china – an emerging global giant - tri-zen is … · japan 5524 china 6508 ... emergence of gas...

THE ICISTHE ICIS--LOR MIDDLE EASTERN BASE OILS & LUBRICANTS CONFERENCE LOR MIDDLE EASTERN BASE OILS & LUBRICANTS CONFERENCE Dubai 20Dubai 20--21 September 200521 September 2005

CHINA CHINA –– AN EMERGING GLOBAL GIANTAN EMERGING GLOBAL GIANTSteve Puckett & Harland BulowSteve Puckett & Harland Bulow

TRITRI--ZEN InternationalZEN International

2MIDDLE EASTERN BASE OILS & LUBRICANTS CONFERENCE MIDDLE EASTERN BASE OILS & LUBRICANTS CONFERENCE –– Dubai 20Dubai 20--21 September 200521 September 2005

CHINA CHINA –– AN EMERGING GLOBAL GIANTAN EMERGING GLOBAL GIANT

SS INTRODUCTIONINTRODUCTION

SS CHINA ON THE WORLD STAGECHINA ON THE WORLD STAGE

SS LUBRICANTSLUBRICANTS

SS BASE OILBASE OIL

SS OUTLOOKOUTLOOK






SS BASE OILBASE OIL

SS OUTLOOKOUTLOOK



CHINA ON THE WORLD STAGE CHINA ON THE WORLD STAGE

China, in just one generation, has risen to be the world’s….

S Number one target for foreign international investmentS Largest producer/exporter of many types of goodsS Largest producer/exporter of many foodstuffsS Second largest and fastest growing producer of carsS Largest ownership of mobile phonesS Second largest and fastest growing consumer of energy



THE 1960THE 1960’’s HAVE FADED INTO DISTANT MEMORYs HAVE FADED INTO DISTANT MEMORY

Photo source: Jon Sigurdson



GDP GROWTHGDP GROWTH

US Govt DOE ‘High Case’ - $ Billion 2000 yr US

A

USA

USA

USA

W. E

urop

e

W. E

urop

e

W. E

urop

e

W. E

urop

e

Chin

a Chin

a

Chin

a

Chin

a

Indi

a

Indi

a

Indi

a Indi

a

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1990 2001 2010 2015

USA W. Europe China India



WORLD OIL CONSUMPTIONUS Govt DOE ‘High Case’ - Million Bbls per day

US

A USA

US

A USA

W. E

urop

e

W. E

urop

e

W. E

urop

e

W. E

urop

e

Chi

na

Chi

na

Chi

na Chi

na

Indi

a

Indi

a

Indi

a

Indi

a

0

5

10

15

20

25

30

1990 2001 2010 2015

USA W. Europe China India



ASIAASIA’’s OIL CONSUMPTION s OIL CONSUMPTION -- 20042004

New Zealand 150

Vietnam 200

Philippines 337Pakistan 440

Malaysia 526

Singapore 754

Thailand 852

Australia 968

Taiwan 1094

Indonesia 1127

S.Korea 2351

India 2389

Japan 5524

China 6508

0 1000 2000 3000 4000 5000 6000 7000

Thousand Bbls per day

Over 5,000 mbcd

Over 2,000 mbcd

Over 1,000 mbcd

Less than 1,000 mbcd



CHINA’s OIL GROWTH (source Tsinghua/TRI-ZEN)

0

2,000

4,000

6,000

8,000

10,000

12,000

1980 1985 1990 1995 2000 2005 2010

Million Bbls per day

Production Demand



GLOBAL ENERGY RESOURCESGLOBAL ENERGY RESOURCES Source: BP Statistical Review of World Energy 2005



CHINA A GLOBAL PLAYER CHINA A GLOBAL PLAYER –– ENERGY SECURITY ENERGY SECURITY

TOP 10 CHINA CRUDE SUPPLIERS

Saudi Arabia 14%Oman 13%Angola 13%Iran 11%Russia 9%Sudan 5%Vietnam 4%Yemen 4%Congo 4%Equatorial Guinea 3%

Source: China Gov’t Stats 2004/Platts



GROWTH ISSUES GROWTH ISSUES –– ENERGY INFRASTRUCTUREENERGY INFRASTRUCTURE

S Energy – high rates of growth and diversification of energy sources± Refinery upgrading programs,

petchem construction ± Pipeline construction and the

emergence of gas ± Insatiable demand for power

generation/distribution± High energy costs

S Unabated infrastructure investment –roads, bridges, airports, ports



GROWTH ISSUES GROWTH ISSUES –– AUTO & GENERAL MANUFACTURINGAUTO & GENERAL MANUFACTURING

S Automotive – colossal investment ahead of market opening in 2007, most major auto companies active

S Auto-parts – growing rapidly and has 1600 manufacturers, with strong foreign presence

S Pharmaceuticals – US$8 billion market growing rapidly at 15% p.a.

S Cosmetics – growing at 13% p.a. and expected to reach US$10 billion by 2010

S Food and Beverage – growing rapidly with sectors such as meat a huge industry, as is beverages

S Telecoms & Technology growing at stellar rates



GROWTH ISSUES GROWTH ISSUES –– TRADETRADE

US merchandise-trade deficit with China

0

50

100

150

200

1990 1995 2000 2005 *

Source: US Dept of Commerce/The Economist * annualised



GROWTH ISSUES GROWTH ISSUES –– ENVIRONMENTENVIRONMENT

Photo source: Jeffery Lopes



S INTRODUCTION

S CHINA ON THE WORLD STAGE

S LUBRICANTS

S BASE OIL

S OUTLOOK



LUBRICANTS BUSINESS LUBRICANTS BUSINESS –– INDUSTRIALISATIONINDUSTRIALISATION

S Industrialisation and urbanisation continue unabatedS Large and growing market at over 4 million tonnes p.a.S Lube market dominated by large domestic companies

± Sinopec± PetroChina ± Large independents eg Monarch

S Internationals have ~25% of the market in premium lube grades S Auto lube market growth spectacular but slowingS Auto manufacturing capacity exceeding domestic demandS Industry standards brought up by foreign investment and export requirementsS International premium brands commanding good margins



LUBRICANTS BUSINESS LUBRICANTS BUSINESS –– DRIVERS DRIVERS

S Rapid modernisation and soaring growthS Leading demand growth rates far above global averages S Transportation & manufacturing both leading demandS Mostly mid/low tier markets but a growing demand for premium lubesS Foreign investment and foreign equipment demand quality S Increasing focus on the environmental/ legislative/performance/product life S Strong brand awareness & OEM drivers



LUBE DEMAND LUBE DEMAND –– 2005 vs 2010 2005 vs 2010 (‘000 tonnes p.a.)

Chi

na

Japa

n

Sou

th K

orea

Sou

th K

orea

Indo

nesi

a

Indo

nesi

a

Chi

na

Japa

n

Indi

a

Indi

a

0

1,000

2,000

3,000

4,000

5,000

2005 2010

ChinaJapanIndiaSouth KoreaIndonesia



LUBE SEGMENTATION LUBE SEGMENTATION –– 20052005

Main Product Demand

Process Oil 6%

White Oil 2%

Marine 4%

Industrial 45%

Automotive 43%



AUTOMOTIVE LUBE SEGMENTATION AUTOMOTIVE LUBE SEGMENTATION –– 20052005

Automotive Demand

Gasoline 23%Heavy Diesel 41%

Motorcycle 7%

Agriculture 18%

Light Diesel 11%

Diesel has a large and increasing share



INDUSTRIAL LUBE SEGMENTATION INDUSTRIAL LUBE SEGMENTATION –– 20052005

Industrial Demand

Grease 3%

Hydraulic fluids 26%

Industrial Engine Oil 18%

Others 30%

Gear oil 4%

Compressor & turbine 8% Metal working 11%

Industrial sector is diverse



INDUSTRY STRUCTUREINDUSTRY STRUCTURE

S Domestic ‘national’ incumbents PetroChina and Sinopec seeing market shares continue drifting downwards

S Nationals have concerns and vulnerabilitiesS Large independent Monarch has built a strong positionS International majors blend locally and dominate top-tier marketsS Japanese companies challengingS Smaller foreign companies importing and some blend locally






SS BASE OILBASE OIL

SS OUTLOOKOUTLOOK



BASE OIL PRODUCTIONBASE OIL PRODUCTION

S Production ~3 million tonnes S Sinopec and PetroChina capable of producing ~3.3 million at 21 locations S Local independents/re-refiners production declining rapidlyS Base oil imports amount to ~0.8 million tonnes and risingS PetroChina produces Naphthenic at Liahoe and Karamay up to 0.7 millionS PetroChina – has Group II potential at Daqing and LanzhouS Sinopec – has begun producing Group II at Gaoqiao



GROUP II/III CAPACITY GROUP II/III CAPACITY (tonnes p.a.)(tonnes p.a.)

S Current:± PetroChina Daqing & Lanzhou (Gp II) 250,000 (potential to be achieved)

S Recent addition:± Sinopec Gaoqiao 2005 (Gp II) 300,000 (upgrade now streaming)

S Proposed:± Sinopec Maoming 2007 (Gp III) 200,000 (delay anticipated)

S Elsewhere in Asia: (Gp II/III)± Petronas Melaka 2007 330,000± Formosa Petchem 2007 540,000 ± CPC Kaohsiung 2008 270,000 ± SK expansion planned± BPCL India 2006 180,000



BASE OIL TRADE FLOWS BASE OIL TRADE FLOWS –– 2005 2005

Group I

Group II/III



BASE OIL TRADE FLOWS BASE OIL TRADE FLOWS –– 20052005

S Europe the “swing” supplierS India’s roleS Trade Flows

± Group I ± Group II ± Group III

S Asia’s new suppliers S Asia’s new position



BASE OIL PRICES FOB SINGAPORE 1997BASE OIL PRICES FOB SINGAPORE 1997––20052005

100

200

300

400

500

600

700

800

1997 1998 1999 2000 2001 2002 2003 2004 2005

US$/MT

SN150 SN500 Bstk



DOMESTIC BASE OIL CLASSIFICATIONDOMESTIC BASE OIL CLASSIFICATION

HVHIVIWHHVI-WMVI-HLVI-H(II)Highly refined

VHIHHVI-HMVI-WHLVI-H(I)Low pour point

Hydrocracked base oil:

HVI-SMVI-SHighly refined

HVI-WMVI-WLow pour point

Solvent refined base oil:

HVIMVILVIGeneral use base oil

>12095-12060-95<60Viscosity index

VHi VIHi VIMed VILow VI

Base oil - PetroChina's Classification System - 2002

UHVI-SVHVI-SHVI-SMVI-SHighly refined

UHVI-WVHVI-WHVI-WMVI-WLow pour point

Special purpose:

UHVIVHVIHVIMVILVIGeneral use base oil

>140120-140 90-120 40-90 <40Viscosity index

UHi VIVHi VIHi VIMed VILow VI

Base oil - Q/SHR001-1996 (Sinopec)



UPDATED CHINA BASE OIL CLASSIFICATIONUPDATED CHINA BASE OIL CLASSIFICATION

All others not included in Group I,II,III or IV Group VAll polyalphaolefins (PAO's)Group IV

>120>90<0.03 andGroup III100-120HVI-S+Group II80-120>90<0.03 andHVI-SGroup II80-120<90>0.03 and/orHVI HVIWGroup 140-80<90>0.03MVI

<40>90<0.03LVI-S

<40<90>0.03LVI

Viscosity IndexSaturates (%)Sulphur (%)GB StandardAPI ClassificationState Standard (GB)State Standard (GB)



BASE OIL EXPORT POTENTIALBASE OIL EXPORT POTENTIAL

S Export potential very limitedS Dalian exports ~40 kT per year

Gp I - SN400/150/70 - reducingS Gaoqiao now producing both

Gp I & IIS Maoming produces only

domestic gradesS Karamay in North West

produces naphthenic

GaoqiaoGaoqiao

MaomingMaoming

ShanghaiShanghai

TianjinTianjinDalianDalian



IMPORTS AND BLENDINGIMPORTS AND BLENDING

S ExxonMobil ~400kT and Shell ~200kT are largest importers from Singapore, for their coastal LOBPs and for term sales

S From Japan, ~80kT imported for Japanese JV and term customers inNorth and Central region

S From Taiwan, ~30kT imported to LOBPs South and Central regionS From Korea, ~30kT imported to North & Central regionS Other imports of ~30kT sourced for foreign invested LOBPs in SouthS Spot supplies from Russia, Iran etc






SS BASE OILBASE OIL

SS FUTURE OUTLOOKFUTURE OUTLOOK



LUBE GROWTH PROJECTIONS 2005LUBE GROWTH PROJECTIONS 2005--20102010 (%p.a.)

Indonesia 4.5

China 4.8

Taiwan -0.5

Australia 0.5

Japan 0.5

Singapore 1

New Zealand 1.2

Philippines 2.6

South Korea 2.7

Malaysia 3.3

Thailand 4.2

Pakistan 4.3

Vietnan 4.4

India 4.6

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5

% p.a.



NEW VEHICLE EMISSION STANDARDSNEW VEHICLE EMISSION STANDARDS

Euro 4Euro 3Euro 2Euro 1Vietnam (diesel)Euro 4Euro 1Vietnam (mogas)

Euro 4Euro 3Euro 2Euro 1ThailandEuro 4Euro 2Euro 1Singapore

Euro 1Philippines

Euro 2MalaysiaEuro 2Euro 1Indonesia

Euro 3Euro 2Euro 1India (others)

Euro 4Euro 3Euro 2Euro 1India (main cities)

Euro 4Euro 3Hong KongEuro 3Euro 2Euro 1China (Others)

Euro 4 Euro 3Euro 2 Euro 1China (BJ & SH)

Euro 2 Bangladesh

Euro 5Euro 4Euro 3EU

20102009200820072006200520042003200220012000



LUBE QUALITY TRENDSLUBE QUALITY TRENDS

S Lube technology driversS Auto market driversS Premium PCMO S Heavy vehicle marketS Supply push vs demand pullS Roles of Group II and Group III



MARKET OUTLOOK MARKET OUTLOOK -- KEY DRIVERSKEY DRIVERS

S Euro standardsS Timing – converging interestsS Drivers in AsiaS GF- 4 impactsS Technical impactsS Forecast 2010S GTL …..S Asia’s challengesS Lower barriers



THE GROWING CONSUMER CLASSES IN ASIATHE GROWING CONSUMER CLASSES IN ASIA

Source: MasterCard International – defined as income of US$5,000 +

China 237

China 64India 11

India 55

Indonesia 11

Indonesia 24

Malaysia 7

Malaysia 20

Philippines 4

Philippines 21

Thailand 10

Thailand 42

0

50

100

150

200

250

300

350

400

450

2002 2010

populationmillions

China’s “consumer classes” are forecast to increase from 64 million to 237 million by 2010.



CHINA THEN & NOWCHINA THEN & NOW

ShanghaiShanghai’’s Bund in 2005 s Bund in 2005 and 1930and 1930’’ss

Photo source: Chinaguides.net



CHINA THEN & NOWCHINA THEN & NOW

ShanghaiShanghai’’s Pudong in 2005 s Pudong in 2005 aand 1930nd 1930’’ss

Photo source: Chinaguides.net



THANK YOU THANK YOU ……. . Steve Puckett & Steve Puckett & Harland Bulow

TRI-ZEN International

Singapore

and

BangkokHanoiHong KongJakartaMelbourneMumbaiPerthShanghai

www.tri-zen.com

china – an emerging global giant - tri-zen is … · japan 5524 china 6508 ... emergence of gas...

Documents