dti heavy oil
TRANSCRIPT
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VALUE & MARKETABILITY OF HEAVY OILS
DEVEX 2006THE PRODUCTION & DEVELOPMENT
CONFERENCE & EXHIBITION
MAY 17-18, 2006
Colin Birch
Senior Principal
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Agenda
Heavy crude market fundamentals
Recent price history
Economic benefits of refining/upgrading
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Heavy crude market fundamentals
Heavy products (heavy fuel oil, bitumen etc)represent less than 20% of world demand
World petroleum demand growth is almostentirely for light products
Gasoline, jet fuel, diesel growing
Heavy fuel oil close to flat and declining in someregions
Most crudes naturally contain more heavy fuel
oil than the market requires
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Heavier crudes naturally contain too much heavyfuel oil
0
10
20
30
40
50
60
70
80
90
100
Br ent Ur als May a Souedie N.Sea
Hvy
wt% Yield
370C+ r esidue 370C- pr oduct s Even a light crude likeBrent contains too much
heavy fuel oil for worlddemand
Heavier crudes contain
much more residue andso need moreupgrading/conversion
API 38 32 22 23 15
HFO DEMAND
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Heavy fuel oil yield depends on crude oil qualityand refinery configuration
0
10
20
30
40
50
60
70
80
Coking Cracking Hydroskimming
Refinery HFO yield, %
Lt Sweet Lt Sour Heavy
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Capital cost of refining increases as complexityincreases
INDICATIVE RELATIVE CAPITAL
COST
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
LSW
Hydroskimming
LSR Cracking Heavy Coking
Complexity of refinerieshas generally increased
incrementally as HFOdemand requirementshave fallen
Economy of scaledecreases capital costper barrel up to a certainlevel
Resid e con ersion capacit is s all added
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Residue conversion capacity is usually addedincrementally
CRUDECRUDE
COKECOKE
DISTILLA
TION
GAS PLANT
HYDROTREATER
REFORMER
FUEL GASFUEL GAS
GASOLINESGASOLINES
MIDDLEMIDDLEDISTILLATESDISTILLATES
LPGLPG
LOW SULFURLOW SULFURHydrogenHydrogen
VACUUMDISTILLATION
VACUUMVACUUMRESIDUERESIDUE
CRACKINGUNIT
COKECOKE
COKING
UNIT
P i f ll d il h i l i h
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Prices for all crude oils have risen strongly in thelast few years
CRUDE OI L PRI CES
0
10
20
30
40
50
60
1995 2000 2005
$/barrel
Brent Maya Souedie
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.. but price differentials have widened
PRICE DIFFERENTIALS VERSUS
BRENT
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
1995 2000 2005
Maya Souedie
Shortage of crude oilsupply has resulted in
increased crude oilproduction from OPEC
Marginal barrels from
OPEC (and non-OPEC)tend to be heavier
Refining industry cannot
adjust to heavier crudeslate in the short term
Excess HFO
Wide light/heavy spreads
I t t i h il fi i h l
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Devex 2006
Investment in heavy oil refining can help recoversome of the differential
PRICE DIFFERENTIALS VERSUS
BRENT
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
1995 2000 2005
Most of the light/heavydifferential can be
recovered throughrefining investments
Several heavy crude
producers have investedin downstream capacityto place their crude
However, this doesnttake account of refiningcapital costs
Maya differential
to Brent
Maya differential+ coking margin
Potential gain fromcoking margin
Th fi i l t i i t t h
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The financial returns on conversion investments haveimproved as light/heavy spreads have widened
CAPITAL RECOVERY FACTORS ON
CONVERSION INVESTMENTS
0
10
20
30
40
50
60
70
1995 2000 2005
ICRF%
0
24
6
8
10
12
14
16$/barrel
Cracking vs. Hyskim Coking vs. Cracking
Brent - Maya
As light/heavy spreadswiden the profitability of
converting HFOcomponents to lightproducts increases
The incentive to processheavier crudes alsoincrease for refinerieswith zero or very low fueloil yields
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VALUE & MARKETABILITY OF HEAVY OILS
DEVEX 2006
MAY 17-18, 2006
Colin Birch
Senior Principal
E-mail : [email protected]
www.purvingertz.com
Stratton House
1, Stratton St.
London
W1J 8LA
Tel: +44 207 499 0115
Fax: +44 207 499 1985
mailto:[email protected]://www.purvingertz.com/http://www.purvingertz.com/mailto:[email protected]