Changing Global Petroleum Product Trade Flows

2014 EIA Energy Conference Washington, DC Antoine Halff July 14, 2014

Crude Exports in 2019 and Growth in 2013-19 for Key Trade Routes1 (million barrels per day)

0.5 (-0.0)

OECD 3.6 Europe (-0.5) OECD 0.2 Asia 0.3 1.3 (+0.6) Oceania3 (0) 2.0 (0.2) OECD 2 (-0.6) 1.6 0.7 4.1 Americas (-0.2) (+0.4) (-0.6) China 0.1 (-0.7) 3.1 Other Asia 1.2 (0.3) 1.0 (+0.1) -0.6 2.2 5.2 1.8 (+0.8) (+0.3) (-0.6)

1.1 (+0.3)

Red number in brackets denotes growth in period 2013-19 1.2 1Excludes Intra-Regional Trade (+0.6) 2 Includes Chile 3 Includes Israel  Asia imports increase by 2.6 mb/d to 22.1 mb, or 65% of the

international crude market © OECD/IEA 2014 Refinery capacity expansions continue…

Crude Distillation Expansions 2.0 CDU Expansions 2013-2019 by Region 1.5

1.0 mb/d

0.5

0.0 2013 2014 2015 2016 2017 2018 2019 -0.5 OECD North America OECD Europe OECD Pacific FSU China Other Asia Latin America Middle East Africa

 95% of new capacity comes from the non-OECD, of which Asia accounts for half

Revisions to capacity expansion plans since 2013 MTOMR 1.5 Chinese CDU expansions vs . previous 1.0 1 600 1 400 0.5 1 200

kb/d 1 000 0.0 800 mb/d 600 -0.5 400 200 -1.0 0 2012 2013 2014 2015 2016 2017 2018 2019 -1.5 Current data May-13 2012 2013 2014 2015 2016 2017 2018 OECD Americas Other OECD China Other Asia Middle East Latin America Other non-OECD

 Projects slip in Latin America  China stalls new projects on looming surplus capacity, corruption scandals, pollution concerns

Middle Eastern product balances Middle East refinery output vs demand 1 500 11.0

Exports 10.0 1 000

kb/d 9.0 mb/d 500 8.0

0 7.0 Imports - 500 6.0 2008 2010 2012 2014 2016 2018 1Q06 1Q09 1Q12 1Q15 1Q18 Naphtha/gasoline Jet/gasoil Fuel oil Reported output Modelled output Demand

 New refinery projects coming on stream in the Middle East exceed regional demand growth  Increased product exports – in particular of middle distillates

FSU key product exports Global fuel oil demand 1 600 10 1 400 8 1 200 1 000 6 kb/d mb/d 800 4 600 400 2 200 0 0 2006 2009 2012 2015 2018 2008 2010 2012 2014 2016 2018 North America Europe OECD Asia FSU Jet/gasoil Fuel oil Latin America Middle East Africa Non-OECD Asia  Equalization of Russian fuel oil export duties with crude oil from Jan 2015, has led to refinery upgrading investments  New duties make simple refiners, with high fuel oil yield, uneconomical  Fuel oil demand unchanged through 2019,as non-OECD offset improvement in OECD © OECD/IEA 2014 Atlantic Basin product trade to increase

Europe’s key product balances OECD America’s key product balances 1 500 1 500 Exports 1 000 1 000 500 kb/d 0 kb/d 500

- 500 0 -1 000 - 500 -1 500 Imports Imports -2 000 -1 000 2008 2010 2012 2014 2016 2018 2008 2010 2012 2014 2016 2018 Naphtha/gasoline Jet/gasoil Naphtha/gasoline Jet/gasoil  European middle distillate deficit balloons to 1.6 mb/d by 2019,but region struggle to rid itself of surplus gasoline supplies  US refinery industry renaissance, coinciding with sharp drop in demand, takes US to top global naphtha/gasoline supplier

Latin American refinery output vs total oil demand Africa refinery output vs total oil demand 8.0 5.0 7.5 4.5 7.0 4.0

mb/d 6.5

mb/d 3.5 6.0 3.0 5.5 2.5 5.0 2.0 4.5 1.5 1Q06 1Q09 1Q12 1Q15 1Q18 1Q06 1Q09 1Q12 1Q15 1Q18 Reported output Modelled output Demand Reported output Modelled output Demand

 Difficulties in bringing new refinery projects on stream leave Africa and Latin America with large product import requirements  Heavy financial burden on governments subsidising fuels

Product Supply Balances - Gasoil/Kerosene Regional Balances in 2013 and 20191 Thousand barrels per day

FSU

Europe 897 1167 -1592 OECD Americas -1057 1377 984

Asia Middle East

1094 1280 358 801

Africa

Latin America -657 -998

-559 -548

Refinery production and supplies from other sources vs. end-user demand. Regional total does not add to zero due to feedstock trade and differences in product classifications.

1. Positive number indicates net-export potential, negative number net-import requirement

 Increased supplies from Middle East, North America & Russia

Product Supply Balances - Gasoline/Naphtha Regional Balances in 2013 and 20191 Thousand barrels per day

FSU Europe 469 528 OECD Americas 1320 718 652 Middle East -205 1023 702 Africa Asia

-143 -974 Latin America -332 -1490 154 138

Refinery Production and supplies from other sources vs. end-user demand. regional total do not add to zero due to feedstock trade and differences in product classifications.

Positive number indicates net-export potential, negative number indicate net-import requirement  N. America faces excess light distillate supply of 1.3 mb/d in 2019  In search of export outlets

Product Supply Balances - Fuel Oil Regional Balances in 2013 and 20191 Thousand barrels per day

FSU

1264 636 Europe OECD Americas 207 -58 -166 175

Middle East

-192 -153 Asia Africa Latin America -1129 - -782 140 -67 113 110

 Russian export duty reform, refinery investments curb output  Global demand stays flat – unless marine bunker markets shift away from fuel oil ahead of new IMO sulphur standards

Chinese total refinery output vs demand Chinese gasoil refinery output vs demand 13.0 5.0 12.0 4.5 11.0 4.0

mb/d 10.0 mb/d 3.5 9.0 3.0 8.0 2.5 7.0 2.0 6.0 1.5 1Q06 1Q09 1Q12 1Q15 1Q18 1Q06 1Q09 1Q12 1Q15 1Q18 Reported output Modelled output Demand Reported output Modelled output Demand

 Apparent slowdown in gasoil demand growth sees product surpluses emerging  China turned net gasoil exporter in 2013

OECD Refinery Shutdowns North America Capacity Additions 1.5 500

400

1.0 300 kb/d

mb/d 200 0.5 100

0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 - 100 2013 2014 2015 2016 2017 2018 2019 OECD Americas OECD Europe OECD Asia Oceania Crude distillation Upgrading Desulphurisation

 4.8 mb/d of OECD crude distillation capacity shut since 2008  Surging US LTO, condensate supplies lead to 750 kb/d expansion in US in 2015-2017

Benchmark simple refinery margins Refinery utilisation rates 7.5 90.0%

5.0 85.0% 2.5

USD/bbl 0.0 80.0%

-2.5 75.0% -5.0

-7.5 70.0% Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 1Q06 1Q09 1Q12 1Q15 1Q18

NW Europe Urals NW Europe Brent World OECD Non-OECD MED Urals Singapore Dubai

 To bring utilization rates up to 2006-2008 levels (when margins were healthy), another 4.8 mb/d of capacity would have to be cut, whether through plant closures, projects delays or cancellations

European Imports of Russian Refined Products in 2013 Netherlands  Russian tax incentives France Germany Turkey for product exports United Kingdom Belgium Finland  Netherlands and France Denmark Poland Hungary account for 50% of trade Greece Sweden Norway Italy  Germany, Turkey, UK, Spain Estonia Portugal Belgium for more than Iceland Czech Republic Slovenia 45% Ireland Slovak Republic Austria Switzerland total= 1.0 mb/d Luxembourg

 OECD Europe gets 36% European Imports of Russain Crude in 2013

Germany of its crude from Russia

Poland Netherlands  Russia exports 71% of Belgium Italy its crude to Europe Finland

Spain

Greece  4 countries account for

France

Sweden >50% of the trade:

Slovak Republic Hungary Germany, Poland, total= 3.0 mb/d Others Netherlands, Belgium

 Declining trend

European Imports of Russian Residual Fuel Oil in 2013

Netherlands France Denmark Belgium Others

kb/d European Residual Fuel Oil Imports total= 320 kb/d 500 450 400 350 300 250 200 150 100 50 0 2000 2002 2004 2006 2008 2010 2012

Netherlands France Belgium Denmark Italy Spain Others

European Imports of Russian Gasoil in 2013

France

United Kingdom Turkey

Netherlands

Germany

Finland

Hungary

Greece

Belgium

Others

total= 428 kb/d

kb/d European Imports of Russian Gasoil 700

600

500

400

300

200

100

0 2000 2002 2004 2006 2008 2010 2012 France Turkey United Kingdom Netherlands Germany Finland Others © OECD/IEA 2014 Thank you

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