Recent Developments in EU Refining and in the …...2014/05/22 · Jan 08 Jan 09 Jan 10 Jan 11 Jan...

Third Meeting of the EU Refining Forum Brussels, 22 May 2014

Toril Bosoni, International Energy Agency

Recent Developments in EU Refining and in the Supply and Trade of Petroleum Products

© OECD/IEA 2014

© OECD/IEA 2012 © OECD/IEA 2014

European Refinery Activity Recovers from 25-year Lows

But throughputs continue to contract year-on-year

• After hitting its lowest level since 1989 in October, regional refinery runs bounce back above 11 mb/d

• European throughputs nevertheless continue to contract annually, by 0.5 mb/d in 1Q14, compared with 1 mb/d in 2H13 (and 650 kb/d for full-year 2013)

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

Jan-08 Jan-10 Jan-12 Jan-14

mb/d OECD Europe Refinery Runs


-1.5

-1.0

-0.5

0.0

0.5

1Q09 1Q10 1Q11 1Q12 1Q13 1Q14

mb/dAnnual Change in European Demand

vs. Crude Runs

Demand Crude Runs

Regional Demand Slide Halted – For Now? Yet, Refineries Curb Runs Sharply

• After plummeting 1.7 mb/d in from 2008 to 2012, regional demand declines by a more modest 120 kb/d in 2013 and 50 kb/d forecast for 2014.

• Since mid-2013, regional throughputs are 850 kb/d lower on average

13.0

13.5

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14.5

15.0

15.5

16.0

2000 2002 2004 2006 2008 2010 2012 2014

mb/d OECD Europe Oil Demand


Industrial Demand Sees Sign of Life LPG imports from Russia and US on the rise

• After years of decline, LPG and Diesel demand looks healthy

• Diesel is projected to expand by 2.8% in 2014 (after having posted 4.5% gains in 1Q14)

• LPG demand is expected to grow slightly in 2014 (+0.9%), after an 11% surge in 2013.

3,600

3,800

4,000

4,200

4,400

4,600

JAN APR JUL OCT JAN

kb/d Oecdeur: Diesel Demand

Range 09-13 2013

2014 5-year avg

800

850

900

950

1,000

1,050

1,100

1,150

JAN APR JUL OCT JAN

kb/d Oecdeur: LPG Demand

2011 2012 2013 2014


Refinery Margins Remain Weak April recovery proves short-lived

• Simple margins remain negative through most of 2013, keeping throughput rates low

• Cracking margins also fall through December, before posting a slight recovery in early 2014

• By mid-May, however, rates fall again as plants complete maintenance amid weak demand and high product imports

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-5.0

-2.5

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15.0

Jan 08 Jan 10 Jan 12 Jan 14

$/bbl Refining Margins Northwest Europe

Urals (HS) Brent (HS)Urals (Cracking) Brent (Cracking)

-7.5-5.0-2.50.02.55.07.5

10.012.515.017.5

Jan 08 Jan 10 Jan 12 Jan 14

$/bbl Refining Margins Mediterranean

Es Sider (Cracking) Es Sider (HS)

Urals (Cracking) Urals (HS)


Weak Margins not Restricted to European Plants Simple refineries at worst level since 2008

• Global margins follow suit. Singapore simple margins firmly negative and US rates come off earlier highs

• Refiners with access to discounted crude and cheap refinery fuel (natural gas) fare better

• US Gulf Coast margins surge in 2014

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

$/bbl Global Cracking Margins

NWE Brent MED UralsSingapore Dubai USGC LLS/HLS

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

$/bbl Simple Refining Margins

NW Europe Urals NW Europe BrentMED Urals Singapore Dubai


US Crude Advantage moves South Gulf Coast Refinery margins surge in 2014 on crude glut

• Midcontinent refiners still enjoy the highest returns – at around $22/bbl on average in April 2014 (down from $28/bbl a year earlier

• Gulf Coast refinery margins averaged $11/bbl in April 2013 in comparison, up from $4.40/bbl the previous year

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14

$/bbl US Gulf Coast Refining Margins

Mars Cracking HLS/LLS Cra.

ASCI Coking Maya/Mars Cok.

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Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14

$/bbl Refining Margins US Midcontinent

WTI Cracking WCS/Bakken Cr.Bakken Cracking WTI CokingWCS/Bakken Cok. Bakken Coking

Data Source: IEA/KBC


Pipeline Expansions Draw Crude out of Midcontinent

Underpinning better Gulf Coast Margins and high runs

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6.5

7.0

7.5

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8.5

9.0

Jan Apr Jul Oct

mb/d US Gulf Coast Refinery Runs

5-yr Average

2013 2014

Source: EIA

70

80

90

100

110

120

Jan Apr Jul Oct

mb US Weekly PADD 2 Crude StocksUS Mid-continent

Range 2009-2013 5-yr Average

2013 2014

Source: EIA

140

160

180

200

220

Jan Apr Jul Oct

mb US Weekly PADD 3 Crude StocksUS Gulf Coast

Range 2009-2013 5-yr Average

2013 2014

Source:

Source: EIA

• US crude stock surplus now sits on the Gulf Coast, rather than in the Midcontinent

• Reflected in US crude differentials


US Refinery Renaissance Support the OECD

• US refiners increased refinery runs by 750 kb/d year-on-year in first four months of 2014

• 2013 yearly gains of 315 kb/d

• Surging domestic liquids supply and better refinery profitability lead to increased downstream investment – 500 kb/d of new capacity likely by 2018

13

14

15

16

17

Jan Apr Jul Oct

mb/d US Weekly Refinery Throughput

5-yr Average

2013 2014

Source: EIA

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

1Q12 3Q12 1Q13 3Q13 1Q14

mb/d OECD Crude ThroughputsAnnual Change

Americas Europe Asia Oceania


European Industry Restructuring Continues

Another 110 kb/d shut in 2014, taking total to 1.8 mb/d since 2008

• MOL shuts Mantova in 2014, Essar cuts capacity at Stanlow

• In addition, lot of ownership changes, with Russian, Chinese, Indian players entering the market, as well as trading companies (Vitol, Gunvor)


Plant Closures in France, Germany, Italy and UK

Refinery Closures to Date:

• France 585 kb/d

• Germany 400 kb/d

• UK 455 kb/d

• Italy 320 kb/d

• From 2007 to 2013, a total of 1.7 mb/d of capacity shut in total. Comparatively, demand fell by 1.9 mb/d

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100

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600

2008 2010 2012 2014

kb/d OECD Europe Refinery Closures

Czech Republic France Germany Italy UK

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1.0

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0.6

0.8

2008 2010 2012 2014

Th

ou

san

ds

mb/d

Th

ou

san

ds

Cumulative European Refinery Shutddowns

France Germany Italy

UK Total (RHS)


European Net Distillate Imports Surge Increasing volumes coming from US, Russia, India, and Saudi?

• Since September 2013, European Net Middle Distillate imports have averaged 1.3 mb/d, compared with 830 kb/d in 2012 and 1.1 mb/d in 2009.

• US overtakes Russia as main supplier in 4Q13, providing 4650 kb/d (compared with 430 kb/d from Russia)

• Russia takes back key European supplier spot in 2014

-200

0

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800

1000

1200

1400

1600

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

Net European Middle Distillate Imports (kb/d)

United States Russian Federation

India Saudi Arabia

Others


US Turns Gasoline Net-Exporter But Jones Act provides market for Europe on East Coast

• For the last four months (Nov13 – Feb14),US is net exporter of Gasoline

• The Jones Act, which prevents non US-flagged ships to sail within US waters, creates market for European gasoline on East Coast

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1600


US Gasoline Imports (kb/d)

OECD Europe Others-200

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1400


US Net Gasoline imports (kb/d)


US Gasoline Exports Stay in the Americas But increasing share of Distillates coming to Europe

• Mexico and Latin America remains the key buyers of US gasoline surplus

• While Latin America is also main market for US middle distillates, increasing share is coming to Europe (over 30% on average in last six months through February

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US Gasoline Exports (kb/d)

Mexico Canada NonOPEC LatAm Others

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1600


US Middle Distillate Exports (kb/d)

OECD Europe Others


Globally, Surplus Refining Capacity Still Exist

• Despite OECD refinery closures, surplus distillation capacity exist

• 3.8 mb/d of OECD capacity already shut since 2008 (including Valero’s 235 kb/d Aruba refinery)

• Another 670 kb/d scheduled for 2014, mostly in Japan

• Additions exceed projected demand growth to 2018

• Furthermore, biofuels, NGLs etc. meet larger share of demand

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2008 2009 2010 2011 2012 2013 2014

kb/d OECD Refinery Closures

North America Europe Pacific Aruba

0.0

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1.0

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2012 2013 2014 2015 2016 2017 2018

mb/dRefinery Additions vs. Demand

Growth

Net Capacity Additions Demand Growth


Good News For Europe Global Refinery Investments Scaled Back

• Project delays, cancellations reduce new additions from year ago plans

• Chinese projects stalled due to concern over surplus capacity and pollution

• Slow progress in Brazil lead to further project slippage

– Less capacity reduction requirements for Europe and other mature markets


New Medium Term Outlook to be Released on 17 June 2014

Will include update on global investment outlook and new trade

balances – for Europe and the World


Thank you

[email protected]

Recent Developments in EU Refining and in the …...2014/05/22 · Jan 08 Jan 09 Jan 10 Jan 11 Jan...

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