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01 March 2016
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Oil & Gas Refining & Marketing
Refiners' Digest COMMENT
The jury is out ■ Refining margins are currently soft, wherever you look from Singapore
to Russia to Europe and the US. All regions are running behind our estimates for 1Q16. NWE stands at $6.1/bbl vs our $7.1/bbl for 1Q16, Asia is at $10.2/bbl QTD vs our $12.3/bbl, and in the US, PADD I is at $8.5/bbl vs our $9.5/bbl, and PADD III on average continues to be slightly below our forecast. Our view has not changed, however: 'sunnier' times are ahead as we head into the summer months and as long as OPEC pumps, not cuts.
■ Movers and shakers last week. In Europe, margins are low and down w/w – uptick in crude, continued weakness in diesel and fuel oil cracks weighed. On middle distillates, inventories were pushed higher when low water levels on the Rhine River disrupted barge shipments in late 2015. Water levels have risen in recent months, allowing normal barge traffic to resume, but reduced distillate heating oil demand due to mild winter (and high runs) kept ARA inventory at elevated levels (leading to volumes held offshore). In Russia, the story looks the toughest (see our new charts) – both simple and teapot refining margins are in negative territory, which should lead to further run cuts and decent crude exports. In Asia, margins remain largely stable at weak levels w/w. Better light distillates, including naphtha encouragingly, were the positives, but offset by increasing prices for Dubai and weaker fuel oil. In the US, PADD III margins ticked up over the week, led by a recovery in the gasoline crack (transition to summer spec). First draw in number of months helped, but gains in PADD I were more subdued as the transition to summer grade gasoline has not kicked in yet. Overall, US gasoline demand is fine as far as recent data is concerned, which is a relief. Overall, however, it is interesting that in an environment where throughput is being cut, crude oil markets have not deteriorated; if anything, they have recovered. Yes, there have been a number of outages (eg KRI, Nigerian exports etc), but whether crude markets (absent any OPEC action) can withstand the pressure from weakening refinery runs in the near-term remains to be seen.
■ What about China? Interestingly, diesel and gasoline exports in January fell m/m (see charts inside), and are at lower levels than much of 2H15. Without data on refinery runs and inventory draws (data will be released for Jan and Feb combined later this month to smooth out the CNY effect), the jury is out on whether the reduced exports represent an improvement in demand. If history is any guide, throughput tends to be lower at the start of the year. But history does not take into account changes to behaviour at teapot refineries (higher runs due to higher crude import licenses), in addition to NDRC's intervention earlier this year, which allows refiners to enjoy higher margins theoretically encouraging higher refinery runs. The government stopped lowering product prices when oil is below $40/bbl since the start of the year, which helps, even though much of the excess profit is placed in a fund that aims to improve energy security/fuel quality. If so, it does at least hint at higher domestic consumption, and alleviate pressure from already battered global diesel market. The jury is out; data will be out end-March.
■ Asian Chemical Prices. Solid momentum remains across the board with seasonal demand emerging post CNY amid sub-par inventory prior to turnaround season. Interestingly, BD spread saw a spike (16% w/w) to US$622/mt whereas ethylene rebounded 7% w/w to US$662/mt. We view recent pricing/margin rally as more of a function of supply issues, which will likely be sustained in 2Q. As such, we see better chance of late-cycle rally for a few 'bad' products in the context of imminent supply drought (e.g. BD).
Research Analysts
Thomas Adolff
44 20 7888 9114
thomas.adolff@credit-suisse.com
Kenneth Whee
852 2101 7319
kenneth.whee@credit-suisse.com
Ilkin Karimli
44 20 7883 0303
ilkin.karimli@credit-suisse.com
Horace Tse
852 2101 7379
horace.tse@credit-suisse.com
Justin Teo
44 20 7888 9484
justin.teo@credit-suisse.com
Yaroslav Rumyantsev
44 20 7883 1722
yaroslav.rumyantsev@credit-suisse.com
01 March 2016
Refiners' Digest 2
Table of contents Regional refining margins 3 Asian Olefin, vinyl and styrenics chain 4 Asian PET chain 5 Refining margins summary 6 Commodity monitor – Crude runs 7 Commodity monitor – Outages/Maintenance 8 Commodity monitor – Global crude differentials 9 Commodity monitor – Saudi Official Selling Prices 10 Commodity monitor – Iraqi OSPs 11 Commodity monitor – NWE product/crude spreads 12 Commodity monitor – US refining margins 13 Commodity monitor – USGC and USEC spreads 14 Commodity monitor – Asian refining margins 15 Commodity monitor – Chinese product demand data 16 Commodity monitor – Chinese net import/export data 17 Commodity monitor – South Korean refinery data 18 Commodity monitor – Japanese refinery data 19 Commodity monitor – Russian refining margins 20 De-constructed: Russian refining margins 21 Commodity monitor – Russian crude/product output 22 Commodity monitor – Saudi Arabia refinery data 23 Commodity monitor – Indian refinery data 24 Commodity monitor – Brazilian product margins 25 Commodity monitor – Brazil refinery data 26 Commodity monitor – Mexico refinery data 27 Regional OECD End-of-Month Industry (oil) stocks 28 US inventory and demand data 29 OECD and European inventory data 30 CS versus Valero's view on net capacity additions 31 Global refining closures since 2009 33 NEW WORLD ORDER – Global product flows and regional product balances 34 OLD WORLD – Global product flows and regional product balances 35 Global refiners’ valuation summary 36 Appendix 37 Downstream: Refining 101 38 Let's take it step by step 42
01 March 2016
Refiners' Digest 3
Regional refining margins
Figure 1: CS Indicator NWE refining margins ($/bbl) Figure 2: MED Complex vs Simple refining margins ($/bbl)
-$5
$0
$5
$10
$15
$20
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r2015 2016 2016 forecasts
-$10
-$5
$0
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$10
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$25
Sep
20
06
Ma
r 2
00
7
Sep
20
07
Ma
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00
8
Sep
20
08
Ma
r 2
00
9
Sep
20
09
Ma
r 2
01
0
Sep
20
10
Ma
r 2
01
1
Sep
20
11
Ma
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01
2
Sep
20
12
Ma
r 2
01
3
Sep
20
13
Ma
r 2
01
4
Sep
20
14
Ma
r 2
01
5
Sep
20
15
Hydrocracking Hydroskimming
Source: Platts, Credit Suisse Research Source: Hellenic Petroleum, Credit Suisse Research
Figure 3: US East Coast 6-3-2-1 ($/bbl) (Brent based) Figure 4: USGC 3-2-1 ($/bbl) (LLS based)
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
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r
Dec
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r
2015 2016 2016 forecasts
-$5
$0
$5
$10
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$25
$30Ja
nuar
y
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
Source: Platts, Credit Suisse Research Source: Platts, Credit Suisse Research
Figure 5: 6-2-3-1 Singapore Refining margins ($/bbl) Figure 6: Russian export margins to NWE ($/bbl)
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
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Nov
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r
Dec
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r
2015 2016 2016 forecasts
-10
-5
0
5
10
15
20
25
30
Medium/Complex NWE Simple NWE Teapot NWE
Source: Platts, Credit Suisse Research Source: Argus, Credit Suisse Research
01 March 2016
Refiners' Digest 4
Asian Olefin, vinyl and styrenics chain
Figure 7: Butadiene margin Figure 8: PE margin
-
100
200
300
400
500
600
700
800
900
Apr
-13
Jun-
13
Aug
-13
Oct
-13
Dec
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Feb-
14
Apr
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Jun-
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Aug
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Oct
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Dec
-14
Feb-
15
Apr
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Jun-
15
Aug
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Oct
-15
Dec
-15
Feb-
16
Butadiene - Naphtha Quarterly Average
US$/MT
-
100
200
300
400
500
600
700
800
900
1,000
Apr
-13
Jun-
13
Aug
-13
Oct
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14
Apr
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Jun-
14
Aug
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Oct
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15
Apr
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Jun-
15
Aug
-15
Oct
-15
Dec
-15
Feb-
16
Ethylene-Naphtha PE-Ethylene Quarterly Average
US$/MT
Source: Thomson Reuters Source: Thomson Reuters
Figure 9: PP margin Figure 10: PVC margin
(100)
-
100
200
300
400
500
600
700
800
900
1,000
Apr-1
3
Jun-
13
Aug-
13
Oct
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Feb-
14
Apr-1
4
Jun-
14
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Feb-
15
Apr-1
5
Jun-
15
Aug-
15
Oct
-15
Dec
-15
Feb-
16
Propylene-Naphtha PP-Propylene Quarterly Average
US$/MT
-
50
100
150
200
250
300
350
400
450
Apr-1
3
Jun-
13
Aug-
13
Oct
-13
Dec
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14
Apr-1
4
Jun-
14
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Oct
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15
Apr-1
5
Jun-
15
Aug-
15
Oct
-15
Dec
-15
Feb-
16
PVC-Naphtha-Chlorine Quarterly Average
US$/MT
Source: Thomson Reuters Source: Thomson Reuters
Figure 11: EDC margin Figure 12: SM margin
(400)
(350)
(300)
(250)
(200)
(150)
(100)
(50)
-
Apr-1
1
Jun-
11
Aug-
11
Oct
-11
Dec
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12
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2
Jun-
12
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Oct
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15
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5
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15
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-15
Feb-
16
EDC-Ethylene-Chlorine Quarterly Average
US$/MT
-
100
200
300
400
500
600
700
800
Apr-1
3
Jun-
13
Aug-
13
Oct
-13
Dec
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14
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4
Jun-
14
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14
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15
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5
Jun-
15
Aug-
15
Oct
-15
Dec
-15
Feb-
16
Ethylene-Naphtha Benzene-Naphtha SM-Benzene-Ethylene
US$/MT
Source: Thomson Reuters Source: Thomson Reuters
Figure 13: PS margin Figure 14: ABS margin
-
200
400
600
800
1,000
Apr
-13
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
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Jun-
14
Aug
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Oct
-14
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Feb-
15
Apr
-15
Jun-
15
Aug
-15
Oct
-15
Dec
-15
Feb-
16
Ethylene-Naphtha Benzene-Naphtha SM-Benzene-Ethylene Polystyrene-SM
US$/MT
-
200
400
600
800
1,000
1,200
1,400
Apr
-13
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
Oct
-14
Dec
-14
Feb-
15
Apr
-15
Jun-
15
Aug
-15
Oct
-15
Dec
-15
Feb-
16
Ethylene-Naphtha Bz-Naphtha BD-Naphtha ACN-Propylene-Ammonia
Propylene-Naphtha SM-Bz-Ethylene ABS-ACN-SM-BD
US$/MT
Source: Thomson Reuters Source: Thomson Reuters
01 March 2016
Refiners' Digest 5
Asian PET chain
Figure 15: PET margin Figure 16: PSF margins
-
100
200
300
400
500
600
700
800
900
1,000
Apr-
13
Ju
n-1
3
Au
g-1
3
Oct-
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De
c-1
3
Fe
b-1
4
Ap
r-1
4
Ju
n-1
4
Au
g-1
4
Oct-
14
De
c-1
4
Fe
b-1
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Ap
r-1
5
Ju
n-1
5
Au
g-1
5
Oct-
15
De
c-1
5
Fe
b-1
6
Ethylene-Naphtha PX-Naphtha MEG-Ethylene PTA-PX PET-MEG-PTA Quarterly Average
0
500
1,000
1,500
2,000
2,500
-
200
400
600
800
1,000
1,200
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c-1
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r-1
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g-1
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Oct-
15
De
c-1
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Fe
b-1
6
0.7x0.87x(PX-Naphtha) 0.87x(PTA-PX) 0.35x(MEG-Naphtha) PSF-(PTA+MEG) Cotton (RHS)
US$/MT US$/MT
Source: Thomson Reuters, Bloomberg Source: Thomson Reuters, Bloomberg
Figure 17: POY margin Figure 18: MEG-Ethylene margin
0
500
1,000
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2,000
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5,000
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3
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r-1
4
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4
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15
Dec-1
5
Feb
-16
0.7x0.87x(PX-Naphtha) 0.87x(PTA-PX) 0.35x(MEG-Naphtha) POY-(PTA+MEG) Cotton (RHS)
US$/MTUS$/MT
(200)
(100)
-
100
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600
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800
Ap
r-1
0
Jul-
10
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10
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r-1
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11
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11
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-12
Ap
r-1
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12
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12
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4
Jul-
14
Oct-
14
Jan
-15
Ap
r-1
5
Jul-
15
Oct-
15
Jan
-16
MEG-Ethylene Quarterly Average
US$/MT
Source: Thomson Reuters, Bloomberg Source: Thomson Reuters, Bloomberg
Figure 19: PTA-PX margin Figure 20: PX-Naphtha margin
(200)
(100)
-
100
200
300
400
Jan
-10
Apr-
10
Jul-
10
Oct-
10
Jan-1
1
Apr-
11
Jul-
11
Oct-
11
Jan
-12
Apr-
12
Jul-
12
Oct-
12
Jan
-13
Apr-
13
Jul-
13
Oct-
13
Jan
-14
Apr-
14
Jul-
14
Oct-
14
Jan
-15
Apr-
15
Jul-
15
Oct-
15
Jan
-16
PTA-PX Quarterly Average
US$/MT
-
200
400
600
800
Apr-
10
Jul-
10
Oct-
10
Ja
n-1
1
Apr-
11
Jul-
11
Oct-
11
Ja
n-1
2
Apr-
12
Jul-
12
Oct-
12
Ja
n-1
3
Apr-
13
Jul-
13
Oct-
13
Ja
n-1
4
Apr-
14
Jul-
14
Oct-
14
Ja
n-1
5
Apr-
15
Jul-
15
Oct-
15
Ja
n-1
6
PX-Naphtha Quarterly Average
US$/MT
Source: Thomson Reuters, Bloomberg Source: Thomson Reuters, Bloomberg
01 March 2016
Refiners' Digest 6
Refining margins summary Figure 21: Quarterly crude price, product crack and refining margin calculations ($/bbl)
3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Last Last Prior Last 1Q16 1Q16
TD 4 wks 2 wks 2 wks 1 wk q/q (%) ($/bbl) y/y (%) ($/bbl)
Crude oil prices ($/bbl)
WTI 97.6 72.9 48.6 57.7 46.6 41.9 31.0 30.2 30.7 29.7 31.5 -26% -11.0 -36% -17.7
Brent 102.2 75.8 53.92 62.1 50.1 43.3 31.9 33.1 33.6 32.6 34.1 -26% -11.4 -41% -22.0
Brent/Urals spread -1.8 -1.6 -1.72 -1.5 -1.5 -2.7 -2.8 -2.7 -2.6 -2.7 -2.6 -3% -0.1 -61% -1.1
Refining margins ($/bbl)
NWE Indicator margin 6.8 6.6 8.6 9.3 10.2 7.0 6.1 4.6 4.3 4.9 4.0 -13% -0.9 -29% -2.5
PADD I 10.2 11.5 12.2 12.6 12.4 8.8 8.5 7.1 6.4 7.7 5.4 -4% -0.3 -31% -3.7
PADD II 17.4 14.4 16.3 20.9 24.2 14.2 7.8 7.6 11.1 4.1 11.9 -45% -6.4 -52% -8.5
PADD III (WTI) 18.4 9.8 17.7 22.6 20.9 10.8 10.5 10.2 10.1 10.3 10.8 -2% -0.2 -41% -7.2
PADD IV 30.5 24.5 23.1 32.7 37.7 23.4 17.6 15.9 16.9 14.9 18.2 -25% -5.8 -24% -5.5
PADD V 16.8 13.7 21.5 29.0 23.2 21.6 17.0 11.6 8.9 14.4 16.2 -22% -4.7 -21% -4.6
US weighted average 17.5 12.1 17.8 22.8 21.7 13.7 11.2 9.8 9.9 9.7 10.9 -18% -2.5 -37% -6.6
Asia (Singapore) 9.7 11.0 12.4 12.5 10.4 11.5 10.2 8.4 9.1 7.8 9.0 -11% -1.3 -18% -2.2
Product cracks (NWE)
Gasoline 13.7 9.8 11.4 17.5 21.0 11.6 12.5 8.8 7.8 9.8 7.8 7% 0.9 9% 1.0
Heating oil 12.6 13.0 13.1 12.5 12.2 8.6 5.3 5.1 5.3 5.0 4.7 -39% -3.4 -60% -7.8
Diesel 16.8 18.1 17.6 16.6 15.9 12.5 8.0 7.9 8.4 7.5 7.9 -36% -4.5 -54% -9.6
LSFO (1%) -11.5 -12.0 -9.3 -10.3 -11.9 -12.8 -11.4 -11.7 -12.1 -11.3 -12.4 11% 1.4 -22% -2.1
HSFO (3.5%) -16.7 -15.9 -13.7 -14.0 -14.8 -17.5 -14.9 -14.6 -14.9 -14.2 -15.1 15% 2.6 -9% -1.2
Naphtha -4.7 -8.7 -2.4 -2.9 -2.8 2.0 1.7 -1.1 -1.3 -1.0 -1.0 -15% -0.3 169% 4.1
Jet 17.9 20.0 18.4 14.9 14.2 12.7 9.5 9.3 9.3 9.3 8.9 -25% -3.2 -48% -8.9
Source: Platts, Credit Suisse research; Note: CS Indicator margin – Crude slate (Brent/Urals at 35/65); Product slate: Gasoline (26%), Naphtha
(7%), Gasoil (10%), ULSD (30%), Jet (7%), LSFO (8%), HSFO (12%) and assumes a 6% C&L loss.
Figure 22: Regional refining margin forecasts ($/bbl)
1Q15 2Q15 3Q15 4Q15 2015 1Q16E 2Q16E 3Q16E 4Q16E 2016E
CS NWE Indicator margin $8.7 $9.3 $10.2 $7.0 $8.8 $7.1 $8.4 $8.9 $5.5 $7.5
Asia (Singapore) 6-2-3-1 $12.4 $12.5 $10.4 $11.5 $11.7 $12.3 $12.4 $10.3 $10.8 $10.9
US East Coast (PADD I) 6-3-2-1 (Brent) $12.3 $12.6 $12.4 $8.8 $11.5 $9.5 $12.5 $12.5 $9.5 $11.5
US Midwest (PADD II) 3-2-1 (WTI) $16.3 $20.9 $24.3 $14.2 $18.9 $10.3 $16.3 $15.5 $12.5 $13.6
US Gulf Coast (PADD III) 3-2-1 (WTI) $17.7 $22.6 $20.8 $10.8 $18.0 $11.3 $14.3 $13.0 $8.0 $11.6
US Gulf Coast (PADD III) 3-2-1 (LLS) $13.4 $17.5 $17.5 $9.2 $14.4 $9.8 $13.3 $12.0 $6.5 $10.4
US West Coast (PADD V) 5-3-1-1 (ANS) $21.6 $29.1 $23.2 $21.5 $23.9 $20.0 $25.0 $20.0 $16.3 $20.3
Source: Platts, Credit Suisse estimates
Figure 23: Full year crude price, European product crack and margin realisations ($/bbl)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
5 yr avg
10 yr avg
Crude oil prices ($/bbl)
Brent 28.83 38.26 54.49 65.41 72.70 97.60 61.81 79.71 111.04 111.85 108.84 99.28 53.54 96.91 83.30
Brent/Urals spread -1.62 -4.14 -4.15 -4.18 -3.31 -2.83 -0.63 -1.40 -1.80 -1.66 -1.18 -1.72 -1.85 -1.64 -2.25
Refining margins ($/bbl)
CS NWE Indicator Margin 4.91 8.12 8.80 7.12 7.78 8.55 3.66 5.14 4.74 7.17 4.44 5.31 8.81 6.09 6.50
Product cracks (NWE)
Gasoline 6.40 9.30 8.80 8.35 10.26 1.83 6.84 7.89 6.80 11.38 8.67 10.38 15.25 10.49 8.77
Heating oil 5.34 8.61 13.26 12.36 12.73 23.81 6.85 9.17 12.61 14.08 12.80 12.30 11.94 12.75 12.90
Diesel 8.65 14.07 19.07 17.24 18.23 30.71 10.95 14.39 18.43 20.23 18.05 16.60 15.89 17.84 18.16
LSFO (1%) -2.75 -12.98 -15.03 -19.49 -18.66 -14.92 -5.58 -7.29 -10.37 -6.20 -12.14 -11.39 -11.01 -10.22 -12.01
HSFO (3.5%) -7.64 -16.66 -20.95 -22.45 -21.83 -28.02 -9.07 -12.06 -17.29 -15.12 -18.09 -18.71 -14.74 -16.79 -18.03
Naphtha 1.14 3.11 -2.14 -3.12 1.85 -10.24 -3.14 -0.91 -7.59 -8.43 -9.05 -6.53 -1.79 -6.68 -4.65
Jet 7.27 12.71 18.03 17.97 18.50 31.06 10.57 13.05 18.84 19.46 17.85 17.30 15.14 17.72 17.98
Source: Platts, Credit Suisse estimates; Note: CS Indicator margin assumes a 6% C&L loss, whereas other margins are unadjusted for C&L
01 March 2016
Refiners' Digest 7
Commodity monitor – Crude runs
Figure 24: Global crude runs (mbd) Figure 25: OECD crude runs (mbd)
Source: IEA, Credit Suisse Research Source: IEA, Credit Suisse Research
Figure 26: US refinery runs (mbd) Figure 27: Original EU 16 refinery runs (kbd)
Source: DOE, Credit Suisse Research Source: Euroil, Credit Suisse Research
Figure 28: Chinese refinery runs (kbd) Figure 29: Russian refinery runs (kbd)
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
Jan
Feb
Mar
ch
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2011 2012 2013 2014 2015
4,000
4,500
5,000
5,500
6,000
6,500
Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
Oct
No
v
Dec
2011 2012 2013 2014 2015 2016
Source: CEI, Credit Suisse Research Source: Federal State Statistics Service (up to end 2012), The
Ministry of Energy (from 2013) Credit Suisse Research
01 March 2016
Refiners' Digest 8
Commodity monitor – Outages/Maintenance
Figure 30: Global reported CDU outages (mbd) Figure 31: World ex-US, ex-FSU & ex-NWE reported CDU
outages (mbd)
Source: Bloomberg, Credit Suisse Research Source: Bloomberg, Credit Suisse Research
Figure 32: Total US CDU maintenance forecast (kbd) Figure 33: NWE reported CDU outages (kbd)
Source: EIA, Credit Suisse Research Source: Bloomberg, Credit Suisse Research
Figure 34: FSU reported CDU outages (kbd) Figure 35: China reported CDU outages (kbd)
Source: Bloomberg, Credit Suisse Research Source: Bloomberg, NBS, Credit Suisse Research
01 March 2016
Refiners' Digest 9
Commodity monitor – Global crude differentials
Figure 36: WTI-Brent differentials ($/bbl) Figure 37: WTI-LLS differentials ($/bbl)
-$30
-$25
-$20
-$15
-$10
-$5
$0
$5
$10
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
-$30
-$25
-$20
-$15
-$10
-$5
$0
$5
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Figure 38: LLS-Brent differentials ($/bbl) Figure 39: LLS-Mars differentials ($/bbl)
-$15
-$10
-$5
$0
$5
$10
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
-$2
$0
$2
$4
$6
$8
$10
$12
Janu
ary
Febr
uary
Mar
ch
April
May
June July
Sept
embe
r
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Figure 40: LLS-Maya differentials ($/bbl) Figure 41: Urals-Brent differentials ($/bbl)
-$5
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Febr
uary
Mar
ch
April
May
June
July
Sept
embe
r
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
-$6
-$5
-$4
-$3
-$2
-$1
$0
$1
$2
Janu
ary
Febr
uary
Mar
ch
April
May
June July
Sept
embe
r
Oct
ober
Nove
mbe
r
Dece
mbe
r2015 2016 2016 forecasts
Figure 42: Bonny Light-Brent differentials ($/bbl) Figure 43: Brent-Dubai differentials ($/bbl)
-$3
-$2
-$1
$0
$1
$2
$3
$4
$5
$6
$7
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
-$5.0
-$3.0
-$1.0
$1.0
$3.0
$5.0
$7.0
$9.0
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Source for Figures 36-43: Platts Source for Figures 36-43: Platts
01 March 2016
Refiners' Digest 10
Commodity monitor – Saudi Official Selling Prices
Figure 44: Saudi OSPs to Asia ($/bbl) Figure 45: OSP to Asia: Extra Light to Heavy spread
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
$4.0
$6.0
$8.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Extra Light Light Medium Heavy
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Figure 46: Saudi OSPs to the US ($/bbl) Figure 47: OSP to the US: Extra Light to Heavy spread
-$3.0
-$2.0
-$1.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Extra Light Light Medium Heavy
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov-
14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov-
15
Jan-
16
Mar
-16
Figure 48: Saudi OSPs to the Med ($/bbl) Figure 49: OSP to the Med: Extra Light to Heavy spread
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
$4.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Extra Light Light Medium Heavy
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov-
14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov-
15
Jan-
16
Mar
-16
Figure 50: Saudi OSPs to Europe ($/bbl) Figure 51: OSP to Europe: Extra Light to Heavy spread
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Extra Light Light Medium Heavy
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
Source: the BLOOMBERG PROFESSIONAL™ service Source: the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 11
Commodity monitor – Iraqi OSPs
Figure 52: Iraqi OSPs to Asia ($/bbl) Figure 53: OSP to Asia: Light to Heavy spread
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Basrah Heavy Basrah Light
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Source: the BLOOMBERG PROFESSIONAL™ service Source: the BLOOMBERG PROFESSIONAL™ service
Figure 54: Iraqi OSPs to the US ($/bbl) Figure 55: OSP to the US: Light to Heavy spread
-$7.0
-$6.0
-$5.0
-$4.0
-$3.0
-$2.0
-$1.0
$0.0
$1.0
$2.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Basrah Heavy Basrah Light
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Source: the BLOOMBERG PROFESSIONAL™ service Source: the BLOOMBERG PROFESSIONAL™ service
Figure 56: Iraqi OSPs to Europe ($/bbl) Figure 57: OSP to Europe: Light to Heavy spread
-$12.0
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Basrah Heavy Basrah Light
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Ma
r-1
6
Source: the BLOOMBERG PROFESSIONAL™ service Source: the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 12
Commodity monitor – NWE product/crude spreads
Figure 58: Original EU 16 refinery runs (mbd) Figure 59: NWE gasoline cracks ($/bbl)
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
Source: Euroil, Credit Suisse Research Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 60: NWE naphtha cracks ($/bbl) Figure 61: NWE Reforming spread ($/t)
-$20
-$15
-$10
-$5
$0
$5
$10
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
-$50
$0
$50
$100
$150
$200
$250
$300
Janu
ary
Fe
bru
ary
Marc
h
Ap
ril
May
June
July
Se
pte
mb
er
Oct
ober
No
vem
ber
De
cem
ber
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 62: NWE 10ppm diesel cracks ($/bbl) Figure 63: NWE 1.0% fuel oil cracks ($/bbl)
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
-$25
-$20
-$15
-$10
-$5
$0
$5
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 13
Commodity monitor – US refining margins
Figure 64: Total US throughput (mbd) Figure 65: USGC 3-2-1 ($/bbl) (WTI based)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Janu
ary
Fe
bru
ary
Marc
h
Ap
ril
May
June
July
Se
pte
mb
er
Oct
ober
No
vem
ber
De
cem
ber
2015 2016 2016 forecasts
Source: DOE, Credit Suisse Research Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 66: USGC 3-2-1 ($/bbl) (MAYA based) Figure 67: US Mid-Continent 3-2-1 ($/bbl) (WTI based)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
$0
$10
$20
$30
$40
$50
$60Ja
nuar
y
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016 2016 forecasts
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 68: US East Coast 6-3-2-1 ($/bbl) (Brent based) Figure 69: US West Coast 5-3-1-1 ($/bbl) (ANS based)
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Fe
bru
ary
Mar
ch
Ap
ril
May
June
July
Se
ptem
ber
Oct
obe
r
No
vem
ber
De
cem
ber
2015 2016 2016 forecasts
$0
$10
$20
$30
$40
$50
$60
$70
Janu
ary
Fe
bru
ary
Mar
ch
Ap
ril
May
June
July
Se
ptem
ber
Oct
obe
r
No
vem
ber
De
cem
ber
2015 2016 2016 forecasts
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 14
Commodity monitor – USGC and USEC spreads
Figure 70: USGC gasoline cracks ($/bbl) (LLS based) Figure 71: USGC distillate cracks ($/bbl) (LLS based)
-$15
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 72: USGC gasoline cracks ($/bbl) (WTI based) Figure 73: USGC distillate cracks ($/bbl) (WTI based)
-$10
$0
$10
$20
$30
$40
$50
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 74: USEC gasoline cracks ($/bbl) (Brent based) Figure 75: USEC distillate cracks ($/bbl) (Brent based)
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
Janu
ary
Fe
bru
ary
Mar
ch
Ap
ril
May
June
July
Se
ptem
ber
Oct
obe
r
No
vem
ber
De
cem
ber
2015 2016
$0
$5
$10
$15
$20
$25
$30
$35
$40
Janu
ary
Fe
bru
ary
Mar
ch
Ap
ril
May
June
July
Se
ptem
ber
Oct
obe
r
No
vem
ber
De
cem
ber
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 15
Commodity monitor – Asian refining margins
Figure 76: Japan crude runs, mbd Figure 77: Chinese refinery runs (kbd)
2000
2200
2400
2600
2800
3000
3200
3400
3600
3800
4000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
Jan
Feb
Mar
ch
Apr
il
May
June
July
Aug
Sep
t
Oct
Nov Dec
2011 2012 2013 2014 2015
Source: JODI, Credit Suisse Research Source: CEI, Credit Suisse Research
Figure 78: 6-2-3-1 Singapore Dubai based margins ($/bbl) Figure 79: Singapore gasoline cracks ($/bbl)
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
Janu
ary
Fe
bru
ary
Marc
h
Ap
ril
May
June
July
Se
pte
mb
er
Oct
ober
No
vem
ber
De
cem
ber
2015 2016 2016 forecasts
$0
$5
$10
$15
$20
$25
$30
$35
$40
Janu
ary
Fe
bru
ary
Marc
h
Ap
ril
May
June
July
Se
pte
mb
er
Oct
ober
No
vem
ber
De
cem
ber
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
Figure 80: Singapore diesel crack ($/bbl) Figure 81: Singapore fuel oil (FO) crack ($/bbl)
$0
$5
$10
$15
$20
$25
$30
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
-$25
-$20
-$15
-$10
-$5
$0
$5
Janu
ary
Feb
ruar
y
Mar
ch
Apr
il
May
June
July
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
2015 2016
Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 16
Commodity monitor – Chinese product demand data
Figure 82: Oil products demand, 3MMA y/y growth (mbd) Figure 83: Oil products demand, y/y (%)
-0.6
-0.3
0.0
0.3
0.6
0.9
1.2
1.5
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Total Oil Products
(MBD)
-10
-5
0
5
10
15
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Total Oil Products
(%)
Source: CEIC, Credit Suisse Asia Oil & Gas Source: CEIC, Credit Suisse Asia Oil & Gas
Figure 84: Gasoline demand, 3MMA y/y growth (mbd) Figure 85: Gasoline demand, y/y (%)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Gasoline
(MBD)
-5
0
5
10
15
20
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Gasoline
(%)
Source: CEIC, Credit Suisse Asia Oil & Gas Source: CEIC, Credit Suisse Asia Oil & Gas
Figure 86: Diesel demand, 3MMA y/y growth (mbd) Figure 87: Diesel demand, y/y (%)
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Diesel
(MBD)
-15
-10
-5
0
5
10
15
20
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Diesel
(%)
Source: CEIC, Credit Suisse Asia Oil & Gas Source: CEIC, Credit Suisse Asia Oil & Gas
01 March 2016
Refiners' Digest 17
Commodity monitor – Chinese net import/export data
Figure 88: Net total oil products import/(export), kbd Figure 89: Net gasoline import/(export), kbd
-300-200-100
0100200300400500600700
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
-300
-250
-200
-150
-100
-50
0
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
Source: CEIC, Credit Suisse Research Source: CEIC, Credit Suisse Research
Figure 90: Net diesel import/(export), kbd Figure 91: Net jet/kero import/(export), kbd
-300
-250
-200
-150
-100
-50
0
50
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
-350
-300
-250
-200
-150
-100
-50
0
50
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
Source: CEIC, Credit Suisse Research Source: CEIC, Credit Suisse Research
Figure 92: Net Naphtha import/(export), kbd Figure 93: Net fuel oil import/(export), kbd
0
50
100
150
200
250
300
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
-200
-100
0
100
200
300
400
500
Jan
Feb
Marc
h
April
May
June
July
Aug
Sept
Oct
Nov
Dec
2012 2013 2014 2015 2016
Source: CEIC, Credit Suisse Research Source: CEIC, Credit Suisse Research
01 March 2016
Refiners' Digest 18
Commodity monitor – South Korean refinery data
Figure 94: South Korean refinery runs (kbd) Figure 95: Oil Products Net Exports (kbd)
2000
2200
2400
2600
2800
3000
3200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
-200
-100
0
100
200
300
400
500
600
700
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014
2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 96: Gasoline output (kbd) Figure 97: Fuel Oil output (kbd)
0
100
200
300
400
500
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 2010
0
50
100
150
200
250
300
350
400
450
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 98: Gas/Diesel output (kbd) Figure 99: Gas oil/ Diesel net exports (kbd)
600
700
800
900
1000
1100
1200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
200
250
300
350
400
450
500
550
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 19
Commodity monitor – Japanese refinery data
Figure 100: Japanese refinery runs (kbd) Figure 101: Oil Products Net Exports (kbd)
2000
2200
2400
2600
2800
3000
3200
3400
3600
3800
4000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014
2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 102: Gasoline output (kbd) Figure 103: Fuel Oil output (kbd)
700
750
800
850
900
950
1000
1050
1100
1150
1200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 2010
0
100
200
300
400
500
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 104: Gas/Diesel output (kbd) Figure 105: Gas oil/ Diesel net exports (kbd)
600
700
800
900
1000
1100
1200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 20
Commodity monitor – Russian refining margins
Refining margins in Russia have come under pressure in 2015. This is due to the
implementation of the so-called tax manoeuvre, which came into force on 1st Jan 2015.
One of the parameters of the tax change was the reduction in export duties, designed to
stimulate upstream economics. Given domestic oil prices are calculated on a netback
basis (i.e. oil prices net of export duties), a reduction in export duties leads to higher
domestic oil prices i.e. higher feedstock costs.
For 2016, we expect margins in Russia to remain largely in line with 2015 levels. The two
main factors impacting margins in 2015 were the tax manoeuvre, which increased the
burden on the downstream segment, and RUB weakness. As per the government’s tax
amendments late last year, a planned cut in oil export duty will be delayed by at least one
year, which should remove the pressure on margins compared to 2015. In this
environment, we do not expect a significant recovery in throughputs either and expect the
companies to demonstrate a similar flexibility on throughputs as they did last year.
Figure 106: Russian refining margins to NWE ($/bbl) Figure 107: Complex Russian margins to NWE ($/bbl)
-10
-5
0
5
10
15
20
25
30
Medium/Complex NWE Simple NWE Teapot NWE
-10
-5
0
5
10
15
20
25
30
Gasoil Gasoline Naphtha VGO Fuel oil Loss Total
Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates
Figure 108: Simple Russian margins to NWE ($/bbl) Figure 109: Teapot Russian margins to NWE ($/bbl)
-10
-5
0
5
10
15
20
Gasoil Gasoline Naphtha VGO Fuel oil Loss Total
-10
-5
0
5
10
15
20
Gasoil Gasoline Naphtha VGO Fuel oil Loss Total
Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates
01 March 2016
Refiners' Digest 21
De-constructed: Russian refining margins
Figure 110: 'Complex' Russian margins to NWE ($/bbls) Figure 111: 'Complex' Russian margins to Med ($/bbls)
0.00
5.00
10.00
15.00
20.00
25.00
30.00
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
0.00
5.00
10.00
15.00
20.00
25.00
30.00
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates
Figure 112: 'Simple' Russian margins to NWE ($/bbls) Figure 113: 'Simple' Russian margins to Med ($/bbls)
-5
0
5
10
15
20
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
-5.00
0.00
5.00
10.00
15.00
20.00
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates
Figure 114: 'Teapot' Russian margins to NWE ($/bbls) Figure 115: 'Teapot' Russian margins to Med ($/bbls)
-5.00
0.00
5.00
10.00
15.00
20.00
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
2016 2015 2014 2013 2012
Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates
01 March 2016
Refiners' Digest 22
Commodity monitor – Russian crude/product output
Figure 116: Production of crude and condensate, kbd Figure 117: Crude export, kbd
10,100
10,200
10,300
10,400
10,500
10,600
10,700
10,800
10,900
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
3,500
3,700
3,900
4,100
4,300
4,500
4,700
4,900
5,100
5,300
5,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
Source: The Ministry of Energy Source: The Ministry of Energy
Figure 118: Crude delivered to refineries, kbd Figure 119: Refinery throughput, kbd
4,500
4,700
4,900
5,100
5,300
5,500
5,700
5,900
6,100
6,300
6,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
4,500
4,700
4,900
5,100
5,300
5,500
5,700
5,900
6,100
6,300
6,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
Source: The Ministry of Energy Source: The Ministry of Energy
Figure 120: Gasoline output, kbd Figure 121: Diesel output, kbd
700
750
800
850
900
950
1,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
1,200
1,300
1,400
1,500
1,600
1,700
1,800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
Source: The Ministry of Energy Source: The Ministry of Energy
Figure 122: Fuel oil output, kbd Figure 123: Jet output, kbd
1,000
1,100
1,200
1,300
1,400
1,500
1,600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
100
120
140
160
180
200
220
240
260
280
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015 2016
Source: The Ministry of Energy Source: The Ministry of Energy
01 March 2016
Refiners' Digest 23
Commodity monitor – Saudi Arabia refinery data
Figure 124: Saudi Arabian refinery runs (kbd) Figure 125: Oil Products Net Exports (kbd)
0
500
1000
1500
2000
2500
3000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
-200
-100
0
100
200
300
400
500
600
700
800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 126: Gasoline output (kbd) Figure 127: Fuel Oil output (kbd)
0
100
200
300
400
500
600
700
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
100
200
300
400
500
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 128: Gas/Diesel output (kbd) Figure 129: Gas Oil / Diesel net export (kbd)
0
200
400
600
800
1000
1200
1400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
-300
-200
-100
0
100
200
300
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 24
Commodity monitor – Indian refinery data
Figure 130: Indian refinery runs (kbd) Figure 131: Oil Products Net Exports (kbd)
0
1000
2000
3000
4000
5000
6000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
-200
0
200
400
600
800
1000
1200
1400
1600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014
2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 132: Gasoline output (kbd) Figure 133: Fuel Oil output (kbd)
200
300
400
500
600
700
800
900
1000
1100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 2010
0
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 134: Gas/Diesel output (kbd) Figure 135: Gas oil/ Diesel net exports (kbd)
500
700
900
1100
1300
1500
1700
1900
2100
2300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
100
200
300
400
500
600
700
800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 25
Commodity monitor – Brazilian product margins
Theoretically, the Brazilian Downstream market is an attractive one: the country is long oil,
short oil products, product demand has been strong over the past ten years (less so now),
and the largest demand centres are located close to the large oil reservoirs. In practice,
the pricing policy of key oil products has been very opaque, making refining a loss making
business for most of the past five years in Brazil. PBR has mentioned a commitment to
price its products in line with international prices in the long run, but at the same time not
passing through international volatility to the domestic consumer. Gasoline and diesel in
Brazil are priced in R$/liter, and there is no known formula for when and by how much
adjustments should be made to follow international prices. PBR's Downstream division
buys oil from its E&P division at market prices, but because Downstream prices are
opaque, PBR's Downstream profitability has varied significantly. Over 2011-14, this
division was loss making; it sold gasoline and diesel at or below prices it paid for crude.
Figure 136: Brazil: Domestic vs international prices (R$/liter)
(30%)
(20%)
(10%)
0%
10%
20%
30%
40%
50%
60%
70%
Jan
10
Jul 1
0
Jan
11
Jul 1
1
Jan
12
Jul 1
2
Jan
13
Jul 1
3
Jan
14
Jul 1
4
Jan
15
Jul 1
5
Jan
16
Gasoline Diesel
Average 20% domestic discount from 2011-14
Source: MME, Credit Suisse Research
Figure 137: Brazilian vs GoM gasoline prices (R$/liter) Figure 138: Brazilian vs GoM diesel prices (R$/liter)
0.0
0.5
1.0
1.5
2.0
2.5
Ja
n-1
0
Ap
r-1
0
Ju
l-1
0
Oct-
10
Ja
n-1
1
Ap
r-1
1
Ju
l-1
1
Oct-
11
Ja
n-1
2
Ap
r-1
2
Ju
l-1
2
Oct-
12
Ja
n-1
3
Ap
r-1
3
Ju
l-1
3
Oct-
13
Ja
n-1
4
Ap
r-1
4
Ju
l-1
4
Oct-
14
Ja
n-1
5
Ap
r-1
5
Ju
l-1
5
Oct-
15
Ja
n-1
6
Domestic gasoline (R$/liter) US GoM gasoline (R$/liter)
0.0
0.5
1.0
1.5
2.0
2.5
Jan-1
0
Apr-
10
Jul-1
0
Oct-
10
Jan-1
1
Apr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Apr-
13
Jul-1
3
Oct-
13
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Domestic diesel (R$/liter) US GoM diesel (R$/liter)
Source: MME, the BLOOMBERG PROFESSIONAL™ service Source: MME, the BLOOMBERG PROFESSIONAL™ service
01 March 2016
Refiners' Digest 26
Commodity monitor – Brazil refinery data
Figure 139: Brazilian refinery runs (kbd) Figure 140: Oil Products Net Import (kbd)
1500
1700
1900
2100
2300
2500
2700
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
100
200
300
400
500
600
700
800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014
2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 141: Gasoline output (kbd) Figure 142: Fuel Oil output (kbd)
200
250
300
350
400
450
500
550
600
650
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 2010
0
50
100
150
200
250
300
350
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 143: Gas/Diesel output (kbd) Figure 144: Gas oil/ Diesel net imports (kbd)
500
550
600
650
700
750
800
850
900
950
1000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 27
Commodity monitor – Mexico refinery data
Figure 145: Mexican refinery runs (kbd) Figure 146: Oil Products Net Import (kbd)
800
900
1000
1100
1200
1300
1400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
100
200
300
400
500
600
700
800
900
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014
2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 147: Gasoline output (kbd) Figure 148: Fuel Oil output (kbd)
200
250
300
350
400
450
500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 2010
0
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
Figure 149: Gas/Diesel output (kbd) Figure 150: Gas oil/ Diesel net imports (kbd)
250
300
350
400
450
500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2014 2014 2015 Avg 2010-2014
0
50
100
150
200
250
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2014 2013 2012
Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research
01 March 2016
Refiners' Digest 28
Regional OECD End-of-Month Industry (oil) stocks
Figure 151: OECD Total Oil fwd demand cover (days) Figure 152: OECD Total Oil stocks (mb)
Figure 153: Americas Total Oil fwd demand cover (days) Figure 154: Americas Total Oil stocks (mb)
Figure 155: Europe Total Oil fwd demand cover (days) Figure 156: Europe Total Oil stocks (mb)
Figure 157: Asia Oceania Total Oil fwd dem cover (days) Figure 158: Asia Oceania Total Oil stocks (mb)
Source for Figures 153-160: IEA Source for Figures 153-160: IEA
01 March 2016
Refiners' Digest 29
US inventory and demand data
Figure 159: US crude inventories (mbbls) Figure 160: US crude days of forward cover
Source: EIA, Credit Suisse Research Source: EIA, Credit Suisse Research
Figure 161: US gasoline inventories (mbbls) Figure 162: US middle distillate inventories (mbbls)
Source: EIA, Credit Suisse Research Source: EIA, Credit Suisse Research
Figure 163: US finished gasoline demand (mbd) Figure 164: US middle distillate demand (mbd)
Source: EIA, Credit Suisse Research Source: EIA, Credit Suisse Research
01 March 2016
Refiners' Digest 30
OECD and European inventory data
Figure 165: OECD crude inventories (mbbls) Figure 166: Original EU 16 crude inventories (mbbls)
Source: IEA, Credit Suisse Research Source: Euroil, Credit Suisse Research
Figure 167: OECD gasoline inventories (mbbls) Figure 168: OECD middle distillate inventories (mbbls)
Source: IEA, Credit Suisse Research Source: IEA, Credit Suisse Research
Figure 169: Original EU 16 gasoline inventories (mbbls) Figure 170: Original EU 16 MD inventories (mbbls)
Source: Euroil, Credit Suisse Research Source: Euroil, Credit Suisse Research
01 March 2016
Refiners' Digest 31
CS versus Valero's view on net capacity additions
Figure 171: Net global distillation capacity additions (kbd)
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,5002
01
3
20
14
20
15
E
20
16
E
20
17
E
20
18
E
20
19
E
20
20
E
MidEastClosure/Capacity cut
North AmericaClosure/Capacity cut
OECD APACClosure/Capacity cut
EuropeClosure/Capacity cut
ChinaClosure/Capacity cut
AfricaRefinery
North AfricaRefinery
FSURefinery
LatamRefinery
MidEastCondensate Splitter
MidEastRefinery
Asia ex ChinaCondensate Splitter
Asia ex ChinaRefinery
ChinaRefinery
OECD APACRefinery
OECD APACCondensate Splitter
EuropeRefinery
North AmericaCondensate Splitter
North AmericaRefinery
Net capacity addition
Source: Company data, Credit Suisse estimates
Figure 172: Valero's estimates for net global distillation capacity additions (mbd)
Source: Valero
01 March 2016
Refiners' Digest 32
Figure 173: Net global distillation capacity additions (kbd) Global refinery net additions in 2015 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
US North America MDU North Dakota Refinery 20,000 2015 Q1
US North America DK Tyler Refinery 15,000 2015 Q1
US North America KMI Galena Park (ph 1) Condensate Splitter 50,000 2015 Q1
Saudi Arabia MidEast Saudi Aramco/Sinopec Yanbu (ph 2) Refinery 200,000 2015 Q2
U.A.E. MidEast Abu Dhabi Nat. Oil Co Ruwais (phase 2) Refinery 200,000 2015 Q2
US North America MPC Catlettsburg Condensate Splitter 35,000 2015 Q2
US North America 3 Tribes Ward County Refinery 20,000 2015 Mid-2015
Australia OECD APAC BP Bulwer Island Closure/Capacity cut -102,000 2015 May-15
Switzerland Europe Tamoil Collombey Closure/Capacity cut -72,000 2015 Mid-2015
Russia FSU LukOil Volgrograd Refinery 65,000 2015 Mid-2015
US North America KMI Galena Park (ph 1) Condensate Splitter 50,000 2015 Q2/Q3
Pakistan Asia ex China Byco Petroleum Karachi Refinery 120,000 2015 Q3
Algeria North Africa Sonatrach Tiaret Refinery 100,000 2015 Q3/Q4
US North America Buckeye Texas Partners/Traf Corpus Christi Condensate Splitter 50,000 2015 Q3/Q4
China China Sinopec Jiangxi Refinery 100,000 2015 Q4
China China CNOOC Zhejiang Refinery 140,000 2015 Q4
China China Sinopec Hebei expansion Refinery 30,000 2015 Q4
Colombia Latam Ecopetrol Reficar expansion Refinery 85,000 2015 Q4
US North America VLO McKee Refinery 27,000 2015 Q4
US North America VLO Corpus Christi Refinery 70,000 2015 Q4
Suriname Latam Staatsolie Tout Lui Faut Refinery 8,000 2015 Q4
Taiwan OECD APAC CPC Kaohsiung Refinery -220,000 2015 Q4
Japan (CS estimate) OECD APAC TonenGen METI Phase II related Closure/Capacity cut -81,000 2015 Q4
Japan (CS estimate) OECD APAC Idemitsu Kosan METI Phase II related Closure/Capacity cut -55,000 2015 Q4
Japan (CS estimate) OECD APAC Cosmo Oil METI Phase II related Closure/Capacity cut -52,000 2015 Q4
Japan OECD APAC PBR Okinawa Closure/Capacity cut -100,000 2015 Q4
Total in 2015 703,000
Global refinery net additions in 2016 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
US North America CLMT Great Falls Refinery 15,000 2016 Q1
US North America Castleton Corpus Christi Condensate Splitter 100,000 2016 Q1
India Asia ex China IOC Paradip Refinery 300,000 2016 Q1
China China CNOOC Taizhou Refinery 60,000 2016 Q2
US North America VLO Houston Refinery 90,000 2016 Q2
US North America CHSCP McPherson Refinery 15,000 2016 1H
US North America MPC Robinson Refinery 30,000 2016 1H
Qatar MidEast QP Ras Laffan II Condensate Splitter 146,000 2016 Q2/Q3
Peru Latam Petroperu Talara Refinery 33,000 2016 2016
Algeria North Africa Naftec Arzew Refinery 25,000 2016 2016
US North America TARGA Houston Condensate Splitter 35,000 2016 2016
South Korea OECD APAC Hyundai Lotte Seosan Condensate Splitter 110,000 2016 Q3
India Asia ex China BPCL Kochi expansion Refinery 112,000 2016 Q3
Mongolia Asia ex China Mogol Sekiyu Darkhan-Uul Refinery 44,000 2016 Q3/Q4
Japan (CS estimate) OECD APAC JX METI Phase II related Closure/Capacity cut -141,000 2016 Q3/Q4
Japan (CS estimate) OECD APAC Showa Shell METI Phase II related Closure/Capacity cut -37,000 2016 Q3/Q4
Japan (CS estimate) OECD APAC Fuji Oil METI Phase II related Closure/Capacity cut -14,000 2016 Q3/Q4
Japan (CS estimate) OECD APAC Taiyo Oil METI Phase II related Closure/Capacity cut -14,000 2016 Q3/Q4
US North America MMP Corpus Christi Condensate Splitter 50,000 2016 2H16
US North America MMLP Corpus Christi Condensate Splitter 75,000 2016 2H16
China China CNOOC Huizhou Refinery 200,000 2016 2H16
France Europe Total La Mede Closure/Capacity cut -153,000 2015 2H16
UK Europe Total Lindsey Closure/Capacity cut -100,000 2016 2H16
Russia FSU Gazprom Neft Omsk Refinery 24,000 2016 2H16
US North America WNR El Paso Refinery 25,000 2016 Q4
US North America PSX Freeport Condensate Splitter 100,000 2016 Q4
China China Shandong govt imposed Teapot refineries Closure/Capacity cut -80,000 2016 Q4
Total in 2016 1,050,000
Global refinery net additions in 2017 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
Iran MidEast NIOC PGS Phase I Condensate Splitter 120,000 2017 Q1
China China CNPC/Aramco Yunnan Refinery 260,000 2017 Q1/Q2
Kuwait MidEast KNPC Shuaiba Closure/Capacity cut -200,000 2017 Q2
Canada North America North West Redwater Partnership Edmonton Refinery 50,000 2017 Q3
Oman MidEast Sohar Bitumen Refinery Sohar Refinery 60,000 2017 Q3
China China PetroChina Huabei Refinery 100,000 2017 Q3
China China CNOOC/Zhonghai Guangdong Refinery 70,000 2017 2017
Venezuela Latam PDVSA Santa Ines Refinery 40,000 2017 2017
Venezuela Latam PDVSA Puerto de la Cruz Refinery 30,000 2017 2017
Saudi Arabia MidEast Saudi Aramco/Sumitomo Rabigh II Refinery 50,000 2017 2017
Algeria Africa Sonatrach Skikda Refinery 100,000 2017 2017
Sudan Africa Ventec Thangrial Refinery 10,000 2017 2017
China China Sinopec/KPC Zhanjiang Refinery 300,000 2017 Q4
China China Shandong govt imposed Teapot refineries Closure/Capacity cut -80,000 2017 Q4
Total in 2017 910,000
Global refinery net additions in 2018 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
Iran MidEast NIOC PGS Phase II Condensate Splitter 120,000 2018 Q1
China China CNPC/PDVSA Jieyang Refinery 400,000 2018 Q3
India Asia ex China IOCL Koyali Refinery 86,000 2018 Q3
Turkey Europe Socar Star (Izmir) Refinery 214,000 2018 Q4
Brazil Latam PBR Abreu e Lima (ph 2) Refinery 115,000 2018 Q4
China China Shandong govt imposed Teapot refineries Closure/Capacity cut -80,000 2018 Q4
Total in 2018 855,000
Global refinery net additions in 2019 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
Iran MidEast NIOC PGS Phase III Condensate Splitter 120,000 2019 Q1
Vietnam Asia ex China PetroVietnam Nghi Son Refinery 200,000 2019 Q1
China China CNOOC Shandong Refinery 70,000 2019 Q1
Timor Leste Asia ex China PTT/Timor Gap TL cond splitter Condensate Splitter 40,000 2019 Q2
Russia FSU Tatneft Taneco Ph 2 Refinery 120,000 2019 Q2
Mongolia Asia ex China Mongol Sekiyu Corp Darkhan-Uul Refinery 40,000 2019 Q3
China China PetroChina Gansu Refinery 60,000 2019 Q3
India Asia ex China MRPL Karnataka Refinery 60,000 2019 Q4
Angola Africa Sonangol Lobito Ph 1 Refinery 120,000 2019 Q4
Total in 2019 830,000
Global refinery net additions in 2020 (excluding creeps)
Country Company Refinery Capacity (bpd) Year Quarter
Bahrain MidEast BAPCO Sitra Refinery 93,000 2020 Q1
Iran MidEast NIOC SIRAF 1 Condensate Splitter 60,000 2020 Q1
Iran MidEast NIOC SIRAF 2 Condensate Splitter 60,000 2020 Q1
Yemen MidEast Yemen-Hunt Marib expansion Refinery 15,000 2020 Q2
China China Sinopec Henan Refinery 160,000 2020 Q3
Malaysia Asia ex China Petronas RAPID Refinery 300,000 2020 Q4
China China PetroChina/Rosneft Tianjin Refinery 320,000 2020 Q4
Australia OECD APAC Vitol Geelong Closure/Capacity cut -105,000 2020 Q4
Australia (CS estimate) OECD APAC Caltex Lytton Closure/Capacity cut -109,000 2020 Q4
Total in 2020 794,000 Source: Company data, Credit Suisse estimates
01 March 2016
Refiners' Digest 33
Global refining closures since 2009 Figure 174: Announced refinery closures
Announced Region Country Company Capacity Complexity Status
Quiangquao Asia China PetroChina 50 Shutdown completed in June 2009
Negishi Asia Japan JX Holdings 70 9.1 Cutting capacity of 70kbd out of 340kbd by October 2010
Oita Asia Japan JX Holdings 24 6.6 Cutting 24kbd out of 160kbd by May 2010 (from March 2011)
Kashima Asia Japan JX Holdings 21 6.4 Cutting 21kbd out of 210kbd by May 2010 (from March 2011)
Mizushima Asia Japan JX Holdings 110 13.7 Cutting 110kbd out of 455kbd.
Toyama Asia Japan JX Holdings 60 1.8 Closed in 2009
Various Asia Japan Cosmo Oil 80 8.6 Completed in Feb 2010; net capacity cut
Kawasaki Asia Japan Showa Shell 120 7.2 Completed in Sept 2011
Sodegaura Asia Japan Fuji Oil 52 8.2 Permanent closure of crude unit 1 in Nov 2010 (from 192kbd)
Sakaide Asia Japan Cosmo 140 6.5 To be closed in July 2013
Tokuyama Asia Japan Idemitsu Kosan 120 6.9 Permanently closed by March 2014
Muroran Asia Japan JX Holdings 180 Permanently closed by March 2014
Kawasaki Asia Japan TonenGen 67 To close one CDU by March 2014
Wakayama Asia Japan TonenGen 38 To close one CDU by March 2014
Chiba Asia Japan TonenGen 23 To reduce capacity of the refinery in 2014
Clyde Asia Australia Shell 85 7.7 To be converted by Sept 2012 (prior target mid 2013)
Kurnell Asia Australia Caltex 125 6.2 Announced for closure in July 2012
Bulwer Island Asia Australia BP 102 7.2 Announced for closure in April 2014; to be closed by mid-'15
Kaohsiung Asia Taiwan CPC 220 5.8 Announced for closure; we assumed late 2015 to be closed
Okinawa Asia Japan PBR 100 2.6 Announced for closure in March 2015; needed upgrade
Eagle Point NA US SUN 145 8.4 Permanently shut down and dismantled in late 2009
Bloomfield NA US Western Ref 17 6.3 Shut down as part of refinery restructuring
Montreal E NA Canada Shell 130 9.4 Operated as terminal since last 2010
Yorktown NA US Western Ref 70 8.4 Shut down - Now operated as a terminal
Bakersfield NA US Flying J 68 8.8 Alon to reopen secondary units only
Tulsa NA US Holly Corp 40 Merger of 2 refineries - Reduced capacity
St Croix NA Virg Islands Hovensa 150 9.4 Capacity reduction to 350kbd by 1Q11
Marcus H. NA US Sun 175 8.2 Idled in Dec 2011
St Croix NA Virg Islands Hovensa 350 9.4 Idling by mid Feb 2012
Aruba NA Aruba Valero 235 8.0 Announced to be closed in March/April 2012
North Pole NA Alaska Flint Hills 135 Closing 1 CDU in 2Q12
Dartmouth NA Canada Imperial Oil 88 7.4 Failure to find a buyer. To be converted into terminal in 2H13
North Pole NA Alaska Flint Hills 85 Closing 2nd
CDU in 2Q14
Gonfreville EMEA France Total 80 7.8 Cutting capacity by 80kbd from 339kbd
Teesside EMEA UK Petroplus 117 2.1 Announced in 2009, and converted in 2010
Dunkirk EMEA France Total 137 6.7 Long-term shutdown since Sept 09. Converted in 1H10.
Harburg EMEA Germany Shell 107 9.6 Initially planned for early 2012; now delayed to 1Q13
Reichstett EMEA France Petroplus 85 5.3 Petroplus looking to convert in 1Q/2Q11
Cremona EMEA Italy Tamoil 94 7.6 To be converted by end 2011
Wilhelmshav EMEA Germany COP 260 5.2 We treat this as an inoperable refinery despite the sale
Arpechim EMEA Romania Petrom 70 7.3 Converting to terminal in 2Q11
Berre EMEA France Lyondell 105 6.7 Mothballed from Jan 2012 for two years; likely idled after
Lisichansk EMEA Ukraine TNK-BP 175 8.3 TNK-BP announced permanent closure
Rome EMEA Italy Total/ERG 89 7.3 ERG announced closure by 3Q12
Coryton EMEA UK Petroplus 220 12.0 Failed to find buyer. Proceed to close starting June 2012
Fawley EMEA UK XOM 80 10.1 Decommissioning 1 CDU of the 330kbd complex in Sept ‘12
Petit Cour. EMEA France Petroplus 154 7.6 Failed to find buyer.
Pardubice EMEA Czech Rep Unipetrol 20 3.9 Ended crude processing in 2012
Venice EMEA Italy ENI 107 6.8 Converted into biodiesel plant
Mantova EMEA Italy IES (MOL) 52 8.4 Converting into terminal in early 2014
Stanlow EMEA UK Essar 101 8.2 Capacity cut to 195kbd (previous run rate of 220kbd)
Milford Haven EMEA UK Murco 106 10.3 Deal with Klesch fell apart; site converted into terminal
Lindsey EMEA UK Total 100 8.1 Closing one CDU in by the end of16
La Mede EMEA France Total 153 8.7 Converting into biodiesel / ref operations to end by end 2016
Collombey EMEA Swiss Tamoil 72 6.9 Closing after failed to find a buyer by end March 2015
Shuaiba EMEA Kuwait KNPC 205 7.4 To be closed in April 2017 (source Argus)
Total 6162 ~7.7
Source: OGJ, Argus, Credit Suisse estimates, Company data
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NEW WORLD ORDER – Global product flows and regional product balances
Figure 175: NEW WORLD ORDER – product flows and balances (kbd)
Source: Credit Suisse Research
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OLD WORLD – Global product flows and regional product balances
Figure 176: OLD WORLD – product flows and balances (kbd)
Source: Credit Suisse Research
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Global refiners’ valuation summary
Figure 177: Global refiners' valuation multiples
Global Refiners: Summary Valuations EPS Metrics Dividends and Buybacks
Price YTD Target Mkt Cap EV EV
Company Ticker Reco Analyst FX perfomance
29-Feb USD terms Price $Mn Mn $Mn 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 16E 17E 16E 17E 18E 16E 17E 18E
US REFINERS
Alon USA ALJ V N Edward Westlake $ $ 9.9 -33.6% $ 19.0 700 1,081 1,081 0.69 0.96 14.3 10.3 - (47%) 39% 0.4 0.4 68% 142% 6.5% 6.5% 6.5% 6.5%
Delek US Holdings DK O Edward Westlake $ $ 15.8 -35.7% $ 37.0 984 1,420 1,420 1.55 1.57 10.2 10.1 - (19%) 1% 1.4 1.5 8% 5% 4.0% 4.2% 4.0% 4.2%
HollyFrontier Corp HFC N Edward Westlake $ $ 33.8 -15.2% $ 60.0 5,831 7,270 7,270 4.85 4.45 7.0 7.6 - 0% (8%) 3.4 4.0 42% 12% 4.0% 4.1% 16.0% 16.1%
Marathon Petroleum Corp. MPC O Edward Westlake $ $ 34.3 -33.9% $ 58.0 18,126 18,354 18,354 4.64 5.26 7.4 6.5 - (21%) 13% 4.4 4.7 6% 12% 3.8% 4.0% 3.8% 4.0%
PBF Energy PBF O Edward Westlake $ $ 30.2 -18.0% $ 44.0 3,102 3,837 3,837 5.93 6.11 5.1 4.9 - 40% 3% 4.2 4.5 40% 35% 4.1% 4.2% 4.1% 7.4%
Phillips 66 PSX.N N Edward Westlake $ $ 79.4 -2.9% $ 95.0 41,875 47,742 47,742 7.54 8.66 10.5 9.2 - (2%) 15% 6.5 7.3 17% 18% 2.6% 2.7% 8.6% 8.8%
Tesoro Corp. TSO O Edward Westlake $ $ 80.7 -23.4% $ 125.0 9,672 12,704 12,704 8.80 7.36 9.2 11.0 - (23%) (16%) 8.8 8.1 0% (9%) 2.6% 2.7% 2.6% 2.7%
Valero Energy VLO O Edward Westlake $ $ 60.1 -15.0% $ 85.0 28,261 31,511 31,511 8.84 7.81 6.8 7.7 - (3%) (12%) 7.2 7.6 22% 3% 4.1% 4.3% 4.1% 4.3%
Western Refining WNR O Edward Westlake $ $ 26.7 -25.1% $ 52.0 2,433 2,783 2,783 2.83 2.74 9.4 9.7 - (44%) (3%) 2.9 2.6 (4%) 5% 5.7% 5.7% 5.7% 5.7%
8.6 8.3 - (7%) 3% 0% 17% 11% 3.4% 3.5% 0.0% 6.3% 6.5% 0.0%
EURO REFINERS
Tupras TUPRS.IS O Onur Muminoglu TRY TRY 75.9 7.2% TRY 85.4 6,419 11,144 5,915 8.99 8.52 7.52 8.4 8.9 10.1 27% (5%) (12%) 9 9 (5%) (7%) 6.5% 6.7% 6.7% 6.5% 6.7% 6.7%
8.4 8.9 10.1 27% (5%) (12%) (5%) (7%) 6.5% 6.7% 6.7% 6.5% 6.7% 6.7%
ASIAN REFINERS
Bharat BPCL.BO O Badrinath Srinivasan Rs. Rs. 769.8 -16.5% Rs. 1130.0 8,155 765,590 11,314 79.98 9.6 - - 7% 93.8 104.9 (15%) - 3.5% 3.5%
Caltex Australia CTX.AX O Mark Samter A$ A$ 36.5 -5.2% A$ 40.0 6,942 10,230 7,297 2.32 2.22 2.32 15.5 16.2 15.5 (0%) (4%) 4% 2.4 2.4 (2%) (7%) 3.2% 3.1% 3.2% 3.2% 3.1% 3.2%
Formosa Petroleum 6505.TW O Jeremy Chen T$ T$ 84.4 5.7% T$ 90.0 24,809 892,485 26,960 4.74 4.81 18.2 17.9 - (5%) 2% 4 4 8% 10% 4.0% 3.8% 4.0% 3.8%
Hindustan Petroleum HPCL.BO O Badrinath Srinivasan Rs. Rs. 688.2 -21.5% Rs. 1080.0 3,414 551,272 8,218 100.35 108.17 6.9 6.4 - 28% 8% 102 114 (1%) (5%) 8.3% 8.9% 8.3% 8.9%
Indian Oil Corp IOC.BO O Badrinath Srinivasan Rs. Rs. 367.3 -17.6% Rs. 495.0 13,063 1,516,265 22,507 48.86 7.5 - - 36% 52 58 (7%) - 4.6% 4.6%
Reliance Industries RELI.BO N David Hewitt Rs. Rs. 966.6 -7.6% Rs. 1050.0 45,872 4,335,476 63,861 58.07 64.30 16.6 15.0 - (32%) 11% 93 106 (38%) (39%) 1.2% 1.3% 1.2% 1.3%
SK Innovation 096770.KS O Kenneth Whee W W 145000 5.9% W 170000 10,880 19,757,987 16,315 14,718 14,755 9.9 9.8 - 67% 0% 15,031 16,455 (2%) (10%) 2.2% 2.2% 2.2% 2.2%
S-Oil 010950.KS O Kenneth Whee W W 79000 -5.6% W 102000 7,218 10,784,592 8,821 7,197 8,226 11.0 9.6 - 28% 14% 7,674 7,900 (6%) 4% 3.8% 5.1% 3.8% 5.1%
ThaiOil TOP.BK O Paworamon (Poom) SuvarnatemeeBt Bt 64 -2.7% Bt 75 3,640 150,757 4,229 7.17 6.77 7.09 8.9 9.4 9.0 20% (6%) 5% 7 7 (2%) (9%) 5.1% 4.8% 5.0% 5.1% 4.8% 5.0%
14.1 11.9 1.1 0% 5% 0% (15%) (14%) 2.9% 2.3% 0.3% 2.9% 2.3% 0.3%
Consensus EPS Credit Suisse
vs consensus
Vo
lati
le EPS P/E EPS Growth Total YieldDividend Yield
Capex and Free Cashflow Cash Flow and EBIDAX
TP
Company FX Upside /
16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 15E 16E 17E (Downside)
US REFINERS
Alon USA $ (152) (90) 72 163 - (35%) 126% (100%) 10% 23% 3.2 2.8 3.8 3.6 - 35.1% 35.3% 28.0% 93%
Delek US Holdings $ (124) (133) 88 86 - 518% (3%) (100%) 9% 9% 4.8 4.6 4.5 4.6 - 26.3% 24.4% 20.0% 134%
HollyFrontier Corp $ (500) (500) 648 533 - 111% (18%) (100%) 11% 10% 5.2 5.4 5.4 5.6 - 12.8% 16.9% 22.4% 77%
Marathon Petroleum Corp. $ (3,699) (3,472) 1,069 1,231 - (60%) 15% (100%) 6% 7% 3.8 3.7 3.6 3.3 - 45.5% 38.9% 34.4% 69%
PBF Energy $ (1,158) (605) (277) 289 - 52% 204% (100%) (9%) 9% 3.5 3.4 3.7 3.7 - 29.9% 33.8% 29.3% 46%
Phillips 66 $ (3,612) (4,350) 673 508 - 151% (25%) (100%) 2% 1% 9.6 8.0 8.7 8.0 - 19.4% 21.8% 23.2% 20%
Tesoro Corp. $ (1,760) (1,992) 261 (64) - (74%) (124%) 100% 3% (1%) 5.0 5.2 5.3 5.6 - 37.4% 29.7% 27.1% 55%
Valero Energy $ (1,950) (1,950) 2,709 1,162 - (21%) (57%) (100%) 10% 4% 5.3 7.2 4.8 5.3 - 13.4% 12.4% 16.2% 41%
Western Refining $ (175) (150) 20 31 - (96%) 56% (100%) 1% 1% 2.1 1.9 na 12.7 13.4 - 20.5% 19.7% 18.4% 95%
45% (25%) (83%) 5% 4% 0% 6.5 6.4 - 6.3 6.2 - 23.8% 23.0% 23.6%
EURO REFINERS
Tupras TRY (823) (773) (848) 1,809 2,103 2,051 1124% 16% (2%) 10% 11% 11% 9.6 8.5 8.2 5.3 5.9 6.9 45.4% 46.2% 44.6% 13%
1124% 16% (2%) 10% 11% 11% 9.6 8.5 8.2 5.3 5.9 6.9 45.4% 46.2% 44.6%
ASIAN REFINERS
Bharat Rs. (88,619) 30,476 - - 146% (100%) (12%) 5% 4.7 8.2 - - 45.2% 40.2% - 47%
Caltex Australia A$ (405) (245) (230) 415 599 640 (48%) 44% 7% 4% 6% 7% 14.9 11.7 11.4 11.9 12.1 12.0 13.5% 22.4% 15.1% 11%
Formosa Petroleum T$ (5,041) (5,166) 55,922 52,366 (38%) (6%) 7% 6% 13.5 14.3 14.7 14.8 - 20.8% 15.5% 10.4% 4%
Hindustan Petroleum Rs. (51,707) (118,277) 12,338 (59,293) - 1119% (581%) 100% (1%) 5% (25%) 3.6 4.0 8.3 8.3 - 66.9% 64.9% 67.5% 57%
Indian Oil Corp Rs. (238,438) (20,038) - - 90% 100% (22%) (2%) 4.1 7.3 - - 45.6% 45.1% - 35%
Reliance Industries Rs. (514,839) (396,891) (135,142) (12,268) - 70% 91% 100% (15%) (4%) (0%) 8.2 8.1 12.5 10.0 - 34% 36% 36% 9%
SK Innovation W (2,000,000) (2,000,000) 1,107,616 272,904 (46%) (75%) 8% 2% 4.3 5.9 8.1 7.6 - 29% 26% 25% 17%
S-Oil W (1,200,000) (1,000,000) 564,842 196,614 (28%) (65%) 6% 2% 5.0 7.4 8.4 8.2 - 26% 22% 22% 29%
ThaiOil Bt (3,530) (864) (864) 12,482 15,459 20,330 (25%) 24% 32% 10% 12% 16% 7.6 7.8 5.9 6.1 6.3 5.9 20% 13% 6% 18%
59% 13% 41% (6%) 1% (0%) 8.3 7.8 0.8 11.1 8.9 0.8 31.8% 31.0% 21.7%
Netdebt /(Net Debt+Equity)Free Cash FlowCapex FCF Growth FCF Yield EV/EBIDAXP/CF
Source: Company data, Credit Suisse estimates, Thomson Datastream
01 March 2016
Refiners' Digest 37
Appendix
01 March 2016
Refiners' Digest 38
Downstream: Refining 101
Figure 178: Downstream Overview
Source: Credit Suisse US Oil and Gas Research, DOE
How refiners make money
Oil refining is the industrial process of turning crude into useful products; i.e., without
refineries, crude oil is an unusable commodity outside of power generation. Refiners differ
significantly from each other in terms of what they specialise in producing (yield), their
ability to process difficult or heavy crude (complexity), and the size of the refinery. The size
of the refinery will allow a company to benefit from economies of scale, while a higher
complexity refinery stands to gain from a higher yield of light products (premium to Brent)
and the ability to process heavier and more sour crude (at a discount to Brent/WTI).
Margins by region can differ depending on the product supply/demand dynamics in the
area as well as availability and price of the region’s price setting marginal crude oil.
Figure 179: Refinery margin calculation
Revenue from
products (depends
on product slate)
minusFeedstock costs
(depends on crude
quality)
minus
Refinery related
costs (opex,
transport,
complexity)
equalsRefinery net margin
Source: Credit Suisse Research
Regardless of the differences between refineries, every refinery earns its return the same
way; it buys crude, incurs some costs from processing it and then sells the products
yielded from processing the crude. After all costs are deducted, a refinery is left with the
refinery margin. In cases where the cost of the crude and processing is larger as was
evident during 2009 and the first half of 2010, the refining margin is negative. A prudent
refiner then would lower the processing rate to reduce the production of the loss-making
products (yield optimisation). This typically means that the refinery reduces the processing
rate to limit the output of fuel oil, a product that trades at a discount to crude and is often
used as feedstock for complex refineries or in bunkering/power generation. In other cases,
a refinery may try to optimise yields by refining a lighter slate of crude, which yields a
higher portion of light products; however, this is at a cost of a higher feedstock burden.
01 March 2016
Refiners' Digest 39
Figure 180: Refining Margins Drive Refinery Value Figure 181: Nelson Complexity Index
Source: Credit Suisse US Oil and Gas Research Source: Credit Suisse US Oil and Gas Research
Figure 182: Crude Oil Characteristics Figure 183: Crude Oil Basics
Source: VLO Source: VLO
Figure 184: Why not make every Refinery complex? Figure 185: MED Complex vs Simple ref margins ($/bbl)
-$10
-$5
$0
$5
$10
$15
$20
$25
Sep
20
06
Mar
20
07
Sep
20
07
Mar
20
08
Sep
20
08
Mar
20
09
Sep
20
09
Mar
20
10
Sep
20
10
Mar
20
11
Sep
20
11
Mar
20
12
Sep
20
12
Mar
20
13
Sep
20
13
Mar
20
14
Sep
20
14
Mar
20
15
Sep
20
15
Hydrocracking Hydroskimming
Source: Credit Suisse US Oil and Gas Research Source: Hellenic Petroleum, Credit Suisse Research
01 March 2016
Refiners' Digest 40
Complex vs Simple refineries. The conversion margin represents the difference between
a cash margin from a simple refinery and one from a refinery with more sophisticated
conversion capabilities. The difference between a complex and simple refinery is the
ability to optimise the stream of crude processed. A complex refiner can take advantage of
the discounts of the medium/heavy sour crude. The Jamnagar refinery in India and
numerous US Gulf Coast refineries are some examples of highly complex refineries where
processing the heavy and difficult crude leaves them less exposed in a weak refining
margin environment.
Figure 186: What's in a barrel of Crude Oil? Figure 187: Basic Refining Concepts
Source: VLO Source: VLO
■ Simple refinery: involves atmospheric distillation, plus some common secondary
processes (usually reforming and hydro-treating to raise the quality of the product
output to current commercial/environmental standards). These simple processes
produce large volumes of residual fuel oil, especially from heavier grades of crude oil.
■ Complex refinery: produces a greater quantity of light products (eg gasoline) by using
the heavy gas oils and gases from some processes as feedstock for others, such as
cracking and alkylation. A highly complex plant adds more technological sophistication,
eating up more of the low value, heavy products through residue destruction
technologies such as coking. Some highly complex refineries are also integrated with
petchem or lubricant plants to further enhance the value of the final products.
Figure 188: Refinery Yield (%) – Europe and Med Figure 189: Refinery Yield (%) – USGC and Asia
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ASC
I_FC
C +
Co
kin
g
LSFO
HSFO
Diesel
Kerosene
Naphtha
Gasoline
LPG
Source: IEA; Note: HS = Hydro-skimming; FCC = Fluid Catalytic
Cracker, VB = Visbreaker, HC = Hydrocracking
Source: IEA; Note: HS = Hydro-skimming; FCC = Fluid Catalytic
Cracker, VB = Visbreaker, HC = Hydrocracking
01 March 2016
Refiners' Digest 41
Refinery complexity varies around the world, due primarily to regional differences in oil
product demand. Most simple refineries are located in developing countries and the former
Soviet Union, where demand for light products is inferior and where significant volumes of
residual fuel are still used for PowerGen. This, however, is changing as economies mature
and product specifications are tightened (and therefore the output of residual fuel oil
declines). The additional processes needed to make the increased amount of light
products also cost more, both in terms of capital and opex. The most complex refineries
are in the US, where gasoline’s share of oil consumption is high. Western Europe’s
refineries are less sophisticated than their American counterparts and have their product
output weighed more heavily towards gas oil.
Gravity is typically measured in terms of a scale set by the American Petroleum Institute
(API) in which higher values designate lighter grades, while sulphur content is usually
measured as the % by weight of sulphur occurring in crude oil. Higher values indicate
more sulphur. These scales are used to classify crude oil as light (>34 degree API),
medium (22-34 degree API) and heavy (<22 degree API), and as sweet (<0.5% sulphur),
medium sour (0.5-1.5% sulphur) and sour (>1.5% sulphur).
Sweet grades are frequently further divided into high or low pour point grades, where pour
point is the lowest temperature at which the grade flows readily, and into naphthenic or
paraffinic grades. Naphthenic crude oil has a high proportion of naphthenes in its naphtha
fractions, making it suitable for gasoline manufacturing, whereas paraffinic crude oil is
more suitable as a petrochemical feedstock.
Fuel cost: a critical variable. A refiners’ principal use of crude is as a processing
feedstock. Thus, the higher the oil price, the bigger the burden from a working capital
perspective, but also from a profitability perspective. The latter is the case as the refining
business is energy-intensive. The cost of fuelling a refinery is 5-12% of the total cost of the
refinery (subject to complexity) in Europe; often this is called Consumption and Losses
(C&L). The higher the complexity of a refinery, the higher the energy costs given the
numerous units, while other factors such as the layout of the refinery also have an impact.
What is the source of power? Typically, refining units consume steam, fuel gas, boiler
feed, gas oil, nitrogen, water and cooling water. The source of power will vary from refinery
to refinery. In some cases refineries get power from the grid while in others they are self-
generated. Self-generation is possible as a refinery utilises the light ends (methane,
ethane) that arise from refining in a gas generator or heating furnace. The advantage is a
refiner is insulated from power shortages on the grid, while self-generating is also utilising
an otherwise wasted energy source from refining, if not connected to the pipeline network.
01 March 2016
Refiners' Digest 42
Let's take it step by step
Figure 190: Breaking Down a Barrel of Crude
Source: Credit Suisse US Oil and Gas Research, DOE
Figure 191: A Closer Look at Separation and Cuts
Source: Credit Suisse US Oil and Gas Research, VLO
01 March 2016
Refiners' Digest 43
Figure 192: From Fractions to Final Products
Source: Credit Suisse US Oil and Gas Research
Figure 193: Advanced Upgrading Unit: Fluid Catalytic Cracker (FCC) – Gasoline Oriented
Source: Credit Suisse US Oil and Gas Research
01 March 2016
Refiners' Digest 44
Figure 194: Advanced Upgrading Unit: Hydrocracker – Diesel oriented
Source: Credit Suisse US Oil and Gas Research
Figure 195: Advanced Upgrading Unit: Delayed Coker
Source: Credit Suisse US Oil and Gas Research
01 March 2016
Refiners' Digest 45
Figure 196: Product Finishing Units: Reformer & Desulfurizer
Source: Credit Suisse US Oil and Gas Research
Figure 197: Product Finishing Units: Alkylation Unit
Source: Credit Suisse US Oil and Gas Research
01 March 2016
Refiners' Digest 46
Figure 198: Making Finished Gasoline
Source: Credit Suisse US Oil and Gas Research
Figure 199: Making Finished Diesel
Source: Credit Suisse US Oil and Gas Research
01 March 2016
Refiners' Digest 47
Figure 200: Examples of the Uses for the Products created from Crude
Source: Credit Suisse US Oil and Gas Research
01 March 2016
Refiners' Digest 48
Companies Mentioned (Price as of 29-Feb-2016)
Alon USA Energy, Inc. (ALJ.N, $9.86) BP (BP.L, 351.45p) Bharat Petroleum (BPCL.BO, Rs769.8) CVR Energy (CVI.N, $23.65) Caltex Australia (CTX.AX, A$36.54) Chevron Corp. (CVX.N, $83.44) ConocoPhillips (COP.N, $33.83) Delek US Holdings, Inc. (DK.N, $15.82) Dow Chemical Company (DOW.N, $48.61) DuPont de Nemours and Co. (DD.N, $60.87) ENI (ENI.MI, €12.95) EOG Resources (EOG.N, $64.74) ExxonMobil Corporation (XOM.N, $80.15) Formosa Petrochemical (6505.TW, NT$84.4) Formosa Plastics (1301.TW, NT$79.0) Galp Energia (GALP.LS, €10.11) Hindustan Petroleum (HPCL.BO, Rs688.15) Holly Frontier Corp. (HFC.N, $33.82) Indian Oil Corp Limited (IOC.BO, Rs367.25) LUKoil (LKOH.MM, Rbl2686.0) MOL (MOLB.BU, Ft13910.0) Marathon (MPC.N, $34.25) Nan Ya Plastics (1303.TW, NT$63.8) Neste (NES1V.HE, €28.91) OMV (OMVV.VI, €24.18) PKN Orlen (PKN.WA, zł63.92) PetroChina (0857.HK, HK$4.99) Petrobras (PBR.N, $3.6) Phillips 66 (PSX.N, $79.39) Reliance Industries Limited (RELI.BO, Rs966.55) Repsol (REP.MC, €9.52) Rosneft (ROSNq.L, $3.77) Royal Dutch Shell plc (RDSa.L, 1647.5p) S-Oil Corp (010950.KS, W79,000) SK Innovation (096770.KS, W145,000) Saras (SRS.MI, €1.485) Sinopec Shanghai Petrochemical Company Limited (0338.HK, HK$3.3) Tesoro Corp. (TSO.N, $80.68) Thai Oil (TOP.BK, Bt63.5) Total (TOTF.PA, €41.38) Tupras (TUPRS.IS, TL75.9) Valero Energy Corporation (VLO.N, $60.08) Western Refining Inc. (WNR.N, $26.67)
Disclosure Appendix
Important Global Disclosures
Thomas Adolff, Justin Teo, Ilkin Karimli, Kenneth Whee and Horace Tse each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
01 March 2016
Refiners' Digest 49
3-Year Price and Rating History for S-Oil Corp (010950.KS)
010950.KS Closing Price Target Price
Date (W) (W) Rating
30-Apr-13 88,500 116,000 O
04-Oct-13 76,300 100,000 *
27-Jan-14 68,600 90,000
11-Mar-14 65,100 80,000
24-Apr-14 60,900 76,000
24-Jul-14 55,000 77,000
20-Aug-14 47,350 60,000
06-Oct-14 41,050 57,000
27-Oct-14 42,100 54,000
27-Jan-15 58,200 66,000
02-Feb-15 60,200 70,000
23-Apr-15 78,100 98,000
23-Jul-15 59,600 100,000
14-Oct-15 66,600 93,000
14-Dec-15 72,500 103,000
28-Jan-16 76,300 102,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
3-Year Price and Rating History for SK Innovation (096770.KS)
096770.KS Closing Price Target Price
Date (W) (W) Rating
29-Apr-13 146,000 206,000 O
04-Oct-13 144,000 170,000 *
04-Feb-14 126,000 165,000
28-Apr-14 120,000 150,000
25-Jul-14 104,000 140,000
21-Aug-14 93,900 130,000
06-Oct-14 77,800 120,000
04-May-15 119,000 144,000
24-Jul-15 97,700 141,000
14-Oct-15 109,000 139,000
26-Oct-15 115,000 156,000
14-Dec-15 122,000 165,000
04-Feb-16 145,000 170,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total retu rn of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underpe rform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.
01 March 2016
Refiners' Digest 50
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover mul tiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 59% (37% banking clients)
Neutral/Hold* 29% (24% banking clients)
Underperform/Sell* 11% (45% banking clients)
Restricted 1%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.
See the Companies Mentioned section for full company names
The subject company (CVX.N, RDSa.L, OMVV.VI, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, TOP.BK, PSX.N, TUPRS.IS, COP.N, 0857.HK, TSO.N, XOM.N, CTX.AX, GALP.LS, 096770.KS, 010950.KS, RELI.BO, ENI.MI, ROSNq.L, EOG.N, DOW.N, DD.N, PBR.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (RDSa.L, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, ENI.MI, DD.N) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (XOM.N) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (RDSa.L, VLO.N, PSX.N, COP.N, 0857.HK, XOM.N, DD.N) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (RDSa.L, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, ENI.MI, DD.N) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (CVX.N, RDSa.L, OMVV.VI, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, TOP.BK, PSX.N, IOC.BO, ALJ.N, TUPRS.IS, COP.N, 6505.TW, 0857.HK, TSO.N, XOM.N, CTX.AX, GALP.LS, 096770.KS, 010950.KS, RELI.BO, ENI.MI, ROSNq.L, EOG.N, 1301.TW, 1303.TW, DOW.N, DD.N, PBR.N) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (XOM.N) within the past 12 months
As of the date of this report, Credit Suisse makes a market in the following subject companies (CVX.N, MPC.N, WNR.N, CVI.N, VLO.N, PSX.N, COP.N, HFC.N, TSO.N, XOM.N, EOG.N, DOW.N, DD.N).
Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014
Credit Suisse may have interest in (BPCL.BO, IOC.BO, HPCL.BO, RELI.BO)
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (0857.HK, TSO.N, CTX.AX).
01 March 2016
Refiners' Digest 51
Credit Suisse has a material conflict of interest with the subject company (VLO.N) . Credit Suisse Securities (USA) LLC is acting as financial advisor to Valero Energy Corp. on their announced decision to pursue separation of their retail business.
Credit Suisse has a material conflict of interest with the subject company (0857.HK) . Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein.
Credit Suisse has a material conflict of interest with the subject company (XOM.N) . Kofi Adjepong-Boateng, a Senior Advisor of Credit Suisse, is a Senior Advisor to Exxon Mobile (XOM).
Credit Suisse has a material conflict of interest with the subject company (ENI.MI) . Credit Suisse is acting as exclusive financial advisor to Eni S.p.A. in relation to the announced sale of a 12.5% stake in Saipem to Fondo Strategico Italiano S.p.A. (FSI).
Credit Suisse has a material conflict of interest with the subject company (ROSNq.L) . Economic sanctions imposed by the United States and European Union prohibit transacting or dealing in new equity of Rosneft issued on or after the date when the Company became the target of such sanctions. This report should not be construed as an inducement to transact in any such sanctioned securities.
Credit Suisse has a material conflict of interest with the subject company (PBR.N) . Andre Natal was formerly employed by Petroleo Brasileiro SA. within the past 12 months and received compensation from the company during that period. A household member of the research analyst Andre Natal is employed by Petroleo Brasileiro SA.
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Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
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The following disclosed European company/ies have estimates that comply with IFRS: (RDSa.L, OMVV.VI, BP.L, DK.N, REP.MC, TUPRS.IS, LKOH.MM, XOM.N, ENI.MI).
Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (RDSa.L, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, EOG.N, DD.N, PBR.N) within the past 3 years.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
For Thai listed companies mentioned in this report, the independent 2014 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: Thai Oil (Excellent)
Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Credit Suisse (Hong Kong) Limited .............................................................................................................................. Kenneth Whee ; Horace Tse
Credit Suisse International ................................................................................... Thomas Adolff ; Justin Teo ; Ilkin Karimli ; Yaroslav Rumyantsev
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
01 March 2016
Refiners' Digest 52
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CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. 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Copyright © 2016 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
01 March 2016
Refiners' Digest 53
Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.
Refiners Digest_01_March_2016.doc