The Middle East Refining Scene and Oil Product Balances - Bassam Fattouh PLATTS 11TH ANNUAL EUROPEAN REFINING SUMMIT, BRUSSELS, SEPTEMBER 2017
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Middle East Refining Scene
and Oil Product Balances
Bassam Fattouh
Oxford Institute for Energy Studies
PLATTS 11TH ANNUAL EUROPEAN REFINING SUMMIT, BRUSSELS, SEPTEMBER 2017
Diesel: Structurally Long
Diesel is Mainly a Saudi Story
Middle East Diesel Demand, y/y change
Middle East Diesel Supply, thousand b/d
thousand b/d
300
2,500
200
2,000 100
-
1,500
(100)
1,000 (200)
(300)
500
(400)
May-15
May-16
May-17
Sep-15
Jan-15
Mar-15
Nov-15
Jan-16
Mar-16
Nov-16
Jan-17
Mar-17
Jul-15
Jul-16
Sep-16
-
Saudi Arabia Kuwait Iran Iraq UAE
Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia UAE
Most of the decrease in regional diesel demand is
Most of the recent increase in regional diesel supply is accounted for by Saudi Arabia (and Iran to lesser
due to Saudi Arabia (and the UAE to a lesser extent) extent); increase from Iraq and UAE not big enough
to offset declines from Saudi Arabia
Source: JODISaudi Economy Slowed Down Markedly as Adjustment Bites
Annual Rates of Private and Non-Oil Sector, % Gross Fixed Capital Formation, y/y, %
12
Private Sector Growth Non-oil Sector
10
8
6
4
2
0
(2)
Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16
Growth in the private and non-oil sector has stalled Gross fixed capital formation witnessed a very
putting at risk Vision 2030 which relies heavily on a sharp decline as spending on key infrastructure
vibrant private sector and SMEs projects falls
Source: Government of Saudi Arabiaprevious quarter to reach SAR2.4bn (12%). The other Province due to heavy investment by Saudi Aramco in
50 sectors accounted for 13% share of the remaining value the oil & gas sector. Makkah region's came second with
Increasing rate of contraction of awarded contracts. (Chart 1), (Chart 2). 21% share, which was mainly attributed to weighty pro-
jects in the petrochemical sector. The Riyadh region had
45
Construction Sector Particularly Hit
The momentum of the value of awarded contracts has a 17% share of the awarded contracts, mainly due to
declined during the first half of 2016. The sharp drop in several contracts in the real-estate and urban develop-
Jun-12 Apr-13 Feb-14 Dec-14 Oct-15 Aug-16 Jun-17contract awards activity followed the collapse of oil pric- ment sectors. Al-Qassim region contributed 8% to the
es, as the government tightened spending and post- overall value of contract awards after a major contract in
Cement Sales, Million Tons
Cement Sales poned its spending plans. Approximately SAR48.2 billion in the real estate sector was awarded by Sulaiman Al-
Value of Awarded Contracts Rajhi College, (Chartby
3). Year
(SAR millions)
Chart 1: Value of Awarded Contracts by Year (SAR millions)
6.5
Sales Production SAR billion
6.0 350
293.4
5.5 300 266.7
234.7
250
5.0 220.7 223.4
(million tons)
207.0
200
ar 4.5
150
ctor 4.0 106.8
100
3.5 50
48.2
n 3.0 0
ce 2.5
2009 2010 2011 2012 2013 2014 2015 1H 2016
Oil & Gas Power Water Industrial
2.0 Healthcare Residential Real Estate Transportation Roads
2008 2011 2014 2017 Petrochemical Education Urban Development Others
Source: Various sources, NCB
Cement sales, a key indicator of construction activity, *See Appendix for the NCB Construction Contracts Index methodology
Sharp drop in contracts awarded as government
fell sharply tightens spending and revises contracts
Source: JADWA, Al-AhliNCB,Big Impact on Diesel Demand
• Diesel demand fell in 2016 with the
decline continuing into 2017 Diesel Demand, y/y, thousand b/d
150
• Many contributing factors 100
– General slowdown in economic activity 50
– Sectors such as construction and -
infrastructure projects particularly hard (50)
hit
(100)
– Pricing reform in 2015 increased diesel
price (150)
– New efficiency measures introduced (200)
– More gas from Wasit plant diverted into (250)
the power sector substituting for liquid
burn particularly diesel (300)
Jan-15
Jan-16
Jan-17
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Jan-14
Jul-14
Jul-15
Jul-16
• Looking ahead, as adjustment/reforms
proceed and as diesel gets substituted
in power sector, diesel demand will
continue to be under pressure but the
recent sharp declines will reverse
Source: JODIWhile Diesel Supply Rising
• Startup of new refineries mainly
geared towards maximizing diesel Diesel Supply, thousand b/d
yield
1,300
– 0.4 mb/d Aramco/Sinopec YASREF
JV 1,200
– 0.4 mb/d Aramco/Total SATORP JV
1,100
• In 2015, y/y growth in diesel supply 1,000
reached 231 thousand b/d, in 2016,
110 b/d were added as refineries 900
ramped up 800
• Jazan refinery expected to come online 700
in 2019 will add to diesel supply + 600
news about SATORP JV
debottlenecking operations to take 500
capacity to 0.46 mb/d by 2020
Oct-14
Jan-16
Apr-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Jan-14
Jan-15
Jan-17
Jul-14
Jul-15
Jul-16
Source: JODISaudi Arabia To Strongly Compete in Diesel Market
• Saudi supply-demand balance Saudi Arabia Diesel Balance,
reached a record level of 485 thousand b/d
thousand b/d in February 2017 600
500
• Saudi Arabia turned into large 400
net exporter of diesel competing
in European and African markets 300
with Asian refineries
200
– Net diesel exports reached 355,000
b/d in 2016 from 7,000 b/d in 2014
100
• Saudi Arabia projected to remain -
Apr-14
Apr-15
Apr-16
Apr-17
Jan-14
Oct-14
Jan-15
Oct-15
Jan-16
Oct-16
Jan-17
Jul-14
Jul-15
Jul-16
structurally long in diesel beyond (100)
2020 even if the economy
rebounds (200)
Source: JODICapacity Additions will Increase Regional Diesel Exports
CDU Condensate
Country Year Company Refinery Capacity b/d b/d
Iran 2017 NIORDC Persian Star Phase 1 120000
Qatar 2017 Qatargas Ras Laffan 146000
Kuwait 2017 KNPC Shuaiba (closure) -200000
Oman Refinery Company
Oman 2017 (Orpic) Sohar 82000
Iran 2017 NIORDC Persian Star Phase 2 120000
Iraq 2018 South Refineries Co Basra 70000
Iran 2018 NIORDC Persian Star Phase 3 120000
Saudi Arabia 2019 Saudi Aramco / Total SATORP 40000
Saudi Arabia 2019 Saudi Aramco Jazan 400000
Iraq 2019 Iraq Oil Projects Co Karbala 150000
Iraq 2020 Satarem / Wahan Missan 150000
Bahrain 2020 Bapco Sitra 93000
UAE 2020 IPIC Fujairah 200000
Oman Refinery Company
Oman 2020 (Orpic) Duqm 230000
Kuwait 2020 KNPC Al-Zour 615000
In 2017, most of the increase in capacity was concentrated in condensate splitter boosting naphtha output;
between 2018-2021, the increase in capacity will boost diesel output
Source: Energy AspectsGasoline: Towards Balance?
Gasoline Towards Balance
Middle East Gasoline Supply, mb/d Middle East Gasoline Demand, thousand b/d
250
200
150
100
50
-
(50)
(100)
(150)
(200)
(250)
Apr-14
Jan-17
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Jan-14
Jan-15
Jan-16
Jul-14
Jul-15
Jul-16
Iran Iraq Saudi Arabia UAE Oman Kuwait
Gasoline demand in Iran, Iraq, and Saudi rebounded
Middle East gasoline supply has increased sharply, but in H1 2017, but growth rate is expected to
the region is still short in gasoline slowdown compared to past as further gasoline
pricing reforms are introduced
Source: Energy Aspects, JODIIran: Towards Self-Sufficiency in Gasoline?
• Iran historically relied on Gasoline Demand, thousand b/d
gasoline imports to meet its 550
domestic requirements & meet 530
Euro-4 specifications 510
490
• Iran imported 49,000 b/d of 470
gasoline in 2016 and 64,000 b/d 450
in the first four months of 2017
430
410
• CNG widely used in transport 390
sector mainly in taxis and buses
370
but sale of gasoline cars has been
rising since lifting of sanctions 350
Apr-14
Apr-15
Apr-16
Apr-17
Oct-16
Jan-14
Jul-14
Oct-14
Oct-15
Jan-15
Jan-16
Jan-17
Jul-15
Jul-16
pushing up gasoline demand
Source: JODI, Energy AspectsIran’s Ambitions Plans to Increase Downstream Capacity
• Start up of new unit at Bandar
Abbas refinery increased Billion
gasoline output Company Country Date USD Refinery Details
• First phase of Persian Gulf Star Daewoo May- Hormuz Extra MoU for construction of
Refinery launched in May E&C Korea 16 10 Heavy, Jask new refinery
(overall project consists of 3
phases, 120,000 b/d each phase; Hyundai/Da
230,000 b/d of gasoline) elim/Chiyod Korea/Japa Siraf Condensate Preliminary agreement
a n Jul-17 3 Splitters for eight 60,000 b/d
• Once the phases of these projects Upgrade to boost light
are complete in 2018, Iran will Daelim Korea Jan-17 1.9 Isfahan products output
stop importing gasoline (closure
of ageing crude distillation units at HoA for upgrade to boost
Abadan refinery could delay the SK E&C Korea Aug-17 1.9 Tabriz light products output
process)
Upgrade to boost light
• More ambitious plan to expand Sinopec China Sep-16 1.3 Abadan products output
and upgrade capacity, but this MoU to study increasing
will depend on foreign SK E&C Korea Jun-16 0.02 Tabriz gasoline, diesel output
investment
MoU for revamp and
Saipem Italy Jan-16 na Isfahan & Tabriz upgrade
Source: MEES, Energy Aspects9.2 9.0
8.4
5.9 5.2 5.8
4.7
3.7 3.8 3.3 3.8 3.4 3.5
Saudi Arabia: The Gasoline Imbalance Gets Smaller
Machinery and Vehicles and Products of Base Metals Prepared Vegetable Live Animals; Textiles and Plastics and Other
Mechanical Associated the Chemical and Articles of Foodstuffs; Products Animal Textile Articles Rubber and
Appliances; Transport or Allied Base Metal Beverages and Products Articles
Electrical Equipment Industries
Annual Change in Main Import Products, Vinegar; Thereof Saudi Arabia Gasoline balance,
Equipment Tobacco
2016 (%) thousand b/d
Annual Change in Main Import Products, 2016 (%) 100
1.0▼
50
-
7.3▼
May-12
May-13
May-14
May-15
May-16
May-17
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
10.1▼
12.2▼ (50)
16.5▼ 16.6▼ 17.0▼
(100)
22.1▼
26.5▼ (150)
27.5▼
Machinery and Vehicles and Products of the Base Metals Prepared Vegetable Live Animals; Textiles and Plastics and Other (200)
Mechanical Associated Chemical or and Articles of Foodstuffs; Products Animal Textile Articles Rubber and
Appliances; Transport Allied Base Metal Beverages and Products Articles
Electrical Equipment Industries Vinegar; Thereof (250)
Equipment Tobacco
(300)
New car imports declined from 964 thousand units
in 2015 to 725 thousand units in 2016; Imports of Saudi gasoline supply-demand imbalance has
used cars down by around 45% y/y to 37.5 thousand reduced sharply over the years
11
units in 2016
Source: JODIFirst Round of Sharp Price Increases but from Low Base
Saudi Arabia fuel prices, $
Further price reforms expected by the end of 2017, but more gradual and accompanied by cash transfer
schemes to offset the negative impact of higher energy prices on low-income households
Source: Saudi Government, Energy AspectsFuel Oil: The Star Performer
Saudi Fuel Oil: Strong Performance
Saudi Fuel Oil Balance, thousand b/d
• Fuel oil star performer in recent
months with consumption
averaging 0.47 mb/d in 2016, 300
higher y/y by 70 thousand b/d 250
200
• Increase in fuel oil consumption 150
almost offset decline in crude burn 100
in 2016 as the Kingdom maximized 50
its crude exports -
– In some months, SA was a net (50)
importer of fuel oil (100)
(150)
• Looking forward, surplus of fuel oil (200)
during winter months to decline as (250)
Apr-14
Apr-15
Apr-16
Jan-17
Apr-17
Oct-14
Oct-15
Oct-16
Jan-14
Jan-15
Jan-16
Jul-14
Jul-15
Jul-16
new power plants come online
Source: JODIDriven by Power Sector
Saudi power projects 2016-19, Capacity GW
Fuel oil will continue to receive a bid as 7 GW of new power capacity coming online will be fueled
by fuel oil; the IMO will have limited impact on Saudi refining sector though the regular trade flows
to optimize logistics and quality will continue
Source: JODI, Energy AspectsKuwait: Continued Reliance on Fuel Oil
Kuwait Fuel Oil Balance, thousand b/d
• Steady increase in power demand
implies that fuel oil supply- 160
demand balance will continue to
shrink despite increase of gas 140
share in power mix 120
100
• Green field Al-Zour refinery 80
delayed until 2021 would produce 60
0.225 mb/d of low sulphur fuel oil
to feed the power sector 40
20
• Overall Kuwait would be fuel oil -
Apr-17
Apr-14
Apr-15
Apr-16
Jan-14
Oct-14
Jan-15
Oct-15
Jan-16
Oct-16
Jan-17
Jul-14
Jul-15
Jul-16
balanced with some occasional (20)
imports during summer
Source: JODIIraq: Not Far Behind
Iraq’s Fuel Oil Demand, y/y change
thousand b/d Iraq Fuel Oil Balance, thousand b/d
60 180
50 160
40 140
120
30
100
20
80
10
60
-
40
Mar-15
Jan-17
May-15
May-16
May-17
Jan-15
Jan-16
Mar-16
Mar-17
Jul-15
Nov-15
Jul-16
Nov-16
Sep-15
Sep-16
(10)
20
(20) -
Apr-14
Apr-15
Apr-16
Apr-17
Oct-14
Oct-16
Jan-14
Jan-15
Jul-15
Oct-15
Jan-16
Jan-17
Jul-14
Jul-16
(30)
(40)
Until Iraq secures gas supplies from new sources,
Fuel oil consumption used in power sector has
fuel oil balance will erode as refinery projects are
been growing strongly in recent months
delayed
Source: JODIDelay in Iraq’s Refinery Projects
Thousand b/d Notes
Operational Capacity 576
Damaged 334
Planned
Karbala 140 Under construction
Basra Expansion 70 EPC awarded
Misan 150 MOU signed
Nasiriya 300 Bids Invited
Basra 300 Bids Invited
Kirkuk 150 Bids Invited
Basra 100 Bids Invited
Kut 100 Bids Invited
Samawah 70 Bids Invited
Refining projects in Iraq continue to face delays as foreign investors’ appetite is weak
Source: MEESIran: The Challenge of Upgrading
Iran’s Fuel Oil Demand, thousand b/d
• Iran’s fuel oil surplus will grow as
country retrofits its fuel oil power
plants and constructs new gas 550
power plants to increase share of 500
gas in power mix 450
400
• Much of surplus currently sold as 350
bunkers, but after 2020 this outlet
300
will become less important
250
200
• Iran keen to upgrade its refineries,
May-13
May-14
May-15
May-16
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Sep-13
Sep-14
Sep-15
Sep-16
but this is very reliant on foreign
investment
Source: JODI, Energy AspectsConclusions
• Investment in refining strategic
– Securing demand for domestic market
– Diversification into products away from crude
– Creating value down the value chain through integration with petrochemicals
• Very ambitious plans to increase refining capacity especially in Iraq and
Iran, but this relies primarily on ability to attract foreign investment
• Ambitions to build capacity in products trading (Saudi Arabia, Iraq,
Oman, Kuwait)
– So far mainly to secure products for the domestic market but this will change
• Competition from Middle East refiners will only intensify, especially in
the diesel segment
• Gasoline imports from the region will fall, especially as Iran is expected
to achieve self sufficiency by 2018
• With some exceptions (Iran, Iraq), the regional net length in fuel oil is
small and IMO’s decision for a transition to low-sulphur marine fuels will
have limited impact on refineries (power sector is an important outlet in
many countries)You can also read
