the altered outlook of jet fuel supply/demand situation in the east of suez market by fereidun...
TRANSCRIPT
![Page 1: The Altered Outlook of Jet Fuel Supply/Demand Situation in the East of Suez Market By Fereidun Fesharaki, President FACTS Inc., Hassaan Vahidy, Lead Analyst,](https://reader033.vdocuments.mx/reader033/viewer/2022051301/5a4d1afb7f8b9ab059983c86/html5/thumbnails/1.jpg)
The Altered Outlook of Jet Fuel Supply/Demand Situation in the
East of Suez Market
ByFereidun Fesharaki, President FACTS Inc.,Hassaan Vahidy, Lead Analyst, FACTS Inc.,
Singapore
Presented toMiddle East Jet Fuels Conference
BahrainMay 2004
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Global Oil Demand and the Asia-Pacific Region
Oil product consumption in the Asia Pacific region has slowed down in the recent years; and even under an optimistic scenario growth rates of the past will not be achieved in years to come.
Currently China accounts for almost 70% of the growth in Asia, and some 25-30% of the global oil consumption growth.
Following poor performance in 2001 and 2002 the region posted a growth of 664 kb/d in 2003. This however does not mark a broad-base growth revival in the region.
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Asia-Pacific Product Demand1970-2015
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
kb/d
LPG
Naphtha
Gasoline
Kero/jet
Gasoil
HFO/other
Growth85-95 5.5.%95-00 3.2%00-05 2.0%05-10 2.8% 10-15 2.5%
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Year World Asia-Pacific Share of AP
1990 330 707 214%1991 410 592 144%1992 560 916 163%1993 330 706 214%1994 840 884 105%1995 1,400 937 67%1996 1,630 863 53%1997 1,500 821 55%1998 420 -216 -51%1999 1,620 946 58%2000 640 516 81%2001 290 62 21%2002 180 236 131%2003 1,600 664 41%2004* 1,680 546 33%Total 10,150 7,970 79%
*ProjectedSources: IEA (for World Demand) and FACTS Inc. (for Asia Pacific)
(kb/d)
Oil Demand, 1990-2004Global and Asia-Pacific Incremental
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1998 1999 2000 2001 2002 2003 2004*China 117 321 320 111 168 451 386India 112 154 28 3 3 0 31Japan -206 84 -40 -209 -59 84 -127S. Korea -246 130 55 2 53 21 22Thailand -43 44 -5 -11 41 48 53Indonesia -57 55 73 45 26 23 46Others 107 158 84 121 3 37 135Total -216 946 516 62 236 664 546*Projected
Asia Oil Demand Growth, Selected Nations (kb/d)
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Mideast: Oil Demand History & Forecast
-
1,000
2,000
3,000
4,000
5,000
6,000
1970 1975 1980 1985 1990 1995 2000 2005 2010
kb/d
LPGNaphthaGasolineKero/jetGasoil*Fuel Oil**OthersDU Crude
*Includes bunkering. **Includes bunkering, excludes DU Crude.
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Asian Product Balances
(200)
(100)
-
100
200
300
400
500
600
1995
1996
1997
1998
1999
2000
2001
2002
2003
kb/d
GasolineKero/jetGasoil
Asian Refining Capacity
-
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003
kb/d
4.5% annual growthRefining Capacity and
Product Balances
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Asia-Pacific Net Imports
-
500
1,000
1,500
2,000
2,500
3,000
1995 1999 2000 2001 2002 2003 2005
kb/d
Other Fuel Oil Diesel KerojetMogas Naphtha LPG
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Middle East: Net Product Export by Group*
(500)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
1997
1998
1999
2000
2001
2002
2005
2008
2010
*Excluding LPG and Others
kb/d
Fuel Oil Diesel Kero/JetGasoline Naphtha
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Mideast Net Exports/Asia-Pacific Net Imports*
(500)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
95
ME
AP
99
ME
AP
00
ME
AP
01
ME
AP
02
ME
AP
03
ME
AP
05
ME
AP
07
ME
AP
10 M
E10
AP
kb/d
HFO/Other GasoilKero/Jet MogasNaphtha
*excluding LPG
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Gross Refining Margins Based on Arab Light Crude Cracking Yield
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$/bb
l
US Gulf CoastNorth West EuropeSingapore
The impact of these product balances is clearly visible on the region’s refining profitability…
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Dubai Crude and Singapore Jet Fuel / Kerosene Prices
0
5
10
15
20
25
30
35
40
45
50
Jan-9
5Ju
l-95
Jan-9
6Ju
l-96
Jan-9
7Ju
l-97
Jan-9
8Ju
l-98
Jan-9
9Ju
l-99
Jan-0
0Ju
l-00
Jan-0
1Ju
l-01
Jan-0
2Ju
l-02
Jan-0
3Ju
l-03
Jan-0
4
US$
/b
DubaiSingapore Jet Fuel / Kerosene
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Ratio of Jet Prices to Crude Prices for US, Europe and Asia (Singapore)
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Jet:Crude USJet:Crude EuropeJet:Crude Asia
… and more so in the case of Jet Fuel
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Regional Refining Profitability and Jet Fuel Prices
The overall surplus of refined products in the Asia-Pacific market has resulted in a decline in the region’s refining profitability vis-à-vis other refining centers.
Although jet fuel prices seem to move in tandem with crude prices, however comparative analysis shows that jet prices as a ratio of crude prices have declined over the last 10 years.
This decline is most pronounced in case of the Asia-Pacific market; which is inline with a surplus of the fuel (I.e., net exports from Asia-Pacific countries).
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Asia Pacific Jet Fuel and Kerosene Demand: History and Forecast
0
500
1000
1500
2000
2500
3000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Jet Fuel
Kerosene
kb/d
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Middle East Jet Fuel and Kerosene Demand:History and Forecast
0
50
100
150
200
250
300
350
400
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Jet Fuel
Kerosene
kb/d
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Consumption growth rates* of Jet Fuel and Kerosene:Asia-Pacific and the Middle East
Jet Fuel KeroseneAsia-Pacific Mid East Asia-Pacific Mid East
1970-80 5.3% 16.9% 4.7% 9.0%1980-90 5.8% 4.2% 2.3% 2.2%1990-00 5.7% 0.5% 2.5% 2.3%2000-05 2.2% 3.1% 1.1% -0.5%2005-10 3.0% 3.2% 1.4% -1.0%2010-15 3.1% 3.5% 0.9% -3.0%
*Annual averages
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Major Kerosene/Jet Fuel Users in Asia Pacific(Top 5 users account for 74% of the total kero/jet consumption in the region = 1.61 mm b/d in 2003)
0 100 200 300 400 500 600 700 800
China
South Korea
Indonesia
India
Japan
Kero
Jet
kb/d
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Major Kerosene/Jet Fuel Users in Mid East(Top Users account for 92% of the total kero/jet consumption
in the region = 294 kb/d in 2003)
0 50 100 150 200
Kuwait
UAE
Iraq
Saudi Arabia
Iran
Kero Jet
kb/d
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Major Net Importers of Kero/Jet in Asia Pacific(kb/d)
43
9
15
42
71
India
Vietnam
Indonesia
Japan
HongKong
10
19
73
85
94
Australia
Japan
India
Indonesia
HongKong
Major Net Importers of Kero/Jet in Asia Pacific(kb/d)
43
9
15
42
71
India
Vietnam
Indonesia
Japan
HongKong
10
19
73
85
94
Australia
Japan
India
Indonesia
HongKong
2003 2010
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Major Net Exporters of Kero/Jet in Asia Pacific(kb/d)
2
10
26
84
127
Pakistan
Thailand
Malaysia
SouthKorea
Singapore
17
18
36
105
154
Malaysia
Pakistan
Taiwan
Singapore
SouthKorea
Major Net Exporters of Kero/Jet in Asia Pacific(kb/d)
2
10
26
84
127
Pakistan
Thailand
Malaysia
SouthKorea
Singapore
17
18
36
105
154
Malaysia
Pakistan
Taiwan
Singapore
SouthKorea
2003 2010Major Net Exporters of Kero/Jet in Asia Pacific
(kb/d)
2
10
26
84
127
Pakistan
Thailand
Malaysia
SouthKorea
Singapore
17
18
36
105
154
Malaysia
Pakistan
Taiwan
Singapore
SouthKorea
Major Net Exporters of Kero/Jet in Asia Pacific(kb/d)
2
10
26
84
127
Pakistan
Thailand
Malaysia
SouthKorea
Singapore
17
18
36
105
154
Malaysia
Pakistan
Taiwan
Singapore
SouthKorea
2003 2010
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Concluding Remarks
The kerosene / jet fuel market has undergone a fundamental change in the East of Suez Market. The change is brought about both by supply side considerations as well as a demand side issue.
Supply side issues are dominated by the massive capacity additions in Asia, this coupled with and a relatively lower growth trajectory in terms of consumption, has resulted in an overall surplus of refined products in the region.
The impact is particularly pronounced in the case of kerosene and jet fuel: the change in net import requirements from approximately 250 kb/d in 1995 to a surplus of approximately 50 kb/d in 2003.
This has negative implications on the overall refining profitability and particularly the attractiveness to produce jet fuel.
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Concluding Remarks (cont’d.) Middle East refiners have traditionally relied on Asian markets. Though
the developments in the Asian downstream market has created a sense of urgency to look for other markets.
On a relative basis, jet fuel is the only globalized product in the world oil market. Unlike gasoline and diesel, it can move across the boundaries as its specifications are less varied than other fuels.
As a base-case, we project Asian and Middle Eastern jet fuel consumption to grow in the range of 3-3.5% per year. However kerosene consumption in Middle East is projected to shrink and grow slightly in the Asian countries.
This growth outlook coupled with the projected increases in East of Suez refining capacity points to out a continued surplus of kerosene and jet fuel in the region.
Rising export availability from the Middle East region suggests that the refiners there will have to continue their efforts in finding markets in Africa, Europe, and beyond.
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