22nd World LP Gas Forum in Rio « Energising the future »

22nd World LP Gas Forum in Rio

« Energising the future »

World LPGAS Forum: 7th – 9th October 2009 1

« Financial Crises in 2008:

Impacts on the LP Gas Business »

Ernst BrandstaetterGeneral Manager

SHV Gas Supply & Risk Management, Paris


SHV Business Structure

SHV Gas

(LPG)

SHV Gas

(LPG)

SHVSHV

NPM Capital

(Private Equity)

NPM Capital

(Private Equity)

Dyas

(E&P of Oil & Gas)

Dyas

(E&P of Oil & Gas)

Mammoet

(Heavy liftingAnd transport)

Mammoet

(Heavy liftingAnd transport)

Makro

(Food & Non Food Consumer Articles)

Makro

(Food & Non Food Consumer Articles)

TCEC

(Renewable

Energy)

TCEC

(Renewable

Energy)

ERIKS

(mechanical engineering

components)

ERIKS

(mechanical engineering

components)


SHV Gas : Presence in the World

China

Philippines

India

Brasil

Europe

South America

North America

Asia

Australia

Africa

2006 2007 2008

Net Sales EUR: ~ 5,5 Billion ~ 5,9 Billion ~ 6,1 Billion

Volumes: 5.099.500 mt 5.091.000 mt 5.226.000 mt

No. of Employees: 11.000 13.300 13,700

No of Countries: 24 25 27

Pakistan


Content

Prediction

Reality

Consequences

Reflection


INTERESTING STATEMENTS…

I do not anticipate any serious problems among the large internationally active banks.

28 February 2008

Ben Bernanke, Chairman of the board of governors of the United States Federal Reserve

I do believe that the Economy is growing.15 July 2008

In today’s regulatory environment it is virtually impossible to violate rules.


11 September 200111 September 2001

REFLECTION: Long Term Crude Development


April: Iran-US relations

deteriorate

March: Falling Russian oil supply – fist y/y declines for

over 10 years

June: Rising Chinese, ME and Indian demand

January: Disruption in Nigeria and North Sea

July: Iran-Us relation turn of

the worse

« We project healthy growth in global GDP (+4.9%) and oil demand (+1.4 mb/d or 1.7%) in 2008. Demand growth will be led by China and the Middle East. »

Société Générale,19 November 2007

«The possibility of $150- $200 per barrel seems increasingly likely over the next six-24 months

(…) »

Goldman Sachs, official report 5 May 2008.

REALITY: C3 CIF ARA & FEI


REALITY: C3 CIF ARA & FEI

September:Lehman Brothers

Collapse.

August: Fannie & Freddi Mac

collaps/financial troubles.

October: Evidence of further US oil

demand deterioration and slowdownin China.

November: Drastic reduction to

GDP forecast

MARKET CRASHMARKET CRASH

• Trading counterparts disappeared or refocussed approach

• Number of derivative desks cut

• Trading markets close to stand still

• Q4 MTM exposure reached record highs. Financing of risk is creating cash flow problem

• Price volatility becomes exceptional

• Stock markets influence commodities

• Unhedged storage positions cause record losses


« Volatility increased to a point we had never seen except in a period of war I’m grateful to all the client who, despite all this turbulence, continued to deal with us. »

Marc Mourre, Morgan Stanley – February 2009

“ A large number of senior London-based equities traders at Morgan Stanley are leaving the firm, or facing redeployment, as the bank presses forward with its plans to cut a further 10% of staff in the institutional securities division.”

Renée Schultes, December 2008

Immediate consequences on the Derivative Markets

• Financial turmoil reduces demand (industrial/commercial/domestic segment)

• Petchem buyers decrease presence on the market

• Triple A rated customers turn to prepayment customers

• Long markets and collapsed crude prices delay/even stop new productions

• Shipping markets crash to record lows

“During the past two quarters, we have seen dramatic softening in demand

for our products and unprecedented volatility in raw materials costs.”

Volker Trautz, LyondellBasel’s Chief Executive


BASF has announced plans to axe 3700 jobs and left the future of 23 production sites in doubt following its acquisition of Swiss firm Ciba in April this year.

July 2009

LyondellBasel is owned by New York- based industrial group Access Industries, but the filing in the Southern district of NY in Manhattan applies to Lyondell Chemical Co., its U.S. arm. The court filing lists assets of $27.1 billion and liabilities of

$19.3 billion.

Immediate consequences on the Physical Markets

ConocoPhillips, lays off 4 % of its GLOBAL workforce and scales back capital spending this year to $12.5bn, from $15.3bn in 2008.

Morgan Stanley

LUKOIL said it would cut its planned capital expenditure in 2009 to $9.7 billion, from an earlier forecast of $11.2 billion, due to unfavorable market

conditions.

Morgan Stanley


January February March April May June July August September October November December

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter


• Financial turmoil reduces demand (industrial/commercial/domestic segment)

• Petchem buyers decrease presence on the market

• Triple A rated customers turn to prepayment customers

• Long markets and collapsed crude prices delay/even stop new productions

• Shipping markets crashed to record lows and will not recover soon

• FOB posted price contracts create massive losses



0

100

200

300

400

500

600

700

800

900

1000

$/M

t


CP

FE

I

Loss

Shipping

Total loss = 240 $/tons

$ 10.500.000 per cargo

C3 CP & C3 FEI $/Mt – October 2008


GOOD NEWS !!

Producers start to connect with the final

customers cutting intermediaries

Shipping costs are at record low levels

Product prices return to the level of year 2002


Prices return to the level of year 2002

CIF C3 - FEI C3

0

200

400

600

800

1000

Dec-08 Dec-07 Dec-06 Dec-02

CIF C3

FEI C3


Alzheimer Syndrom in Commodities Trading

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

J F M A M J J A

BRENT Y08 Yield Basis Jan 08

BRENT Y09 Yield Basis Jan 09

22nd World LP Gas Forum in Rio « Energising the future »

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