Refining Outlook: elements for a modern industrial culture in Italy

Transcription

1 Refining Outlook: elements for a modern industrial culture in Italy Stefano Donzelli Foster Wheeler 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 1

2 Foreword Five apparently Immutable Laws of Refining in the 21 st Century driving investments 1. Crude Oil 2. Product Demand and GDP growth 3. Political Stability, Objectives and Drivers 4. IOC / NOC 5. Finance and People A couple of wildcards Residue upgrading: profitable refining with focused high conversion The Refining Industry in Italy: elements for a modern industrial culture 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 2

3 Five immutable laws of Refining in the 21 st Century 1. The Price of Crude Oil will trend above $ 100 a barrel Crude Oil pricing will continue to drive the need to maximise value from each and every barrel of crude Weekly Europe Brent Spot Price FOB (Dollars per Barrel) Libyan output is lost Iran conflict strengthens Fear of Greek exit Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2012 Feb 2012 Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Source: EIA Data 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 3

4 Five immutable laws of Refining in the 21 st Century 2. Non-OECD demand growth for refined products will be huge IMF s latest outlook (April 2012): economic outlook improving but fragile Demand for refined products closely related to GDP growth Diesel and naphtha demand is expected to growth in 2013 Bulk of gasoline demand from growing transport sector in non- OECD These themes will continue into the medium and long term 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 4

5 Five immutable laws of Refining in the 21 st Century KBD OECD oil consumption - Light distillates NonOECD oil consumption - Light distillates OECD oil consumption - Middle distillates NonOECD oil consumption - Middle distillates OECD oil consumption - Fuel oil NonOECD oil consumption - Fuel oil Source: BP Statistical Review 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 5

6 Five immutable laws of Refining in the 21 st Century 3. Political stability and objectives will drive investment plans Largest projected sources of liquids production growth are: Iraq, Brazil, United States, Canada, Kazakhstan, Kuwait, Saudi Arabia; NOC s will control many investments: Long term Client s relationships Local presence and content Difficult business environment Political influence on project development Preference for LSTK contracts A huge amount of investment is still required as clean fuels legislation sweeps across the globe. 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 6

7 Five immutable laws of Refining in the 21 st Century 3. Political stability and objectives will drive investment plans Gasoline Diesel Source: IFQC Source: IFQC 0 ppm ppm ppm ppm Up to 2500 ppm ppm 10 or 15 ppm 50 ppm 0 ppm 350 ppm 2000 ppm >2000 ppm 500 ppm All export refineries are built to the latest clean fuels specifications Existing domestic refineries react to domestic legislation 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 7

8 Five immutable laws of Refining in the 21 st Century 3. Political stability and objectives will drive investment plans (cont.) 2.5 MBPD of refining capacity in line in 2012 Asia is the largest contributor (1.7 MBPD in next six months) China accounts for nearly one third of Asian market, to keep up with demand driven by GDP growth 4. The IOC / NOC Paradigm Shift IOC s continue to move away from downstream to upstream/midstream Downstream investments belong to NOC, that are becoming increasingly international 5. Resource Constraints Finance and People Availability of finance and technical resources will impact the speed of investments 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 8

9 A couple of wildcards 1. Availability of Cheap Gas Cheap gas will influence not only the level of investment, but also the optimal configuration for refineries 2. Marine Fuel Oil Specifications - A Major Challenge for Refiners? Still a key market for lower quality/higher sulphur refinery residual fuel oil Current and planned legislation for ships SOx emissions will require more stringent constraints 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 9

10 Residue Upgrading: Profitable Refining with Focused High Conversion Significant political pressure to address environmental issues Declining markets for high sulfur fuel oil Light / heavy crude spread Increased demand for distillates and clean fuels New crudes sources and extra heavy crude upgraders Residue upgrading & conversion Catalytic Residue FCC Residue Hydrocracking Non-catalytic Delayed Coking Flexicoking Visbreaking Solvent deasphalting 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 10

11 Market Segmentation: Summary of key Themes OECD countries Slow demand growth, remaining below 2005 peak Very challenged margins Competition for export markets from new non-oecd capacity Increasingly stringent product / environmental specifications Expect limited investment focused on strategic sites, energy efficiency, environmental compliance and CO 2 charging IOC - asset sales/shutdowns New owners profiles / philosophy US now advantaged slightly with low energy costs (shale gas) Non-OECD countries Demand growing may surpass OECD demand by 2015 Strong investment / interest in new refineries, major expansions and significant upgrades Strong local demand + targeting export markets Increasing environmental focus Need for further upgrading capacity to address declining residual fuel oil markets and future demand for distillates NOCs are generally in the driving seat Joint Ventures: NOC s with crude & NOC s with growth markets 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 11

12 Refining Industry in Italy Total effective capacity (end of ): Millions of Tons (down to 3% compared to 2010) N 2 refineries converted in logistic hub in N 1 refinery planned to be temporary closed in 2013 Rotating closures foreseen for other refineries until 2014 Change in Market Share and Operators Structure Investments and industrial activities (mainly for environmental issues) Over than 8,200 skilled direct employees and 11,100 indirect employed make the refining industry one of the leading-edge sectors in Italy s economy Source: Unione Petrolifera 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 12

13 Tackle a De-industrialization process in Italy Do we still need a leading-edge industry in Italy? YES Is an Asset of the Country Significant Level of Employment Research, Develop and Innovate to compete in the present market Struggling against culture/policy currently opposing industry Need of a modern industrial culture 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 13

14 Elements for a modern industrial culture New Industrial Policy Time frame Modern Industrial Culture New Concept of Sustainability Transparency Acceptability 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 14

15 Elements for a modern industrial culture New Industrial Policy: cost of energy, bureaucracy, tax charges, etc. Sustainability: a concept to be modernized Need of a new equilibrium between industry and environment Acceptability Clear rules and values to get investments accepted by the communities Transparency Communication Strategy Reputation Behaviours Time Frame: foresight is important, but time is of the essence 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 15

16 Time is of the Essence Il lungo termine è una guida fallace per gli affari correnti: nel lungo termine, saremo tutti morti John Maynard Keynes 24/10/12 Le strategie di mercato e di procurement per la filiera dell impiantistica italiana 16