2012-2015 fundamental outlook around brent and ... - the ice

Alexander PöglHead of Business Development, JBC Energy

Mr. Pögl has been using his vast knowledge of energy markets to advise national

and international oil and gas companies as well as government-related agencies

around the world for many years. He is regularly leading high level energy study

projects for JBC Energy clients, is heavily involved in the company’s consulting

projects and has participated in several international benchmarking audits

concerning energy trading and risk management issues. Aside from his research

work at JBC Energy, Mr. Pögl is a regular trainer in JBC Energy’s Academy

passing on his insights in the energy markets to the company’s clients. On a daily

basis, Mr. Pögl contributes to nearly all of JBC Energy’s reports and uses his far-

reaching knowledge of the energy industry to guide both seasoned and junior

analysts alike. Prior to his work within JBC Energy, Mr. Pögl has spent several

years in the field of international project management.

8 February 2012

Fundamental Outlook around Brent & Gasoil

Alexander Pögl

JBC Energy GmbH

January 2012

Research - Energy Studies - Consulting - Training

For ICE Futures Forum

8 February 2012 Slide 2

Disclaimer

All statements other than statements of historical fact are, or may be deemed to be, forward-looking

statements. Forward-looking statements (including those depicted in graphical form) are statements of

future expectations that are based on JBC Energy‟s current expectations and assumptions and involve

known and unknown risks and uncertainties that could cause actual results, performance or events to differ

materially from those expressed or implied in these statements. Forward-looking statements include, among

other things statements expressing JBC Energy‟s expectations, beliefs, estimates, forecasts, projections

and assumptions. These forward-looking statements are identified by their use of terms and phrases such

as „„anticipate‟‟, „„believe‟‟, „„could‟‟, „„estimate‟‟, „„expect‟‟, „„intend‟‟, „„may‟‟, „„plan‟‟, „„objectives‟‟, „„outlook‟‟,

„„probably‟‟, „„project‟‟, „„will‟‟, “forecast”, “predict”, “think”, „„seek‟‟, „„target‟‟, „„risks‟‟, „„goals‟‟, „„should‟‟ and

similar terms and phrases. All forward-looking statements contained in this speech/presentation are

expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Readers/audience should not place undue reliance on forward-looking statements. Each forward-looking

statement speaks only as of the date of this presentation. Neither JBC Energy nor any of its subsidiaries

undertake any obligation to publicly update or revise any forward-looking statement as a result of new

information, future events or other information. In light of these risks, results could differ materially from

those stated, implied or inferred from the forward-looking statements contained in this speech/presentation.

Any persons acting on information contained in this presentation does so solely at their own risk. JBC

Energy is not responsible for the accuracy of data collected from external sources and will not be held liable

for any errors or omissions in facts or analysis contained in this presentation.

8 February 2012

Overview

Changing Crude Balances

Inter-regional Crude Arbitrage Flows

Refining Industry Outlook

Implications for Gasoil/Diesel Arbitrage Flows

Slide 3


Crude Oil - Overview

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

140.00

Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

Nymex WTI Vs ICE Brent FL - right scale

ICE Brent FL

Nymex WTI FL

Nymex WTI and ICE Brent (FL) [$/bbl]

Source: CME Group, ICE

8 February 2012


Current Output vs. Expectations

-900 -800 -700 -600 -500 -400 -300 -200 -100 0

Libya

Sudan

Syria

Yemen

Angola

Nigeria

China

Iraq

Iran

Venezuela

Brazil

Azerbaijan

Egypt

Underperforming Crude Suppliers 2011 ['000 b/d]

Source: JBC Energy estimates

Political instability

Sudan blocking South Sudan exports

Maintenance on ACG fields

Petrobras missing output targets

Exports dropping

Lack of investment / sanctions

PL 19-3 shut-down due to oil spill

Militant attacks and piracy

Falling behind growth targets

Field maintenance

High decline rates

EU sanctions

Annual Average vs. expected

Current Figures vs. expected



85

86

87

88

89

90

91

92

2010 2011 2012

Assuming IEA Demand Growth

Supply Disruptions in 2011

World Oil Supply

Maximum Supply Potential - Tight Scenario

Maximum Supply Potential - Base Case

World Oil Supply Outlook for 2012 [million b/d]

Tight Scenario:

Only Saudi Arabia has spare capacity

available, where the amount they are

willing to bring on stream on an annual

average basis is limited to 500,000 b/d.

No Libyan-style outage assumed, but

high decline rates and prolonged

problems in MENA countries and lower

than expected growth rates.

350,000 b/d

supply cushion

1.6 million b/d

supply cushion


Crude Oil - Iran

Strait of Hormuz Strategic Background Info

Jazireh-ye SirriAbu Musa

Shipping Lanes

Iranian missile lauch sites

Iranian military facilities

Iran-Oman maritime border

Islands seized

by Iran

U.A.E.

Oman

IranJazireh-ye Qeshm

Strait of Hormuz Shipping

Lanes 2 miles wide each Source: Various


Crude Oil - Iran

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Total Iranian Export

Other

France

South Africa

Greece

Spain

Turkey

Italy

Korea

Japan

India

China

Iranian Crude Exports by Destination - 2011 ['000 b/d]

24%

15%

11%10%

10%

9%

7%

5%

4%3% 2%

Source: IEA, National Statistics, JBC Energy Calculations


Crude Oil - Iran

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

Russia Algeria Azerbaijan

Egypt Iraq Kazakhstan

Syria Tunisia Libya

Saudi Arabia Iran

(Potential) Crude Flows to Med/Black Sea by Country of Origin [million b/d]

Sources: IEA, JBC Energy estimates


Crude Oil - Iran

4.00

4.25

4.50

4.75

5.00

5.25

5.50

5.75

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

Total Crude Inflows to Med/Black Sea

Total Crude Intake of Med 5 Countries

Crude Flows vs. Refinery Intake in Med/Black Sea [million b/d]

Sources: IEA, JBC Energy estimates

Med 5 includes:

France, Greece, Italy, Turkey, Spain Such a massive prospective stockbuild is

unlikely. Instead Med refiners may slash crude

imports by up to 400,000 b/d in Feb-Apr.

Iranian flows may be on the chopping block…


Crude Oil - World

Major Inter-Regional Crude Flows 2010-2012 ['000 b/d]

Source: JBC Energy, IEA, Reuters

2010 10,729

2011 (est.) 11,118

2012 (est.) 10,950

2010 1,700

2011 (est.) 1,600

2012 (est.) 1,980

2010 689

2011 (est.) 780

2012 (est.) 870

2010 754

2011 (est.) 682

2012 (est.) 740

Mideast to Selected Asia

WAF to Asia

LatAm to Asia

Russia to Asia

2010 2,017

2011 (est.) 2,404

2012 (est.) 1,930

2010 794

2011 (est.) 1,100

2012 (est.) 960

2010 340

2011 (est.) 370

2012 (est.) 360

2010 3,319

2011 (est.) 3,260

2012 (est.) 3,340

Mideast to Europe

WAF to Europe

LatAm to Europe

Russia to Europe

2010 1,847

2011 (est.) 2,000

2012 (est.) 1,970

2010 1,829

2011 (est.) 1,500

2012 (est.) 1,450

2010 3,245

2011 (est.) 3,190

2012 (est.) 3,300

2010 273

2011 (est.) 280

2012 (est.) 290

Mideast to N. America

WAF to N. America

LatAm to N. America

Russia to N. America


Crude Oil - World

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%Norway UK

Others (NL, GER, DEN) Change y-o-y - right scale

North Sea Liquids Production [million b/d, %]


Crude Oil - Russia

0

1

2

3

4

5

6

7

8

9

10

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BPS-2

ESPO

Other routes

BPS-1

Transneft's share in CPC (31%)

Omsk-Pavlodar

Western pipelines (Druzhba, Belarus, Ukraine)

Russian Crude Exports - Old Base Case

Russian Crude Exports - Current Base Case

Russian Crude Export Capacity & Crude Exports [million b/d]

Source: JBC Energy SuDeP, Argus


Crude Oil - Russia

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

40%

50%

60%

70%

80%

90%

100%

Refinery Throughput

Total Products Demand

Refinery Utilisation

Russian Products Demand vs Refinery Throughput ['000 b/d]

8 February 2012 Slide 15 Slide 15 Slide 15 Slide 15

Crude Oil - Russia

1.51.51.6

2.12.11.6

0.80.9

1.0

1.61.3

0.8

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

West (Druzhba, Belarus, Ukraine) North (Baltic & Arctic & River Petersburg)South (Black Sea, Caspian) East (Pacific, China, Kazakhstan)Old Crude Export Forecast

Russian Crude Exports by Direction [mbpd]


Crude Oil - Asia

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

25.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-5

-4

-3

-2

-1

0

1

2

3

4

5

Asian Net Crude Imports

Russian Exports to the East

Global Middle Eastern Exports

Extraregional Crude Requirements -Right Scale

Asian Crude Requirements [million b/d]

Asian crude requirements will outstrip total regional

and Middle Eastern exports from 2012. In 2012,

however, Middle Eastern exports to Asia may drop

as more West African crude is attracted into the

region due to falling Atlantic Basin requirements

8 February 2012

Crude Oil - Prices

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

Dubai (1st Mth) vs Dtd Brent

WTI Cushing (1st Mth) vs Dtd Brent

Urals (RCMB) vs Dtd Brent

Global Crude Oil Price Developments [$/bbl]

Source: JBC Energy, Platts

January 2012 to December 2013 figures

are JBC Energy projections.


Crude Oil – Global Flows

Major Interregional Crude Oil Flows - 2010/2015 ['000 b/d]

North America

Europe

FSU East

OECD Asia

OECD Asia

Non-OECD

Asia

Middle East

Africa


361333

2048

2018

23542007

1853

1611

2520

2409

2157

1826

4957 5274

644

721

10721719

6202

7741

22892678

564987

5204

4489

South America

2010

2015

Flows >500,000 b/d displayed


Demand – Global Trends

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

Non-OECD

Asia

Middle East Central &

South

America

Africa FSU East Non-OECD

Europe

OECD Asia OECD

Europe

North

America

LPG Naphtha Gasoline

Jet/Kero Gas Oil/Diesel Fuel Oil

Other Products

Regional Oil Demand Growth by Products: 2010 - 2016 [million b/d]

8 February 2012

Demand – Europe

-240 -200 -160 -120 -80 -40 0 40 80 120 160 200

Rest of Europe

Turkey

Poland

Netherlands

Belgium

Spain

Italy

France

UK

Germany

Transport

Residential

Agriculture

Power

Petchem

Industry

Bunker

Refinery Fuel

Other

Sector-by-Sector Oil Demand Growth in Europe 2010-2016 ['000 b/d]

8 February 2012

Global Downstream – Capacity Expansions

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Total Conversion Capacity

2007

Total CDU Capacity 2007

CDU FCC Hydro Cracking Coking

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Conversion Capacity

Growth 2008-2018

CDU Capacity Growth

2008-2018

World Conversion and CDU Capacity Development ['000 b/d]

60%

19%

21%

37%

27%

25%

1998-2007 Average Annual Crude

Supply Growth: 598,000 b/d

1998-2007 Average Annual NGL &

Other Liquide Growth: 280,000 b/d 2008-2018 Average Annual Crude

Supply Growth: 290,000 b/d

2008-2018 Average Annual NGL &

Other Liquide Growth: 330,000 b/d



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

%L/H spread to Oman/Dubai %L/H spread to Dtd. Brent

%L/H spread to WTI Cushing

Light/Heavy Product Spreads as Percentage of Regional Benchmark [%]

Source: Platts

L/H product spreads calculated as:

(gas oil + gasoline)/2-HSFO



1.8

1.61.6

1.1

0.7

0.8 1.1 1.1

1.4

2.4

2.3 2.22.5

2.6 2.72.5

2.82.9

3.1 3.2 3.3

0.6

0.7

0.8

0.3

0.20.8

1.01.2

1.9

2.6

2.02.1

2.4

2.52.8

3.1

3.4 3.8 4.14.5

4.7

0

2

4

6

8

10

12

14

16

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

North America

OECD Asia

Europe

Other Regions

World Surplus Refining Capacity [million b/d, %]

For this chart, surplus capacity is defined as capacity that is not being used on top

of a spare capacity treshold of 10%-15% (depending on the region).


Atlantic Basin Downstream – Consolidation Outlook

0

10

20

30

40

50

60

70

80

90

100

2011 2012 2013

75%

76%

77%

78%

79%

80%

81%

82%

83%

84%

85%

Capacity Europe + North America

Capacity World

Refinery Utilisation Europe + North America

Refinery Utilisation World

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2012

Other Expected Net-Additions

US East Coast

Hovensa

Petroplus

Refining Capacity and Utilisation [million b/d, %]


European Downstream – Consolidation Outlook

Europe: Refinery Industry Consolidation

240 (-86)

Gonfreville

100 Harburg

Shell-->Nynas

93 Heide

Shell-->Klesch

160 Dunkirk

dismantling

117 Teesside

terminal

(Proposed) Sale of Refinery [b/d]

Shutdown [b/d]

Capacity Downsizing [b/d]

220 Total Lindsey

80 Gothenburg

Shell-->St1

70 OMV Pitesti

shutdown/terminal

85 Reichstett

terminal

Russian Company Acquired Stake [b/d]

360 ERG Priolo

60% Lukoil

150 Vlissingen

45% Lukoil

480 Ruhr Oel

50% Rosneft

200 Mazeikiu

???

210 Gdansk

???

150 NIS 56% Gazprom

Neft

80 Bosanski Brod

Zarubezhneft

320 Mozyr

43% Slavneft

120 Burgas

70 Odessa

50 Ploiesti

Lukoil

160 Lisichansk ?

TNK-BP

90 Cremona

terminal

Asian Company Acquired Stake [b/d]

210 Lavera 50%

PetroChina

210 Grangemouth 50%

PetroChina

130 Murphy Milford Haven

terminal?

270 Shell Stanlow

--> Essar Oil

210 Chevron Pembroke

--> Valero

220 Schwedt 12.5%

Gazprom Neft ???

178 Ceska

Rafinerska 32.5 %

Gazprom Neft ???

260 Wilhelmshaven

Hestya Energy

terminal

105 Berre

shut down

833,000

1,224,000

86,000

2,748,000

690,000

107 Antwerp temp.

shut down

162 Petit Couronne

temp. shut down

dismantling

68 Cressier temp.

shut down

110 Ingolstadt

Petroplus

163 Coryton

Petroplus

8 February 2012 Slide 26 Slide 26

Gasoil/Diesel Balance - Europe

-1,500

-1,000

-500

0

500

1,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

65%

70%

75%

80%

85%

90%France GermanyItaly NetherlandsPoland SpainTurkey UKOther Refinery Utilisation- right scaleUtilisation, Petroplus Shutdown - right scale

Europe's Gas Oil/Diesel Balance ['000 b/d]

Net refinery consolidation of 500,000 b/d

in 2010/11 taken into account.



0

1

2

3

4

5

6

7

8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

10 ppm 50 ppm 350 ppm

1000 ppm 3000 ppm

Europe Gas Oil/Diesel Demand by Sulphur Content [million b/d]

Source: JBC Energy



2012

2015

Net-Imports NW Europe

Net-Imports Mediterranean Europe

0 500 1,000 1,500 2,000 2,500 3,000

2012

2015Russian ULSD

Russian Off-Spec to Desulphurise

US

Middle East & Asia

Intra-European Desulphurisation Flows

0 500 1,000 1,500 2,000 2,500 3,000

2012

2015

European ULSD Net-Imports and Supplies ['000 b/d]

Potential Maximum ULSD Supplies to Europe ['000 b/d]

Sourc

e:

JB

C E

nerg

y e

stim

ate

s


Gasoil/Diesel Balance - Competition

-1,500

-1,000

-500

0

500

1,000

1,500

2008 2010 2012 2014 2016

Gasoline Jet/Kero

Gas Oil/Diesel Fuel Oil

Product Net-Imports of Core Refining Products ['000 b/d]

-1,500

-1,000

-500

0

500

1,000

1,500

2008 2010 2012 2014 2016

AsiaMiddle East



0 25 50 75 100 1250 25 50 75 100 125

Other

Russia

India

Malta

Italy

Greece

Israel

US

Netherlands

UK

Romania

Bulgaria

Retailer - ULSD

Retailer - HS

2010

0 25 50 75 100 125

2011 (Jan - Sept)

Turkey - Gas Oil/Diesel Imports by Retailers ['000 b/d]

Source: EPDK

2009

Reliance



0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

600

800

1,000

Gas Oil/Diesel Net-Imports - Right Scale

Total Gas Oil/Diesel Fuel Exports

Total Gas Oil/Diesel Fuel Imports

US Gas Oil/Diesel Trade Flows ['000 b/d]

Source: EIA



-3,000

-2,000

-1,000

0

1,000

2,000

3,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

23%

25%

27%

29%

31%

33%

35%

Europe - Gasoline US - Gasoline

Europe - Gas Oil/Diesel Rest of World - Gasoline

US - Gas Oil/Diesel Rest of World - Gas Oil/Diesel

US - Gas Oil/Diesel Yield

Gasoline and Gas Oil/Diesel Product Balance ['000 b/d, %]

8 February 2012 Slide 33 Slide 33 Slide 33 Slide 33


30

40

50

60

70

80

90

100

110

120

2008 2009 2010 2011 2012 2013 2014 2015

Light products (old scheme) Heavy products (old scheme)

Light products (Dec 10 scheme) Heavy products (Dec 10 scheme)

Crude Gasoline & naphtha (Aug 11 scheme)

Light products (Aug 11 scheme) Heavy products (Aug 11 scheme)

Russian Oil Export Duties According to New Law [% of crude export duty]

Source: Ministry of Energy

Base Prior to October 2011 Currently From January 2015

Crude(Urals price per bbl -

$25)* __% +$465% 60% 60%

Gasoline and naphtha Crude duty 90% 90% 90%

Clean products (other light

and middle distillates)Crude duty 67% 66% 66%

Dirty products (fuel oil,

bitumen, lubricants, etc.)Crude duty 47% 66% 100%

Source: Russian Government

New Oil Export Duties



-12.00

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

65/71.5/38.5 65/67/46.7 65/64/52.9 65/60/60 60/66/66 60/66-90/66 60/66-90/100 60/66/100

Simple Refiners

Complex Refiners

Impact of Crude & Product Export Duties on Russian Refinery Margins [$/bbl]


x-axis reads as:

marginal rate of crude duty /

clean product duty as share of crude duty /

dirty product duty as share of crude duty

2011

legislation

2010

legislationlegislation

2012legislation

2013

December 2010 legislation August 2011

legislation

Starting

October

2011

Starting

2015



-200

0

200

400

600

800

1,000

1,200

1,400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fuel Oil Gas Oil

Jet/Kero Gasoline

Naphtha

Russian Product Balance ['000 b/d]



Diesel Supply Potential 2016 from main non-European Suppliers ['000 bpd]

Source:JBC Energy estimates

Russia

2011 2016

0 250

Americas

2011 2016

125 220

Saudi Arabia

(Saudi Aramco)

2011 2016

0 80

India

(Reliance)

2011 2016

115 230

Russian refining sector will be

massively upgraded over the

next 3-7 years and most gas oil

volumes will be desulphurised

domestically. The considered Yug-

pipeline would also push more

volumes towards the Med.The US refining sector has proved

to be highly competitive.

The expansion of the Latin

American refining sector in the

coming years will redirect further

volumes to Europe. If US

utilisation rates in 2016 were 83%

instead of the projected 78% and

distillate yields were 1pp higher,

another 450,000 b/d of diesel

would be freed for exports.

Total might bring its diesel share in the

Jubail refinery to the Med - equivalent

roughly to 20% of the overall Middle

Eastern diesel length in 2016-20.

While our base-case expectation is that

Asian diesel supplies to Europe will remain

roughly stable, a strong Indian refining

investment program and higher supplies

from South Korea could easily double

volumes.

Diesel supplies to Europe (mostly Med) from

the listed suppliers are expected to rise by

anywhere between 0.4 and 1 million b/d over the next 5-10 years.


Thank You!

www.jbcenergy.com

Research – Energy Studies – Consulting – Training

2012-2015 fundamental outlook around brent and ... - the ice

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