middle distillates: a mediterranean refiner perspective · fcc & hcu speciality refinery ......
TRANSCRIPT
1 SARAS S.p.A. 4th Platts European Refining Markets 1
Platts 4th Middle distillates conference: 30-31 January 2014 Giuseppe Gibin – head of Crude & Product trading supply – Saras S.p.A.
Middle distillates: a mediterranean refiner perspective
2 SARAS S.p.A. 7th Platts European Refining Markets 2
• Where are we coming from • Refinery profitability • The Med arena • Saras Overview and Med peculiarities • What to do ?
Agenda
3
Crack vs investments timeline
2001: Saras Hydrocracking 65 kb/d and Gasification Plant converting abt 20 kb/d into power and H2
Most of the investments in HCK have been increasing middle distillates production also after the peak crack season
Most of the investments decided around the peak margin years hard repayment expected
0
20000
40000
60000
80000
100000
120000
140000
160000
20012003
20052007
20092011
20132015
2017
b/d
Hydrocracking added capacity
Source Woodmackenzie
4
Crack vs Gross Profitability
Urals Med $/Bbl
0
20
40
60
80
100
120
140
gen-0
5giu
-05nov-0
5ap
r-06set-0
6feb
-07lug-0
7dic-0
7
mag-08ott-
08
mar-09
ago-09
gen-1
0giu
-10nov-1
0ap
r-11set-1
1feb
-12lug-1
2dic-1
2
mag-13ott-
13
Urals Med $/Bbl
Ural med $/b
Crack Ulsd $/bl
Crack/Crude
2005-2009 67.4 20.1 0.30
2010-2013 101.6 17.1 0.17
Decrease in Gross Profitability despite “acceptable” crack value
Assuming the crack uf ULSD as the major driver for
refinery margin….
The absolute value of the crack is not equivalent to its relative value to the crude cost:
- 43%
Source Woodmackenzie, company data
5
Gross profitability in a higher price scenario
Refinery economics in a higher price scenario are facing higher C+L costs:
• Consumptions (i.e. steam, power) cost more • Losses worth more
...and deep conversion refineries imply higher operating cost
Energy has become 60% + of refinery operating costs...
2 1 0
2004-08 2009-10 2011 2012 2001-03
$/bl
4
3
6 5
Gross Margin (before variable costs) C&L1
70
60
50
40
0 2012 2011 2010 2007 2006 2009 2008 2005 2004
Energy cost as % of Opex
$ 38 $ 55 $ 65 $ 72 $ 97 $ 62 $ 80 Brent Price $ 111 $ 112
1. Consumption & Losses
... and Energy consumption is a key driver of profitability
$/bbl
Cheap gas or advantaged crude NOT extensively available in Med Area
Source: Saras elaboration, BCG, EMC and Platts
6
Affecting profitability
Additional pressure is deriving from backwardated market i.e 0.50 $/bll (2010 – 2013 scenario)
Financing WC cost: • WC requires more cash during a period of increasing inventories, but also when the payables/receivables cycle gets longer
Backwardation implied cost: both on pricing cycle and on increasing inventories
5 after B/L 10 days avg delivery 15 days CIF / FOB/ ITT Avg 15 days
abt 40 days = all 50 c/bbl paid, in case price hedging is applied
Crude payables Refinery processing Products receivables
Payment due 30 after B/L
10 days avg voyage 15 days run Sales FOB/CIF/ITT
Payment received 15 after B/L
B/L date
Crude pricing Refinery processing Products pricing
B/L date
7
Greater Europe balances
Reduced refinery runs + additional refinery closure are expected
Europe shorter in Mid Distillates
The land for import……
Source Woodmackezie
8
Europe and Med arena
How to survive in this battleground……?
Source PIRA
9
Med Balances
Euro Med diesel/gasoil balance
-900,0
-800,0
-700,0
-600,0
-500,0
-400,0
-300,0
-200,0
-100,0
0,0
100,020
00
2002
20
04
2006
20
08
2010
20
12
2014
20
16
2018
20
20
2022
20
24
Euro Med Diesel Euro Med Gasoil
NON Euro Med diesel/gasoil balance
-350,0
-300,0
-250,0
-200,0
-150,0
-100,0
-50,0
0,0
50,0
100,02000
2002 2004
2006 2008
2010 2012
2014 2016
2018 2020
2022 2024
Non Euro Med Diesel Non Euro Med Gasoil
ALL Med diesel/gasoil balance
-900,0
-800,0
-700,0
-600,0
-500,0
-400,0
-300,0
-200,0
-100,0
0,0
100,02000
2002 2004
2006 2008
2010 2012
2014 2016
2018 2020
2022 2024
All Med Diesel All Med Gasoil
Med area is expected to be shorter in Mid Distillates, with a significant part of Gasoil demand still present in the
non Euro Med
The short is due more to lower refinery runs and closures than demand
Source Woodmackezie
10
King Leonidas needs some support….?
Is the door for extra UE barrels too much open ?
11
Saras: overview of Refinery and Med capacity
28,9%
9,7%
29,7%
17,5%
2,4%6,5%
4,8%
FCC FCC & COKHSKIM FCC & HCU & COKFCC & HCU Speciality RefineryHCU & COK HCUCOK
Source Wood Mackenzie
• 71 refineries • abt 8.7 M/bpd capacity CDU • Avg CDU 123 Kbpd • Avg WMI 4,9
28,9%
9,7%
29,7%
17,5%
2,4%6,5%
4,8%
FCC FCC & COKHSKIM FCC & HCU & COKFCC & HCU Speciality RefineryHCU & COK HCUCOK
Source Wood Mackenzie
Saras NCI 9.2, WMI 8.86
Med capacity
12
Saras: crude and middle distillates in brief
Typical crude slate
45%
30%
12%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sweet/Waxy M Sour H Sulphur H Acidic
Typical product slate
Abt 50% Middle distillates (85% ULSD)
Abt 40 crude types processed in the last 2 years
Middle distillates portfolio allocation last 3 years
Delivered abt 65%
FOB abt 35%
Term abt 80%
Spot abt 20%
Middle distillates: core production of the refinery
Zero fuel oil refinery
Nearly all the residue is converted and all the cutters stock into Mid Dist
Source Company data
13
Some Med Peculiarities vs NWE
MENA remains a viable market for non 10ppm Sulphur Gasoil
Logistic is less developed vs NWE (size, independent hub storages, etc)
Granularity of the market (size, number of trades/clients)
Lower liquidity of the market
“Security valve” for a refinery, opportunity not to desulphurize
Hardly accessible ports for arb cargoes (with limited storage) …but
improving
Laborious supply is required (ie combo cargoes, double ports)
Hedging and paper market limited, less flexibility
Not only import but more complex operations are required
Geographic/specs/countries variety Sub region balances, less standardized supply
As a buyer/trader Med is still a place where is important to maintain a long position on FOB barrels Mid Dist
14
Virtous refinery actions and competitive / risk factors:
3. Allocation of gasoline surplus (deblending, non Euro specifications, increased focus to MENA markets)
4. In time investments in HCK and H2 (allowed to repay investments during the higher margin years) ….evaluating investments in logistic, bunkering, for reducing cost of consumptions/losses
5. Leveraging more on integration/complexity (integration with petchem, gasification/power) … increasing synergies
1. Coastal location fob value of production
2. Coastal location flexibility to ample and diversified crude supply
the technological and operational excellence is mandatory but not sufficient for survival
….but flexible portfolio FOB/Delivered sales, niche market and local supply presence ….but FOB barrels of ULSD/Gasoil are well bid as backstop supply for the region
6. Ownership: independent oil refining companies disappearing
15
Saras: current operating model
Saras group structure and operating model has recently been reviwed with a more commercial driven approach
Saras Spa Sarlux Refinery
16
Supply & Trading adaptive approach is required
Paper market monitor and presence: • Diff ULSD Med/NWE – ICE GO • Monthly Spread • Arb USGC/ME– NWE/Med • Crack GO/ULSD • Desulph and conversion Spread • Exploiting pricing optionality
Optimization of physical crude and products: • Crude selection • VGO / SRFO selection • In refinery blending (FAME, GTL) • Enahancing cold properties • Steering inventories level
Service to client: • Trigger price • Storage + Sale • Bio fuels tickets • Combi cargoes
Organizational model: S&T driving the Planning of Production decisions
S&T integrated with downstream (wholesales/retail) Risk managment team inside S&T
More to do …. logistic, analytical, financing
17
Supply & Trading adaptive approach is required
Organizational model: S&T driving the Planning of Production decisions
S&T integrated with downstream (wholesales/retail) Risk managment team inside S&T
Being ready to cover local short balances that may arise
Continous LP model update optimizing crude slate and reselling option/constant BE calculations Approaching clients on different channel (wholesale/retail/cargo) offering multiple options and maximising the overall profit and market development Plain vanilla hedge + paper trading + inventories hedge within a structured department
Paper market monitor and presence:
Investments in software and info tools + media
are required
Anticipating market trends (arb in products, crude supply) Active hedging Crack forward trading Driving production/blending decision upon positions taken in spread (i.e. desulph/conversion) Handling backwardation and leveraging contango Enabling all pricing formula
18
Spain and Italy….reversing position ?
-140
-120
-100
-80
-60
-40
-20
0
20
40
602011 2012 2013 2014 2015 2016 2017 2018
'000 b
/d
Refinery Supply / Demand Balance Total Supply / Demand Balance*
-50
-
50
100
150
200
2011 2012 2013 2014 2015 2016 2017 2018
'000 b
/d
Refinery Supply/Demand Total Supply demand balance
Spanish balance Italian balance
Reshaping flows
0
500
1000
1500
2000
2500
3000
3500
2010 2011 2012 2013
Kton
s
Italy Spain
Opening and closing refineries
changing balances and flows
Mid dist liftings from Saras
refinery
Source Woodmackenzie, company data
19
Italy at a glance
Local balances to be covered
20 20
Supply & Trading adaptive approach is required
more trading oriented….is it enough ?
Filling conversion plants not CDU Quick decision process for new crudes and feedstocks Exploiting new slate combination Testing the “lower runs” asset within the refinery
Optimization of physical crude and products:…..and facing the crude supply disruptions of these last years
Service to client:
Never fail to sell due to a refinery problem Always say YES …at certain conditions Combined offers (CSO, Bio tickets, BIO Fame addictivated) Taking rent storage capacity and supply clients through ITT Ready and flexible to change programs, swap, buyback
Flexibility at utmost
