The Refining Sector in Greece

Ministry for Reconstruction of

Production, Environment, and Energy-Greece

5th EU Refining Forum 15 June 2015, Brussels

The Refining Industry in Greece

2

Company Refinery

Refining capacity

Nelson complexity

factor Type Million tones

per year

Thousand

barrels per

day

Hellenic Petroleum

Aspropyrgos 7.5 145 11.0 Cracking (FCC)

Elefsina 5.0 100 8.1 Hydrocracking

Thessaloniki 3.5 70 7.3 Hydroskimming

Motor Oil Korinthos 9 180 10.4 Cracking (FCC)

Total 25 495 9.6 (EU: 7.6)

Source: Ministry/IOBE

The refining sector in Greece: Contribution to the Economy and Prospects (IOBE Danchev, Maniatis, 2014)

The demand for oil products has fallen sharply in Greece and in the wider

region since the start of the economic crisis

3

0

5

10

15

20

25

30

35

Greece Italy Spain Portugal Turkey S. Europe

mill

ion

to

nn

es

Gasoline

2007 2012

0

10

20

30

40

50

60

70

80

90

100

Greece Italy Spain Portugal Turkey S. Europe

mill

ion

to

nn

es

Diesel

2007 2012

-15,7%

Source: Eurostat/Petder *South Europe here includes Greece, Italy, Spain, Portugal, Turkey, Cyprus, Malta, Bulgaria, Romania, Slovenia and Croatia.

Key drivers of the demand contraction Economic recession Tax hikes on oil products Weather conditions

Source: Ministry

2008 2012 2013 2013/12 2013/08

Domestic

market (%) Change

Other products 3214 1748 1717 -2% -47%

Heating oil 2457 1863 908 -51% -63% Diesel oil 2976 1925 2009 4% -32% Gasoline 4059 2943 2670 -9% -34% Subtotal 12706 8479 7304 -14% -43% International

market Marine heavy

fuel oil 2815 2064 1912 -7% -32% Marine Diesel 339 264 281 6% -17% Jet fuel oil 965 641 656 2% -32% Subtotal 4119 2969 2849 -4% -31% Total 16825 11448 10153 -11% -40%

-26,9%

The domestic production has rocketed due to stronger exports

4

0

5

10

15

20

25

30

mil

lion

to

ne

s

Production

Demand (including international marine bunkers)

Exports

Imports

0%

10%

20%

30%

40%

50%

60%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Share of exports in production

Source: Eurostat

Trade surplus of petroleum products since 2009, with 86% of the exports going to non-EU markets

5

-4

-2

0

2

4

6

8

mil

lion

to

ne

s

Trade balance of petroleum products

2.8

0.1

0.2

0.2

0.2

0.3

0.3

0.4

0.4

0.5

0.5

0.5

0.5

0.6

0.7

2.1

0 1 2 3

Other

Montenegro

UAE

Egypt

Italy

Saudi Arabia

Cyprus

USA

Bulgaria

Israel

Singapore

Gibraltar

FYROM

Libya

Lebanon

Turkey

Billion €

Main export destinations for petroleum products

ΕU 28: 14%

Third countries:

86%

Source: Εurostat

The cost of capital has increased, with a negative impact on the profitability of the sector

6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

01

/01

/20

03

01

/07

/20

03

01

/01

/20

04

01

/07

/20

04

01

/01

/20

05

01

/07

/20

05

01

/01

/20

06

01

/07

/20

06

01

/01

/20

07

01

/07

/20

07

01

/01

/20

08

01

/07

/20

08

01

/01

/20

09

01

/07

/20

09

01

/01

/20

10

01

/07

/20

10

01

/01

/20

11

01

/07

/20

11

01

/01

/20

12

01

/07

/20

12

01

/01

/20

13

01

/07

/20

13

(%

) Interest rate differentials of business loans in Greece vs Eurozone

Up to 1 year

Over 1 and up to 5 years

Over 5 years

Total

Source: ECB

The Gross value added approached 1 bn € with significant impact on employment

7

0.0%

2.0%

4.0%

6.0%

8.0%

0.00.20.40.60.81.01.2

Shar

e in

Man

ufa

ctu

rin

g

Bill

ion

€

Gross value added

GVA Share in manufacturing 0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Bill

ion

€

GVA of industry sectors

60

70

80

90

100

110

120

130

Industrial Production Index (2005=100)

Manufacturing

Manufacture of refined petroleum products

0.0

1.0

2.0

3.0

4.0

5.0

2005 2006 2007 2008 2009 2010 2011 2012*

tho

usa

nd

Total employment

Source: EL.STAT.

Petroleum products

Metal products

Food 1 bn €

Investments totaling 2,7 billion € in 2009-2012 when GDP contracted by more than 20%

8 Source: EL.STAT 2011/Data processing IOBE

• Large part of the operating surplus is reinvested • Investment intensity index exceeded 28% on average for the period 2005-2011

Sectors

Refining

Refineries’ activity contributed about 3,8 bn € in 2012 (2% GDP)

9 Source: IOBE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Direct Indirect Induced Total

€ b

illio

n

Impact on GDP

0

5

10

15

20

25

30

35

40

45

Direct Indirect Induced Total

Tho

usa

nd

s

Impact on Employment

1,4

0,6

1,8 3,8

4100

7200

29200 40500

The key EU legislation that has a real or potential impact on the competitiveness of the refining sector

10 Source: IOBE/Ministry

Emission Trading System (ETS)

• Estimated cost of direct emissions 2013-2020 and current protection (Refining finally included in carbon leakage list till 2020, but still risk for post 2020) :

• 5€/tCO2 : €108 million

• 30 €/tCO2 : €648 million

• Higher carbon leakage risk from indirect emissions in Greece:

• High cost of indirect emissions (electricity prod. Mix),(own produced products instead of gas)

• High trade intensity i.e. >50% (significantly higher than EU -38%)

Industrial Emissions Directive (IED)

• The recently adopted BREFs for refineries (Oct14)

• Impose compliance with stricter BAT-ELVs

• Provide tools for a cost-effective reduction for air emissions, i.e. bubble concept for SO2 and NOX

• Compliance cost estimated at €70-300 million per refinery (Europia 2013)

Fuel Quality Directive (FQD)

• Reduction of the carbon footprint, increased use of bio fuels and specification changes (e.g. sulphur, aromatics etc)

• Adjustment cost for the refineries:

• Additional processing requirements

• Substitution of fossil-based fuels with bio fuels

• Potentially higher CO2 emissions during the production process

Measures that could be taken to safeguard the competitiveness of the refining sector

11 Source: IOBE/ Ministry

EU level

• ETS – Carbon leakage:

• Allocation of allowances to the refining sector after 2019 as well

• Balanced approach in the implementation of policy measures on climate, energy and the environment

• Take into account impact on competitiveness

• Take into account the fitness check’ conclusions before deciding on changes in the legislation that affect the refining sector

• Avoid unilateral EU measures

• Push for global agreement in COP Paris 2015 on greenhouse gas reduction

Domestic level

• Measures for Energy cost reductions:

• Excise duty on electricity (2,5 €/Mwh) and natural gas (5,4 €/Mwh)

• Contribution to RES (ETMEAR) ( 2,23 €/Mwh),

• Indirect CO2 emissions cost (electricity) 4,44 €/Mwh

• Public Service Obligations (YKO) (4,14 €/Mwh )

• Fully implement the adopted measures for the elimination of the illicit fuel trade (trade oil product sector)

Thank you for your attention

www.ypeka.gr

Directorate for Hydrocarbons CHRYSOCHOOU Tasos ChrysochoouA@eka.ypeka.gr

Ministry for Reconstruction of Production,

Environment and Energy Greece

http://www.ypeka.gr/http://www.ypeka.gr/http://www.ypeka.gr/