Europe

East of Suez Oil and Gas Market in a Global Context:
Impact on Condensate Markets
By
Dr. Fereidun Fesharaki
Chairman
Presented at
17th Annual Condensate and Naphtha Forum
November 14-15, 2013
Bali, Indonesia
This presentation material contains confidential and privileged information intended solely for conference participants.
The dissemination, distribution, or copying by any means whatsoever without FGE’s prior written consent is strictly prohibited.
1
www.FGEnergy.com
Why are oil prices so high?
Will high oil prices last?...the big picture
Recession and rebound: How have global refiners adjusted?
LNG supply bonanza: How will it impact condensate supply?
2
www.FGEnergy.com
Why are oil prices so high?
3
Why are Oil Prices Stubbornly High?
Global Supply Disruptions
mmb/d
4
3
Nigeria Force Majeure:
Bonny Light
Usan
Nembre Creek
2
Libya Uprising
www.FGEnergy.com
Libya recent
protests take
total supply
outage to over
3.5 mmb/d
1
Iran Sanctions
0
Iran
South Sudan
Nigeria
4
Syria
Yemen
Libya
Saudi Oil Output – Balancing the Market
11.0
140
10.5
130
10.0
120
9.5
110
9.0
100
8.5
90
Saudi comfort zone 8-10 mmb/d
8.0
80
Saudi Production
7.5
70
Brent Price
7.0
60
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S
11
12
13
5
Dated Brent, US$/bbl
Saudi Production, mmb/d
www.FGEnergy.com
www.FGEnergy.com
Will high prices last?...the big picture
6
Five Key Oil Demand Growth Centers
(Year-on-year Oil Demand Growth, kb/d)
www.FGEnergy.com
1
2
500
400
300
200
100
0
China
2013 2014 2015
3
500
400
300
200
100
0
4
Latin America
5
2013
2014
2015
500
400
300
200
100
0
500
400
300
200
100
0
Africa
Middle East
2013 2014 2015
2013 2014 2015
7
500
400
300
200
100
0
India
2013 2014 2015
Three Centers of Oil Demand Loss
(Total Oil Demand, mmb/d)
USA
Japan
Europe
21
20
19
18
17
6
5
4
3
2
17
16
15
14
13
2007
2009
2011
www.FGEnergy.com
2013
2015
2007
2009
2011
8
2013
2015
2007
2009
2011
2013
2015
Big Boys Driving Global Demand
9
www.FGEnergy.com
Crude Production 2012-2017
www.FGEnergy.com
mmb/d
4.5
mmb/d
4.0
Canada
4.0
mmb/d
3.5
Europe
Other FSU
mmb/d
11.0
Russia
10.5
3.5
3.0
3.5
3.0
3.0
2.5
mmb/d
11.0
10.0
2.5
9.5
mmb/d
8.3
USA
10.0
8.2
9.0
8.1
8.0
8.0
7.0
7.9
- main growth regions
mmb/d
11.0
Latin America
mmb/d
10.0
Africa
mmb/d
26.0
10.8
9.8
10.6
9.6
10.4
9.4
24.0
10.2
9.2
23.0
25.0
10
Middle East
Asia Pacific
Why Crude Oil Prices are Likely to Fall
Saudi Arabia’s difficulty in continuing to balance the market
www.FGEnergy.com
11
140
120
10
100
Dated Brent
Saudi “comfort
zone”
8
Saudi Production
80
60
7
40
6
20
5
0
2009
2010
2011
2012
2013
2014
2015
11
2016
2017
2018
2019
2020
US$/bbl
mmb/d
9
Long-Term Brent Oil Price Outlook
$160
www.FGEnergy.com
$140
Ceiling - US$120/bbl
$120
US$/bbl
$100
$80
Floor - US$80/bbl
$60
$40
$20
$-
2012 are actual. Forecasts in $2013.
12
www.FGEnergy.com
Recession and rebound: How have global refiners adjusted?
13
Distribution of Global Closures/Run Cuts
www.FGEnergy.com
PHASE I : 2008-2012
PHASE II: 2013-2016
PHASE III: 2017-2020
•
•
•
Widespread cuts, but
Europe bears the brunt
(40%)
•
OECD Asia biggest share:
Japan government plan,
Australia + Philippines…
Europe closures shift to
Med
4.2 mmb/d
FSU
Asia
•
US leads cuts (demand,
crude infrastructure, LatAm)
Annual closures or run cuts
300-550 kb/d in 2016-20
4.7 mmb/d
3.6 mmb/d
Africa
NW
Europe
Africa
FSU
FSU
NW
Europe
NW
Europe
Africa
Med
Europe
Med
Europe
Asia
East Eur
East Eur
Med
Europe
Carib/
LatAm
Asia
North
America
North
America
Carib/
LatAm
North
America
East Eur
Carib/
LatAm
14
Source: FGE World Refining Outlook
Refining Closures & Delays Spreading From Mature Markets
Closure >50 kb/d
(occurred/announced)
Existing refinery
threatened
www.FGEnergy.com
New investment
threatened/cancelled
Cuba (Chinese JV)
Kenya: possible
closure (Essar/state)
Ghana: idled
Vietnam: KPC not guaranteed
crude (or financing)
Philippines: Shell
Petrobras struggling with investment plans,
invites Sinopec and GS Caltex to 2 projects
Nigeria
(Chinese JV)
Chile: poor
economics
PETRONAS
selling Durban
(but BP/Shell
upgrading
nearby plant)
15
Malaysia: RAPID FID delayed
Indonesia (Pertamina/Saudi)
Who is Building East of Suez?...Why?
kb/d
10,000
Total Net Refining Capacity Additions in East of Suez, 2013-2020
8,175 kb/d
www.FGEnergy.com
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Chinese NOCs
Chinese NOCs with
Crudes Suppliers
Indian NOCs
16
ME NOCs
ME NOCs with IOCs
Others (Net)
Even with Closures, Global Refinery Capacity Additions
Overwhelm Demand Growth
www.FGEnergy.com
kb/d
Global CDU Capacity vs Refined Products Demand Growth
3,000
Incremental
CDU Capacity
2,000
1,000
Incremental
Refined
Products
Demand
0
-1,000
kb/d
3,000
Excluding China, the Picture Looks Better Through 2015
Incremental
CDU Capacity
2,000
1,000
Incremental
Refined
Products
Demand
0
-1,000
17
Product Trade: China as a Wild Card
•
•
•
www.FGEnergy.com
Policies in China will not allow imports to grow drastically.
China will add 4.4 mmb/d of refining capacity between mid-2013 and the end of 2020.
Net fuel oil imports are
expected to shrink by 2015
but LPG imports will grow.
Naphtha is likely to witness
some growth.
Most importantly, gasoline
and diesel exports are
expected to be larger during
the coming years.
China Petroleum Product Balance
400
200
(Net Import) / Net Export (kb/d)
•
•
LPG
Naphtha
0
Gasoline
Kero/jet
-200
Diesel
Fuel Oil
-400
-600
China can potentially be
a huge product
exporter!
-800
1998
2002
2006
2008
2009
2010
Year
18
2011
2012
2013
2014
2015
2020
China Could Seriously Boost Asia’s Exports
www.FGEnergy.com
Asian Balances: Based on China Export Scenarios
kb/d
Gasoline
1,200
Gasoil
2015 Export Scenarios
2020 Export Scenarios
1,000
800
600
400
200
2013
2015 Low
2015 Base
2015 High
19
2020 Low
2020 Base
2020 High
East of Suez Net Surplus to Rise
Net Product Balances (kb/d)
www.FGEnergy.com
Middle East
Net Imports/Exports (kb/d)
800
600
Combined East of Suez
1,500
400
200
1,000
500
0
-200
2013
0
-400
Naphtha Gasoline Kero/jet
-500
Gasoil
2020
Fuel Oil
Combined East of Suez
Asia Pacific
-1,000
1,000
1,500
-1,500500
0
Naphtha Gasoline Kero/jet Gasoil
Net Imports/Exports (kb/d)
Net Imports/Exports (kb/d)
Net Imports/Exports (kb/d)
1,000
1,000
Fuel Oil
-500
-1,000
-1,500
500
0
-500
-1,000
-1,500
-2,000
Naphtha Gasoline Kero/jet Gasoil
Naphtha Gasoline Kero/jet Gasoil
Fuel Oil
20
Fuel Oil
Will Asia Get the Crude it Wants?
Mismatch Between What Asia Wants and What it Will Get
www.FGEnergy.com
Change in Asian ‘ideal’ crude demand 2011-2015
2.0
Ideal vs Forecast 2011-2015
2.0
mmb/d
1.5
1.5
1.0
0.5
0.0
-0.5
Backed out
(closures/upgrades)
New projects
•
Preferred
Actual
1.0
0.5
0.0
-0.5
Net
-1.0
-1.0
•
mmb/d
• But medium sour availability is falling!
Most of the new projects in Asia are designed
for Middle East and/or medium sour crude
(27-34 API)
=> Asia must cope with less
•
Closures will back out 800 kb/d medium sour
crude—but net demand still rises 1 mmb/d
Global surplus of light sweet crudes
=> Refiners must adapt (price incentive)
Source: Crude Trade Study 2013
21
www.FGEnergy.com
LNG supply bonanza: How will it impact condensate supply?
22
New Supplies = Big Bonanza?
www.FGEnergy.com
Canada
Announced: 119 mmtpa
US
Under Construction: 16 mmtpa
Announced: > 200 mmtpa**
Mozambique
Announced: 20 mmtpa
Australasia
Under Construction: 67.9 mmtpa
Planned: 8.4 mmtpa
23
** Capacity per DOE authorization to FTA countries, in
addition to capacities under construction.
But is All of it Rich Gas?
www.FGEnergy.com
mmtpa
500
Rich
Lean
Superlean
• Trend towards
leaner gas than the
existing capacity
400
300
200
100
0
Existing
Under Construction +
Planned + Speculative
Superlean: <1,040 Btu/scf; Lean: 1,041-1,089 Btu/scf; Rich: 1,090 Btu/scf and above
24
Condensate Export Availability?
www.FGEnergy.com
Australia
Most new gas is dry except Ichthys and Prelude.
East Africa
New gas so far appears dry—unlikely to contain condensates.
The US
Some shale plays such as Eagle Ford contain substantial condensate
volumes, but it will probably be treated like crude and the US
Government will probably not allow exports.
Canada
So far, Canadian shale gas appears relatively dry.
25
Thank You
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