42%, 6.28%, and 0.49%, respectively, while natural gas-fired power plants The average proportion of the 11-15 years of planning reached 54%. Low natural gas prices have reduced the cost of electricity production in the United States. In the past three years, the cost of industrial electricity in the United States has remained roughly the same, with an average increase of 6% in the past five years. In the EU, the electricity price has increased by an average of 2.3% and 7% respectively; the current US electricity price is only 75% of China's electricity price. We believe that due to the shale gas revolution, US natural gas prices will remain low in the next few years, which will gradually spread the US power cost advantage to the high-energy-consuming chemical industry, thereby reducing the cost of high-energy-consuming chemical products and improving their competitiveness. Figure 5: US power generation raw materials accounted for
2. The transmission mechanism of
US shale gas to China's olefin industry gradually spread to the chemical industry with the US shale gas revolution effect, which will have a long-term impact on China's chemical industry. We believe that It may affect the overall industry of general-purpose resins (polyolefins and PVC) in China through three channels. The first way is that China draws on the experience of shale gas development in the United States to form its own shale gas industry, which will cause the natural gas price to drop sharply in the US version, thus reducing the overall cost level of the chemical industry. However, China’s shale gas development is still at present. In the primary stage, combined with the complexity of China's shale gas stratum structure and the limited capacity of pipeline transportation, it is difficult to form a leap-forward development in the short term. Therefore, this approach is more reflected in the long-term impact of the next 10-20 years and even longer. . The second approach is reflected in the process of replacing natural gas and oil with natural gas in the United States, which has led to a decline in the price of international coal and oil, which affects the cost of domestic coal-to-olefins and naphtha to ethylene. We believe that ethylene is produced in ethylene by naphtha. The production cost is in the upper range. Therefore, even if the oil price declines, it will still be in a competitive situation. The relatively low cost of coal-to-olefins may be the future development of China's ethylene industry, taking into account the production cycle of coal-to-olefin production capacity. Therefore, the impact of this route is more reflected in the medium and long term (5-10 years). The third route is to influence the price of domestic related chemicals through the import substitution effect of ethylene and downstream polyethylene and polyvinyl chloride. Although the current import of polyethylene and polyvinyl chloride from the United States is relatively low, In recent years, the success of the US shale gas revolution has gradually demonstrated its competitive advantages in chemical products. The growth rate of imports in China has increased rapidly, so this may be a short-term direct impact on China's chemical industry. Therefore, we will focus on the impact of the third route on China's olefin industry.
III. Analysis of import substitution effects of
polyethylene and PVC From the analysis logic of import substitution effect, we believe that there are three main factors affecting the import substitution effect. First, whether the domestic production capacity of the importing country can meet its domestic demand. The second is the status of the exporting country in the commodity in the importing country, and the third is whether the exporting country has a sufficient amount of product exports. Therefore, we will also analyze the import substitution effect of LLDPE and PVC from these three aspects. For LLDPE, the current domestic production capacity is about 4.1 million tons, and its operating rate can be maintained at 80-90%. In 2012, China's LLDPE capacity is expected to increase by about 1 million tons (including full-density production lines), but the actual production is only about 300,000 tons. The current ratio of domestic production to imports is about 6:4, so imports are in the supply of LLDPE. Take a more important position. Secondly, the total import of LLDPE in China in 2011 was 2,457,100 tons, mainly from Saudi Arabia, the United States, South Korea and neighboring countries in Southeast Asia. In terms of absolute quantity, US imports have maintained rapid growth, and imports have increased from 136,700 tons in 2005 to around 320,000 tons in 2011. From the perspective of the status of importing countries, the United States is China's second largest source of LLDPE imports, accounting for about 13% of total imports, accounting for 6% of China's apparent consumption. Therefore, from this perspective, the US shale gas revolution will be against China. The LLDPE industry has had a major impact. However, the current factors restricting US imports to enter the Chinese market are mainly from domestic production capacity. Since 2006, the domestic LLDPE capacity expansion has been limited, basically maintaining around 4.4 million tons, and by 2017, the US no capacity expansion plan. Therefore, the new increment of LLDPE in the United States is limited, which will greatly reduce the impact of its low-cost price on the Chinese LLDPE industry. Figure 7: China LLDPE capacity and production For PVC, the current pattern of overcapacity in China is difficult to change in the short term. Since 2005, China's PVC plants have been intensively put into operation. In 2011, the production capacity has reached 21.622 million tons/year, and the annual average capacity increase rate is close to 10%. In sharp contrast, the operating rate is always between 50% and 60%; in 2012, China's PVC capacity is expected to continue to increase by 4.98 million tons, but the output growth rate is obviously behind the capacity expansion rate, and the future PVC capacity utilization rate is expected. It will continue to be between 50% and 60%, so we can be sure that domestic production capacity is sufficient to meet demand. Secondly, in 2011, China's total PVC imports totaled 1.05 million tons, mainly from the United States, Japan, and Taiwan. Among them, the absolute amount of imports in the United States maintained rapid growth, and the import volume increased from 62,000 tons in 2008 to 364,000 tons in 2011, accounting for an increase from 7.7% to 35%. However, due to the total consumption of 14 million tons in China's PVC industry, imports from the United States account for a very small proportion, accounting for only 2.7% of the overall domestic demand, so the overall impact of US imports on the Chinese PVC industry in the short to medium term is limited. In addition, the US PVC industry will basically have no capacity expansion plan in the next 3-5 years, the production capacity will be maintained at around 8 million tons, and the capacity utilization rate will remain at 85-90%. Despite the advantages of cheap ethylene, the US exports of PVC have been growing since 2006, and the proportion of exports to total production has rapidly increased from 12% in 2006 to 47% in 2011. However, due to limited new capacity and US domestic demand recovery, its exports increased. The speed will gradually slow down, and we expect the export ratio to remain at around 45%. Therefore, from the export incremental point of view, the US PVC export potential is limited, which will greatly reduce its impact on China's PVC industry. In general, subject to the supply and demand structure of PVC industry in China and the United States, the short-term impact of US PVC on China's PVC industry is limited. Figure 9: China's PVC capacity and output
IV. Conclusion The US shale gas revolution has had a long-term impact on the US chemical industry, and the US chemical industry is likely to set off a new round of recovery. In the long run, the cost advantage of ethane-based ethylene in the United States will exist for a long time in the future, which will form a long-term suppression of global ethylene prices. However, in the short-term, due to the slow expansion of downstream polyethylene and PVC capacity in the United States, the new incremental growth will limit the expansion of its low-cost advantage to a large extent. In general, the spillover effects of the US shale gas revolution are more reflected in the long-term and limited short-term effects.
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