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Enterprise Improvement
Financial Advisory
Information Management
Leadership & Organizational Effectiveness
Turnaround & Restructuring
15-16 February 2016
Global Market Outlook and implications for
Egypt’s downstream sector
www.alixpartners.com
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2
• Global perspectives on the downstream industry
• Challenges and opportunities for Egypt
• How to develop a competitive downstream industry
www.alixpartners.com
Contents
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3
• Global perspectives on the downstream industry
• Challenges and opportunities for Egypt
• How to develop a competitive downstream industry
www.alixpartners.com
Contents
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Refined products: global refining overcapacity
Source:OPEC, AlixPartners analysis
Refinery utilization (throughput/capacity), 2014 (% of calendar day capacity)
US
&
Canada
88%
81% 77%
62%
77%
85%
World Other
Asia
Pacific
China Middle
East
77%
Russia
&
Caspian
Europe Africa Latin
America
82% 82%
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Refined products: demand growth should be driven by Asia, Middle-
East and Africa
Annualized growth rate of gasoline and gasoil demand by region
between 2014 and 2020, Mb/ day
Source:OPEC, AlixPartners analysis
Europe
1% 1% Russia/ Caspian
1% 2%
Asia Pacific
2% 3%
Middle-East
1% 2%
Africa
2% 3%
US and Canada
1% 1%
Total World
1% 2%
Gasoline Diesel
Latin America
2% 2%
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Refined products: additional refinery investments …
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Planned additional refining capacity 2014-2035 (millions of barrels per day)
Source: IEA, AlixPartners
4.0
China
0.4
North
America
Middle
East
2.9
Europe
0.2
India
2.3
1.4
Brazil 1.5
12.7
Total World
Rest of the World
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Refined products: additional refinery investments … leading to global
surplus
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Planned additional refining capacity 2014-2035 (millions of barrels per day)
Source: IEA, AlixPartners
4.0
China
0.4
North
America
Middle
East
2.9
Europe
0.2
India
2.3
1.4
Brazil 1.5
12.7
Total World
Rest of the World
Expected global surplus by 2020, (Mb/d)
0.60.8
Gasoline/ Naphta Middle Distillates
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Petrochemicals: Significant capacity increase driven by Asia and the
Middle East
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2000
281 305
2014
Global petrochemicals capacity 2000-2014 (MTA)
North America
Total World
Europe
GCC
China
Others
Source: GPCA, ICIS, IFDC
2014
247
2000
246
2014
114
2000
741
508
2014
327
2000
Rest of Asia
2000
39 184
2014 195
2000 2014
148
2014
1 179
2 156
+4% p.a.
2000
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Petrochemicals: demand will continue to grow for most products
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Source: IHS
61
Ethylene
52
Methanol
48
Propylene
19
Paraxylene
15
Benzyne
3.5% 6.9% 4.2% 4.5% 2.3%
Global petrochemical demand growth 2010 – 2020, MM
Tons 2010-20 AAGR
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11
• Global perspectives on the downstream industry
− Impact of low oil price
• Challenges and opportunities for Egypt
• How to develop a competitive downstream industry
www.alixpartners.com
Contents
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Low oil price generated a capex cut of 15% in 2015 for Oil & Gas
overall, driven by E&P
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Global Capex spending estimates public Oil&Gas companies (USD billions)
Note: (1) Does NOT include National and State Owned Oil Companies
Downstream
Midstream
2016E
-17%
751
2010
1 061
2011
901 956
2012
849
+10% p.a.
717
-15%
1 018
2015 2013 2014
Chemicals
E&P
OFE/OFS
Delta Capex
CAGR 2014 – 2016E
+5%
+4%
+34%
+4%
- 50%
Source: Bloomberg, AlixPartners analysis
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13
• Global perspectives on the downstream industry
• Challenges and opportunities for Egypt
• How to develop a competitive downstream industry
www.alixpartners.com
Contents
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Egypt downstream industry has suffered in the recent years,
but demand remained strong
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522496
544548554
2014
-10%
2013 2012 2011 2010
+5%
826799781751716
2012 2011 2014
3,6% CAGR
2013 2010
Source: OPEC, AlixPartners analysis
Egypt – Output of refined petroleum (1000 b/d) Egypt demand of petroleum products (1000 b/d)
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Egypt’s downstream has more opportunities than challenges ahead
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New gas resource
discoveries
(Zohr gas field)
Projects to increase
capacity
Local demand and
consumption
Strategic location
(capacity of Suez canal)
Political stability and
support to downstream
Project financing
Technology
Regulation and
subsidies
Feedstock availability
USD
14.5Bn
+4% p.a.
30 tril.
feet3
Tahrir
MIDOR
X 2
Opportunities Challenges
Source: OPEC, GPCA, TO&GY, AlixPartners analysis
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Why is it strategic for Egypt to develop its downstream industry?
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Create added value locally on the back of upstream resources
Support and foster the development of a local manufacturing industry
Create direct and indirect jobs
Increase exports via strategic location
Bring currencies to the country
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17
• Global perspectives on the downstream industry
• Challenges and opportunities for Egypt
• How to develop a competitive downstream industry
www.alixpartners.com
Contents
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Some key success factors to build a competitive downstream
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Technology and scale
Trading and Marketing capabilities
Operational excellence
Integrated Platforms - clusters
Public - Private cooperation
1
2
3
4
5
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Some key success factors to build a competitive downstream
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Technology and scale
Trading and Marketing capabilities
Operational excellence
Integrated Platforms – Clusters
Public - Private cooperation
1
2
3
4
5
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Developing a competitive downstream industry
Learnings from Malaysia
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Source: Malaysia Petroleum resources corp
Pengerang refinery and petrochemical integrated complex
(RAPID project)
Common infrastructure
• Cogeneration plant
• Air-separation unit
• LNG regasification
terminal
• Raw-water supply project
• Liquid bulk terminal
Shared services
• Safety
• People
• Maintenance
Product exchanges
• Hydrogen
• Naphta
• Benzene
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Public authorities can support the development of the downstream
industry through five main levers
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Tax incentives for investors
Business friendly environment
Investment in downstream capacity
Investment in downstream infrastructure
Scaling down of fuel subsidies
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Public authorities can provide support to the development of the
downstream industry through five main levers
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Fuel subsidies ended in 2014
Public authorities funded
key infrastructures of the
integrated complexes
JV between Petronas and
International players
In strategic industries
and locations Tax incentives for investors
Business friendly environment
Investment in downstream capacity
Investment in downstream infrastructure
Scaling down of fuel subsidies
Limited bureaucracy
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Conclusion
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Global perspectives on the downstream industry
Refining: Slow growth and overcapacity
Petrochemicals: strong demand, need for capacity
Beyond self-
sufficiency, need to
build a competitive
industry
How to develop a competitive downstream industry
Integrated model with operational excellence and the right
infrastructure to balance capacities with market
State support: save on subsidies to invest in productive
assets
Challenges and opportunities for Egypt
Opportunities: Political support, Local demand, New
discoveries, Pipeline of projects, strategic location
Challenges: Feedstock, Financing, Subsidies, Technology
Plan infrastructure
to capture synergies
and facilitate
import/export
Downstream
development is
strategic for Egypt
future economic
growth
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Thank you
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