10h15 - Ammar Tahir, Petrobas Base Oil Melaka

WORLD BASE OIL
DEMAND & SUPPLY
By Ammar Tahir
Petronas
PRESENTATION OUTLINE
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Introduction to Malaysia
Introduction to PETRONAS
World Group III Base Oil Demand
World Group III Base Oil Supply
Projected Outlook
Conclusions
WHERE IS MALAYSIA?
BRASIL
Capital City: Kuala Lumpur
Population: 26 million (August 2009)
Climate: Tropical
Average Annual Temperature: 26.7OCelsius
PETRONAS Company Profile
National oil & gas company of Malaysia
– Fully integrated:• E&P
• Marketing and distribution
• Oil Refining
• Shipping
• Gas
• Properties
• Petrochemicals
– Crude oil and natural gas production is 1.77
million BOE per day
• Listed in the Fortune Global 500 with the following
2009 rankings:
– No. 80 by Revenue : US$ 77 billion
– No. 20 by Return on Revenues : 20%
– No. 25 by Return on Assets : 14%
• Breakdown of revenue source by percentage
5
(FY2008/09)
– Overseas Operations
– Exports
– Domestic
:
:
:
37%
40%
23%
PETRONAS GROUP III BASE OIL
PRODUCTION CAPACITY
MG3 = MELAKA GROUP III
• Capacity : 6,500 barrels/day (300,000 mt/year)
• Divided into
ETRO 4
30 - 50%
ETRO 6
25 - 45%
M500
10 – 30%
• ETRO base oil comes with top-tier formulation support
meeting API SM, ILSAC GF-4, ACEA and various OEM
specifications.
6
MELAKA GROUP III BASE OIL PLANT = MG3
P ETRO NAS
8
Why is Petronas in South America?
• Petronas acquired FL Selenia in December
2007 for €1 billion
• The acquisition automatically included FL
Selenia Italy, SUNOCO (Belgium), FL Iberia
(Spain), FL Brasil & FL Argentina.
• Selenia
Petronas Lubricants International
• Long term presence and commitment
IN EUROPE
Petronas Marketing Netherlands (R’dam)
Antwerp Storage
PLI BELGIUM
PLI ITALY
Genoa Storage
Napoli Storage
PLI SPAIN
VOPAK STORAGE TERMINAL IN LINKEROEVER,
ANTWERP
VOPAK STORAGE TERMINAL IN LINKEROEVER, ANTWERP
STOLT TERMINAL IN SANTOS
CONSISTENCY IN ETRO SUPPLY
BACK-UP
BASE OIL DEMAND
DRIVERS FOR BASE OIL & LUBRICANTS
The Economy
Base Oil Capacity
Imbalances
Capacity Changes
Product Demand
Base Oil
Economics
Changing
Specifications
Crude Oil &
Product
Economics
GROUP III DEMAND DRIVERS
Environmental
concerns
D + E + Fecon
= DEFECON
Emissions
Lower fuel
consumption
= savings $$$
Demand
Drivers for
Group III
Fuel
Economy
Longer oil
change
interval
Durability
CHANGE IN SPECIFICATIONS
165 base oil refineries with total capacity of 47 million mt per year
47 million metric tons per year of base oil capacity
Source : L & G
19
Majority of the base oil refineries in Asia
and Europe are producing Group I base
oils
7%
1.2 0.4
% %
5%
1%
98.
4%
87%
1%
17%
34%
8%
48%
16%
52%
24%
Group I
Group II
Group III
Naphthenic
Source : L & G
20
WHO ARE THE CURRENT GROUP III MAJOR MERCHANT
PRODUCERS?
250 Kmt/year
SK CORP
1,200 Kmt/year
300 Kmt/year
PETRO CANADA
460 Kmt/year
100 Kmt/year
GS CALTEX
200 Kmt/year
21
GLOBAL GROUP 3 BASE OIL SUPPLIERS 2011-2012
Finland
250 kmt/year
Canada
100 kmt/year
Middle east
2,000 – 2,200 kmt/year
Korea
1,500 kmt/year
SEA
650 kmt/year
NEW
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MAJOR NEW CAPACITIES
• SHELL PEARL GTL [QATAR]
1.2 Million Metric Tons/Year
• BAPCO/NESTE [BAHRAIN]
400,000 Metric Tons/Year
• TAKREER/NESTE [UAE]
500,000 Metric Tons/Year
UNDER
CONSTRUCTION
CONFIRMED
2011
UNDER
REVIEW
WHERE WILL THE SURPLUS GO?
WORLD GROUP III BASE OIL SUMMARY
• Total World Capacity of GIII from 2011-2012 at
4.5 million metric tons/year
• “Actual” supply estimated at 3.6 to 4 million
metric tons per year
• Major Supply source from Asia & Middle East
WHERE ARE THE DEMAND FOR GROUP III?
In ‘000 metric tons per year
700
500
1,350
700
10
100
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GLOBAL LUBRICANT DEMAND
Total Lubricants Demand (‘000 metric tons per year)
Lubricant Demand to follow
economic growth
East Of Suez will represent
50% of global lube consumption
by 2020
North America & Europe to
continue to decline
Expected after 2020 , engine
technology & fuel efficiency
improvements will slow the
growth of demand for finished
lubricants globally
Source: Purvin & Gertz Inc
Global Lube Demand by Regional Share
Total Lube Demand in 2009 estimated at 38.2 million metric tons
Rest Of the
World
7%
13%
North & South America
33%
12%
Asia Pacific
35%
Source: Kline
DEMAND FOR GROUP III INCREASING
BASE OIL DEMAND BY API GROUP (‘000 METRIC TONS PER YEAR)
Group I to retain
global dominance at
least until 2015-2020
Group II and III
demand to increase
due to global needs to
improve fuel efficiency,
control emissions and
prolonged drain
intervals
Source: Purvin & Gertz Inc
GROUP I PRODUCTION IN THE WEST WILL FALL
SHARPLY
Source: Purvin & Gertz Inc
BASE OIL CAPACITY GROWING FASTER THAN DEMAND
BASE OIL CAPACITY VERSUS ACTUAL PRODUCTION (‘000 METRIC TONS PER YEAR)
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
1995
2,000
2005
2010
2015
STAY AT GROUP I OR SWITCH TO
GROUP III???
The switch will be an
economic decision (both by
producers and lube blenders)
In 2008, SAE 10W-40 represents 30% out of the total
European Passenger Car Motor Oils (PCMO) consumption
5%
20%
Group I
45%
30%
Source : Lubrizol
33
Mixing two Group I base oils to lower treat Group III will
provide the balance between cost and performance
100% 4cSt
grade
100% 6cSt
grade
Grade mix
4cSt: 51%
6cSt: 49%
Grade mix
4cSt: 51%
10cSt: 49%
20% Group III 4 cSt + Group I (SN150 +SN600)
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Example
10W-40
PCMO
Constant DI/VM
The addition of Group III 4 cSt (ETRO 4) will increase the
ability of Group I SN150 meeting 10W-40 blending
window
100% 4cSt
grade
100% 6cSt
grade
Grade mix
4cSt: 51%
6cSt: 49%
35
Example
10W-40
PCMO
Constant DI/VM
GROUP I + GROUP III
Is the answer???
OUTLOOK
IMPACT OF ECONOMIC CRISIS
Weaker demand
(but improving)
Overcapacity
(not over supply!)
Weaker margins for Group I
Group III Centre
moving East
Hydroprocessing
Capacity continue
expanding
LONGER TERM
Europe & USA
expected to
rationalise its
Group I capacities
Advances in Engine Technology
Source: ACEA
Advances in Lube Technology
Source: Lubrizol
Consumer demands better oil
Source: Lubrizol
Emissions Legislation
Source: ACEA
ECONOMIC CRISIS
Global Lube Demand Improving
WORLD ECONOMY IS RECOVERING
ECONOMIC GROWTH HOT SPOTS 2010
VIVA SOUTH AMERICA!!
Real GDP growth
(Annual % change)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Argentina
8.8
9
9.2
8.5
8.7
6.8
-2.5
1.5
2.5
3
Brazil
1.1
5.7
3.2
4
5.7
5.1
-0.7
3.5
3.5
3.5
Chile
4
6
5.6
4.6
4.7
3.2
-1.7
4
4.5
5.2
Ecuador
3.6
8
6
3.9
2.5
6.5
-1
1.5
1.8
2.5
Peru
4
5
6.8
7.7
8.9
9.8
1.5
5.8
5.5
5.5
Uruguay
2.3
4.6
6.8
4.6
7.6
8.9
0.6
3.5
3.6
3.8
China
10
10.1 10.4 11.6
13
9
8.5
9
9.7
9.8
Malaysia
5.8
6.8
6.2
4.6
-3.6
2.5
4
5.5
5.3
5.8
Source: IMF
CONCLUSIONS
• The World is moving towards higher quality
base stocks (Group II & III)
• Trend headed by advanced
economies, followed by emerging economies
• Advances in engine technology and
formulation improvements demand for higher
quality lubricants & better basestocks.
• Group III consumption growth is a slow but
definite eventuality.
The future is now
The future is
MUITO OBRIGADO