Refining An Overview

Transcription

1 An Overview October 2014

2 Industry Upstream - It involves the exploration for and extraction of petroleum crude oil and natural gas. The upstream oil sector is also known as the exploration and production (E&P) sector. Midstream - The midstream involves storing, marketing and transporting petroleum crude oil,natural gas. Midstream operations aresometimes included in the downstream category. Downstream - The downstream sector includes petroleum refineries, petroleum product distribution, retail outlets and natural gas distribution companies.

3 mln tonnes World Oil Reserves 145, , , ,204 World Consumption (annual) 3,162 3,584 4,040 4,185 World Production (annual) 3,175 3,620 3,979 4,133 Largest Consumer USA mln tonnes China mln tonnes Largest Producer Saudi Arabia mln tonnes Russia mln tonnes Largest Reserves Venezuela - 46,576 mln tonnes Saudi Arabia - 36,518 mln tonnes

4 Jargon Over 195 different types of s API Gravity: American Institute Gravity, which is a measure that compares how light or heavy a crude oil is in relation to water. If an oils API Gravity is greater than 10 then it is lighter than water and will float on it. If an oils API Gravity is less than 10, it is heavier than water and will sinks. West Texas Intermediate: also known as Texas Light Sweet is a light crude oil. API Gravity of 39.6 degrees, 0.24% sulfur content Brent Blend: a combination of different oils from 15 fields throughout the Scottish Brent and Ninian systems located in the North Sea. API Gravity is 38.3 degrees, 0.37 percent sulfur content OPEC Basket: The acronym OPEC stands for Organization of -Exporting Countries which is an organization that was formed in 1960 in order to create some common policy for the production and sale of oil within its jurisdiction. Comprises 11 member countries crude stream. API Gravity is 32.7 degrees, 1.77 percent sulfur content

5 000' mln tonnes World Reserves North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific Total

6 mln tonnes mln tones World Production 1,600 4,800 1,400 4,200 1,200 3,600 1,000 3, , , , North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific World Production

7 mln tonnes mln tones World Consumption 1,600 4,800 1,400 4,200 1,200 3,600 1,000 3, , , , North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific World Consumption -

8 USD / bbl 160 Price Comparison WTI and Brent Brent Crude WTI

9 Global Trade In mln tons

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11 & Shale Gas ly Recoverable Reserves Shale Gas

12 Global Capacities (mln tonnes) 3,706 4,094 4,572 4,727 YoY 10.5% 11.7% 3.4%

13 Process } Light Distillates } Medium Distillates } Heavy Distillates

14 Types of Topping - The topping refinery just separates the crude into its constituent petroleum products by distillation, known as Atmospheric Distillation. Topping Refinery produces naphtha but no gasoline. Hydroskimming - The hydroskimming refinery is equipped with Atmospheric Distillation, naphtha reforming and necessary treating processes. Hydroskimming refinery is more complex than a topping refinery and it produces gasoline. Cracking - The cracking refinery, in addition to the above, is equipped with vacuum distillation and catalytic cracking. The cracking refinery reduces fuel oil by conversion to light distillates and middle distillates. Coking - The coking refinery is equipped to process the vacuum residue into high value products using the Delayed Coking Process. The coking refinery adds further complexity to the cracking refinery by high conversion offuel oil into distillates and petroleum coke. Nelson Complexity Index - The Nelson Complexity Index typically varies from about 2 for Hydroskimming refineries, to about 5 for the Cracking refineries and over 9 for the Coking refineries., with high Nelson Complexity Index have the necessary flexibility in processing a wide variety of crudes and are capable of achieving higher value addition.

15 mln tonnes mln tones Global Capacities 1,600 4,800 1,400 4,200 1,200 3,600 1,000 3, , , , North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific Global Capacities Global Capacities (mln tonnes) 4,572 4,591 4,658 4,727 YoY 1.1% 0.4% 1.5% 1.5%

16 %age %age Regional Capacity Utilization 90% 90% 80% 80% 70% 70% 60% 60% 50% North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific Global Capacity Utilization 50%

17 Global Refined Products Trade In mln tons

18 s

19 Lube Oil Jargon Viscosity Index? Used to measure the thickness of liquid. High for thin liquids and low for thick, which means, The higher the VI, the less an oil will thicken as it gets cold and the less it will thin out at higher temperatures providing better lubricant performance at both temperature extremes. 11% 9% 30% 50% Group I Group II Group III Group IV & V

20 Global Demand ~38.6mln tonnes Europe: Oversupplied market Low prices. pressure on margins Weak demand Capacity expansion Threat from the US supply North America: Demand Driver: USA Shift towards Group II World s largest refinery coming online may create a supply glut Net exporter Middle East: Demand Driver: Industrialization and vehicle growth ~15% expected growth in lube demand Rising capacities 17% 8% 7% 25% 43% Asia North America Europe Middle East Others Asia: Majorly driven by developing economies like China & India Stable supply since no planned maintenance Expected urbanization in China expected to support the lube market Govt. restriction on vehicle purchase may hinder the demand

21 Margins Margins still under pressure post Baltic Sea glut problems. Going forward, the margins are expected to remain under pressure owing to the extensive capacity expansion, which is expected to rise by ~3.5mln tonnes per annum by 2014.

22 Capacity Expansion

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24 % age mln barrels Recoverable Reserves 100% 9% 2% 1% 7% 9% % 9% 8% 8% 11% 8% 10% % 20% 15% 14% % % 51% 60% 58% 80 0% OGDCL MOL PPL POL UEPL Others Total -

25 % age mln barrels Crude Production 100% 80% 5% 6% 5% 13% 10% 15% 5% 4% 3% 10% 10% 9% % 11% 12% 14% 18 40% 12 56% 57% 54% 20% 6 0% OGDCL MOL PPL POL UEPL Others Total -

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27 Capacity & Utilization Refinery Capactity Utilization Capactity Utilization Capactity Utilization Expansion Byco % % % - Pak Arab Refinery % % % - National Refinery % % % - Pakistan Refinery % % % - Attock Refinery % % % 0.5 ENAR Petrotech % % % - Dhodak Refinery % Total % % % 0.5 Without Byco %

28 mln tonnes Processed POL Imports Imported Crude Local Crude

29 Percentage Product Mix 100% 80% 4% 4% 4% 5% 5% 4% 9% 8% 7% 9% 8% 7% 13% 14% 14% 60% 26% 25% 26% 40% 20% 34% 36% 37% 0% HSD FO Motor Spirit Aviation Fuel Naphta Non Energy Products Other Energy Products

30 % age mln tonnes Supply Demand Mix Fuels 100% 10 80% 44% 52% 57% 50% 44% 46% 25% 23% 33% 8 60% 6 40% 20% 56% 48% 43% 50% 56% 54% 75% 77% 67% 4 2 0% HSD Motor Spirit Furnace Oil Imports Local Consumption

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32 Exchange Rate Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Exchange Gain Rate / Loss 1, QFY14 2QFY14 3QFY14 4QFY14 (500) (1,000) (1,500) PARCO NRL ARL PRL

33 Impact of Regulatory Duty Government of Attock National Pak Pakistan Byco Country's FY13 Pakistan Refinery Refinery Arab Refinery Collection Sector (Imports) (ARL) (NRL) Refinery (PRL) Pakistan Sale of HSD (Thousand Tonnes) 6,820 2,954 3, (PARCO 1, (Byco) 290 Conversion to Liters (Mln Liters) 8,149 3,530 4, , Average Ex-Refinery Price (PKR/Liter) Total Revenue (PKR Mln) 507, , ,592 41,177 53, ,128 45,159 21,538 Deemed Duty on HSD - 7.5% (PKR Mln) 38,049 16,479 21,569 3,088 4,044 9,235 3,387 1,615 Profitability (PKR Mln) 27,580 2,627 3,520 19,950 1,482 Profitability excluding deemed duty (PKR Mln) 6,010 (461) (524) 10,716 (1,905) Deemed Duty increase from FY16-9% (PKR Mln) 7,610 3,296 4, ,

34 Price Disclosure Particulars (Rs/ Litre) HSD (Diesel) PMG (Petrol) Retail Direct Retail Direct LDO Ex Refinery Price Levy Inland Freight Equalization Margin Dealer Commission Distribution Margin Ex Depot Price Sales Tax Maximum Ex Depot Price

35 Key Risks Volatility in margins an outcome of fluctuating crude oil prices and simpler technology Unfavorable changes in pricing regime removal of deemed duty Prevailing Inter-Corporate Debt impacting throughput levels Exchange rate depreciation What s the outlook Stable

36 Bibliography 1. Pakistan Energy Year Book : Attock Limited: Product Prices 3. Attock Refinery Limited Annual & Quarterly Financial Statements Sep13, Dec13, Mar14, Jun14 4. BP Statistical Review of World Energy 2013: bp.com 5. US Energy Information Administration 6. Bain & Company: Global 7. zedatawatch: A Brief History of Oil Prices and Middle East Tensions: Fear of a Black Gold Shortage 8. Oil Price History and Analysis: 9. The Economist: ICIS Base Oil Review Argus Base Oil Report Kline & Company 13. Fuels & Lube : Lube Report: Ernst & Young - The international dynamics of shale 16. Ernst & Young -Shale gas in Europe: Revolution or evolution? 17. KPMG -Shale Development: Global Update 18. PricewaterhouseCoopers, the next energy resolution 19. Deloitte University Press- US shale: A game of choices 20. Oxford Business Group 21.

37 Analysts Rai Umar Zafar Manager Ratings Muhammad Siddiq Senior Financial Analyst Suffiyan Saleem Financial Analyst DISCLAIMER PACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but its accuracy or completeness is not guaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part, provided the source is duly acknowledged. The presentation should not be relied upon as professional advice.