eu refinery sector fitness check · 2014. 11. 12. · jrc eu refining sector fitness check progress...

JRC

EU Refining Sector Fitness Check

Progress Update 22 May 2014

Robert Marschinski - European Commission, JRC

(jointly with D.Bakhtieva, L.Delgado, P.Eder, M.Mraz,

U.Temurshoev)

JRC

Content

• Fitness Check: objective, approach, concepts

• Example 1: Renewable Energy Directive

• Example 2: int'l competitiveness of EU refining

02/04/2014 EU refinery sector Fitness check 2

JRC

Fitness Check - Petroleum Refining Sector

Review of EU environmental and energy legislation affecting the European refining sector during the time period 2000-2012:

1. Assess economic impacts of legislation

cost impact on EU refineries

oil products market impact

international competitiveness impacts

2. Identify policy inconsistency, redundancy, excessive burden


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Conceptual Framework for 10 Directives

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02/04/2014 EU refinery sector Fitness check 5 Benefits from legislation

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Methodology: 3 Pillars

DATA on EU refineries' investments and configuration (JRC/EUROPIA

CONCAWE/SOLOMON)

DATA from specialized company on global prices, product trade and refining margins

OURSE MODEL: Economic model of global refining market, 9 regions, of which 2 EU

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Methodology: 3 Pillars

DATA from specialized company on global prices, product trade and refining margins

Legislative cost impact e.g. investments in - desulphurisation units - refinery SO2 abatement - energy efficiency

Competitiveness impact e.g. in terms of EU refining's - net cash margins - utilization rates - return on investment

OURSE MODEL: Economic model of global refining market, 9 regions, of which 2 EU

DATA on EU refineries' investments and configuration (JRC/EUROPIA

CONCAWE/SOLOMON)

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Content





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Renewable Energy Directive


0%

1%

2%

3%

4%

5%

6%

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

millio

n t

on

s o

f o

il e

qu

ivale

nt

Biofuels in road transport in EU27

biofuels fossil road fuels share biofuels

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-50

-40

-30

-20

-10

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

millio

n t

on

s o

il e

qu

ivale

nt

EU: diesel deficit & gasoline galore

EU diesel/gasoil imports biodiesel consumption EU gasoline exports biogasoline consumption

Additional EU gasoline exports due to bio-gasoline

Reduction of EU diesel imports due to bio-diesel

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Effect of EU biofuel policy on petroleum sector ambiguous:

• Positive for Bio-Diesel • reducing EU diesel deficit and dependence on imports

• in 2012, diesel imports would have had to be 79% higher without biodiesel

• Negative for Bio-Gasoline • problem of EU gasoline excess capacity is reinforced

• in 2012, without bio-gasoline either

(i) EU gasoline exports could have been lowered by 6%, or

(ii) EU utilization rates could have been up to 3 percentage points higher

• Next: OURSE model for further quantification (and validation)

• However: impact of 3 Mtoe increase in bio-gasoline remains small compared to 52 Mtoe drop in fossil gasoline demand over 2000-12



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Content





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Int'l competitiveness of EU refining

-50

0

50

100

150

200

250

300

350

2000 2002 2004 2006 2008 2010 2012

[$

/b

arrel]

- i

nd

exed

to

EU

28

in

year 2

00

0

EU-28 INDIA Korea/ Singapore Middle East

RUSSIA US Gulf Coast US East Coast

Data source: Solomon Associates

Net cash margins: EU28 and competitor regions

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-50

0

50

100

150

200

250

300

350

2000 2002 2004 2006 2008 2010 2012

[$

/b

arrel]

- i

nd

exed

to

EU

28

in

year 2

00

0

EU-28 INDIA Korea/ Singapore Middle East

RUSSIA US Gulf Coast US East Coast

Data source: Solomon Associates

Net cash margins: EU28 and competitor regions

2000 2012

Korea/ Singapore 34 159

Middle East 23 72

US Gulf Coast 113 251

US East Coast 116 244

Ø 72 181

EU28 100 143

EU28 vs. Ø +28 -38

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Net Cash Margin = Gross Margin – Personnel Cost – Energy Cost – Other Cost

Hence, the EU's backslide with respect to its competitors is the net effect resulting from backslides (or gains) in these four underlying components.

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net effect= -66


+28

-38

+1 -3

-63 -1

Gross Margin

Personnel

Energy Other

JRC computation with Solomon Ass. data

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net effect= -66


+28

-38

+1 -3

-1

Gross Margin

Personnel

Energy Other

-13

-50

Energy cost deterioration vis-à-vis USA

Energy cost deterioration vis-à-vis KOR/SIN & MidEast

JRC computation with Solomon Ass. data

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net effect= -66


+28

-38

+1 -3

-1

Gross Margin

Personnel

Energy Other

-13

-50

Energy cost deterioration vis-à-vis USA

Energy cost deterioration vis-à-vis KOR/SIN & MidEast

The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs.*

* Preliminary finding with caveats, e.g. strong data limitations

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The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs over the years 2008-2012.*

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Figure: Washington Post

The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs over the years 2008-2012.*


JRC

Final remarks on EU competitiveness

1. Loss of EU competitiveness seems evident, but due to current data limitations no definite conclusions should be drawn

2. Energy costs play a very significant role, but how exactly do they propagate into markets and EU refining economics?

3. Net Cash Margin only one possible indicator of competitiveness (but perhaps the most important)

4. Need for further analysis, e.g.: • if US energy cost effect is 74%, what are the other 26% ?

• cost = price x quantity analyse relative role of energy prices vs. energy intensity


JRC

THANK YOU [email protected]


JRC

BACK-UP SLIDES


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Conceptual Framework for 10 Directives


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3 methodological pillars:

• 1) Estimating cost impacts by using primary data on compliance costs from EU refineries (joint JRC / CONCAWE / Solomon refinery questionnaire).

• 2) Statistical descriptive analysis of refinery sector and competitiveness impacts based on global time series data. The acquisition of such data from a third party is currently undertaken.

• 3) Modelling the legislative and market driven impacts on the refining sector, using the global OURSE model.

25

26

APPROACH

SURVEY TO

REFINERIES

(detailed view)

STATISTICAL

ANALYSIS

(intermediate)

OURSE

MODELLING

(aggregate

view)

Review of

literature

Costs impact of

legislation

Direct (a) X

Indirect (b) X X

Competitiveness impacts of

legislation (c)

X X

Benefits of legislation (x) (x) X

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Questionnaire: Process

• Questionnaire developed by JRC in consultation with CONCAWE • Is data actually recorded by refinery?

• Is it relevant?

• Is it 'inaccessible' because commercially sensitive?

• 2-step approach chosen for reasons of efficiency • Step 1: industry consultant SOLOMON extracts relevant data from its

existing database (~¾ of all needed data)

• Step 2: facilitated by CONCAWE, all remaining data is requested directly from refinery via questionnaire


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Questionnaire: Process


JRC/ CCW

Solomon

Refinery site

Refinery agrees that data can be used in study. Sign consent

letter

empty

Only consolidated +

Aggregated data + trend data

Solomon provide consent letter to refineries, and indicate what data to be

collated.

Solomon Proposal for Step1 Data Collection- based on Questionnaire EU Refining Fitness Rev2A.xlsx

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Questionnaire: Data Coverage

• Time horizon 1998 – 2012 (only even years)

• SOLOMON part:

• Organization and staff

• Capacity and production (inputs & outputs)

• Complexity and investments (desulphurisation units..)

• Cost structure (variable, fixed, energy costs…)

• Detailed energy in- & outputs, and energy efficiency

• Biofuel inputs

• Refinery part: • Pollution (SOx, NOx ..) and related investments

• Effects from strategic oil stocking obligations


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Questionnaire: Data Coverage

• Data will be reported to JRC in aggregated format:

• 9 geographical groups of 'peers'

• 5 types of refinery complexity

• Stand-alone refinery vs. refinery as part of petrochemical complex

• Data is anonymized

• Some data will only be reported in terms of its relative change with respect to the 1998 base year (i.e. as index)


eu refinery sector fitness check · 2014. 11. 12. · jrc eu refining sector fitness check progress...

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