Japanese Energy Supply Strategy in the context of Growing Regional Demand

Transcription

1 Japanese Energy Supply Strategy in the context of Growing Regional Demand Shigeya Kato Senior Managing Director Showa Shell Sekiyu K.K. 1

2 Contents 2 1. Transition of Japanese Oil Industry 2. Japanese Primary Energy Transition 3. Issues at Stake

3 1. Transition of Japanese Oil Industry 3

4 Japanese Oil Supply/Demand Balance 4 Main Product= Mogas, Jet, Kero, GO(Motor/Industrial), Fuel Oil. Excl. Naphtha Mil.bbl/d 6 Era of High Growth Era of Redundancy Era of Deregulation Idle Capacity by Shutdown 5 4 1,400 Crude Intake Mainpro Production 3 Domestic Demand st Oil Shock 2 nd Oil Shock Available Capacity on Stream-day basis

5 Demand is Whitening Mil bbl/d Japanese Oil Demand Transition by product Total 3.12Mb/D White 2.34 (75%) FO 0.78 (25%) Fuel Oil Industrial Gas Oil AGO 5 Total 3.85Mb/D White 3.49 (91%) FO 0.36 (9%) Forecast 2 Kero/Jet 1 Naphtha Mogas F 1985F 1990F 1995F 2000F 2004F 2005F 2009F Data :METI

6 Product Price (1) Domestic Market Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 US$/bbl Japanese Wholesale Market Price (RIM) Crack Spread from JCC+Tax 12Months Moving average Gasoline(Ron90) Middle Distillates LSWR HSFO(S3.0)

7 Product Price (2) Import 7 RIM Import US$/bbl RIM Compared with Import Parity 12Months Moving average Gasoline(Ron90) 10 5 Middle Distillates - LSWR -5 HSFO(S3.0) Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Import Data : Premium&Freight is estimated by SSSKK Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

8 2. Japanese Primary Energy Transition 8

9 Primary Energy in Japan Mil.KL (coe) 1 st Oil Shock 2 nd Oil Shock 417 New Energies Nuclear Hydro 444 Gas Coal METI s Outlook for 2010 Reference Case Energy Conservation Case % 72 Oil

10 3. Issues at Stake 10

11 What are Issues at Stake? 11 1) Social responsibility = Environment 2) Price stability 3) Supply security 4) Investment 5) Return

12 1) Social Responsibility = Environment 12 a. Low sulfur product b. CO2 reduction c. Land remedy

13 1) Environment a. Low Sulfur Product 13 ppm 500 Mogas ppm 500 Automotive Gasoil USA Korea USA Europe China 200 China Europe Korea Japan Japan Voluntary Rule by Industry Regulation by Government

14 1) Environment b. CO2 Reduction CO2 kt 50,000 CO2 Reduction CO2 Ton / Refinery Total Throuphput 14 CO2 / Refinery Total Throuphput Ton / KKLs 25 40,000 CO2 Reduction Effect 20 30, ,000 35,320 36,870 38,610 40,050 40,470 41,620 43,810 43,220 43,780 43,640 43,830 43,400 43,850 20,000 10,000 CO2 Emission Source: PAJ

15 1) Environment c. Land Remedy Number of Service Stations 15 Number of Depots 60,000 55,000 60,421 Number of Service Stations 56, ,000 50, ,000 40,000 Number of Depots , ,

16 2) Price Stability 16 Utilization of refining capacity in conjunction with widering gap between product demand and refining capacity in the Pan-Pacific a. Standardization of product specs -> Make arbitrage work b. Cooperation between producing and consuming countries to cope with heavying slate of crude oil

17 2) Price Stability - Japanese Crude Slate 17 API Refinery modernisation completed 78.7% Japan s Crude Slate - Lighter and Sourer Diesel sulfur 2,000 ppm API 81.0% 82.4% Sulfur White Oil Demand Ratio 83.3% 83.3% Diesel sulfur 500 ppm 84.2% Diesel 50 ppms 84.9% 86.0% 86.3% 84.5% Sul content (wt%) 1.50% 1.45% 1.40% 1.35% 1.30% 1.25% 1.20% 34.8 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY % Remark: White Products Ratio is on CY basis. Source: PAJ, IEA

18 2) Price Stability UK North Sea US Oman Colombia Argentina Yemen Norway Gabon Congo India Turkmenistan Sudan Vietnam Angola Eq. Guinea Canada Ecuador Kazakhstan Chad Russia - Significant Change in Crude Production (2004) Sweet Sour kbbl/d Source: Shell 18

19 3) Supply Security 19 Enhancement of strategic reserve in light of growing dependency on Middle-East

20 3) Supply Security Vol Mil. bbl - Japanese Crude Dependency on Mid-East 20 5,000 1 st Oil Shock 2 nd Oil Shock Ratio % 100 4,000 Others , ,000 1, ME Ratio Mid-East Source: METI

21 3) Supply Security - Security of Sea Lane 21 Bil.MT 2 1 Malakka Traffic Expectation Oil/Korea Oil/Japan Oil/China(IEA) Holmes Strait Philippines Malakka Strait Source: Fujitsu research institute

22 3) Supply Security Mil.bbl Japanese Oil Stock Transition Target (Private+National : Image) Crude (National) 90Days Obligation (Private) Crude (Private) 100 Product&Feedstock (Private) 70Days (35days) Source: PAJ

23 4) Investment 23 No more Boom-and-Bust -> Investment for value creation not for volumetric expansion.

24 4) Investment on Secondary Unit in Japan 24 Japanese CDU Capacity Mil.b/d 6 Upgrading Units Capacity Mil.b/d Japanese CDU Capacity kb/d 47.4% % HD Capacity kb/d % % FCC Capacity kb/d % Coker Capacity kb/d 3.0% Source: PAJ

25 5) Return 25 Fair return on investment for the sake of socially acceptable and sustainable growth.

26 5) Return - foreign capital in Japanese Main Oil Companies % Bil.Yen % Foreign Capital Ratio Others Foreign Capital Source: financial statement reports 34.8% 40% 30% 20% 10% 0% Foreign Capital Ratio

27 5) Return Proceed (Trillion Yen) - Profit Transition (All Industry in Japan) 2nd Oil Shock depression Due to Strong Yen Burst of the Economic Bubble 27 Profit/Income (Trillion Yen) 800 Proceed(Left Axis) Ordinary Profit(Right) NIAT(Right) Scale Expansion Value Creation '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 ' FY

28 5) Return - ROE by Industry 28 25% 20% All Manufacturer 15% 10% All Industry 5% 0% -5% -10% Oil/Coal Source:

29 29 Conclusion Acceleratedly growing importance of cooperation among North-East countries