Strategic Shifts in the Global Oil Equation

Transcription

1 Strategic Shifts in the Global Oil Equation Dr. Fereidun Fesharaki, Chairman FACTS Global Energy (FGE) The 31 st JCCP International Symposium Tokyo, Japan January 30-31, 2013 The dissemination, distribution, or copying by any means whatsoever without FACTS Global Energy s prior written consent is strictly prohibited. 1

2 Overview Short Term: Price Pressures, Sanctions on Iranian Oil, and OPEC Spare Capacity Long Term: Market Tightness to Return and OPEC Holds the Cards for Additional Supply A Real Game Changer: Liquids Production from Shale Gas Projects Refining Sector: Near-Term Outlook OK, but will be Difficult. Will Enough Capacity be Closed? East of Suez Products Trade: More Gasoline and Diesel Must Leave the Region Gasoline: A Fuel of the Past? Bunker Sector: Specification Changes to Impact Bunker Demand 2

3 Short-Term Oil Market: Price Pressures, Sanctions on Iranian Oil, and OPEC Spare Capacity 3

4 Oil Demand in 2011 and Slowdown from 2010 OECD demand boosted in Q by high Japan oil input for power generation, due to shortfall in nuclear Y-o-y decrease in OECD demand in Q should slow down temporarily in Q and Q (mild winter last year) Non-OECD demand growth projected to pick up in second half of 2013, mainly due to acceleration in China Change y-on-y, mmb/d mmb/d +2.7 mmb/d +0.9 mmb/d +0.9 mmb/d +0.8 mmb/d OECD Non-OECD Net Global Growth 4

5 Iran Oil Exports Recovering Slightly Now Iran s estimated oil exports down to only 900 kb/d in July/August 2012 due to sanctions versus 2.2 mmb/d average in However, exports are expected to recover to around mmb/d towards end Since the introduction of gas sanctions in October 2012, Iranian LPG exports have also been affected only one shipment in November, compared to seven in September and five in October. 2,500 2,000 1,500 1, Crude Oil Imports From Iran Current Outlook Through December (kb/d) Others EU Turkey S. Korea Japan India China 5

6 OPEC Spare Capacity Estimated at 4.5 mmb/d 14,000 OPEC Estimated Output and Capacity 12,000 10, Estimated Spare Capacity Estimated November 12 Output 8,000 kb/d 6, ,000 2, *Note: Nigeria/Iraq output currently constrained by temporarily unavailable capacity; Iran's capacity at end-2012 potentially lower than projected due to impact of sanctions. 6

7 Long Term: Market Tightness to Return and OPEC Holds the Cards for Additional Supply 7

8 Long Term: Market Tightness Will Return Annual Base-Load Demand Growth: , kb/d Others: 48 kb/d Iran: 27 kb/d China India Other Asia Middle East UAE: 48 kb/d Iraq: 45 kb/d Saudi Arabia: 112 kb/d Structural Demand Shift: OECD countries: Oil demand has peaked; Non-OECD countries: Strong annual base-load demand growth of around 1.0 mmb/d in

9 1.5 1 Non-OPEC Production Plateau FSU M East L America N America Asia/Pacific Africa Europe Total mmb/d, change y-on-y * 2020* 2025* * Annual average of 5 years change But what will be the impact of shale gas related oil? 9

10 Expansion in Iraqi Export Infrastructure System Current Capacity (mmb/d) Planned Capacity (mmb/d) Iraqi-Turkish System (North) Basra Port (South) Al Amaya Port (South) New Southern Export Project Total = 6.9 mmb/d by New Southern Export Project (3 undersea pipelines and 5 SPM facilities) plans to add a total of 3.2 mmb/d of export capacity by The first new SPM offshore Basra started up in March 2012, shortly followed by the second SPM in April, each with an eventual capacity of 900 kb/d. The third and fourth SPMs are scheduled for completion by 2020; with another spare SPM scheduled for completion by This has already allowed Iraq to boost exports from its Southern fields. Total crude exports reached a new monthly high of more than 2.6 mmb/d in October

11 Asia Net Crude Imports Rising Fast mmb/d Diversifying sources of crude supplies, but Asia has to import more from OPEC (especially Middle Eastern countries). Asian NOCs aggressively acquiring overseas upstream assets. China spent over US$60 billion in overseas direct oil and gas assets acquisitions between 2008 and end India, Korea, and Japan are also aggressive in their overseas acquisitions. Establishing a global trading network

12 $200 $180 Long-Term Oil Price Outlook Dubai in US$/bbl $160 $140 CEILING $120 US$/bbl $100 $80 $60 $40 $20 $- FLOOR are actuals. Forecasts in $

13 A Real Game Changer: Liquids Production from Shale Gas Projects 13

14 Real Game Changer: Liquids Production from Shale 2,000 1,800 Mississipian Lime Granite Wash Woodford Permian (Shale) Niobrara Eagle Ford Bakken 1,600 1,400 1,200 kb/d 1, US crude production declined from about 6 mmb/d in 2003 to 5 mmb/d in early 2009, but light crude production associated with shale gas plays has reversed the trend. Current liquid production from shale is 700 kb/d with projections to nearly 2 mmb/d by

15 Non-Conventional Supply: Shale Gas Revolution Continues South America Proven Natural Gas Reserves (tcf) Technically Recoverable Shale Gas Resources (tcf) Venezuela Colombia Argentina Brazil Chile Uruguay 21 Paraguay 62 Bolivia Total 1,225 Total Recoverable Resource: 6,242 tcf Africa Proven Natural Gas Reserves (tcf) Technically Recoverable Shale Gas Resources (tcf) South Africa 485 Libya Tunisia Algeria Morocco Western Sahara 7 Mauritania 1 0 Total 1, Europe Asia (incl. AU) Proven Natural Gas Reserves (tcf) Proven Natural Gas Reserves (tcf) Technically Recoverable Shale Gas Resources (tcf) France Germany Netherlands Norway UK 9 20 Denmark Sweden 41 Poland Turkey Ukraine Lithuania 4 Others* Total 639 * Bulgaria, Hungary and Romania. Technically Recoverable Shale Gas Resources (tcf) China 107 1,275 India Pakistan Australia ** Total 1,785 North America USA Canada Mexico Total 1,551 ** Recently downgraded by Geoscience Australia 12 Already banned!

16 Future of Shale Gas Liquids Outside the US The US resources are less than 8% of global resources. Very little non-us information on organic content. Speed of development outside the US will be slow due to lack of well servicing infrastructure. Shale gas requires pipeline infrastructure and a market. Shale gas exploration in China, Australia, Poland, and Argentina. What is the potential for shale gas liquids by ? 5 mmb/d? 10 mmb/d? Equivalent to Iraq or Saudi Arabia production? 16

17 Refining Sector: Near-Term Outlook OK, but will be Difficult. Will Enough Capacity be Closed? 17

18 Pressure on Refining Sector Falling Utilization Spare Capacity (mmb/d) 20 Spare Capacity Utilization after closures Utilization (no closures) Global Refining Capacity and Utilization Rates 88% 86% 84% 82% 80% 78% 76% 74% To bring utilization rates back up to 82-83% globally will require closure of around 7 mmb/d of capacity between 2009 and (2 mmb/d already confirmed) On the basis of current capacity + scheduled expansions, global utilization rates are set to fall to about 79% by This is not feasible on a sustainable basis! 18

19 Refinery Closures and Sales Since 2008 mmb/d 3.0 Who? mmb/d 4.5 Where? 2.5 Action since mid-2008 IOCs Atlantic Indep Action since 2008 For Sale Sold/Purchased 2.0 Japanese Refiners NOCs 3.0 Confirmed to close 1.5 Financials Other 2.5 Closed (August 2012) Confirmed Closures Potential Closures Sold For Sale Purchased 0.0 Europe North America Asia LatAm Africa 19

20 East of Suez Refinery Build and Demand Growth Total AP Incremental Demand Total ME Incremental Demand kb/d 3,000 2,500 2,000 1st Wall of Refining Capacity Total AP Incremental CDU Capacity Unit: mmb/d AP CDU Addition ME CDU Addition AP Demand Growth ME Demand Growth Gap 2.34 (0.82) 2.10 Total ME Incremental CDU Capacity 2 nd Wall of Refining Capacity 1,500 1,

21 kb/d 12,000 Who is Building East of Suez? Total Net Refining Capacity Additions in East of Suez, ,120 kb/d 10,000 8,000 2, ,680 6,000 4, ,000 4,130 0 Chinese NOCs Chinese NOCs with Crudes Suppliers Chinese NOCs with IOCs and ME Suppliers Indian NOCs ME NOCs ME NOCs with IOCs Others (Net) NOCs will be involved in more than 90% of the refining capacity expansions in Unlike the period, independents will build much less refining capacity. IOCs are only involved in joint-venture projects with Chinese and Middle East NOCs. 21

22 Asia Pacific Refineries Becoming More Complex mmb/d AP Cracking to CDU Ratio, CDU Capacity Cracking-to-CDU Ratio (RHS) 44% 42% kb/d 1,200 1,000 AP Incremental Cracking Capacity, Coker HDC 25 40% 800 FCC/RFCC 20 38% % 34% 32% % Thermal cracking/vis-breaking is not included because almost no new builds/expansions Asia Pacific refineries are becoming more complex with higher conversion ratios, thus more fuel oil will be converted to gasoline and diesel, leading to higher surplus of transportation fuels and larger deficit of fuel oil. 22

23 Incremental East of Suez Refinery Supply: Additional upgrading capacity increases East of Suez gasoline and diesel/gasoil supply significantly between Has too much upgrading been planned? LPG Naphtha Gasoline Kero/Jet Diesel Fuel Oil ,000 1,200 1,400 1,600 1,800 kb/d 23

24 Survival of the Fittest? Export Ratio (Total Export/Total Production) 100% 80% 60% 40% 20% 0% -20% Selective Refineries Complexities and Products Export Ratio, End 2010* SK Energy Ulsan Shell Tabangao Average Japanese refinery Shell Clyde FPCC Yunlin S-Oil Ulsan GS Caltex Yocheon Reliance Jamnagar 2nd Refinery Nelson Index * Note: the bubble size represents the size of the refinery 24

25 Refinery Closures and Sales in Asia Japan Taiwan China Singapore IOCs (Ex-Japan) kb/d Closures ( ): 2, kb/d in Japan - 50 kb/d in China (local 1,800 refineries) 1,600 1,400 Confirmed Closures: kb/d in Japan kb/d in Australia (Shell and Caltex) Potential Closures: kb/d in Japan kb/d in PH (Shell) kb/d in Taiwan kb/d in China (local refineries) Sold: - PetroChina bought the 107 kb/d Osaka refinery from JX Group and 50% stake of the Singapore SRC refinery - San Miguel bought Esso Malaysia's 85 kb/d refinery in Port Dickson 1,200 1, Closures ( ) Confirmed Closures Potential Closure Sold 25

26 East of Suez Products Trade: More Gasoline and Diesel Must Leave the Region 26

27 kb/d 1,400 1,200 India Fearless Push Forward India Petroleum Product Balance LPG (Net Import) / Net Export 1, Naphtha Gasoline Kero/Jet Diesel Fuel Oil 27

28 China Deficit in Products Expected to Enlarge by 2020 kb/d China Petroleum Product Balance LPG (Net Import) / Net Export Naphtha Gasoline Kero/Jet Diesel Fuel Oil 28

29 East of Suez Net Products Exports kb/d LPG Naphtha Gasoline Kero/jet 1, Diesel Fuel Oil Key Developments: Naphtha and fuel oil continue to be in large net deficit. Gasoline and middle distillates net exports set to increase due to rapid expansion of refining capacity. 29

30 Regional Products Trade Pointers for the Future North America: Structural decline in oil demand Latin American deficit will remain (for now) WTI price realignment: pressure on refining will re-emerge? Latin America: Robust demand growth Delays to refining capacity Gasoline + MD deficit continues Europe: Oil demand declining Squeeze on gasoline export markets continue Middle distillate imports remain high Pressure on refining remains Russia: Shifting emphasis towards clean product exports Regaining lost European MD market Eastwards export shift mainly to crude oil Middle East: High demand growth but slower refining expansion Main growth in products exports shifted beyond 2015? Africa: Refining expansion slower Products imports remain through mid term 30 Asia: Continued strong demand growth But refining capacity expansion keeping pace Naphtha and fuel oil deficits continue

31 Gasoline: A Fuel of the Past? 31

32 Bearish Outlook for Global Gasoline Demand Gasoline Demand by Region mmb/d 10 mmb/d 24 Global demand to peak around 2017 at slightly above 23 mmb/d 9 N. America Asia Europe Middle East Global Total (Right Axis) Bearish outlook, but gasoline will still remain world s major road transport fuel. OECD demand set to decline with the largest drop in North America led by the US. Non-OECD Asia will drive gasoline demand growth. 32

33 US Vehicle Efficiency Affecting Demand Trend Now Gradual introduction of more efficient vehicles is starting to impact fleet average 12 Liter/100 km New Registered Light Duty Vehicles 9 Fleet on the road

34 Asian Gasoline Demand Will Grow, But for How Long? Asian Gasoline Demand mmb/d mmb/d 8 4 China Japan + Korea India + Indonesia Rest of Asia Asia 2030 China s gasoline demand to grow by more than 500 kb/d in the next five years and keep rising to 2.8 mmb/d in 2020 due to massive fleet expansion. Passenger car fleet to grow to some 210 million in 2020 and 250 million in Demand growth in India and Indonesia is also expected to be strong. However, new technologies like engine downsizing, fuel efficient tires, hybrid vehicles, etc., will cap overall gasoline demand growth strongly in the next few decades. 34

35 Bunker Sector: Specification Changes to Impact Bunker Demand 35

36 How will Specification Changes Impact Bunker Demand? 6 5 Bunker Demand with IMO Global Cap in 2025 (base case) mmb/d mmb/d Distillate Residual Residual 2 Additional 2.2 mmb/d distillate demand vs Distillate Bunker Demand with IMO Global Cap in 2020 Additional 1.3 mmb/d distillate demand vs base case FO >4% FO 3.5% FO 1.5% Distillate >0.5% Distillate % Distillate <0.1% FO 1% Source: Outlook for Marine Bunkers and Fuel Oil to 2030 (FGE/Robin Meech) 36

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38 Appendix 38

39 WORLD OIL SUPPLY/DEMAND & STOCK CHANGE Q11 2Q11 3Q11 4Q Q12 2Q12 3Q12 4Q Q13 2Q13 DEMAND USA Canada/Mexico Latin America W Europe FSU (apparent demand) Other Europe Japan Korea/Aus/NZ China (apparent demand, excl. strategic) Other Asia-Pacific Africa M East Total Demand SUPPLY USA Canada Mexico North Sea Total FSU China Other Non-OPEC Total Non-OPEC Output (Crude/NGLs) Bio-liquids (ethanol/bio-gasoline, etc) GTL/CTL Processing Gain, balancing item etc Non-OPEC Supplies (incl. Indonesia) Libya Iraq Other OPEC Total OPEC Crude (excl. Indonesia) NGLs/other Total OPEC (excl. Indonesia) Total Supply STOCK CHANGE OECD Company Strategic/government (incl. China) Non-OECD/transit/floating/unreported lmplied Stock Change % % % % % % % % % Reference items Demand change year-on-year % Call on OPEC crude (no stock change) FSU Net Oil Exports End-period OECD company stocks (bill bbls) End-period OECD stock cover (days) 39 3Q13 4Q % % % % % % %