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Global Markets Developments
by Jeet Bindra, February 2018in support from Argus Consulting Services
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Argus Media group notices
GDP
Crude
Natural Gas
Electric Vehicles
Petroleum Products
Petrochemicals
Petroleum Coke
LPG
Vision
Global market developments
Global growth underpinned by Asia-Pacific
Copyright © 2018 Argus Media group. All rights reserved.
0.0%
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Africa Asia
Pacific
Europe FSU Middle
East
North
America
South
America
2010-2020
2020-2030
2030-2040
Global GDP growth projections – 10 year CAGR Synchronized global
activity boosting near term prospects for most countries
Chinese GDP growth trending lower as drivers of growth transition
India to underpin longer term growth
Global Crude demand
Copyright © 2018 Argus Media group. All rights reserved.
Crude demand growth to remain strong until the latter stages of 2020’s
Consistent growth in Indian oil demand to become the main driver of growth
2015
2020
2025
2030
0 20 40 60 80 100 120
Rest of World India Rest of Asia
Global oil demand
mln bbl/d
Crude prices
Copyright © 2018 Argus Media group. All rights reserved.
Strong US supply response should help keep prices within the Tight-light oil (TLO) band in the medium term
Copyright © 2018 Argus Media group. All rights reserved.
US tight light oil (TLO) has become the major US oil product.
Production has surpassed 5,100 thousand bpd in December, 2017.
Over the past 6 months, US TLO production has been growing at a rate of 2% per month.
Most UD TLO – today - is being produced in the Permian basin.
Main sources of US oil production
Copyright © 2018 Argus Media group. All rights reserved.
Bakken and Niobrara production has also been growing.
We expect continued growth in US TLO production as long as monthly average oil prices remain above ~ $55/bbl.
The Permian basin is the largest producer
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6 million bpd
US Tight Oil Production History (through December, 2017)
Total Permian (TX& NM)
Eagle Ford (TX)
Bakken (MT & ND)
Niobrara-Codell (CO, WY)
Utica (OH, PA & WV)
Haynesville
Marcellus (PA,WV,OH &NY)
Woodford (OK)
Granite Wash (OK & TX)
Austin Chalk (LA & TX)
Monterey (CA)
US crude exports beyond Canada soar after ban lifted
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China buying about two-thirds of US exports to Asia
Copyright © 2018 Argus Media Ltd. All rights reserved.
US shipments to Europe also rising substantially
Copyright © 2018 Argus Media Ltd. All rights reserved.
Natural Gas Demand growth
Copyright © 2018 Argus Media group. All rights reserved.
Lower prices have spurred greater demand in the US and elsewhere
Rapid growth in China is absorbing fresh LNG supply
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2000 2004 2008 2012 2016 2020
Rest of World
US
Middle
EastEurope
Russia
China
Asean
India
Global natural gas demandBcm
Electric Vehicles
Copyright © 2018 Argus Media group. All rights reserved.
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2010 2020 2030 2040
North Americamln
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2010 2020 2030 2040
Europemln
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2010 2020 2030 2040
Asia Pacificmln
EV’s set to account for all of long term increase in fleet in North America and Europe
Growing share of EV’s in Asia, but strong growth in total fleet
India looking to phase out sales of gas and diesel vehicles by 2030, but strong growth projected in the interim
Worldwide, both distillate and gasoline growth are robust
Copyright © 2018 Argus Media group. All rights reserved.
– Data from IEA, EIA and Argus
0.80
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G/D ratiomn b/d
Worldwide Gasoline & Distillate Demand History (2017 data are averages through 3Q 2017)
Gasoline Distillate G/D Demand Ratio
CAGRs 2000 to 2008 2009 to 2017
Gasoline 2.61% 1.80%
Distillate 0.29% 1.34%
CAGR – compound annual growth rate
Copyright © 2018 Argus Media group. All rights reserved.
Major growth has been in non-OECD countries
– Data from IEA, EIA and Argus
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OECD non-OECD USA China Canada
mn b/d
Comparison of Year 2016 Demand Levels
Gasoline Demand Distillate Demand
-0.2% 0.2% 4.8% 2.5% 0.4% 2.8%-0.4% 7.6% 0.3%1.6%
2009 – 2017 CAGRs
The non-OECD, and especially Chinese growth rates, will gradually drive significant changes in product and crude oil flows.
Chinese gasoline demand is growing at high rates
Copyright © 2018 Argus Media group. All rights reserved.
– Data from IEA, EIA and Argus
0.50
0.55
0.60
0.65
0.70
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0.80
0.0
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G/D ratiomn b/d
China Gasoline and Distillate Demand History
Gasoline Distillate G/D Demand Ratio
CAGRs 2000 to 2008 2009 to 2016
Gasoline 8.07% 7.61%
Distillate 10.54% 2.76%
US products demand has plateaued, exports are surging
Copyright © 2018 Argus Media group. All rights reserved.
2.10
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2.25
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2.35
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2.45
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2015
2017
G/D ratiomn b/d
US Gasoline and Distillate Demand
History (2017 data are average through 3Q 2017)
Gasoline Distillate G/D Demand Ratio
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2006
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2011
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2013
2014
2015
2016
‘000 b/d
US Distillate Export Destinations
Latin America
Other (predominatly EU)
Canada
US refiners will need to serve export markets to sustain output levels
Transportation fuel - India
Copyright © 2018 Argus Media group. All rights reserved.
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2005 2009 2013 2017 2021 2025 2029 2033
Gasoline
Distillate
Long term growth in demand
year-on-year
-60
-40
-20
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20
40
60
2005 2009 2013 2017 2021 2025 2029 2033
Gasoline Distillate
Net Import balance for products
mn t
Sustained growth in products demand will see India become a large net importer
MARPOL VI set to destroy high S bunker demand
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Marine fuel standard of 0.5pc sulphur in 2020
High proportion of 3mn bpd of resid will need to find a new home or be converted to low-sulphur material
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12.0 million bpd
World Bunker Fuel & Resid Demand
Resid bunker fuel demand Total world resid demand
Wider light-heavy crude spreads
Copyright © 2018 Argus Media group. All rights reserved.
$0
$2
$4
$6
$8
$10
$12
$14
$16$/bbl
Light-Heavy Crude Price Differential[Brent/North Sea Dated vs. Maya (USGC). Yearly avg. prices. 2017 data through May 22, 2017]
?
1 Argus Scenario from Argus MARPOL VI effects model
Wider crude spreads should benefit refineries with plans for heavy crude processing, although little new capacity announced on the back of MARPOL VI
India’s deficit of petrochemicals is growing
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Footnote: 1 Petrochemicals includes olefins, aromatics, and polymers
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India Polyethylene (PE) Outlook
India is adding capacity for PE production, but will still import more than 25 pc ofdomestic demand; Growth in demand near 10 pc per year
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India Polypropylene (PP) Outlook
After becoming balanced in 2016, India is forecast to be importing 400+kt/yrto supply domestic demand in 2020; Demand is growing more than 10 pc/yr
India petroleum coke market balance
Copyright © 2018 Argus Media group. All rights reserved.
2013 2014 2015 2016 2017E 2018F 2019F
-10
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10
20
30
40
-10
0
10
20
30
40 Gasifier consumption
Net Imports
Domestic production
Apparent demand ex-gasifier
Indian supply of petcoke
Source: Argus estimates
mn t RIL gasifier coming on
stream over next 12 months
Regional curbs on usage in some industries likely to impact imports
Domestic output continues to expand, more refiners considering gasification technology
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2010 2011 2012 2013 2014 2015 2016
mn tRefinery Production Gas Processing
— Argus Consulting
Notes: 2016 data is provisional
Global LPG production by source
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Global LPG consumption
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2010 2011 2012 2013 2014 2015 2016
mn tAfrica Asia Pacific Europe
Latin America Middle East North America
Russia and Central Asia
Growth area
Copyright © 2018 Argus Media group. All rights reserved.
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50
100
150
US Europe Asia-Pacific Latin America Africa
mn t
Th
ou
san
ds
2016 2017 2018
— Argus Consulting, 2017
Asia is the key center of incremental demand
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US LPG export market
mn T
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2012 2017 2022 2027
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2010 2012 2014 2016 2018 2020 2022 2024 2026
mn t
Residential Agricultural
Industrial Commercial
Transport Refinery fuel
Petrochemical Other non-energy Consumption
— Argus Consulting, 2017
Global outlook for LPG consumption by sector
Copyright © 2018 Argus Media group. All rights reserved.
0
50
100
150
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400
2010 2012 2014 2016 2018 2020 2022 2024 2026
mn tAfrica Asia Pacific Europe
Latin America Middle East North America
— Argus Consulting, 2017
Global regional LPG consumption outlook
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-50
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350
400
2010 2012 2014 2016 2018 2020 2022 2024 2026
mn t Total Consumption Total Production Net Position
— Argus Consulting, 2017
Global LPG structural balance, 2010-2027
The next decade will be long LPG
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Some Random Thoughts
Near Term Priorities
Successful Completion of:
1. West Coast Refinery Project
2. Rajasthan Refinery Project
3. Kakinada Petrochemical Complex
4. HMEL Bathinda Petrochemical Project
5. BS VI Projects
Upstream
Continue aggressive pursuit of Hydrocarbon Exploration & Licensing Policy (HELP) in line with OALP
Identify & participate in promising exploration blocks outside India
Encourage participation in blocks outside India that offer NGLs (feedstock for petrochemicals)
Focus: Reduce Crude Oil Imports!
Midstream
Rationalize pipeline network
Consider establishing a National Pipeline Company on a Common Carrier basis to maximize asset utilization
Encourage Undivided Joint Interest (UJI) concept for new pipeline projects
Streamline & expedite permitting of LNG/LPG/Naphtha Import Terminals
Encourage Shared Terminal Facilities
Downstream
Successfully implement BS VI
MARPOL, consider Condo Desulfurizers/Take advantage of light/heavy differential
Maximize use of opportunity crudes
Benchmark, gap analysis with focus on net cash margin
Establish “Safe Operating Envelop” for each process unit & maximize asset utilization
Implement Energy Conservation (Stochiometric firing of furnaces, steam leaks/usage, flare, etc.)
Higher Octane – explore Ionic Alkylation, a Chevron Technology
Identify projects to integrate petrochemicals/fertilizers
Crack diesel, kerosene and move as feed to petchem
Explore Waste to Biofuels
Operational Excellence
Reliability Centered Maintenance
Technology to Predict Failures/Condition Monitoring
Advance Process Controls/AI
Safety & the Environment
Treat everyone with dignity & respect
Implement Incident & Injury Free initiatives (Behavior Based Safety, Reinforcement Based Leadership, etc.)
Any human being who enters our premises MUST enjoy the fundamental GOD given right to go back to their families injury free at the end of each shift, every day.
Protect Water Aquifer
All Hydrocarbon tanks (including Petrol pumps) to be inspected periodically for leaks
All new hydrocarbon tanks must have double bottom with leak detection
Consider a National Drug & Alcohol Policy
Pre-employment screening for all at Hydrocarbon facilities, including tank truck drivers
Random tests using “Single Barrel” data process
Technology
Centre for High Technology should leverage talent at IITs & other institutions
Champion Waste to Fuels, Cellulose to Fuels and other renewable energy sources
Technologies to reduce Carbon Footprint
Thank you
by Jeet Bindra, February 2018with support from Argus Consulting Services
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