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15-16 February 2016

Global Market Outlook and implications for

Egypt’s downstream sector

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2

• Global perspectives on the downstream industry

• Challenges and opportunities for Egypt

• How to develop a competitive downstream industry


Contents

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Contents

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Refined products: global refining overcapacity

Source:OPEC, AlixPartners analysis

Refinery utilization (throughput/capacity), 2014 (% of calendar day capacity)

US

&

Canada

88%

81% 77%

62%

77%

85%

World Other

Asia

Pacific

China Middle

East

77%

Russia

&

Caspian

Europe Africa Latin

America

82% 82%


Refined products: demand growth should be driven by Asia, Middle-

East and Africa

Annualized growth rate of gasoline and gasoil demand by region

between 2014 and 2020, Mb/ day

Source:OPEC, AlixPartners analysis

Europe

1% 1% Russia/ Caspian

1% 2%

Asia Pacific

2% 3%

Middle-East

1% 2%

Africa

2% 3%

US and Canada

1% 1%

Total World

1% 2%

Gasoline Diesel

Latin America

2% 2%

Refined products: additional refinery investments …


Planned additional refining capacity 2014-2035 (millions of barrels per day)

Source: IEA, AlixPartners

4.0

China

0.4

North

America

Middle

East

2.9

Europe

0.2

India

2.3

1.4

Brazil 1.5

12.7

Total World

Rest of the World

Refined products: additional refinery investments … leading to global

surplus


Planned additional refining capacity 2014-2035 (millions of barrels per day)

Source: IEA, AlixPartners

4.0

China

0.4

North

America

Middle

East

2.9

Europe

0.2

India

2.3

1.4

Brazil 1.5

12.7

Total World

Rest of the World

Expected global surplus by 2020, (Mb/d)

0.60.8

Gasoline/ Naphta Middle Distillates

Petrochemicals: Significant capacity increase driven by Asia and the

Middle East


2000

281 305

2014

Global petrochemicals capacity 2000-2014 (MTA)

North America

Total World

Europe

GCC

China

Others

Source: GPCA, ICIS, IFDC

2014

247

2000

246

2014

114

2000

741

508

2014

327

2000

Rest of Asia

2000

39 184

2014 195

2000 2014

148

2014

1 179

2 156

+4% p.a.

2000

Petrochemicals: demand will continue to grow for most products


Source: IHS

61

Ethylene

52

Methanol

48

Propylene

19

Paraxylene

15

Benzyne

3.5% 6.9% 4.2% 4.5% 2.3%

Global petrochemical demand growth 2010 – 2020, MM

Tons 2010-20 AAGR

11


− Impact of low oil price




Contents

Low oil price generated a capex cut of 15% in 2015 for Oil & Gas

overall, driven by E&P


Global Capex spending estimates public Oil&Gas companies (USD billions)

Note: (1) Does NOT include National and State Owned Oil Companies

Downstream

Midstream

2016E

-17%

751

2010

1 061

2011

901 956

2012

849

+10% p.a.

717

-15%

1 018

2015 2013 2014

Chemicals

E&P

OFE/OFS

Delta Capex

CAGR 2014 – 2016E

+5%

+4%

+34%

+4%

- 50%

Source: Bloomberg, AlixPartners analysis

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Contents

Egypt downstream industry has suffered in the recent years,

but demand remained strong


522496

544548554

2014

-10%

2013 2012 2011 2010

+5%

826799781751716

2012 2011 2014

3,6% CAGR

2013 2010

Source: OPEC, AlixPartners analysis

Egypt – Output of refined petroleum (1000 b/d) Egypt demand of petroleum products (1000 b/d)

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Egypt’s downstream has more opportunities than challenges ahead


New gas resource

discoveries

(Zohr gas field)

Projects to increase

capacity

Local demand and

consumption

Strategic location

(capacity of Suez canal)

Political stability and

support to downstream

Project financing

Technology

Regulation and

subsidies

Feedstock availability

USD

14.5Bn

+4% p.a.

30 tril.

feet3

Tahrir

MIDOR

X 2

Opportunities Challenges

Source: OPEC, GPCA, TO&GY, AlixPartners analysis

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Why is it strategic for Egypt to develop its downstream industry?


Create added value locally on the back of upstream resources

Support and foster the development of a local manufacturing industry

Create direct and indirect jobs

Increase exports via strategic location

Bring currencies to the country

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Contents

Some key success factors to build a competitive downstream


Technology and scale

Trading and Marketing capabilities

Operational excellence

Integrated Platforms - clusters

Public - Private cooperation

1

2

3

4

5

Some key success factors to build a competitive downstream


Technology and scale

Trading and Marketing capabilities

Operational excellence

Integrated Platforms – Clusters

Public - Private cooperation

1

2

3

4

5

https://www.google.ae/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwietN2swNvKAhXMXBQKHbDXDjMQjRwIBw&url=https://jeetkunedomalaysia.wordpress.com/home/jeet-kune-do-jkd-malaysia-flag/&psig=AFQjCNGpoeq-rUpWQSe66U6jXZsUunAa5A&ust=1454585756799686

Developing a competitive downstream industry

Learnings from Malaysia


Source: Malaysia Petroleum resources corp

Pengerang refinery and petrochemical integrated complex

(RAPID project)

Common infrastructure

• Cogeneration plant

• Air-separation unit

• LNG regasification

terminal

• Raw-water supply project

• Liquid bulk terminal

Shared services

• Safety

• People

• Maintenance

Product exchanges

• Hydrogen

• Naphta

• Benzene


Public authorities can support the development of the downstream

industry through five main levers


Tax incentives for investors

Business friendly environment

Investment in downstream capacity

Investment in downstream infrastructure

Scaling down of fuel subsidies

Public authorities can provide support to the development of the

downstream industry through five main levers


Fuel subsidies ended in 2014

Public authorities funded

key infrastructures of the

integrated complexes

JV between Petronas and

International players

In strategic industries

and locations Tax incentives for investors

Business friendly environment

Investment in downstream capacity

Investment in downstream infrastructure

Scaling down of fuel subsidies

Limited bureaucracy


Conclusion


Global perspectives on the downstream industry

Refining: Slow growth and overcapacity

Petrochemicals: strong demand, need for capacity

Beyond self-

sufficiency, need to

build a competitive

industry

How to develop a competitive downstream industry

Integrated model with operational excellence and the right

infrastructure to balance capacities with market

State support: save on subsidies to invest in productive

assets

Challenges and opportunities for Egypt

Opportunities: Political support, Local demand, New

discoveries, Pipeline of projects, strategic location

Challenges: Feedstock, Financing, Subsidies, Technology

Plan infrastructure

to capture synergies

and facilitate

import/export

Downstream

development is

strategic for Egypt

future economic

growth


Thank you

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