Embed Size (px)
DESCRIPTION
International Energy Consultants. US Downstream Industry Outlook and Opportunities. LSU Energy Summit 2004 October 21, 2004 Gil Nebeker Purvin & Gertz, Inc. Agenda. About Purvin & Gertz, Inc. Drivers of Downstream Profitability U.S. Downstream Market Outlook Downstream Opportunities. - PowerPoint PPT Presentation
Citation preview
US Downstream Industry US Downstream Industry
Outlook and OpportunitiesOutlook and Opportunities
LSU Energy Summit 2004LSU Energy Summit 2004October 21, 2004October 21, 2004
Gil NebekerPurvin & Gertz, Inc.
LSU Energy Summit 2004LSU Energy Summit 2004October 21, 2004October 21, 2004
Gil NebekerPurvin & Gertz, Inc.
International Energy Consultants
2
AgendaAgenda
About Purvin & Gertz, Inc.
Drivers of Downstream Profitability
U.S. Downstream Market Outlook
Downstream Opportunities
3
Purvin & Gertz - BackgroundPurvin & Gertz - Background
Founded in 1947 – in business for 57 years
Independent firm owned by consultants
Global presence with offices in:
Houston, Los Angeles, Calgary, London,
Singapore, Buenos Aires and Moscow
Consulting staff of Chemical Engineers/MBAs
Focus on technical/commercial issues
4
Industries ServedIndustries Served
Crude and Condensate - Supply & Pricing
Petroleum Products - Refining & Marketing
NGL - Processing & Marketing
Natural Gas and LNG - Markets & Infrastructure
Technology Development – GTL , Heavy Oil Upgrading
5
AgendaAgenda
About Purvin & Gertz, Inc.
Drivers of Downstream Profitability
U.S. Downstream Market Outlook
Downstream Opportunities
6
Key drivers of downstream profitability . . . Key drivers of downstream profitability . . .
LONG-TERM DRIVERS Demand Growth Refinery Capacity
Utilization
SHORT-TERM INDICATORS Product Inventories Market Price
Structure
PRODUCT SUPPLY/DEMAN
DCrude Oil Market
Conditions
Conversion Capacity Investment
Conversion Capacity Utilization
LIGHT/HEAVY DIFFERENTIAL
7
Factors that determine refining margins Factors that determine refining margins involve trends, cycles and random events . . .involve trends, cycles and random events . . .
Product Quality
Crude Oil Quality
Trade Patterns
Technology
TRENDS
World Economic growth
Product demand growth rates
Major Capacity Additions
CYCLES
Weather
Refinery Outages
Supply Disruptions
Political Events
RANDOM EVENTS
8
AgendaAgenda
About Purvin & Gertz, Inc.
Drivers of Downstream Profitability
U.S. Downstream Market Outlook
Downstream Opportunities
9
Overall U.S. downstream returns have been Overall U.S. downstream returns have been poor, but have improved in the late 1990s . . .poor, but have improved in the late 1990s . . .
Source: U.S. Department of Energy Financial Reporting System Data
-5
0
5
10
15
20
1985 1990 1995 2000 2005
U.S. Refining & Marketing Return on Investment, Percent
Approximate Cost of CapitalEstimate
-5
0
5
10
15
20
1985 1990 1995 2000 2005
U.S. Refining & Marketing Return on Investment, Percent
Approximate Cost of CapitalEstimate
10
Short-term outlook for refining profitability is Short-term outlook for refining profitability is positive in all major regions . . . positive in all major regions . . .
US: Tight capacity will keep markets strong, particularly for high-conversion refiners
Europe: Strong US gasoline prices will help maintain margins as European gasoline demand shrinks
Asia: Capacity overhang finally wearing off, need for conversion capacity will grow
11
Is there enough refinery capacity?
12
US refinery capacity utilization is highUS refinery capacity utilization is high
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
17,500
18,000
Cap
acity
K B
arre
ls/C
D
70%
75%
80%
85%
90%
95%
100%Capacity Utilization %
13
U.S. refinery capacity additions have slowed, U.S. refinery capacity additions have slowed, but response to tight capacity is expected . . .but response to tight capacity is expected . . .
-400
-200
0
200
400
600
800
1991 1993 1995 1997 1999 2001 2003
Thousand Barrels per Day
Expansions
Closures
-400
-200
0
200
400
600
800
1991 1993 1995 1997 1999 2001 2003
Thousand Barrels per Day
Expansions
Closures
14
Refinery capacity effectively full including Refinery capacity effectively full including the impact of feedstocks in Europe . . .the impact of feedstocks in Europe . . .
88%
92%93%
85%90%
91%
0
5
10
15
20
25
U.S. Europe Asia
1995 2003
Million Barrels per Day
Note: European capacity utilization includes secondary feedstocks.
88%
92%93%
85%90%
91%
0
5
10
15
20
25
U.S. Europe Asia
1995 2003
Million Barrels per Day
Note: European capacity utilization includes secondary feedstocks.
15
U.S. refinery capacity additions are lagging U.S. refinery capacity additions are lagging runs, but further creep will meet the shortfallruns, but further creep will meet the shortfall
Million Barrels per Day
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1995-1999 1999-2003 2003-2007
Capacity
Incremental Runs
Capacity Creep
Million Barrels per Day
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1995-1999 1999-2003 2003-2007
Capacity
Incremental Runs
Capacity Creep
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1995-1999 1999-2003 2003-2007
Capacity
Incremental Runs
Capacity CreepCapacity Creep
16
U.S. gasoline imports are increasing, but U.S. gasoline imports are increasing, but there may be a limit to future increases . . .there may be a limit to future increases . . .
0.0
0.5
1.0
1.5
1990 1995 2000 2005 2010
Other
CIS Region
Europe
Canada
Latin America
Million Barrels per Day
0.0
0.5
1.0
1.5
1990 1995 2000 2005 2010
Other
CIS Region
Europe
Canada
Latin America
Million Barrels per Day
17
Efficiency gains and alternative fuels will slow Efficiency gains and alternative fuels will slow U.S. gasoline growth later this decade . . .U.S. gasoline growth later this decade . . .
7
8
9
10
11
12
1990 1995 2000 2005 2010 2015
1992-2003 Trend line
Forecast
Million Barrels per Day
7
8
9
10
11
12
1990 1995 2000 2005 2010 2015
1992-2003 Trend line
Forecast
Million Barrels per Day
18
US Gulf Coast refinery profitability should remain US Gulf Coast refinery profitability should remain strong as product markets remain tight . . .strong as product markets remain tight . . .
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
Heavy Sour Coking
Light Sour Coking
Light Sour Cat Cracking
Forecast in 2004 Dollars per BarrelForecast in 2004 Dollars per Barrel
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
Heavy Sour Coking
Light Sour Coking
Light Sour Cat Cracking
Forecast in 2004 Dollars per BarrelForecast in 2004 Dollars per Barrel
19
However profitability will likely remain below levels However profitability will likely remain below levels necessary to support new grass roots capacitynecessary to support new grass roots capacity
Forecast in 2004 Dollars per BarrelForecast in 2004 Dollars per Barrel
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
Grass Roots Investment Margin
Heavy Sour Coking Margin
20
Light/heavy differentials will provide incentive Light/heavy differentials will provide incentive for incremental conversion investments . . .for incremental conversion investments . . .
0
5
10
15
20
1985 1990 1995 2000 2005 2010
USGC Light Products minus Fuel Oil,Constant 2004 Dollars per Barrel
0
5
10
15
20
1985 1990 1995 2000 2005 2010
USGC Light Products minus Fuel Oil,Constant 2004 Dollars per Barrel
21
AgendaAgenda
About Purvin & Gertz, Inc.
Drivers of Downstream Profitability
U.S. Downstream Market Outlook
Downstream Opportunities
22
New and different crude oils will create New and different crude oils will create investment opportunities for refiners . . .investment opportunities for refiners . . .
0.0
0.5
1.0
1.5
2.0
Synthetic HeavyCrude
Condensate High TAN
Million Barrels per Day Increase, 2000 - 2010
0.0
0.5
1.0
1.5
2.0
Synthetic HeavyCrude
Condensate High TAN
Million Barrels per Day Increase, 2000 - 2010
23
Canadian production is growing due to Canadian production is growing due to increases in bitumen and synthetic crude . . .increases in bitumen and synthetic crude . . .
0
1
2
3
4
1985 1990 1995 2000 2005 2010
Bitumen
Synthetic
PentanesPlusEast Coast
Light Sweet
Light Sour
Heavy
Million Barrels per Day
0
1
2
3
4
1985 1990 1995 2000 2005 2010
Bitumen
Synthetic
PentanesPlusEast Coast
Light Sweet
Light Sour
Heavy
Million Barrels per Day
24
Russian/Caspian crude exports increasing Russian/Caspian crude exports increasing dramatically and penetrating new markets ... dramatically and penetrating new markets ...
0
2
4
6
8
10
12
14
1990 1995 2000
Million Barrels per Day
Runs
Exports
Production
0
2
4
6
8
10
12
14
1990 1995 2000
Million Barrels per Day
Runs
Exports
Production
25
Successful downstream strategies will take Successful downstream strategies will take advantage of current market opportunities ...advantage of current market opportunities ...
Favorable changes in crude oil supply patterns for U.S. refiners
Tight capacity creates potential to integrate crude opportunities with capacity additions
Product specification changes have forced investment, but contributed to strong product prices
Industry is entering an ‘Investment Phase’ providing benefits to financially strong companies
26
Russian imports to the U.S. are increasing as Russian imports to the U.S. are increasing as export supplies exceed European runs . . .export supplies exceed European runs . . .
0
100
200
300
400
500
Jan2002
Jul Jan2003
Jul Jan2004
Thousand Barrels per Day
0
100
200
300
400
500
Jan2002
Jul Jan2003
Jul Jan2004
Thousand Barrels per Day
US Downstream Industry US Downstream Industry
Outlook and OpportunitiesOutlook and Opportunities
LSU Energy Summit 2004LSU Energy Summit 2004October 21, 2004October 21, 2004
Gil NebekerPurvin & Gertz, Inc.
LSU Energy Summit 2004LSU Energy Summit 2004October 21, 2004October 21, 2004
Gil NebekerPurvin & Gertz, Inc.
International Energy Consultants
28
This analysis has been prepared for the sole benefit of NAPIA/PIRA. Neither the This analysis has been prepared for the sole benefit of NAPIA/PIRA. Neither the analysis nor any part of the analysis shall be provided to third parties without the written analysis nor any part of the analysis shall be provided to third parties without the written consent of Purvin & Gertz. Any third party in possession of the analysis may not rely consent of Purvin & Gertz. Any third party in possession of the analysis may not rely upon its conclusions without the written consent of Purvin & Gertz. Possession of the upon its conclusions without the written consent of Purvin & Gertz. Possession of the analysis does not carry with it the right of publication.analysis does not carry with it the right of publication.
Purvin & Gertz conducted this analysis utilizing reasonable care and skill in applying Purvin & Gertz conducted this analysis utilizing reasonable care and skill in applying methods of analysis consistent with normal industry practice. All results are based on methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review is information available at the time of review. Changes in factors upon which the review is based could affect the results. Forecasts are inherently uncertain because of events or based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY.MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY.
Some of the information on which this analysis is based has been provided by others. Some of the information on which this analysis is based has been provided by others. Purvin & Gertz has utilized such information without verification unless specifically Purvin & Gertz has utilized such information without verification unless specifically noted otherwise. Purvin & Gertz accepts no liability for errors or inaccuracies in noted otherwise. Purvin & Gertz accepts no liability for errors or inaccuracies in information provided by others.information provided by others.
About this presentationAbout this presentation
