asian refining and product market : … refining and product market : trends and outlook alex yap...
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ASIAN REFINING AND PRODUCT MARKET : TRENDS AND OUTLOOK
Alex Yap – Senior Analyst
INTRODUCING
• A new product portfolio which helps customers better understanding the drivers of supply and demand dynamics which move commodity prices
• Builds on 100 years of experience and expertise in price assessments and news
• Proprietary analysis, tools, data and information
• Capabilities developed internally and through the integration of Bentek Energy, Petromedia (Bunkerworld), Eclipse
• Functions as a separate part of Platts and does not produce benchmarks or participate in the price assessment process.
• Initial Asian offering: China Oil Analytics
REFINING MARGINS: THE PARTY GOES ON
• 2015 average Singapore Cracking Margins $5.03/bbl
• Jan 2016: Singapore Cracking Margins at their highest since April 2008
$0
$20
$40
$60
$80
$100
$120
-$2.00
$0.00
$2.00
$4.00
$6.00
$8.00
Platts Dubai Singapore Cracking Margin Platts Dubai
$/bbl $/bbl
PRODUCT CRACKS: DIFFERENT STORY, SIMILAR OUTCOME
4
• 2008: extreme strength in Middle Distillates, weak Fuel oil
• 2015: strength in Gasoline and Naphtha, moderate Middle Distillates & Fuel Oil
-$20
-$10
$0
$10
$20
$30
$40
Gasoline RON 92 Gasoil Kerojet Naphtha Fuel Oil 380 cst
2008
2015
Singapore Product Cracks ($/bbl)
ASIA: KEY REFINING HOTSPOTS
India: new set of expansions by NOCs could maintain strong exports
Indonesia: Continued refining shortfall, rising imports
Australia: further closures to deepen import dependency?
Japan: new round of govt. mandated closured by 2017
Malaysia: RAPID to Malaysia into net product exporter
Vietnam: Nghi Son by 2018-19; third refinery & Dung Quat expansion?
China: continued capacity building to drive emergence as leading exporter?
0
5
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15
20
25
30
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40
End-2015 End-2020
mil b/d
China Rest of Asia 6
+0.74 mb/d
+2.0 mb/d
Projected Asian Refining Capacity
ASIAN REFINING CAPACITY: ADDITIONS AND CLOSURES
Key Changes
2016 Paradeep (India) - 300 kb//d
2017 METI directives (Japan) – 400 kb/d reductions
2018 Nghi Son (Vietnam) – 200 kb/d
2019 RAPID (Malaysia) – 300 kb/d
2020 (China) – 2.0 mb/d net additions
Key Uncertainties
20?? Hengyi (Brunei) – 160 kb/d
20?? Third refinery (Vietnam) – 160-200 kb/d
20?? New grassroots (Indonesia) – 300 kb/d
20?? Geelong (Australia) – 120 kb/d closure
MIDDLE EAST: ONGOING CAPACITY ADDITIONS
Saudi Arabia: Yanbu (YASREF) begins operations early 2015
Saudi Arabia: Jazan refinery (400 kb/d) scheduled for completion in 2017-18
Iraq: new capacity plans in questions due to political and economic problems
Iran: post-sanctions press ahead with refinery refurbishment and expansion plans
Yemen: civil conflict has disrupts operations at Aden refinery
Kuwait: addition of Al-Zour refinery (615 kb/d); revamp of Mina Abdullah and Mina Al Ahmadi (800 kb/d) to raise exports
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1015
20253035404550
End-2015 End-2020
mil b/d
China Rest of Asia Middle East
+0.74 mb/d
+2.0 mb/d
+0.71 mb/d
Projected Asia & Mid East Refining Capacity
EAST OF SUEZ CAPACITY TO RISE DESPITE SLOWDOWN CONCERNS
WILL OVERCAPACITY SQUEEZE MARGINS?
• In some markets, domestic refiners enjoy protection through tariff, pricing, logistics & marketing barriers (e.g. Indian NOCs, China, Indonesia)
• Commercial, export-oriented players sell in the open market; margins rise and fall on regional benchmarks (e.g. Reliance & Essar, Singapore, S Korea)
• Therefore, each capacity addition or closures can impact regional margins differently
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Asia Selected Aggregate Util.% China Util.%
PRODUCT BALANCES: ASIA & MID EAST
-200
0
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1,000
Gasoline Fuel oil Gasoil Kerojet Naphtha
kb/d Middle East
-2,000
-1,500
-1,000
-500
0
500
1,000
Gasoline Fuel oil Gasoil Kerojet Naphtha
kb/d Asia
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PRODUCT BALANCES: EAST OF SUEZ
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Gasoline Fuel oil Gasoil Kerojet Naphtha
mil b/d Asia & Mid East Combined
2015
2020
KEY CERTAINTIES & UNCERTAINTIES
• Crude : prices will begin to rise as the market rebalances towards 2017-18
• Refinery margins: slower demand growth, more capacity additions and crude price recovery will eventually weigh on profitability
• China: will excess capacity be unleashed towards export markets?
• India: new capacity additions to sustain exports volumes?
• Southeast Asia: will Indonesia, Vietnam, Malaysia, Brunei be able to realize planned projects?
• Bunker specifications: could IMO regulations (2020? 2025?) shake up the fuel oil and gasoil trade?
