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Global Crude, Refining and Clean Fuels Outlook to 2035

December 2012


Economic Outlook, Crude Price Trends

50 60 70 80 90

100 110 120 130 140 150

2010

20

11

2012

20

13

2014

20

15

2016

20

17

2018

20

19

2020

20

21

2022

20

23

2024

20

25

2026

20

27

2028

20

29

2030

Baseline High Low

-‐3.0

-‐2.0

-‐1.0

0.0

1.0

2.0

3.0

4.0

5.0

$-‐$10,000.00 $20,000.00 $30,000.00 $40,000.00 $50,000.00 $60,000.00 $70,000.00 $80,000.00 $90,000.00

$100,000.00

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Global GDP US$ Size & Y-‐O-‐Y Growth RatesUS$ Billions (bar/left), % Real Change (line/right)

Global GDP US$ Size & Y-O-Y Growth Rates US$Billions (bar/Left), % Real Change (line/right)

Hart Energy WTI Price Forecast (US$ per barrel)


Global Refined Product Demand

0

20

40

60

80

100

120

2011 2012 2015 2020 2025 2030 2035

Gasoline Naphtha JetFuel Middle Distillate Residual Fuel Other Products

MILLION b/d


Global Product Demand Outlook

Source: Hart Energy’s World Refining & Fuels Service

2011 2012 2015 2020 2025 2030 2035 Increment 2011-2035

26% 23% 14%

7% 7%

29% 34% 46%

10% 10% 11%

Other LPG Heavy Fuel Oil Distillate Jet Fuel/Kerosene Naphtha Gasoline


Shift to Lower-Sulfur Diesel

0

5

10

15

20

25

30

35

40

45

2011 2012 2015 2020 2025 2030 2035

< 10 ppm 11 - 50 ppm 51 - 500 ppm 501 - 2,000 ppm > 2,000 ppm


Shale/Oil Sands Boom in NA

§  Unconventional Tight Oil (Shale) dramatically changing North American crude oil landscape

♦  Addition of 4 million b/d production

♦  Quality shift to light, low sulfur

♦  Logistic constraints – emerging crude-by-rail infrastructure

§  Major uptake in Canadian oil sand production over next decade

♦  Turn up in production – 2+ million b/d increase 2011 to 2020

♦  Additional 0.8 million b/d 2021- 2025

§  Increasing supply of condensate and NGL

North American petroleum independence in 10 years U.S. surpassing Saudi Arabia crude oil production – emerging as world’s No. 1 liquids producer


A New Force in the Market?


A New Force in the Market?


North America: Supply Landscape

0

1000

2000

3000

4000

5000

6000

7000

2012 2014 2016 2018 2020 2022 2024 2026

Sweet Conventional Light SCO Other Conventional

Heavy SCO Bitumen Blends

0

4,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Bakken Permian Eagle Ford Other

U.S. Tight Oil Production kb/d

Canadian Crude Production kb/d


PADD 3 Crude Oil Quality

0100020003000400050006000700080009000

2012 2014 2016 2018 2020

Low Sulfur Light Low Sulfur Med Low Sul Heavy

High Sul Light High Sul Med High Sulfur Heavy

THOUSAND b/d

Increasing share of light, low-sulfur crude in mix and lighter, lower-sulfur overall crude mix.

34%

15%

Year 2012 2014 2016 2018 2020

°API 30.0 30.5 30.9 31.3 31.4

Sulfur 1.54 1.49 1.44 1.39 1.37


Shale & Tight Resource Advantages

Shale Gas – Lower Fuel Costs for Energy-Intensive Refining


U.S.: Favorable Refining Position

Added advantage on hydrogen purchases. Additional potential from other energy purchases.

Potential $/Barrel Margin Advantage at Lower Natural Gas Price

Refining Utilization to Remain High (thousand b/d)

2008 2010 2012 2014 2016 2018 2020

PADD 2/4 PADD 3 PADD I & 5

PADD U.S. Price $/

103 CF

Natural Gas 103 CF/Bbl

Offshore Refinery Fuel Basis

$8/103 CF $12/103 CF $17/103 CF

PADD 1 $5.00 0.10 $0.30/bbl $0.70/bbl $1.20/bbl PADD 3 $3.00 0.18 $0.90/bbl $1.62/bbl $2.52/bbl


Tight Oil Production Light Liquids

THOUSAND b/d

Source: Hart Energy/Rystad Energy’s North American Shale Quarterly

2500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Condensate NGL

2,500

1,000


Latin America: Refined Product Demand

§  Demand (8.5 MMb/d) will grow by 47% (2030) §  Diesel and gasoline represent 60% of total demand and contribute 80% of increment §  LPG and fuel oil participation higher than other regions §  Brazil and Mexico represent 60% of total demand

LPG Naphtha Gasoline Jet/Kero Diesel Fuel Oil Other

Increment 2011-2030

2011 2020 2030

2.1% LPG, 6%

Naphtha, 2%

Gasoline, 37%

Jet/Kero, 5%

Diesel, 42%

Fuel Oil, 0% Other, 8%

MILLION b/d


Asia Pacific: Dominates Demand Growth

2011 2015 2020 2025 2030

China India Japan Other

Strong growth from 2011 level of 28 million b/d (China 35% of total)


Asia Pacific: Developments

2011 2015 2020

Transport Fuel Naphtha Resid

2011-15 2015-20 2020-25

Capacity Projects Capacity Requirements

Crude capacity expansions outpacing demand – over 4 million b/d by 2015


India: Refining Outlook

Major Expansions 2012 and 2020

§  India currently major refined product exporter of > 1 million b/d

§  Upgrade will increase export capability by ~ 150,000 b/d

§  Longer term, greater share needed in country and in Asia Pacific

Conversion

Hydrocracking 40 KB/D

Catalytic Cracking 170 KB/d

Coking 290 KB/d

Fuel Quality

Alkylation 8 KB/D

Isomerization 9 KB/D

Reforming 80 KB/D

Hydrotreating 660 KB/D


Europe: Refining Challenges

§  Imbalance between production and demand (gasoline, diesel) §  Strong dieselization of passenger fleet §  Stringent marine fuel requirements §  Biofuels requirements §  Energy efficiency and CO2 reduction (ETS) §  Competitive pressure from low-cost U.S. producers

§  Modernization (addition of hydrocrackers) §  Further decline in gasoline/distillate production ratio §  13 closures since 2008 (ca 1.24 million b/d capacity) §  Another 0.5 million b/d capacity under threat §  Facilities sold for foreign capital (Russia, India, China) or for sale

§  Production vs. demand imbalance will remain an issue


Russia/CIS: Expansion Plans

Units to be commissioned in Russia between 2012 and 2020

§  Initial focus on quality (octane, sulfur), later focus on conversion

§  Upgrade planned for Belarus

§  Azerbaijan and Kazakhstan plan complete modernization

§  Ukraine has serious problems in refining sector

Conversion

Hydrocracking 13 units

Catalytic Cracking 4 units

Coking 4 units

Fuel Quality

Alkylation 11 units

Isomerization 15 units

Reforming 8 units

Hydrotreating 23 units


Middle East: Oil & Product Supplier

§  Fastest growth in oil product demand §  Refinery construction ongoing §  Worries on global market over regional instability §  Iraq

♦  Strong increase in crude oil production

♦  Speed, size of expansion depends on export capabilities

§  Iran ♦  Feels effect of sanctions (mainly on oil export side)

♦  Progress in refinery upgrades, but grassroots facilities lagging

§  Saudi Arabia ♦  Strong refinery construction (1.2 million b/d within five years)

♦  Gasoline for domestic market, diesel (10 ppm) for export


Takeaway Points

§  North American crude expansion will shift crude supply/markets

§  North America: Highly competitive refining position

§  Growing pressure on light product (naphtha/gasoline) markets in Atlantic Basin

§  Strong growth in Latin America/Middle East: Latin America over investment scenario; Middle East emerging as marginal global diesel supplier

§  Russia: Planned refining expansion covering domestic needs and maintaining European supply


Thank You!

Terry Higgins Executive Director, Refining & Special Studies

[email protected] +1.703.891.4815


Hart Energy Consultants

Speak the language – 20 different languages

spoken

On the ground

Close network with all in country and regional

stakeholders

Numerous advanced degrees (engineering,

finance, law)

Combined 200+ years of energy industry

experience


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Welcome to Executive Energy Clubimages.hartenergy.com/images/email/marketing/... · Economic Outlook, Crude Price Trends 50 60 70 80 90 100 110 120 130 140 ... Dominates Demand Growth