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UPSTREAM | MIDSTREAM | DOWNSTREAM | FUEL & TRANSPORT
Outlook for Refining
Anshuman AgrawalManager, [email protected]@stratasadvisors.comM +91 989 194 4883T +65 635 361 27
www.stratasadvisors.com
© Stratas Advisors. All rights reserved. 2
Main Themes
Supply, Demand and Flows
CAPEX Requirements
Refinery Capacity Requirements
Key Takeaways
Global -- Supply, Demand and Flows
© Stratas Advisors. All rights reserved. 4
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LPG Gasoline Naphtha
Naphtha, Gasoline and LPG – Demand
Global (2018-2040) Naphtha
• Demand to grow by 2.3 MMBPD
• CAGR 1.4%
Gasoline
• Demand to grow by 5.3 MMBPD
• CAGR 0.8%
LPG
• Demand to grow by 3.1 MMBPD
• CAGR 1.2%
Source: Stratas Advisors
Units | MBPD
© Stratas Advisors. All rights reserved. 5
Supply and Demand – Gasoline
Regional (2018-2040)• Asia-Pacific supply
increases by 3.6, demand by 4.6 MMBPD, CAGR 2.3%
• Middle East supply and demand increases by 0.9 MMBPD, CAGR 1.9%
• Europe and North America supply and demand decreases
• Africa S/D 0.7/0.8 MMBPD
• Latin AmericaS/D 0.3/0.8 MMBPD
• Russia & CISS/D 0.2/0.3 MMBPD
Source: Stratas Advisors
Units | MBPD
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Africa Asia-Pacific EuropeLatin America Middle East North AmericaRussia & CIS
Dem
and
Supp
ly
© Stratas Advisors. All rights reserved. 6
Gasoline Demand By Grade (RON)
Global (2018-2040)RON 91 Grade
• Demand increased by 1.9 MMBPD
RON 95 Grade
• Demand increased by 2.5 MMBPD
RON 98 Grade
• Demand increased by 0.8 MMBPD
Source: Stratas Advisors
Units | MBPD
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RON 98 RON 95 RON 91
© Stratas Advisors. All rights reserved. 7
Diesel and Residual Fuel Oil - Demand
Global (2018-2040) Diesel
• Demand to grow by 1.35 MMBPD
Fuel Oil
• Demand to reduce by 0.15 MMBPD
Source: Stratas Advisors
Units | MBPD
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2018 2020 2025 2030 2040Fuel Oil Diesel
© Stratas Advisors. All rights reserved. 8
Diesel Demand by Sulfur
Global (2018-2040) HS (S 51 - 500 ppm)
• Demand decreased by 2.5 MMBPD
ULSD
• Demand increased by 4MMBPD
Gas Oil (S>500 ppm)
• Demand decrease by 1.4 MMBPD
Source: Stratas Advisors
Units | MBPD
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ULSD (S< 10 ppm) LS (S 11 - 50 ppm)HS (S 51 - 500 ppm) Gas Oil (S>500 ppm)
© Stratas Advisors. All rights reserved. 9
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Africa Asia-Pacific EuropeLatin America Middle East North AmericaRussia & CIS
Supply and Demand – Diesel
Regional (2018-2040)
Source: Stratas Advisors
Units | MBPD
Dem
and
Supp
ly• Asia-Pacific supply
increases by 1.2, demand by 2 MMBPD, CAGR 0.9%
• Middle EastS/D 0.3/0.4, demand CAGR 1.8%
• Europe and North America supply and demand decreases
• Africa S/D 0.5/0.7 MMBPD
• Latin AmericaS/D 0.2/0.2 MMBPD
• Russia & CISS/D -0.5/0.1 MMBPD
© Stratas Advisors. All rights reserved. 10
LSFO and HSFO - Demand
Global (2018-2040) LSFO (S≤0.5%)
• Demand increases by 3.1 MMBPD
HSFO (S>0.5%)
• Demand decreases by 3.5 MMBPD
IMO 2020 regulation impact
• LSFO Demand increases in 2020 3.1 MMBPD which remain balanced till 2040
Source: Stratas Advisors
Units | MBPD
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HSFO (S>0.5%) LSFO (S≤0.5%)
© Stratas Advisors. All rights reserved. 11
Supply and Demand – Fuel Oil
Regional (2018-2040)
Source: Stratas Advisors
Units | MBPDD
eman
d
Supp
ly
0100020003000400050006000700080009000
2018 2020 2025 2030 2040Africa Asia-Pacific EuropeLatin America Middle East North AmericaRussia & CIS
• Asia-Pacific supply increases by 0.1, demand decrease by -0.3 MMBPD,
• Middle EastS/D 0.3/0.3, demand CAGR 0.7%
• Europe and Latin America supply and demand decreases
• Africa S/D 0.1/0 MMBPD
• Latin AmericaS/D -0.1/-0.1 MMBPD
• Russia & CISS/D -0.3/0.1 MMBPD
Middle East -- Supply, Demand and Flows
© Stratas Advisors. All rights reserved. 13
Naphtha, Gasoline and LPG – Demand
Middle East (2018-2040) Naphtha
• Demand almost same 0.07 MMBPD
Gasoline
• Demand to grow by 0.9 MMBPD
LPG
• Demand to grow by 0.5 MMBPD
Source: Stratas Advisors
Units | MBPD
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2018 2020 2025 2030 2040LPG Gasoline Naphtha
© Stratas Advisors. All rights reserved. 14
Supply and Demand – Gasoline
Middle East (2018-2040) Demand
• Demand to grow by 0.9 MMBPD
Supply
• Supply to grow by 0.9 MMBPD
Source: Stratas Advisors
Units | MBPD
0
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Supply Demand
Dem
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Supp
ly
© Stratas Advisors. All rights reserved. 15
Gasoline Supply – Demand By Grade (RON)
Middle East (2018-2040) RON 91
• Supply increases by 0.4 MMBPD, demand increases by 0.3 MMBPD
RON 95
• Supply and demand increases by 0.5 MMBPD
RON 98
• Demand increases by 0.1 MMBPD, no change in supply
Source: Stratas Advisors
Units | MBPD
0
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2018 2020 2025 2030 2040
RON 91 RON 95 RON 98
Dem
and
Supp
ly
© Stratas Advisors. All rights reserved. 16
Diesel and Residual Fuel Oil - Demand
Middle East (2018-2040) Diesel
• Demand to grow by 0.4 MMBPD
Residual Fuel Oil
• Demand to grow by 0.3 MMBPD
Source: Stratas Advisors
Units | MBPD
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2018 2020 2025 2030 2040
Diesel Residual Fuel Oil
© Stratas Advisors. All rights reserved. 17
0
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Gas Oil (S>500 ppm) HS (S 51 - 500 ppm)LS (S 11 - 50 ppm) ULSD (S< 10 ppm)
Diesel By Sulfur - Supply and Demand
Middle East (2018-2040) Gas Oil (S>500 ppm)
• Supply decreases by 0.5 MMBPD and demand decreases by 0.4 MMBPD
ULSD (S< 10 ppm)
• Supply increases by 0.7 MMBPD, demand increases by 0.9 MMBPD
HS (S 51 - 500 ppm)
• S/D -0.01/-0.02 MMBPD
LS (S 11 - 50 ppm)
• S/D 0.01/0 MMBPDSource: Stratas Advisors
Units | MBPDD
eman
d
Supp
ly
© Stratas Advisors. All rights reserved. 18
LSFO and HSFO - Supply and Demand
Middle East (2018-2040) LSFO (S≤0.5%)
• Supply increases by 0.4 MMBPD, demand increases by 0.5 MMBPD
HSFO (S>0.5%)
• Supply decreases by 0.08 MMBPD and demand decreases by 0.18 MMBPD
Source: Stratas Advisors
Units | MBPD
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LSFO (S≤0.5%) HSFO (S>0.5%)
Dem
and
Supp
ly
© Stratas Advisors. All rights reserved. 19
Gasoline Trade Flows
North America to Middle East :
0
Latin America to Middle East :
0
Africa to Middle East :
3, -14, -3, 24, -23
Europe to Middle East : 127, 75, 130,
196, 448
Russia & CIS to Middle East: 85, 18, -12, -2, 3
Total Import to Middle East: 336, 131, 66, 204, 410
Asia to Middle East : 121, 52, -49, -14, -18
Units | MBPDTo Middle East (2018, 2020, 2025, 2030, 2040)
© Stratas Advisors. All rights reserved. 20
Residual Fuel Oil (HSFO) Trade Flow
North America to Middle East :
3, 0, 0, 0, 0
Latin America to Middle East :
3, 0, 0, 0, 1
Africa to Middle East :
9, -3, -2, 39, 49
Europe to Middle East :
-4, 0, -4, -7, -11Russia & CIS to
Middle East: 82, 14, 11, 30, 50
Total Import to Middle East: 68, -13, -29, 60, 84
Asia to Middle East : -25, -24, -34, -2, -5
Units | MBPDTo Middle East (2018, 2020, 2025, 2030, 2040)
© Stratas Advisors. All rights reserved. 21
Diesel (Gasoil S>500ppm) – Trade Flow
North America to Middle East :
0
Latin America to Middle East :0, 0, -4, 0, 0
Africa to Middle East :
-121, -175, -144, -32, -19
Europe to Middle East : 7, 5, 10, 22, 21
Russia & CIS to Middle East: 66, -3, 35, 32, 9
Total Import to Middle East: -32, -127, -108, 33, 28
Asia to Middle East : 16, 46, -5, 11, 17
Units | MBPDTo Middle East (2018, 2020, 2025, 2030, 2040)
Refinery Capacity Requirements
© Stratas Advisors. All rights reserved. 23
Refining Investments
Middle East (2018-2040)
Source: Stratas Advisors
Units | MBPDCDU
• Additional 2.5 MMBPD by 2025 and addition 0.45 MMBPD by 2040
HDS
• 0.6 MMBPD by 2025 and 0.6 MMBPD by 2040
Conversion
• FCC: Additional 0.45 MMBPD by 2025 and 0.3 MMBPD by 2040
• Coking and Hydrocracking: Both to increase by 0.46 MMBPD (by 2025) and 0.48 MMBPD (by 2040)
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2018-2025 2026-2040CDU CokingHydrocracking Middle Distillate HDSFCC
© Stratas Advisors. All rights reserved. 24
Grassroots Refinery Projects- Middle East
Source: Stratas Advisors
Units | MBPD
• Iraq is the leading country with four projects, total 0.66 MMBPD of capacity
• Kuwait has the largest single project of Al Zour, 0.62 MMBPD of capacity
No. Country Company Location Capacity ExpectedCompletion Probability
1 Kuwait KNPC Al Zour 615 2019 High2 Saudi Saudi Aramco Jazan 400 2019 High
3 UAEIPIC (InternationalPetroleum Inv. Co.)
Fujairah 400 2020 Medium
4 Iraq Iraqi Ministry of Oil Nasiriyah 300 2021 Medium
5 OmanKuwait Petroleum Oman Oil Company
Duqm 230 2022 Medium
6 Iraq Iraqi Ministry of Oil Maysan 150 2020 Medium7 Iraq Iraqi Ministry of Oil Kirkuk 70 2022 Medium8 Iraq Iraqi Ministry of Oil Karbala 140 2020 High9 Iran Tamin Petroleum Bandar Abbas 360 2019 High
© Stratas Advisors. All rights reserved. 25
Expansions / Modernization Refinery Projects- Middle East
Source: Stratas Advisors
Units | MBPD
• Total Expansion projects capacity 0.22 MMBPD
No. Country Company Location Capacity Expected Completion Project type
1 UAEEmirates National Oil Co.
Jebel Ali 140 to 210 2019 Expansion
2 Bahrain Bahrain Petroleum Co. Sitra 260 to 360 2022 Expansion3 Iran National Iranian Oil Co. Esfahan 359 2021 Modernization
4Saudi Arabia
Saudi Arabian Oil Co.Ras Tanura
550 2021 Modernization
5 Iraq Qaiwan Group Bazian 35 to 85 2021 Expansion
© Stratas Advisors. All rights reserved. 26
• Grassroots Projects
• Expansion or Modernization Projects
Grassroots Refinery Projects- Middle East
Source: Stratas Advisors
1
2
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78
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12
3
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5
Iraq
• 0.66 MMBPD of capacity of 4 Projects
Kuwait
• 0.62 MMBPD of single project
Total
• 2.9 MMBPD of capcityaddition
© Stratas Advisors. All rights reserved. 27
Refinery Investments-Middle East
Source: Stratas Advisors
Units | MBPD• US $67 billion refinery
investment in next 5 years.
• 2.9 MMBPD CDU capacity will be added in addition to 3.8 MMBPD of secondary processing units.
• Secondary processing capacity includes Reformer/Alkylate (22%) Conversion (29%) Hydrotreating (49%)
Year CDULight Oil Processing Units
Conversion Units
Hydro-processingUnits
Investment ($ billion)
2019 1445 338 452 866 24.4
2020 690 146 189 393 15.0
2021 350 309 81 395 13.1
2022 400 34 400 239 14.0
Key Takeaways
© Stratas Advisors. All rights reserved. 29
Key Takeaways• After Asia, Middle East is the region with the most substantial gasoline demand growth
for the time period of 2018-2040
• Middle East gasoline demand increasing 1.9% annually while Asia demand is increasing 2.3% annually and global gasoline demand CAGR is forecasted to be +0.8%
• In addition to GDP and population growth, the demand is increasing as vehicle miles travel is increasing
• In longer term, the gasoline supply/demand gap for Middle East remains around 0.9 MMBPD even with the materialized investment in refinery capacity expansions/ grassroots projects
• From 2018 to 2040, Middle East RON 91 gasoline demand is increasing by 30% while RON 95 demand is increasing by 91%
© Stratas Advisors. All rights reserved. 30
Key Takeaways
• Middle East is currently an exporter of diesel gasoil (S>500 PPM), but exports are expected to decrease after 2020 and the region to become an importer after 2030
• The change in diesel gasoil balances results from production shifting from high sulfur to low sulfur to meet internal demand of low sulfur product
• Global diesel demand increases 5% while Middle East diesel demand increases by 19% from 2018 to 2040
• In Middle East refinery investment is sufficient for next 5-7 years with the projected expansion and grassroots refinery investments
• For the longer term, the Middle East will need to make additional investment: 350 MBPD in Hydrocracker, 300 MBPD in FCC and 120 MBPD in coker for 2040.
• Middle East will be able to supply bunker fuel up to 365 MBPD by 2020 and 395 MBPD by 2025
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