Refining outlook for 2030

Refining outlook for 2030
September 2014
Agenda
Refining: Current situation and medium-term outlook
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The long term perspective: uncertainties and scenarios
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1
Since 2008, the global refining industry has been living in a
difficult context of margins and utilization
US Gulf Coast and midcontinent specific situation due to regional specific competitiveness change
Refining margins have dropped since highs in 2005-07
NWE Brent Cracking ($/bbl)
12
10
8
58
5.8
5.2
4.1
3.7
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4
5.4
5.3
6
3.5
2.3
1.4
2
1.2
0.6
0
-2
2004
2006
2005
2008
2007
2010
2009
2012
2011
2014
2013
Spot Cracking margin
Cracking margin - Average for the year
Notes: Since June 2012 Maya Coking is 50/50 Maya/Mars Coking and LLS Cracking is 50/50 HLS/LLS Cracking; Includes 1Q 2014
Source: IEA
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What factors are driving the international refining
environment?
Refining margins and
utilization
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Regional Demand
Capacity and Marginal
refining configuration
Price differentials
•Light-Heavy
•Sweet-sour
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Throughput has recovered to pre-crisis level after amjor fall in
2009
Although in refinery utilization is lower in most of the regions
Refinery utilization dropped significantly,
since 2007
Refining throughput evolution
Average refinery utilization by region
Worldwide refinery throughput (Mbpd)
% Utilization
80
95
-2.1
75
74.0
74.5
72.9
75.2
75.0
75.7
75.9
+1%
76.3
-5%
90
73.2
-9%
+9%
-15%
-5%
85
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75.4
-2%
70
80
65
75
60
70
2004 2005 2006 2007
2008 2009 2010
2011 2012 2013
USGC
LatAm
OECD
Europe
2007
FSU
2009
AP
(excl.
China)
2011
China
ME
2013
Source: 2014 BP Statistical Review of World Energy; EIA; BCG Analysis
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Distillation and conversion capacity have increased despite
plant closures
Recent capacity investment has been very high for historical standards
Additions of distillation capacity have
grown significantly in the last 3 years...
(kb/d)
... while installation of new conversion
capacity keeps a similar rhythm
(kb/d)
809
2.500
1.500
2.000
301
1.500
1.000
435
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1647
776
153
1.000
895
457
5
500
671
264
500
0
0
Avg. 2003-2008
Avg. 2009-2011
Total 2003-2013
10,004 kbpd
Avg. 2012-2013
Refinery closures average
FSU
ME
WE
AP
NA
Note: Conversion projects include Hck, FCC, Coking and Visbreaking
Source: O&G journal, BCG Refining Capacity Database; BCG Analysis
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Avg. 2003-2008
RoW
Avg. 2009-2011
Avg. 2012-2013
Total 2003-2013
4,507 kbpd
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5
In Europe throughput still well below Golden Age, with
significant impact on the marginal configuration
Conversion increate at global level impacting the economics of high conversion segments
OECD Europe configuration curve: 2013
In Golden age marginal configuration was HsK...
HsK
OECD Europe marginal configuration – mar 08
$/bbl
18
18
16
16
14
14
12
12
10
10
8
8
6
6
VB
Hsk
4
4
2
Mbpd
0
-2
2
Total capacity
14 4 Mb/d
14.4
0
1
2
Ck/ VB/
Hck/ Hck/
Ref Ref
3
4
Hck/
Ref
5
6
VB/
FCC/
Alk/
Ref
7
8
9
10
VB/ FCC/
FCC/ Ref
Ref
11
12
13
VB/ VB
Ref
14
15
16
Topping
2007
13.6 Mbpd
Mbpd
2
0
-2
0
1
Ck/
Hck/
Ref
2
3
4
5
6
VB/ Ck/ Hck/ VB/
Hck/ FCC/ Ref FCC/
Ref Ref
Alk/
Ref
7
8
VB/
FCC/
Ref
9
10
11
VB/ FCC/
Ref Ref
2008
13.3 Mbpd
12
13
14
Hsk
2013
11 6 Mbpd
11.6
Source: BCG refining model; IEA; 2014 BP Statistical Review
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15
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(U$D/bbl)
Reduction in throughput has mainly impacted less complex
refineries, thus reducing overall market supply of 650ºF+
650 F
While OECD throughput fell 6% between
2007 and 2011
2011...
..actual fuel oil production in OECD
countries fell 23% (4x faster !)
OECD refinery throughput – intake – (Mbpd)
Fuel Oil Production in OECD Countries (Mbpd)
50
5
-23%
-6%
40
4
20
39.8
39.4
37.3
37.4
37.4
37.1
2
36.5
1
0
0
2007
2008
2009
2010
2011
2012
2013
75.4
75.0
73.2
75.2
75.7
75.9
76.3
4.0
3.5
10
WW
Through
put
4.4
OECD FO
Yield
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3
30
3.5
34
3.4
3.2
2.8
2007
2008
2009
2010
2011
2012
2013
11.0
%
10.5
%
9.7
%
9.5
%
9.1
%
8.8
%
8.0
%
Source: 2014 IEA Oil Information, 2014 BP Statistical Review and analysis BCG
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Strong reduction in Light-Heavy differentials driven by
conversion growth and reduction in the production of +650ºF
Tight demand-supply balance in the bottom of the barrel
Light- Heavy differentials highly reduced
impacting negatively economics of
NWE product LH differential over Brent price ($/ton)
conversion
Tightening of +650ºF supply-demand
balance
NWE product LH differential over Brent price ($/ton)
Supply-Demand
Supply
Demand of +650ºF
650 F (in kbpd)
1.1
2008-2009
2010-2013
0.9
Refining throughput
-530
530
+1 210
+1,210
Change in
conversion capacity
-360
-1,700
+Other (API)
-250
-300
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1.0
0.8
0.7
0.6
0.5
0.4
Fukushima
-90
0.3
’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14
-1,140
-880
Notes: Includes 1Q 2014
Source: Bloomberg, BCG refining model, BCG demand model, BP Statistical Review, BCG analysis
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Change in 650º pricing mechanism resulting in lower L-H
differentials for same crude price
Reduced relationship of L-H levels to crude price
... and also for p
products
Product Light Heavy differential ($/bbl)
65
60
2004-2008
55
50
40
2009-2014
35
30
25
20
15
10
30
40
50
60
70
80
90
100
110
120
130
140
Brent crude price ($/bbl)
Notes: Includes 1Q 2014
Source: Bloomberg; BCG Analysis
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45
In this global context, distinct regional dynamics can be
observed
US Gulf Coast
• Increase in
competitiveness due to
advantaged crude prices
and lower natural gas costs
• Utilization
Utili ti rate
t in
i 90% vs.
world average of 81%1
• Becoming an export hub to
the world
Russia
• Increase in conversion
capacity due to tax incentives
• New capacity additions will
increase middle distillate
production capacity ~15%
15%
between 2014-18
Middle East
• Significant
g
capacity
p
y
coming online 2014-183:
– Distillation: 2.8 Mb/d
– Conversion: 1.1 Mb/d
• Swing export capacity
Europe - Asia
Asia- Pacific
• Fastest medium-term5 growth:
Gasoline and diesel demand
expected to grow 20% and 29%,
respectively5, compared to global
growth of 7% and 16%
• Strong capacity growth in parallel
with demand
• Very different dynamics per subregion:
– India,
India Mature markets
markets,
China, SE
Note: 1. 2012 2. Assumes 100% probability of all announced closures 3. Probability weighted additions 4. includes capacity creep 5. 2012-2020
Source: EIA, BCG Global Refining Model, BP Statistical Review; OPEC, BCG analysis
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Europe
• Slow demand
recovery
• Closures expected 2
(1.35 Mb/d, 20142020)
• Environmental
regulations may add
pressure
• Short diesel – long
gasoline
Focus on US: Radical change in international
competitiveness of refining industry in the US...
Crude
advantage1
Natural gas
advantage2
Combined
"feedstock"
advantage
$/bbl
6
5.4
4
$5.3
2.0
2
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3.4
1.2
0.1
0
-1.1
-2
2010
2013
2010
2013
2010
2013
1. Differential between LLS and Delivered Brent. 2.Difference in the cost of natural gas used per barrel in an FCC configuration (Henry Hub vs. NBP UK price)
Source: Bloomberg, World Bank, EIA, BCG analysis
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Agenda
Refining: Current situation and medium-term outlook
Copyright © 2
2014 by The Boston Co
onsulting Group, Inc. A
All rights reserved.
The long term perspective: uncertainties and scenarios
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Refining industry long term perspective
Demand side
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Supply side
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Very strong capacity and conversion capacity will continue in
the next few years
Even at higher rates than recent growth
Capacity gross additions
will remain very high in next 4 years
... along with conversion capacities
Average Distillation capacity additions per year –
new refineries and expansion at existing sites
kbpd
Actual
Announced
4,000
Average Conversion capacity additions per year –
new projects and expansion at existing sites
kboe/d
Actual
Announced
2,000
3.993
1.619
1,500
3,000
2,000
WE
1,647
1.478
1,000
895
679
671
901
1,000
776
ME
560
AP
FSU
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2 167
2,167
457
500
264
NA
245
RoW
World
0
20032008
20092011
20122013
20142017
20182020
0
20032008
20092011
20122013
20142017
20182020
We expect around 2.32 Mbpd of cumulative closures in 2014
2014-20
20 mainly
2
2
in Japan (~0.45 Mbpd) and Western Europe (~0.7 Mbpd)
1. Total capacity in the period, based on BCG Refining Model Projections; 2. Probability weighted
Notes: Announced capacity includes New Refineries and Investment in current refineries. Conversion projects include Hck, FCC, Coking and Visbreaking – Probability weighted
Source: BCG Global Refining Model, BCG Analysis
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Net capacity additions will add ~8.0 Mbpd of distillation
and ~3.5
3.5 Mbpd of conversion during 2014-2020
2014 2020
Expected net capacity additions 2014-2020
World
8.5
8.0
CDU
0.4
15.1
0.9
7.1
1.2
FCC
-2.3
1.2
0.0
0
0.0
-3.8
45.7
0.6
0.3
31.4
0.3
0.7
0.0
-0.1
13.3
19.5
0.1
-3.5
0.3
2.1
102
0.3
-0.1
47.7
0.7
16.2
HCk
18.8
13.3
-0.2
0.3
15.4
0.1
4.7
0.6
0.1
6.9
0.0
LatAm
7.1
-0.6
0.2
-6.4
0.0
FSU
-4.3
97.5
0.3
2.6
Western
Europe
21.8
1.8
13.2
0.0
0.1
VB
Middle
East
17.9
5.4
0.1
1.0
Ck
Asia
Pacific
0.0
3
0.2
229
0.0
33.4
0.4
0.0
Mbpd
0
10
-0.2
0.0
0.2
0
2
4
x%
6
0
1
2
-1
0
1
0.0
0.5
1.0
0.0
Expected
Capacity
% incremental 2014-2020 over current capacity
Conversion rate (% FCC)
0.5
14-16
17-20
2012
36.8%
55.6%
37.9%
17.9%
32.9%
16.8%
33.6%
2020
37.7%
56.9%
33.5%
29.5%
37.0%
25.9%
32.6%
Note: Includes New Refineries, Investment in current refineries, Closures and Creeping. Assuming capacity closures of 3.0 mb/d
Source: BCG refining model
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North
America
Global average crude API expected to be slightly higher,
however changes not significant
API Gravity
Sulphur content (%)
33.50
33 45
33.45
33.40
33.40
33.40
33.41
33.42
33 43
33.43
33.45
33.46
33.47
33.48
33.49
1.25
1.24
1.23
1.22
1.21
33.37
1.20
1.18
1.17
1.17
33.30
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1.19
33.35
1.17
1.16
1.15
1 15
1.15
1.14
1.15
1.15
1 15
1.15
1 15
1.15
1.15
1.16
1.15
0.05
1.14
0.00
0.00
2010
2011
2012
2013
2014
2015
Sulphur
2016
2017
2018
2019
2020
API
Source: OPEC World Oil Outlook
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Refining industry long term perspective
Demand side
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Supply side
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Significant number of uncertainties around demand with high
impact on the long term
Macroeconomic
environment
Long-term economic growth
Demographics
2
3
Fuel Efficiency
Efficiency of ICE vehicles
Substitution
Development of EV
Gas in road transport
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1
Gas as a fuel in shipping
Biofuels beyond 2020
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Significant number of uncertainties around demand with high
impact on the long term
Macroeconomic
environment
Long-term economic growth
Demographics
2
3
Fuel Efficiency
Efficiency of ICE vehicles
Substitution
Development of EV
Gas in road transport
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1
Gas as a fuel in shipping
Biofuels beyond 2020
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Economic and population growth will make of 2030 a quite
different world
Creating the base of a growth in transportation fuels
2013
2030
x1.2
Millions
7,125
8,373
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World
population
x1.9
World
GDP1
Trillion USD
(CAGR 2013-2030)
2013 2030)
69.66
124.1
(3.5% p.a.)
x1.5
# of Cars
(private
transport)
Million
~ 985.5
1,437.4
1. Real 2010 GDP base year; 2. Available 2011 and 2015 data from which 2013 was calculated
Source: World Bank; Economist Intelligence Unit; IMF
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Demographic impact, although highly differentiated between
countries, increases overall demand
2011 demography
2035 est. demography
Total population, 2011 (%)
40
Total population, 2035 (%)
-40
32%
37%
27%
23%
20
19%
17%
20
++
8%
0
Increases
oil demand
0
0–24
24–39
40–64
Over 64
0–24
24–39
40–64
Over 64
+
40
Developed
countries
(e.g., Japan)
40
34%
23%
20
23%
20%
21%
20
0
-
32%
32%
15%
Decreases
oil demand
0
0–24
24–39
40–64
Over 64
0–24
24–39
40–64
Over 64
Overall impact
High mileage
Medium mileage
Increases
oil demand
Low mileage
Note: Low mileage: below 4,000 per year; Medium mileage: between 5,000 and 8,000 miles; High mileage: above 8,000 miles per year
Source: United Nations; National Household Travel Survey; BCG analysis
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Developing
countries
(e.g., China)
36%
Impact on
Demand
Significant number of uncertainties around demand with high
impact on the long term
Macroeconomic
environment
Long-term economic growth
Demographics
2
3
Fuel Efficiency
Efficiency of ICE vehicles
Substitution
Development of EV
Gas in road transport
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1
Gas as a fuel in shipping
Biofuels beyond 2020
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Transport fuel efficiency is high in the political agenda
and will increase dramatically in most regions
New vehicles
N
hi l efficiency
ffi i
targets (l/100km)
0.0%
-4.9%
11.4
10
8.6
11.2
New passenger cars
N
efficiency targets (l/100km)
15
15
Passenger Cars
8.6
8.1
6.3
Light Trucks
7.8
10
10
-1.5%
-2.8%
-4.2%
6.0
5
5
5
7.8
0
8.1
6.3
5.4
Avg. car fleet 11.9
efficiency
2009
10.9
2015
9.5
2016
9.2
• US CAFE Standards were virtuallyy unchanged
g
since 1985: Passenger cars objective of 27.5
mpg since 1985 and Light trucks 19,5 in 1985
and 22.5 in 2008
• EISA2 in 2007 was the first step change, with
Obama update in 2009 setting current target
(35 5 mpg average ffor 2016)
(35.5
1995
Avg. car fleet 8.1
efficiency
6.6
5.6
4.0
0
0
1995
-2.9%
2009
7.1
2015
2020
6.5
5.9
• Regulation
g
((EC)) No 443/2009 of the European
p
Parliament and of the Council of 23 April 2009
sets Emission Performance Standard for new
passenger cars sold in the EU until 2020
• EC proposal to limit emissions on light
commercial vehicles IP/09/1605 from October
2009
2002
Avg. car fleet 11.8
efficiency
2009
2015
10.3
• Chinese Vehicle Fuel Consumption
p
Standards
in 2004
• The standards are based in 16 different
categories based on weight
• The "blended" mandatory efficiency standards,
set an ambitious target of 42.2 mpg by 2015,
similar to that in Europe
1. For EU,1995 and 2005 are actual figures. Before the Emission Performance Standard for new passenger cars (2008) there were no mandatory targets, but voluntary industry guidelines
2. Energy Independence and Security Act. 2. Average fuel economy standard of 35.5 mpg in 2016
Note: conversion from gCO2/km to mpg on a gasoline basis (150 g CO2/km = 37.6 mpg = 6.3 l/ 100km)
Source: Bureau of transport statistics, The White House, EIA, EU commission; IEA; BCG analysis
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New passenger cars
efficiency targets1 (l/100km)
ICE shifting to small, turbocharged engines
Engines downsizing in number of cylinders...
Engines production by # cylinders
%
8.3
3.9
4.0
3.8
3.8
3.7
9.8 10.6 10.7 10.3 9.7
20.4
17.2 6.9
6.1
5.8
6.8
2.9
8.2
2.5
6.8
100
92.6
96.5 96.8
6.4
73.1
7.4 11.7 18.2 18.7
75.6
79.4
82.3
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8.5
80
Engines by aspiration type
Million units
2.5
100
... with turbocharged gaining share from
naturally aspirated
63.5
58.5
56.1
5.9
5.2
60
65.9 68.6
79.4 79.3 79.6 79.0 79.2 77.1
72.5 72.5
0
0
00
05
09
10
11
12
13
17
20
21
00
05
09
10
11
12
13
8 cylinder
8-cylinder
3 cylinder
3-cylinder
Naturally aspirated
6-cylinder
4-cylinder
Turbocharged
17
20
21
1. ICE and ICE: stop/start
Source: IHS Automotive (September, 2014)
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Improvement of up to 35% possible for ICE efficiency
Efficiency gains for gasoline
gasoline—expected
expected
maximum potential
%
Efficiency gains for diesel—expected
diesel expected
maximum potential
%
100
5
5
8
20
75
50
4
-35%
5
75
3
-25%
6
2
2
100
50
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100
100
75
65
25
25
0
0
Base
2010
Low Super- Start- Adv. inj. Cyl.
friction charging stop
deac.
Gasoline
2020
Base
2010
Low Super- Start- Adv. inj. Cyl.
friction charging stop
deac.
2020
Diesel
Source: BCG KT analysis
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Significant number of uncertainties around demand with high
impact on the long term
Macroeconomic
environment
Long-term economic growth
Demographics
2
3
Fuel Efficiency
Efficiency of ICE vehicles
Substitution
Development of EV
Gas in road transport
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2014 by The Boston Co
onsulting Group, Inc. A
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1
Gas as a fuel in shipping
Biofuels beyond 2020
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Electric Vehicle is still in a very emerging phase
Less than 200
200.000
000 vehicles worldwide by beginging 2013
USA
71,174
Portugal
1,862 Spain
787
0.7%
4.4%
3.6%
3.0%
Germany
5,555
China
11,573
0.4% 0.9%
1%
Italy
1,643
6.2%
0.8%
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France
20,000
ee
Denmark Netherlands
Sweden
6 750
6,750
1 388
1,388
1,285
UK
Finland
0.7%
0.1%
8,183
271
Japan
44,727
India
1,428
%: Approximate % of Global Electric Vehicle
Stock, 2012 (Total EV Stock = 180,000+)
#
Cumulative Registration/Stock of
Electric Vehicles, 2012
Note: Electric vehicles are defined in this report as passenger car plug-in hybrid lectric vehicles (PHEV), battery electric vehicles (BEV), and fuel cell electric vehicles (FCEV)
Source: IEA Global EV Outlook – Understanding the Electric Vehicle Landscape to 2020
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Electric Vehicles: Penetration will happen when cost is
competitive and when distance is not an issue
What is the criteria for penetration?
I
II
"When EV are cost competitive to ICE"
500
"When battery cap. is comparable to ICE"
300
400
200
500
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300
300
200
100
250
100
82
0
0
2012
20??
Costs of battery (USD/KWh)
2012
20??
Miles per charge
Note: Data represented for regular vehicles and not to luxury cars which have already reached range of ~250miles per charge
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Private transport
Electric Vehicles: Cost and Range are main obstacles for
penetration at commercial level
Battery costs expected to improve
improve,
and are improving quicker than expected...
Range needs to be extended to
avoid negative externality branding
Forecast of Ion-Lithium battery costs
($ p
per kWh,, normalized))
Forecast for Range of EV car
((Miles per
p charge)
g )
1.200
600
1.105
2010
Plateau based on
industry report
VW
900
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400
2012
Nissan
2013
600
500
600
Renault
200
300
ICE-BE
level
225
0
2015
Estimates from 2010
2020
Realized
2025
Tesla 2014 expected level
0
2005
2010
2015
Realized*
2020
2025
2030
Forecast
2035
2040
Alternative
Equivalence range
Note: 400 km is the upper target for distance per charge of EV car
Source: BCG analysis, IEA, Advanced Automotive Batteries, Boston Consulting Group, Deutsche Bank, Electrification Coalition, National Research Council, and Pike Research; BCG worldwide
expert
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The discovery of shale has re-priced US gas as a low priced
commodity
Increasing
g the supply
pp y in
low-cost part of supply curve …
Supply cost ($/mmBtu)
Overview of CME Henry Hub Gas contract
($ per mmBtu)
6
15
4
10
~7
$/mmbtu
2
5
0
0
0
500
1,000
1,500
~3
3.5
5
$/mmbtu
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NG resources (Tcf)
Shallow Water
Conventional
CBM
Deep Water
Tight Gas
Shale
Associated Gas
Note: Supply cost is total upstream cost, net economic uplift from NGLs for right hand graph. Assumes NGLs at $40/bbl
Source: Rystad; BCG estimates
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… moving gas pricing to a new "low" regime
US is the region where gas as transportation fuel will be
the most significant
US view
MD/HD trucks
tr cks account
acco nt for ~10%
10% in registered
vehicles, but ~40% in energy consumption1
Share (%)
100
Attractive
Att
ti conversion
i econom. ffor MD/HD
vehicles due to higher fuel consumption
Payback (years)
2
Payback period is only 2.7
years
10
7
1
LD
33
HD trucks
5
2
Buses
50
0
0
89
HD
MD
MD trucks
5
10
15
Relative fuel consumption
p
57
LD trucks
0
No.of trucks
Energy consumption
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7
20
Thousands
ousa ds gallons
ga o s / yea
year
Assumptions/Results
LD
MD
HD
Miles/year (000s)2
Fuel Economy (mpg) 2
Incremental NGV Cost ($000s) 2
Gallons/year (000s)
Annual Fuel Savings ($000s)3
11
18
10
06
0.6
1
9.4
25
3
30
83
8.3
14
2.2
100
6
85
16 7
16.7
27
3.1
Payback Years
For US, displacement of oil product with gas in Commercial transport will mainly affect diesel
and
d would
ld representt ~150
150 kb/d b
by 2020 and
d ~450
450 kb/d b
by 2030
1. Data are for calendar year 2010/2011 – MD trucks including class 3-6 and HD including class 7–8; 2. Analysts' estimates; 3. Used 2012 annual average of fuel prices: Diesel - $3.97/DGE;
Gasoline - $4.07/DGE; CNG - $2.34/DGE
Source: EIA AEO 2013; Transportation Energy Data Book (July 2012); Macquarie (April 2, 2012); Morgan Stanley (April 16, 2013); Alternative Fuels Data Center; BCG analysis
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High uncertainty for fuel penetration outlook
Evolution of light-duty powertrains and fuels
IEA Fuel mix of energy demand for road
transport
(%)
(%)
1
1
3
100
5
29
2
2
90
1
2
8
80
2
60
42
48
12
39
5
1
29
41
40
42
43
50
48
54
12
20
50
4
46
0
0
2012
2020
2035
0
2
1
15
5
3
2
2012
2020
2030
Electricity
LPG
Fossil diesel
Fossil gasoline
Electric energy
Natural gas
Gas oil
Diesel biofuel
Gasoline biofuel
All fuels ((CNG,, LPG))
Biofuels
Gasoline
Note 1: New policies scenario, IEA Note 2: The shares of oil products are calculated on a volumetric basis;contributions are shown as the equivalent product volume they move
Source: World Energy Outlook, 2013 (IEA); ERTRAC European Research Roadmap – 2011 ERTRAC’s Research Roadmaps for the Decarbonization of Road Transport
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100
ERTRAC New passenger vehicle sales using
each energy source/powertrain (%)
Against a base-case, a material reduction in demand requires
a number of significant change in transport
1,0%
0,4%
Mb/d
1,4%
Key assumptions for transport in 2030
-0,4%
109
99
95
91
88
6
8
6
Electric cars2
Biofuel volume
11
Biojet
Brown
case
Base-case
Green
scenario
4%
6%
33%
x 1.5 (from
2020)
x 2 (from
2020)
x 2.5 (from
2020)
<1%
2%
15%
+3%/yr
+3%/yr
4%
15%
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Oil demand scenarios in 2030
8
ICE fuel efficiency1 +2%
14
LNG for marine
4%
36
GDP growth
2012
2020
xx
% CAGR 2012-2020
xx
% CAGR 2020-2030
2030
Base-Case
2030 Brown
Power
Industry
Residential and commercial
Petrochemicals
Other transports
Others
3% 2020-2030
2030 Green
Road transport
Note: Other includes agriculture and fishing plus other products and ethan 1. Including impact of higher penetration of hybrid cars 2. % of vehicle stock at end og the period
Source: IEA, BCG demand model, BCG analysis
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Only in the brown scenario we will see investment scenarios
above to those we are experiencing today
Annual average 2011-2030 atmospheric distillation capacity
additions including creeping required to supply the
forecasted demand
Annual average 2011-2030 conversion capacity additions
including creeping required to supply the forecasted
demand
(kbpd)
(kbpd)
1,500
1,000
B
Base
case
1,085
198
800
1,000
770
600
522
762
725
421
142
197
500
634
230
400
307
Coker VB
327
FCC/HCK
124
1,014
540
528
200
216
99
117
0
380
127
30
97
297
0
Brown World Base Case Green World 1990-2007
2008-2011
Brown World Base Case Green World 1990-2007
2008-2011
Creeping
New p
projects
j
net of closures
1. Average size of Coker assumed to be 40 kbbl/d; average size of Hck/FCC units assumed to be 50 kbbl/d. New units without taking into account creeping capacity.
Source: BCG Refining Model: BCG Demand Model
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1,212
Historical patterns of refining industry
returns...
... will be likely impacted by long term industry
outlook
Average historical returns have been above other
commodities
Overall industry structural profitability to be under
pressure
• Slowdown in refined product demand growth will
pressure margins as new capacity is built
– More likelihood of overbuild
• Investment opportunities will be reduced as compared
with historical patterns
Very high dispersion within the sector
High return volatility with "boom-and-bust" cycles
• Above average returns have not lasted more than
three consecutive years in the last 12 years
Return volatility to increase
• Expected high crude prices will translate in very broad
L-H differentials when conversion capacity scarce
TSR 200-20131 (%)
40
18.0
20
13.8
9.0
5.8
8.6
4.7
36
3.6
0
Dispersion of returns for new projects will remain as
refiners will have opportunities to differentiate
themselves
• Exposure to higher growth markets and substitution
of imports
• Processing of domestic crudes
• Logistics/market advantage
Median TSR for top quartile
Median TSR for the industry
-20
E&P
R&M
EUR
R&M
US
Steel
Utilities
Median TSR for low quartile
Chemicals Paper
1. Data up to June 2013
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What are the implications of the longer term outlook over
profitability prospect for new projects?
Thank you
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