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A s e a n C o u n c i l O n P e

REGIONAL INFLUENCE OF

LOCAL REFINERIES - IMPACT

IN THE GLOBAL MARKET AND

MEETING PRODUCT QUALITY

WORLD FUEL CONFERENCES9th and 10th November 2004Singapore




ASEAN is an association of the following countries:Brunei Darussalam, Myanmar, Cambodia, Indonesia,Malaysia, Philippines, Singapore, Thailand, Vietnam and Laos.The Asean Council on Petroleum, ASCOPE was established with

primary objectives for regional cooperation on energy and petroleum resources amongst the ASEAN member countriesthrough the following activities:

*To promote active collaboration and mutual assistance in the

development of the petroleum resources in the region through joint endeavours in the spirit of equality and partnership.*To collaborate in the efficient utilisation of petroleumresources.

ASCOPE




*To provide assistance to each other in the form of training, theuse of research facilities and services in all phases of the

petroleum industry.*To facilitate the exchange of information which will promote

methodologies leading to successful achievement in the petroleum industry and which may help in formulating policieswithin the industry.*To conduct petroleum conference on a periodical basis. The 8thASCOPE Conference & Exhibitions will be held at Philippines

in November 2005.*To maintain close and beneficial cooperation with existinginternational and regional organisation with similar aims and

purposes. PETRONAS is currently the ASCOPE Secretariat.

ASCOPE




Presentation Outline

The following topics will be covered in the presentations:

1.A review of refining capacity and overall productsupply/demand by each ASEAN Country until year 2010.

2. Implementation of the Clean Fuels program in the region andits impact to the Refinery.3. Potential trading intra ASEAN and with other regional

refineries.

(Note: Tightening of the product quality will have impact on theoperating mode and refining crude slate. With the correspondingfacilities upgrading, more foreign crude will flow into the region.However, this paper will not deliberate into impact of these varying

crude slate and mode changes to meet the new specifications.)




Most of the ASEAN countries are following theEuropean standards instead of the WWFC

Mogas European Standards

Specifications Unit Euro-2 Euro 3 Euro 4

Lead, max g/l 0.013 0.005 0.005

Sulphur, max ppm 500 150 50

Benzene, max vol % 5 3.5 1

[email protected],max kpa 35~60 45~60 56~60

Density, min-max kg/m3 725~780 720~775 720~754Distillation

IBP, max

T10, max

T50, min-max

T90, max

FBP,max

0C0C0C0C0C

40

74

75~115

180

215

40

210 210

Distillation

E70 min-maxE100 min-max

E150 min

E180 min

vol %vol %

vol %

vol %

15~4740~70

85

20~5046~71

75

Olefins, max vol % 21 10

Aromatics, max vol % 42 35

Oxygen content, max wt % 2.7 2.7




Most of the ASEAN countries are following theEuropean standards instead of the WWFC

Diesel European Standards

Specifications Unit Euro-2 Euro 3 Euro 4

Cetane Index, min 46 46 52

Cetane number, min 49 51 55

Sulphur, max ppm 500 350 50

Density, min-max kg/m3 820~860 820~845 820~840Distillation

T50, max

T85, max

T95, max

FBP,max

0C

0C

0C

0C

350

360

245

340

350

360

320

340

350

Flash point, min0C 55 55

Viscosity @ 37.8 0C

min-max

cst 2.0~4.5 2.0~4.5 2.3~3.3

PNA, max vol % 11 11 11

CFPP,min

0C -44~0 -44~0

Aromatics vol % 25 15

Lubricity 460




BRUNEI

oCrude refining capacity of 10,000 bpd processing mostly localsweet crudes.

oDiesel/Mogas supply/demand:

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Diesel Mogas

0 0 0

b p d

2 004 2 00 7 2 010

..

(Projected demand growth at 1.7~2.0 %)




BRUNEI

oCurrent Diesel specs of 5000 ppm S.oMogas is fully unleaded since 2000 with specs of 1000 ppm S

and 5% benzene.

oAll of the products shortfall are imported.o No reported plan to move to European mogas/diesel specs.oExisting refinery will not be able to meet the new European

standards.o




MYANMAR

oThree refineries with total Crude refining capacity of 57,000 bpd but running at low capacity. Plan to upgrade/revampexisting facilities within the next few years.


0.0

5.0

10.0

15.0

20.0

25.0

30.0

Diesel Mogas

0 0 0

b p d

2 00 4 2 00 7 2 01 0

..

(Forecast figures from FACT).




MYANMAR

oCurrent diesel specs of 2000 ppm S.oMogas still fully leaded at 0.15 gm/l.oMost of the product shortfall will be imported.o No reported plan to move to European mogas/diesel specs.

oExisting refinery will not be able to meet the Europeanstandards.

-




CAMBODIA

o No crude refining capacity. Most of petroleum productrequirement are imported.

oAverage demand in 2004 at 1200 bpd mogas and 2400 bpddiesel.

oProduct Quality:-Mogas is still fully leaded.-Current diesel specs of 2000 ppm S.

o No reported plan to move to European mogas/diesel specs.




INDONESIA

oTotal Crude refining capacity of 1.1 million bpd processing amix of local and imported crudes. A new Condensate splitter at Tuban (100 kbpd) with CCR is expected in 2005. Another new 250 kbpd refinery expected in 2010.


(Forecast figures from FACT. Projected demand growth at 1.7~2.0 %)

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

Diesel Mogas

0 0 0

b p d

2004 2007 2010

..




INDONESIA

oUnleaded mogas introduced in greater Jakarta & Cerebon areain July 2001 and Bali in January 2003. Current ratio of unleaded to leaded mogas is 40:60. With the implementationof the Blue Sky Project leaded mogas will be phased out andlowering of S from 2000 to 500 ppm by 2005.

oWith the plan upgrading of the Balogan refinery with new cat.reformer and isomer unit and Cilacap refinery with a newisomer unit, Pertamina will be able to lower benzene from

5% to 3% in Java and Bali region and surrounding areas by2008 as part of the Blue Sky Project.oMogas shortfall continues from 70 kbpd in 2004 to 55kbpd by

2010.




INDONESIA

oCurrent diesel specs limit at 5000 ppm S, distillation T90 at370 0C and cetane nos 48.

oBy 2005 all Pertamina refinery will be able to meet the newdiesel S spec of 500ppm.

oPost 2005 all Pertamina refinery will be able to meet Euro 3specs of 350 ppm S and T95 of 350 0C.

oDiesel shortfall continues from 180 kbpd in 2004 to 200 kbpd by 2010.

•




MALAYSIA

oTotal Crude and condensate refining capacity of 580 kbpdfrom Shell, Petronas, ConocoPhillips and ExxonMobil,

processing a mix of local and imported crudes.oDiesel/Mogas supply/demand:


0.0

50.0

100.0

150.0

200.0

250.0

Diesel Mogas

0 0 0

b p d

2004 2007 2010

..




MALAYSIA

oMalaysia will implement the Euro 2M Mogas specs in Jan2005 by lowering the S from 1000 to 500 ppm S with a 5%

benzene specs.oTo meet the Euro 4 specs of 50 ppm S and 1% benzene

planned for 2010, Petronas refinery requires a new benzeneextraction unit.

oFor the other Oil refineries, Shell and Exxon/Mobil will not beable to meet the Euro 4 specs. However, no upgrading

investments plan has been announced.oMogas import requirement shall widen from 64 kbpd in 2004

to 100 kbpd by 2010.




MALAYSIA

oSimilarly will implement the Diesel Euro 2M in Jan 2005 by lowering S from 3000 to 500 ppm with 49 cetane nos,and T95 @ 370 0C distillation specs.

oMalaysia will proceed to introduce Euro 4M specs by 2010

with the proposed specs limit: 51 Cetane nos, 50 ppm Sand T95 distillation of 340 0C .

oTo meet the new specs Petronas refinery will requires anew DHT unit.

oThe other Oil refineries i.e. Shell and Exxon/Mobil will

not be able to meet the Euro 4 specs. However, noupgrading investment plan has been announced.

oMalaysia will continue to face diesel shortfall which will be imported (about 30 kbpd).




PHILIPPINES

oTotal Crude refining capacity of 280 kbpd from Petron andShell. Caltex closed down its refinery.



0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Diesel Mogas

0 0 0

b p d

2 00 4 2 00 7 2 01 0

..




PHILIPPINES

oHas introduce the Clean Air Act (CAA) in 1999. Mogascurrent specs limit at 1000 ppm S, 2 vol % benzene and 35%aromatics. No near term plan to move to Euro 4.

oPetron will be able to meet the Euro 4 specs of 1% benzene,50 ppm S, 35% aromatics and10% olefins with recentupgrading investment of the LN isomerisation unit andhydrotreaters. However, Shell will not be able to meet theEuro 4 specs.

oMogas shortfall continues from 35 kbpd in 2004 to 57 kbpd by2010.




PHILIPPINES

oCurrent diesel specs limit at 500 ppm S since Jan 2004. Other specs are T90 distillation at 375 0C and cetane nos 48.

oPetron able to meet the Euro 4 specs of 50 ppm S and 15%aromatics with recent upgrading investment of gasoilhydro-treaters and a new hydro-cracker. Plan to further lower the S to 10ppm by 2011.

oShortfall continues from 57 kbpd in 2004 to 80 kbpd by 2010.




SINGAPORE

oTotal Crude refining capacity of 1.24 Million bpd fromExxonMobil Shell and SRC.



0.0

50.0

100.0

150.0

200.0

250.0

300.0

Diesel Mogas

0 0 0

b p d

2004 2007 2010

..




SINGAPORE

oCurrent Mogas specs limit at 500 ppm S and 3.5 vol % benzene since 2001. No near term plan to move to Euro 3or 4. However, the Government is expected to legislate to1% benzene in near future.

oAll refineries (SRC, Exxon Mobil and Shell) unable to meetEuro 4 specs of 1% benzene, 50 ppm S, 35% aromatics and10% olefins.

oMogas volume available for export is expected at 120 kbpd

mostly to affiliated Co’s.




SINGAPORE

oCurrent diesel specs limit at 500 ppm S. Plan to lower S to 50 ppm by April 2006 to meet Euro 4.

oAll refineries would be able to meet the new specs withexisting desulfurisation capacity with minor investmentsrequired.

oProjected diesel available for export of 200 kbpd mostly toaffiliated Co’s.




THAILAND

oTotal Crude refining capacity of 1.0 Million bpd processingmostly imported crudes.



0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

Diesel Mogas

0 0 0

b p d

2 00 4 2 00 7 2 01 0

..




THAILAND

oCurrent Mogas specs limit at 500 ppm S and 3.5 vol % benzene, 35% aromatics.

oPlan to further lower S from 500 to 150ppm in 2005 (Euro 3specs).

oProposed to proceed to Euro 4 specs by 2010. Most of therefineries will not be able to meet the Euro 4 specs of 1%

benzene, 50ppm S and 10% olefins.oBalance mogas until 2008 and expected shortfall by 20 kbpd

by 2010. High mogas growth inline with an increased inautomobiles sales.




THAILAND

oCurrent diesel specs limit at 350 ppm S since Jan 2004 (Euro3). Plan to lower S further to 150 ppm by 2008.

oProposed to proceed to Euro 4 specs by 2010. Most of therefineries will not be able to meet the Euro 4 specs of 50

ppm S and PNA of 11%.oTotal upgrading investment for all 5 refineries (except TPI and

RPC) in Thailand to meet Euro 4 will exceed US$ 1 billion.oCurrent balance on diesel. Expected shortfall from 2007

onwards (30~80 kbpd).o




VIETNAM

oTotal Crude refining capacity of 5.4 kbpd. Plan new refinery atDung Quat (120 kbpd) to be commissioned by 2008 and

Nghi Son ( 120 kbpd) expected post 2010.oDiesel/Mogas supply/demand:

(Forecast figures from FACT. Projected demand growth at 5.5.~6.1 %)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Diesel Mogas

0 0 0

b p d

2004 2007 2010

..




VIETNAM

oCurrent mogas specs of 1500 ppm S and 5% benzene.oCurrent diesel specs a mix of 500, 2500 and 5000 ppm S.oWith the commissioning of both the new refineries, Vietnam

will be able to meet Euro 3 and 4 specs respectively.oMogas and diesel shortfall continues until the construction of

the second refinery.




Impact of Quality changes to the Refinery

oMost of ASEAN countries will be implementing the Clean Fuels program in phases since it involve high upgrading investmentcost translating to a higher fuel cost.

oIn addition, with the regulated market the government is politically sensitive since the higher fuel cost will have a direct

impact to end customers increase cost of living.oThailand is ahead in the above program followed behind by other

countries like Malaysia, Singapore, Philippines and Indonesia.Other countries like Vietnam, Brunei, Myanmar has yet toannounce their plan. However, most of these countries areunable to meet the European specs without any new investment.

oEach country also implement varying specs limit.oPresent is the summary of the Clean Fuels implementation plan

for mogas and diesel fuels in the various Asia Pacific countries.




Most of the ASEAN countries has set the benzenecontent in gasoline within the 3% to 5% limit.

Benzene limit in mogas : Current level and target (vol %)

4%

PNG

Brunei

India(nationwide)

Malaysia

Vietnam

Indonesia

Myanmar

Cambodia

3.5%

Singapore

Thailand+

2.5%

China

2% 1.5%

Hong Kong

JapanTaiwan

S. Korea(2006)

Australia*(2006)

India (2010)

3.0%

India's metro

cities andnationwidestarting 2005.

Indonesia(2008)#

N. Zealand

Sri Lanka

Philippines

1%

S. Korea

WWFC (2.7)EUROII, IIIand IVCARBIII(1.1%)

Source : IFQC, FACTS

5%

Notes :

1. * Varies from state to state between 1 to 5%

2. + Average benzene content in Thailand - 1.6%

3. # Proposed

4. WWFC - World Wide Fuel Charter




Impact of regional mogas to the Global market

oThe total mogas shortfall from ASEAN countries (excludingSingapore) is 206 kbpd in 2004 and projected to increase to 261kbpd by 2010.

oExcept for Malaysia and Singapore most of the Asean countries

consume low octane mogas (92~94 RON).oCurrent net mogas exporters in Asia Pacific are India, S Korea,Singapore, Taiwan, Thailand and China (about 360~380 Kbpd).However, India, Thailand and China produces low octanematerials (93~95 RON) thus can satisfy most the demand from

Indonesia, Vietnam and Philippines until 2010.oSingapore which produces high octane mogas will be able to

satisfy part of Malaysian demand only specifically to itsaffiliated company.




Impact of regional mogas to the Global market

oHigh octane mogas avails will continue to be very tight.This is reflected in the increase in average value per octane of mogas for 95~97 is higher by 30% ascompared to 92~95.

oIntra ASEAN mogas trading volume has been increasingfrom 5.7 kbpd in 2002 and expected to increase to 12.3

kbpd in 2004.oIn addition availability of Euro 4 Mogas (benzene of 1%

and S of 50 ppm) will be scarce in the region without

any new upgrading investment. oDue to the tightening of high octane mogas supply in theregion, Malaysia has to review its high octane mogas specs.oAlternatively, Malaysia has to put additional new facilitiesto generate more gasoline at the same time meeting the

incoming stringent specs.




Impact of regional diesel to the Global market

oThe total diesel shortfall from ASEAN countries (excludingSingapore) is expected to increase from 337 kbpd in 2004 to493 kbpd by 2010.

oMajor gasoil exporters in Asia Pacific are Singapore, South

Korea, India and Taiwan with a net exportable volume of 470 kbpd. Currently, this volume can just satisfy theASEAN demand including demand from China andPakistan. However, post 2005 this exportable volume isinadequate to satisfy the increasing appetite for diesel in

ASEAN region since it has also to compete with theincreasing demand from China and Pakistan. The expectedshortfall is in the region of 100~200 kbpd. With plancapacity addition in the Middle East countries (Iran, Kuwait




Impact of regional diesel to the Global market

and Saudi Arabia) and with a projected surplus volumeof 500 kbpd, it is expected these 500 ppm diesel will thenflow into the ASEAN region.

oIntra ASEAN diesel trading volume has been increasing from

10.0 kbpd in 2002 and expected to increase to 24.3 kbpd in2004oCurrently, a small volume 50 ppm diesel is only available from

Singapore and Korea refineries. With the increasing demandfor this ultra low S diesel, this diesel will also flow from

Middle East to the ASEAN region, with the surplus volumearising from the increase in the Middle East hydro-crackingcapacity.




Summary of Impact to Global market

oWith the tightening of product supply from the local refineries,and the potential deregulations of the high growth market,refining margin is expected to improve, thus potential for new refining investments to meet the Clean Fuels

requirement.oIn conclusion, the ASEAN refining market is moving ahead tomeet the changing specifications, albeit at a slower pace,over the coming decade.

o

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