Pakistan Refining Industry An Overview - PACRA · Pakistan Refining Industry An Overview September...
Transcript of Pakistan Refining Industry An Overview - PACRA · Pakistan Refining Industry An Overview September...
Pakistan Refining Industry An Overview
September 2015
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
World Crude Oil Reserves
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
•Stagnancy in Reserves •Largest Region Contributes – 48%
World Crude Oil Production
2011 2012 2013 2014World Production (mln tonnes) 4,008 4,116 4,127 4,221 YoY 3.0% 2.7% 0.2% 2.3%
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
•Increase in US Production Level – 10% •Maintain level of Middle East Region
World Crude Oil Consumption
2009 2011 2012 2013 2014World Consumption (mln tonnes) 3,925 4,085 4,133 4,179 4,211 Change -3% 1.1% 1.2% 1.1% 0.8%
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
•Limited growth in major consumption region •China Factor •Slower recovery in European economies
Global Crude Oil Trade In mln tons
Imports Exports Net Imports Exports NetAsia Pacific 922 36 (886) 980 48 (931) Europe 464 19 (445) 447 12 (435) US 384 6 (379) 365 17 (349) Former Soviet Union 0 300 300 0 295 295 Middle East 11 855 845 11 850 839 Rest of the World 97 662 565 73 655 582 Global 1,878 1,878 - 1,876 1,876 -
2014CrudeRegion
2013
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Shale Oil & Shale Gas –Technically Recoverable Reserves Country Billion
Barrels Russia 75 USA 58 China 32 Argentina 27 Libya 26 Australia 18 Venezuela 13 Mexico 13 Pakistan 9 Canada 9 Others 65 World Total 345 Country Trillion
Cubic Feet China 1,115 Argentina 802 Algeria 707 USA 665 Canada 573 Mexico 545 Austraila 437 South Africa 390 Russia 285 Brazil 245 Others 1,535 World Total 7,299
Shale Oil
Shale Gas
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Global Refining Capacities
2011 2012 2013 2014Global Refining Capacities (mln tonnes) 4,558 4,638 4,741 4,806 YoY 0.8% 1.8% 2.2% 1.4%
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Regional Capacity Utilization
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
•Opposite Stance by US refining sector
In mln tons
Global Refined Products Trade
Imports Exports Net Imports Exports NetAsia Pacific 400 283 (117) 394 264 (129) Europe 159 97 (62) 174 99 (75) US 99 151 52 90 180 90 Middle East 41 116 75 6 144 138 Former Soviet Union 6 145 138 43 129 85 Rest of the World 192 106 (86) 205 96 (109) Global 897 897 - 912 912 -
Region Refined Products2013 2014
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Domestic Oil Dynamics
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Recoverable Reserves
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
60% 58% 58%
15% 14% 14%
8% 10% 10%
8% 8% 8%
7% 9% 9%2% 1% 1%
-
80
160
240
320
400
0%
20%
40%
60%
80%
100%
2012 2013 2014
mln
bar
rels
%
age
OGDCL MOL PPL POL UEPL Others Total
Crude Production
57% 54% 50%
12% 14% 20%
10% 9% 7%
4%3% 2%
10% 15% 16%
6% 5% 5%
-
7
14
21
28
35
0%
20%
40%
60%
80%
100%
2012 2013 2014
mln
barr
els
% a
ge
OGDCL MOL PPL POL UEPL Others Total
2012 2013 2014Total (mln barrels) 24.5 27.8 31.6
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Domestic Refineries
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Industry Structure
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Oligopoly: Fewer Large Players Dominates the Market Largely same products Higher barriers to enter the market
Industry Lifecycle Capacity Expansions Profitability growing but volatile Stage of Refinery – Hydroskimming
Industry Competiveness: Threats to Entry – As such no threats to entry, as huge CAPEX is require to setup a refinery. Substitution Effect – Overall there is no substitute of oil products, however specific Product wise substitution exist (e.g, CNG/LNG for PMG/FO). Competitive Rivalry – No competitive Rivalry exist as prices of products are linked with international crude prices.
Industry Competitiveness High Supplier Power
Limited availability of input material (crude oil) owing to scare nature Sizeable import of increasing dependence on international upstream oil industry
High Buyer Power
Few large buyers Low distinction among refined products Easy access to imported refined products
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Product Slate
Product PARCO NRL
ARL PRL
HSD 40% 37% 32% 30%
Motor Gasoline
20% 7% 19% 10%
Furnace Oil 25% 22% 24% 30%
Naptha - 11% 13% 11%
HOBC 0.3% - - -
LPG 3% - - 2%
Lube Oil - 9% - -
Kerosene 2% - 2.5% -
Asphalt - 5% 2.5% -
Others 9.7% 9% 7% 17%
Total 100% 100% 100% 100%
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Product Mix
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
36% 37% 39%
25% 26% 26%
14% 14% 14%
8% 7% 7%8% 7% 7%5% 4% 4%4% 4% 3%
0%
20%
40%
60%
80%
100%
2012 2013 2014
Perc
enta
ge
HSD FO Motor Spirit Aviation Fuel Naphta Non Energy Products Other Energy Products
Supply Demand Mix – Fuels
56%48%
43%37%
50%56% 54%
59%
75% 77%
67% 68%
44%52%
57%63%
50%44% 46%
41%
25% 23%
33% 32%
-
2
4
6
8
10
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014
HSD Motor Spirit Furnace Oil
mln
tonn
es
% a
ge
Imports Local Consumption
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Pricing Mechanism/Disclosure
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
HSD PMG HSD PMGRetail Retail Retail Retail
Ex Refinery Price 78.72 72.55 42.55 40.01 Petroleum Levy 8.00 10.00 7.84 9.92 Inland Freight Equalization Margin 1.72 3.52 1.24 3.41 Dealer Commission 2.30 2.78 2.60 3.08 Distribution Margin 1.86 2.23 2.35 2.35 Ex Depot Price 92.60 91.08 56.58 58.77 Sales Tax 15.74 15.48 25.46 14.95 Maximum Ex Depot Price 108.34 106.56 82.04 73.72
Sales Tax 17% 17% 46% 27%
Sep-15Oct-14
Particulars (Rs/ Litre)
Impact of Deemed Duty on HSD
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Sale of HSD (Thousand Tonnes) 6,889 2,582 4,307
Conversion to Liters (Mln Liters) 8,232 3,085 5,147
Average Ex-Refinery Price (PKR/Liter) 78.87 78.87 78.87
Total Revenue (PKR Mln) 543,334 203,627 339,707
Deemed Duty on HSD - 7.5% (PKR Mln) 40,750 15,272 25,478
Profitability (PKR Mln) 13,038
Profitability excluding deemed duty (PKR Mln) (12,440)
Refining Sector
Government of Pakistan (Imports)
Country's CollectionFY14
Business Risk - Refining Capacity & Utilization
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
*BYCO’s capacity will be enhanced by 5.4mln tpa after commissioning of its new refinery expected during FY16.
Capactity Utilization Capactity Utilization Capactity UtilizationByco Petroleum* 1.8 10.8% 1.8 12.5% 1.8 70.0% - Pak Arab Refinery 4.5 91.6% 4.5 102.0% 4.5 102.0% - National Refinery 2.7 78.8% 2.7 85.0% 2.7 81.4% - Pakistan Refinery 2.1 74.1% 2.1 78.0% 2.1 77.0% - Attock Refinery 2.0 100.0% 2.0 100.0% 2.0 102.0% 0.5ENAR Petrotech 0.3 56.0% 0.3 95.0% 0.3 - Dhodak Refinery - - - - - - -
Total 13.4 69% 13.4 79% 13.4 87% 0.5
11.6 92% 11.6 91%
Expansion
Without Byco
Refinery 2013 2014 2015
WTI Crude and US Gasoline Comparison
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Iran Nuclear Deal
0
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120
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Jun‐13 Sep‐13 Dec‐13 Mar‐14 Jun‐14 Sep‐14 Dec‐14 Mar‐15 Jun‐15
USD
$/bb
l
RBOB
CL
*RBOB: Reformulated Blendstock for Oxygenate Blending (gasoline) *CL: WTI Crude Oil
0
15
30
45
60
75
90
105
120
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
USD/
bbl
WTI Brent
Crude Oil Prices - USD/bbl
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
95.0096.0097.0098.0099.00
100.00101.00102.00103.00104.00
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Exchange Rate
Exchange Rate
Key Challenges Volatility in margins an outcome of fluctuating crude oil prices and simpler technology Unfavorable changes in pricing regime – removal of deemed duty Prevailing Inter-Corporate Debt – impacting throughput levels Exchange rate depreciation
Global Oil Dynamics Global Refinery Domestic Oil
Dynamics Domestic Refineries Business Risk Outlook
Bibliography
1. Pakistan Energy Year Book : 2013-2014 2. Attock Petroleum Limited: www.apl.com.pk | Petroleum Product Prices 3. Attock Refinery Limited –Annual & Quarterly Financial Statements –Sep14, Dec14, Mar15, Jun15 4. BP Statistical Review of World Energy 2014: bp.com 5. US Energy Information Administration 6. Bain & Company: www.bain.com | Global Refining 7. zedatawatch: A Brief History of Oil Prices and Middle East Tensions: Fear of a Black Gold Shortage 8. Oil Price History and Analysis: http://www.wtrg.com/prices.htm 9. The Economist: http://www.economist.com/node/18285768 10. Kline & Company 11. Ernst & Young - The international dynamics of shale 12. Ernst & Young -Shale gas in Europe: Revolution or evolution? 13. KPMG -Shale Development: Global Update 14. PricewaterhouseCoopers Shale Oil, the next energy resolution 15. Deloitte University Press- US shale: A game of choices
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Analysts
Rai Umar Zafar Manager Ratings +92 42 3586 9504 [email protected]
Shoaib Afzal Financial Analyst +92 42 3586 9504 [email protected]
Usama Liaquat Financial Analyst +92 42 3586 9504 [email protected]