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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


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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


• CAGR 0.8%

LPG


• CAGR 1.2%

Source: Stratas Advisors

Units | MBPD


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


Units | MBPD

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Africa Asia-Pacific EuropeLatin America Middle East North AmericaRussia & CIS

Dem

and

Supp

ly


Gasoline Demand By Grade (RON)

Global (2018-2040)RON 91 Grade

• Demand increased by 1.9 MMBPD

RON 95 Grade


RON 98 Grade



Units | MBPD

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RON 98 RON 95 RON 91


Diesel and Residual Fuel Oil - Demand

Global (2018-2040) Diesel


Fuel Oil

• Demand to reduce by 0.15 MMBPD


Units | MBPD

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2018 2020 2025 2030 2040Fuel Oil Diesel


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


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)


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Africa Asia-Pacific EuropeLatin America Middle East North AmericaRussia & CIS

Supply and Demand – Diesel

Regional (2018-2040)


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


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


Units | MBPD

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HSFO (S>0.5%) LSFO (S≤0.5%)


Supply and Demand – Fuel Oil

Regional (2018-2040)


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


Naphtha, Gasoline and LPG – Demand

Middle East (2018-2040) Naphtha

• Demand almost same 0.07 MMBPD

Gasoline


LPG



Units | MBPD

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2018 2020 2025 2030 2040LPG Gasoline Naphtha


Supply and Demand – Gasoline

Middle East (2018-2040) Demand


Supply

• Supply to grow by 0.9 MMBPD


Units | MBPD

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Supply Demand

Dem

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ly


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


Units | MBPD

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2018 2020 2025 2030 2040

RON 91 RON 95 RON 98

Dem

and

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ly


Diesel and Residual Fuel Oil - Demand

Middle East (2018-2040) Diesel


Residual Fuel Oil



Units | MBPD

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Diesel Residual Fuel Oil


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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)


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


LSFO and HSFO - Supply and Demand

Middle East (2018-2040) LSFO (S≤0.5%)


HSFO (S>0.5%)

• Supply decreases by 0.08 MMBPD and demand decreases by 0.18 MMBPD


Units | MBPD

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LSFO (S≤0.5%) HSFO (S>0.5%)

Dem

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ly


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)


Residual Fuel Oil (HSFO) Trade Flow


3, 0, 0, 0, 0

Latin America to Middle East :

3, 0, 0, 0, 1


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



Diesel (Gasoil S>500ppm) – Trade Flow


0

Latin America to Middle East :0, 0, -4, 0, 0


-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


Refinery Capacity Requirements


Refining Investments

Middle East (2018-2040)


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


Grassroots Refinery Projects- Middle East


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


Expansions / Modernization Refinery Projects- Middle East


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


• Grassroots Projects

• Expansion or Modernization Projects

Grassroots Refinery Projects- Middle East


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78

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Iraq

• 0.66 MMBPD of capacity of 4 Projects

Kuwait

• 0.62 MMBPD of single project

Total

• 2.9 MMBPD of capcityaddition


Refinery Investments-Middle East


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


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%


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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