kbc ioe webinar - southeast asia downstream

© 2012 KBC Advanced Technologies plc. All Rights Reserved.

Southeast Asia Downstream: Where is the next Singapore? Webinar Presented by Edward Kleinguetl

20 June 2012

Before We Begin… > This webinar is being recorded for future reference. > Questions can be asked in the chat box and will be

answered at the end during Q&A. > An email will be sent within 24 hours with download details

of the webinar materials.

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Agenda > The case for Southeast Asia > Investment modality > Intra-regional strategies of the Majors > Capacity rationalisation > Extra-regional influences > Investment opportunity analysis > Where is the Next Singapore?

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The Case for Southeast Asia

Why an Interest in Southeast Asia? > High economic growth > Huge projected deficits in refined products and

petrochemicals > Limited firm capacity development

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7.8 %

6.3 % 5.7

% 4.1 %

4.0 % 3.4

% 2.7 % 1.5

% China India SE Asia FSU Latin

America Middle East

USA Europe

Latest GDP Growth Projections (2012-15)

Product Deficits(SE Asia and ANZ) Refined Products > Refined Products

Considered – LPG – Naphtha – Motor Gasoline – Jet/Kerosene – Gas/Diesel Oil – Other

> Petrochemicals Considered – Polyolefins – Aromatics

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* Deficits before considering capacity adjustments

-743

-3,054 -3,605 -4,000

-3,500 -3,000 -2,500 -2,000 -1,500 -1,000

-500 0

2012 2025 2030

000 Tons

-1,079

-2,989 -3,586 -4,000

-3,500 -3,000 -2,500 -2,000 -1,500 -1,000

-500 0

2012 2025 2030

kbpd

Petrochemicals

Plus the Neighbor to the North (China) Petrochemicals Assumptions:

> Self-sufficient on refined products

> Still requiring petrochemical imports

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-16,331

-20,450 -21,800

-25,000

-20,000

-15,000

-10,000

-5,000

0

2012 2025 2030

000 Tons

How SEA / ANZ Deficit Will be Satisfied

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kbpd

2030 SEA / ANZ Deficit

3,586

KBC assumed net SEA / ANZ capacity additions/closures*

1,107

Extra-regional:

Indian surplus capacity 1,000

Arabian Peninsula – new capacity* 1,127

Extra-regional deficits to be filled from new capacity

(450)

Remaining net deficit

802

2030 product balance 3,586 * Capacity assumptions at 85% of nameplate

Refined Products Only

KBC Assumed Capacity Adjustments

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Country Assumptions kbpd

Brunei Zhejiang Hengyi project 135

Indonesia Three announced revamps; no new refineries 152

Malaysia Project RAPID and Port Dickson expansion 300

Philippines Shell upgrade --

Thailand Sriracha Refinery expansion to 300 bpd 25

Vietnam Five projects move forward 830

ANZ Capacity closures (140)

Adjustment of nameplate capacity to 85% operating rate* (195)

Net capacity additions assumed 1,107 * Capacity assumptions at 85% of nameplate

Refined Products Only

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Investment Modality

Three Possible Investment Modes

> Invest > Acquire > Joint Venture

(Motiva Port Arthur model)

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Major Southeast Asia Investment Risks > No perfect investment > National aspirations > Extra-regional players > The (over)courtship of Vietnam > China economic slowdown > Classic petrochemical over-expansion > Workforce challenges in certain locations > Political and economic stability

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Intra-Regional Strategies of the Majors

International Super Majors > Focused on Mega-Centres > Increasing emphasis on upstream operations

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Chinese Majors > Expanding Trading Capacity

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Indian Merchant Refiners

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> Leveraging the Corporate Advantage

Saudi Aramco Asia Corporation > More than just crude: Leveraging engineering expertise

(Dhahran) and large project experience

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Capacity Rationalisation

Capacity Adjustments

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Country Rationalisation Asset Intra-regional Australia Capacity Closures Exit of the Super-Majors

Thailand Rumoured sale Esso Refinery

Extra-regional* Japan Closure / curtailment IKC: Tokuyama Refinery

JXE: Muroran Refinery Sale Petrobras Nansei Refinery

Tonen General (Exit of a Super-Major) Korea Capacity rationalisation Hyundai Oilbank

* Niche players could exploit available assets

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Extra-Regional Influences

Arabian Gulf: A Surge of Products

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1,000 kbpd

776 kbpd

351 kbpd

Planned Ethylene Capacity (2014-2018)*

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1.5 million tonnes 1.4 million tonnes

1.2 million tonnes

1.3 million tonnes

Est. 1.0 million tonnes

* Excludes new Iranian ethylene capacity: 1.0 million tonnes under construction and 3.0 million tonnes under engineering

> Targeting China and Southeast Asia

Chinese Influences > Refined product self-

sufficiency > Foreign petrochemical

expansion > Involvement of smaller

Chinese companies

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North Asia Influences: Heading South

> Limited exports to Southeast Asia > But, likely investors in regional opportunities

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Investment Opportunity Analysis

Vietnam: Heavily Courted

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> Binh Son Refinery Expansion – 55 kbpd – PDVSA (?), SK Energy, JX Energy (?)

> Nghi Son Refinery & Petrochemical LLC – 200 kbpd – Idemitsu, Kuwait Petroleum, PetroVietnam, Mitsui

> Long Son Refinery Project – Petrochemical Facility

• Siam Cement, QPI, Thai Plastics, PetroVietnam, Vinachem

– Refinery Project (240 kbpd) • Aramco (?), Total (?), PetroVietnam

> Project No. 4: Van Phong Bay Refinery – 200 kbpd – Petrolimex and others

> Project No. 5: Nhon Hoi Refinery – 200 kbpd – STFE (?); PTT (?); other private Chinese (?)

Nghi Son Refinery

Long Son Refinery

Binh Son Refinery

Van Phong Bay Refinery

Nhon Hoi Refinery

Indonesia: Always a Bridesmaid?

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> Three Proposed Revamps (Existing Refineries)

– Balikpapan, Cilacap, and Dumai

– Capacity Increase: 152 kbpd

> Balongan Refinery, West Java – Location: Near Existing Balongan

Refinery

– MoU with Kuwait Petroleum

– Proposed Capacity: 400 kbpd

> Tuban Refinery, East Java – Location: Tuban, Indonesia

– MoU with Aramco

– Proposed Capacity: 400 kbpd

Tuban Refinery

Balongan Refinery

Malaysia: Interesting Possibilities

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> Port Dickson Expansion – Expansion capacity not defined – Potential for additional growth

> Project RAPID

– Location: Johor, Malaysia – Proposed Capacity: 300 kbpd – Integrated refinery and

petrochemical facility • Joint agreements: PTTGC

and Itochu Corporation • Petrochemicals MoU:

BASF – Ground broken: May 2012

Project RAPID

Port Dickson Refinery

Thailand: Interesting Assets

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> Esso Thailand Refinery (Sriracha) – Excellent asset; rumoured for sale – Potential for additional growth – Integration possibilities

> Star Petroleum Refining Company Ltd.

(Rayong) – Joint venture: Caltex and PTT – Good asset – Integration possibilities – Potential expansion challenges due to air

quality issues in Rayong area

Esso Thailand

Star Petroleum

Brunei: Potential Projects to Leverage

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> Zhejiang Hengyi Refinery – Proposed Capacity: 135 kbpd – Proposed Location: Pulau Muara

Besar – Paralxylene back to China

> PetroBru – Proposed Capacity: 200 kbpd – Proposed Location: Pulau Muara

Besar – Feasibility study completed in 2009

> Investment Considerations – Would need additional crude supply – Political and economic stability – Could leverage one of the proposed

projects to expand to world-scale capacity (200-300 kbpd)

PetroBru Zhejiang Hengyi Refinery

Other Possible Locations / Assets

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Intra-Regional > Singapore > Philippines

– Petron Refinery Expansion – Shell announced upgrade

> Myanmar Extra-Regional > Sri Lanka

Poll Question #1 > Where would you site a new world-scale

integrated refinery-petrochemical facility within Southeast Asia? a) Brunei e) Singapore b) Indonesia f) Thailand c) Malaysia g) Vietnam d) Philippines h) Other

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Where is the Next Singapore?

Extra-Regional: Arabian Peninsula > Major Middle East

expansion over the decade > Replaces India as the

global refined products arbitrage hub

> Becomes a major petrochemicals producer

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Intra-Regional: Malaysia and Brunei

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> Even with dominance of Arabian Peninsula, the region has room for at least one world-scale integrated refinery-petrochemical merchant centre Country Location Commentary

Malaysia Project RAPID Subsequent expansion beyond 300 kbpd

Malaysia Port Dickson Expansion Significantly greater expansion; possible Motiva-type JV

Malaysia Grassroots: Sarawak or Sabah Petronas is a solid operating company

Brunei Pulau Muara Besar Leverage either Zhejiang Hengyi or PetroBru Project

Intra-Regional: Runners-Up

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> Other possibilities for consideration Country Location Commentary

Thailand Esso Refinery (Sriracha) Existing asset; likely one of the highest quality existing assets

Vietnam Long Son Refinery Project Grassroots project; proposed integrated facility

Conclusions > Southeast Asia

– Strong economic growth – Increasing demand for refined products and petrochemicals – Least amount of capacity development compared to other high

growth regions

> The “Next Singapore” – Likely “extra-regional” as Arabian Peninsula becomes dominant

production base – Still room for at least one regional world-scale integrated refining and

petrochemical complex (merchant centre)

> Various investment opportunities and models exist > Risks need to be carefully assessed and managed

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Players to Watch Relative to SE Asia > CNOOC > Private Chinese

Companies > Japanese Energy

Companies > Japanese Trading

Companies > Korean Energy

Companies > Kuwait Petroleum

Corporation > PDVSA

> Pertamina > Petronas > PTT (Thailand) > Qatar Petroleum

International > San Miguel Group > Saudi Aramco Asia

Corporation > Siam Cement > Trading Companies (e.g.,

Trafigura, Vitol, Concorde)

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KBC Reports Supporting this Presentation

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See the KBC Website for details www.kbcat.com

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Please send any further questions and feedback to: kbc-marketing@kbcat.com

Closing > Questions? > Future webinar topics:

– Asian gas and LNG markets – Market conditions – Asset optimisation for competitive advantage – Investment support – Sustainable workforce development

> We welcome suggestions for future topics – please email kbc-marketing@kbcat.com

> Next webinar information will go out shortly. > Thank you for joining us!

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