9h55 am-Tammy Klein Presentation_Nov2014_REV

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Making the Case for Oxygenates in the GCC

Tammy Klein, Senior Vice President Middle East Methanol Forum, Nov. 26, 2014

© Stratas Advisors. All rights reserved. 3

Sulfur reduction and octane improvement primary focus

GCC Fuel Quality Change Drivers 2012-2030

Prevalence of MTBE blending

No regulatory push to increase

octane, but market octane

demand expected to

increase

No ethanol push

Benzene and aromatics reductions expected

beginning in 2016 in GCC

(GSO 2196/2011)


Proposed/Confirmed FQ Changes

• Jordan (GCC applicant) – 2018: 400 to 50 ppm sulfur

• Kuwait – 2018: 500 to 10 ppm sulfur

• Saudi Arabia – 2016: FQ Roadmap

• Sulfur: 1,000 to 10 ppm • Benzene: 3 to 1 vol% max • Aromatics: No limit to 35 vol% max • Olefins: 20 to 18 vol% max • RVP: 45-62 (s) / 45-69 (i) / 45-79

(w) → 45-60 (s) / 45-70 (w) • Distillation EP: 225 to 210 ⁰C max

• UAE – 2015: 100 to 10 ppm sulfur

Proposed/Confirmed Fuel Quality Changes Sulfur reduction a key focus; Saudi Arabia’s fuel quality roadmap takes effect in 2016

Legend:

10 ppm

11-99 ppm

100-150 ppm

151-600 ppm

601-2500 ppm

No information

Sulfur Limits in 2020


Market octane demand expected to increase, desulfurization a key driver along with phase out of low octane grades

Octane Market Share

RON 81 84 87 90 91 92 95 98 Bahrain 40.0% 60.0% Iran 90.0% 10.0% Iraq 100.0% Jordan (applicant) 75.0% 25.0% Kuwait 35.0% 63.0% 2.0% Oman 12.0% 88.0% Qatar 43.0% 57.0% Saudi Arabia 65.0% 35.0% U.A.E. 38.0% 60.0% 2.0% Yemen 99.9% 0.1%

Octane Market Share in GCC Countries, 2013

Data as at the end of 2013 Iran's gasoline market share may change as starting from April 2014 RON 95 50 ppm sulfur production accounted

for about 30% of total gasoline production

Source: Stratas Advisors, 2014


Average Annual Growth is 3.2% between 2012 -2030

Middle East Gasoline Supply & Demand

020406080

100120140

2012 2015 2020 2025 2030

Mill

ion

Tons

Middle East Production Middle East Demand

Robust demand growth in Arab Gulf stems from population increases and economic growth coupled with subsidized gasoline prices

The above positive factors will be offset partially by lower growth in the rest of the Middle East

Significant level of refining investments will shift the region from a net importer to net exporter



Region becomes a net exporter after 2020

Middle East Gasoline Net Imports, 2012-2030

From a regional perspective, Latin America and Africa will remain net importers of gasoline throughout the forecast timeframe

North America and Middle East will shift from being net importers to net exporters

-50

-40

-30

-20

-10

0

10

20

30

2012 2015 2020 2025 2030

Mill

ion

Tons

North America Latin America Europe CIS Asia Pacific Middle East Africa



Highlights and Observations

• Oxygenates Limits – 10 vol% max: Kuwait, Oman, UAE – 15 vol% max: Saudi Arabia, Qatar – No limit: Bahrain

• Oxygen limit: – 2.7 wt% max: Kuwait, Iran, Oman, Jordan,

UAE – No limit: Bahrain, Qatar (proposed for 2015),

Saudi Arabia • Metallic Additives

– In use in Iraq and Yemen • No ethanol blending in the region

– Though American producers are hunting for export markets!

• No methanol blending in the region at this time

MTBE Blending in the GCC Countries Sulfur reduction a key focus; Saudi Arabia’s fuel quality roadmap takes effect in 2016

MTBE Blending in the Middle East

Legend:

Blends MTBE

Doesn’t Blend MTBE

No information


Two Largest Growth Markets Are Asia Pacific and GCC

Stratas Base Case: Global MTBE Demand, 2012-2030

0.0

5.0

10.0

15.0

20.0

25.0

2012 2015 2020 2025 2030

Mill

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Tons

Latin America Europe Russia/CIS Asia Pacific Middle East Africa

Latin America constrained on refining capacity for producing volume and gasoline octane Russia has large octane deficit due to increasing octane and removal of metallic additives China has large octane deficit due to sulfur reduction and removal of metallic additives;

China has limited refinery octane producing capability

8.98% 7.69% 6.63% 2.87%

Note: Percentages represent growth in each of the study time increments shown. Source: Stratas Advisors, 2014


Demand to increase, will largely be supplied by domestic production

Stratas Base Case: GCC MTBE Demand

Demand to increase as region reduces sulfur, improves octane Region will largely be supplied by domestic production

0

1

2

3

4

5

6

2012 2015 2020 2025 2030

Mill

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Tons


Contact Information

Q & A Tammy Klein, Senior Vice President

[email protected] +1.239.970.2231

9h55 am-Tammy Klein Presentation_Nov2014_REV

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