refining-economics

(1)

Refinery Planning &

Economics

(2)

Topics

1- Oil Markets

2- Crude Oil Pricing

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(3)

Oil Markets

• Crude Oil Markers (Benchmarks)

• World Refining Centers

• Oil Movement & Trade Paths

• Petroleum Trade Markets

(4)

Crude Oil Markers

The Three Main Crude Oil Markers

are:

• West Texas Intermediate - America

• Brent - Europe & Africa

(5)

Crude Oil Prices

25.9 36.1 0 5 10 15 20 25 30 35 40 77 79 81 83 85 87 89 91 93 95 97 99 01 03 $/BBL

(6)

Contango &

Backwardation

Brent Crude Oil Prices

15

17

19

21

23

25

27

1 Jan 9 Jan 17 Jan 25 Jan 2 Feb 10 Feb 18 Feb 26 Feb 6 Mar 14 Mar 22 Mar

$/ BBL _{Dated Brent} _{Current (Month 1)}

Future (Month 2)

Source: Platt's - 2001

WHEN FUTURE PRICE IS

LOWER THAN TODAY'S

WHEN FUTURE PRICE IS HIGHER

(7)

ASIA

NWE

US

MED

(8)

DUBAI

BRENT

WTI

(9)

Arbitrage

• The Trade Between Geographical Areas

to Earn Profit

• The Arbitrage is Open When the Price in

the Loading Port Plus Freight is Less Than

the Price at the Discharge Port

(10)

Arbitrage

(11)

Naphtha Arbitrage

(Japan/MED)

$14 /MT

$30 /MT

$228/MT

$177/MT

$200/MT

$14/MT

$21/MT

(12)

Naphtha Arbitrage

(Japan/MED)

$13 /MT

$29 /MT

$200/MT

$177/MT

$180/MT

$176/MT

“THE ARB IS CLOSE”

$7/MT

– $5/MT

(13)

Saudi Aramco

International Crude Oil

Storage

(14)

Petroleum Stocks

Reports

American Petroleum Institute

(API)

– Weekly Report Covering the US

Energy Information Agency

(EIA/DOE)

– Weekly Report Covering the US - Official

International Energy Agency

(IEA)

(15)

API Report

API STATISTICS

API NATIONAL PETROLEUM REPORT - SUMMARY

(STOCKS THOUSAND BARRELS) CHANGE ON

08/06/99 07/30/99 08/07/98 WEEK YEAR CRUDE OIL STOCKS 323073 326234R 344736R -3161 -21663 DISTILLATE STOCKS 139050 139697R 144358R -647 -5308 GASOLINE STOCKS 206627 210103 215351 -3476 -8724 JET NAPHTHA STOCKS 126 43 49 +83 +77 JET KERO STOCKS 45468 45303 40987 +165 +4481 CRUDE RUNS 15366 15371 15247 -5 +119 PCT OF CAPACITY 95.0 99.1 97.8 -4.1 -2.8 API NATIONAL PETROLEUM REPORT - SUMMARY

(OUTPUT/IMPORTS THOUSAND B/D) CHANGE ON

08/06/99 07/30/99 08/07/98 WEEK YEAR CRUDE PRODUCTION 5950 5950 6285R +0 -335 GASOLINE OUTPUT 8236 8157 7892 +79 +344 REFORM MOGAS OUTPUT 2548 2535 2576 +13 -28 OXYG MOGAS OUTPUT 567 528 421 +39 +146 OTHER MOGAS OUTPUT 5121 5094 4895 +27 +226

(16)

Stocks’ Impact On

Prices

200,000

250,000

300,000

350,000

400,000

27 -J

ul

3-A

u

g

10 -A

u

g

17 -A

ug

24 -A

u

g

31 -A

ug

7-S

ep

14 -S

ep

21 -S

ep

28 -S

ep

5-O

ct

12 -O

ct

19 -O

ct

26 -O

ct

0

2

4

6

8

10

12

14

16

18

$/BBL 1,000 BBL

(17)

Topics

1- Oil Markets

2- Crude Oil Market

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(18)

Crude Oil Market

• Evolution of Crude Oil Pricing

• Crude Oil Value

• Petroleum Oil Price Reporting

• Crude Oil Contracts

(19)

Evolution of Crude

Pricing

• Posted Price:

– Set by Governments of Producing Countries

– Price Changes Infrequently & Varies by Producer

• Netback Price:

– Based on Product Prices Less Refining Fee

– Guaranteed Refiners a Positive Margin

• Market-Related Price:

– Related to Published Quotation of a Marker Crude

– Differentials Applied are Standard

(20)

Crude Oil Value

Crude Oil Value is Related to the Value of the

Refined Products

• API

• Sulfur Content

Other Factors

• Refinery Type (Configuration)

• Paraffinic/Naphthenic

(21)

Oil Price Reporting

• Who Report Oil Prices?

– Platt’s

– Petroleum Argus

(22)

Oil Price Reporting

• How are Oil Prices Published?

– Published Quotations Represent

Fixed-Price Spot Transactions, Confirmed Bids

& Offers and Market Talk.

– Price Reporting Agencies have Different

Bases for Trade Reporting, Freight

Assessment and Freight Calculation

(23)

Platt’s Crude Oil

Marketwire Report

PLATT'S CRUDE OIL MARKETWIRE VOL. 21 NO. 167 AUG 26, 1999 New York (Platt's)--26AUG99

BRENT(SEP)+20.69-20.73+ DUBAI(OCT)19.94-19.99 WTI(OCT)21.09-21.11 BRENT(OCT)+20.65-20.67+ DUBAI(NOV)19.72-19.80 WTI(NOV)21.14-21.20 BRENT(NOV)+20.43-20.47+ DUBAI(DEC)19.50-19.60 P-PLUSWTI2.71-2.73 BRENT(DTD)+20.34-20.38+ OMAN (OCT)19.97-20.08 WTI(MID)20.89-20.94 FORTIES +20.38-20.44+ OCT "MPM" 0.27-0.30 WTS 20.02-20.08 EKOFISK +20.24-20.33+ URAL(MED) 19.71-19.80 EUGENEI 20.32-20.38 STATFJORD +20.23-20.29+ URAL(RDAM)19.76-19.82 BONITO 20.49-20.56 OSEBERG +20.37-20.45+ ILT(SIDI) 19.12-19.18 MARS 19.42-19.48 FLOTTA +19.69-19.78+ IHVY(SIDI)18.66-18.72 POSEIDON19.42-19.48 BONNY LT +20.52-20.59+ SUEZBLEND 18.42-18.50 LLS 21.26-21.32 QUA IBO +20.54-20.62+ ESSIDER 20.18-20.24 HLS 21.07-21.13

(24)

Platt’s Crude Oil

Marketwire Report

CRUDE QUALITY AT RUSSIAN BLACK SEA PORT OF

NOVOROSSIISK HAS FALLEN IN RECENT WEEKS AS A RESULT

OF INTERRUPTED FLOW OF AZERI LIGHT CRUDE THROUGH

BAKU-NOVOROSSIISK PIPELINE, TRADING SOURCES SAID

THURS. TRANSNEFT-OPERATED PIPELINE, LINKING AZERI OIL

FIELDS INTO URALS SYSTEM THROUGH DAGESTAN AND

SEPARATIST REPUBLIC OF CHECHNYA, HAS SUFFERED

REPEATED STOPPAGES THIS YEAR FROM SABOTAGE IN

CHECHNYAN SECTION. ALSO, RUSSIAN FORCES ARE BOMBING

INSIDE CHECHNYA IN PURSUIT OF MUSLIM REBELS IN AREA.

A HEAVIER MIX OF SOUR CRUDES ENTERING URALS PIPELINE

SYSTEM IN RUSSIA MEANT A SHIPMENT LOADED ON AUG 23

HAD AN API OF 30.48, COMPARED WITH EXPECTATIONS OF

AROUND 32.4, TRADERS SAID.

(25)

Contracts

• Contract Types:

– Term

– Spot

• Sales Types:

– FOB

Free On Board

– CIF

Cargo, Insurance & Freight

– C&F

Cargo & Freight

– Others

Lightering, ship,

(26)

Far East: 48%

Europe:

25%

US

22%

Others

5%

Saudi Arabia

Production: 8.3

MBD

Consumption: 1.8

MBD

Export:

6.5 MBD

(27)

8.20 8.02 8.30 8.00 7.90 8.00 8.10 7.00 7.20 7.40 7.60 7.80 8.00 8.20 8.40 8.60 2001 2002 2003 2004 2005 2006 2007 Million BBL/Day

Saudi Arabia's

(28)

Saudi Arabia's

5-Year Crude Production Plan

(by Grade)

0 1 2 3 4 5 6 7 8 9 2001 2002 2003 2004 2005 2006 2007 ASL AXL AL AM AH Million BBL/Day A ct u al

(29)

Top 10 Oil Production

-2002

R us si a fe d er at io n U SA M ex ic o C hi na Ir an N or w ay V en ez ue la C an ad a U K S au d i A ra b ia 0 1 2 3 4 5 6 7 8 9 _{Million BBL/Day} * Production Source: BP

(30)

Oil Production -2002

Africa 10% FSU 11% Asia Pacific 11% Middle East 30% North America 19% Other Americas 9% Europe 10%

(31)

Oil Production -2002

OPEC 33% OECD 25% Non-OPEC 42%

(32)

Top 10 Oil Consumption

-2002

It al y F ra nc e C an ad a In di a So ut h K or ea G er m an y R us si a U SA C hi na Ja pa n 0 5 10 15 20 25 Million BBL/Day

Total World: 75.8 Million BBL/ Day

(33)

Oil Consumption - 2002

Africa 3% FSU 5% Middle East 6% Other Americas 6% Europe 22% North America 31% Asia Pacific 27%

(34)

World Total Oil

Consumption

Sa ud i A ra bi a Sp ai n U kr an ia M ex ic o C an ad a It al y F ra nc e C an ad a In di a S K or ea R us si a G er m an y B ra zi l U S A C hi na Ja pa n 0 5 10 15 20 25 Million BBL/Day

Total World: 75.8 Million BBL/ Day

(35)

Global Supply/Demand

Balance

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 1992 1993 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Million BBL/Day SURPLUS DEFICIT

(36)

Proven Oil Reserve by

country 2002

R us si a N ig er ia C hi na M ex ic o U SA L ib ya Sa ud i A ra bi a Ir aq U A E K uw ai t Ir an V en ez ue la N or w ay A lg er ia K az ak hs ta n B ra zi l A ze rb ai ja n 0 50 100 150 200 250 300 Billion Barrel

World Total: 1,034

264 113 98

(37)

Proven Oil Reserve by

region

(38)

Reserve/Production Ratio

2002

41 87 0 10 20 30 40 50 60 70 80 90 100

North Other Europe Africa FSU Asia Middle World

(39)

O

Organization of the

P

Petroleum

Exporting

_E

C

Countries (OPEC)

• Founded in Baghdad

in 1960

• Objective:

To Coordinate and

Unify Policies Among

the

Members

in

Order to Secure Fair

and Stable Prices for

Petroleum Producers

OPEC COUNTRIES:

IRAN, IRAQ, KUWAIT,

SAUDI

ARABIA, VENEZUELA,

QATAR,

(40)

OPEC PRODUCTION LEVEL

20 21 22 23 24 25 26 27 28 29 30

Apr 01 J un 01 Aug 01 Oct 01 Dec 01 Feb 02 Apr 02 J un 02 Aug 02 Oct 02 Dec 02 Feb 03

Million BBL 0 5 10 15 20 25 30 35 40 $/BBL

(41)

TOPICS

1- Oil Markets

2- Crude Oil Pricing

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(42)

REFINING

• Refined Products Supply/Demand

• World Refining Capacity

• Refined Products Applications

• Refined Products Specifications

• Regional Quality Variations

(43)

World Supply &

Demand

Refined Products

1995 1997 1999 2001 2003 2005 2007 2009 2015 Naphtha Gasoline J et/Kero Gasoil Fuel Oil

Surplus

Deficit

(44)

World Supply &

Demand

Refined Products by

Region

1995 1997 1999 2001 2003 2005 2007 2009 2015 _Middle East FSU Asia Europe Latin America Africa Canada United States

Net

Exporter

Net

Importer

(45)

World Refining

Capacity

0 10 20 30 40 50 60 70 80 90 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Million BBL/Day

North America Other Americas Europe Former Soviet Union Middle East Africa Asia Pacific

74.86

(46)

Refined Products

Applications

• Propane:

Petrochemical Industry/Home

• Butane:

Petrochemical/Home/Gasoline

• Naphtha:

Petrochemical/Gasoline

• Jet:

Jet Fuel/Domestic Appliances

• Gasoil:

Automotive Fuel/Heating Oil

(47)

Products Specifications

• Naphtha

– Naphthenic / Paraffinic

• Gasoline

– Octane Number (RON/MON)

– Sulfur Content / Olefins Content

• Gasoil

– Sulfur Content

– Cetane Number

• Fuel Oil

– Sulfur Content

– Viscosity

(48)

Regional Quality

Variations

• End Use Requirement

• Climate Conditions

• Refinery Technology

(49)

Regional Quality

Variations

• Gasoline

– Lead-Free

– MTBE Concern

– Benzene Content

– Volatility

• Diesel

– 0.05% Sulfur

• Fuel Oil

(50)

Regional Quality

Variations

• Gasoline

– Lead-Free

– Benzene Content

– Following the US

• Diesel

– 0.05% Sulfur

• Fuel Oil

– 1.0% Sulfur

WESTERN EUROPE

(51)

Regional Quality

Variations

• Gasoline

– Leaded/Unleaded

– MTBE

• Diesel

– 1.0 - 0.25% Sulfur

• Fuel Oil

– 4.0% Sulfur

ASIA/PACIFIC

(52)

TOPICS

1- Oil Markets

2- Crude Oil Pricing

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(53)

REFINED PRODUCTS

(ASIA/Arab Gulf)

• Regional Products Balance

• Products Seasonality

• Spreads

• Refined Products Sales

• Refining Margins

(54)

Regional Products

Balance - 2002

-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 A u st ra lia C h in a In d ia In d o n es ia J a p a n M a la y si a P a k is ta n P h ili p p in es S in g a p o re S . K o re a T a iw a n T h a ila n d V ie tn a m O th er Million BBL/Day

DEFICIT

SURPLUS

(55)

Regional Products

Balance - 2005

-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 A u st ra lia C h in a In d ia In d o n es ia J a p a n M a la y si a P a k is ta n P h ili p p in es S in g a p o re S . K o re a T a iw a n T h a ila n d V ie tn a m O th er Million BBL/Day

DEFICIT

SURPLUS

(56)

Refined Products Sales

• Naphtha

– Naphtha C&F Japan - Freight

(Japan/AG)

+ Premium

• Jet

– Arab Gulf Jet Quotation + Premium

– Singapore Jet Quotation - Discount

• Gasoil

– Singapore Gasoil 0.5%S Quotation - Discount

– Arab Gulf Gasoil 0.5%S Quotation + Premium

(57)

Refined Products Sales

• Straight-Run Fuel Oil

– Singapore HSFO 180 Quotation - Freight

(Singapore/AG)

+ %Premium (Gasoil - Fuel Oil)

• Cracked Fuel Oil

– Singapore HSFO 380 Quotation - Discount

(58)

Saudi Arabia Products

Supply & Demand -

2004

0 200 400 600 800 1000 1200

LPG Naphtha Gasoline Kero/jet Diesel Fuel Oil

Exports Demand

(59)

-100 200 300 400 500 600 Forecast

Saudi Arabia Products

Demand 1970-2010

(60)

TOPICS

1- Oil Markets

2- Crude Oil Pricing

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(61)

World LPG Demand

50 100 150 200 250 Oceania Africa Middle East FSU / E Europe L atin America West Europe Asia North America Million MT 110 240

(62)

World LPG Demand

0 10 20 30 40 50 60 70

North Asia West Latin FSU / E Middle Africa Oceania

1985 2005

(63)

Asian LPG Demand

10 20 30 40 50 60 70

I ndian

Subcontinent

Southeast

Asia

Far East

Million MT

(64)

0 10 20 30 40 50 60 70

Town Gas

Chemicals

Engine Fuel

I ndustrial

Residential/

Commercial

Million MT

Asian LPG Demand

by End-Use

(65)

0 10 20 30 40 50 60 70 J a p a n a la y si a K o re a T a iw a n g a p o re h a il a n d ip p in e s C h in a In d ia d o n e si a a k is ta n

Kilograms LPG per Capita

Asian LPG Demand

(66)

0 5 10 15 20 25 30 35

1990

1995

1997

1998

2000

2002

2005

Other Far East I ndian Subcontinent China Korea J apan Million MT

Asian LPG Import

(67)

Major LPG Exporters

12.5 19.6 23.6 25.6 _22.1 29.6 10 20 30 40 50 60 70 80 FSU L America Australia S E Asia Canada North Sea Africa Middle East Million MT

27

40

46

53

58

75

(68)

Middle East LPG

Exports

7.9 12.4 14.3 13.8 _11.0 13.0 0 5 10 15 20 25 30 Bahrain Oman I raq I ran Qatar Kuwait U.A.E. Saudi Arabia Million MT

(69)

Local Petrochemical

Demand

(70)

Local Petrochemical

Demand

NG

BUTANE

PROPANE

0 2 4 6 8 10 12 1997 1998 1999 2000 2001 2002 Million MT/Year

(71)

TOPICS

1- Oil Markets

2- Crude Oil Pricing

3- Refining

4- Refined Products Prices (Asia/AG)

5- LPG

(72)

SHIPPING

• Tanker Types

(73)

AFRA

• “AFRA” - Average Freight Rate Assessment

• Compiled Monthly by London Tanker Broker

Panel (LTBP)

• Mainly Used in Oil Trade Transactions

• Represents the Weighted Average of the

Commercially Chartered Tonnage Employed

in the Transport of Oil

(74)

Tanker Types

Coastal Tankers

Aframax

Suez-max

VLCC

ULCC

(75)

AFRA

1 General Purpose: 16,500 - 24,999 2 Medium Range: 25,000 - 44,999 3 Large Range 1 45,000 - 79,999 4 Large Range 2 80,000 - 159,999 5 VLCC 160,000 - 319,999 6 ULCC 320,000 - 549,999

(76)