25/09/2012

Panel

Energy Efficiency - Driven by Legislation or Key for Refining in the 21st Century?

Thomas GanglOMV Germany GmbH

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OMV Refining & Marketing incl. Petrochemicals OMV Refining & Marketing incl. Petrochemicals OMV Refining & Marketing incl. Petrochemicals OMV Refining & Marketing incl. Petrochemicals

Supplying over Supplying over Supplying over Supplying over 200 mn People 200 mn People 200 mn People 200 mn People with Energywith Energywith Energywith Energy

EBIT 2011: EUR 271 mn

� Refineries in Austria, Germany and RomaniaRefineries in Austria, Germany and RomaniaRefineries in Austria, Germany and RomaniaRefineries in Austria, Germany and Romania

� 20% market share in the Danube region20% market share in the Danube region20% market share in the Danube region20% market share in the Danube region

� High product quality and environmental standardsHigh product quality and environmental standardsHigh product quality and environmental standardsHigh product quality and environmental standards

� Refining capacity 22.3 Refining capacity 22.3 Refining capacity 22.3 Refining capacity 22.3 mnmnmnmn t per annumt per annumt per annumt per annum

� Strong retail brand and highStrong retail brand and highStrong retail brand and highStrong retail brand and high----quality, innovative nonquality, innovative nonquality, innovative nonquality, innovative non----oil business oil business oil business oil business

(VIVA)(VIVA)(VIVA)(VIVA)

� Active in 13 countries with around 4,500 filling stations in 2011 Active in 13 countries with around 4,500 filling stations in 2011 Active in 13 countries with around 4,500 filling stations in 2011 Active in 13 countries with around 4,500 filling stations in 2011

(incl. Petrol Ofisi)(incl. Petrol Ofisi)(incl. Petrol Ofisi)(incl. Petrol Ofisi)

OMV filling station network

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� 98 refineries with approx. 785 MT refining capacity representing roughly 17 % of global capacity.

� Competition from large refineries in Russia, Asia, and the Middle East; often benefitting from subsidies, tax regimes, and low labour costs.

� Decline in domestic demand due to energy efficiency increases and increasing share of biofuels, intensified by European policy.

� Bankruptcy of Petroplus, in Feb. 2012 illustrates how substantial and immediate the challenges for the European oil industry are.

Refining Industry in Europe is Integrated in Global Competition Refining Industry in Europe is Integrated in Global Competition Refining Industry in Europe is Integrated in Global Competition Refining Industry in Europe is Integrated in Global Competition

source: EUROPIA 2012

unequal environmental and

other policies

exposure to demand changes

e. g. US petrol market

competition from subsidise

national oil company refineries

new export refining capacity

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The Legal Landscape for European Refineries is Quite Unfavourable for Global The Legal Landscape for European Refineries is Quite Unfavourable for Global The Legal Landscape for European Refineries is Quite Unfavourable for Global The Legal Landscape for European Refineries is Quite Unfavourable for Global

CompetitivenessCompetitivenessCompetitivenessCompetitiveness

source: European Commission, EUROPIA 2012

EU Energy Strategy ‘11-‘20Energy Infrastracture

Package ‚10

Energy Efficiency Action

Plan ‚11

Energy Efficiency

Directive ‚12

Low Carbon Energy System

Roadmap to 2050 ‘11

Roadmap for a competitive low carbon economy by ‘50

Fuels Quality Directive ‘ 09

Transport 2050 Roadmap to a single EU transport area ‘11

Renewable Energy

Directive ‘09

Industrial Emissions

Directive ‘10

European Trading Sceme

‘09

Roadmap to a resouce

efficient Europe ‘11

Energy

Transport

Climate

Environ-

ment

� The EU Targets 2020 are the basis for the current enforced and planned set of legislation.

� This legislation in the EU increase costs for refining operations and necessitates investments to remain in business with no actual return on investments.

� Legislative parts are contradictive to others.

Long term Current

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� EU Target 2020 are� 20% reduced CO2 emissions� 20% share of renewable energy � 20% improved efficiency

� Several product related directives were enforced. The consumer has to be informed about energy efficiency.

� Evaluation of achieved efficiency targets and established measures in 2011 showed a gap towards the EU goal.

The 20The 20The 20The 20----20202020----20 Targets Drive the Energy Efficiency Legislation in Europe and their 20 Targets Drive the Energy Efficiency Legislation in Europe and their 20 Targets Drive the Energy Efficiency Legislation in Europe and their 20 Targets Drive the Energy Efficiency Legislation in Europe and their

Member StatesMember StatesMember StatesMember States

Energy Efficiency Directive (EED) in 2012

Product related efficiency information

EU Commision gap analysis

tyre label car label

source: European Commission 2011

1.400

1.500

1.600

1.700

1.800

1.900

2005 2010 2015 2020

pri

ma

ry e

ne

rgy

con

sum

pti

on

[M

toe

]

-20%

∆∆∆∆ 12%

-20 % objective

status 2011

businessas usual

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Panel

Energy Efficiency Directive Calls for 1.5 % per Year Energy Efficiency Directive Calls for 1.5 % per Year Energy Efficiency Directive Calls for 1.5 % per Year Energy Efficiency Directive Calls for 1.5 % per Year SSSSavingsavingsavingsavings of Energy at Final of Energy at Final of Energy at Final of Energy at Final

CCCCustomerustomerustomerustomer

source: European Commission 2012

National energy efficiency obligation schemes for Energy provider:Achieve annual energy savings equal to 1.5 % of their previous year’s energy sales by volume.

• Saving obligation is not per se resulting in better energy efficiency; lowering the utilisation would even decrease efficiency.

• The height of energy savings is clearly above to sound scientific basis for refineries.

• Member state flexibility for transposition into national law, but cross-European harmonisation is very likely gone.

Mandatory energy audits for large companies

• Introduction of ISO 50001 energy efficiency standards.

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� Globally, energy prices differ tremendously from region to region.

� Even in the European Union , the energy prices and energy taxes vary significantly.

� European oil industry - as an global competing business - suffers from high energy costs compared to other regions .

� Energy efficiency is one key to global competitiven ess

Energy Costs and Energy Taxes are rather Diverse even in the EU Member Energy Costs and Energy Taxes are rather Diverse even in the EU Member Energy Costs and Energy Taxes are rather Diverse even in the EU Member Energy Costs and Energy Taxes are rather Diverse even in the EU Member

StatesStatesStatesStates

source: Eurostatt, acess Aug. 6th, 2012

Gas prices for industrial consumers

[EUR/GJ]

Electricity prices for industrial

consumers [EUR/kWh]

high low high low

Implicit tax rate on energy [EUR/toe]

Ratio tax revenues/energy consumption

high low

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30

35

40

45

50

55

60

65

70

energy cost share

[% of total OPEX]

year

201520102005200019951990

� The share of energy costs in total OPEX increased continuously since 1992 across Europe

� Within 18 years, the share increases by 67 %

� Currently, the share of energy costs is around 60 % , a further increase is anticipated

� OMV refineries energy costs are in line with European trend .

� Energy costs are the main driver to increase energy efficiency

For European Refining Industry Energy Costs are 60 % of Total Operating For European Refining Industry Energy Costs are 60 % of Total Operating For European Refining Industry Energy Costs are 60 % of Total Operating For European Refining Industry Energy Costs are 60 % of Total Operating

CostsCostsCostsCosts

EU

source: own data and CONCAWE „Refinery Energy Systems“, 2012

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0

20

40

60

80

100

Cost/Income [$/bbl]

crude

costs

product

income

0

1

2

3

4

5

6

7

8

CO2 costs

Illustrative refinery operating costs 2007 [$/bbl]

other

operating

costs

energy

cost

hydrocarbon

margin

Net

margin

less CO2

& IPPC

cost

IED

Due to global competition and legislative burden, EU refining margins are very Due to global competition and legislative burden, EU refining margins are very Due to global competition and legislative burden, EU refining margins are very Due to global competition and legislative burden, EU refining margins are very

low low low low

source: Platts, CONCAWE, EUROPIA 2007 & 2012

� Refining is a “margin business“

Energy costs

~ 60 % of OPEX

Net margin

20 EUR/t CO2,

~25 % emission to

cover by purchasing

certificatsOPEX

Investment

depreciation

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Resource Efficiency, Environmental Protection, and Energy Savings are a Resource Efficiency, Environmental Protection, and Energy Savings are a Resource Efficiency, Environmental Protection, and Energy Savings are a Resource Efficiency, Environmental Protection, and Energy Savings are a

combined Challengecombined Challengecombined Challengecombined Challenge

62

45

34

2000

1992

+82%

Sulphur removal [% of crude]

2010

2,1

1,1

0,8

+176%

Diesel/petrol ratio [-]

2010

2000

1992

source: CONCAWE „Refinery Energy Systems“, 2012

Increasing sulphur removal – e.g. in diesel to 10 mg/kg – and tightened air quality limits (NOx, SOx, VOC, PM)

Fuel demand change increase conversion capacities to upgrade heavy crudes and residues

The overall energy consumption is increased by aforementioned measures , but energy efficiency is increased by 10 % resulting in aver.65 ktoe savings per year. 90

100

110

120

130

140

150

20102005200019951990

-10%Total energy consumption

w/o efficiency increases

Total actual

energy consumption

Energy IntensityEn

erg

y i

nte

nsi

ty

an

d c

on

sum

pti

on

(19

92

= 1

00

)

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Many Measures to Increase Refineries Energy Efficiency Exist, but Many are Many Measures to Increase Refineries Energy Efficiency Exist, but Many are Many Measures to Increase Refineries Energy Efficiency Exist, but Many are Many Measures to Increase Refineries Energy Efficiency Exist, but Many are

Cost Intensive, tooCost Intensive, tooCost Intensive, tooCost Intensive, too

Process DesignDirect (hot) supply of units

Thermal integration

Heat recoveryDistrictheating

Flue gas heatrecovery

Tank & piping insulation

Cleanliness Heat exchanger fouling monitoring

Electrical EfficiencyImprovement ofpump-efficiency

Reduction of condensationturbine losses

Loss reduction Flares Steam Power Cooling water

Procurement Life cycle cost criteria

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� Energy efficiency is one cornerstone in OMV Refining & Petrochemicals strategy.

� OMV Schwechat Refinery is the first business in Austria with ISO 50001 certification.

� The strategic approach as well as the formation of a multidisciplinic Energy Team are in line with the ISO 50001 and mandatory to achieve future efficiency gains .

OMV is the First Company in Austria with OMV is the First Company in Austria with OMV is the First Company in Austria with OMV is the First Company in Austria with

ISO 50001 ComplianceISO 50001 ComplianceISO 50001 ComplianceISO 50001 Compliance

Refining & Petrochemical

Strategy Key Performance Indicators

ISO 50001 Plan, Do, Check, Act

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� Heat exchanger efficiency is decreased by fouling.

� Losses by hydraulic limits.

� Heat exchanger fouling indicator monitoring established.

� Forecasts of fouling behaviour.

� Short cleaning stoppage for sensitive heat exchangers within regular shutdown cycles.

� Maintaining of design throughput and above.

� Minimisation of energy costs.

One Example of Energy Efficiency Measures:One Example of Energy Efficiency Measures:One Example of Energy Efficiency Measures:One Example of Energy Efficiency Measures:

Equipment CleanlinessEquipment CleanlinessEquipment CleanlinessEquipment Cleanliness

0 100 200 300 400 500 600 700time [d]

fouling indicator [-]

heat exchanger

cleaning

Rd E58572AB cleaning Dec. 2011

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� Until the purchase of Petrom Petrobrazi this refinery had a very high energy intensity. We increased the energy efficiency 1) by more than 22 % within six years by operational measures and major investments. Petrobrazi is on the best way to European average efficiency.

� The energy efficiency of Schwechat Refinery is comparable to the European average, but increased slightly more quickly than average.

� Burghausen Refinery is among the best energy efficient refineries in the world. Even Burghausen develops faster than the European Average.

OMV Suceeds to Increase Energy Efficiency Faster than European AverageOMV Suceeds to Increase Energy Efficiency Faster than European AverageOMV Suceeds to Increase Energy Efficiency Faster than European AverageOMV Suceeds to Increase Energy Efficiency Faster than European Average

source: own data and CONCAWE „Refinery Energy Systems“, 2012

lower as EU

EI equal to EU

EI higher as EU

110

100

90

2010200920082007200620052004

Europe

Burghausen (DE)

100

95

90

Europe

Schwechat (AT)

Energy Intensity

(2004 = 100)

100

90

80

70

-22%

Europe

Petrobrazi (RO)

1) Refining energy efficiency is measured and compared with a standard state-of-the-art refinery.

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� Energy efficiency is one important key to global competitiveness.

� Resource efficiency, environmental protection, and energy savings are a combined challenge.

� European saving objectives are not energy efficiency targets.

� EU set of legislation is unfavourable for investments necessary to increase energy efficiency.

� OMV refineries increase energy efficiency faster than European average.

Energy Efficiency is Our Core Competency, but Contradictive Legislation Hinders Energy Efficiency is Our Core Competency, but Contradictive Legislation Hinders Energy Efficiency is Our Core Competency, but Contradictive Legislation Hinders Energy Efficiency is Our Core Competency, but Contradictive Legislation Hinders

CompetitivnessCompetitivnessCompetitivnessCompetitivness

source: own data and CONCAWE „Refinery Energy Systems“, 2012

0

1

2

3

4

5

av.

ye

arl

y e

ffic

ien

cy i

ncr

ea

se

(pe

rio

d 2

00

4 –

20

10

)

PB

Z

SW

BG

H

Eur

ope

order of absolute

energy intensity

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Thank you for your attention!