Creatie van opties ter optimalisatie van de waarde in de

European refining: squeezed in the middle?
Competitiveness, international competition and new ownership
CIEP collected presentations (2012-2013)
1. European refiners
New Owners?
With data until 2013
Complete study can be downloaded for
free on our website:
http://www.clingendaelenergy.com/publicati
ons/publication/a-cinderella-story-
Gasoline Demand Declining, Diesel Rising
Tax incentives contributed to a fundamental change in the EU
demand structure and mismatch with refining production.
Road diesel/gasoline demand in the EU 1990 - 2030
(Incl. biofuels)
Sources: Wood Mackenzie - Historical demand 1990 - 2005
JEC Fleet & Fuels model - Projections 2010 - 2030
210.0
3.5
3.3
3.1
2.9
2.7
2.5
2.3
2.1
1.9
1.7
1.5
1.3
1.1
0.9
0.7
190.0
Million tonnes/year
170.0
150.0
130.0
110.0
90.0
70.0
50.0
Source: Europia
1990
1995
2000
2005
2010
3
2015
2020
2025
2030
Gasoline
Diesel
Ratio
Mismatch supply (gasoline) and demand (diesel)
Diesel
(MT/a)
Gasoline
(MT/a)
Source: Europia White Paper on EU Refining - May 2010
Source: Europia White Paper on EU Refining - May 2010
4
European imports per product
Source: IEA
Margins Defined by 2 Worldwide Markets
production of fuel 15% GHG
fuel use 85% GHG
retail
site
crude
recovery
crude
transportation
crude refining to
products
product storage &
transportation
Refinery Margin $/bbl
World Wide
Crude Prices
$/bbl
World Wide
Fuels Prices
$/bbl
EU unilateral regulatory
costs drive down margins
Source: Europia
6
fuel vehicle
Prolific restructuring of the EU refining sector
Source: IEA
Prolific restructuring of the West European refining sector
(’08–’12)
Germany
UK
Status
Grangemouth
to PetroChina (50%)
Heide
Status
to Kletch & Co (’10)
Stanlow
to Essar (‘11)
Ruhr Oel
to Rosneft (50%) (‘10)
Pembroke
to Valero (‘11)
Harburg
To Nynas (‘13)
Lindsey
for sale
Wilhelmshaven
to Hestya Energy (‘11)
Milford haven
for sale
Ingolstadt
To Gunvor (‘12)
Teesside
Storage
Coryton
Tolling arrangement
Morgan Stanley, KKR,
AtlasInvest
France
Fos Lavera
Dunkirk
Gonfreville
Normandy
Reichstett
Berre ‘d Etang
Pt. Couronne
Status
To PetroChina (‘11)
convert
shut in
shut in
Idle
for sale
Tolling arrangement: Shell
NL
TRN
Belgium
Antwerp
Antwerp
Status
to Lukoil (’09)
Status
to Vitol (‘08)
To Gunvor (‘12)
Switserland Status
Cressier
To Vitol (‘12)
Italy
Status
storage
Cremona
Source: CIEP Analysis, Purvin&Gertz, WGI, OGJ, IHS Global Insight, Bloomberg, Barclays Capital, FT
Also rest of Europe impacted….
Biggest loss in refining capacity
(2008-12)
1.
2.
3.
4.
France (-25%)
Germany (-12%)
UK (-11%)
Italy (-8%)
Source: WSJ
Source: IEA
Source: IEA
Europe ≠ rest of the world
Source: IEA
Asia, Middle East new builds
Source: Bain & Co
Dismal market conditions in the European refining sector
• Mature to declining European product demand
• Overhang of unsophisticated refining capacity
• Mismatch between refining slates and demand profile
• Intense global competition
• Low utilisation rates (80% in 2012)
• Razor thin refining margins (even for complex refineries)
Alarm Bells are ringing….
KPMG, June 2012
How are individual refiners reacting to the market
conditions in the European refining sector?
Ability of refinery owner to adjust to market developments
Vertical
Integration
Market dynamics
and risks buffered
by other divisions
Adjustment of
refining division to
changing market
dynamics and risks
Unable to adjust to
changing market
dynamics
Market dynamics
buffered by
internal capital
Source: CIEP Analysis, conceptual only
Financial
Capabilities
Six types of European refiners
Type
Examples
IOC
ExxonMobil, Shell, Total
Pure-Play
Refiners
Petroplus, Ineos, Valero
National Champions
(Europe)
ENI, Statoil, PKN Orlen
Producer
NOC
KPC, PDVSA, Rosneft,
National Champions
(Emerging Markets)
Lukoil, Essar, PetroChina
Other
Lyondell Basell, Koch, Hestya Energy
New core owners of European refining capacity?
Vertical
integration
IOC
increasing
-27%
stable
downsizing
Nat. Champ.
Europe
0%
Pureplay
-49%
Source: CIEP Analysis, conceptual only
Nat.
Champ.
EM
+362%
Producer
NOC
9%
Financial
Capabilities
New core owners of European refining capacity?
• Core owners of European refining capacity (IOCs) are
divesting
• New owners with different levels of commitment
• Shielded European national champions are keeping a
low profile
2. US Refining Dynamics and its implications for
European competitiveness
With data until 2013
Complete study can be downloaded for
free on our website:
http://www.clingendaelenergy.com/publicati
ons/publication/us-refining-dynamics
Increasing global competition
USA
Cheap feedstock
and operating
costs are driving
refining revolution
and record
volumes of
product exports,
namely distillates
Russia
Change in export
duties incentivizes
upgrades and
product exports,
fuel oil decrease
and gasoline and
diesel floods by
2015-2020?
Asia
Bulk of newbuilds,
Focus on
domestic demand,
record volumes of
product from India
1.
2.
3.
4.
Less complex
Atlantic Basin
Gasoline exports
Brent feedstock
Middle East
Vulnerability!
Jubail (KSA) and
Ruwais (UAE)
export-oriented
new-builds, cheap
feedstock and
cheap labour
A revolution in US light tight oil production…
The US has
added over
2.5 mb/d of
crude oil in
only three
years,
reaching
levels not
seen since
the end of
the 1980s
Source: EIA
Shale plays in the United States
Bakken, ND
ND from zero to hero:
100,000 bpd to 1 mb/d in
4 years…
Texas doubled its oil
production in 2.5 years to
almost 3 mb/d…
Source:
EIA
Eagle Ford, TX
… have led to bottlenecks and other
infrastructural issues…
Pipelines
•
•
•
•
Rail
Keystone XL project caught up in political quagmire, but southern leg ready for
action
Rail provides flexibility
Source: Eprinc
East Coast natural home for LTO
Clear risks involved… (Quebec, North Dakota)
… which has severely depressed domestic prices
of US oil and imported Canadian crude…
$160,00
WTI
$140,00
$120,00
$100,00
Bakken (North Dakota Light Sweet
Flint Hills)
$80,00
$60,00
WCS (Western Canadian Select)
$40,00
$20,00
oct.-13
juil.-13
avr.-13
janv.-13
oct.-12
juil.-12
avr.-12
janv.-12
oct.-11
juil.-11
avr.-11
janv.-11
oct.-10
juil.-10
avr.-10
janv.-10
oct.-09
juil.-09
avr.-09
janv.-09
oct.-08
juil.-08
avr.-08
janv.-08
$0,00
Brent
Source: Eprinc
… translating into record profits for inland and
Gulf Coast refiners and revival of East Coast
refiners…
Source: EIA
… and surging oil product exports
Distillates
(ULSD)
Gasoline
NGLs
Source: EIA
•
•
•
US refiners now exporting about 4 mb/d of products, net exports around 2.2 mb/d
Drop in domestic demand, surge in domestic output, surge in global demand
Main export markets: Latin America, Middle East, Europe, Asia and also North &
West Africa…
How long will US refineries hold on to their
competitive edges?
Gas prices: current prices not sustainable in relation to
production costs, prices will have to rise, especially when the US
starts exporting, but prices will remain lower than in Europe and
Asia
Oil prices: whether they will increase depends on infrastructure
and regulation. Can infrastructure build, be it pipeline or rail,
outpace production growth? Will the US Gov’t approve crude oil
exports beyond Canada? Can refineries process even more light
sweet oil/condensates and heavy Canadian crude and when will
they reach a ‘blending wall’? And, how long and how profound
will be the unconventional revolution – shale drilling needs high
oil prices, high level of depletion… Productivity and technology
key! * ’conventional’ wisdom: peak before 2020
Global refinery new-builds: how will the US fare against newbuilds in emerging markets? Less absorption potential for US oil
products? Ditto for European surpluses!
A word about petrochemicals
Production costs of ethylene
Source: ICIS
• Increasing US production of NGLs from liquid plays
• US switch from naphtha to shale gas as petrochemical feedstock
• Oversupply of naphtha is depressing prices and hurting EU refiners
Conclusions
Shale revolution in the US has negatively impacted European refining and
general industrial competitiveness
Integration of US oil markets is forced by legislation and infrastructural
issues to go through a refining window: intensifies competition in oil product
markets
• Traditional ‘Atlantic balancing trade’ disrupted:
Europe less and less able to sell its surplus
gasoline to the US East Coast, while the US has
doubled its exports of oil products to Europe
between 2007 and 2012 (mainly diesel)
• US refiners are taking over traditional European
gasoline export markets such as North and West
Africa. Europe forced to sell into competitive Asian
market
• Gas as a cheap petrochemical feedstock in US
has added to the global naphtha glut, hurting EU
refiners
Source: WSJ