Shifting Trade Winds and Impact on the Demand for Shippingmarketexchange.com/2014_Platts/Day...

Shifting Trade Winds and Impact on the Demand for Shipping

Platts Bunker Fuel Conference

Houston, Texas

24 June 2014

Trusted commercial intelligencewww.woodmac.com


2

1970s: Wood Mackenzie developed into top-rated institutional broker, with particular emphasis on high quality research and recognised in financial centres across UK, Europe and US

History of Wood Mackenzie 1844 to 2014

1970

1973

1980

2001

20032004

2007: Creation of coal team via acquisitions of Hill & Associates and Barlow Jonker

2008: Creation of metals team via acquisition of Brook Hunt

2013: Developing of Petro-Chem Research

2001: Management & employee buy-out from Deutsche Bank backed by the Bank of Scotland

20122014

2003: Development of Regional Gas & Power Services

1973: North Sea Service, Wood Mackenzies first industry research offering was launched

1980s: Commenced provision of consulting services

2004: Initial investment in LNG and Macro Oils Research

2012: Refinancing deal, involving Hellman & Friedman acquiring the majority equity stake in the business alongside Charterhouse Capital Partners Ltd

20072008

NorthSea

NorthSeaWM HQ in Edinburgh

EXCHANGEPLACE 2

1844: Wood Mackenzie

founded asEdinburgh-basedstock-broking firm

30 employees10 employees ~1,000 employees

1970 20141980 1990 2000

20 employees 150 employees


3

Europe 1.8%

Economic and energy demand shifts towards Asia

GDP average annual growth rate (2014 2025)

USA 2.7% Japan

0.8%China 7.2%

Russia 3.1%

Brazil 3.3%

India 6.4%

< 1%

1 - 2%

2 - 4%

4 - 6%

Source: Wood Mackenzie

GDP Growth (2014-2025 annualized)

> 6%


4

So US product exports continue to grow

-2,000

-1,000

0

1,000

2,000

3,000

4,000

2000 2005 2010 2015 2020

Ba

lan

ce

s (

kb

/d)

LPG Naphtha Gasoline Jet/Kerosene Diesel/Gasoil Fuel Oil

Deficit

Surplus

US Product Balances


5

Middle East NOCs are building large, complex new refineries which will compete successfully in Europe

European Mid-Cycle NCM

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2018 NCM 2012 NCM*

$/bbl

Second Quartile Third Quartile Fourth Quartile

Jubail (SATORP)

First Quartile


6

Gasoline trade volumes fall, as the North American and Middle East deficits reduce

-50-40-30-20-10

010203040

-50-40-30-20-10

010203040

-50-40-30-20-10

010203040

-50-40-30-20-10

010203040

-50-40-30-20-10

010203040

-50-40-30-20-10

010203040

Key net trade 2013 (mtpa)

Gasoline tradeGasoline trade


Gasoline flows to the ME from Asia reverse as new refining capacity in the ME meets with strong gasoline demand in Asia

Europe

Latin America

FSU

Middle East

Asia

North America

Africa

The Middle East deficit falls, thereby prompting lower imports from Europe and higher exports to Africa and Asia

North American exports to Latin America and Africa rise

Source: IEA; GTIS; Wood Mackenzie

Total in 2020 = 60 Mt (17% of total clean product trade)

-10 Mt (-2.1% CAGR) versus 2013

To N. America

2013 balance

2020 balance

Arrow width proportional to trade volume

Balances do not total zero please see Balancing the World Methodology

North American imports from Europe fall

-50-40-30-20-10

010203040


7

The Middle East emerges as a key diesel/gasoil exporter

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40

-100

-80

-60

-40

-20

0

20

40


Diesel/Gasoil tradeDiesel/Gasoil trade


US exports of diesel to Europe increase

Latin America

FSUEurope

Africa

Asia

North America

Middle East

Russian exports to Europe are expected to remain high

European imports from Middle East are expected to increase hugely

Source: IEA; GTIS; Wood MackenzieTotal in 2020 = 186 Mt (52% of total clean product trade

+45 Mt (+4.0% CAGR) versus 2013

To L. America

2013 balance

2020 balance

Arrow width proportional to trade volume

Balances do not total zero please see Balancing the World Methodology

To N. America


8

-100 0 100 200 300 400

Latin America

Europe

Africa

FSU

Middle East

Asia Pacific

North America

Imp

ort

er

Latin America Europe Africa FSU Middle East Asia Pacific North America

Exporter

2013 - 2020 Change in CPP Tanker Demand, billion tonne.miles

From 2013 to 2020 the emergence of Europe as a major product importer drives CPP tanker demand

Lower gasoline importsIncreased imports of most products as demand grows

Growth in diesel and jet fuel imports

Decline in gasoline imports from Europe due to refining investments

Source: Wood Mackenzie

New capacity, decreases need for clean product imports


9

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2006 2007 2008 2009 2010 2013 2020

Bill

ion

s o

f to

nn

e-m

iles .

Growing clean product trade drives increasing tanker demand

Inter-Regional Clean Oil Tanker Demand, billion tonne.miles

Source: IEA; GTIS; Wood Mackenzie

CAGR +3.0%

CAGR +4.1%


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Disclaimer

This report has been prepared for Platts Bunker Fuel Conference attendees by Wood

Mackenzie Limited. The report is intended solely for the benefit of Platts attendees and

its contents and conclusions are confidential and may not be disclosed to any other

persons or companies without Wood Mackenzies prior written permission.

The information upon which this report is based from our own experience, knowledge

and databases. The opinions expressed in this report are those of Wood Mackenzie.

They have been arrived at following careful consideration and enquiry but we do not

guarantee their fairness, completeness or accuracy. The opinions, as of this date, are

subject to change. We do not accept any liability for your reliance upon them.

Strictly Private & Confidential


11

Harold Skip York

Skip York is a Principal Analyst in Wood Mackenzies Oils Research Team responsible for cross-segment integration of petroleum market and infrastructure issues for North America. With over 20 years of worldwide experience across the energy value chain, he has deep expertise in petroleum market economics and price-setting mechanisms including valuing non-fungible crudes across a number markets, NGLs, and leveraging technologies for competitive advantage.

Specializes in strategy, transaction support, asset valuation, and commercial optimization. Recently he has been focusing on the implications of logistic constraints on market-clearing dynamics and prices for Canadian heavy crude oil and NGL production growth from unconventional plays.

Prior to joining Wood Mackenzie, Skip worked for ExxonMobil in a variety of strategic planning assignments. He held roles as the global expert on joint venture negotiation best practices, managing new business development downstream opportunities in Asia Pacific, and leading research teams on studies of the economic impact of large-scale oil investments on the economy of Russia. He also has consulted for clients at McKinsey & Company and Charles River Associates.

Skip holds a PhD Economics from the University of Virginia, as well as, a Masters of Science and Bachelor of Science also in Economics from the University of Wyoming.

Principal Analyst Oils Research

E [email protected]

T +1 713 470 1667

Europe +44 131 243 4400Americas +1 713 470 1600Asia Pacific +65 6518 0800

Email [email protected] www.woodmac.com

Wood Mackenzie* is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insight theyneed to make better strategic decisions. For more information visit: www.woodmac.com

*WOOD MACKENZIE is a Registered Trade Mark of Wood Mackenzie Limited

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