global overview of trade imbalances and impact on european … · 2018-10-01 · blending as...

Confidential. © 2017 IHS MarkitTM. All Rights Reserved.

Report

Coventry, UK

John Leavens, Director, Oil Markets Midstream & Downstream Consulting

[email protected]

September 2018

IHS Energy

UK Tank Storage Conference 2018

Overview of trade imbalances and impact on

European storage

mailto:[email protected]


Contents

• Introduction to IHS Markit

• The IMO 2020 bunker specification change: what is to be

expected for tank terminals around 2020?

• What is the outlook for the European and North European trade

levels?

2


Introduction to IHS Markit

3


Resources

Financial

Consolidated

Markets & Solutions

Transportation

OPERATIONAL RISK

& REGULATORY

COMPLIANCE

DIGITAL & WEB

SOLUTIONS

MARITIME

& TRADE

AEROSPACE,

DEFENSE &

SECURITY

AUTOMOTIVEENGINEERING &

PRODUCT DESIGN

ECONOMICS &

COUNTRY RISKENERGY

CHEMICALFINANCIAL

MARKETS DATA

& SERVICES

TECHNOLOGY,

MEDIA &

TELECOM

© 2017 IHS Markit. All Rights Reserved.

Addressing strategic

challenges with

interconnected

capabilities


IHS Markit activities in the Oil Markets, Midstream,

Downstream & Chemical

5

5

BESPOKE CONSULTING• Strategy development and investment options assessment

• Market studies to support portfolio optimization and business

development

• Competitive benchmarking

• Refinery economics and crude valuations

• Transaction support, due diligence and asset valuations

MIDSTREAM CONTENT & ASSETS• Midstream Essentials

SUBSCRIPTIONS• Crude Oil Markets

• Midstream Oil & Natural Gas Liquids

• Refining & Marketing

• Global Lubricants Service

• Company Strategies & Performance

ANALYTICAL MODELS• Energy Demand Model

• Product Supply/Demand Model

• Crude Flow Model

• Custom model and functionality development

CONTENT

ANALYTICS

INSIGHT

1

2

3

4


Main IHS Markit activities in the Tank Storage Industry

6

• Storage demand forecast based on market

elements and indication of type of storage by

product

Market projects

• Benchmarking of single terminals vs. other

competing terminals in the region

• Impact from refinery closures

• Forecast of level of activity

• Cost structure

• Fee rates

Competitive assessments

• Alignment with expected market developments

• Outlook for the main business segments

• New investments screening

• Profitability review

Business strategy

• Location

• Market Sector

• Differentiation

• Benchmarking

Due diligence / M&A


The IMO 2020 bunker specification

change: what is to be expected for tank

terminals around 2020?

7


The international

maritime organisation

has voted to reduce the

maximum bunker sulphur

content to 0.50%wt. from

2020 onwards

• Marine bunkers have seen a trend of sulphur

reduction for about 10 years.

• Global bunkers moved from 4.5% max to 3.5% max

in 2012

• In ECA zones bunkers moved from 1.5% to 1% in

2010 and down to 0.1% in 2015

• In October 2016, the IMO voted to reduce

maximum global bunker sulphur content to 0.50%

in 2020

8

Marine fuels sulphur specificationsEuropean and North American

Emission Control Areas


The shipping industry has four main options, and likelihood is that a

combination will be implemented

• Installation of Exhaust Gas

Cleaning Systems (EGCS or

‘scrubbers’) to remove sulphur

oxides from the exhaust on

board.

• Switching away from high sulphur

fuel oil grades to low-sulphur

fuels, based on gasoil, low

sulphur residuals, or hybrids.

• Switch to alternative fuel sources,

notably liquefied natural gas,

which requires vessel

modifications.

• Non-compliance, either

sanctioned due to acknowledged

supply-side difficulties

(transitional, category-based

exemptions, local non-availability

etc.), or grey area non-

compliance (i.e. malicious intent).

9

Switch to liquefied

natural gas

Switch to a compliant

low-sulphur bunker fuel

Non-compliance,

Sanctioned or

otherwise

Install exhaust gas

cleaning systems,

aka Scrubbers

Source: IBIA

Source: ENGIE

Source: The Maritime Executive

Source: Bluebird Marine Systems


Beyond 2020, a strong adoption of scrubbers and acceptance of new

0.50%S fuels is expected to reverse the HFO demand decrease

10

0

1,000

2,000

3,000

4,000

5,000

6,000

2005 2010 2015 2020 2025 2030 2035

Gas/Diesel Oil Residual Fuel Oil

Global bunker fuel demand

Th

ou

san

d b

/d

Source: IHS Markit © 2018 IHS Markit

Scrubber uptake: Desulphurised

residue to 0.50%S bunkers. More

blending as refiners/traders get

“creative.” Adoption of scrubbers

reduces gas/diesel oil market

share to just over 26% by 2030

Global adoption of 2020 IMO

standards: Gasoil market share

increases from 20% in 2018 to

51% in 2020 (+1.3 million b/d)

Initial adoption of scrubbers

Hybrid fuel penetration

Blending into 0.50%S bunker fuel

Sanctioned or Unsanctioned Non-

compliance


A residue surplus around 200,000 b/d is expected in 2020 – potential

impact to be expected on storage tanks

11

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Disposition

Creation

Global residue in bunker sector – 2014 to 2020


Millio

n B

/D

Notes: Net Other Conv. Runs include all residue conversion units excluding coking units

Crude run

increase

Changes in conversion runs

Bunker market

Surplus


The IMO 2020 bunker specification could create opportunities for

tank terminals

12

• With the implementation date approaching and with an expected steep

increase in demand of compliant fuels stockpiling of gasoil and low

sulphur fuels is possible

• Independent fuel suppliers and traders could increase blending of new

marine fuels hybrids in tank farms

• Heavy sulphur marine fuels temporarily stranded might need to be

stored waiting to find an outlet


What is the outlook for the European

and North European trade levels?

13


Sales of alternative fuel/powertrain vehicles are accelerating. Their

share of Europe’s LDV fleet expected to reach about 25% by 2040

14

0

50

100

150

200

250

300

350

400

Europe light duty vehicle (LDV)

Source: IHS Markit

Notes: LDVs are vehicles ≤ 8,500 lbs (~3,856 kg). Other LDVs

include LPG, CNG-LNG, Hybrid-Gasoline, Hybrid-Diesel,

PHEV/FEV, and Hydrogen.

© 2018 IHS

Millio

n v

eh

icle

s

Other

LDVs

Dedicate

d Diesel

Dedicated

Gasoline

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

120

140

160

180

2000 2005 2010 2015 2020 2025 2030 2035 2040

Plug-in hybrid vehicles (PHEV)

Full electric vehicles (FEV)

LPG

CNG-LNG

Hydrogen

Share of LDV fleet (Right Axis)

Non-dedicated gasoline and diesel vehicles in Europe LDV fleet outlook

Source: IHS MarkitNotes: LDVs are vehicles ≤ 8,500 lbs (~3,856 kg)

© 2018 IHS Markit

Millio

n v

eh

icle

s

Sh

are

of

LD

V f

leet


Improved fuel economy in conventional and hybrid vehicles is

expected to displace more road fuel demand than electric vehicles

15

0

100

200

300

400

500

600

700

800

900

2000 2005 2010 2015 2020 2025 2030 2035 2040

Demand displaced by improving LDV fuel economy

Europe road fuel demand displaced by improving LDV

fuel economy (Base Case)


Th

ou

san

d b

arr

els

per

day

Notes: Fuel economy analysis based on Dedicated ICE and Hybrid LDVs. Based on FEV being

0

100

200

300

400

500

600

700

800

2000 2005 2010 2015 2020 2025 2030 2035 2040

Demand displaced by FEV LDV growth

Europe road fuel demand displaced by FEV LDV

growth (Base Case)


Th

ou

san

d b

arr

els

per

day

Notes: Based on FEVs being preferential over Hybrid Gasoline LDVs.

Includes plug in hybrids


European Market Overview - Demand is forecast to remain virtually

constant until 2025 before gradually declining

16

• Total refined product demand is expected

to decline slowly in the long term.

• Gasoline: expected to make a temporary

come-back pending greater penetration

of electric and other alternative vehicle

types

• Road diesel: European governments

firm up on reversal of pro-diesel policies,

resulting in a sharp decline in the share

of new diesel passenger car registrations

• Jet demand is expected to grow a

modest rate.

• Heavy fuel oil Continued decline in

inland demand partly off-sets a gradual

recovery in bunker demand after 2020.0

5

10

15

20

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Other Residual Fuel Oil Naphtha Jet/Kero Gasoline Gasoil/diesel

Refined product demand by product

Millio

n b

/d



IMO change to bring short-term respite to European refineries, but

long-term pressure remains and will result in lower crude runs

• Crude runs have been

supported by stronger

margins in 2015-18, and

will again be boosted

during the 2020-21 period,

as refiners ramp up for

IMO specification change.

• This will lend some short-

term respite to

restructuring, although

rationalization will continue

post 2021.

• Longer term, pressure from

imports (from Middle East,

Russia and India) and

reduced demand will weigh

on the industry in all

European regions.

17

0

10

20

30

40

50

60

Other Products Naphtha

Residual Fuel Oil Jet/Kero

Gasoline Gasoil/diesel

Refinery Yields

Pe

rce

nt

Source: IHS Markit © 2018 IHS

0

2

4

6

8

10

12

14

16

18

Crude runs Condensate runs Capacity

Crude runs and capacity

Mil

lio

n b

/d

Source: IHS Markit © 2018 IHS


European refined product trade expected to remain stable. Gasoline

trade level to decline overtime

• Gasoline: IHSM expects exports to fall

back slightly (on lower European

production), with imports remaining

constant.

• Jet Fuel / Kerosene: The outlook is for

increased imports (driven by increased

demand for air travel) with exports

remaining constant.

• Diesel/Gasoil: The diesel/gasoil pool has

seen massive increase in trade volume

with both imports and exports increasing

rapidly. Imports are projected to peak

before declining slowly by 2040.

• Fuel Oil: Long term forecast is for similar

trade volumes to today as European

produced volumes replace Russian

volumes.

18

-150

-100

-50

0

50

100

150

200

2000 2017 2020 2025 2030 2040

Naphtha Imports Naphtha Exports Gasoline ImportsGasoline Exports Jet Fuel / Kero Imports Jet Fuel / Kero ExportsDiesel / Gasoil Imports Diesel / Gasoil Exports Fuel Oil ImportsFuel Oil Exports

Europe product trade balance, 2000-2040


Millio

n t

on

nes p

er

an

nu

m

IMPORTS

EXPORTS


Diesel gasoil trade levels expected to remain overall stable. Imports

from CIS to increase in the medium term

19

0

10

20

30

40

50

60

70

80

90

2000 2017 2020 2025 2030 2040

North Europe South Europe Central Europe AfricaAsia CIS North America Latin AmericaMiddle East Other

North Europe Diesel / Gasoil import flows, 2000-2040


Millio

n t

on

nes

0

10

20

30

40

50

60

70

80

90

2000 2017 2020 2025 2030 2040


North Europe Diesel / Gasoil export flows, 2000-2040


Millio

n t

on

nes


Gasoline trade levels expected to progressively decline. African

region expected to become the largest outlet for export

20

0

50

100

150

200

250

2000 2017 2020 2025 2030 2040


North Europe Gasoline import flows, 2000-2040


Millio

n t

on

nes

0

50

100

150

200

250

2000 2017 2020 2025 2030 2040


North Europe Gasoline export flows, 2000-2040


Millio

n t

on

nes


Long term outlook is stable and provide a positive support to storage

activities

21

• Demand for refined products expected to hold in the medium term and

to mildly decline in the long term

• As refinery runs are expected to decline, the trade level of the main

refined products are expected to remain stable

• Overall storage activities are expected to experience stable market in

the long term


ANNEX


Including hybrids the share of alternative fuel/powertrain vehicles is

expected to reach 40% of the LDV fleet by 2040

23

0

50

100

150

200

250

300

350

400

Europe light duty vehicle (LDV)

Source: IHS Markit

Notes: LDVs are vehicles ≤ 8,500 lbs (~3,856 kg). Other LDVs

include LPG, CNG-LNG, Hybrid-Gasoline, Hybrid-Diesel,

PHEV/FEV, and Hydrogen.

© 2018 IHS

Millio

n v

eh

icle

s

Other

LDVs

Dedicated

Diesel

Dedicated

Gasoline

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

20

40

60

80

100

120

140

160

180

2000 2005 2010 2015 2020 2025 2030 2035 2040

Plug-in hybrid vehicles (PHEV)

Full electric vehicles (FEV)

Hybrid - Gasoline

Hybrid - Diesel

LPG

CNG-LNG

Hydrogen

Share of LDV fleet (Right Axis)

Non-dedicated gasoline and diesel vehicles in Europe LDV fleet outlook

Source: IHS MarkitNotes: LDVs are vehicles ≤ 8,500 lbs (~3,856 kg)

© 2018 IHS Markit

Millio

n v

eh

icle

s

Sh

are

of

LD

V f

leet


Improved fuel economy in conventional vehicles is initially expected

to displace more road fuel demand than electric and hybrid vehicles

24

0

100

200

300

400

500

600

700

800

900

1000

2000 2005 2010 2015 2020 2025 2030 2035 2040

Demand displaced by improving fuel economy of dedicated ICE LDVs

Europe road fuel demand displaced by improving fuel

economy of dedicated ICE LDVs (Base Case)


Th

ou

san

d b

arr

els

per

day

Notes: Fuel economy analysis based on Dedicated ICE LDVs.

0

100

200

300

400

500

600

700

800

900

1000

2000 2005 2010 2015 2020 2025 2030 2035 2040

Demand displaced by FEV LDV growth

Europe road fuel demand displaced by growth of

hybrid and FEV LDVs (Base Case)


Th

ou

san

d b

arr

els

per

day

Notes: Based on alternative LDVs being preferential over Dedicated ICE LDVs. Alternative LDVs

include Hybrid Gasoline, Hybrid Diesel, Plug-in Hybrid Vehicle (PHEV), and Full Electric Vehicle

Includes plug in hybrids

IHS Markit Customer Care

[email protected]

Americas: +1 800 IHS CARE (+1 800 447 2273)

Europe, Middle East, and Africa: +44 (0) 1344 328 300

Asia and the Pacific Rim: +604 291 3600

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