outlook for russia’s downstream industry, infrastructure ... · outlook for russia’s downstream...
TRANSCRIPT
Outlook for Russia’s downstream industry, infrastructure
development and evolving export strategy
September 2013
Brussels, Belgium
1
Russia’s crude oil production will continue to increase slightly due to new
basins getting up to speed, especially East Siberia and shelf
Source: IHS CERA, Wood Mackenzie
72 7949
0.4%
2020
536
9
107
302
38
2017
533
8
112
307
35
2012
518
5
120
317
27
Other
Volga-Urals
West Siberia
Timan-Pechora
East Siberia and Sakhalin
Sakhalin-2
Priobskoye Samotlorskoye
Orenburg
Vankorskoye
Yuganskneftegaz Fields
Urengoi
Romashkinskoye
Bashneft
LUKOIL-Perm
Malobalykskoye
Samara Tatneft fields Tomskneft
fields
LUKOIL-Komi
Megionneftegas
Fyodorovskoye
Salym Group
Prirazlomnoye
UVAT
Sakhalin-1
Verkhnechonskoye
Krasnoleninskoye
Talakan Fields
Tevlinsko-Russkinskoye
Udmurtneft
+6%
+4%
-1%
-1%
+XX%
Kuyumba
Urubcheno-Tohoma
Kovykta
Basins:
Lodochnoye
Suzunskoye Trebsa & Titova
Rosneft shelf
exploration licenses
CAGR, %
Crude production, MT:
Total recoverable resources in
Rosneft shelf licenses, bln TOE
1621
Oil Gas
2
Russia will continue to export more than 50% of its crude while refining
throughput can even slightly decrease following light yields improvement
incentivized by duty regime
Sources: IHS CERA, Petromarket, Ministry of Energy
Refining, mln. tn
Export, mln. tn
Oil production in Russia, mln. tn
• Increase of conversion is the
key focus of Russian refining
industry upgrades not
throughput increase
• Exports of crude will continue to
expand healthily with Russia
continuing to expand its export
optionality
536533518
0,4%
2020 2017 2012
146 156 168
-0,6%
2020
254
86
2017
260
104
2012
266
120
8981
1,4%
2020
282
2017
273
2012
252
193 192 202
50
Light Heavy
1,8%
East West
3
Government has proclaimed 3 key goals for Russian refining
industry upgrade campaign by 2020
• Increased motor fuel production
and Euro-5 compliance will remain
in focus in nearest years
Euro <5
Euro 5
2020
0%
100%
2012
70%
30%
• Minimal increase in crude units
capacities balanced by a closure
of simple refineries
• Key focus is on meeting demand
for gasoline and jet fuel
2020
66%
2012
55%
Source: Minenergo, Skolkovo business school, grandsmeta
• Some experts estimate that 70% of Russian refining units have already exceed
their expected lifetime
• Key replacement goals:
−High health, security and environment standards
−Operations continuity
−Maximization of refinery utilization
−Decrease in labor due to automation & technology
Lights yield
(conversion)
Fuel
Standards
Replacement
of old units
1
2
3
126
89
Lights yield, %
Diesel fuel and gasoline production,
Mt
4
Key focus of refining upgrades is to meet motor fuels and jet fuel demand
Source: Rosneft forecast, Petromarket
Gasoline
Diesel
Jet fuel
Fuel oil
Demand, mln. tn Supply, mln. tn
404033
+2%
2017 2012 2020
504536
+4%
2020 2012 2017
13129
+5%
2017 2012 2020
141416
2020 2012 2017
-1%
454535
2017 2012 2020
+3%
817354
+5%
2017 2020 2012
161510
2020
+6%
2017 2012
4054
76-8%
2020 2017 2012
• Mostly balanced with some
regional deficits
• Demand will be met through
secondary processes upgrades
• Always surplus export product
in Russia
• Overall demand growth will be
slightly above gasoline due to
increasing share of diesel
trucks
• The highest growing product
• Sufficient supply growth, since
most conversion upgrades are
middle distillates oriented
• New significant cracking
capacities
• Large export drop
• Growth in number of
passenger cars
• Growth in passenger
traffic
• Increase in fuel
efficiency of new
aircrafts
• Growth in number of
trucks
• Increase in fuel
efficiency
• Increase in fuel
efficiency
• Power generation
switching to natural gas
• Growth in bunker fuel
Demand level
5
In 2011 the tax regime was significantly tightened and tax incentives
were introduced for investments in conversion and quality
• Increased attractiveness of gasoline
sales on domestic market
• Refusal from gasoline oriented
conversion projects (FCC)
• Increased attractiveness of naphtha as
steam cracking feedstock
• Decrease of refining industry
attractiveness and available cash flow
for upgrades
• Decrease refining volumes growth
rates and closing of non-efficient
refineries with the introduction of 100%
tax
• Increased investments in conversion
projects
Key changes
«60-66»
tax regime
90% export duty for
gasoline
Differentiation of
gasoline and diesel
excise duty
Causes Product duty as a share of crude export duty Impact on industry
• Increased speed of investments in
gasoline and diesel quality projects
• Pressure on simple refineries
66%66%67%
100%
66%
47%
From 1 Jan.2015 Since Oct. 2011 Till Oct. 2011
• Increase in refining
throughput, not covered
by secondary processes
capacities
• Lack of investments in
conversion projects
• Necessity to stimulate
oil production
• 2011 gasoline shortage
crisis, caused by
gasoline exports in
conditions of unsatisfied
domestic demand
• Negative ecological
impact of low standard
motor fuels
• Growth of topping
refinery industry
focused on export
Heavy Light
90%
66%67%
From
May 2011
Expected from
Oct. 2011
Till May 2011
337306
249234171156
156207 195178
130124 14413190108
2014 2013 Till 31 Dec.
2012
Till 30 June
2012
Diesel < Euro 5
Gasoline Euro 5
Gasoline < Euro 5
Diesel Euro 5
Excises, USD/t
6
Tighter tax regime stimulates quicker conversion focused upgrades in
the industry with Rosneft leading the way
Key findings
• Anticipated fiscal regime tightening
(equalization of crude and dark products
export duties) stimulates VIOCs investmets
in conversion projects
• Middle distillates oriented upgrades
(hydrocracking) due to lower gasoline
netbacks
• Standalone refiners will face decreased cash
flows restricting upgrades and will gradually
lose competitiveness against VIOCs
refineries
• Rosneft has the most ambitious program of
modernization, which will bring its refineries
into profitability leaders
Increasing the depth of processing is essential to remain competitiveness in a tightening of the tax regime
1 Besides LTO and quality CAPEX
2 Conversion projects on existing refineries
Investments in
conversion projects1, $/tn
of 2012 refining vol. Key projects till 2021 Lights yield, %
• Catalytic Cracking (Kuibyshev, Syzran)
• VGO hydrocracking (Komsomolsk, Ryazan,
Tuapse, Novokuybyshevsk, Achinsk,
Saratov)
• Delayed coking (Tuapse,
Novokuybyshevsk, Achinsk)
• Catalytic Cracking (Nizhny Novgorod)
• VGO hydrocracking (Volgograd)
• Delayed coking (Perm)
• Vacuum residue hydrocracking (Nizhny
Novgorod)
• Catalytic cracking (Omsk, Moscow)
• VGO hydrocracking (Omsk)
• Delayed coking (Omsk, Moscow)
• VGO hydrocracking (Kirishi)
• VGO hydrocracking (Ufa)
• Delayed coking (Ufa)
80%
56%
66%53%
73%61%
2021 2012
55%39%
71%60%
Source: Petromarket, McKinsey
38
48
97
112
3362
7
2013 2014 2015 2016 2017
Key focus of refineries’ upgrade in mid-term is Euro-5 compliance
Company Quality projects
Gasoline: Isomerization, Reforming,
Alkylation, Hydrotreating (15 projects)
Diesel: Hydrotreating (6 projects)
Year when all production is fully complied with Euro-51 Current quality
Gasoline: Isomerization, Reforming,
Alkylation, Hydrotreating (4 projects)
Diesel: Hydrotreating (3 projects)
Gasoline: Isomerization, Reforming,
Alkylation, Hydrotreating (5 projects)
Diesel: Hydrotreating (3 project)
Gasoline: Isomerization, Reforming (2
projects)
Diesel: Hydrotreating (1 project)
Gasoline: Alkylation, Hydrotreating (2
projects)
Diesel: nothing
1 Some companies will continue to produce non Euro-5 compliant product for export. In this case, the tick shows a year of completion of latest quality project
13% 38% 28% 21%
Euro-3 Euro-4 Euro-5 lower than Euro-3
53% 21%
13% 13%
50% 50%
32%
2%
18% 48%
15% 78% 7%
47% 21% 22%
83% 17%
85% 13%
2%
4% 96%
79% 19%
11% Source: Petromarket
8
Rosneft leads the way in Russia’s strive for crude export diversification and
secured end-consumer monetization via long-term contracting
Kozmino
Ust-Luga
Saras
Ruhr Oel
1 Rosneft share; 2 volumes may vary year-to-year
JV for sale of
crude oil and oil
products
Skovorodino
Shipments to China
via ESPO will
increase to
30 mln. tn./year Tianjin Refinery
construction
plans 13 mln. tn
Mozyr
Crude oil shipments to
direct consumers via
Druzhba pipeline
Lisichansk
Tuapse
Taganrog
Ventspils
Nakhodka
Vanino
Primorsk
Oil field
Druzhba
Crude oil long-term contracts
Ukraine
Direction Counterparties Volume,
mln. tn
Annual average
volume2, mln. tn
Term, years
China CNPC, Transneft 625 28 - 30 20-25
Novorossiysk /
Primorsk / Ust-Luga
Glencore, Vitol, Trafigura 74 15 5
Germany Total, RTSA, Sunimex 49 12 3-5
Poland Orlen, Mercuria 34 11 3
Belarus Mozyr refinery, Naftan 23 8 3
Czech Republic Orlen 6 2 3
Novorossiysk
Crude oil distribution, mln. tn
Volume 2012
Production in Russia 206,7
Refining 83,7
Domestic sales 16,1
Export sales 106,9
Volume 2012
Domestic market 37,7
Export 44,9
Sales of oil products, mln. tn
Port
Total 73 mln tn./year2
Main pipelines
9
Kozmino
Vladivostok Nakhodka
Murmansk
Kaliningrad
Saint
Petersburg
Primorsk
Ust-Luga
Vysotsk
Novorossiysk Tuapse
China Mongolia
Kazakhstan Ukraine
Finland
Japan
Possible direct crude
supplies to Southern
Germany via Druzhba
and IKL-MERO
pipeline in Czech
Republic
Projected export
oriented petroleum
products pipeline in
South Russia «Syzran -
Tuapse»
Expansion of crude export
pipeline system to Far
Eastern markets, also
allowing East Siberian
fields development
Increased supplies to
China on long-term
contracts basis
Tianjin
refinery
Planned 13 mtpa new
refinery partially
supplied from ESPO
Pipeline to projected
VNHK petrochemical
plant VNHK
Komsomolsk
Projected feed
crude pipeline
from ESPO to
Komsomolsk
refinery
Russia is investing in infrastructure for export of crude and
petroleum products
Crude terminals
Oil products terminals
Existing crude pipeline
Planned crude pipeline
Existing oil products pipeline
Planned oil products pipeline
Construction of most modern deep
water Russian Baltic port (44 mtpa
crude, 34 mtpa refined products,
full capacity expected in 2016)
Expansion of Tuapse
refined products
terminal Reconstruction of
Nahodka terminal
Samara
Perm
Tyumen
Tayshet Kemerovo
Vankor
Expansion of
ESPO pipeline to
80 mtpa
Vitino
Arkhangelsk
Ventspils
Gdansk
Kavkaz
Baku
Atyrau
Kuyumba and
Yurubcheno-
Tohomsk
fields
Adamova
Fenyeslitke
Budkovce
10
A new paradigm is evolving with new crude channel to East and the
substitution of export of fuel oil by diesel fuel
Export flows from Russia, mln.tn
Source: Rosneft forecast based on IHS CERA and Petromarket
West
Crude oil
Diesel
Fuel Oil
Crude oil
Diesel
Fuel Oil
193192202
2017 2012
-1%
2020
898150
2020 2017
+7%
2012
312817
2020
+8%
2012 2017
172436
-9%
2020 2017 2012
001
2012 2017 2020
91624
2012 2017
-12%
2020
11
Rosneft – TNK-BP refining assets
ROSNEFT refining post-acquisition position
Comparison of Rosneft and TNK-ВР assets
2012 production, mln tn
Achinsk
(8 Mtpa,HSK)
Komsomolsk
(8 Mtpa, DCU)
50% Yaroslavl (15 Mtpa,
FCC, VGO HCK)
Saratov (7 MTpa,
HSK)
Samara group (25 Mtpa,
3 FCC, DCU)
Tuapse
(12 Mtpa, HSK)
Ryazan (17 Mtpa,
FCC)
Rosneft
TNK-BP
fuel oil
jet
diesel
gasoline
24,4
10,1
1,5
7,5
5,4
39,1
17,0
1,5
14,9
5,7
63,5
27,1
3,0
22,4
11,0
Angarsk
(10 Mtpa, FCC)
• TNK BP refineries fit ideally in the central region where the most of demand is and Rosneft
has had lower supplies for its own channels (e.g. retail sites and jet fuel in Moscow airports)
• Another synergy will come through “best of both” practices exchange in refinery operations
(e.g. Lean program roll out in TNK BP, energy efficiency in Rosneft, etc)
12
Rosneft in the years 2008-2013 successfully implemented more than
20 projects for new construction and revamping of units and facilities
2008 2009 2010 2011 2012 2013 Refinery
Achinsk
Angarsk
Komsomolsk
Novokuibishevsk
Syzran
TNK-BP Refineries
Kuibyshev
Tuapse
• Isomerization
• Sulfur
production
• Hydrogen
production
• Hydrogen
production
• Isomerization
• Isomerization
(revamping)
• Reforming
• Isomerization
• Reforming
(revamping)
• Visbreaker
(revamping)
• Reforming
(revamping)
• Reforming
(revamping)
• Gasoline
blending
• Delayed coking
• «Wet
catalysis»
(revamping)
• Reforming
(revamping)
• LPG gantry
• Gasoline blending
• Visbreaking
(revamping)
• Revamping of
furnaces to gas
• Water supply
system
• Saratov isomerization
• Saratov crude unit
(revamping)
Integration of TNK-BP
• Crude unit
Total • New: 2 • New: 2 • New: 2
• Revamped: 3
• New: 2
• Revamped: 3
• New: 4
• Revamped: 2
• New 2
• Reforming
• Saratov diesel
HT
• Ryazan diesel
HT (revamping)
13
Tuapse refinery – from topping to a new leader in Russia
Key success factors for Tuapse refinery:
• Strategic location:
Immediate proximity to large Southern Russian markets with growing demand
Close to Tuapse oil products terminal
which enables to flexibly distribute sales between export and internal trade channels
• Complete re-equipment of refinery, including:
Increase throughput from 5 to 12 mln. t./year
Achieve 90% lights yield
Achieve Nelson index of 8
3rd construction
stage 2018
11,4
0,7 0,0
6,5
4,4
0,1 2,0
1,4
0,9
0,4
2,2
0,8
4,3
3,7
0,5
11,9
2nd construction
stage 2017
0,7
2,4
1,0
Current
production 2012
Tuapse refinery production structure, mln.t
Tuapse
Saratov
Export to MED: Naphta,
Jet, Diesel, Fuel oil, etc.
Grozny
Filling stations
South Russia
LINIK
BATO TZK
Tuapse refinery in Rosneft portfolio
Bunker
Gasoline
Naphtha
Other
Fuel oil
Diesel
Jet
14
Achinsk
Angarsk Koltsovo
Irkutsk
Krasnoyarsk Samara
Saratov
Komsomolsk VKO
SVO
Ryazan
Tuapse
Vladivostok
1
YANIOS
Rosneft assets map
Key aspects
Asia-Pacific &
China
Black sea
Baltic states
Refining:
Retail (>10 stations):
Jet fuel sales:
Not covered
Bunker
Export directions:
28
7
8 5
15 19
15
5
7
10
4
…
…
Oil
Petroleum
products
(export
directions)
11
3
1
2
Europe
• Refineries are located
across all Russia, and
could support development
of almost all main retail and
B2B markets
• Retail assets and Jet fueling
complexes are located
across all country and can
ensure significant network
synergies
• Presence on all oil and
petroleum products export
direction ensures additional
flexibility for value creation
by arbitrage Mongolia & China
Rosneft covers all export directions and is present across all value
chain in Russia; trade channels will cover most attractive cities and
regions from a demand point of view