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Oil Supply-Demand Imbalances and Trade Flows for Turkey and the Atlantic Basin and Implications for Oil Terminal Business

Istanbul, October 2009

Ben Holt Vice President Wood Mackenzie

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Turkey’s Oil Products Position

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Crude Oil Transit and Refining

Agenda

International Oil Products Trade Flows

Implications for Turkey 4


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Turkey- Key Oil Transit Country

Turkish Straits near capacity for oil tanker transit

Growing volumes via BTC Pipeline

Potential further by-pass pipeline eg Samsun-Ceyhan

Refineries at Mediterranean end of by-pass lines under consideration?

Crude and product exports from Iraq to increase?

Black Sea and Caspian Oil Map Black Sea and Caspian Oil Map

Source: Wood Mackenzie


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Russian crude oil refining and exports to increase by 2015, but with much greater flexibility in export routes

Net Russian crude exports to increase from 272 Mt in 2008 to 300 Mt in 2015

Russian refinery crude intake to increase from 220 Mt to 230 Mt over the same period

Incremental pipeline crude export capacity (BPS2 30 Mta, ESPO 80 Mta) will exceed increased exports, allowing

"Focus on higher netback routes

"Flexibility to vary exports between markets

Russia’s Crude Production, Refining and Exports Russia’s Crude Production, Refining and Exports

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2015


Mt

Net Crude Exports Crude Refined


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Caspian crude oil output growth should provide further transit opportunities for Turkey

Kazakh crude production to exceed 3.1 Mbd by 2020

Azeri production to rise to over 1.2 Mbd

Turkmen output also to rise, to 300 kbd by 2020

Iraqi output to double vs 2008, to 4.8 Mbd by 2020

Syrian crude output may decline

New refining projects mooted in Iraq, Syria

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2008 2010 2012 2014 2016 2018 2020

Source:Wood Mackenzie

Millio

n b

dKazakhstan

Azerbaijan

Turkmenistan

Caspian Crude Oil Production Forecast to 2020


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GDP growth rate is constant, PPP-weighted Source: IEA, EIA, IMF, National Statistics, Wood Mackenzie

High oil prices and then the financial crisis have brought a large downturn in global oil demand…

Mb

/d

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Demand Growth GDP Growth


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…. which, with new refining capacity being built, is leading to large overcapacity in refining over the next five years

Absent exceptional factors, it will be challenging to justify new refineries in the Med eg at Ceyhan

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Mbd

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Demand (LHS) Refining Capacity (LHS) Spare Capacity (RHS)

Source: BP Stats Review, Wood Mackenzie

Forecast


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Agenda




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LPG Naphtha Gasoline Jet/Kero Diesel/Gasoil Fuel Oil

Other

products


Millio

n T

onne

s

2000 2005 2006 2007 2008

Diesel has been the key growth oil product in Turkey and net imports have grown rapidly in recent years

Large net LPG imports, recently stable

Naphtha and especially growing Gasoline surplus consistent with the European trend

Significant and increasing deficit in gasoil and diesel

Surplus of heavy fuel oil, can partly support the bunker market

Turkey Oil Product Balances, 2000-2008

Surplus

Deficit


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After recovery from current downturn, gasoil/diesel demand will grow further

We expect gasoil/diesel demand to grow 3% pa on average from 2010 to 2020, slowing later

Gasoline demand starts to increase especially later in next decade

LPG demand to grow once again

Jet kerosene demand grows steadily

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LPG

Naphth

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Gas

oline

Jet/O

ther

Ker

osene

Diese

l/Gas

oil

Fuel O

il

Oth

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roduc

ts


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2000 2005 2008 2010 2015 2020

Turkey Oil Product Demand, 2000-2020


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A large swing is ongoing in refined product yield towards diesel in the Med

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2005 2008 2010 2015 2020 2025

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finer

y Y

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LPG

Naphtha

Gasoline

Jet/Kero

Diesel

Gasoil

LSFO

HSFO

Other products

RFL

Source Wood Mackenzie

Med regional refinery investments in hydrocracking and coking lead to large swing in yields – between 2008 and 2015, diesel yield grows by 5% and HSFO yield falls by 8%

This allows refiners to keep up with regional diesel demand growth

Mediterranean Overall Refinery Product Yields


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Mediterranean Oil Product Balances to 2020

Diesel deficit and Naphtha surplus stabilise after 2010

Gasoline surplus falls after 2015

HS Fuel Oil position dependent on bunker market developments

Mediterranean Oil Product Balances to 2020

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LPG Naphtha Gasoline Jet/Kero Diesel Gasoil LSFO HSFO

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nces, M

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Surplus

Deficit



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Russia’ s product exports are significant to Turkey

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LPG Naphtha Gasoline Jet/Kero Diesel/Gasoil Fuel Oil

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lances, M

t .

2000 2005 2008 2010 2015 2020 2025

Surplus


Forecast Russia Net Product Balances

We see naphtha/gasoline exports rising by 4 Mta, gasoil/diesel by +13 Mta and fuel oil falling by 19 Mta by 2015

Exports of LPG and condensate from upstream sources (not included here) are likely to grow on lower flaring

Product exports decline later with increasing domestic demand, unless further new refining capacity is added


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Significant new and expanded capacity to be built in the Middle East: in competition with Russia in export refining; NOC’s likely to run at capacity

Yanbu Saudi Aramco/ CoP 400 kbd, 2015

Ras Laffan Qatar Petroleum 146 kbd, 2009

Jubail Saudi Aramco/Total 400 kbd, 2014

Bandar Abbas NIOC 120 kbd, 2013 120 kbd, 2014 120 kbd, 2015

Jamnagar II Reliance 580 kbd, Operational

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2005 ME capacity Projects ME Demand

Karachi Indus Refinery Ltd 90 kbd, 20011



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Outlook for gasoline trade flows

Key net trade 2010 (kbd)


Asia

FSU

New net trade 2015 (kbd)

Europe

North America

Latin America Africa

Gasoline flows from Europe to North

America are forecast to increase

Indian Ocean rim refiners will try to push gasoline into

North America

Growing surplus of gasoline in FSU as refiners invest in improving octane

levels

Middle East

The deficit in North America is expected to grow, despite weak demand, as refiners reduce utilisation and shift yields towards middle distillates. Asia Pacific becomes deficit by 2015, from current surplus

Greater Europe/FSU will maintain a large surplus and continue to export to North America and SS Africa

Middle East becomes surplus by 2015


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Outlook for diesel/gasoil trade flows


US exports of diesel to US exports of diesel to Europe remain high in Europe remain high in

the short termthe short term, , but but amount falls post amount falls post 20102010

European imports of European imports of dieseldiesel//gasoil from Middle gasoil from Middle

East could increaseEast could increase

Russia will continue to Russia will continue to export dieselexport diesel//gasoil to gasoil to

EuropeEurope

Middle East Middle East dieseldiesel//gasoil exports gasoil exports to Asia will increase to Asia will increase later in the forecast later in the forecast

periodperiod

Growing demand and reduced refinery utilisation will result in a widening deficit in Greater Europe, with the FSU remaining the most important source of European imports.

The surplus in North America falls post 2010 as demand growth picks up.

Exports from the Middle East will grow between 2010 and 2015 as new refineries come on stream, while the surplus in Asia falls in this time period due to strong growth in demand.


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Implications for Turkey’s Oil Infrastructure

Samsun-Ceyhan pipeline offers one route for growing Caspian and Russian crude volumes to the Med and global export markets

Economics for new refining, for example at Ceyhan, may be challenging in the near term

The Turkish products market will be increasingly deficit in middle distillates and LPG in the medium term, despite planned upgrading at existing Tupras refineries

Russian and Indian Ocean Rim export refiners and traders are likely to be looking for terminal capacity to access the Turkish market


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áBen Holt

Vice President, Downstream Oil Consulting

Wood Mackenzie Limited

1 Finsbury Square

London EC2A 1AE

T: +44 203 060 0467

E: [email protected]

Contact


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Wood Mackenzie

Kintore House 74-77 Queen Street Edinburgh EH2 4NS

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Wood Mackenzie has been providing its unique range of research products and consulting services to the Energy industry for over 30 years. Wood Mackenzie provides forward-looking commercial insight that enables clients to make better business decisions. For more information visit: www.woodmac.com


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