Petroleum Webinar Held by İKMİB

Istanbul Chemical Substances and Products Exporters Association (İKMİB) held a webinar titled "Analysis of Oil Market and Oil Price Formation, Effects on the Chemical Sector" on 4 June 2020 via video conference on Zoom. The webinar covered the development of global energy sources, fundamental dynamics of the oil sector, oil price formation and analysis of coronavirus impact on prices, reflection of energy source changes on the chemical sector, how oil prices reached minus USD 40.32 per barrel, and sector future expectations. Organized by İKMİB to inform its members about recent developments in the energy market, the webinar was held with the participation of İKMİB Board Chairman Adil Pelister and Dr. Mevlüt Çetinkaya, Petrochemistry Marketing Manager of SOCAR Turkey Refinery and Petrochemistry Business Unit.

Adil Pelister: "The chemical sector needs to scale up"

İKMİB Board Chairman Adil Pelister, who delivered the opening speech of the webinar, said that the country was going through a difficult period due to the pandemic, that normalization had begun as of June, that noticeable improvement would be felt from the coming months onward, and that they believed they would match past years' performance. Recalling that the chemical sector displayed successful performance in 2019, Pelister said, "Our chemical sector in particular reached the position of Turkey's second largest exporting sector with USD 20.6 billion in exports. The largest share in our exports was held by the petrochemistry, plastic and plastic products group. Therefore, the main topic of this seminar is of great importance. Due to the downsides brought by Covid-19, almost all sectors applied the brakes. Our sector was also negatively affected. However, with the measures taken by our government, particularly through credit opportunities to ease the burden on our companies, and with the determination of our people, I believe we will get through this process. I believe that in this period we need to invest in matters of greater importance in our exports in order to scale up. While making these investments, we expect our government to stand by us and for the announced support to continue and increase. I hope our chemical sector and its sub-sectors will enter a successful period in this regard."

"I believe we will reach USD 20 billion in chemical exports in 2020"

Stating that the negative atmosphere has now lifted and that with normalization in both our country and EU countries which account for half of our exports, exports will increase, Pelister said, "The European Central Bank announced an additional package of EUR 600 billion in support measures and the total support package value was increased to EUR 1 trillion 350 billion. In our country, the support package exceeded TRY 240 billion. Therefore, we anticipate that these support measures will bring vitality to both production and consumption. In the five-month period of 2020, chemical sector exports show a 17 percent decline compared to the same period last year. However, I believe we will close this gap in the coming months and reach USD 20 billion. In our meeting with U.S. Commerce Secretary Wilbur Ross on shale gas and ethylene derived from shale gas, we said that with a petrochemistry facility to be established in our country, we could create the position to begin production. Our companies need to engage in scale-expanding activities. Our companies' capital structures need to be strengthened. There is a saying I want to emphasize: "A substance cannot be created from nothing, nor can what exists be destroyed," let us not forget this. Oil is obtained, used, and after use, certain waste is generated. We need to reprocess waste within the framework of circular economy. I hope technologies that will reintroduce carbon emissions into the economy will come into play in the future. I think these might also change the world's ecological balance."

Mevlüt Çetinkaya: "Petrochemistry and chemistry will determine oil's fate in the future"

Dr. Mevlüt Çetinkaya, Petrochemistry Marketing Manager of SOCAR Turkey Refinery and Petrochemistry Business Unit, noted in his speech that the world was disrupted due to coronavirus and that everything was turned upside down in this period, emphasizing that oil is a very important matter affecting the entire world, wars are fought over it, and when prices rise it causes our country's import bill to increase, and when it falls it can reduce our exports to oil-exporting countries due to decreased revenues in those countries. Stating that global energy demand increases based on population and income growth and decreases based on shift to alternative sources and efficiency, Çetinkaya said, "Global economic growth, population and prosperity increase led energy to grow at an annual 2 percent over the last 20 years. Emerging economies led by China and India drive this growth. In the coming period, orientation toward renewable energy will increase further. In particular, a decline in primary energy consumption in transport and industry is expected. In the future, electric vehicles will spread rapidly, oil's throne will continue to be shaken. In 2040, the number of electric vehicles is projected to reach 350 million units. Until 2050, fundamental change and transformation will occur in energy source use, oil's share will decline, natural gas will maintain its share, and renewable energy's share will rise to 64 percent. The leading country in oil production is the United States, followed respectively by Russia, Saudi Arabia, Iraq, Canada and China. In the future, petrochemistry and chemistry will determine oil's fate. Fossil sources will turn to the petrochemistry sector."

"Oil prices are expected to remain in the USD 35-45 range"

Emphasizing that oil requires a very long period from investment to production, Çetinkaya noted that the investment period varies between 2 to 6 years and that the process of converting oil into final products takes approximately one month. Noting that oil prices are directly affected by various geopolitical and economic events, Çetinkaya said, "Global economic growth, demand, prices of oil products and storage capacity are the main determinants affecting price formation. The global economy is slowing in a synchronized manner. However, pandemic was one of the most important factors pulling down oil demand. Sharp and large economic collapses affected oil prices. Crude oil plays an important role in commodity investment and interest in futures is steadily increasing. The halt of air transport, continuation of production resulting in inadequate storage areas, excess supply and low demand stocks brought stocks to critical levels, causing oil to see minus USD 40.32 per barrel prices. Supply cuts have begun in oil. Supply cuts and demand improvement will bring stocks into balance in the last quarter of 2020. Throughout 2020, continued control of oil supply and prices remaining in the USD 35-45 range are expected. Depending on these developments, a 20 percent contraction in energy investments is expected."

"The chemical sector should strengthen its innovation power and resilience"

Evaluating the impact of recent developments and Covid-19 on the chemical sector, Çetinkaya said: "Petrochemistry and chemistry form the foundation of today's prosperity level. There are negative perceptions about the chemical sector and industries related to it. However, recently there have been efforts such as circular economy that explain this sector is environment-friendly. Within the scope of circular economy, I foresee that the content and characteristics of productions will change. Therefore, I believe that negative perceptions toward the sector will change to positive in the coming period. The importance of chemistry was further understood during the pandemic period. While petrochemical product prices fell at different rates due to Covid-19 impact, IPA (isopropyl alcohol) prices peaked during this period. Again, demand for packaging and mask raw materials increased significantly worldwide. The collapse in oil prices causes major changes in chemical raw material prices and the global competition order. However, I foresee that supply chains will be restructured, acquisitions and mergers will increase, and new business models will emerge. It is of great importance for the chemical industry to strengthen its innovation power and resilience to provide responsible value chains for future generations."