AIR POLLUTION AND ENERGY EFFICIENCY · 2016. 10. 31. · July 15, 2016 EnSys Energy with...

https://edocs.imo.org/Final Documents/English/MEPC 70-INF.9 (E).docx

E

MARINE ENVIRONMENT PROTECTION COMMITTEE 70th session Agenda item 5

MEPC 70/INF.9

21 July 2016 ENGLISH ONLY

AIR POLLUTION AND ENERGY EFFICIENCY

Review of fuel oil availability as required by regulation 14.8 of MARPOL Annex VI –

Result of multi stakeholder study by EnSys/Navigistics

Submitted by BIMCO and IPIECA

SUMMARY

Executive summary: This document provides the full report of a supplemental marine fuel availability study

Strategic direction: 7.3

High-level action: 7.3.1

Output: 7.3.1.10

Action to be taken: Paragraph 2

Related document: MEPC 70/5/5

Introduction 1 MARPOL Annex VI, regulation 14.8 requires a review of the standard set forth in regulation 14.1.3 to be completed by 2018 to determine the availability of fuel oil to comply with the fuel oil standard set forth in that paragraph. Action requested of the Committee 2 The Committee is invited to review the complete report of the Supplemental Fuel Availability study by EnSys/Navigistics as the basis of the findings of the report's executive summary, set out in document MEPC 70/5/5.

***

MEPC 70/INF.9 Annex, page 1

https://edocs.imo.org/Final Documents/English/MEPC 70-INF.9 (E).docx

ANNEX

SUPPLEMENTAL MARINE FUEL AVAILABILITY STUDY

Supplemental Marine Fuel Availability Study

July 15, 2016

EnSys Energy with Navigistics Consulting

7/15/2016


MARPOL Annex VI Global Sulphur Cap 2020 Supply-Demand Assessment Final Report

EnSys Energy & Systems, Inc.

1775 Massachusetts Avenue, Lexington, MA, 02420

(781) 274 8454

www.ensysenergy.com


July 15, 2016

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Table of Contents

1 Introduction ....................................................................................................................... 1

2 Executive Summary ............................................................................................................ 3

2.1 2020 Marine Fuels Demand ........................................................................................ 4

2.2 2020 Global Fuel Formulation ..................................................................................... 5

2.3 2020 Global Demand ................................................................................................... 6

2.4 2020 Refining Capacity ................................................................................................ 7

2.5 WORLD Model Case Results ........................................................................................ 7

2.5.1 2020 Base Case (No Global Fuel) ......................................................................... 7

2.5.2 2020 Global Fuel Cases ........................................................................................ 8

2.5.2.1 Inadequate Capacity ..................................................................................... 8

2.5.2.2 Major Changes to Refinery Operations, Marine Fuels Blending, Crude and

Product Movements .................................................................................................... 10

2.5.2.3 Need for Time ............................................................................................. 11

2.5.2.4 Severe Economic Impacts ........................................................................... 11

2.6 Context for Viewing Results ...................................................................................... 16

2.6.1 Factors Intrinsic to the WORLD Model .............................................................. 16

2.6.2 External Factors ................................................................................................. 17

2.7 Overall Conclusions ................................................................................................... 18

3 Demand Assessment ........................................................................................................ 20

3.1 Adjust the IMO’s 3rd GHG Study to 2020 without the 0.5% Sulphur Cap ................. 21

3.2 Potential Role for LNG by 2020 ................................................................................. 22

3.3 Potential Role for Other Alternative Fuels by 2020 .................................................. 23

3.4 Vessel Speeds and Use of Slowdown in 2020 ........................................................... 24

3.5 Scrubber Penetration by Year-End 2019 ................................................................... 36

3.6 Marine Fuel Demand and “Switch” Volumes in 2020 ............................................... 51

3.6.1 Scrubber Energy Use .......................................................................................... 53

3.6.2 EU and China Territorial Adoption of 0.5% max Sulphur Marine Fuel Zones

outside of ECAs ................................................................................................................ 54

4 WORLD Modelling Cases & Premises .............................................................................. 55


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4.1 Cases Run .................................................................................................................. 55

4.2 Global 2020 Supply-Demand Outlook ....................................................................... 57

4.2.1 The Need for a Global Outlook .......................................................................... 57

4.2.2 Comparison of Recent Global Outlooks ............................................................. 57

4.3 Supply Demand Outlook ........................................................................................... 60

4.4 Product Quality Outlook ........................................................................................... 64

4.4.1 Gasoline ............................................................................................................. 65

4.4.2 Jet Fuel and Kerosene ........................................................................................ 65

4.4.3 On and Off Road Diesel Fuel, Heating Oil .......................................................... 65

4.4.4 Residual Fuel ...................................................................................................... 66

4.5 Marine Fuels Grades & Qualities .............................................................................. 66

4.6 Transportation Outlook ............................................................................................. 68

4.7 Refining Capacity Outlook ......................................................................................... 69

4.7.1 Overview ............................................................................................................ 69

4.8 Base Capacity January 2016 ...................................................................................... 69

4.9 Closures 2016 – 2019 ................................................................................................ 72

4.10 Projects 2016 – 2019 ............................................................................................. 77

4.11 Projected Net Available Capacity End 2019 .......................................................... 83

4.11.1 Nameplate versus Effective Capacity ................................................................ 84

4.11.2 Regional Refinery Maximum Utilisation Rates .................................................. 84

4.11.3 Hydrogen Plant, Sulphur Plant and FCC SOx Emissions ..................................... 86

4.11.3.1 Hydrogen Plant Capacity ............................................................................ 87

4.11.3.2 Sulphur Plant Capacity ................................................................................ 88

4.11.3.3 FCC SOx Emissions Constraints ................................................................... 91

5 WORLD Modelling Results ............................................................................................... 92

5.1 Key Model Results & Findings ................................................................................... 93

5.1.1 2015 Calibration Case ........................................................................................ 93

5.1.2 2015 Adjusted Case............................................................................................ 93

5.1.3 2020 Base Case .................................................................................................. 94

5.1.4 2020 Global Fuel Cases ...................................................................................... 96

5.1.4.1 Changes in Refining Operations & Trade Movements ............................... 96


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5.1.4.1.1 Refinery Operations ............................................................................................ 96

5.1.4.1.2 Marine Fuel Blending .......................................................................................... 99

5.1.4.1.3 Refinery CO2 Emissions ..................................................................................... 101

5.1.4.1.4 Crude & Product Flows ..................................................................................... 101

5.1.4.2 Changes in Supply Costs and Differentials ............................................... 106

5.1.5 Detailed Global Case Results ........................................................................... 115

5.2 Over/Under Optimisation Factors and Risks ........................................................... 121

5.2.1 Factors Intrinsic to the WORLD Model ............................................................ 122

5.2.1.1 Model Inherent Crude and Product Trade Flexibility ............................... 122

5.2.1.2 Model Inherent Refinery Operations & Blending Flexibility .................... 122

5.2.1.3 Model Inherent Product Logistics Flexibility & Quality ............................ 123

5.2.1.4 Inland versus Coastal Refineries ............................................................... 123

5.2.2 External Factors Impacting Premises ............................................................... 126

5.2.2.1 2020 Refinery Available Capacity ............................................................. 126

5.2.2.2 Impact on Crude Runs & Prices ................................................................ 127

5.2.2.3 Level of Global Demand and Call on Refining .......................................... 128

5.2.2.4 Global Crude Slate .................................................................................... 130

5.2.2.5 Marine Fuel Total Demand ....................................................................... 130

5.3 Summary of Findings & Conclusions ....................................................................... 131

6 Appendices ..................................................................................................................... 134

6.1 Background on the EnSys WORLD Model ............................................................... 134

6.2 Refinery Projects Detail ........................................................................................... 138

6.2.1 Projects 2016-2019 Included ........................................................................... 138

6.2.2 Projects Post 2019 Excluded ............................................................................ 143

6.3 WORLD Model Results – Detail ............................................................................... 144

6.3.1 Refinery Operations – 2020 Base Case ............................................................ 144

6.3.2 Refinery Operations – 2020 Mid Switch High MDO Case ................................ 149

6.3.3 Refinery CO2 Emissions .................................................................................... 154

6.3.4 Crude and Product Movements – 2020 Base Case .......................................... 155

6.3.5 Crude and Product Movements – 2020 Mid Switch High MDO Case ............. 161

6.3.6 Crude Movements by Type – 2020 Base Case ................................................. 167


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6.3.7 Crude Movements by Type – 2020 Mid Switch High MDO Case ..................... 172

6.3.8 Marine Fuels Blends – 2020 Base and Mid Switch Cases ................................ 177

6.3.9 Marine Fuels Global Average Densities – 2020 Base and Mid Switch Cases ... 180


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Table of Exhibits

Exhibit 2-1 Navigistics 2020 Marine Fuel Demand Outlook (Energy balanced) ........................ 5

Exhibit 2-2 WORLD Model Cases ............................................................................................... 6

Exhibit 2-3 Diesel – IFO Price Differentials Northwest Europe ................................................ 14

Exhibit 2-4 Northwest Europe MDO vs HS IFO Prices - $/tonne ............................................. 15

Exhibit 2-5 Impact of Global Rule on Global Product Supply Costs - $/barrel Change ........... 15

Exhibit 3-1 Marine Fuel Demand Analytical Approach ............................................................ 21

Exhibit 3-2 Fuel Mix Scenarios from 3rd GHG Study ............................................................... 21

Exhibit 3-3 Fuel Mix from 3rd GHG Study for 2020 with and without Global Sulphur Cap .... 22

Exhibit 3-4 Marine Fuel Prices, $s per Ton .............................................................................. 25

Exhibit 3-5 Vessel Time Charter Rates, $s per Day .................................................................. 26

Exhibit 3-6 Average at Sea Speed, knots ................................................................................. 27

Exhibit 3-7 Vessel Fuel Consumption Speed Relationship ....................................................... 28

Exhibit 3-8 Fuel Speed Curve – Relative Fuel Consumption Factor v. Froude Number .......... 28

Exhibit 3-9 Daily Fuel Consumption at Sea 2007, 2012, and 2016 .......................................... 30

Exhibit 3-10 Number of Ships by Type and Size Category 2012 and 2016 .............................. 31

Exhibit 3-11 DWT Capacity by Ship Type for the Size Categories shown previously, 2012 and

2016 ......................................................................................................................................... 32

Exhibit 3-12 Waterborne Trade, 2012 and 2016 (estimated by CRS) ...................................... 32

Exhibit 3-13 “Trade Limited”: adjusted Fleet Capacity, 2012 and 2016 (estimated by CRS) .. 32

Exhibit 3-14 “Trade Limited”: adjusted Fleet Size, 2012 and 2016 ......................................... 33

Exhibit 3-15 “Trade Limited” Fleet-wide Fuel Consumption Change, 2012-2016 ................... 34

Exhibit 3-16 Actual and Predicted Optimal Speeds 2007, 2012, 2016, and 2020 ................... 35

Exhibit 3-17 Actual and Scrubber Installations by Year (2010 through 2015 – not cumulative)

and Ship Populations (as of 2012) ........................................................................................... 40

Exhibit 3-18 Actual Scrubber Economics, Ships in Target Population and Fuel Consumed .... 43

Exhibit 3-19 Whole Fleet Scrubber Market Penetration S-Curve ............................................ 45

Exhibit 3-20 Whole Fleet Predicted Scrubber Penetration, cumulative .................................. 46

Exhibit 3-21 Whole Fleet ex ECA Predicted Scrubber Penetration, , cumulative .................... 48

Exhibit 3-22 ECA Only Predicted Scrubber Penetration, cumulative ...................................... 49

Exhibit 3-23 ECA Proxy Predicted Scrubber Penetration, cumulative ..................................... 50

Exhibit 3-24 ECA Proxy Predicted Scrubber Penetration Adjusted, cumulative ..................... 51

Exhibit 3-25 Navigistics 2020 Marine Fuel Demand (Energy balanced) .................................. 51

Exhibit 3-26 2020 Marine Fuel Demand Cases ........................................................................ 52

Exhibit 4-1 Summary of WORLD Model Cases ......................................................................... 56

Exhibit 4-2 Recent Global Outlooks ......................................................................................... 59

Exhibit 4-3 Global Demand Differences versus WEO 2015 New policies ................................ 59

Exhibit 4-4 2020 Base Case Supply Demand Outlook .............................................................. 62

Exhibit 4-5 WORLD Model Product/Consumption Types ........................................................ 63


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Exhibit 4-6 OPEC 2015 World Oil Outlook Demand by Product .............................................. 63

Exhibit 4-7 Marine Fuel Grades Modelled ............................................................................... 67

Exhibit 4-8 Global Refinery Base Capacity per Different Organisations .................................. 70

Exhibit 4-9 Assessed Refinery Capacity January 2016 ............................................................. 71

Exhibit 4-10 Refinery Closures Recent & Projected by Year and Region ................................. 74

Exhibit 4-11 Refinery Closures Recent & Projected ................................................................. 74

Exhibit 4-12 Refinery by Refinery Closures - 1 ......................................................................... 75

Exhibit 4-13 Refinery by Refinery Closures - 2 ......................................................................... 76

Exhibit 4-14 Refinery by Refinery Closures – 3 ........................................................................ 76

Exhibit 4-15 Watch List for Potential Refinery Closures .......................................................... 77

Exhibit 4-16 Refining Base Capacity January 2020 – 2016 Base Less Closures ....................... 77

Exhibit 4-17 Refining Projects Through 2019 .......................................................................... 79

Exhibit 4-18 OPEC 2015 World Oil Outlook Project Additions ................................................ 81

Exhibit 4-19 Refining Projects through 2019 - Adjusted .......................................................... 82

Exhibit 4-20 Projected Total Refining Capacity End 2019 ........................................................ 82

Exhibit 4-21 EnSys vs MTOMR Capacity Projection ................................................................. 83

Exhibit 4-22 Historical United States Refinery Utilisations ...................................................... 85

Exhibit 5-1 Impact of Global Rule on Refinery Crude Runs ................................................... 103

Exhibit 5-2 Impacts on Hydrogen, Sulphur and FCC SOx Scrubber Requirements ................ 103

Exhibit 5-3 Impacts on Hydrogen, Sulphur Plant % of 2016-2019 Projects ........................... 104

Exhibit 5-4 Total Marine Fuel Pool Selected 2020 Cases ....................................................... 105

Exhibit 5-5 Changes in Crude Oil Movements 2020 Mid Switch High MDO vs Base Case .... 106

Exhibit 5-6 Diesel – IFO Price Differentials Northwest Europe .............................................. 110

Exhibit 5-7 Diesel – IFO Price Differentials United States Gulf Coast .................................... 111

Exhibit 5-8 Diesel – IFO Price Differentials Asia (Singapore) ................................................. 112

Exhibit 5-9 Summary 2020 MGO – IFO Differentials $/tonne Basis ...................................... 113

Exhibit 5-10 Northwest Europe MGO vs HS IFO Prices - $/tonne ......................................... 113

Exhibit 5-11 Impact of Global Rule on Global Product Supply Costs - $/barrel Change ....... 114

Exhibit 5-12 Impact of Global Rule on Global Product Supply Costs – Percent Change ....... 114

Exhibit 5-13 WORLD Premises & Results – Refining Additions .............................................. 115

Exhibit 5-14 WORLD Premises & Results – Refinery Distillation and Upgrading ................... 116

Exhibit 5-15 WORLD Premises & Results – Refinery Desulphurisation, Hydrogen, Sulphur

plant ....................................................................................................................................... 117

Exhibit 5-16 WORLD Premises & Results – Crude & Product Prices ...................................... 118

Exhibit 5-17 WORLD Premises & Results – Price Differentials & Crack Spreads ................... 119

Exhibit 5-18 WORLD Premises & Results – Product Supply Costs ......................................... 120

Exhibit 5-19 Isolated Refining Capacity - Distillation ............................................................. 125

Exhibit 5-20 Isolated Refining Capacity – Upgrading and Desulphurisation ......................... 126


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Acronyms & Abbreviations

bbl Barrel

boe Barrel of oil equivalent (on energy content basis)

b/d barrels per day

BTX Benzene, toluene, xylene (mixed) aromatics

cd calendar day – used in reference to plant capacity to denote

maximum long term sustainable throughput allowing for planned

shutdowns (see CD)

CTL coal-to-liquids

DM Distillate Marine (per ISO 8217 Specification)

DWT Deadweight capacity of a ship

ECA Emissions Control Area

EIA Energy Information Administration

EPA Environmental Protection Agency

FCC fluid catalytic cracker

FSU Former Soviet Union

HCR hydrocracker

HDS hydrodesulphurization (unit)

HFO heavy fuel oil (taken in this report as equating to IFO)

H2S hydrogen sulphide

HS high sulphur

GTL gas-to-liquids

IEA International Energy Agency

IEO [EIA] International Energy Outlook

IFO (marine) intermediate fuel oil

IMO International Maritime Organization


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ISO International Standards Organization

LNG liquefied natural gas

LS low sulphur

MARPOL International Convention for the Prevention of Pollution from Ships

mb/d million barrels per day

mb/cd million barrels per calendar day (referring to refinery plant capacity)

mtpa million tonnes per annum

MDO marine diesel (taken here as equating to ISO-8217 DMB)

MGO marine gasoil (taken here as equating to ISO-8217 DMA)

MTOMR [IEA] Medium Term Oil Market Report

NGL’s natural gas liquids

RO-RO Roll-on/ roll-off – ship designed to carry wheeled cargo

RM Resid Marine (per ISO 8217 Specification)

scf/d standard cubic feet per day (of natural gas or hydrogen)

scf/cd standard cubic feet per day (in reference to capacity)

sd stream day – used in reference to plant capacity to denote maximum

short term throughput (see CD)

st/d short tons per day (1 short ton = 2000 lbs)

st/cd shorts tons per calendar day (in reference to sulphur plant capacity)

VLCC Very large crude carrier

WORLD [EnSys] World Oil Refining Logistics Demand Model

WEO [IEA] World Energy Outlook

WOO [OPEC] World Oil Outlook

UNEP United Nations Environmental Protection

United Kingdom United Kingdom of Great Britain and Northern Ireland

United States United States of America


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US United States of America

USEC United States of America East Coast

USGC United States of America Gulf Coast

‘switch volume’ the volume of high sulphur marine fuel to be converted to 0.5%

sulphur standard under the IMO Global Sulphur Cap


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1 Introduction

MARPOL Annex VI calls for a Marine Fuel Availability Study that will inform the debate,

scheduled for MEPC 70 in October 2016, and the related decision to be taken by the IMO,

over whether the 0.5% Global Sulphur Cap should be implemented in 2020 or delayed to

2025. EnSys and Navigistics, as others, have believed for some time that the IMO decision

will have major impacts on the maritime and refining industries, as well as the global

environment. We have also been concerned that any single study would generate debate

whereas adding a second study could reduce uncertainty and place the IMO in a stronger

position to make a sound decision. Accordingly EnSys Energy and Navigistics Consulting

have undertaken this Supplemental Marine Fuels Availability Study with the aim of providing

additional insight and a ‘second opinion’ that will inform the IMO and stakeholders. As

always in these studies, our goal has been to provide an assessment that is impartial,

objective and thorough. This work has been executed with sponsorship from several

associations, namely: IPIECA, BIMCO, Fuels Europe / CONCAWE, Canadian Fuels Association

and Petroleum Association of Japan.

In undertaking this analysis, we have been mindful of the Terms of Reference for the IMO

study and have aimed to address the items raised therein. This Final Report describes the

work we have undertaken, our methods, findings and conclusions. The body of the report

below contains six sections:

Section 2 – Executive Summary – focusses on the key findings and their implications.

Section 3 contains the Navigistics demand analysis comprising (1) findings from our detailed

evaluation of scrubber potential, (2) an assessment of projected total 2020 marine fuels

‘base’ demand, i.e. before application of the Global Sulphur Cap and (3) resulting assessed

potential required ‘switch volumes’ of HS HFO to LS (0.5% sulphur) compliant fuel.

Section 4 describes the use of EnSys’ proprietary WORLD model, a fully integrated model of

the global petroleum ‘liquids’ supply, refining, demand and trade industry that has been in

use, calibrated and verified since 1987. The WORLD Model cases and associated premises

are detailed including our refinery capacity outlook. .

Section 5 presents the results from the WORLD Model cases and as such gets to the heart of

this report and the analysis. A second part of Section 5 discusses a range of factors that

could influence the results either ‘up’ or ‘down’. These provide a critical context for viewing

and evaluating the Model results themselves. The factors reviewed cover both features of

the WORLD Model itself which are likely to influence results and external developments

which could affect the premises used and hence results. The section concludes with a

summary of findings and conclusions.


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Section 6, Appendices, includes three sections. The first, Section 6.1, provides background

on the EnSys WORLD Model. The second (6.2) provides detail on refinery projects. The third

section (6.3) provides supporting detail on WORLD Model results, including refinery

operations and CO2 emissions, crude and product movements and marine fuel blends.

Price Terminology Used in the Report

In order to maintain clarity, throughout this Report,

‘price’ is used solely to refer to published reported

prices, as for instance 2015 average reported prices

for selected crude oils and products or ‘world’/IEA

import crude oil price as included in the IEA WEO.

‘Supply cost’ is used to refer to results generated

within the WORLD Model relating to products and

crude oils. In mathematical terms, the Model

generates ‘marginal prices’. These EnSys equates to

open market prices for crude oils or products but –

again – to avoid confusion – we refer to these as

‘supply costs’. Likewise, when used, the terms

‘differentials’, ‘margins’ and ‘crack spreads’ refer to

WORLD Model results that have been derived from

Model supply costs.


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2 Executive Summary

EnSys, refining and oil markets specialists, and Navigistics, marine specialists, have

combined their experience and expertise to evaluate the outlook for marine fuels supply

and demand in 2020 on the basis that the MARPOL Annex VI 0.5% sulphur Global Fuel

standard would be implemented at the start of that year. Our goal is to support the IMO

and stakeholders in making their decision on 2020 versus 2025 timing by conducting an

analysis which supplements the ‘2018’ study now being undertaken by another contractor

for the IMO, i.e. to provide a ‘second opinion’ which should hopefully reduce the range of

uncertainty facing the IMO.

This Final Report presents our findings with respect to the following key questions:

1. What is the marine fuel outlook for 2020, firstly for total demand and then, critically,

for the volume that would need to be ‘switched’ from high sulphur to 0.5% sulphur

fuel to meet the IMO Global Sulphur Cap?

2. What is the likely range of variability or uncertainty in the ‘switch volume’ outlook?

3. What are the potential options for formulation of the 0.5% Global fuel?

4. What is the base outlook for global ‘liquids’ supply, demand and refining in 2020

including the level of available refining capacity?

5. Given the above:

a. How is the global refining industry likely to respond and adapt its operations?

b. Will it be able to meet the full Global Rule supply requirements?

c. What are the expected economic impacts across marine fuels and all other

fuels worldwide as a result of the Global Sulphur Cap?

Our ‘bottom line’ assessment from having addressed the above, item by item, is that:

The uptake of scrubbers will be limited by end 2019 such that the required ‘switch

volume’ from high sulphur to Global Fuel standard is estimated as 3.8 mb/d (195

million tpa) plus and minus a range of uncertainty

Based on this outlook, the global refining industry will lack sufficient capacity in one

critical respect in 2020, namely sulphur plant and to a lesser degree hydrogen plant,

(both vital to the ability to desulphurise refinery streams), to fully respond to the

Global Sulphur Cap

However, even if sufficient sulphur and hydrogen plant capacity were to become

available, which we believe to be unlikely, for the industry to attempt to fully

respond the Global Sulphur Cap in 2020 would lead to severe strains on global oil

markets with sharply increased supply costs not only for marine fuels but, critically,

for nearly all fuels in all regions worldwide. Further, the scale of the needed refining

adjustments and the impossibility in the refining industry of adding capacity in


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months rather than years are such that strained supply and markets can be expected

to be sustained over an extended period.

Even the possibility of alleviating the market strain through the expansion of markets

for HS HFO displaced from consumption on ships is uncertain, would take time and

would bring its own consequences including increases in crude oil and – potentially -

product costs stemming from increased use of crude oil. Further, it could result in a

reallocation of HS fuel and emissions from ships to land rather than a net reduction

in sulphur emissions.

The balance of this Final Report sets out the basis for these findings.

2.1 2020 Marine Fuels Demand

We developed our 2020 marine fuel demand perspective using the IMO’s 3rd GHG Study as

our basis. We assessed the likely impact on global marine fuel demand of increased ships’

speeds based on projected marine distillate costs in 2020 (based on $80 per barrel Brent

crude oil) and actual vessel speeds in 2016 - based on a sampling of data for bulkers (over

60k DWT), containerships (over 3,000 TEUs), and crude oil tankers (over 80k DWT). The

speed adjustment increased marine fuel demand by 7.1%. We conducted a survey of

Exhaust Gas Cleaning System Association (EGCSA) members to determine the actual

scrubber installations to date and calculated the expected installation of scrubbers by year-

end 2019 based on those findings. Scrubbers are predicted to be installed on ships

consuming 48 million tons of HS IFO in 2020. Our total calculated marine fuel consumption,

with speed up, in 2020 is 342 million tons (energy balanced). (3rd GHG Study scenario

average was 330 million tons.) The most critical finding, from a fuel availability perspective,

is that we assess the need to “switch” 205 million tons of HS HFO to 195 million tons (3.8

mb/d) of marine distillates (or other 0.5% sulphur fuel).1 Exhibit 2-1 summarises this

central assessment.

1 The tons and volume differences derive from the energy content differences as per Exhibit 2-1.


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Exhibit 2-1 Navigistics 2020 Marine Fuel Demand Outlook (Energy balanced)

Allowing for a greater degree of vessel speed-up could, we believe, raise required ‘switch

volume’ to around 4.2 mb/d. We thus set out a range of +/-0.4 mb/d around our central

estimate of 3.8 mb/d. This central estimate for a 3.8 mb/d (195 mtpa) switch volume to

marine distillate equates to a reduction in 2020 marine HFO demand from 253 to 48 mtpa

(per Exhibit 2-1). Since 2020 inland HFO demand is projected at 210 mtpa (3.7 mb/d), the

effect of the Global Sulphur Cap is thus to drop total 2020 HFO demand by some 44%.

2.2 2020 Global Fuel Formulation

Most earlier studies have expressed the view that the Global Sulphur Cap would require a

switch to 0.5% sulphur marine distillate. However, the fact is 0.1% sulphur ECA fuel

offerings have included proportions of heavier fuels. There is also a clear refining incentive

to produce heavier compliant fuels as these would use less distillate, more heavy

components and thus be lower cost. We therefore assessed that Global Fuel compliance via

100% marine distillate would not be realistic.

Our High MDO cases assumed 90% MDO (at DMB standard) and 10% heavier fuel. 2 This low

penetration scenario for heavier fuel can be taken to reflect either an initial situation, early

in 2020, where the refining and blending industry reacts by supplying predominantly

previously proven marine (distillate) fuels and/or a somewhat longer term situation where

technical or other issues relating to heavier fuel grades have continued to limit their

acceptance.

We also examined Low MDO scenarios with higher levels of penetration by heavier 0.5%

marine fuel types, anything from a light to a heavy IFO but always within ISO 8217

specifications for RM grades. (There is nothing in the IMO MARPOL Annex VI regulation

2 ECA and non-ECA marine distillates (other than Global Fuel) were taken to be at DMA standard.


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which states that the Global Fuel must be a particular grade.) For the Low MDO scenario,

we opted to be relatively conservative and assumed that, during 2020, acceptance and

penetration of heavier 0.5% sulphur marine fuel formulations could at best reach around

half of the total 0.5% marine fuel supplied. The resulting WORLD Model cases are as

summarised in Exhibit 2-2 below.

WORLD Model Cases

Case No.

Year Case Description Global Fuel

Switch Volume mb/d

Switch Volume

mtpa

% MDO in Global

Fuel

0 2015 Base / Calibration Case No 0 0 0%

1 2020 Base Case No 0 0 0%

2 2020 Low Switch – High MDO Yes 3.4 175 90%

3 2020 Mid Switch – High MDO Yes 3.8 195 90%

4 2020 High Switch – High MDO Yes 4.2 215 90%

5 2020 Low Switch – Low MDO Yes 3.4 175 50%

6 2020 Mid Switch – Low MDO Yes 3.8 195 50%

7 2020 High Switch – Low MDO Yes 4.2 215 50%

Exhibit 2-2 WORLD Model Cases

2.3 2020 Global Demand

Given the scale of the recent drop in crude oil prices, we see it as essential to use as a basis

for our global (WORLD) modelling a ‘top down’ supply/demand/world oil price outlook that

reflects this development. Outlooks available to us in March that had been produced in

2015 or early 2016 by the three main agencies that develop public world supply/demand

projections, namely the IEA, EIA and OPEC Secretariat, ranged from a low of 97.4 to a high of

100.5 mb/d for global demand in 2020. As a ‘central’ case, and effectively the IEA’s

reference long term outlook, we elected to use the IEA WEO New Policies Case which

projects 2020 demand at 98.9 mb/d. (After applying our 2020 Base Case marine fuels

outlook, this adjusts to 99.2 mb/d.)

Since that time, two new EIA outlooks have 2020 demand at 100.3-101.5 mb/d and a recent

comment by a prominent energy analyst Daniel Yergin would appear to indicate that his

analytical firm, IHS, now sees 2020 demand at 101.3 mb/d. Therefore, as further discussed

below, the outlook used is somewhat low compared to latest projections, with implications

for the impacts the Global Sulphur Cap would have.


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The WEO New Policies case projected world oil price in 2020 at $80/barrel.3 EnSys

combined ‘top down’ regional projections for supply and demand in the WEO with ‘bottom

up’ detailed data on crudes and non-crudes supply and on demand by product to flesh out

the base supply/demand picture for 2020.

2.4 2020 Refining Capacity

In developing the basis for this study, EnSys undertook a thorough update to our refinery

capacity, projects and closures data. For this, we drew on multiple sources. We continued to

make limited adjustments to that outlook and incorporated our latest assessments as of

early June into our modelling. Recognising that projects by definition comprise somewhat of

a moving target, we project that total capacity additions from projects for 2016 through

2019 are likely to add some 5.6 mb/cd of new distillation capacity together with close to 3

mb/cd of upgrading capacity and 3.6 mb/cd of desulphurisation. Partially offsetting these

additions, we have assessed potential closures to end 2019 at 2 mb/cd. Combining these

developments with base capacity as of January 2016 leads us to projected available capacity

at end 2019 of 101.3 mb/cd to which WORLD Model cases added a further 0.3 to 0.45

mb/cd of capacity via minor debottlenecking (small capacity, low cost expansions). The

resulting total of around 101.7 mb/cd of 2020 available capacity is close to the 101.8 mb/cd

projected by the IEA in its February 2016 MTOMR.

As a key component of our refinery capacity analysis, we paid particular attention to

capacity ‘effective availability’ (i.e. maximum utilisation rate). Capturing this distinction

versus ‘nameplate’ capacity is essential to developing realistic assessments of global refining

system capability. We used our 2015 Calibration case as a means to fine tune values in

order to get the Model set to the right degree of ‘tightness’ in the global system (i.e. a good

match to major published 2015 crude and product price differentials); also to achieve

regional refinery throughputs that were close to 2015 actuals.

Finally, we also paid particular attention to supplementing published data for hydrogen and

sulphur plant capacities via additional research and Model checks. We did this to ensure

that the 2020 Base Case would have adequate – but not much excess – hydrogen and

sulphur plant capacity against which the impacts of the Global Fuel cases could be gauged.

2.5 WORLD Model Case Results

2.5.1 2020 Base Case (No Global Fuel)

As previously noted, significant time was spent achieving a good 2015 Calibration case. The

initial 2015 case was adjusted in June for minor assessed refinery base capacity changes. All

3 IEA import price in $2014.


July 15, 2016

8

subsequent 2020 cases were run using the adjusted refinery capacity data, i.e. the figures

presented above. The next step was the 2020 Base Case, i.e. no Global Fuel. This

constituted a key reference point against which the impacts of the two sets of three Global

Fuel cases could be evaluated. Versus 2015, the 2020 Base Case shows differentials for

(inland) diesel versus HS IFO that are within but close to the upper end of the recent

historical range. This derives from an embedded projection of continuing growth for

diesel/gasoil and jet/kerosene demand. As we discuss below, this outlook may not fully

reflect a recent softening in (inland) diesel demand growth.

2.5.2 2020 Global Fuel Cases

The two sets of Global Fuel cases simulate substantial, and relatively immediate, changes

imposed on to the 2020 Base Case. The results point to severely strained and potentially

infeasible refining sector conditions, impacting supply costs for all products across all world

regions, not just marine fuels. Regarding the two sets of cases, the High MDO series had

greater impacts on the system and product supply costs than the Low MDO (High Heavier

Fuel) cases. This is to be expected since the allowed heavier marine fuels are generally

easier and less costly to produce. Equally, the impacts increased in going from Low to Mid

to High Switch volume.

2.5.2.1 Inadequate Capacity

Our view is that in 2020 the global refining industry will lack sufficient sulphur plant and

secondarily hydrogen plant capacity to fully meet the Global Sulphur Cap, i.e. switch 3.8+/-

mb/d (195+/- mtpa) to 0.5% Global Fuel standard. This is based on our assessment that

expected 2020 hydrogen and sulphur plant capacity, in the form of current base plus firm

projects less effects of closures, will not be adequate to meet the increased

desulphurisation load (which requires hydrogen as a key input and produces H2S which must

be recovered in sulphur plants). Based on the hydrogen and sulphur plant effective

availabilities we employed, additional hydrogen plant capacity would be needed to the tune

of some 35-50% of the level of additions via known 2016-2019 projects (and an increase of

20-35% over the 2020 Base Case which allowed for and included hydrogen plant additions

equating to 17% of firm projects). While this might be plausible, the corresponding level for

sulphur plants is that further additions equating to 60-75% of the planned 2016-2019

projects would be needed to meet the industry’s sulphur recovery needs under the Global

Fuel cases. (The 2020 Base Case showed only 2% of further sulphur plant additions needed

beyond projects.)

Even if we are being overly conservative on hydrogen and sulphur plant maximum

utilisations, (we have global averages of around 70-75% of calendar day capacity for

hydrogen plants and 48.5-52.5% for sulphur plants depending on the case), the message is

that we do not see 2020 capacity for these units as adequate to meet the increased sulphur

recovery load under the Global Fuel cases.


July 15, 2016

9

In addition, we placed constraints on the level of FCC stack gas SOx emissions allowed in the

Global Fuel cases. This was necessary because FCC’s act as partial sulphur removal units;

increased feed sulphur leads to increased sulphur, in the form of SOx, in FCC stack gas. In

the Global Fuel cases, we only allowed FCC stack gas emission to rise provided FCC SOx

scrubbers were installed. In the Global Fuel cases, SOx scrubbers were installed at the level

of some 200 – 400 st/d of sulphur removal capacity. Firstly, the fact that such capacity was

installed in the Global Fuel cases confirms the pressure to raise FCC feed sulphur levels.

Second, and more critical here, we do not believe such capacity would be installed by 2020

(or an equivalent alternative in the form of FCC feed desulphurisation units). This projected

inability to handle increased FCC sulphur emissions adds to the projected inability to handle

the increased hydrogen and sulphur recovery requirements.

Our Model cases show that, if extra hydrogen, sulphur recovery and FCC SOx scrubber

capacity were to exist, the global system’s hydrocrackers and desulphurisation units should

be able to handle the needed extra sulphur removal load, albeit with associated severe

market strain developing as detailed below. Base Case sulphur removal load of around

69,000 st/d total on the hydrocracker and desulphurisation units would need to rise to

79,000 +/- st/d in the Global Fuel cases. We have not evaluated the degree to which this

increase would comprise increases in feed sulphur level with relatively little change in

percent desulphurisation levels or would entail appreciable increases in percent

desulphurisation. (The latter is less likely to be achievable.) We believe mainly the former.

However, our view is that this result – that the global system’s hydrocracking and

desulphurisation units can handle the increased load - needs to be treated with some

degree of circumspection since desulphurisation processes tend to be limited in terms of the

maximum percentage desulphurisation they can achieve.

Overall, on the above basis, we believe full compliance with the Global Sulphur Cap is not

feasible with the refinery equipment expected to be in place in 2020. Put another way, for

the global refining system to be able to adjust fully to the Global Sulphur Cap in 2020, we

believe additional sulphur and hydrogen plant beyond expected 2020 capacity plus FCC SOx

scrubber capacity would be needed.

The projections selected and developed under this study for 2020 global demand and

available refining capacity are broadly similar to those being projected by the IEA. However,

where we differ with the IEA is on projected ‘switch volume’ to compliant fuel under the

Global 0.5% Sulphur Rule. Against our assessment here of 3.8 mb/d (195 mtpa)4, (3.4 mb/d

4 The advent of the 0.5% Global Sulphur Cap, would at 3.4 – 4.2 mb/d switch volume increase total global distillate demand (gasoil/diesel plus jet/kero) ‘overnight’ by some 10%. Since IFO today contains proportions of lighter, distillate type, blendstocks as well as residual streams, the total volume of residual fuel to be upgraded to distillate and desulphurised to 0.5% would be less than the assessed 3.8 mb/d central switch volume (from HFO to MDO or other compliant fuel) but the impact on global refining would still be substantial.


July 15, 2016

10

[175 mtpa] without any vessel speed up), the IEA has presented in its 2015 and 2016

MTOMR’s switch volumes of respectively 2.2 and 2.0 mb/d (approx. 110 and 100 mpta). At

the same time, they have declared that they see those volumes as causing severe challenges

to the global refining industry.

2.5.2.2 Major Changes to Refinery Operations, Marine Fuels Blending, Crude and

Product Movements

The Model cases (run with hydrogen and sulphur plant capacity added in order to obtain

feasible results) quantify and illustrate that the Global Sulphur Cap would have extensive

impacts on refinery processing, marine fuel blending and crude and product routing.

Essentially all refinery units would be affected. As components of the mechanism by which

refiners would react:

Crude runs would increase by 0.25-1.25 mb/d (approx. 12.5-62.5 mtpa). This is

because of increased processing intensity and associated higher fuel and hydrogen

use and because throughputs to cokers5 would be maximised in order to process

high sulphur residua which have to be removed from the marine fuel pool

Operations would change on FCC units (notably increases in low sulphur resid feed)

and on hydrocrackers

Desulphurisation load on HDS units and hydrocrackers would rise and throughputs

would be maximised

Catalytic reforming unit severities would rise to generate more hydrogen, needed as

part of the increased desulphurisation load. This shift would affect yields of LPG

streams and gasoline ‘reformate’ from catalytic reformers, in turn impacting gasoline

and LPG economics

All of these assuming the increased hydrogen and sulphur plant capacity described

above.

Refinery CO2 emissions are also projected to increase under the Global Sulphur Cap

because of the increase in refinery processing intensity.

Whether the industry would be able to achieve worldwide the full suite of changes shown as

needed would be very dependent on actual operating capacity, on achievable utilisation

rates and also on the evolution by 2020 of global supply and demand, including the quality

of the global crude slate.

5 Cokers (delayed or fluid coking units) ‘crack’ most frequently low quality vacuum residual streams to lighter components but some 30-40 weight percent of the product yield is solid petroleum coke which is ‘lost’ from the petroleum liquids system.


July 15, 2016

11

In terms of marine fuel blending, Model results show that the Global Sulphur Cap would

lead to up to 2.8 mb/d (approx. 145 mtpa) of distillates/VGO plus low sulphur resid being

added to the global marine fuel pool and over 2.6 mb/d (close to 150 mtpa) of medium and

high sulphur residual removed. (The quantity differences are in part because of different

volume energy contents.) Taken down to the refinery and port/blender level, these equate

to massive changes in marine fuel blends across the sector.

In similar vein, Model results show changes to regional crude runs and major shifts in crude

flows. At the aggregate level, the 2020 Mid Switch High MDO case projects 44 mb/d

(approx. 2,200 mtpa) of crude oil trade between the major regions (up from 43 mb/d

[approx. 2,150 mtpa] in the Base Case). Of this 44 mb/d, there are over 8.5 mb/d (approx.

430 mtpa) of crude oil routing changes, i.e. 20% of exported crude. (Changes in product

flows are also identified as being substantial.) These, like the refining changes, constitute a

major set of realignments for the industry to accomplish and ones that would not be

achieved overnight or likely even in a few weeks. (Apart from anything else, transit times on

longer crude hauls run in the range of 15 – 30 days and full purchase-to-delivery cycles still

longer.)

2.5.2.3 Need for Time

As stated above, the projected changes to refinery operations, blending and crude and

product flows are of such a scale that, even with preparation, they would not occur

‘overnight’. The world’s refineries, pipelines and maritime shippers react efficiently to

changes in markets and economics, but changeovers of this magnitude would take weeks

and potentially months to complete.

Compounding this situation is the presence of uncertainty over the formulation of the

Global Fuel. There is an economic incentive for refiners to offer – and shippers to buy -

heavier 0.5% sulphur grades since they would be lower cost than marine distillate.

However, ‘new’ marine fuels formulations generally will only be accepted gradually and

once they are shown to not cause problems during on-board use. Such acceptance could

therefore take many months.

2.5.2.4 Severe Economic Impacts

The changes in projected product supply costs and refining economics as a result of a full

switch to Global Fuel are indicated as potentially extreme. The precise numbers in these

strained Model cases are not the main point. What is most important is the finding and

message that the modelling analysis is pointing to a severe degree of economic strain on the

global refining and supply system should the Global Sulphur Cap be enacted in full force in

January 2020.


July 15, 2016

12

Exhibits 2-3 and 2-4 illustrate the market impacts projected in the Model cases.6 Starting

from a 2020 Base Case within - if at the upper end of - the normal historical range, i.e.

around $35-38/barrel for inland ULS diesel – HS IFO380 differentials, projections for the

High MDO cases lie in the $70-80/barrel range. In the Low MDO scenarios, the situation is

noticeably ‘better’, but these differentials are still in the $60-70/barrel range. In $/tonne,

these differentials range up to $380 versus under $190 in the Base Case. These are well

beyond anything in recent history, including 2008 when distillate became extremely tight.

In the WORLD Model, we compute and report what we term product ‘supply costs’. These

are computed by multiplying the projected ‘marginal cost’ (which we equate to regional

supply cost) of each product in each region by its sale / consumption volume to arrive at

total $/day cost for that product. These costs are then added together across all Model

regions and products to arrive at the total global supply cost. Dividing by the demand

volume for each product we can express supply cost as average $/barrel.

The results from the Model cases indicate the effect of the Global Sulphur Cap would be to

increase open market prices by some $10 to nearly $20 /barrel average across all products

in all regions worldwide – not just across marine fuels. (See Exhibit 2-5.) The corresponding

percentage increases are around 11 to 23 percent. Expressed as $billion per year, the

increase in global supply costs across all petroleum products is projected to range from

somewhat under $350 bn/yr to over $700 bn/yr depending on the scenario. This ‘all

products’ effect arises because refining is a co-product industry and so developments in

marine fuels quality and mix impact inland diesel and gasoil which in turn impact the closely

related products jet/kerosene, then gasoline and so on.

A further implication of this is that light/heavy crude differentials would be significantly

impacted as would be refining margins, with different types of refinery impacted differently.

As an illustration of the impact on light versus heavy crude oils, Brent-Mayan differentials

are projected to double under the High MDO cases and to still widen significantly under the

Low MDO cases. These same Model projections indicate sophisticated refineries that run

heavy sour crude and fully upgrade to clean products, with emphasis on distillates

(gasoil/diesel and jet/kero), would see large increases in margins. Conversely, refineries

that are simpler and have an appreciable yield of high sulphur residual fuel would be

expected to see margins deteriorate versus ‘business as usual’. One potential implication is

that sustained low margins resulting from the advent of the Global Sulphur Cap could lead

more refineries to close.

6 The 1.5% / 0.5% designation on MGO in Exhibit 2-4 refers to respectively the existing 1.5% sulphur specification for MGO (DMA) in ISO 8217:2012 and the 0.5% standard that would apply under the IMO Global Sulphur Cap.


July 15, 2016

13

One question these Model results pose is how long the strained market conditions could be

expected to continue. Our view is that the strained conditions could be relatively long

lasting. Yes, the refining industry would attempt to adapt but investments would be needed

and those would take years not months to bring on stream. Scrubbers would become highly

attractive economically but it would still take time to equip large numbers of vessels. It is

more likely that in the short to medium term something else would have to ‘give’, most

likely either a reduction in the volumes of Global Fuel refiners attempt to produce and

shippers to purchase or the interjection of a clearing mechanism for surplus heavy fuel that

would entail continued market stress because of low residual fuel prices and (still more)

increases in crude runs.


July 15, 2016

14

Exhibit 2-3 Diesel – IFO Price Differentials Northwest Europe


July 15, 2016

15

Exhibit 2-4 Northwest Europe MDO vs HS IFO Prices - $/tonne

Exhibit 2-5 Impact of Global Rule on Global Product Supply Costs - $/barrel Change

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

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Northwest Europe MGO vs HS IFO380

IFO380 HS

MGO 1% / 0.5%


July 15, 2016

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2.6 Context for Viewing Results

WORLD is a detailed, powerful and proven model. But it is just that – a model. Results out

are dependent on premises in and the Model itself embodies certain facets which can affect

results. We have therefore set out several points which we believe are key to setting a

context within which to view the Model results. The ‘bottom line’ from this is that we see

most factors pointing to the Model results understating rather than overstating the

challenges and costs the industry and markets would face.

2.6.1 Factors Intrinsic to the WORLD Model

One aspect of the WORLD Model is that is generally run with only very limited constraints

on crude movements. In contrast, in the real world, many movements are tied to

ownership interests and/or term contracts. Thus there is potentially more flexibility

inherent in the WORLD Model cases to reallocate crudes than exists in the real world,

especially in the near term after an event such as the Global Sulphur Cap. Therefore, if

anything, the Model results arguably overstate the ease with which the crude oil market

could adapt (at least in a period of a few months) and understate the difficulty and costs.

A central aspect of any mathematical model is that it reacts instantly to changes. WORLD

results implicitly have the world’s refineries responding rapidly and fully to the Global

Sulphur Cap. While much of the world’s refining industry operates at a very sophisticated

level in terms of economic planning, it is not necessarily the case either that the industry in

total will react (which is implicitly assumed in the Model) or that all affected refineries

would react swiftly or fully. For these reasons, if anything, the Model results are also likely

to overstate the ease and speed with which the industry would react in terms of refining

adjustments and thus again understate the supply and market impacts, especially in the

shorter term.

A related factor is that refineries in WORLD are aggregated into large regional groups (36

spread across the Model’s 23 regions with highest disaggregation in the United States of

America and Canada). Over time, EnSys has applied methods to offset the resulting implicit

risk of over-optimisation. However, in the Model, all refineries within a region are implicitly

inter-connected and can share units, capacities and also blend streams. In reality, that is

often not the case since refineries may be dozens or hundreds of miles apart. Thus the

Model intrinsically tends to overstate the ease with which blendstocks can be shared or

traded within a region and thus may understate the costs of meeting a regulation such as

the Global Sulphur Cap. Even to the extent refineries are coastal and can ship blend stocks

to other refineries, doing so adds costs which are not reflected in the Model.

For regions outside the United States of America and Canada, the Model intrinsically

assumes, through regional refinery aggregation, that none of the refineries in a given region


July 15, 2016

17

is isolated inland and thus unable to contribute to marine fuels production. An assessment

by EnSys led to the conclusion that, in WORLD, this effect relates to some 9% of the world’s

refinery capacity – and around 6% of upgrading and desulphurisation capacity. Thus, while

not large, this effect nonetheless leads to a minor degree of over-optimisation in the

WORLD Model results.7

2.6.2 External Factors

The Model results show a clear need for increases in crude runs under the Global Sulphur

Cap. In the Model cases, we held marker crude price constant in order to maintain

consistency across cases. Yet it is clear that a (relatively rapid) increase in crude oil demand

at a non-trivial level would almost certainly lead to an increase in global crude oil prices.

Even a $1/barrel increase in crude oil price would add on the order of $35 billion/year to

global petroleum product supply costs, a $5/barrel increase around $180 billion / year to

cost increases already assessed at $350 to $700+ billion / year per Model cases depending

on the scenario. The market would eventually adapt and price elasticity effects would bring

demand and supply costs down. However, the potential for damage to the world’s

economies from petroleum product price spikes is well known.

As noted above, latest available global outlooks have higher global demand for 2020, at

around 100 – 101.5 mb/d, than the 98.9 mb/d we used from the 2015 WEO (99.2 mb/d

after adjustment to our marine fuels demand outlook). There is of course uncertainty in

these outlooks but, were EnSys to re-run WORLD cases with 2020 demand in the 100 – 101

mb/d range to be more in line with the latest agency outlooks, the difficulties being

projected would be further exacerbated. Again, the implication is that the current WORLD

Model results may be understating the difficulty and challenge to implement the Global

Sulphur Cap. Offsetting this is the fact that assessments of 2015 actual ‘demand’ allowing

for product inputs to inventory and of refinery crude runs have recently been adjusted

upward by the IEA and other agencies. Were EnSys to rerun the 2015 Calibration case, we

would likely moderately adjust upward maximum allowed process unit utilisation rates to

still ‘hit’ the same supply costs and differentials at higher global refinery throughput. This

would carry through into the 2020 cases and tend to ease the economic impact of the

Global Fuel cases. Overall, our view is that these two global demand / refinery runs effects

broadly offset each other.

Recent press articles have referred to a ‘diesel glut’. Recognizing that our initial projection

for 2020 inland diesel demand was potentially above what latest projections would show

(i.e. that there is a softening in the rate of growth for diesel), EnSys adjusted global 2020

7 Restrictions of time and budget prevented EnSys from addressing this issue by re-working the Model’s refining groups but this could be done in the future.


July 15, 2016

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land-based diesel demand down by 0.25 mb/d and gasoline 0.25 mb/d up across all final

cases versus our original (April) 2020 demand projection. We tested the potential impact of

a further softening in diesel demand by running sensitivity cases with a further 0.25 mb/d

less inland diesel demand and 0.25 mb/d more gasoline. While, under this assumption, the

impacts of the Global Rule on distillates supply costs worldwide softened, the impacts on

gasoline supply costs increased so that aggregate supply costs across all products indicated

no net improvement.

2.7 Overall Conclusions

Our demand analysis projects that a limited fraction of ships will be running with onboard

scrubbers by end 2019 and therefore that the bulk of the compliance load will fall on

refiners to supply 0.5% sulphur Global Fuel.

Given this outlook, Model results point to extreme difficulty – and indeed potential

infeasibility - for the refining sector to supply the needed fuel under the Global Sulphur Cap

and to simultaneously meet all other demand without surpluses or deficits. Market impacts

are projected as very substantial across all products and regions worldwide, not just marine

fuels, and, consequently, potentially significant impacts across economies and sectors.

Moreover, as stated above, we see the Model results if anything understating rather than

overstating the challenges in meeting the Global Sulphur Cap in 2020.

The WORLD Model results themselves indicate the global refining industry is unlikely to be

able to meet the needed extra sulphur removal demand because 2020 sulphur plant (and

hydrogen plant) capacity will not be adequate based on current capacity plus projects. The

projection is that these capacity limitations would prevent the industry from supplying the

volumes (and qualities) needed to achieve full compliance with the Global Sulphur Cap.

The Model results further show that, even if sufficient added sulphur plant and hydrogen

capacity were to become available, the industry could potentially meet the Global Fuel

volumes but only with attendant severe economic impacts in the form of substantial

increases in supply costs not only for marine fuels but also for nearly all fuels (except high

sulphur HFO) across all regions of the world. Refining economics would also be impacted

with potential adverse consequences for simpler refineries that could lead to more closures.

Should the shipping industry be able to accept relatively new IFO 0.5% sulphur fuel

formulations, (versus marine distillate), that would moderately alleviate the economic

impacts of the fuel switch but this would almost certainly take time and is not guaranteed

given recent ship operational issues with 1% sulphur fuels. It should be born in mind that

achieving compliance using a higher proportion of LS IFO fuels does little or nothing to

change the issue regarding potentially inadequate sulphur plant capacity; this because the

sulphur removal load is unchanged.


July 15, 2016

19

We therefore conclude that a full-on switch to the Global Sulphur standard in January 2020

does not look workable.

This study has been focussed on one question – if the Global Sulphur Cap is implemented in

full in January 2020 what is the impact? Any rigorous analysis of the follow-on implications

of our findings on this question is beyond the scope of this assignment. However, our

findings clearly beg the question of what would or could happen. Our judgement and

experience indicate that, if the rule were in full force with all refiners and shippers

attempting to comply, the impacts across all products (not just marine) worldwide would be

severe. Refiners would not be able to put in capacity rapidly to resolve the market strain –

even minor projects take one to two years to implement and major ones often three to as

much as seven.

Also, an added factor to be considered by refiners in making investment decisions

specifically to address the marine fuels market is that the projected extreme price

differentials caused by the shift to 0.5% sulphur marine fuel would greatly enhance the

economics of and arguably orders for scrubbers. This would create the prospect of the

proportion of vessels able to use HS marine fuel growing over time, in turn cutting the

volumes of Global Fuel needed. An expectation of such a scenario would create a perceived

risk that marine-fuel-specific refinery investments could become ‘stranded’. This, in its turn,

would cut the justification for and likelihood of such investments occurring. Thus achieving

full compliance, whether by scrubbers or refining, would take time. The expected adverse

market impacts from the rule would also take time to fade, with the potential for

widespread economic consequences in the interim.

We do not see any easy resolution of this situation. Even the possibility of alleviating the

market strain through the expansion of markets for HS HFO is uncertain, would take time

and would bring its own consequences including increases in crude oil and – potentially -


reallocation of HS fuel and emissions from ships to land rather than a net reduction in

sulphur emissions.


July 15, 2016

20

3 Demand Assessment

Our approach to estimating 2020 marine fuel demand is based on the principle that the

IMO’s 3rd GHG Study developed a widely accepted global 2012 marine fuel consumption

baseline. That widely accepted baseline was projected to 2020 in the 3rd GHG Study based

on the following:

The Global 0.5% sulphur cap would enter into force in 2020.

Scrubbers would be used on vessel’s consuming ~60 percent of global marine fuel

LNG would grow to ~8 percent of marine fuel consumption in 2020 or about 27

million tons from about zero tons in 2012 (excepting LNG tanker boil-off

consumption) and estimated 8 million tons in 2015.

The vessel speeds identified in the 2012 baseline would continue through 2020 (the

3rd GHG Study was conducted in 2q2014 when Brent crude oil prices were on the

order of $100 per barrel).

Sixteen growth scenarios were projected to 2050. The sixteen growth scenarios were

relatively consistent to 2020 (with widening divergence occurring beyond 2025). We

used the average of the sixteen growth scenarios in 2020 as our starting point

forecast of 2020 marine fuel demand (consistent with the 3rd GHG Study)..

Our analytical approach to estimating 2020 marine fuel demand and the all-important

“switch” volume (the amount of HFO that will be converted to a marine distillate based fuel)

is based on accepting the 3rd GHG Study’s 2012 baseline and marine transport activity

forecasts and focusing our efforts on the 3rd GHG Study’s major assumptions that have the

most impact and, we believe, needed updating based on being two years closer to 2020.

Our primary areas of focus in re-examining the 3rd GHG Study’s 2020 projection are:

Potential changes in vessel slowdown and operating speed impacts on global marine

fuel demand. Vessel speed has a tremendous impact on vessel fuel efficiency (ships

get much higher “miles per gallon of fuel consumed” at slower speed. The optimal

economic speed is based on a trade-off between fuel costs (in $s per ton) and ship

costs (in $s per day term charter hire).

Potential penetration of LNG as a marine fuel. LNG has no sulphur and very low NOx

emissions. NOx emissions are in the process of being regulated more strictly for

international shipping.

The likely uptake of marine exhaust gas cleaning systems or scrubbers by year-end

2019. Scrubbers are an alternative compliance mechanism for meeting the 0.5%

sulphur cap while using HFO (of up to 3.5% sulphur). The scrubber issue is perhaps


July 15, 2016

21

the most important. Consider that no 0.5% sulphur marine fuel would be needed if

all vessels used scrubbers as their compliance mechanism. Our analytical approach is

shown in Exhibit 3-1.

Exhibit 3-1 Marine Fuel Demand Analytical Approach

3.1 Adjust the IMO’s 3rd GHG Study to 2020 without the 0.5%

Sulphur Cap

We adjusted the IMO’s 3rd GHG Study to a no 0.5% sulphur cap in 2020 based on

information provided in paragraph 3.2.7 (page 156-157) of the 3rd GHG Study. The fuel mix

information in Table 74 “Fuel mix scenarios used for emissions projection (mass%)” shown

in ¶ 3.2.7 that we used is summarized in Exhibit 3-2.

Fuel Mix 2012 Base

Case

2020 High LNG-extra ECAs

Case

2020 Low LNG-constant ECAs

Case

HFO 85% 60% 73%

MGO &

LSHFO 15% 30% 25%

LNG 0% 10% 2%

Total 100% 100% 100%

Exhibit 3-2 Fuel Mix Scenarios from 3rd GHG Study

2020

Adjust IMO 3rd

GHG Study to no 0.5% Cap basis

2020

Vessel Slow-down Adjustment

& LNG Use

2020

Scrubber Penetration

2020 Marine Fuel Demand & Switch

Volume


July 15, 2016

22

Based on the fuel mix for domestic and international shipping developed for 2015 in the 3rd

GHG Study and energy balancing (constant joules), we developed the fuel mix for 2020 with

(as per 3rd GHG Study) and without the 0.5% sulphur cap in 2020 shown in Exhibit 3-3.

3rd GHG 3rd GHG 3rd GHG

2020 2020 2020

With 0.5% Intl Domestic Total Global

HFO 186 5 191

MGO 77 35 112

LNG 17 10 27

Total 280 50 330

2020 2020 2020

Without 0.5% Intl Domestic Total Global

HFO 222 9 232

MGO 53 35 88

LNG 5 6 11

Total 280 50 330

Exhibit 3-3 Fuel Mix from 3rd GHG Study for 2020 with and without Global Sulphur Cap

3.2 Potential Role for LNG by 2020

LNG has the potential to eliminate SOx emissions, as natural gas does not contain sulphur.

The marine use of LNG faces two significant hurdles:

Ship Retrofitting - Engine technology for retrofitting as well as LNG storage tanks

onboard are a potential roadblock to LNG powering.

LNG Bunkering – The availability of LNG for ship bunkering is emerging with

bunkering facilities announced/operational in Europe and the United States.

However, these facilities are not widespread and between now and 2020 we expect

that LNG vessels will only be developed in areas with known supplies and on vessels


July 15, 2016

23

that do not require origin/destination flexibility (e.g., ferries trade on fixed routes

whereas tankers and bulkers do not trade on the same route every voyage).

We reviewed numerous studies on LNG as a marine fuel by the leading classification

societies, technical societies (e.g. Society of Naval Architects and Marine Engineers,

SNAME), government sponsored organisations, and engine manufacturers.

The 3rd GHG Study predicts LNG demand in 2020 ranging from 2 percent (in the low LNG

penetration scenario) to 10 percent in the high LNG penetration scenario. It is unclear how

boil-off from LNG tankers is handled in the 3rd GHG Study. Based on LNG tanker fuel

consumption it appears that LNG boil-off is accounted for in estimating LNG tanker fuel

consumption of HFO and MGO/MDO but is not added in as LNG fuel.

There are LNG powered ferries in operation in Europe and LNG powered offshore supply

vessels (OSVs) in operation in the United States Gulf of Mexico. The first LNG powered large

cargo ship, Tote’s two Marlin Class LNG powered containerships, will be used in the United

States domestic trade between Jacksonville, Florida and San Juan, Puerto Rico. The first

Marlin Class containership was launched on 18 April 2015 at NASSCO in San Diego, CA. The

Tote 3,100 TEU containership entered service in late 2015. Tote is also converting its ORCA

Class RO-ROs to LNG. The two ORCA Class RO-ROs trade between Tacoma, Washington and

Anchorage, Alaska. Crowley is also building two LNG powered containerships for the Puerto

Rico – the United States mainland trade.

The economic case for LNG has declined with the 2014-5 crude oil price collapse as the price

spread between LNG and oil (on a joules basis) has declined.

In assessing 2020 marine fuel demand, we applied the IMO 3rd GHG projections of 3.3% of

total fuel with no 0.5% standard and 8.5% with the standard. (See Exhibit 12.), 8.5%,

equating to 27 mtpa of total marine fuel, corresponds to the IMO 16 scenario average for

2020. However, given the current state of development of LNG powered vessels, our belief

is that the 2 percent low case in the 3rd GHG Study could be a more appropriate level of

LNG use for 2020. Should this prove to be the situation, the effect would be to moderately

raise the total volume of liquid marine fuels demand in 2020 and, with that, the volume to

be switched to 0.5% sulphur under the global standard. Our final assessment of LNG

penetration is the 11 million tons we developed for 2020 without the global 0.5% sulphur

cap shown previously.

3.3 Potential Role for Other Alternative Fuels by 2020

The alternative fuels currently under consideration are nuclear, methanol, and hydrogen

(fuel cells). Nuclear power has been tried in cargo ships in the past but has faced significant

public perception problems. The primary nuclear vessels are naval vessels (primarily

submarines and aircraft carriers) and icebreakers (Russian Federation). Methanol marine


July 15, 2016

24

engines are just entering the “trial” stage with a Stena Ro-Pax ferry recently commissioned.

Hydrogen powered fuel cells have been installed in a few ship-assist tugs with limited

installations elsewhere.

For our 2020 demand outlooks, we assume minimal market penetration of alternative fuels

other than LNG.

3.4 Vessel Speeds and Use of Slowdown in 2020

The IMO 3rd GHG Study detailed the reductions in ship speeds that occurred between 2007

and 2012 and its demand projections were based on a continuation of current shipping

speeds. (The study was undertaken, as noted, assuming high crude oil prices would

continue.) The optimal economic speed of cargo ships is a trade-off between fuel costs and

vessel charter costs (time basis). As fuel costs per ton decline (with assumed constant time

charter rates) the optimal economic speed of a ship would increase (all else equal).

Similarly, if time charter rates increased (with assumed constant fuel cost per ton) the

optimal economic speed of a ship would increase (all else equal) in order to reduce total

vessel voyage time and, therefore, charter hire.

The 2014 crude oil price collapse resulted in a dramatic decline in marine fuel costs as



July 15, 2016

25

Exhibit 3-4 Marine Fuel Prices, $s per Ton

As is obvious in Exhibit 3-4, marine fuel prices have declined dramatically from the 2nd

Quarter of 2014 ($582 per ton of IF-380) when the IMO 3rd GHG Study was conducted to the

1st Quarter of 2016 ($143 per ton IF-380). Given this decline in the cost of marine bunkers

one would expect to see vessel speeds increase.

However, as previously mentioned vessel time charter rates are also an important

component of the calculus of the optimal economic speed of a ship. Time charter rates for

tankers (310k DWT VLCC basis one-year), bulkers (170k DWT Capesize basis one-year), and

containerships (Post-Panamax 6,800 TEU basis three-years) are shown in Exhibit 3-5.

$0

$200

$400

$600

$800

$1,000

$1,200

$1,4002

00

7-J

an

20

07

-Ju

l

20

08

-Jan

20

08

-Ju

l

20

09

-Jan

20

09

-Ju

l

20

10

-Jan

20

10

-Ju

l

20

11

-Jan

20

11

-Ju

l

20

12

-Jan

20

12

-Ju

l

20

13

-Jan

20

13

-Ju

l

20

14

-Jan

20

14

-Ju

l

20

15

-Jan

20

15

-Ju

l

20

16

-Jan

Mar

ine

Fu

el P

rice

s, R

ott

erd

am, $

pe

r to

n

Marine Fuel Prices - Rotterdam, $s per Ton2007 - 2016

IF-380

MGO

Source: Clarkson Research

Services Limited - Shipping

Intelligence Network (SIN)


July 15, 2016

26

Exhibit 3-5 Vessel Time Charter Rates, $s per Day

While tanker (VLCC) rates have risen significantly from the 2nd Quarter of 2014 ($24,500 to

$25,500 for all three vessel types) to the 1st Quarter of 2016 (VLCC $46,300), rates for

containerships (6,800 TEU $14,000 per day) have declined by nearly half and bulkers (170k

DWT Capesize $5,400) have collapsed to near cash costs. This would indicate that an update

on vessel speed is appropriate given the change in optimal speed economics from the time

of the 3rd GHG Study.

We conducted a study of vessel speed for the larger tanker, bulker, and containership size

categories used in the 3rd GHG Study. Our study was done on a random sampling of vessels

(at sea not approaching a port) using AIS data (using Genscape’s Vessel Tracker). The results

of our vessel speed update analysis in comparison with the 2007 and 2012 speeds identified

in the 3rd GHG study are shown in Exhibit 3-6.

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Tim

e C

har

ter

Rat

es,

$s

pe

r D

ay

Tanker, Bulker and Containership Time Charter Rates, $s per Day

2014 - 2016

Bulker-170k DWT Cape Size

Tanker - 310k DWT VLCC

Containership,6,800 TEUPost-Panamax

Source: Clarkson Research

Services Limited - Shipping

Intelligence Network (SIN)


July 15, 2016

27

IMO 3rd

GHG

IMO 3rd

GHG

Navigistics

Ship Type Size,

lower

Size,

upper Units

Design

Speed 2007 Speed 2012 Speed 2016 Speed

Bulk

Carrier

60,000 99,999 dwt 15.3 13.0 11.9 11.7

Bulk

Carrier

100,000 199,999 dwt 15.3 12.8 11.7 11.6

Bulk

Carrier

200,000 dwt 15.7 11.5 12.2 11.9

Container 3,000 4,999 TEU 24.1 18.6 16.1 16.4

Container 5,000 7,999 TEU 25.1 20.6 16.3 17.5

Container 8,000 11,999 TEU 25.5 21.3 16.3 17.7

Container 12,000 14,499 TEU 28.9 20.6 16.1 18.5

Container 14,500 TEU 25.0 14.8 19.7

Oil Tanker 80,000 119,999 dwt 15.3 13.3 11.6 12.7

Oil Tanker 120,000 199,999 dwt 16.0 13.7 11.7 12.9

Oil Tanker 200,000 dwt 16.0 14.6 12.5 12.8

Exhibit 3-6 Average at Sea Speed, knots

As the data shows in Exhibit 3-6, bulker speeds (given the dire financial conditions in the

trade) have declined slightly (probably constant within the accuracy of our sampling

approach) from 2012 (the 3rd GHG Study’s baseline) to 2016 (April). Containership speeds

have increased slightly given the decline in fuel price (recognize also that there is some

inertia in changing container speeds as ships must be either inserted or deleted in a trade

string to maintain constant port calls i.e., it is more complicated to alter containership

speeds than it is for tankers and bulkers due to the network nature of container shipping

services). Tanker speeds have increased from 2012 to 2016 as well. None of the vessel types

or sizes analysed have returned to 2007 speed levels as of this time.

Determining the impact of the speed changes identified is a complex process as the

relationship between fuel consumption and vessel speed is driven by many factors as shown

in Exhibit 3-7.


July 15, 2016

28

Source: St. Amand, D., Optimal Economic Speed and the Impact on Marine GHG Emissions,

Society of Naval Architects and Marine Engineers (SNAME) Transactions 2012.

Exhibit 3-7 Vessel Fuel Consumption Speed Relationship

The above relationship was developed into a fuel speed model (same source) for use in

estimating the impact of reduced speed operations as shown in Exhibit 3-8.

Source: St. Amand, D., Optimal Economic Speed and the Impact on Marine GHG Emissions,

Society of Naval Architects and Marine Engineers (SNAME) Transactions 2012.

Exhibit 3-8 Fuel Speed Curve – Relative Fuel Consumption Factor v. Froude Number8

8 Froude number (Fn) in hydrodynamic terms is a vessel’s speed (meters per second) divided by the square root of the gravitational constant (9.81) times the length on waterline of a ship (in meters).

Hull

Power v. speed

Propeller

Propulsive Efficiency v.

RPM

Main Engine SFC v. %MCR

Fuel SpeedRelationship

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

0.900

1.000

0.0000 0.0500 0.1000 0.1500 0.2000 0.2500

Re

lati

ve F

ue

l Co

nsu

mp

tio

n F

acto

r-R

ed

uce

d/F

ull

Spe

ed

Froude Number


July 15, 2016

29

The plot shown in Exhibit 3-8 was developed as a tool for use in estimating the impact of

speed reduction on vessel fuel consumption and is useful for high-level analysis of marine

fuel consumption at varying speeds. There are many factors that impact the relationship

between fuel consumption and vessel speed including:

Vessel hull form and characteristics including length, beam, draft, block coefficient,

displacement, wetted surface, etc. (the above curve only considers vessel length as it

is readily available – by only using the model within one vessel type and size

category the simplification is not problematic).

Propeller type, design, and operating parameters (rpm, thrust, etc.).

Engine type and design (slow speed two stroke turbo charged, electronic injection

controls, slide valves, etc.).

Hull condition (e.g., fouling), propeller condition, and engine condition.

Vessel load condition (laden or ballast) and trim.

Sea state and other ambient conditions.

The curve in Exhibit 3-8 does not take these variables into account but rather looks at the

relative fuel consumption between design speed and reduced speed. The curve is not meant

to accurately predict the actual fuel consumption in service for a specific vessel but rather as

a useful tool in predicting the fleet wide impact of speed reduction on fuel consumption.

The Fuel-Speed Model was tested against the 2007 and 2012 data from the 3rd GHG Study

and found to be consistent for tankers and bulkers. The model predicted a larger impact for

containerships than was shown in the 3rd GHG Study (i.e., predicted lower fuel consumption

at reduced speeds than was found in the 3rd GHG Study). Containerships operate at higher

speeds (as shown in Exhibit 3-6) with higher Froude numbers than tankers and bulkers and

as seen in Exhibit 3-8 are in a much steeper portion of the fuel speed curve.

Fortunately, the speed changes between the 2012 3rd GHG Study baseline and the updated

AIS sampling study for 2016 are not large so we can use a simple linear interpretation to

assess the impact of the speed changes on fuel consumption. The average at sea daily fuel

consumption for each ship type and size (evaluated for average speed) are shown in Exhibit

3-9.


July 15, 2016

30

IMO 3rd

GHG

IMO 3rd

GHG Calculated

2016-

2012

Ship Type Size,

lower

Size,

upper Units 2007 T/D 2012 T/D 2016 T/D

%

Change

Bulk

Carrier

60,000 99,999 dwt 37.7 28.8 27.2 -5.6%

Bulk

Carrier

100,000 199,999 dwt 55.5 42.3 41.1 -2.8%

Bulk

Carrier

200,000 dwt 51.2 56.3 54.1 -3.9%

Container 3,000 4,999 TEU 90.4 58.7 62.5 6.5%

Container 5,000 7,999 TEU 151.7 79.3 99.5 25.5%

Container 8,000 11,999 TEU 200.0 95.6 124.8 30.6%

Container 12,000 14,499 TEU 231.7 107.8 173.9 61.3%

Container 14,500 TEU 100.0 183.2 83.2%

Oil

Tanker

80,000 119,999 dwt 49.2 31.5 43.0 36.4%

Oil

Tanker

120,000 199,999 dwt 65.4 39.4 55.0 39.6%

Oil

Tanker

200,000 dwt 103.2 65.2 70.6 8.3%

Exhibit 3-9 Daily Fuel Consumption at Sea 2007, 2012, and 2016

While bulkers show a decline in vessel fuel consumption at sea per day, tankers and

containerships show significant increases in daily at sea fuel consumption.

The overall impact on marine fuel consumption is a function of time at sea and changes in

fleet size. We used the average days at sea per year from 2012 as shown in the 3rd GHG

Study (the change in speed would impact the average days at sea but is not considered to be

significant).

The number of ships in each type and size category changed between 2012 and 2016 as



July 15, 2016

31

2012 2016

Ship Type Size, lower Size,

upper

# of Ships # of Ships

Bulk

Carrier

60,000 99,999 2,259 2,852

Bulk

Carrier

100,000 199,999 1,246 1,324

Bulk

Carrier

200,000 294 526

Container 3,000 4,999 968 838

Container 5,000 7,999 575 614

Container 8,000 11,999 331 542

Container 12,000 14,499 103 175

Container 14,500 8 64

Oil Tanker 80,000 119,999 917 921

Oil Tanker 120,000 199,999 473 503

Oil Tanker 200,000 601 657

Exhibit 3-10 Number of Ships by Type and Size Category 2012 and 2016

Based on the changing freight rates it is expected that vessel utilization has not remained

constant between 2012 and 2016. Therefore, it would be inappropriate to scale the fuel

consumption directly with the change in fleet size. We developed and used a “Trade

Limited” adjusted fleet size to scale fuel consumption from the vessel to the fleet level. The

“Trade Adjusted” fleet scaling was done to account for significant “idling” of bulkers and

containerships as well as the use of floating storage for holding crude oil at sea (the tanker

size categories are primarily crude oil tankers AFRAmax, SuezMax, and VLCCs).

Our approach was to examine the increase in fleet capacity (on a DWT basis) for each major

ship type as shown in Exhibit 3-11.


July 15, 2016

32

2012 2016 Change

Dry Bulk 458,973 576,099 25.5%

Crude Oil 357,556 379,897 6.2%

Containers 147,710 187,589 27.0%

Exhibit 3-11 DWT Capacity by Ship Type for the Size Categories shown previously, 2012 and 2016

We did account for the change in average ship size in each category (all ship counts and

parameter information derived from the IHSF database (SeaWeb) that was also used in the

3rd GHG Study (for the ship types and sizes examined the data was tested for consistency

and accuracy – no adjustments were needed).

The next step was to examine trade growth from 2012 to 2016. This was done on a

seaborne trade basis using tons of cargo carried (ton-mile data was not available) from

Clarksons’ Research Services (CRS) Shipping Review and Outlook Spring 2016 as shown in

Exhibit 3-12.

Trade

,mTons

2012 2016 Change

Dry Bulk 4,232 4,702 11.1%

Crude Oil 1,906 1,938 1.7%

Containers 1,463 1,762 20.4%

Exhibit 3-12 Waterborne Trade, 2012 and 2016 (estimated by CRS)

As can be seen between Exhibit 3-11 and Exhibit 3-12 the size of the fleet has increased

more than the trade volume has grown. We then developed “Trade Limited” vessel counts

to more accurately use in scaling changes in individual ship daily at sea fuel consumption to

fleet-wide fuel consumption. The “Trade Limited” fleet capacity is shown in Exhibit 3-13.

2012 Change 2016 Trade Limited

Dry Bulk 458,973 11.1% 509,946

Crude Oil 357,556 1.7% 363,559

Containers 147,710 20.4% 177,898

Exhibit 3-13 “Trade Limited”: adjusted Fleet Capacity, 2012 and 2016 (estimated by CRS)


July 15, 2016

33

The next step involves adjusting the Total Fleet to the “Trade Limited” Fleet vessel counts in

each size category (this adjustment was done reflecting actual ship numbers and the trend

to larger ships). This is done to develop an operating fleet with consistent 2012 basis and is


2012 2016 2016 2016

Ship Type Size,

lower

Size,

upper

# of

Ships

# of

Ships

Trade Limited

#

Adjusted

#

Bulk

Carrier

60,000 99,999 2,259 2,852 2,510 2,510

Bulk

Carrier

100,000 199,999 1,246 1,324 1,384 1,324

Bulk

Carrier

200,000 294 526 327 367

Container 3,000 4,999 968 838 1,166 838

Container 5,000 7,999 575 614 693 614

Container 8,000 11,999 331 542 399 453

Container 12,000 14,499 103 175 124 175

Container 14,500 8 64 10 64

Oil Tanker 80,000 119,999 917 921 932 921

Oil Tanker 120,000 199,999 473 503 481 481

Oil Tanker 200,000 601 657 611 635

Exhibit 3-14 “Trade Limited”: adjusted Fleet Size, 2012 and 2016

The process involved the following:

1. Identifying the actual ship count in April 2016 for each ship type and size category.

2. Identifying the number of ships in each category if we just increased the size of the

2012 ship count by the growth in cargo tons.

3. Adjusting the ship counts where the “Trade Limited” fleet was larger than the actual

fleet and then adjusting the ship count in specific categories to match Trade Limited

DWT capacity to Adjusted Fleet capacity (Bulkers >200,000 DWT, Containerships

between 8,000 and 11,999 TEUs, and Tankers over 200,000 DWT).


July 15, 2016

34

The change in fleet-wide fuel consumption (at sea only in thousands of tons per year) is


Ship Type Size, lower Size,

upper

Units 2012 2016 Change

Bulk

Carrier

60,000 99,999 dwt 12,198.6 13,031.2 832.6

Bulk

Carrier

100,000 199,999 dwt 10,591.0 10,992.1 401.1

Bulk

Carrier

200,000 dwt 3,234.0 4,016.0 782.0

Container 3,000 4,999 TEU 13,455.2 10,894.7 (2,560.5)

Container 5,000 7,999 TEU 11,212.5 14,418.6 3,206.1

Container 8,000 11,999 TEU 8,076.4 13,911.2 5,834.8

Container 12,000 14,499 TEU 2,441.1 7,789.8 5,348.7

Container 14,500 TEU 202.4 2,825.3 2,622.9

Oil Tanker 80,000 119,999 dwt 5,410.3 7,358.1 1,947.8

Oil Tanker 120,000 199,999 dwt 3,784.0 5,449.1 1,665.1

Oil Tanker 200,000 dwt 9,195.3 10,442.6 1,247.3

Total 79,800.8 101,128.7 21,327.9

Exhibit 3-15 “Trade Limited” Fleet-wide Fuel Consumption Change, 2012-2016

Overall, the change in ship speeds between 2012 and 2016 (in isolation) is calculated to

increase marine annual fuel consumption by 21.3 million tons per year. We did not include

all ship types and sizes in our analysis but rather examined the vessel types and sizes that

are the most likely to adjust speeds in service and were major fuel consumers (~35 percent

of total marine fuel consumption in 2012 was used by the ship types and size categories

selected). The 21.3 million tons per year represents a 7.1 percent increase in fuel

consumption from the 300.5 million tons per year 2012 baseline developed in the 3rd GHG

Study.


July 15, 2016

35

For marine demand development we adopted the following two scenarios for assessing

2020 marine fuel consumption:

2012 3rd GHG Study baseline adjusted to 2020 as done in the 3rd GHG Study (i.e., use

the 2020 3rd GHG Study average 2020 scenario).

Increase the first 3rd GHG Study baseline scenario marine fuel demand by 7.1% to

use a 2016 based speed allowance.

Using the Optimal Economic Speed model described previously (using 2016 fuel prices and

charter rates) showed that all ship types and sizes would be returning to Design CSR speeds.

2007 vessel speeds (actual) may be understated because of sea conditions. Sea conditions

were accounted for in the 2012 speed analysis done in the 3rd GHG Study. The optimal

speed (as determined using the Optimal Speed Model) and actual speeds are shown for

tankers and bulkers in Exhibit 3-16. The 2020 scenario is based on 2016 charter rates and an

assumed MGO price of $646 per ton (based on $80 Brent crude price using EnSys’ WORLD

Model).

Desig

n

2007 2007 2012 2012 2016 2016 2020

Ship

Type

Size, lower

Size,

upper

CSR,

Knots

Speed,

actual

Speed,

Model

Speed,

actual

Speed,

Model

Speed,

actual

Speed,

Model

Speed,

Model

Bulk

Carrier

60,000 99,999 15.3 13.0 15.3 11.9 11.5 11.7 15.1 10.6

Bulk

Carrier

100,000 199,999 15.3 12.8 15.3 11.7 11.8 11.6 15.3 10.8

Bulk

Carrier

200,000 15.7 11.5 12.2 11.9 15.7 11.4

Oil

Tanker

80,000 119,999 15.3 13.3 15.3 11.6 11.7 12.7 15.3 13.1

Oil

Tanker

120,000 199,999 16.0 13.7 16.0 11.7 12.2 12.9 16.0 13.6

Oil

Tanker

200,000 16.0 14.6 16.0 12.5 12.5 12.8 16.0 13.9

Exhibit 3-16 Actual and Predicted Optimal Speeds 2007, 2012, 2016, and 2020

The Optimal Economic Speed Model shows that at 2016 term charter rates and roughly

2012 fuel costs (MGO at $80 per barrel Brent equivalent) would cause bulkers to operate

slower than in 2012 and tankers would return to 2007 speeds.


July 15, 2016

36

However, it is recognized that increasing vessel speed has the same impact as increasing

vessel supply. Increasing vessel supply would impact freight rates and perhaps fuel prices.

Using the actual 2016 charter rates, fuel prices, and fleet capacity was considered to be

more conservative than developing a freight rate forecast (through an iterative process

examining speed and deliverability) for 2020 for use in the Optimal Economic Speed Model.

3.5 Scrubber Penetration by Year-End 2019

Scrubber penetration is one of the most critical of the “demand” side issues for determining

the amount of heavy fuel oil (HFO) marine bunkers (e.g., IF-380, IF-180, etc.) that will need

to be “switched” to marine distillate or other non-residual based fuel (e.g., LNG, methanol,

etc.) in order to comply with the 0.5% global sulphur cap. A vessel equipped with a marine

scrubber will be able to comply with the 0.5% sulphur cap while operating on residual based

fuels (e.g., 3.5% sulphur HFO) and, therefore, would not require the fuel to be “switched.”

We have developed an independent analysis of likely scrubber penetration by year-end

2019 as follows:

Developed and completed a new and independent survey of the members of the

Exhaust Gas Cleaning System Association (EGCSA) of marine scrubber installations

(the survey was developed and conducted by Navigistics with guarantees of

confidentiality of all individual responses - no EGCSA staff or members were shown

or provided data from any responses). Nine of the 14 manufacturing members of the

EGCSA responded to our survey (64 percent - members that have not completed a

marine scrubber installation were excluded from the response analysis). The non-

respondents were generally smaller scrubber manufactures with an estimated two

or three units installed. The respondents included the manufacturers/installers of

330 of the 346 identified marine scrubber installations or 95 percent. With the

assistance of EGCSA, website and news release information from the non-

respondents, and other sources we were able to develop an estimate of the

production/installation profile of the 16 marine scrubbers not included in direct

responses. We believe that our survey provides close to a 99% scrubber

identification rate. Of the 346 scrubber installations identified 238 were completed

by year-end 2015. The other 108 are in the process of being installed in 2016 or are

contracted for installations on newbuildings with deliveries in 2017 and 2018. We

believe the 2016-2018 data provide only “partial” year total orders (i.e., we do not

know what full year totals will be) and, therefore, are excluded from year-end totals.

As of mid-March 2016 90 vessels were being fitted with scrubbers (with expected

completion in 2016). 101 vessels were fitted with scrubbers in 2015. Note that all

reference to “fitted with scrubbers” and “number of scrubbers” used in this analysis

reflect the number of vessels fitted with scrubbers and not the number of scrubber


July 15, 2016

37

units installed on vessels (some vessels use multiple scrubber units to handle the

exhaust from all engines/boilers). Therefore, a ship fitted with three scrubber

systems would be counted as one scrubber (equipped vessel). Survey respondents

advised both the number of ships equipped and the number of scrubber systems on

each ship.

The EGCSA members indicated that the uncertainty over the implementation date of

the global 0.5% global sulphur cap (2020 or 2025) has been a significant impediment

to sales. Shipowners expressed unwillingness to the scrubber manufacturers to

invest the approximate $3 to $8 million (varies with scrubber type and size) unless

required to by regulation. Recently the classification society, DNV-GL, announced a

“scrubber ready” notation for newbuildings. Knut Ørbeck-Nilssen, CEO at DNV GL

was quoted in a DNV-GL press release9 as follows:

“This new SCRUBBER READY class notation gives shipowners the flexibility to minimize their

initial investment when ordering a newbuilding, while at the same time having the

confidence that their vessels are already on the track to easy compliance with incoming

emissions regulations,”

This new DNV-GL class notation lends further credence to the notion that shipowners are

preparing for but not ordering scrubbers for complying with the global sulphur cap.

Remember also that ships are regularly bought and sold (i.e., there is an extensive second

hand market) and a shipowner may not expect to be the owner of a given ship in 2020 let

alone 2025 (further reducing their incentive to install a scrubber this far in advance of an

“uncertain” regulatory requirement). It is also unclear at this time whether the sale price of

an existing ship reflects an increased value if a scrubber is installed.

The EGCSA survey identified that 236 of the 346 scrubbers installed or on order (68%

through 31 December 2015) were for cruise ships, ferries, and RO-RO/Passenger

type vessels. Many of these vessels operate primarily in Emission Control Areas

(ECAs – current ECAs include the North Sea and Baltic in Europe and the North

America ECA around the United States and Canada plus Hawaii and the United States

Caribbean territories) that had a 0.1% sulphur cap as of 1 January 2015. This provides

insight into the scrubber penetration rate prior to a certain implementation date.

Our approach to calculating the likely 2020 scrubber penetration rate involved the following

analytical steps:

9 3 March 2016 see https://www.dnvgl.com/news/dnv-gl-scrubber-ready-a-step-ahead-of-tomorrow-s-regulations-58846.


July 15, 2016

38

1. Conduct a survey of scrubber manufacturers to identify existing (and

underway) marine scrubber installations by type of ship and when placed in

service.

2. Assess scrubber economics to determine the vessel types and sizes that

would find scrubbers economically attractive. We included economic

questions in our scrubber survey and reached out to other sources (e.g., ship

owners for feedback on the installed cost of scrubbers). We also obtained

scrubber capital costs and operating costs from CE Delft (as presented at the

EGCSA’s annual meeting on 25 February 2016 that we also attended and used

to solicit support for our survey). The economic costs for scrubbers that we

developed were consistent with those presented by the CE Delft team and so

we are using similar scrubber capital and operating costs as CE Delft in this

analysis. We tested the scrubber economics at a range of price spreads

between IF-380 and marine distillates (e.g., MDO and MGO) both current and

projected to 2020 (based on an assumed $80 per barrel Brent crude oil price

in 2020 using preliminary analysis with EnSys’ WORLD model to predict

product price differentials).

3. Using a four year payback rule (capital costs divided by annual savings less

operating costs on a before tax basis – savings are taken as the differential

between MGO and IF-380 consumed) we identified which of the vessel types

and sizes would find scrubbers economically attractive (the vessel types and

sizes are the same as used in the IMO’s 3rd GHG Study - see Tables 12 and 13

on pages 56-57 of the 3rd GHG Study). We based our number of ships,

average engine size, and average annual fuel consumption for each ship type

and size category on the data for 2012 included in Table 14 of the IMO’s 3rd

GHG Study (see pages 59-60). We also eliminated vessels that were

considered unlikely to install scrubbers due to size, physical constraints,

current use of marine distillates, and operating patterns (e.g., tug boats,

yachts, fishing boats, offshore supply vessels, etc.). This provided an estimate

of the population of ships that potentially would find scrubbers as an

economically attractive compliance option.

4. We then used linear regression and the “S-Shaped” technology introduction

curve to project, based on actual installations through 2015, what the

installed scrubber rate would likely be at the end of 2019 (based on current

available information). We did this analysis from the following three

perspectives in order to gain insight into the “regulatory uncertainty” issue

facing scrubber sales:


July 15, 2016

39

I. Whole fleet and regulatory perspective with an assumed global

sulphur cap of 0.5% commencing 1 January 2020 with no

consideration of ECA impacts (for vessel types and sizes with a four-

year or less payback). Total 2012 vessel population (potential

scrubber installations) of 23,892.

II. ECA only (North Sea and Baltic10) perspective for Ferry, Cruise (Global

operators), and RO-Pax vessels only with a 1 January 2015 sulphur cap

of 0.1% (for vessel types and sizes with a four-year or less payback).

Total 2012 vessel population (potential scrubber installations) of 533.

III. World Fleet ex ECA with a 1 January 2020 global sulphur cap of 0.5%

(for vessel types and sizes with a four-year or less payback) excluding

the 533 vessels in the Europe ECA population. Total 2012 vessel

population (potential scrubber installations) of 23,359.

5. As a next step, we compared the required scrubber installation rate with the

scrubber manufacturing capacity provided by the respondents to our EGCSA

survey. Several respondents pointed out that scrubber manufacturing

capacity was flexible and could be “ramped-up” if demand surfaced through

sub-contracting component manufacturing (e.g., pumps and valves). We are

also aware that manufacturers of scrubbers for land-based facilities are

preparing to enter the marine market with potentially large manufacturing

capacity (in comparison with existing marine scrubber manufacturers).

Based on the analytical steps just described we arrived at a “likely” scrubber penetration

rate in the 2020 to 2025 period.

EGCSA Survey Results

The EGCSA Survey results were reported in part previously in this report. The overall results

by year of installation are shown in Figure 3-17.

10 In this section of our report all references to ECA only and ex-ECA relate to the North Sea and Baltic ECAs and do not consider the North American ECA as explained previously (e.g., the number of exemptions / extensions granted by the United States Coast Guard and EPA combined with the “non-availability” exemption make the North American ECA a less “regulatory certain” sulphur cap.


July 15, 2016

40

Whole Fleet ECA Only Ex ECA only

Year \ Population, # Economic Ships 23,892 533 23,359

2010 1 1

2011 4 1 4

2012 12 4 8

2013 28 19 9

2014 89 77 12

2015 101 68 33

Total Scrubbers Installed (Cumulative) 235 169 67

Exhibit 3-17 Actual and Scrubber Installations by Year (2010 through 2015 – not cumulative) and Ship Populations (as of 2012)

The initial year is shown in the above Exhibit as the year shown with 1 installation (2010 for

the whole fleet, 2011 for the ECA only fleet, and 2010 for the Ex-ECA fleet). Note that

scrubbers installed in the 2005-2009 period (only a few) were considered “test” installations

that likely had special arrangements between the scrubber manufacturer and the shipowner

and, therefore are excluded from our analysis.

Scrubber Economics

CE Delft developed the costs of scrubbers (hybrid retrofit) as follows (this cost equation is

consistent with our findings):

Capital Costs = $2.9 million + $58 x Installed Power (in kWs)

Operating Costs (annual) = $1.3 thousand + $0.6 per kW of Installed Power + 0.5% fuel cost

Using these costs and a fuel differential of $235 per ton (based on $80 per barrel Brent

crude oil) shows the following ships (by type and size per IMO 3rd GHG Study categories) to

have a payback period of four years or less (payback period is defined as Capital Costs

divided by Annual Fuel differential savings less annual operating costs – all before tax) as

shown in Figure 3-18.


July 15, 2016

41

Ship Type Size,

lower

Size,

upper Units

Number

(IHSF)

Payback,

Years

Econo

mic

1=yes

# ships IF-380

Consumed

Bulk

Carrier 0 9,999 dwt 1,216 13.4

0 0

Bulk

Carrier 10,000 34,999 dwt 2,317 4.1

0 0

Bulk

Carrier 35,000 59,999 dwt 3,065 3.2 1 3,065 14,712

Bulk

Carrier 60,000 99,999 dwt 2,259 2.3 1 2,259 15,361

Bulk

Carrier 100,000 199,999 dwt 1,246 1.8 1 1,246 12,211

Bulk

Carrier 200,000

dwt 294 1.5 1 294 3,616

Chemical

Tanker 0 4,999 dwt 1,502 9.3

0 0

Chemical

Tanker 5,000 9,999 dwt 922 6.9

0 0

Chemical

Tanker 10,000 19,999 dwt 1,039 3.5 1 1,039 4,156

Chemical

Tanker 20,000

dwt 1,472 2.2 1 1,472 10,010

Container 0 999 TEU 1,126 3.7 1 1,126 4,391

Container 1,000 1,999 TEU 1,306 2.1 1 1,306 10,187

Container 2,000 2,999 TEU 715 1.6 1 715 8,294

Container 3,000 4,999 TEU 968 1.2 1 968 17,811

Container 5,000 7,999 TEU 575 1.1 1 575 13,915

Container 8,000 11,999 TEU 331 1.0 1 331 9,798


July 15, 2016

42

Container 12,000 14,499 TEU 103 1.2 1 103 3,028

Container 14,500

TEU 8 1.1 1 8 260

General

Cargo 0 4,999 dwt 11,620 27.2

0 0

General

Cargo 5,000 9,999 dwt 2,894 9.4

0 0

General

Cargo 10,000

dwt 1,972 3.1 1 1,972 9,268

Liquified

Gas

Tanker

0 49,999 cbm 1,104 4.9

0 0

Liquified

Gas

Tanker

50,000 199,999 cbm 463 0.8 1 463 10,464

Liquified

Gas

Tanker

200,000

cbm 45 0.6 1 45 1,733

Oil

Tanker 0 4,999 dwt 3,500 16.6

0 0

Oil

Tanker 5,000 9,999 dwt 664 9.9

0 0

Oil

Tanker 10,000 19,999 dwt 190 7.2

0 0

Oil

Tanker 20,000 59,999 dwt 659 2.4 1 659 4,152

Oil

Tanker 60,000 79,999 dwt 391 1.9 1 391 3,245

Oil

Tanker 80,000 119,999 dwt 917 1.8 1 917 8,528

Oil

Tanker 120,000 199,999 dwt 473 1.5 1 473 5,723


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43

Oil

Tanker 200,000

dwt 601 1.0 1 601 12,020

Other

Liquids

Tankers

0

dwt 149 15.9

0 0

Ferry-pax

only 0 1,999 gt 3,081 17.2

0 0

Ferry-pax

only 2,000

gt 71 3.0 1 71 348

Cruise 0 1,999 gt 198 16.2

0 0

Cruise 2,000 9,999 gt 69 8.5

0 0

Cruise 10,000 59,999 gt 115 0.9 1 115 2,266

Cruise 60,000 99,999 gt 87 0.5 1 87 5,011

Cruise 100,000

gt 51 0.4 1 51 3,733

Ferry -

Ro-pax 0 1,999 gt 1,669 22.9

0 0

Ferry -

Ro-pax 2,000

gt 1,198 2.3 1 1,198 8,865

Regrigera

ted Bulk 0

dwt 1,090 2.4 1 1,090 6,213

RO-RO 0 4,999 dwt 1,330 9.4

0 0

RO-RO 5,000

dwt 415 1.5 1 415 4,482

Vehicle 0 3,999 vehicl

e 279 2.1 1 279 2,037

Vehicle 4,000

vehicl

e 558 1.6 1 558 5,915

Exhibit 3-18 Actual Scrubber Economics, Ships in Target Population and Fuel Consumed

Based on our scrubber economic analysis (at a fuel price differential of $235 per ton LS MGO

v. HS IF-380), 23,892 ships of a total population of 107,749 (based on 2012 fleet per IMO’s


July 15, 2016

44

3rd GHG Study) would be candidates for scrubbers. These 23,892 ships consumed 86% of the

global marine HFO consumption in 2012. We did not assess the suitability for retrofit for the

vessel types that were determined to be economically viable. Henceforth, we only perform

analysis and refer to penetration rates as based on the economically viable population

identified in Exhibit 3-18.

There are numerous barriers that can hinder the adoption of economically attractive marine

technology. These barriers were examined in depth in a 2012 study for the European

Commission entitled “Analysis of market barriers to cost effective GHG emission reductions

in the maritime sector” by Maddox Consulting (Navigistics was the “technical” lead on the

study). We have addressed “regulatory uncertainty” but numerous other barriers exist

including the “principle-agent” barrier (e.g., under a term charter the shipowner does not

pay for fuel and, therefore, would not benefit directly from installing a scrubber as seen in

the United States Jones Act’s product tanker fleet operating in the North America ECA).

Other barriers to scrubber adoptions would also include the economic condition of the dry

bulk fleet with its current historically low freight rates (i.e., at today’s freight rates dry bulk

vessels do not provide the cash flow needed to cover the capital costs of a scrubber).

Concerns regarding scrubber “wash-water” disposal were handled by only using “hybrid”

scrubbers in our economic analysis. A “hybrid” scrubber can operate in open loop mode

away from “no discharge” or more restrictive discharge areas (in open loop mode scrubber

wash water is discharged directly overboard) and in closed loop mode in other areas (in

closed loop mode wash water is retained onboard for later discharge).

The “S-Curve” Model

We assessed the scrubber penetration rates (for vessel types and sizes with a four-year or

less payback) using the S-curve model (with 60% maximum penetration in each case).

Scrubbers are at an early stage of the market introduction period. Projecting a market

penetration is difficult at such an early stage. The S-Curve approach used is consistent with

the development of a 2020 mid-level MGO/MDO scenario.

An S-Curve has the format as follows:

Where: Y = Market share in a given year

ϒ = Maximum market share, taken as 60% consistent with low 3rd GHG HFO fuel mix

X = Year (Start 2010 is start year after trial period)

α = Independent variable, intercept

β = independent variable

Y =Υ

(1 +eα+βX)


July 15, 2016

45

Where α and β are found by linear regression.

The “whole fleet” I sample has a total ship population of 23,892. The regression results yield

an adjusted R squared of 0.975 with:

α = 10.32942

β = -1.09267

The resulting S-Curve is shown below.

Exhibit 3-19 Whole Fleet Scrubber Market Penetration S-Curve

Source: Navigistics analysis

Similar “S-Curves” were developed for the ECA-only and Whole Fleet less ECA populations.

Year-end Penetration,

Actual, %

Penetration,

Predicted, %

Predicted Ships Pred. Ships

per Year

Actual, Ships

per Year

2010 0.004% 0.006% 1 1 1

2011 0.021% 0.017% 4 3 4

2012 0.071% 0.052% 12 8 12

0.000%

10.000%

20.000%

30.000%

40.000%

50.000%

60.000%

70.000%

Penetration

Predicted


July 15, 2016

46

2013 0.188% 0.155% 37 25 28

2014 0.561% 0.459% 110 73 89

2015 0.984% 1.347% 322 212 101

2016 3.847% 919 597

2017 10.180% 2,432 1,513

2018 22.718% 5,428 2,996

2019 38.702% 9,247 3,819

Exhibit 3-20 Whole Fleet Predicted Scrubber Penetration, cumulative

Note that in the Exhibit 3-20 the Penetration %s shown are all based on a 23,892 ship fleet

population for each year shown.

The key value in this Exhibit is the cumulative 38.7% by year end 2019 (i.e., the ships that

are predicted to be fitted with scrubbers in time for the potential 1 January 2020 global

0.5% sulphur cap). The 38.7% penetration rate equates to 33% of global HFO consumption

(2012 basis – unadjusted for scrubber manufacturing capacity).

However, the prior analysis does not take into account the regulatory uncertainty related to

the 2020/2025 issue. Based on the interviews with scrubber manufacturers, regulatory

uncertainty has been a major barrier to scrubber sales. Therefore, it is important to assess

the potential impact of regulatory uncertainty on scrubber penetration.

Our approach to examining scrubber penetration with less regulatory “uncertainty” involves

examining the penetration of scrubbers in the various ECAs. We have broadly grouped the

ECAs into North American (waters off the United States and Canada) and European (North

Sea and Baltic). Our approach to the analysis varies by ECA grouping as follows:

North America – The United States Coast Guard and EPA have granted numerous

exemptions/extensions to compliance with the 0.1% sulphur restriction to 1 January 2020.

These exemptions/extensions include all steam-powered vessels (there are numerous steam

powered tankers, containerships, bulkers, and others operating in the United States Jones

Act cabotage trade). Also vessels with compliance plans for installing scrubbers or

converting to LNG were granted exemptions/extensions. As of this date there are two

bulkers operating on the Great Lakes with scrubbers and three containerships in the Alaskan

trade are adding scrubbers. There are six containerships/ RO-ROs either recently delivered


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47

or under construction that are or will be LNG powered. In the coastal tanker trade all vessels

are complying (if not exempted to 2020) by using LSMDO. All of the Jones Act tankers are on

term charters under which the charterers pay for the fuel directly so there is no incentive at

this time to fit scrubbers or convert to LNG.

In Canada a “Fleet Averaging” system has been developed for the Great Lakes and St.

Lawrence Seaway system that allows a vessel operator to establish a plan for meeting the

ECA sulphur restriction through a fleet wide average system that is available through 31

December 2020. The “fleet averaging” system allows a 10% sulphur credit if a vessel was

delivered after 31 December 2008 and a 20% credit if the vessel was delivered after 31 July

2012 and has more than 5 kW of installed power. After 31 December 2020 all Canadian

vessels must comply with the ECA sulphur restriction. It is believed that Canada’s “fleet

averaging” system was developed as a competitive response to the United States

exemptions/extensions granted on the Great Lakes.

Because of the exemptions/extensions granted by the United States authorities and

Canada’s “fleet averaging” system, we do not view the North American ECA as operating

under regulatory “certainty.”

Europe – European ferry operators have been “early adopters” of scrubber technology. We

do believe that the North Sea and Baltic ferry and RO-RO pax system has been operating

with more regulatory certainty regarding the 0.1% sulphur restriction imposed on 1 January

2015. As stated previously, Ferry / Cruise / RO-RO Pax vessels accounted for 169 of the 235

vessels fitted with exhaust gas scrubbers (through year end 2015 per the EGCSA survey).

Based on IHS Sea-Web’s vessel database we identified a total population of

Ferry/Cruise/RO-RO pax of 565 vessels that would fall into the “potential” for Europe ECA

compliance (or global cruise ship operator). The “potential” rule was based on economics

(over 2,000 GT) with a flag state bordering the North Sea or Baltic or a cruise ship registered

in a North Sea or Baltic country or using an open registry (e.g., Bahamas). The actual

scrubber penetration at year-end 2014 was 18%. By year end 2015 actual scrubber

penetration was 30% (the S-Curve model “predicted” a 34% scrubber penetration).

As found in our EGCSA survey, 101 of the 134 scrubber installations through year-end 2014

(75% - 134 is the sum of 2010-2014 in Exhibit 3-17) appear to be driven by complying with

the 1 January 2015 ECA sulphur cap of 0.1%. These installations were done with more

regulatory certainty (the 1 January 2015 ECA requirement for the North Sea and Baltic was

adopted by the IMO in October 2008 as part of the amendments to MARPOL Annex VI and,

therefore, were known throughout the period in question) than currently exists for the 0.5%

global sulphur cap that will become effective on either 1 January 2020 or 1 January 2025.


July 15, 2016

48

Therefore two cases can be made regarding the scrubber installations identified as being

driven by the North Sea and Baltic ECA requirements as follows:

The 101 scrubber installations done to comply with the 1 January 2015 ECA

requirement should not be included in predicting scrubber penetrations for a still

“unknown” 0.5% Global sulphur cap compliance date (the “Global ex-ECA scenario”).

and/or

The installation of scrubbers in anticipation of the 1 January 2015 ECA sulphur gap

could serve as a “proxy” for scrubber penetration for the Global sulphur cap given an

assumed “certainty” date (when MEPC will decide) for the 2020/2025 issue (the

“ECA proxy scenario”).

Both of these are examined in the following paragraphs.

The Global ex ECA scenario predicted scrubber penetration rate (using the S-Curve model

with 60% max penetration) is shown in Figure 3-21 (the cumulative column shows actual

installations through 2015 then adds predicted installations each year in number of ships - %

penetration based on 2012 population of 23,359 ships).

Actual/year Predicted/year Cumulative Penetration %

2010 1 2 1 0.0%

2011 4 2 5 0.0%

2012 8 4 13 0.1%

2013 9 10 22 0.1%

2014 12 21 34 0.1%

2015 33 46 67 0.3%

2016 100 167 0.7%

2017 213 380 1.6%

2018 443 823 3.5%

2019 877 1,700 7.3%

Exhibit 3-21 Whole Fleet ex ECA Predicted Scrubber Penetration, , cumulative

The Global ex-ECA scenario predicts that 7.3% of the 2012 fleet will be equipped with scrubbers by year-end 2019. This 7.3% of the Global ex-ECA fleet is estimated to consume 6.2% of Global ex-ECA HFO consumed. To this total we must add the ECA total projected to


July 15, 2016

49

be 56% of ECA HFO consumption (estimated at 5.0% of total HFO in 2012 remember Europe ECAs only). This yields a Global total HFO consumed by ships equipped with scrubbers at year-end 2019 of 8.7% of total marine HFO consumption (2012 consumption basis Global ex-ECA plus ECA).

The ECA Proxy scenario predicted scrubber penetration rate (using the S-Curve model with max 60% penetration) is shown in Figure 3-22 (the cumulative column shows actual installations through 2015 then adds predicted installations each year in number of ships - % penetration based on 2012 population of 533 ships).

Actual/year Predicted/year Cumulative Penetration %

2011 1 1 1 0.2%

2012 4 4 5 0.9%

2013 19 17 24 4.5%

2014 77 58 101 18.9%

2015 68 113 169 31.7%

2016 87 256 48.0%

2017 31 287 53.8%

2018 8 294 55.2%

2019 2 296 55.6%

Exhibit 3-22 ECA Only Predicted Scrubber Penetration, cumulative

Note: The penetration % should become asymptotic to 60%. However, the use

of “actuals” combined with “predicted” is less as 2015 (after the regulation

came into force) the 68 “actual” installations was less than the “predicted” 113

scrubber installations. The “predicted” scrubber installations not adjusted for

“actual” installations is asymptotic to 60%.

The ECA proxy scenario is more complicated as we must account for the following two factors:

When did the ECA “regulatory certainty” become accepted in the marine industry (by shipowners, the buyers of scrubbers).

When did shipowners recognize scrubbers as an acceptable compliance option.


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50

We’ve adopted a simple rule that both conditions are met when scrubber penetration installations reached approximately 1% of the total applicable population. For the ECA proxy scenario this occurred in 2012 as shown in Figure 3-23 when scrubber penetration reached 0.9%.

The ex-ECA scenario reaches 0.7% penetration in 2016 but does not cross the 1% threshold until 2017. Timing for implementation of the Global 0.5% sulphur cap will be finalized at either MEPC 70 (Fall 2016) else at MEPC 71 (Spring 2017). Therefore, we used 2017 as our base year for “regulatory certainty” for the 2020 (assumed) Global sulphur cap. The ECA proxy scenario shows that scrubber penetration for the ex-ECA fleet would be as shown in Figure 3-23 (with 2017 as the base year).

Ex ECA only, % ECA Proxy, %

2016 0.71%

2017 1.63% 0.9%

2018 3.52% 4.5%

2019 7.28% 18.9%

Exhibit 3-23 ECA Proxy Predicted Scrubber Penetration, cumulative

The ECA proxy scenario is below the Global ex ECA scenario for all installations before 2018. Therefore, to develop our ECA proxy scenario we need to adjust the scrubbers installed by the pre-2018 installations (actual through 2015 and predicted Global ex ECA in 2016 and 2017). This adjustment is shown in Figure 3-24.

Global ex ECA

ECA proxy

ex ECA /year

ECA Proxy/year

Higher of

Cumulative Penetration, %

2010 1 1 1 1 0.0%

2011 5 4 4 5 0.0%

2012 13 8 8 13 0.1%

2013 22 9 9 22 0.1%

2014 34 12 12 34 0.1%

2015 67 33 33 67 0.3%

2016 167 100 100 167 0.7%


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2017 380 219 213 219 219 386 1.7%

2018 823 1,052 443 833 833 1,219 5.2%

2019 1,700 4,426 877 3,375 3,375 4,593 19.7%

Exhibit 3-24 ECA Proxy Predicted Scrubber Penetration Adjusted, cumulative

The adjusted ECA proxy scenario shows that 19.7% of the ex-ECA fleet is predicted to be equipped with scrubbers by year-end 2019. This equates to 15.9% of the HFO consumed (2012 basis). To this we must add the ECA scrubber equipped ship HFO consumption predicted for year-end 2019, this yields a Global total HFO consumption (on ships equipped with scrubbers of 18.7%).

This equates to 48.2 million tons per year in 2020 or 0.9 mb/d of HFO consumption in 2020.

We believe that the ECA proxy adjusted scenario is the most reasonable scenario to use for scrubber penetration and HFO fuel consumption in 2020.

3.6 Marine Fuel Demand and “Switch” Volumes in 2020

To calculate our central marine fuel demand scenarios for 2020, we energy balanced with

constant energy between cases (scrubber energy use excluded so as not to impact “switch”

volumes). The energy balanced (final) Navigistics 2020 marine fuel demand and “switch”

volumes are shown in Exhibit 3-25.

Exhibit 3-25 Navigistics 2020 Marine Fuel Demand (Energy balanced)

Exhibit 3-26 summarizes marine fuel demands by type and total for the 2020 Base Case (no

Global Fuel) and for the three Global Fuel scenarios. Final volumes used in WORLD cases

were arrived at by applying the 90:10 (High MDO) and 50:50 (Low MDO) to set the


July 15, 2016

52

proportions of Global MDO versus Global heavier fuels allowed to meet total Global Fuel

demand.

Exhibit 3-26 2020 Marine Fuel Demand Cases

Millions b/d 2020:no 2020:yes2020:Effect of

global rule

2020 2020 2020

Scenario Global 0.5% fuel no yes Effect of 0.5

NavLow HFO 4.11 0.85 (3.26)

NavLow MDO 1.75 5.14 3.39

NavLow ECA 0.57 0.57

NavLow LNG 0.44 0.44 0.00

NavLow Total fuel 6.31 6.43 0.13

NavLow Total HFO+MDO 5.86 5.99 0.13

NavLow Scrubber % of total fuel 13.3%

n.b. Scrubber % of total fuel mmtpa 15%

NavMod HFO 4.49 0.85 (3.63)

NavMod MDO 1.75 5.52 3.77

NavMod ECA 0.57 0.57

NavMod LNG 0.44 0.44 0.00

NavMod Total fuel 6.68 6.82 0.14

NavMod Total HFO+MDO 6.24 6.38 0.14

NavMod Scrubber % of total fuel mb/d 12.5%


NavHi HFO 4.86 0.85 (4.01)

NavHi MDO 1.75 5.92 4.17

NavHi ECA 0.57 0.57

NavHi LNG 0.44 0.44 0.00

NavHi Total fuel 7.05 7.21 0.16

NavHi Total HFO+MDO 6.61 6.77 0.16

NavHi Scrubber % of total fuel 11.8%


2020 Base Case

2020 Global Fuel Cases

Summary of Marine Fuels Demand Cases


July 15, 2016

53

Without the “speed-up” impact, applying our analysis of scrubber penetration to the IMO’s

3rd GHG Study original outlook (at lower LNG and scrubber penetration) leads to an energy

balanced “switch” volume from HFO to MDO of 3.4 mb/d (175 mtpa). Including the impact

we have assessed for “speed-up” adds 0.4 mb/d to the “switch” volume’ leading to our

central estimate of 3.8 mb/d (195 mtpa). Our high case equated to 4.2 mb/d (215 mtpa)

switch volume.

For reference purposes, the 3rd GHG Study (as produced with no changes) has a “switch”

volume of 0.44 mb/d, (approx. 22 mtpa), reflecting the high scrubber penetration and LNG

use assumed in that study.

Our central estimate for a 3.8 mb/d (195 mtpa) switch volume to marine distillate equates

to a reduction in 2020 marine HFO demand from 253 to 48 mtpa (per Exhibit 3-25). Since

2020 inland HFO demand is projected at 210 mtpa (3.7 mb/d), the effect of the Global

Sulphur Cap is thus to drop total 2020 HFO demand by some 44%.

3.6.1 Scrubber Energy Use

An exhaust gas cleaning system requires energy to operate the pumps and scrubbing units

to clean the SOx from the exhaust gas of a ship. This energy use is estimated at 1% of the

power used by the engine(s) that are installed on the ship. The 1% is electrical energy that is

either generated by auxiliary diesel generator sets (burning either MDO/MGO or HFO), shaft

generators (using main engine power, HFO), or in a few cases waste heat generators (few

installations to date – using the heat in the exhaust to generate electrical power). For our

analysis, we do not include increased energy consumption for exhaust gas cleaning in our

analysis of refinery switch volume (other than in assessing scrubber economics) as it is a

small amount (at 48 million tons/year HFO fuel consumption on ships equipped with

scrubbers this would equal 0.48 million tons/year or 0.0083 mb/d of additional switch

volume if all ships fitted with scrubbers powered them with auxiliary diesel generators

running on MDO/MGO).

The 0.008 mb/d maximum impact on the 2020 medium case switch volume of 3.8 mb/d is

considered very small in the overall “switch” volume analysis (a 0.2% maximum impact).

Given the level of uncertainty with how the electricity to power the exhaust gas cleaning

system is generated onboard and the fact that this can be “covered” by less than a 0.1 knot

reduction in vessel speed, we have opted to handle scrubber energy consumption as within

the error tolerance of the overall refining analysis and not explicitly increase the overall

switch volume. We consider this to be a “conservative” assumption by not increasing the

switch volume.


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54

3.6.2 EU and China Territorial Adoption of 0.5% max Sulphur Marine

Fuel Zones outside of ECAs

The adoption by the EU and China of specific territorial water in which ships can only use

fuel with a maximum of 0.5% sulphur (unless equipped with a scrubber) is handled within

the total marine fuel switch cases. The 0.5% maximum sulphur in marine fuel in 2020 would

apply to those waters under the IMO’s Annex VI regulation (if adopted in 2020). Therefore,

these territorial (not IMO-adopted ECA) marine fuel sulphur restrictions are fully accounted

for in our analysis of the 2020 marine fuel switch volumes.


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4 WORLD Modelling Cases & Premises

4.1 Cases Run

Exhibit 4-1 sets out the WORLD Model cases run. The 2015 case served to establish a basis

for stepping forward to the 2020 Base Case (No Global Fuel). Then Cases 3 through 7

comprise a range of Global Fuel scenarios. All of Cases 3 through 7 were run as ‘deltas’ off

the 2020 Base Case, i.e. what was changed was the marine fuels total demand, switch

volume and/or the percent required to be met with MDO versus alternative compliant fuel.

MDO was taken to be DMB fuel11. The allowed alternative compliant fuels were 0.5%

sulphur but heavier than MDO (DMB), anything from a light to a heavy IFO but always within

ISO 8217 specifications for RM grades. These fuels were introduced into the analysis since

(a) fuels offered under the 0.1% sulphur ECA standard have included grades heavier than

marine distillate and (b) because prior WORLD analyses of 2020 conducted in 2015 showed

that there is a refining logic and incentive to blending heavier 0.5% marine fuels. (This

stems from the fact that a nominally 0.5% sulphur distillate fuel will have quality ‘giveaway’

on viscosity, carbon residue and other parameters which can be taken advantage of to blend

in other blendstocks that are poorer quality - and lower cost - while still staying within ISO

8217 RM grade specifications. There is nothing in the IMO MARPOL Annex VI regulation

which states that the Global Fuel must be a particular grade.)

In short, it appears unrealistic to assume that compliance would be entirely via use of

marine distillate. What the split may be between marine distillate and heavier grades is an

unknown. Consequently we took the path of assessing two different levels of potential

heavier fuel use. Cases 3 through 5 assume a conservative, low, use of heavier fuels. We

opted for 10% since a scenario with nil heavier marine fuels seems unlikely. The low

penetration level can be taken to reflect either an initial situation, early in 2020, where the

refining and blending industry reacts by supplying predominantly previously proven marine

(distillate) fuels and/or a somewhat longer term situation where technical or other issues

relating to heavier fuel grades have continued to limit their acceptance.

Cases 5 through 7 assume a higher level of heavy fuels usage. Again the level here is open

to question. Refining and blending economics would arguably drive the industry toward a

11 We are aware from previous work that the majority of marine distillate currently sold is at the higher DMA quality. Our cases were on the basis that all ‘traditional’ MDO would be to DMA quality – with maximum Sulphur cut to 0.5% nominal in 2020 in the Global Fuel cases. We were also on the basis that all 0.1% sulphur ECA fuel would be to DMA standard. This possibly ignores the heavier ECA fuels that have been made available but also ignores that we understand some ECA fuel may be sold at qualities more in line with on-road diesel, i.e. we believe these two factors roughly offset each other.


July 15, 2016

56

longer term predominance of heavier fuels (as is the case today where IFO predominates

over marine diesel use). As the case results show, this would bring down the costs of

marine and other fuels versus a predominant use of MDO. For the purposes of this analysis,

with its focus on the year 2020, we opted to be relatively conservative and assumed that,

during 2020, acceptance and penetration of heavier 0.5% sulphur marine fuel formulations

could reach around half of the total 0.5% marine fuel supplied. (Were cases to be run

showing higher penetrations of heavier grades they would show further reductions in supply

costs versus the 50% level but – as stated – we believe it is questionable whether say a 75-

80% level would be realistic in 2020 and have therefore, to date, not modelled such a

penetration level.)

WORLD Model Cases

Case No.

Year Case Description Global Fuel

Switch Volume mb/d

Switch Volume

mtpa

% MDO in Global Fuel

0 2015 Base / Calibration Case No 0 0 0%

1 2020 Base Case No 0 0 0%

2 2020 Low Switch – High MDO Yes 3.4 175 90%

3 2020 Mid Switch – High MDO Yes 3.8 195 90%

4 2020 High Switch – High MDO Yes 4.2 215 90%

5 2020 Low Switch – Low MDO Yes 3.4 175 50%

6 2020 Mid Switch – Low MDO Yes 3.8 195 50%

7 2020 High Switch – Low MDO Yes 4.2 215 50%

Notes:

Strictly the 2020 Base Case should contain small volumes of 0.5% marine fuel to account for the three DECA’s (Domestic Emissions Control Areas) being introduced in China and for the 0.5% fuel volumes required by the EU for use within its Exclusive Economic Zone (EEZ) waters from 2020 whether or not the IMO Global Sulphur Cap is introduced then or delayed until 2025. EnSys and Navigistics did not attempt to estimate these volumes since the main focus was on the 2020 Global Fuel cases which necessarily included these volumes.

Exhibit 4-1 Summary of WORLD Model Cases

The overall goal of the cases run was to (a) calibrate the WORLD Model using 2015 then (b)

establish a 2020 No Global Fuel Base Case followed by (c) cases evaluating a range of Global

Fuel scenarios. Using this approach, it was possible to assess the incremental effects on

supply and world oil refining and markets of switching to the Global Fuel at different levels

of uptake (switch volume) and of assumed fuel mix.


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4.2 Global 2020 Supply-Demand Outlook

4.2.1 The Need for a Global Outlook

Marine fuels demands comprise part of the total worldwide demand for respectively middle

distillate (gasoil and diesel) and heavy (or residual) fuel oils. In turn, those are elements of

the total global “liquids” market which comprises the light products, LPG’s, naphtha and

gasoline, the middle distillates, jet fuel/kerosene and gasoil/diesel, and the “other products”

which comprise an array of minor fuels from propylene, aromatics and other specialty

streams to lubricating oils, asphalt and the refinery by-products petroleum coke and

sulphur. Since crude oils contain varying percentages of the lightest LPG type components

through to the heaviest residual fractions, and since refining is a co-product processing

industry, changes in one segment of the refined products market in terms of demand level

or quality impact across the total market as do changes in the quality of crude oils available

worldwide and the volume and mix of natural gas liquids, biofuels, gas-to-liquids, coal-to-

liquids and other “non-crude” supply streams.

Thus to assess what the product supply/demand outlook could look like in 2020 for marine

fuels, with a potential large swing from IFO to marine distillate or other fuel compliant with

the 0.5% sulphur standard, it is first necessary to understand the base outlook for the global

supply and refining system across all products. Various agencies led by the International

Energy Agency (IEA), the United States Energy Information Administration (EIA) and the

OPEC Secretariat generate such projections on a regular basis. EnSys is thoroughly familiar

with these outlooks. We spend a significant part of our time employing them as “top down”

scenarios to then examine, using our WORLD Model, how the global industry is likely to

react and operate in terms of refinery throughputs, capacity additions, crude and products

trade and associated economics.

4.2.2 Comparison of Recent Global Outlooks

To set a basis for the 2020 WORLD Modelling, we examined recent studies from these

agencies. These are summarized in Exhibits 4-2 and 4-3.

In the first quarter of 2016, when we were reviewing which global outlook to use as the

basis for the WORLD Model cases, the EIA had not released their 2016 IEO or AEO. The

available outlooks produced in 2015 spanned from a projected low of 97.4 mb/d for 2020

global demand (OPEC 2015 World Oil Outlook) to a high of 100.2 mb/d (IEA 2015 World

Energy Outlook Current Policies case). The then sole available outlook produced in 2016,

the IEA February 2016 Medium Term Oil Market Report had a higher projection, at 100.5

mb/d, than any of the outlooks produced in 2015. At 98.9 mb/d for 2020, the IEA WEO

New Policies case, which is effectively the IEA’s reference outlook, equated exactly to the

average of all the 2015 outlooks.


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58

It goes without saying that oil markets are currently in a state of major flux and uncertainty

and that this in turn heightens the uncertainty underlying any projection of supply, demand

and price to 2020. It is noteworthy that, even though the IEA’s 2015 WEO doubtless more

fully takes account of the crude price drop than did the 2014 WEO, the 2015 WEO Current

Policies and New Policies projections of 2020 global demand are both down versus the 2014

projections. We believe this relates to projected reductions in global economic growth in

the period to 2020 (that offset the effects of lower oil prices in promoting demand). That

said, since the 2015 WEO New Policies case constituted IEA’s ‘reference case’ and since it

comprised – in first quarter 2016 - a relatively central outlook, we used this for our 2020

global supply/demand/oil price ‘top down’ projection. Once we had inserted our marine

fuels demand outlook, 2020 global demand adjusted up slightly to 99.2 mb/d from the

original WEO 98.9 mb/d.)

As the updated Exhibit 4-2 shows, the just-released EIA outlooks continue the trend toward

upward revisions in the 2020 demand outlook. At 100.3 mb/d, the IEO is very close to the

IEA MTOMR. The 2016 AEO Early Release contains the highest outlook to date at 101.5

mb/d and is a full 3.1 mb/d above the projection for 2020 contained in the AEO EIA released

a year ago. In addition, in a May 16th Wall Street Journal article, Daniel Yergin stated that

“by 2020 world oil consumption could be 5.7 million barrels per day higher than this year’s

95.6 million”. This would appear to refer to a current IHS forecast for 2020, one that would

total 101.3 mb/d and again very close to the 2016 AEO figure of 101.5 mb/d.

As discussed further in Section 5.2.2.3, we recognize that latest available outlooks are

veering toward higher demand levels with implications for the degree of challenge in

meeting the Global Sulphur Cap. If we were to select a global outlook today, we would

likely opt for a level above 100 mb/d and thus at least 1 mb/d above that we employed via

our selection of the 2015 WEO New Policies case.


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Exhibit 4-2 Recent Global Outlooks

Exhibit 4-3 Global Demand Differences versus WEO 2015 New policies

Projected 2020

Demand

Change

YoY

Projected 2020

Oil PriceOil Price Basis

mb/d mb/d $/barrel

IEA WEO (Nov) 2014 Current Policies 100.6 $116/$136 IEA import price in $2013/nominal

IEA WEO (Nov) 2015 Current Policies 100.2 -0.4 $83/$92 IEA import price in $2014/nominal

IEA WEO (Nov) 2014 New Policies 99.1 $112/$131 IEA import price in $2013/nominal

IEA WEO (Nov) 2015 New Policies 98.9 -0.2 $80/$89 IEA import price in $2014/nominal

IEA WEO (Nov) 2015 Low Oil Price 99.7 $55/$61 IEA import price in $2014/nominal

IEA MTOMR (Feb) 2015 99.1 $73IEA import price current year dollars,

implies around $66/bbl in $2014

IEA MTOMR (Feb) 2016 100.5 1.5 n.a.

OPEC WOO (Nov) 2014 96.9 $95.4/$110 OPEC Reference Basket $2013/nominal

OPEC WOO (Dec) 2015 97.4 0.5 $70.7/$80 OPEC Reference Basket $2014/nominal

EIA AEO (April) 2015 - Reference Case 98.4 $79/$90 Brent $2013/nominal

EIA IEO 2016 - released early May 100.3 $79.13 Brent $2015/n.a. nominal

EIA AEO 2016 - early release 101.5 3.1 $76.57/$84.59 Brent $2015/nominal

Notes:

Recent Global Outlooks - Updated

WEO demand figures adjusted for the fact that the IEA present biofuels in gasoline/diesel equivalent volumes. These are

multiplied by an overall factor of approx 1.4 to put biofuels and thus total demand on same basis as other outlooks.


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4.3 Supply Demand Outlook

Exhibit 4-4 summarizes the detail in the 2020 Base Case supply and demand outlook.12

Underlying these global totals are breakdowns by region and by crude type, NGL split, and

by grade within each product category. The marine diesel category is broken into three

grades: 0.1% ECA MGO (assumed to be at DMA standard), 1%/0.5% ‘traditional’ MGO/MDO

(again assumed DMA) and 0.5% Global Fuel (assumed DMB). The grades IFO encompass HS

IFO180 and IF380 plus 0.5% lighter (closer to VGO quality) and heavier (IFO) grades.

(Overall, the WORLD Model includes some 55 product grade/consumption types as

summarised in Exhibit 4-5.)

The crude supply mix stems from the WEO regional breakdown of total liquids supply and is

based on the return in that projection to an approximately $80/barrel ($2014) by 2020.

Clearly, developments in crude supply warrant monitoring, for example how predominantly

heavy crude production will progress in Canada,13 Venezuela, Mexico and Brazil and light

crude production in the United States, North Sea, North and West Africa, and the Caspian.

Problems or improvements could swing the global crude slate either lighter or heavier – or

they could partially offset each other, leaving total crude quality little changed. As it stands,

our projection includes essentially static overall global crude slate quality at around 32.6°

API and 1.25 % sulphur.

With respect to non-crudes supply, there is again some degree of uncertainty in the outlook

stemming from the recent large moves in crude oil and natural gas prices. Recent strong

growth in NGL’s production is being tempered by these price reductions. Similarly, lower oil

prices tend to weaken the economics of GTL and CTL liquids and also of biofuels. By way of

example, the November 2015 WEO New policies case we used had an assessed 2.94 mb/d of

biofuels supply in 2020. The February 2016 MTOMR had a total of 2.67 mb/d for 2020 and

the just-released EIA 2016 IEO has 2.5 mb/d. These differences may relate purely to

differing methodologies or they may indicate a downward trend. To the extent the growth

in all these non-crudes supplies slows, it will increase the ‘call on refining’. As essentially all

the non-crudes supplied are light, clean streams, declines will not only require volume

replacement by crude oil but will also tend to add to refinery upgrading and

desulphurisation load. Both of these effects will tend to raise prices for clean products.

On the demand side, the WEO and other similar outlooks do not contain projections for

demand by product type. EnSys’ approach is to use historical data and growth rates but to

also wherever possible take into account an available third party outlook by product. For

12 The fact that the supply and demand totals do not exactly match is an artifice of the balancing method within WORLD. 13 A new outlook from the Canadian Association of Petroleum Producers is due this June.


July 15, 2016

61

this study EnSys used the outlook from the 2015 OPEC World Oil Outlook as a starting point

and then tuned to the WEO ‘top down’ demands. Exhibit 4-6 shows the relevant table from

the World Oil Outlook.14

Versus an initial 2020 demand assessment, (made in April), we adjusted our 2020 global

outlook for land-based diesel down by 0.25 mb/d and gasoline up by 0.25 mb/d to reflect

the current softening in diesel demand growth and strengthening in that for gasoline. In

Section 5.2.2.3, we discuss further the implications of changes in the supply and demand

outlook.

14 Note, the WOO Table 5.1 embodies an assumed 2020 shift of IFO to marine distillate.


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Exhibit 4-4 2020 Base Case Supply Demand Outlook

Supply mb/dCrude Oil

United States 9.014

Canada 4.024

Mexico 2.125

Greater Caribbean 3.719

Rest of South America 4.412

Europe North 2.734

Europe South 0.155

Europe East 0.142

FSU excluding Caspian 10.321

Caspian 2.661

Middle East 27.887

Africa North 2.54

Africa West 4.436

Africa East-South 0.278

Pacific Japan/Australasia 0.713

Pacific 'High Growth' 1.27

China 4.559

Other Asia 1.944

Total Crudes 82.934

Non-Crudes

NGL's 10.006

Methanol (for MTBE) 0.158

Petrochemical Returns 0.357

Biofuels 2.94

GTL Liquids 0.199

CTL Liquids 0.1

Process Gain / Other 2.491

Total Non-Crudes 16.251

Total Supply 99.185

Demand

LPG's (incl ethane) 9.504

Naphtha 7.361

Gasoline 25.472

Jet/Kerosene 7.454

Inland Diesel / Heating Oil 27.866

Marine Diesel 1.883

Inland Residual Fuel 4.039

Marine IFO 4.354

Other Products 9.773

Crude Direct Use 1.29

Transport Losses 0.189

Total Demand 99.185

Global Supply/Demand 2020 Base Case


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WORLD Model Product/Consumption Types LPG's 2

naphtha 3

gasoline 18

jet/kero 3

inland diesel 7

inland resid 3

marine fuels 7

other products 10

sub total 53

crude direct use 1

transport losses 1

total 55

The other products category includes: propylene, aromatics (BTX), lubes & waxes,

asphalt, FCC coke, high grade petroleum coke, fuel grade petroleum coke, process gas, sulphur

Exhibit 4-5 WORLD Model Product/Consumption Types

Exhibit 4-6 OPEC 2015 World Oil Outlook Demand by Product


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4.4 Product Quality Outlook

WORLD contains regional grade break downs across each of gasoline, diesel/gasoil and

residual fuel with associated assessed typical properties based on specifications by grade.

Increasingly, developing countries are following the lead of the industrialised nations in

shifting their gasoline and diesel products progressively toward advanced ultra-low sulphur

specifications; normally based on EURO III/IV/V standards. These trends are embodied in

the Model. Current and recent product qualities are assessed based on several sources

including country by country research, data from UNEP and others.

We obtain and apply data on product specifications but are also aware that there can be

appreciable product quality ‘giveaway’, i.e. that, at times, actual product qualities, notably

sulphur, can be well within the stated specifications. This was evident when EnSys

conducted a project for the World Bank in 2009 to assess the refining costs of implementing

advanced ‘AFRI’ standards for gasoline and diesel in sub-Saharan Africa. (The AFRI standards

broadly follow the EURO III/IV/V standards.)

Also, in a 2014 study, EnSys simulated 225 refineries across the world’s developing regions

in order to assess product sulphur levels for the International Council on Clean

Transportation (ICCT). The analysis indicated then current weight average diesel fuel

sulphur levels of close to 3,000 ppm for the Middle East, 2,000 ppm for the Greater

Caribbean region (in which we include Colombia, Ecuador, Mexico and Venezuela) and

1,400-1,700 ppm for other developing regions. In many instances, assessed ‘actual’ sulphur

levels were well below specification for the grade. Weight averaged sulphur levels were

also assessed for gasoline, jet/kerosene and residual fuels. The latter were indicated as

averaging close to 30,000 ppm in the Middle East and Greater Caribbean down to around

15,000 ppm in Africa. These findings were embodied in the WORLD Model.

In addition, for trending product qualities forward, EnSys has relied on research as well as a

section in the 2014 OPEC World Oil Outlook which covered product quality developments in

detail. The following lists the main product quality trends from 2015 to 2020 contained

within the Model for this study. Most of the ‘action’ is in the developing regions. This is

because, in the industrialised regions, gasoline and on-road diesel are generally at ultra-low

sulphur standards (predominantly 10 ppm) off-road diesel and heating oil are at low sulphur

standard (which we define here as 500 ppm nominal) and tight standards also apply to

residual fuels (in the range of 0.3 – 1.0%). The following commentary excludes marine fuels

which are dealt with in Section 4.5.


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4.4.1 Gasoline

Current regional and grade limits in WORLD range from a high of 450 ppm to a low of 10

ppm (ULS grades) even though, as discussed above, nominal specifications can be

appreciably higher.

Developments assumed 2015 to 2020:

the United States and Canada move to 10 ppm (“Tier 3” gasoline) from the current

30 ppm standard

FSU, notably Russian Federation – substantial progress toward ULS standards (10

ppm)

Africa, Middle East, Latin America, developing Asia – significant progress in reducing

overall gasoline sulphur levels (by 45 – 65%), also limited introduction of EURO type

ULS grades (10-50 ppm).15

4.4.2 Jet Fuel and Kerosene

While the nominal specification for jet fuel is 3,000 ppm, the Model limits for 2015 are 700

ppm with lower limits in one or two regions such as Pacific Industrialised. The 2020 case

assumes introduction of tighter specifications (50 ppm) in the United States, Canada and

Europe but no change in other regions where sulphur reduction is assumed to be enacted

post 2020.

Similar reductions were assumed in kerosene sulphur because jet fuel (Jet A/A-1) and

kerosene are extremely similar products and can be co-produced.

4.4.3 On and Off Road Diesel Fuel, Heating Oil

Current sulphur limits in the Model range from 10 ppm for ULS diesel to highs of 4,000 –

5,000 ppm for off-road diesel/heating oil in selected regions, (a total of seven different

grades), in part reflecting the findings from EnSys’ ICCT study noted above.

Developments assumed 2015 to 2020:

US and Canada – heating oil standards progress from LS (500 ppm) to ULS

standards

FSU, notably Russian Federation - substantial progress toward ULS standards

(10 ppm) for on-road diesel, more limited progress for offroad/heating oil

Latin America, Africa, developing Asia – limited progress toward implementing

ULS fuels but appreciable reductions in total diesel/heating oil pool sulphur

levels

15 The trend to the EURO III/IV/V grades also leads to tighter specifications for octane, benzene and aromatics.


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66

Middle East – limited change toward tighter standards.

4.4.4 Residual Fuel

In covering inland residual fuels, WORLD contains three grades, 0.3%, 1% and high sulphur.

The ‘high’ sulphur standard is taken in most regions to be 3%, although in Mexico for

example the high sulphur fuel there is sold at a 4% standard. In regions such as Europe,

Pacific Industrialised (Japan, Australasia), the United States and Canada, there is no ‘high’

sulphur fuel allowed for domestic consumption; all consumption is taken to be of 1% or

0.3% fuel. Tight standards are also applied in the Model Pacific High Growth region which

embodies Republic of Korea, Taiwan Province of China, Singapore among others.

In the 2020 cases, no changes were assumed in inland residual fuel qualities or mixes.

4.5 Marine Fuels Grades & Qualities

Exhibit 4-7 below summarises the marine fuels grades used in the modelling, namely three

distillate and four IFO grades.

We are aware from previous work that the majority of marine distillate currently sold is at

the higher DMA quality. Our cases were on the basis that all ‘traditional’ MGO would be to

DMA quality – with maximum Sulphur cut to 0.5% nominal in 2020 in the Global Fuel cases.

We were also on the basis that all 0.1% sulphur ECA fuel would be to DMA standard. This

possibly ignores the heavier ECA fuels that have been made available but also ignores that

we understand some ECA fuel may be sold at qualities more in line with on-road diesel, i.e.

we believe these two factors roughly offset each other.

For the 2020 Global Fuel cases, the Global Fuel requirements were assumed to be met by

MDO at DMB standard or, alternatively, by heavier (IFO) fuels. Our basis for selecting DMB

rather than DMA for 0.5% fuel delivered as distillate was that the large volumes involved

would drive refiners and blenders to opt for the somewhat heavier fuel (i.e. DMB) and

would put in place the logistics to supply DMA and DMB separately. We recognize this is a

parameter that could be subject to debate.16

The alternative heavier 0.5% fuels were given specification ranges that would keep them

within ISO 8217 specifications but which broadly would cover potential for supplies of both

heavy and lighter, low viscosity RM IFO grades. The IFO 80 grade was introduced to reflect

16 As indicated in Exhibit 4.7, there are differences between DMA and DMB but they are relatively limited. DMB can be slightly heavier, (higher density), has a higher maximum viscosity; also a higher maximum pour point, lower cetane index and a micro carbon residue limit to guard against the inclusion of heavy residual type blendstocks.


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67

that the advent of the 0.1% sulphur ECA standard has led to the supply of a number of new

formulations that are more in akin to VGO than to residual fuel grades. That said, the Global

IFO 80 grade and to some degree the Global IFO 380 grade represent new fuel

compositions, in terms of blendstocks. EnSys recognised that these could take time to be

accepted because it would be necessary to first establish that they did not cause onboard

operational issues; hence the case approach adopted to consider a more conservative ‘High

MDO’ scenario and an alternative ‘Low MDO’ scenario which allowed for sale of higher

proportions of the Global IFO fuels.

Note that EnSys invariably allows for product quality giveaway in the many product

specifications embodied in the Model, i.e. when we use the term 0.5% Fuel, that is nominal

and we select a lower actual value (such as 0.4%) to reflect the likely actual range of blend

qualities; likewise with other specifications.

In addition to the specifications shown, for the IFO grades, EnSys placed upper limits at,

respectively, 25% and 10% on the volume proportions of cracked stocks and visbroken

stocks allowed into the IFO blends. This was done to guard against potential fuel instability

that could, for instance, lead to asphaltene deposition.

Exhibit 4-7 Marine Fuel Grades Modelled

WORLD Model GradeISO8217

Grade

density @

15C - max

wt %

sulphur -

max

flash

point

degC -

min

viscosity

@ 40C

(mm2/s) -

max

viscosity

@ 50C

(mm2/s) -

max

pour point

Summer /

Winter

average

(degC) - max

cetane

index -

min

micro

carbon

residue

(%m/m) -

max

Marine Distillate Fuels

'Traditional' MGO DMA 890 1.5/0.5 60 6 0/-6 = -3 40

ECA MGO DMA 890 0.1 60 6 0/-6 = -3 40

Global MDO DMB 900 0.5 60 11 6/0 = 3 35 0.3

IFO Fuels

HS IFO180 RMG 0.991 3.5 60 180 30 18

HS IFO380 RMG 0.991 3.5 60 380 30 18

Global IFO 80 / 'Hybrid' RMD 0.975 0.5 60 80 30 14

Global IFO 380 RMG 0.991 0.5 60 380 30 18

Key Specifications Employed

Marine Fuel Grades Modelled

1. 'Traditional' MGO 2015 sulphur limit was set to 0.5% to reflect Ensys' understanding of typical actual quality

2. 'Traditional' MGO 2020 sulphur limit was set to 0.5% in line with Global Fuel Rule

3. In 2020 Global Fuel cases, HS IFO use was restricted to volumes related to vessels assumed to install scrubbers

4. CCAI (IFO specification) was mot modelled.

Notes:


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4.6 Transportation Outlook

WORLD contains a detailed representation of inter-regional marine movements, with

expanded detail on pipelines and rail for the United States and Canada. Each year we

update to the January release of WorldScale flat rates and analyse the state of the tanker

market and potential trends in order to project future percents of WorldScale. Recently,

the tanker market has seen relatively low rates. For this and other recent studies, we have

been assuming a gradual increase in rates to reflect a slow return toward a more balanced

market.

With respect to pipelines, we track the United States and Canadian projects in our monthly

North America Logistics Review. The major lines of concern are arguably the three main exit

pipeline projects out of western Canada, namely Keystone XL, Trans Mountain expansion

and Energy East. Keystone XL we consider as potentially cancelled (i.e. unless resurrected

by a change of the United States Administration in the November 2016 election). Both

Trans Mountain expansion and Energy East are experiencing headwinds and a slow

permitting process. Currently in our database, we have Trans Mountain online in 2019 and

Energy East in 2020. However, to reflect the doubt that exists and to adopt a ‘central

estimate’ we assumed for this study that Trans Mountain would be online by 2020 but that

Energy East would not.17 We did assume that a number of lesser the United States pipeline

projects would go ahead, including some degree of Canada to the United States cross-

border expansion as well as increased movements to eastern Canada via the Line 9 reversal.

Overall, the assumptions made on major pipelines affect primarily the directions in which

western Canadian crude can flow.

Finally, the Model embodies crude-by-rail options. Even allowing for normally low

utilisations, there is substantial capacity available today to move crudes from especially the

Bakken and western Canada to coastal markets. Because of yet another crude-by-rail train

derailment and fire, this time in Oregon, EnSys cut the potential 2020 capacity for moving

crude by rail into the United States West Coast and thence potentially to export.

17 In May, the Canadian National Energy Board (NEB) issued a report recommending that the Canadian government approve the Trans Mountain Expansion Project (Project), subject to 157 conditions; http://www.neb-one.gc.ca/pplctnflng/mjrpp/trnsmntnxpnsn/index-eng.html.

http://www.neb-one.gc.ca/pplctnflng/mjrpp/trnsmntnxpnsn/index-eng.html


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4.7 Refining Capacity Outlook

4.7.1 Overview

In developing the basis for this study, EnSys undertook a thorough update to our refinery

capacity, projects and closures data. We have continued to make limited adjustments to

that outlook and have incorporated our latest assessments as of early June into our

modelling. We have a January 2016 total base capacity of 97.7 mb/cd. This is slightly above

the level assessed by the IEA in their February 2016 MTOMR. Our assessment is for refinery

projects to add 5.6 mb/cd of additions by end 2019. We also estimate a total of 2 mb/cd of

refinery closures between 2016 and end 2019. The net effect is a projected end 2019 global

base capacity of 101.3 mb/cd. We note this brings our capacity outlook close to the 101.8

mb/cd listed in the IEA February 2016 MTOMR. The gap narrows to a minimal level when

2020 minor debottlenecking additions from the WORLD Model cases of around 0.3 to 0.45

mb/cd are added in. The resulting tables are set out in Exhibits 4-9, 4-16, 4-17, 4-19, and 4-

20 below.

As a key under-pinning of our WORLD modelling activities, EnSys maintains a detailed,

global refinery database. This is regularly reviewed and updated. For this Supplemental

Marine Fuels project, we have updated our data covering each of the three components

affecting projected 2020 available capacity, namely: base capacity, (updated to January

2016), closures, (with focus on those expected to occur in 2016 through 2019), and projects,

(with emphasis on those that can be expected to be on stream by end 2019 – and so able to

contribute to compliance with the MARPOL Annex VI Global Sulphur Cap). Thus January

2016 base capacity minus assessed closures to end 2019 plus capacity additions via projects

through 2019 equals projected end 2019 capacity.

The sections below review each of these facets in turn, leading to our projection of net

available end 2019 capacity. Our research relies on publicly available data, including surveys

(such as from the Oil & Gas Journal) that can be purchased, supplemented by mainly online

research into sources ranging from industry press to investor presentations and refining

company websites. We are at pains to cross-check across sources wherever possible.

We would point out that refinery projects – and closures – constitute moving targets and

that there can be varying degrees of clarity over status, timing and configuration. In short, it

is necessary to recognise that there at least a limited degree of uncertainty surrounding

2020 capacity.

4.8 Base Capacity January 2016

As noted above, data on the global oil industry is not an exact science. No one has a perfect

view, including on refining base capacity. Exhibit 4-8 below compares EnSys’ assessment of


July 15, 2016

70

global base capacity as of January 2016 against that in the IEA 2016 MTOMR and three other

sources. Given the range of these estimates, and the time spent over the past few years

examining individual refinery data, we believe our assessment of 96.7 mb/cd is sound.

Exhibit 4-8 Global Refinery Base Capacity per Different Organisations

In this project, we updated our capacity base from January 2015 to January 2016. Exhibit 4-

9 provides the resulting breakdown of capacity for major process units18 aggregated by

major region and globally.

18 The WORLD Model includes breakdowns within the unit categories shown and additional unit types (not shown) with their capacities.

Reference Date mb/cd

IEA MTOMR February 2016 2015 (1) 97.2

BP Statistical Review June 2016 2015 (1) 97.2

EnSys Marine Fuels April 2016 Jan 2016 97.4

EnSys Marine Fuels June 2016 Jan 2016 97.7

OGJ Refinery Survey Jan 2016 89.5

IEA WEO 2015 2014 (1) 94.1

Note:

1. Not stated whether beginning of end of year. For MTOMR presumed end of 2015

Global Refinery Base Capacity per Different Organisations


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Exhibit 4-9 Assessed Refinery Capacity January 2016

In the time between conducting our initial 2015 Model Calibration case and our final 2020

analytical cases, we made small adjustments to refinery base capacity. In addition, we

undertook research on solvent deasphalting capacity. United States capacity data are

contained in annual refiner submissions to the EIA. Our focus was on capacity outside the

United States. As a result, we arrived at assessed total global refinery solvent deasphalting

capacity of just over 1 mb/cd. This was a significant increase (some 300,000 b/cd) over our

previous assessment (based as it was more on published data).

Solvent deasphalting is relevant in that the process extracts limited quantities of vacuum

gasoil (VGO) remaining in vacuum residua. It thus has the effect of recovering additional

VGO (albeit generally of low quality) and of reducing the volume of remaining vacuum

residua that commonly is routed to a coker. It thus tends to reduce loads on cokers, freeing

up capacity to take in other feedstocks. As further described in Section 5.1.2, because of

these changes, EnSys reran the 2015 WORLD case and the 2020 Base and Global Fuel cases.

The net effect of the slight increase in total available refinery capacity plus the increase in

assessed solvent deasphalting capacity was to modestly narrow light-heavy product supply

cost differentials across all cases.

million barrels per calendar

day

Asia

Pacific Europe FSU

Middle

East Africa

Latin

America

North

America Global

Distillation

Crude Oil (Atmospheric) 32.105 15.716 8.028 9.487 4.206 6.277 21.864 97.683

Vacuum 11.004 6.584 3.210 2.610 1.042 2.754 10.051 37.256

Upgrading

Coking 2.799 0.702 0.318 0.287 0.084 0.646 3.211 8.047

Catalytic Cracking 5.814 2.208 0.775 0.814 0.255 1.242 6.548 17.656

Hydrocracking 3.125 1.920 0.402 0.901 0.163 0.197 2.173 8.881

Gasoline Quality

Reforming 3.867 2.363 1.169 1.025 0.499 0.394 4.472 13.789

Isomerisation 0.367 0.594 0.293 0.348 0.060 0.055 0.911 2.629

Alkylation 0.315 0.237 0.017 0.092 0.034 0.145 1.289 2.129

Polymerization 0.012 0.044 0.010 0.005 0.006 0.006 0.057 0.141

Desulphurisation

Naphtha 4.222 3.085 1.216 1.375 0.618 0.543 5.456 16.516

Gasoline 1.695 0.582 0.149 0.240 0.101 0.285 2.675 5.727

Middle Distillates 8.923 5.403 2.039 2.265 0.820 1.026 7.140 27.617

Vacuum Gasoil/Residual 3.162 1.740 0.271 0.376 0.034 0.230 3.147 8.959

REFINING CAPACITY JANUARY 1, 2016


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4.9 Closures 2016 – 2019

Exhibits 4-10 and 4-11 below summarize EnSys’ assessment of potential refinery closures

while Exhibits 4-12 through 4-14 provide underlying detail. We would point out that, while

the latter exhibits detail individual refineries, our primary objective is to assess the expected

overall level of closures through 2019. Therefore, with regard to refineries that are

projected to close, we are in a sense using these as proxies; in other words it may turn out

that a specific refinery expected to close in fact does not but that another similar facility in

the region does.

The data show that, between 2012 and 2015, some 3.8 mb/d of refinery capacity closed.

Much of this, 1.8 mb/d, was in Europe followed by 0.8 mb/d in Asia (led by Japan then

Australia, Taiwan Province of China and Singapore), close to 0.4 mb/d in North America,

(Alaska, California and eastern Canada), then close to 0.6 mb/d in Latin America (refineries

on the islands of St. Croix and Aruba) and 0.26 mb/d in the Russian Federation. These

closures include both total and partial refinery shutdowns. In Europe, for example, most

but not all have been complete refinery closures. In contrast, the residue upgrading ratio

rule introduced in Japan in 2010 has led to a range of mainly partial closures and a focus on

reductions in crude distillation capacity rather than secondary units.

A key question in this study is – what extent of closures could be expected through 2019?

Already announced closures, taken as firm, total 1.6 mb/cd for 2016 through 2019. The

closures are in Japan, other Asia, Kuwait and Europe. Those in Japan constitute a

continuation of reaction to the residue upgrading rule with listed total closures of some 0.53

mb/d. Those in Kuwait total 0.34 mb/d and result from KNPC’s plans to close the Shuaiba

refinery in 2017 and to close old capacity at the Mina al-Ahmadi refinery while adding new

capacity (handled under our projects list) at the Mina al-Abdullah refinery as part of a

project to integrate the two facilities.

In addition to actual and announced near term closures, EnSys maintains a list of refineries

that we consider are potential closure candidates (‘closure watch list’). These are

summarised in Exhibit 4-15. Based on recent history, we believe that additional refinery

closures will occur beyond those that have been formally announced. We took our ‘watch

list’ as a starting point for assessing potential additional closures. The total capacity of

refineries currently on the watch list is in excess of 1.4 mb/d. We assumed that, of these,

one could expect at least around 0.4 mb/d could close by end 2019. We placed these

closures in Asia, Europe and North America. These, combined with the announced closures,

lead to a total of just over 2 mb/d of closures for 2016 through 2019.

As Exhibit 4-10 illustrates, our assessment leads to a projected closure rate of just over 0.5

mb/d per year, essentially half the average of close to 1 mb/d per year that occurred from

2012 through 2015. The reduction in rate of closure is arguably not surprising though given


July 15, 2016

73

the extent of closures that have been occurring since 2008 and the effects these have had.

Notably, cumulative closures in Western Europe (EU-15 plus Norway) led to utilisations

rising to the high 80% range in 2015 from an unsustainable 75% a few years before. In

addition, while the reduction in crude oil price has tended to constrain refined product light-

heavy price spreads, it has also substantially reduced the cost of natural gas used for fuel

and hydrogen feedstock in Europe and Asia. This has narrowed the competitive

disadvantage on operating costs versus refineries in the United States and parts of the

Middle East. Likewise, the crude price reductions are arguably raising expectations for

increases in total global demand, (see Section 4.3), which in turn could lead refiners in

vulnerable regions to hold off on announcing closures. There is also the possibility that not

all of the ‘announced’ closures will actually occur.

Consequently, we believe this estimated level of refinery closures through 2019 is

reasonable. WORLD Modelling results do indicate potential for additional closures by 2020,

over and above the 2 mb/cd assumed. However, recent prospects for more rapidly rising

global liquids demand could act to deter refiners from closing facilities.19 Exhibit 4-16 sets

out the resulting projected 2020 base capacity, i.e. the 2016 base minus closures and before

addition of projects.20

19 In its June Oil Market Report, the IEA stated they see global supply and demand being rebalanced by the second half of 2016 because of demand rising more rapidly. The IEA revised its projection for 2016 demand growth to 1.6 million b/d from1.2 million b/d, an appreciable 400,000 b/d increase. http://www.oceanintelligence.com/news/141935?tag=22-210916-1424670-0-OI. 20 There is currently a small discrepancy between our closure projects list – which leads to 2.33 mb/d of closures 2016-2019 – and our WORLD Model refinery database – which has 2.4 mb/d. This will be resolved before Model cases are undertaken.

http://www.oceanintelligence.com/news/141935?tag=22-210916-1424670-0-OI


July 15, 2016

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Exhibit 4-10 Refinery Closures Recent & Projected by Year and Region

Exhibit 4-11 Refinery Closures Recent & Projected

million b/cd 2012 2013 2014 2015 2016 2017 2018 2019

Total

2012 -

2019

Total

2016 -

2019

North America 0.07 0.09 0.22 - - - 0.12 - 0.49 0.12

Latin America 0.59 - - - - - - - 0.59 -

Europe 0.97 0.20 0.37 0.26 - - 0.27 0.18 2.24 0.45

FSU - - - 0.26 - - - - 0.26 -

Africa - - - - - - - - - -

Middle East - - - - - 0.20 - 0.14 0.34 0.34

Asia Pacific 0.08 0.14 0.60 - 0.88 0.12 0.13 - 1.94 1.12

Total: 1.71 0.43 1.18 0.52 0.88 0.32 0.51 0.32 5.86 2.03

Refinery Closures Recent and Projected by Region


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Exhibit 4-12 Refinery by Refinery Closures - 1

(1) Taiwan Province of China

Region Closure Type Status Country Location Company Capacity (b/d) Year

Asia Pacific Refinery Closure Closed Australia Clyde Refinery Shell (79,000) 2012

Asia Pacific Refinery Closure Closed Japan Sakaide Cosmo (140,000) 2013

Asia Pacific Refinery Downsize Closed Japan Chiba

Kyokuto Petroleum

Ind. (subsidiary of

TonenGeneral) (23,000) 2014

Asia Pacific Refinery Downsize Closed Japan Kawasaki TonenGeneral (67,000) 2014

Asia Pacific Refinery Downsize Closed Japan Wakayama TonenGeneral (38,000) 2014

Asia Pacific Refinery Closure Closed Japan Tokuyama Idemitsu Kosan (120,000) 2014

Asia Pacific Refinery Closure Closed Japan

Muroran Refinery

(Hokkaido) JX Nippon (180,000) 2014

Asia Pacific Refinery Downsize Closed Japan Yokkaichi Cosmo (43,000) 2014

Asia Pacific Refinery Closure Closed Australia Kurnell Refinery Caltex (124,500) 2014

Asia Pacific Refinery Closure Closed Singapore Jurong

Jurong Aromatics

Corp (JAC) (100,000) 2016

Asia Pacific Refinery Closure Closed Others(1) Kaohsiung

Chinese Petroleum

Company (270,000) 2016

Asia Pacific Refinery Closure Closed Australia

Brisbane Refinery

(Bulwer Island) BP (102,000) 2016

Asia Pacific Refinery Closure Closed Japan

Nishihara

Refinery

(Okinawa)

Petrobras/Nansei

Sekiyu (90,000) 2016

Asia Pacific Refinery Downsize Announced Japan

Chiba

(consolidation

betw. 2 Refs)

Tonen General &

Cosmo (100,000) 2016

Asia Pacific Refinery Downsize Announced Japan Yokkaichi

Cosmo Oil (?and

Showa Shell?) (63,000) 2016

Asia Pacific Refinery Closure Announced Japan

likely shut 1 of its

7 refineries JX Energy (121,000) 2016

Asia Pacific Refinery Downsize Announced Japan unknown Showa Shell (34,000) 2016

Asia Pacific Refinery Downsize Announced Japan Ichihara, Chiba Idemitsu Kosan (20,000) 2017

Asia Pacific Refinery Downsize Announced Japan unknown

Tonen General &

Kyokuto (72,000) 2017

Asia Pacific Refinery Downsize Announced Japan unknown Taiyo Oil (13,000) 2017

Asia Pacific Refinery Downsize Announced Japan unknown Fuji Oil (13,000) 2017

Recent (from 2012) and Projected Global Refinery Closures


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Exhibit 4-13 Refinery by Refinery Closures - 2

Exhibit 4-14 Refinery by Refinery Closures – 3

Region Closure Type Status Country Location Company Capacity (b/d) Year

Europe Refinery Closure Closed France Petit Couronne Petroplus (162,000) 2012

Europe Refinery Closure Closed France Berre l'Etang LyondellBasell (105,000) 2012

Europe Refinery Closure Closed Italy Rome Total Erg (86,000) 2012

Europe Refinery Downsize Closed Italy Trecate ExxonMobil (70,000) 2012

Europe Refinery Closure Closed

United

Kingdom Coryton Petroplus (220,000) 2012

Europe Refinery Downsize Closed

United

Kingdom Fawley Refinery Esso (ExxonMobil) (80,000) 2012

Europe Refinery Closure Closed Romania Arpechim Petrom (70,000) 2012


Czech

Republic Paramo Unipetrol (20,000) 2012

Europe Refinery Closure Closed Ukraine Lisichansk Rosneft (TNK-BP) (160,000) 2012

Europe Refinery Downsize Closed Germany

Harburg -

Hamburg Shell (110,000) 2013


Canary

Islands Tenerife Cepsa (88,000) 2013

Europe Refinery Closure Closed Italy Mantova Refinery MOL Group (55,000) 2014

Europe Refinery Closure Closed Italy

Porto Marghera

(near Venice) Eni (80,000) 2014


United

Kingdom Milford Haven Murphy Oil (130,000) 2014


United

Kingdom

Ellesmere Port

(Stanlow) Essar Oil (101,000) 2014

Europe Refinery Closure Announced France

La Mede

(Marseille) Total SA (160,000) 2018

Europe Refinery Closure Closed Italy Gela (Sicily) Eni (100,000) 2015


United

Kingdom Lindsey Total (103,500) 2015

Europe Refinery Closure Closed Switzerland Collombey Tamoil (55,000) 2015

Europe Refinery Downsize Announced

United

Kingdom Killingholme Phillips 66 (110,600) 2018

FSU Refinery Downsize Closed

Russian

Federation

Syzran and

Novokuibyshevsk Rosneft (260,000) 2015

Recent (from 2012) and Projected Global Refinery Closures


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Exhibit 4-15 Watch List for Potential Refinery Closures

Exhibit 4-16 Refining Base Capacity January 2020 – 2016 Base Less Closures

4.10 Projects 2016 – 2019

EnSys maintains a database of refinery projects. The 2015 OPEC World Oil Outlook, Chapter

621, contains a detailed review of projects as we saw them in mid-2015. For this study, we

have undertaken a thorough update, mindful of the continuing effects of low oil prices in

reducing cash flow available for projects and of the potential for delays and cancellations.

In reviewing projects, it is critical to assess each project according to its status and

probability of going ahead. EnSys classifies projects into five categories as follows:

Class 1 – an announcement and little more, little definition, very high uncertainty

21 http://www.opec.org/opec_web/en/publications/340.htm.

b/cd Asia Pacific Europe FSU Middle East Africa North

America

Latin

AmericaGlobal

Presumed Closed (125,000) (177,000) - - - (115,000) - (417,000)

Presumed Stays Open (109,000) (356,000) (190,000) (210,000) - (154,000) (31,000) (1,050,000)

Total (234,000) (533,000) (190,000) (210,000) - (269,000) (31,000) (1,467,000)

Watch List for Potential Refinery Closures


dayAsia

Pacific Europe FSU

Middle

East Africa

Latin

America

North

America Global

Distillation


Vacuum 10.889 6.486 3.210 2.505 1.042 2.754 9.996 36.883

Upgrading

Coking 2.784 0.702 0.318 0.287 0.084 0.646 3.211 8.032


Hydrocracking 3.104 1.920 0.402 0.855 0.163 0.197 2.136 8.777

Gasoline Quality

Reforming 3.825 2.310 1.169 1.010 0.499 0.394 4.441 13.647

Isomerisation 0.357 0.557 0.293 0.348 0.060 0.055 0.911 2.582

Alkylation 0.313 0.233 0.017 0.092 0.034 0.145 1.289 2.123

Polymerization 0.012 0.044 0.010 0.005 0.006 0.006 0.057 0.141

Desulphurisation

Naphtha 4.165 3.007 1.216 1.352 0.618 0.543 5.435 16.336

Gasoline 1.695 0.582 0.149 0.240 0.101 0.285 2.675 5.727



REFINING BASE CAPACITY JANUARY 1, 2020 - 2016 BASE LESS CLOSURES

http://www.opec.org/opec_web/en/publications/340.htm


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Class 2 – project scope / configuration usually defined but still at an early stage and

considered to have a high level of uncertainty

Class 3 – well defined, potentially financing arranged and engineering contracts let but still

not near construction

Class 4 – close to construction and strong backing hence considered highly likely to go ahead

Class 5 – under construction with significant progress clear hence considered certain to

complete.

In evaluating projects, we generally exclude projects in Classes 1 and 2 as being too

uncertain and include projects in Classes 4 and 5.22 The main questions tend to arise over

projects in Class 3 and here we often apply a probabilistic approach, i.e. assume that x % go

ahead within the timeframe. From experience, refinery projects tend to slip and so

excluding a portion of the Class 3 projects captures this tendency. Another factor is that, in

this marine fuels study, we have taken the view that, while simulating 2020, we are planning

to count in only that capacity which we expect to be on stream by end 2019 – and which is

thus able to contribute to meeting the IMO Global Sulphur Cap which would come in on

January 1st 2020. The project table presented in Exhibit 4-17 lists our current assessment of

capacity additions for 2016 through 2019 by major process categories by region and

globally. This Exhibit (shown as “UNADJUSTED”) includes 100% of Class 3 projects (as well as

4 and 5). Then, we set out our reasons for adjusting these capacity additions and show the

resulting adjusted additions from 2016 through 2019 in Exhibit 4-19.

As noted elsewhere, capacity additions are always a moving target and so we continually

monitor developments. As can be seen, with 100% of all Class 3 projects included, our

projection is for 6.4 mb/d of new distillation capacity to come on stream between January

2016 and December 2019 plus substantial amounts of secondary capacity; over 3.1 mb/d of

upgrading, nearly 0.9 mb/d of gasoline quality and almost 4.0 mb/d of desulphurisation.

The bulk of this new capacity is in Asia, led by China and India, and the Middle East with

projects including several large new refineries and expansions. The bulk of the North

America projects are in the Gulf Coast region. These include a number of condensate

splitter projects (hence the high ratio of distillation to secondary capacity). They exclude a

number of additional splitter projects that we have downgraded; also the recently mooted

major expansion at the Exxon Beaumont refinery.

22 Including all Classes, refinery projects listed today total some 20 mb/d of distillation capacity plus secondary additions. It is therefore (a) critical to carefully evaluate status and timing and (b) to be expected that variations in assessed probability and timing can lead to potentially appreciable differences in capacity assessed to be available by a given horizon.


July 15, 2016

79

Relatively limited additions are projected as firm in other regions. In Africa, two large

projects not included are the Nigerian Dangote project, (variously being reported as

anything from 400,000 to 650,000 b/d capacity but with projected start up after 2019), and

the Mthombo project in South Africa (360,000 b/d, nominally at the site preparation stage

but with delays reported and start up not now projected until after 2019). Capacity

expansion in Europe is focussed mainly on one project for a new refinery in Turkey. In the

FSU, most projects in the Russian Federation are focussed on upgrading and quality

improvement rather than distillation expansion. Quality improvement projects are spread

through most regions driven by the on-going drive toward low and ultra-low sulphur

gasoline and diesel standards.

Details underlying the summary data in Exhibit 4-17 are shown in Appendix Section 6.2. The

section lists major projects by region together with aggregate additions from small projects.

Section 6.2.2 lists major Class 3 projects which we see as potentially starting up in the 2020-

2021 time frame.

Exhibit 4-17 Refining Projects Through 2019


day

Asia

Pacific Europe FSU

Middle

East Africa

Latin

America

North

America Global

Distillation


Vacuum 0.693 0.086 0.010 0.370 0.124 0.269 0.015 1.567

Upgrading

Coking 0.269 0.095 0.167 0.309 0.025 0.223 0.179 1.267


Hydrocracking 0.240 0.131 0.277 0.121 0.090 0.042 0.155 1.056

Gasoline Quality

Reforming 0.276 0.028 0.018 0.226 0.061 0.040 0.002 0.651

Isomerisation 0.011 0.015 0.037 0.042 0.033 0.000 0.000 0.138

Alkylation 0.014 0.000 0.041 0.000 0.000 0.000 0.034 0.089

Polymerization 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Desulphurisation

Naphtha 0.318 0.032 0.021 0.260 0.070 0.065 0.002 0.768

Gasoline 0.151 0.000 0.090 0.194 0.040 0.070 0.004 0.549



of which

VGO 0.124 0.000 0.075 0.194 0.000 0.053 0.000 0.446

Resid 0.030 0.000 0.000 0.155 0.000 0.018 0.000 0.203

REFINING PROJECTS THROUGH 2019 - UNADJUSTED


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80

As part of our assessment, we compared our listed projects with those from the IEA 2016

MTOMR. There are many similarities but also some differences. The latter concern mainly

projects in the United States. The box below elaborates on the different assumptions made.

Comparison of the United States Refining Projects – EnSys vs. IEA MTOMR

2016

The IEA MTOMR 2016 shows completion of a 15 kbpd refinery by the Three Affiliated Tribes in

Thunder Butte, North Dakota in 2016 whereas EnSys does not believe this project will move

forward because it is currently on-hold.

o Source: Indianz

IEA MTOMR 2016 shows Alon in Bakersfield 65 kbpd will go ahead in 2017 whereas EnSys does

not believe this project will move forward. Per Alon Jan 2016 Investor Presentation (Slide 4),

“*The California refineries have not processed crude since 2012” and (Slide 17) ”Received permit

in September 2014 to construct a new 140,000 bpd rail unloading facility at the Bakersfield

refinery; however, the current crude differential environment would not justify construction at

this time”

o Source: Alon Investor Presentation (Jan 2016)

the United States Splitter Projects

In light of recently lifted the United States export ban, the IEA MTOMR 2016 also makes several

optimistic assumptions about condensate splitter projects in the United States. For example, one

project the IEA MTOMR 2016 lists as going ahead in 2016 is Targa Resources’ 35 kbpd

condensate splitter project in Channelview, Texas (EnSys currently sees this as a low ranked

project). A Dec 2015 Reuters article says that “Targa Resources Partners LP is working closely

with Noble Group as Asia's biggest commodity trader evaluates whether to move forward a deal

to support a Targa-built condensate splitter.”

o Source: Reuters

The IEA MTOMR 2016 shows completion in 2017 of Martin Midstream’s 50 kbpd in Corpus

Christi, Texas whereas EnSys does not predict that this project will materialize. The December

2015 Fuelfix article asserts, “Martin Midstream appears poised to scrap its splitter plan or shift to

a cheaper stabilizer,” said Housley Carr with RBN Energy.

o Source: Fuelfix

The IEA MTOMR 2016 shows completion in 2017 of Castleton Commodities’ 100 kbpd in Corpus

Christi, Texas and EnSys currently perceives this as a low ranked project. December 2015 Fuelfix

article states “Castleton Commodities has delayed plans to start construction in the middle of

this year but has indicated it could start work early next year.”

o Source: Fuelfix

http://www.indianz.com/News/2015/017048.asp

http://content.equisolve.net/alonusa/media/a2ff823f433889aeba2e6822951754d6.pdf

http://www.reuters.com/article/targa-resour-splitter-condensate-idUSL1N0XW28220150505

http://fuelfix.com/blog/2015/12/22/oil-exports-prompt-splitter-decisions-in-corpus-christi/

http://fuelfix.com/blog/2015/12/22/oil-exports-prompt-splitter-decisions-in-corpus-christi/


July 15, 2016

81

We also reviewed our projects against the assessment we undertook in mid-2015 as part of

our OPEC 2015 World Oil Outlook cycle. Table 6.1 from the World Oil Outlook is reproduced

here as Exhibit 4-18. The 2016 – 2019 distillation capacity additions (with associated

secondary capacity not shown) total 4.8 mb/d. This projection was the result of a careful

evaluation of the projects identified at the time and of a degree of factoring applied to the

Class 3 projects (and all Class 1 and 2 projects excluded). As noted, the project additions

listed in Exhibit 4-17 are on the basis of all Class 3 projects being included. For 2016-2019,

these total some 3.4 mb/d, over half of the total 6.4 mb/d of Class 5+4+3 projects, i.e. a

significant proportion.

On conducting our current projects update, we identified, in part courtesy of the MTOMR,

that several significant projects in China should be added to the projects list, mainly at Class

3 or above. All told these sum to a raw total of around 1 mb/d. Allowing for these projects

to be ‘factored down’ because they mainly fall in Class 3, and adding those to the 4.8 mb/d

for 2016-2019 from the 2015 OPEC World Oil Outlook, leads to an indicated total for 2016-

2019 projects of around 5.5-5.6 mb/d (4.8 plus approximately 1 mb/d times 75%). Applying

the same 75% factor to the Class 3 projects across our updated database leads to a 2016-

2019 total of 5.6 mb/d as set out in Exhibit 4-19. Based on experience and the stated cross-

check we believe this outlook is reasonable. Note we have been careful to update timing on

a number of large projects that have now slipped out of the 2016-2019 time frame. These

include al-Zour in Kuwait, Dangote in Nigeria and Mthombo in South Africa. (See Appendix

Section 6.2.2 for detail.)

The resulting net projected end 2019 refining capacity is set out in Exhibit 4-20.

Exhibit 4-18 OPEC 2015 World Oil Outlook Project Additions


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Exhibit 4-19 Refining Projects through 2019 - Adjusted

Exhibit 4-20 Projected Total Refining Capacity End 2019


dayAsia

Pacific Europe FSU

Middle

East Africa

Latin

America

North

America Global

Distillation


Vacuum 0.614 0.076 0.010 0.357 0.103 0.231 0.015 1.406

Upgrading

Coking 0.229 0.085 0.167 0.283 0.019 0.198 0.157 1.137


Hydrocracking 0.229 0.102 0.252 0.117 0.074 0.031 0.151 0.956

Gasoline Quality

Reforming 0.240 0.021 0.018 0.214 0.061 0.032 0.002 0.588

Isomerisation 0.011 0.015 0.028 0.039 0.033 0.000 0.000 0.126

Alkylation 0.014 0.000 0.041 0.000 0.000 0.000 0.031 0.086

Polymerization 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Desulphurisation

Naphtha 0.276 0.024 0.021 0.246 0.070 0.056 0.002 0.695

Gasoline 0.131 0.000 0.087 0.183 0.036 0.056 0.003 0.496



of which

VGO 0.108 0.000 0.075 0.183 0.000 0.043 0.000 0.408

Resid 0.026 0.000 0.000 0.146 0.000 0.015 0.000 0.186

REFINING PROJECTS THROUGH 2019 - ADJUSTED


dayAsia

Pacific Europe FSU

Middle

East Africa

Latin

America

North

America Global

Distillation


Vacuum 11.504 6.562 3.220 2.862 1.145 2.985 10.011 38.289

Upgrading

Coking 3.012 0.786 0.485 0.570 0.103 0.844 3.368 9.169


Hydrocracking 3.333 2.022 0.654 0.972 0.237 0.228 2.287 9.733

Gasoline Quality

Reforming 4.064 2.330 1.187 1.225 0.560 0.426 4.443 14.234

Isomerisation 0.369 0.572 0.321 0.387 0.093 0.055 0.911 2.708

Alkylation 0.327 0.233 0.058 0.092 0.034 0.145 1.319 2.209

Polymerization 0.012 0.044 0.010 0.005 0.006 0.006 0.057 0.141

Desulphurisation

Naphtha 4.440 3.030 1.237 1.598 0.689 0.599 5.437 17.031

Gasoline 1.826 0.582 0.236 0.422 0.137 0.341 2.678 6.223



PROJECTED REFINERY CAPACITY END 2019 INCLUDING PROJECTS


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4.11 Projected Net Available Capacity End 2019

To take the assessment of end 2019 base capacity one step further, we compared our

outlook with that contained in the IEA 2016 MTOMR. This comparison is summarised in

Exhibit 4-21. Our end 2019 projected base capacity comes out at 101.3 mb/d, 0.5 mb/d

below the IEA’s 101.8 mb/d. For the reasons set out above, we believe this basis is

reasonable in terms of both projects and closures.

We would point out that 101.3 mb/d would not represent the final capacity in the 2020

case. This is because, although 2020 is considered as too near to today to allow for

unfettered investment by the Model in additional refining capacity, we do allow for limited

creep / de-bottlenecking capacity across primary and a number of secondary units in

selected regions. WORLD Model results, (see Section 5.1.5), embodied around 0.3 to 0.45

mb/d of additional minor debottleneck distillation capacity (plus secondary units) in the

2020 cases taking our projected end 2019 total capacity in place up very close to the IEA

estimate.

Exhibit 4-21 EnSys vs MTOMR Capacity Projection

million b/cd

2016

MTOMR

EnSys June

2016

Jan 2016 base capacity 97.2 97.7

Additions to end 2019 5.8 5.6

Announced/firm closures to end 2019 (2) (1.22) (1.60)

Presumed additional closures to end 2019 0.00 (0.40)

Total projected closures to end 2019 (1.22) (2.00)

Net additions to (end) 2019 incl closures 4.6 3.6

Net end 2019 base capacity (1) 101.8 101.3

WORLD Model De-bottleneck Capacity Additions

up to 0 0.45

Final Projected End 2019 Capacity 101.8 101.8

Notes:

1. Main difference here relates to EnSys including the K Lindsey

closure in 2015 versus IEA 2016

EnSys vs. IEA MTOMR Refinery Capacity Projection


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4.11.1 Nameplate versus Effective Capacity

EnSys would stress that the above assessment relates to nameplate capacity. We recognise

in the WORLD Model that there are significant differences between nameplate and effective

capacities. Even in regions with highly efficiently run refineries, such as the United States,

sustained annual average utilisations rarely rise much above 90% of calendar day capacity.

In many other regions utilisations can be far lower. This is the case, for example, in parts of

Africa and the FSU. (Currently refineries in Nigeria have all but stopped after a long period

of utilisations reported as low as 30%.) In addition, there are areas of the Middle East and

Africa where conflicts are causing partial or total refinery shut-downs, in turn raising the

question of whether these refineries will be back in operation, even at moderate rates, by

2020. Over time, EnSys has built in to the WORLD Model effective maximum utilisation

rates by region to reflect these factors.

We would also point out that the extent of refinery turnarounds and unscheduled

shutdowns varies from year to year; further that, if faced with wide price differentials in

2020, refiners may defer turnarounds thus raising short term effective available capacity.

However, we do not believe it is appropriate to build such an assumption in to the analysis;

rather we have applied typical/average conditions.

Overall, it has to be recognised that there is inevitably some degree of uncertainty in the

projection of both nameplate and effective available capacities – just as there is with total

demand and marine fuels demand / switch volume. If and as necessary, these can be

tackled via Model sensitivity cases.

4.11.2 Regional Refinery Maximum Utilisation Rates

As stated above, the world’s refineries do not operate either primary (distillation) or

secondary process units at nameplate capacity. Making this distinction in global WORLD

type analyses is absolutely critical.23 The United States arguably has the world’s most

efficient refineries but EIA data show that, as a whole, the United States system has

operated since 1985 at anywhere from a low of 77.6% of nameplate (calendar day) capacity

to a high of 95.6%. In 2015, overall utilisation was 91.2%, a level towards the upper end of

the historical range.

23 The 2015 BP Statistical Review indicates 2014 global refinery utilisation rate at just under 80% equating to a nearly 20 million b/d gap between nameplate capacity (96.5 mb/cd 2014 per BP) and refinery throughput (76.8 mb/d 2014 per BP).


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The United States Percent Utilization of Refinery Operable Capacity (Percent) – Source EIA

Decade Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9

1980's

77.6 82.9 83.1 84.4 86.3

1990's 87.1 86.0 87.9 91.5 92.6 92.0 94.1 95.2 95.6 92.6

2000's 92.6 92.6 90.7 92.6 93.0 90.6 89.7 88.5 85.3 82.9

2010's 86.4 86.2 88.7 88.3 90.4 91.2

Exhibit 4-22 Historical United States Refinery Utilisations

In this analysis, EnSys applied maximum crude unit utilisation rates that reflected current

and recent operations across the world’s regions. For the 2015 Calibration Case, maximum

utilisation rates covered a range from 88-93% for the United States and Canadian refining

regions to a low of 50% for West Africa. For Europe, maximum utilisations were set at up to

85-86% for Western Europe, moderately lower for Eastern Europe. For the Latin American,

Caspian and Middle East regions, maximum utilisations were set in the broadly in the mid

70’s% range. Other regions were set to maxima generally in the low to mid 80% range.

For the 2020 cases, allowed maximum utilisations were left unchanged for most regions, in

some instances moderately raised. West Africa maximum utilisations were modestly

increased on the basis that, by 2020, there one could foresee at least some small

improvement in the region in terms of its refinery operations24. In the Middle East, a limited

improvement was also allowed for; this to reflect the new, large scale, and one would

expect, efficient capacity coming on stream there. (Implicitly, this premise assumes that

additional capacity will not be taken offline in the region or elsewhere through conflict.)

Small increases in maximum utilisation were allowed for in the Russian Federation and the

Pacific Industrialised region (Japan plus Australasia) as a reflection of the on-going

rationalisation programs there. In China, refinery utilisations have been dropping as

capacity additions have out-paced domestic demand growth but a small increase by 2020

was applied to allow for the potential that this situation could turn around.

In Europe, utilisations have risen significantly in recent years due to the spate of closures

there. Looking ahead to 2020, the assumption was made that maximum utilisations /

effective available capacity would stay essentially unchanged as some additional closures

offset flat to declining regional product demand. In Latin America, maximum utilisations

were projected to remain unchanged through 2020. (The difficulties being experienced in

24 NNPC has been putting out requests for assistance to restart and improve operations at its refineries. Note we assumed the Dangote project would not be on stream by end 2019.


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Brazil and Venezuela today may if anything lead to further reductions in effective capacity

available.)

Overall, as elsewhere in this analysis, our goal was to achieve ‘central’ assumptions for the

2020 cases.

Secondary process units were assigned maximum utilisations / effective availabilities based

on industry knowledge and published data. They also constituted a ‘tuning’ variable in

calibrating the 2015 Calibration Case. Effective secondary capacity availability is arguably a

more important driver of refining economics and hence product supply costs and

differentials than is primary distillation capacity. Again, mainly United States history was

used to gauge ‘efficient’ potential utilisations for the major upgrading units (the EIA carry

data on capacity of and inputs to catalytic cracking, hydrocracking and coking units, also

catalytic reforming). Maximum utilisations for other regions were then ‘scaled’ based on

regional utilisations relative to the United States.

Maximum utilisations for other secondary units are based on accumulated knowledge from

industry sources. Overall, ‘efficient’ maximum utilisations were set at 90% for FCC and

coking, slightly lower for hydrocrackers, 90%+/- for the main desulphurisation units

(somewhat lower for resid desulphurisation) and 85%+/- for tertiary units such as

alkylation.25 For hydrogen plant, ‘efficient’ maximum utilisation was set at somewhat over

90% and for sulphur plants 65%. Again, variations are embodied in WORLD to reflect

regional differences in utilisation rates / effective availability of capacity.

4.11.3 Hydrogen Plant, Sulphur Plant and FCC SOx Emissions

In conducting the analysis, EnSys paid particular attention to capacity for and potential

constraints that could arise related to hydrogen and sulphur plants and also regarding FCC

SOx emissions. These are three areas of the WORLD Model that are both critical to this

study, since a primary impact of the Global Sulphur Cap will be to require substantial

sulphur removal, and can have a ‘tail wagging the dog’ effect of even causing the Model to

go infeasible if capacity is inadequate in the scenario being modelled. EnSys therefore

wanted to ensure they could be handled adequately, both in terms of establishing a realistic

baseline and in terms of capturing whether available capacity in 2020 would be sufficient

under the Global Sulphur Cap and then, if not, how much additional capacity would be

needed.

25 EIA data showed maximum annual average utilizations between 2010 and 2015 of 87% for FCC units, 89% for coking, 90% for hydrocrackers and 80% for catalytic reforming units.


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4.11.3.1 Hydrogen Plant Capacity

Hydrogen plant data represent a particular challenge. One reason is that, in certain regions,

most notably the United States, there is substantial use of merchant hydrogen plant

capacity, i.e. outside refinery gates, which supplements hydrogen generated by in-refinery

hydrogen plant and catalytic reformers. For example, in the United States Gulf Coast, there

is a 1.4 billion scf/d hydrogen supply and pipeline system (operated by Air Products) which

supplies refineries in the region and is the biggest of its kind in the world. Further, the EIA

requires that refiners report in-refinery hydrogen plant capacity26 whereas the Oil & Gas

Journal, for its Worldwide Refining Survey, requests respondents also take account of

‘outside the fence’ merchant capacity from which they receive hydrogen. Finally, the

quality of reported hydrogen plant capacity data is variable. This is evident, for example, in

China where only minimal hydrogen plant capacity is reported in the January 2016 Oil & Gas

Journal Refining Survey. (China is also one region where merchant capacity is starting to

appear.)

To deal with the potential gaps in reported hydrogen plant capacity, the 2015 Calibration

Case was run with the option to purchase additional hydrogen plant capacity where

needed.27 As a result, limited amounts of hydrogen plant capacity were selectively added in

to the base, notably in the United States, China and, to lesser degrees, the Russian

Federation and Europe. The 2015 case with the added capacity was then cross-checked to

ensure that no regions were showing significant excess amounts of hydrogen plant capacity.

(This could have led to unrealistic ‘free’ capacity being spuriously available in the 2020

cases).

As with all the refinery processes, for the 2020 Base Case, known assessed hydrogen plant

capacity additions via projects were added in to the base 2020 capacity. The Base Case was

run with the option to “purchase” additional hydrogen plant capacity but the additions were

checked as to their scale. The 2020 Base Case added only a small amount of further

hydrogen plant capacity, some 619 million scf/cd on top of a projected 2020 base of 27,436

million scf/cd including projects. This was considered realistic given that the known projects

included only in-refinery additions; also that the total hydrogen plant additions projected via

projects from 2016 through end 2019 we assessed at 3,704 million scf/d. In short, we

26 EIA Forms 810 and 820. 27 Hydrogen is produced from purpose-built hydrogen plant but also as a byproduct from catalytic reforming units. Their main function is to increase the octane level of naphtha for use as gasoline blendstock but they also produce propane, butane and hydrogen. The level of hydrogen produced from the catalytic reformers is a function of their throughput but also their severity of operation (octane level of the reformate product). Thus there is some degree of potential to vary hydrogen production from the reformers but this tends to be limited by their need to produce key blendstock for gasoline (and in some refineries for use as BTX aromatics feedstock). The WORLD Model captures the interplay between hydrogen available from hydrogen plant and from the catalytic reformers.


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concluded this approach set up a relatively realistic 2020 Base Case outlook with respect to

hydrogen plant capacity.

2020 Global Fuel cases were also run with hydrogen plant capacity addition allowed. A key

aim here was to assess the degree to which Global Fuel scenarios would require additional

capacity, over and above the total in the Base Case, to cope with the increased

desulphurisation load. The indicated incremental hydrogen plant requirements could then

be assessed against the rate of capacity additions via 2016-2019 projects to determine if

such further additions by end 2019 would be achievable.

4.11.3.2 Sulphur Plant Capacity

Sulphur plant capacity data do not suffer from the inside/outside the refinery fence

complexity of hydrogen plant but our experience has been that the capacity data are not

always fully captured. According to our database, which is based on public data

supplemented by research, a significant number of the world’s refineries have some form of

hydro-desulphurisation capacity but no reported sulphur plant capacity. This includes

refineries in the United States, Canada, Europe and Japan/Australasia. We find it difficult to

believe that so many refineries, especially in the industrialised regions, are operating with

no sulphur plant, and hence with the implication that H2S from desulphurisation units is

going either to fuel or the flare.

In WORLD, we do not normally allow for H2S to go to the flare or fuel and did not do so in

any of the cases run for this study. Thus the presence of inadequate/under-reported sulphur

plant capacity in the WORLD Model data can distort the results obtained (‘tail wagging the

dog’ effect) and can go so far as to make a Model case mathematically infeasible.28

Consequently, we have followed the practice of adding in limited amounts of sulphur plant

capacity to the calibration case in order to maintain feasibility (and to establish a baseline as

if all refineries were routing H2S to the sulphur recovery plant). In this study, we added

close to 9,800 st/cd as adjustments to the original 2016 base capacity of nearly 120,000

st/cd (to arrive at an ‘assessed’ 2016 base capacity before projects of just over 128,000

st/cd). We fully understand that this means we are adding capacity which may or may not

in fact exist today and, thus, that we may be understating future needed additions.29

However, the approach does lead to a 2020 basis (see below) from which it is possible to

assess the effects of changing fuels requirements. Moreover, supplemental research (see

28 This is because, if the sulphur plant capacity specified in the Model case is inadequate to handle the H2S generated from desulphurization units, then the fact that part of the H2S has ‘nowhere to go’ will prevent the Model from removing sufficient sulphur from the demanded gasoline, jet/kero, diesel etc. and thus prevent these products from being produced to the required sulphur specification standards. This inability to meet required product sulphur limits will send the Model infeasible. 29 To the extent that refiners with HDS capacity but no sulphur plant were to respond to the Global Sulphur Rule by putting more H2S to fuel or flare, the sulphur extracted at those refineries would merely be emitted locally instead of at sea. Again, this possibility was not permitted in the WORLD Model cases.


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box) reinforced the adjustments made for the two countries where the gaps between

reported and needed sulphur plant capacity were largest, namely the Russian Federation

and China.

As with hydrogen plant, the 2020 Base Case was run with the option to purchase additional

sulphur plant capacity. The needed volume, over and above additions via known projects

was small, just over 300 st/cd versus additions versus projects of 13,366 st/cd and a total

2016 base plus projects of over 141,000 st/cd. Thus, as with hydrogen plant, this small 2020

Base Case addition was assessed as reasonable.30 Again, the key question was whether and

how much additional sulphur plant capacity (over and above base capacity plus projects)

would be indicated as needed in the Global Fuel cases and whether such levels of further

additions could realistically be achieved by end 2019.

30 A key factor affecting whether and how much additional sulphur plant capacity is needed is the assumed level of utilization. In the WORLD Model, our base assumption is for a maximum ‘efficient’ 65% utilization / effective availability to allow for the high level of redundancy normally employed with sulphur plants. We then assign variations off this base level for each refining region. As can be seen in Section 5 Model results tables, our overall global utilizations were generally in the 48-53% range. Research and contact with sulphur plant experts confirmed that this level lies in the middle of a typical operating range from 40 – 70%. Also, the fact that the utilization levels we had set led to a very small amount of required additions in the 2020 Base Case, over and above known projects, tended to reinforce that we had picked appropriate levels for sulphur plant utilization. A number of factors combine to lead to the relatively low utilization levels that are typical for sulphur plants. Firstly, spare capacity is needed so that the refinery can cover a sulphur plant outage and still not exceed its allowed SOx emissions limits. As a result, refineries may have two, three or more sulphur plants to provide necessary redundancy. This situation is compounded by the need to (a) accommodate the refinery switching to a higher sulphur than normal crude slate and (b) to deal with the consequences of potential surges or upsets in the upstream gas plant which extracts H2S that is routed to the sulphur plant. The Director of Technology at Jacobs Comprimo Sulfur Solutions pointed out that “Refineries need to deal with a shutdown scenario. So when a sulfur recovery unit trips, the capacity needs to be off loaded to other SRUs or the refinery production needs to be cut (in most countries) so that is the main reason why there is some installed spare capacity and the SRUs run below max capacity.”


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Sulphur Plant Capacity Research

As stated in the body of the text, the WORLD cases were run with adjustments to sulphur (and hydrogen) plant capacity that were developed by running 2015 test cases which showed how much additional capacity was needed, i.e. which highlighted and enabled us to adjust for gaps in the published capacity data. Since running the WORLD cases, EnSys has undertaken further research into sulphur plant capacity data. We researched and contacted major sulphur plant process vendors as detailed below.

Company Sulphur Removal Technology

Number of SRU Projects

Jacobs Comprimo Sulfur Solutions 191

Black & Veatch Oxygen Enrichment/Claus/ Tail Gas Treatment

138

Air Liquide Claus and Oxyclaus 104

Kinetic Technology Sulphur Recovery 86

WorleyParsons Oxygen Enrichment 38

Data provided by these vendors, placed together with data from Hydrocarbon Publishing and the Oil & Gas Journal, enabled us to piece together more complete pictures of sulphur plant capacity in selected target countries. The supplemental research from the tertiary sources resulted in raising assessed Russian Federation sulphur capacity from 1,413 st/d to 3,924 st/d. These figures excluded 18 of the 39 total refineries in the country. The 18 excluded refineries account for 1.4 of the 7 mb/cd of Russian Federation capacity. Extrapolating the data indicated total Russian Federation sulphur production capacity of somewhat under 5,000 st/d. By comparison, the 2015 modelling exercise we conducted led to us add 3,370 st/d of capacity to the original 1,413 to arrive at a total of 4,783 st/cd, i.e. very close to the capacity reported via vendor research and then extrapolated.

Likewise, adding data from vendors raised China’s sulphur plant capacity from 4,239 to 7,886 st/cd and covered 23 of 49 total refineries. The missing 26 refineries account for roughly 4.2 of the total 13 mb/cd of crude refining capacity in China. Extrapolating the data indicates possible total sulphur plant capacity in China of around 9,000-11,000 st/d (ignoring China’s ‘teapot’ refineries where sulphur plant capacity is expected to be low as the refineries are generally simple.) By way of comparison, EnSys’ 2015 modelling lead to 4,365 st/cd being added to the original 4,239 st/cd for a total for China of 8,594 st/cd.


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4.11.3.3 FCC SOx Emissions Constraints

FCC units act as partial desulphurisation units with the extracted sulphur routed to the FCC

stack gas as SOx. Resulting emissions to atmosphere may be controlled via installation of

stack gas SOx scrubbers. Another common means to reduce FCC SOx emissions is for

refiners to install an FCC feed desulphurisation unit where the sulphur is removed in the

form of H2S and then converted to sulphur in a sulphur recovery plant. This generally

reduces feed and thus product sulphur and SOx emissions by around 90%. The feed

treatment unit also has the effect and benefit of appreciably improving FCC yields.

Consequently, many refiners have opted for feed desulphurisation over stack gas scrubbing.

(Stack gas scrubbers have very high operating costs.)

The WORLD Model embodies FCC feed desulphurisation and the computation of FCC stack

sulphur emissions as a function of FCC feed quality and process operations. The Model also

includes the FCC SOx scrubber unit. An issue in this area is that there is a lack of data on

FCC SOx scrubber capacity. However, we are aware that it is unrealistic to assume that

refineries can simply raise their FCC SOx emissions should a particular scenario indicate that

raising the sulphur level of FCC feed is warranted. Such potential certainly exists in the case

of the Global Sulphur Cap, because refiners could have economic incentives to switch lower

sulphur VGO and residua from FCC feed to 0.5% sulphur marine fuel blends and take higher

sulphur feeds into the FCC. Such switching would tend to be limited by the need for the

refineries to still meet the specifications for gasoline and distillate products from the FCC.

However, to cover this situation, EnSys adopted a two-step process.

Firstly, the 2020 Base Case was run without constraint on FCC SOx emissions. Then the

emissions from that case were put into the Model as upper limits which were assumed to

remain in place across the Global Fuel cases. Thus, any need to raise FCC feed sulphur in a

Global Fuel case resulted in the need to purchase FCC SOx scrubber capacity so that there

was no net increase in FCC SOx emissions to atmosphere. The Global Fuel cases thus

captured both the economic impacts (on product prices) of the need to constrain FCC SOx

emissions and/or purchase SOx scrubber capacity and showed how much of such capacity

would be needed under any shift to the Global Fuel standard.


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5 WORLD Modelling Results

This section gets to the core of the analysis by setting out our assessment of the ability of

the global refining sector in 2020 to meet assessed marine fuels demand. In the body of

this section below, we have focussed on key results which convey primary messages from

the analysis, generally at the global level. Appendix Section 6.3 contains additional detail for

two key cases, namely the 2020 Base and Mid Switch High MDO cases. These detailed

tables provide further information, notably at the regional level, and they illustrate the level

of detail that applies across all cases, namely:

Refinery operations for major process units, again for each of the ten regions and

global, including: capacity additions, throughput and utilisations

Total crude oil movements, total trade other than crude oils (i.e. including non-

crudes, products and intermediates), and product movements for the major

products between ten aggregate regions

Crude oil movements by type, with seven crude oil categories, for each of the ten

aggregate regions., expressed first from the perspective of imports into and

production and consumption within the region and secondly from the perspective of

production within and exports from the region.

The first part of this Section concentrates on actual Modelling results obtained; the second

part reviews the factors that could materially impact and change the results, and hence the

2020 outlook.

Detailed global results are set out in Section 5.1.4 and are referred to throughout the next

sections below. As a general point, we would emphasise that, in WORLD Model cases,

everything must balance. Neither crudes, nor products nor intermediate streams can be

‘dumped to ground’ or bought in. For instance, it is not possible for the refining regions to

spuriously demand say more light sweet crude than is available globally in total. If that

happens, the case is flagged as infeasible. Also, each refinery and each region must balance

in terms of inputs and outputs. Across crudes and every other stream, imports must

balance exports. All supply of all crudes and non-crudes must be used (except for volume of

the marker crude which is allowed to float and given a price); and all demands for all

products must be met (except for fuel grade petroleum coke and elemental sulphur which

are allowed to float and are given prices). In short, the system has to maintain an overall

global balance. In doing so, very few movements or refinery operations are forced; rather

the Model is allowed to use the flexibilities inherent in the global refining and transport

system to move crudes, non-crudes and products, and to set refinery processing and

blending operations and thus to achieve an overall global balance.


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5.1 Key Model Results & Findings

As noted elsewhere in this report, there is no such thing as perfect insight into the exact

situation that will apply in 2020 in terms of either global liquids supply and demand, marine

fuels demand, required ‘switch volume’ under the Global Sulphur Cap, refining capacity or

key economic parameters, notably world oil price, also freight rates. The cases run to date

and set out below therefore aim to shed light on the central issue of the supply and market

impacts for an assessed likely range of potential marine fuel ‘switch volume’ and Global Fuel

formulation given central premises regarding global demand, refining capacity, etc.

Additional sensitivities can be probed via added WORLD Model cases if appropriate.

5.1.1 2015 Calibration Case

To establish a basis for the 2020 modelling cases, EnSys undertook a 2015 Calibration Case.

A primary purpose of the this case was to achieve WORLD Model results that closely

matched actual 2015 year average data for crude oil and product prices and differentials,

i.e. which thus set the Model to an appropriate degree of market tightness / slackness.

Exhibit 5-16 compares 2015 actual average open market / spot prices in selected major

market centres (shown in the first column) with the corresponding Model results (shown in

the second and third columns).31 Outside of the 2015 data in the first column, the only

input price in the exhibit is that for Saudi Light crude oil. All other Model prices/supply costs

are outputs. (Input prices were from Bloomberg except those for MGO $/tonne which were

from Clarkson Research Services.) The same applies to the resulting computed differentials


As can be seen, the Model prices obtained were generally close to the reported 2015 actual

prices, giving confidence that the Model was calibrated to an appropriate level of tightness /

slackness. A key part of the tuning related to setting regional maximum effective

availabilities / utilisation rates on distillation and secondary processing units. These settings

impacted and were used to tune regional crude runs as well as prices/differentials.

5.1.2 2015 Adjusted Case

In a final review of base refinery capacity, as discussed in Section 4.8, EnSys identified a

small amount of additional refinery capacity that needed to be added in to the base and

undertook research which led to an appreciable upward revision in solvent deasphalting

capacity. We subsequently reran the 2015 case (the Adjusted Base Case). The capacity

31 Note that in the WORLD Model we are taking marginal costs and equating those to spot prices. Also, we have not, at any stage in this analysis attempted to assess or report impacts on retail prices with its necessary consideration of both taxes and subsidies.


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additions led to moderate softening in crude and product differentials. The 2020 cases were

run with the same base capacity as per the Adjusted Base case (plus 2016-2019 projects and

net of 2016-2019 closures), i.e. the various cases were run with the capacities listed in

Exhibit 4-9 (January 2016 capacity) and Exhibit 4-20 (end 2019 capacity).

5.1.3 2020 Base Case

The 2020 Base Case (no Global Fuel) constituted the basis against which the Global Fuel

cases were run and evaluated, enabling us to identify and quantify the projected differential

impacts of implementing the Global Sulphur Cap in January 2020. As the detailed exhibits

show:

Global demand was modelled at 99.2 mb/d. (The IEA WEO was at 98.8 mb/d which

adjusted up to 99.2 mb/d when we applied our marine fuels demand outlook.) This

and other ‘top down’ parameters relating to supply and world oil price were taken

from the 2015 IEA WO NEW Policies case.

Total 2020 marine bunkers demand was assessed at 6.24 mb/d (341 mtpa) excluding

LNG. This comprised approximately 0.57 mb/d (approx. 29 mtpa) of 0.1% ECA fuel

(at DMA standard), 1.18 mb/d (approx. 59 mtpa) of other MDO (again at DMA

standard) and 4.494 mb/d (approx. 253 mtpa) of IFO, predominantly IFO380.

To end 2019 base distillation capacity of 95.66 mb/cd plus 5.64 mb/cd of assessed

construction was added 0.36 mb/cd of minor debottlenecking, leading to a total

capacity of 101.66 mb/cd.

Minor debottlenecking was also allowed and took place for vacuum distillation, FCC,

hydro-cracking and coking; also limited revamping of high pressure catalytic

reformers to CCR type and of conventional distillate desulphurisation to ultra-low

sulphur type.

As previously discussed, small amounts of hydrogen and sulphur plant capacity

additions were seen as necessary. For hydrogen plant, these equated to 17% of the

3704 million scf/cd added via projects. Again, EnSys considered this plausible given

that the known projects are only for in-refinery plant and additional merchant plant

capacity can be expected to be installed in the period from 2016 through 2019. The

Base Case sulphur plant additions over and above projects equated to only 2% of the

13,366 STPD projected to be added 2016-2019, indicating that sulphur plant

additions via 2016-2019 projects look to be in good balance with 2020 Base Case

capacity needed. Hydrogen plant utilisations in the Base Case were almost 75%

global average and sulphur plant utilisation close to 50%.


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FCC stack sulphur emissions were computed at 4,673 tonnes per day total across the

36 refining groups in the Model.32 The 2020 Base Case emissions were then set as

upper limits (i.e. not-to-exceed levels) for all the Global Fuel cases and, in those

cases, additional FCC sulphur (SOx) emissions handled via purchase of incremental

SOX scrubber capacity.

Global crude runs were at 82.2 mb/d, representing an overall 80.9% utilization level

– although with major variations from region to region. (See Appendix Section 6.3 for

more detail.)

Major upgrading units were projected as running at 67.3% for cokers, 72.8% for

FCC’s and 78.0% for hydrocrackers, global average. The somewhat lower utilisation

for cokers reflects the combination of cumulative major investments in coking

capacity and the recent lightening of the global crude slate.

Overall distillate desulphurisation capacity utilisation was projected at 77.1% with

VGO and resid desulphurisation units at respectively 70.0% and 61.4% global

average.

For catalytic reforming, hydrogen and sulphur plant the levels were respectively

69.1%, 74.8% and 48.7%.

For all units it should be borne in mind that allowed maximum utilisations (maximum

effective availabilities) were set generally well below nameplate capacity especially

in certain regions of the world.

Marker crude (Saudi Light) price was set at $76.03/barrel (FOB), $26.53 / barrel

higher than in 2015.

Gasoline to HS IFO380 supply cost differentials were projected as moderately ($4-

7/barrel) higher than in 2015 but ULS/LS diesel to HS IFO380 differentials markedly

($13-15/barrel) higher. These widened Base Case (no Global Fuel) distillate-resid

differentials reflect the growth in jet/kero and gasoil/diesel demand contained in the

demand projection (with the adjustment discussed earlier) and equate to the upper

end of the range for such differentials in recent years. (See Exhibits 5-6, 5-7, 5-8.)

Approximately $4-6/barrel of the widening in the diesel-IFO differentials versus 2015

is accounted for by the increase in crude oil price. (See Exhibit 5-17.)

Likewise 2020 Base Case crack spreads were indicated as around $7-10/barrel higher

for sweet crudes than was the case in 2015 and $10-12/barrel for heavy, high

sulphur crudes. Again, up to $4/barrel of this increase is due to the higher world

crude oil price.

32 The WORLD Model contains 23 ‘supply-demand’ regions. The five United States PADD district regions are broken into sub-PADD level refining groups, and Canada’s refining is split into three groups, leading to a total of 36 refining groups in the Model. Outside the United States and Canada, each supply-demand region has one refining group which aggregates all the refineries in that region.


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Overall, the 2020 Base Case indicates appreciable tightening, especially on distillate

products (jet fuel, kerosene and diesel) versus the situation in 2015. Again, the relatively

significant growth in these products that was included in the Base Case outlook is a central

factor. This effect is further examined in Section 5.2.2.

5.1.4 2020 Global Fuel Cases

The two sets of Global Fuel cases simulate substantial, and relatively immediate, changes

imposed on to the 2020 Base Case. The results point to severely strained and potentially

infeasible refining sector conditions, impacting pricing for all products across all world

regions, not just marine fuels. Regarding the two sets of cases, the High MDO series had

greater impacts on the system than the Low MDO (High Heavier Fuel) cases. This is to be

expected since the increased volumes of heavier marine fuels allowed under the Low MDO

cases, (50% of total ‘switched’ fuel versus 10% in the High MDO cases), are generally easier

and less costly to produce. Equally, the impacts increased in going from Low to Mid to High

Switch volume.

5.1.4.1 Changes in Refining Operations & Trade Movements

5.1.4.1.1 Refinery Operations

The results indicated that, even with the additions to capacity for hydrogen plant, sulphur

plant and FCC SOX scrubbers allowed for in the Model, (see further discussion below), the

industry would only be able to handle the projected switch volumes with severe economic

strain. The mechanism for achieving the switch volume conversion would entail extensive

changes to refinery operations and to inter-regional trade. Important factors indicated

from the modelling results include:

A key component indicated in achieving the required upgrading of residual streams

to marine distillate boiling range is increases in coker unit throughputs. Thus

effective availability / maximum achievable utilisations of coking capacity, and

projected supply of heavy crudes that take up coking capacity, are central to the

ability of the refining industry to respond in 2020 to the Global Sulphur Cap

Cokers are a ‘carbon removal’ upgrading process33 such that part of the liquid

coker feedstock is rejected as solid petroleum coke. This in turn necessitates

running more crude oil to replace the lost residual liquid volumes rejected to coke.

Refinery processing intensity and thus fuel use also increase, thereby further

33 FCC (fluid catalytic cracking) is also a carbon removal process and produces coke. Hydrocracking in contrast is a hydrogen addition upgrading process since external hydrogen becomes embodied in the streams being processed in the unit. Where the hydrogen used has been generated from natural gas, this means the hydrocracker acts as a partial ‘gas-to-liquids’ process.


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raising required crude runs. The additional crude runs bring in light components

including fractions which add directly and indirectly (e.g. via FCC and

hydrocracking) to the production of more middle/marine distillate material. As

shown in Exhibits 5-1 and 5-14, these increases in crude runs are significant,

around 0.25 mb/d at the Low switch level up to close to 1.25 mb/d at the High

level. In the Model cases these increase were all projected to be Middle East

medium sour as the balancing crude type. Further, no change was made in

assumed world crude oil price to reflect the increased crude runs

Vacuum unit throughputs increase because of the higher crude runs, producing

VGO and vacuum resid

Coker utilizations are maximized to upgrade high sulphur vacuum resid to cracked

distillates and naphtha. (As would be expected, the Low MDO cases – which call for

less upgrading to distillate versus the High MDO – show less tendency to ‘max out’

coker utilisations.)

The 4 +/- mb/d (approx. 200+/- mtpa) of IFO released contains lighter cuts as well

as residual streams

FCC resid feed rate increases, releasing VGO. FCC conversion levels tend to drop to

increase distillate (light cycle oil) yield at the expense of gasoline

Hydrocrackers (already operating close to full in the Base Case) take in more HS

VGO less LS VGO, also more coker gasoil

VGO/resid HDS unit utilisations are maximised

Distillate HDS unit duties / desulphurisation rates are maximised. Note this can be

at the expense of catalyst life so not sustainable longer term

Catalytic reforming unit severities rise, producing more hydrogen and impacting

gasoline and LPG pools

Even so, appreciable hydrogen plant throughput/capacity increases are needed,

around 2-3% incremental over total global 2020 Base Case capacity and around 35-

50% of additions via 2016-2019 projects (20 – 35% versus projected 2020 Base

Case situation which included additional hydrogen plant capacity added by the

Model)

Substantial sulphur recovery plant throughput/capacity increases are also needed,

around 6% incremental over total global 2020 Base Case capacity and around 60-

75% of additions via 2016-2019 projects. See Exhibits 5-2 and 5-3. These required

sulphur plant capacity increases are on top of a projected / allowed increase in

sulphur plant utilisations of close to 4% worldwide average between the 2020 Base

and Global Fuel cases. See Exhibit 5-15.

The above add up to very substantial changes in refinery operations especially if attempted

over a relatively short period.


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Sulphur disposition is clearly crucial in governing the extent to which the global refining

industry can react to and meet the Global Sulphur Cap. All assays and process vectors in the

WORLD Model are weight and sulphur balanced and essentially all products have weight

percent / ppm specifications imposed. We do not currently generate sulphur balance

reports. That said the main mechanisms by which the industry is responding to the Global

Sulphur Cap are evident in the Model results. Taking the Mid Switch High MDO case as an

example, converting 3.8 mb/d (195 mtpa) of HS IFO to 0.5% (nominal) sulphur content fuel

requires extracting or reallocating of the order of 15,000 st/d of sulphur. Versus the 2020

Base Case, sulphur plant throughputs go up by 10,000 st/d, signifying increased hydro-

processing severity/throughput (desulphurisation and hydrocracking), hydrogen use and

sulphur recovery as the primary mechanism to change the required marine product sulphur.

In addition, the 2020 Mid Switch High MDO case shows an increase versus the 2020 Base

Case of around 0.43 mb/d of fuel grade petroleum coke production. Depending on its exact

sulphur content, this removes 4,000 – 6,000 st/d of sulphur. Thirdly, the 2020 Global Fuel

cases call for increases in FCC SOx scrubber capacity in the range of 200 to 400 st/cd (of

sulphur) depending on the case. These three routes sum to a total of around 14,000 –

16,000 st/d, i.e. they balance with the 15,000 st/d to be removed.

Despite the increasing trend toward ever tighter low and ultra-low sulphur standards across

most of these products in most regions of the world, it is conceivable that the pressure to

reduce marine fuel sulphur under the Global Sulphur Cap could lead to pressure to raise

sulphur contents on other fuels where there is any opportunity because of available

‘giveaway’ versus the fuel’s sulphur specification. Since refiners blend to minimise

‘giveaway’ versus sulphur and other key specifications, we would expect this scope to be

very limited. We would point out though that the combined jet/kero, inland gasoil/diesel

and inland residual fuels sold comprise a projected 2020 pool totalling almost 40 mb/d of

product – and gasoline another 25 mb/d. That said, significant portions of the gasoline and

diesel pools today constitute low and ultra-low sulphur products, as noted, where the scope

to raise sulphur content is either nil or minuscule. EnSys examined results from the 2020

Base Case and found that, in the Base Case, the vast majority of product blends worldwide,

covering gasoline, jet fuel, kerosene, diesel, heating oil and residual fuels were limiting in

the Model on sulphur, i.e. had no scope for increase. There were limited exceptions in

certain regions in the case of jet fuel, (against a typical 700 ppm assumed maximum), and

high sulphur inland HFO and marine IFO.

In short, the way the Model 2020 Base Case was set up means that – in the Global Fuel

cases - the scope to move sulphur into non-marine products is minuscule. In other words,

the cases are arguably conservatively appropriate because they call for the

refining/blending sector to fully deal with the change in marine fuel sulphur with no ‘easy

out’ options.


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One question these Model results bring up is whether the desulphurisation and

hydrocracking units would in fact be able to handle the increased processing severity

implied in these results. Given that the combined throughput on hydrocrackers plus

distillate and VGO/resid desulphurisation units in the 2020 Base Case is 36.6 mb/d, a brief

side calculation indicates that the increased load may be manageable but EnSys would

caution that the ability indicated in the Model runs for the HDS plus HCR units to cope with

the Global Fuel shift should be treated with some circumspection. 34

In any event, provided we have not understated the effective capabilities (effective

maximum utilisations) of the hydrogen and sulphur plants, the modelling results indicate it

is the capacity levels of those two units that would limit first. WORLD Model results for 2020

have global Base Case sulphur plant throughputs at somewhat over 69,000 st/d but rising to

79,000+/- st/d under the Global Fuel cases, i.e. around a 15% increase. (See Exhibit 5-15.)

As we state, we believe this means the sulphur plant capacity projected to be in place in

2020, and to a lesser degree the hydrogen plant capacity, would be inadequate to meet

requirements under the Global Sulphur Cap. Put another way, our Model projections

indicate full compliance with the Global Sulphur Cap will not be feasible with the refinery

equipment expected to be in place in 2020.

5.1.4.1.2 Marine Fuel Blending

Exhibit 5-4 summarises impacts on marine fuels blends for three 2020 cases: Base Case, Mid

Switch Low MDO and Mid Switch High MDO. Addition detail for these cases is provided in

Appendix Section 6.3.7.35 These cases represent a progression in terms of the marine fuel

pool getting lighter; the switch to 0.5% Global Fuel is allowed to be 50:50 MDO and IFO in

the Low MDO case and 90:10 MDO/IFO in the High MDO case.

The table highlights the progressive shift away from residual content (especially high

sulphur resid streams) and toward increased distillates and vacuum gasoils (VGO). The

increases in distillates include increases in both ‘straight run’ and ‘cracked stock’ streams.

The increases in VGO comprise increases mainly in ‘straight run’ streams but also limited

increases in hydrodesulphurised VGO indicating some potential degree of ‘pulling’

desulphurised VGO streams away from FCC feed. This is consistent with the albeit limited

34 We believe it would be more a matter of whether the HDS and HCR units could handle the increased absolute sulphur removal, based on increases in sulphur in the feedstock, rather than increases in the percentage desulphurization. (Raising the sulphur in the feedstock and keeping the desulphurization percentage constant will still lead to more tons of sulphur being removed.) 35 Appendix Section 6.3.8 summarises global average densities for each marine fuel ‘pool’ for the 2020 Base Case and Mid Switch High MDO cases.


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increases projected for FCC SOx scrubber capacity which reflect the increased pressure on

FCC feed sulphur content.

The Mid Switch cases each include a switch volume of 3.8 mb/d (195 225 mtpa) from high

sulphur marine fuel (predominantly IFO) to 0.5% Global Fuel. In each Mid Switch case, the

HS resid stream content in the marine fuel pool drops to 0.5 mb/d from 3.1 mb/d in the

2020 Base Case. (The HS resid remains solely in the 0.84 mb/d [48 million tpa] of HS IFO

projected to be used in ships with scrubbers.) The distinction is important between the 3.8

mb/d switch volume and the 2.6 mb/d reduction in HS resid content (and 2.4 mb/d

reduction in total resid content i.e. including LS resid streams). The former equates to total

volume shift to Global Fuel standard, the latter to the change in (HS) resid volume content

of the total marine fuel pool.

The difference is because (a) the total marine fuel pool being represented here includes

both ‘traditional’ MDO and 0.1% ECA fuel, both of which are distillate fuels and (b) because

the HS IFO in the Base Case itself includes lighter ‘cutter stocks’ as well as residual streams.

The 2020 Base Case global HS IFO pool contained 2.55 mb/d of mixed lighter cutter stocks,

0.46 mb/d of VGO (which may in reality be present mainly as a component of atmospheric

resid streams) and 3.24 mb/d of mixed residual streams, predominantly high sulphur. (See

Section 6.3.7.) Thus, while the total switch volume is – in this scenario – 3.8 mb/d, the total

HS resid that must be removed from the pool under the Global Sulphur Cap and thus

upgraded is less – at 2.6 mb/d. Partly offsetting the reduction in HS resid content, the

volume of LS resid increases by a small amount (0.26 mb/d) in the High MDO Mid Switch

case and by a much larger 1.45 mb/d in the Low MDO case (which allowed 50% of the

Global Fuel to be IFO type fuels). It is important to recognise these shifts and distinctions

when considering the impacts on refinery processing.

Likewise, under the Global Sulphur Cap, the volume of combined distillates and VGO

needing to be incrementally added into the marine fuel pool (relative to the Base Case) is

2.5 mb/d in the Mid Switch High MDO case and over 1.1 mb/d in the Mid Switch Low MDO

case. (Note the volumes required are affected by differences in energy content which were

taken into account in our ‘switch’ case projections.) The relatively high proportion of VGO

foreseen as being added (around 20% of the pool in the Low MDO case and 31% in the High

MDO case) is a reflection of the fact that we assumed the Global Fuel MDO would be to

DMB standard. This is a heavy distillate whose specifications allow in significant proportions

of VGO-quality streams. In addition, the heavier (light IFO) type blends allowed for in

significant volume under the Low MDO cases also allow in significant proportions of VGO.36

36 The Mid Switch Low MDO case allowed 50% of the Global Fuel to be IFO, either IFO80 or the traditional IFO380. In this case, only 6% of the total LS IFO was the low viscosity blend. This appears logical as the general


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Overall, this aspect of the Model case results points to the Global Sulphur Cap necessitating

a very substantial scale of change in the marine fuel blends and thus across the blending

sector.

5.1.4.1.3 Refinery CO2 Emissions

Appendix Section 6.3.3 sets out global refinery CO2 emissions under the Model 2015 and

2020 cases. These are set out on two bases, first total direct emissions (predominantly from

hydrogen plant and refinery fuel) and then with emissions from combustion of refinery

petroleum coke added in. This step is taken since it can be argued that inclusion of

petroleum coke emissions is necessary to fully account for effective refinery CO2 output.

(The counter argument is that incremental fuel grade petroleum coke displaces coal and so

there is no net increase.)

The results indicate that the Global Fuel cases increase global direct refinery CO2 emissions

by around 3.7 – 4.4% in the High MDO cases and 2.1-2.5% in the Low MDO cases. Because

of the increase in coker throughputs and petroleum coke output in the Global Fuel cases,

adding in emissions from petroleum coke production has an appreciable impact. It raises the

increases over the 2020 Base Case to the 9.5 – 10% range in the High MDO cases and to 7%

in the Low MDO cases.37 Including fuel grade petroleum coke, these increases equate to

around 135 million tonnes/year for the High MDO cases versus the 2020 Base Case and

above 90 million tonnes/year for the Low MDO cases; (and to respectively around 40 and

20-25 million tonnes/year excluding emissions from incremental petroleum coke). These are

partially offset by reductions in CO2 emissions from the conversion to lighter marine fuels.

For instance, in the Mid Switch High MDO case, we calculate CO2 emissions from

combustion of marine fuels at 1,087 million tonnes/year versus 1,100 million tonnes/year in

the 2020 Base Case. This reduction of 13 million tonnes/year does not offset the increases in

CO2 emissions resulting from more intense refinery processing (even discounting the effect

of fuel grade petroleum coke).

5.1.4.1.4 Crude & Product Flows

Substantial changes to crude flows are also shown as needed to accompany and achieve the

projected and wide-ranging refinery operational changes. Details of crude oil and product

flows are contained in the Appendix Sections 6.3.4 through 6.3.7. These include total crude

refining/blending logic would drive toward using any possible quality premium, such as on viscosity, to blend to the maximum allowable level. 37 In the Low MDO cases, there are two offsetting effects as switch volume is raised, an increase in direct refinery CO2 emissions and a decline in petroleum coke emissions.


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trade, total trade by major products and for all non-crudes; also trade by major crude grade

with import and export balances by region.

Exhibit 5-5 summarises changes in inter-regional crude movements for the 2020 Mid Switch

volume High MDO case versus the 2020 Base Case. Among other changes:

The United States refinery throughputs increase by around 0.7 mb/d with the region

taking in increased volumes primarily of (heavy and medium) crudes from Latin

America and the Middle East

As a result, some Canadian (heavy) crude is diverted away from the United States

notably to Asia. (Note, in this analysis we assumed expansion of the Trans

Mountain pipeline to 890,000 b/d by 2020. Eliminating the Trans Mountain

expansion would reduce the potential to reallocate these heavy crudes.)

Conversely, the United States exports more (light) crude to Canada, Latin America

and Asia

African crude exports are maximised (regional crude runs drop slightly) with

increased flows mainly to Asia and less to Latin America and domestically

Europe retains more of its regional production (with exports to Asia dropping

commensurately), takes in more Middle East crude and less Latin American and the

Russian Federation/Caspian, part of which is then refined domestically in the

Russian Federation/Caspian where refinery runs increase moderately

The Middle East (in this analysis) bears the full brunt of required increased

production (+0.7 mb/d change between the 2020 Base and Mid Switch High MDO

cases) with increased exports to the United States, Europe and Africa, less to Asia.

At the aggregate level, the 2020 Mid Switch High MDO case projects some 44.0 mb/d

(approx. 2,200 mtpa) of crude oil trade between the major regions (up from 43.0 mb/d

[approx. 2,150 mtpa] in the Base Case). Of this 44 mb/d, there are some 8.6 mb/d (approx.

500 mtpa) of crude oil routing changes, i.e. 20% of exported crude trade.

Total trade of non-crude supply streams (NGL’s, biofuels, etc.) plus finished products and

intermediates is likewise projected to increase and change because of the Global Sulphur

Cap. Total imports/exports in the Base Case of 19.7 mb/d (approx. 985 mtpa) are projected

to rise to 22.4 mb/d (approx. 1,120 mtpa) in the Mid Switch High MDO case, with 6.6 mb/d

(approx. 330 mtpa) of total trade/routing changes. These shifts are indicated as spread

across all the non-crude/product groups.

The particulars of trade movements developed using the WORLD Model are very sensitive

to assumptions. That said, the message that comes across here is that, like the refining

changes, the levels of trade shifts projected here constitute a major set of realignments for

the industry to accomplish and ones that would not be achieved overnight or likely even in a

few weeks. (Apart from anything else, transit times on longer crude and product hauls run


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in the range of 15 – 30 days. Also the Model contains only very limited constraints on crude

and product movements, whereas, in the real world, term contracts, ownership interests

etc. can all act to create a degree of lag and inertia if the system has to make major

adjustments.)

Exhibit 5-1 Impact of Global Rule on Refinery Crude Runs

Exhibit 5-2 Impacts on Hydrogen, Sulphur and FCC SOx Scrubber Requirements


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Exhibit 5-3 Impacts on Hydrogen, Sulphur Plant % of 2016-2019 Projects


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Exhibit 5-4 Total Marine Fuel Pool Selected 2020 Cases

million bpdTotal

Marine

Fuel

Total

Marine

Fuel

Change vs.

Base Case

Total

Marine

Fuel

Change

vs. Base

Case

Change

vs. Low

MDO

Case

kerosenes 0.48 0.35 (0.12) 0.59 0.11 0.23

middle distillates 1.29 1.70 0.41 2.04 0.75 0.34

cracked stocks 0.78 0.82 0.03 0.95 0.17 0.13

VGO SR (non HDS) 0.31 0.95 0.64 1.59 1.28 0.64

VGO HDS 0.14 0.32 0.18 0.36 0.21 0.03

resid SR LS / HDS < 1% 0.04 1.49 1.45 0.30 0.26 (1.19)

resid SR MS 1-2% 0.07 0.18 0.11 0.05 (0.02) (0.13)

resid SR HS > 2% 2.99 0.46 (2.54) 0.48 (2.51) 0.02

resid visbroken 0.13 0.03 (0.10) 0.03 (0.11) (0.00)

Total 6.25 6.30 0.05 6.38 0.14 0.08

Total distillates (incl cracked stocks) 2.55 2.87 0.32 3.58 1.03 0.71

Total VGO 0.46 1.27 0.82 1.95 1.49 0.68

Total resid 3.24 2.16 (1.09) 0.86 (2.38) (1.30)

Total 6.25 6.30 0.05 6.38 0.14 0.08

Total distillates (incl cracked stocks) 41% 46% 56%

Total VGO 7% 20% 31%

Total resid 52% 34% 13%

Total 100% 100% 100%

of which

atmos resid HS > 3% 2.30 0.33 (1.97) 0.39 (1.91) 0.06

vacuum resid HS > 3% 0.69 0.13 (0.57) 0.09 (0.61) (0.04)

visbroken resid HS > 3% 0.12 0.03 (0.09) 0.02 (0.10) (0.01)

Total resid HS > 3% 3.12 0.49 (2.63) 0.50 (2.62) 0.01

HS resid as % of total resid 96% 23% 58%

LS VGO / Resid < 1% 0.45 2.55 2.10 1.88 1.43 (0.67)

Total Marine Fuel Pools Selected 2020 Base and Mid Switch Cases

Mid Switch Low MDO Mid Switch Hi MDOBase Case


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Exhibit 5-5 Changes in Crude Oil Movements 2020 Mid Switch High MDO vs Base Case

5.1.4.2 Changes in Supply Costs and Differentials

The changes in open market product supply costs and refining economics projected as a

result of a full switch to Global Fuel are indicated as having the potential to be extreme. In

the past 28 years, the WORLD Model has been used to simulate inter alia a series of both

real and hypothetical oil market disruptions.38 The economic impacts coming out of the

Model cases here are similar to effects we have seen in analyses of simulated market

disruptions. The precise numbers in these strained Model cases are not the main point.

What is most important is the finding or message that the modelling analysis is pointing to a

severe degree of economic strain on the global refining and supply system should the Global

Sulphur Cap be enacted in full force in January 2020.

Exhibits 5-6 through 5-10 focus on the impacts of most relevance to the marine market,

namely differentials between diesel and HS IFO380. Since we did not have available long

data series for marine distillate fuels, we have presented differentials for on-road diesel

versus HS IFO in three key markets, Northwest Europe, the United States Gulf Coast and

Asia (Singapore). The exhibits illustrate the substantial increases in differentials, from

within, if at the upper end, of the normal historical range in the 2020 Base Case, i.e. around

$35-38/barrel, to the $70-80/barrel range in the High MDO cases – and still in the $60-

70/barrel range in the Low MDO cases. In $/tonne, these differentials range up to $380

versus under $190 in the Base Case. These are well beyond anything in recent history,

including 2008 when distillate became extremely tight.

38 EnSys has worked for many years on disruption analyses for the United States Department of Energy Office of Strategic Petroleum Reserve and also the Office of Policy and International Affairs.

million bpd Total

Exports

Total

Local +

Exports

Producing Regions1.00

United

StatesCanada

Latin

AmericaAfrica Europe FSU

Middle

EastAsia

United States 0.32 (0.00) (0.32) 0.07 0.13 0.00 0.00 0.00 0.00 0.12

Canada 0.04 (0.00) (0.32) (0.05) 0.00 0.00 0.01 0.00 0.00 0.35

Latin America (0.13) 0.00 0.31 (0.07) 0.13 (0.01) (0.43) 0.00 0.00 0.08

Africa 0.06 (0.00) 0.07 (0.00) (0.23) (0.06) (0.05) 0.00 0.00 0.26

Europe (0.15) 0.00 0.00 0.00 0.00 0.00 0.15 0.00 0.00 (0.15)

FSU (0.05) (0.00) 0.13 0.04 0.00 0.00 (0.23) 0.05 0.00 0.00

Middle East 0.71 0.71 0.79 0.00 (0.01) 0.03 0.55 0.00 0.00 (0.65)

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.04 (0.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.00)

Other Asia/Pac 0.16 (0.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.00)

Total Imports 1.00 0.99 0.04 (0.11) 0.02 (0.15) 0.00 0.00 0.22

Total Crude Runs 0.70 0.66 (0.00) 0.02 (0.04) (0.00) 0.05 0.00 0.02

Crude Oil Movements: 2020 Mid Switch High MDO Case vs 2020 Base Case

Consuming Regions


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In the scenarios with less Global MDO, more Global IFO, the situation is ‘better’ as noted.

However, while increasing the proportion of heavier marine fuel helps reduce costs, the

impacted is limited by the fact that essentially the same amount of sulphur must still be

removed because the specification is still 0.5% whatever the fuel formulation.

Exhibit 5-10 2015 data are taken from published prices for MGO and HS IFO380. The MGO

prices are from Clarksons and the IFO from Bloomberg. The Bloomberg IFO prices check

closely with those from Clarksons and in turn the supply costs in our 2015 Model case were

close to these actuals. However, the MGO supply costs from our 2015 Model case were well

below the Clarksons actual prices. One reason for this could be that the actual quality of the

MGO sold, as reflected in the Clarksons prices, is higher than the DMA type qualities we

have assumed in our Model cases. Should that be the case, our Model cases are potentially

understating the differentials that would apply in 2020; or, put another way, the implication

is that we should possibly be using higher qualities for the MGO which, again, would lead to

wider differentials than we are showing.

In the WORLD Model, we compute and report what we term aggregate product ‘supply

costs’. These are computed by multiplying the open market $/bbl supply cost of each

product in each region from the Model results by its sale / consumption volume to arrive at

total $/day supply cost for that product. The supply costs for each product are then added

together across all Model regions to arrive at the total global supply cost by product.

Finally, summing the global totals for each product give the aggregate supply cost across all

products. The units of the supply cost are $/barrel * million barrels / day = $ million /day.

So we can express and compare costs in that form or we can divide by the demand volume

for each product and so express supply cost as average product $/barrel.

Exhibit 5-18 provides detail of global supply cost by product across the Model cases. Exhibit

5-11 illustrates product supply impacts as $/barrel changes average across all sold products

worldwide versus the 2020 Base Case. Exhibit 5-12 shows the data expressed as percent

changes in global average supply cost versus the 2020 Base Case. These charts and tables

reinforce the potentially major impact of the Global Sulphur Cap across total petroleum

products, not solely marine fuels. The results from the Model cases indicate the effect

would be to increase open market prices by some $10 to nearly $20 /barrel average across

all products in all regions worldwide – not just across marine fuels. The corresponding

percentage increases are around 11 to 23 percent. Expressed as $billion per year, the

potential increase in global supply costs across all petroleum products is projected to range

from somewhat under $350 bn/yr to over $700 bn/yr depending on the scenario.39

39 Note this analysis and all prices here are quoted in $2015 not $ nominal.


July 15, 2016

108

Exhibit 5-18 gives the breakdown of supply costs by product type. In, for example the Mid

Switch High MDO case, total weighted average marine fuels supply costs go up by 27%

versus the 2020 Base Case per the Model results. This scale of increase is due to the

combined effects of increases in distillate supply costs and a much increased proportion of

MDO in the marine fuel mix. Average supply costs go up by 24% for jet/kero and inland

gasoil/diesel but also by 18% for gasoline and 9% for naphtha and lighter products. This is

because refining is a co-product business and what happens with one product affects every

other. In this vein, projected supply costs for inland residual fuels drop by 11% because of

the shift away from HS IFO. This in turn is a weighted average of supply costs for low

sulphur residual fuels which stay relatively constant and of significant reductions in supply

costs for high sulphur residual fuels (which also carry through into HS IFO supply costs).

A further implication of this is that light/heavy crude differentials would be significantly

impacted as are refining margins, with different types of refiner impacted differently.

Exhibit 5-16 shows how Brent-Mayan differentials double under the High MDO cases and

still widen significantly under the Low MDO cases. These same Model projections indicate

sophisticated refineries that run heavy sour crude and fully upgrade to clean products, with

emphasis on distillates (gasoil/diesel and jet/kero), would expect to see large increases in

margins. (See the crack spreads in Exhibit 5-17 for United States Gulf Coast Saudi Heavy and

Mayan crudes.) Conversely, refineries that are simpler and have an appreciable yield of high

sulphur residual fuel would be expected to see margins deteriorate versus ‘business as

usual’. One implication is that sustained low margins resulting from the advent of the

Global Sulphur Cap could lead more refineries to close.

One question these Model results pose is how long the strained market conditions could be

expected to continue. Our view is that the strained conditions could be relatively long

lasting. Yes, the refining industry would attempt to adapt but investments would be needed

and those would take years not months to bring on stream. Scrubbers would become highly

attractive economically but it would still take time to equip large numbers of vessels. It is

more likely that in the short to medium term something else would have to ‘give’, most

likely either a reduction in the volumes of Global Fuel refiners attempt to produce and

shippers to purchase or the interjection of a clearing mechanism for surplus heavy fuel that

would entail continued market stress because of low residual fuel prices and (still more)

increases in crude runs.

From our experience in the industry, we do not see any opportunity for a swift change that

would resolve the market strain that is indicated. It is possible that the market for selling

high sulphur fuel into the power and industrial boiler sectors could expand given time. This

would, however, constitute a reversal of the long term trend for reductions in sales of HFO

into those sectors. Also, to occur, it would mean HS HFO would need to be priced

competitively with natural gas or coal. That would tend to keep HS HFO prices down at


July 15, 2016

109

depressed levels and so could potentially do little to directly ease the projected strain in

market differentials. What growth in HS HFO sales would do is allow more crude oil to be

run (assuming incremental supplies are readily available from OPEC or other countries). This

would bring in light streams that would help to raise or ease supply of gasoline, jet/kero,

land and marine distillates. It would tend though to bring higher crude oil prices which in

turn would raise product supply costs. In short, we do not see any short term mechanism

that would offset or eliminate the potential economic strain projected as resulting from fully

meeting the Global Sulphur Cap in 2020.


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110

Exhibit 5-6 Diesel – IFO Price Differentials Northwest Europe


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Exhibit 5-7 Diesel – IFO Price Differentials United States Gulf Coast


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Exhibit 5-8 Diesel – IFO Price Differentials Asia (Singapore)


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Exhibit 5-9 Summary 2020 MGO – IFO Differentials $/tonne Basis

Exhibit 5-10 Northwest Europe MGO vs HS IFO Prices - $/tonne

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$100

$200

$300

$400

$500

$600

$700

$800

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July 15, 2016

114

Exhibit 5-11 Impact of Global Rule on Global Product Supply Costs - $/barrel Change

Exhibit 5-12 Impact of Global Rule on Global Product Supply Costs – Percent Change


July 15, 2016

115

5.1.5 Detailed Global Case Results

Exhibit 5-13 WORLD Premises & Results – Refining Additions

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

2015 2015 2020 2020 2020 2020 2020 2020 2020

Base Case

Calibration

Base Case

Adjusted

Base No

0.5% Fuel

Low Switch

High MDO

Mid Switch

High MDO

High Switch

High MDO

Low Switch

Low MDO

Mid Switch

Low MDO

High

Switch

Low MDO

Demand million b/d

World demand 93.67 93.67 99.19 98.95 99.34 99.73 98.95 99.34 99.73

Total Marine Bunkers Demand 5.70 5.70 6.24 6.00 6.40 6.79 6.00 6.40 6.79

Switch to LS Global Fuel (MDO/Hybrid/IFO) 0.00 0.00 0.00 3.40 3.79 4.18 3.40 3.79 4.18

of which

Switch using LS MDO 0.00 0.00 0.00 3.08 3.43 3.78 1.78 1.99 2.19

Switch using LS Hybrid / IFO 0.00 0.00 0.00 0.32 0.36 0.40 1.62 1.80 1.99

Switch % MDO 0% 0% 0% 90% 90% 90% 52% 52% 52%

Refining n.b. 2 mb/d of closures assumed by 2020

Base Capacity mb/cd 97.40 97.68 95.66 95.66 95.66 95.66 95.66 95.66 95.66

Firm Construction mb/cd 5.64 5.64 5.64 5.64 5.64 5.64 5.64

Further Crude Unit Additions mb/cd 0.04 0.03 0.36 0.45 0.45 0.45 0.38 0.45 0.45

Total Additions over Base mb/cd 0.04 0.03 6.00 6.08 6.09 6.09 6.01 6.08 6.09

Total Capacity at Horizon mb/cd 97.44 97.72 101.66 101.74 101.75 101.75 101.67 101.74 101.75

Total Investment over Firm Projects ($bn 2014)$0.34 $0.15 $4.26 $12.48 $13.77 $14.51 $10.60 $11.34 $12.36

Investment Change vs Base Case $0.00 $8.23 $9.52 $10.25 $6.35 $7.08 $8.10

Secondary Processing Capacity Additions

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

(beyond assessed projects)

ATMOSPHERIC DISTILLATION 0.04 0.03 0.36 0.45 0.45 0.45 0.38 0.45 0.45

VACUUM DISTILLATION 0.00 0.00 0.04 0.07 0.06 0.06 0.05 0.05 0.05

COKING 0.00 0.00 0.02 0.06 0.06 0.06 0.04 0.04 0.04

VISBREAKING

CATALYTIC CRACKING 0.01 0.01 0.09 0.10 0.10 0.10 0.10 0.09 0.10

HYDRO-CRACKING 0.00 0.00 0.02 0.02 0.02 0.02 0.02 0.02 0.02

CATALYTIC REFORMING - REVAMP 0.03 0.01 0.17 0.21 0.29 0.30 0.21 0.21 0.28

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

DESULPHURIZATION (excluding NDS)

- GASOLINE - ULS

- DISTILLATE - REVAMP TO ULS 0.07 0.02 0.39 0.45 0.45 0.44 0.46 0.47 0.47

- DISTILLATE ULS NEW 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

- DISTILLATE CONV/LS NEW

- VGO/RESID

HYDROGEN (MMSCFD) 0 0 619 1670 1822 1935 1265 1358 1430

SULPHUR PLANT (TPD) 0 0 310 8830 9560 10190 7700 8360 9180

FCC SOX SCRUBBER (TPD) 0 0 0 290 330 380 220 240 300

FCC SULPHUR EMISSIONS (TPD) n.r. n.r. 4673 4791 4790 4790 4795 4790 4790

Model Additions over and Above Projects as % of Base Case Project Additions

Hydrogen Plant

Additions 2016-2019: 3704 MMSCFD 0% 0% 17% 45% 49% 52% 34% 37% 39%

Sulphur Plant

Additions 2016-2019: 13366 STPD 0% 0% 2% 66% 72% 76% 58% 63% 69%

WORLD Global Premises & Results


July 15, 2016

116

Exhibit 5-14 WORLD Premises & Results – Refinery Distillation and Upgrading

Throughputs & Utilizations

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

Total Crude Runs mb/d 78.77 78.67 82.21 82.64 83.06 83.48 82.45 82.85 83.24

Total Capacity mb/cd 97.44 97.72 101.66 101.74 101.75 101.75 101.67 101.74 101.75

Utilizations (% of calendar day capacity) 80.8% 80.5% 80.9% 81.2% 81.6% 82.0% 81.1% 81.4% 81.8%

Crude Distillation

ATMOS:Base Capacity (data) 97.40 97.68 95.66 95.66 95.66 95.66 95.66 95.66 95.66

ATMOS:Known Projects (data) 0.00 0.00 5.64 5.64 5.64 5.64 5.64 5.64 5.64

ATMOS:Debottlenecking (WORLD) 0.04 0.03 0.36 0.45 0.45 0.45 0.38 0.45 0.45

ATMOS:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

ATMOS:Total Operating Capacity 97.44 97.72 101.66 101.74 101.75 101.75 101.67 101.74 101.75

ATMOS:Crude Throughput 78.77 78.67 82.21 82.64 83.06 83.48 82.45 82.85 83.24

ATMOS:Refinery Utilisation 80.8% 80.5% 80.9% 81.2% 81.6% 82.0% 81.1% 81.4% 81.8%

ATMOS:Average API 33.73 33.95 33.86 34.10 34.05 34.06 33.94 33.96 34.02

ATMOS:Average Sulphur 1.20% 1.21% 1.22% 1.21% 1.21% 1.22% 1.21% 1.21% 1.21%

Incremental Crude Run vs. Base 2020 0.43 0.85 1.27 0.24 0.64 1.03

Vacuum Disitllation

Vacumn:Base Capacity (data) 37.16 37.26 36.88 36.88 36.88 36.88 36.88 36.88 36.88

Vacumn:Known Projects (data) 0.00 0.00 1.41 1.41 1.41 1.41 1.41 1.41 1.41

Vacumn:Debottlenecking (WORLD) 0.00 0.00 0.04 0.07 0.06 0.06 0.05 0.05 0.05

Vacumn:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Vacumn:Total Operating Capacity 37.16 37.26 38.33 38.35 38.35 38.35 38.33 38.33 38.33

Vacumn:Throughput 24.61 24.80 25.45 26.49 26.50 26.64 26.13 26.24 26.40

Vacumn:Utilizations 66.2% 66.6% 66.4% 69.1% 69.1% 69.5% 68.2% 68.5% 68.9%

Total Coking (Delayed + Fluid)

Coking:Base Capacity (data) 8.05 8.05 8.03 8.03 8.03 8.03 8.03 8.03 8.03

Coking:Known Projects (data) 0.00 0.00 1.14 1.14 1.14 1.14 1.14 1.14 1.14

Coking:Debottlenecking (WORLD) 0.00 0.00 0.02 0.06 0.06 0.06 0.04 0.04 0.04

Coking:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Coking:Total Operating Capacity 8.05 8.05 9.19 9.23 9.23 9.23 9.21 9.21 9.21

Coking:Throughput 6.17 6.12 6.18 7.32 7.32 7.32 6.96 6.88 6.79

Coking:Utilizations 76.6% 76.1% 67.3% 79.4% 79.4% 79.4% 75.5% 74.7% 73.8%

Total FCC (includes RFCC)

FCC:Base Capacity (data) 17.65 17.66 17.57 17.57 17.57 17.57 17.57 17.57 17.57

FCC:Known Projects (data) 0.00 0.00 0.75 0.75 0.75 0.75 0.75 0.75 0.75

FCC:Debottlenecking (WORLD) 0.01 0.01 0.09 0.10 0.10 0.10 0.10 0.09 0.10

FCC:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FCC:Total Operating Capacity 17.66 17.66 18.41 18.42 18.42 18.42 18.41 18.41 18.41

FCC:Throughput Total million bpd 13.64 13.63 14.03 14.08 14.04 13.99 14.03 14.01 13.99

FCC:Utilizations 77.2% 77.2% 76.2% 76.4% 76.2% 76.0% 76.2% 76.1% 76.0%

FCC:Resid feed million bpd 3.14 2.74 3.49 4.56 4.67 4.69 3.93 3.96 3.98

FCC:Resid feed percent of total 23.0% 20.1% 24.9% 32.4% 33.3% 33.5% 28.0% 28.2% 28.4%

FCC:Conversion % n.r. 74.0% 72.8% 72.5% 72.5% 72.6% 73.0% 73.0% 73.0%

Total Hydrocracking

HCR:Base Capacity (data) 8.93 8.93 8.78 8.78 8.78 8.78 8.78 8.78 8.78

HCR:Known Projects (data) 0.00 0.00 1.02 1.02 1.02 1.02 1.02 1.02 1.02

HCR:Debottlenecking (WORLD) 0.00 0.00 0.02 0.02 0.02 0.02 0.02 0.02 0.02

HCR:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

HCR:Total Operating Capacity 8.94 8.94 9.82 9.82 9.82 9.82 9.82 9.82 9.82

HCR:Throughput 6.85 6.86 7.66 7.75 7.77 7.80 7.75 7.76 7.79

HCR:Utilizations 76.7% 76.8% 78.0% 78.9% 79.1% 79.4% 78.9% 79.0% 79.3%

Total Distillate Desulfurization

Desulfur:Base Capacity (data) 27.61 27.62 27.33 27.33 27.33 27.33 27.33 27.33 27.33

Desulfur:Known Projects (data) 0.00 0.00 1.81 1.81 1.81 1.81 1.81 1.81 1.81

Desulfur:Debottlenecking (WORLD) debottlenecking not allowed in cases - only limited revamp from conventional to ULS debottlenecking not allowed in cases - only limited revamp from conventional to ULS

Desulfur:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Desulfur:Total Operating Capacity Net 27.61 27.62 29.14 29.14 29.14 29.14 29.14 29.14 29.14

Desulfur:Throughput 20.75 20.88 22.47 22.25 22.27 22.29 22.38 22.40 22.43

Desulfur:Utilizations 75.2% 75.6% 77.1% 76.4% 76.4% 76.5% 76.8% 76.9% 77.0%



July 15, 2016

117

Exhibit 5-15 WORLD Premises & Results – Refinery Desulphurisation, Hydrogen, Sulphur plant

Throughputs & Utilizations

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

Total Distillate Desulfurization

Desulfur:Base Capacity (data) 27.61 27.62 27.33 27.33 27.33 27.33 27.33 27.33 27.33

Desulfur:Known Projects (data) 0.00 0.00 1.81 1.81 1.81 1.81 1.81 1.81 1.81

Desulfur:Debottlenecking (WORLD) debottlenecking not allowed in cases - only limited revamp from conventional to ULS debottlenecking not allowed in cases - only limited revamp from conventional to ULS

Desulfur:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Desulfur:Total Operating Capacity Net 27.61 27.62 29.14 29.14 29.14 29.14 29.14 29.14 29.14

Desulfur:Throughput 20.75 20.88 22.47 22.25 22.27 22.29 22.38 22.40 22.43

Desulfur:Utilizations 75.2% 75.6% 77.1% 76.4% 76.4% 76.5% 76.8% 76.9% 77.0%

VGO Desulfurization

VGO HDS:Base Capacity (data) 7.05 7.08 7.05 7.05 7.05 7.05 7.05 7.05 7.05

VGO HDS:Known Projects (data) 0.00 0.00 0.41 0.41 0.41 0.41 0.41 0.41 0.41

VGO HDS:Debottlenecking (WORLD) debottlenecking not allowed in cases debottlenecking not allowed in cases

VGO HDS:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

VGO HDS:Total Operating Capacity 7.05 7.08 7.46 7.46 7.46 7.46 7.46 7.46 7.46

VGO HDS:Throughput 4.73 5.09 5.23 5.55 5.58 5.59 5.56 5.57 5.58

VGO HDS:Utilizations 67.1% 71.9% 70.0% 74.4% 74.8% 74.9% 74.5% 74.7% 74.8%

Resid Desulfurization

Resid HDS:Base Capacity (data) 1.88 1.88 1.85 1.85 1.85 1.85 1.85 1.85 1.85

Resid HDS:Known Projects (data) 0.00 0.00 0.19 0.19 0.19 0.19 0.19 0.19 0.19

Resid HDS:Debottlenecking (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Resid HDS:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Resid HDS:Total Operating Capacity 1.88 1.88 2.04 2.04 2.04 2.04 2.04 2.04 2.04

Resid HDS:Throughput 0.90 1.03 1.25 1.34 1.32 1.30 1.21 1.24 1.25

Resid HDS:Utilizations 47.8% 55.0% 61.4% 65.7% 64.8% 64.0% 59.5% 60.7% 61.4%

Total Catalytic Reforming

Cat Reforming:Base Capacity (data) 13.69 13.79 13.65 13.65 13.65 13.65 13.65 13.65 13.65

Cat Reforming:Known Projects (data) 0.00 0.00 0.59 0.59 0.59 0.59 0.59 0.59 0.59

Cat Reforming:Debottlenecking (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cat Reforming:Major New Units (WORLD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cat Reforming:Total Operating Capacity 13.69 13.79 14.23 14.23 14.23 14.23 14.23 14.23 14.23

Cat Reforming:Throughput 9.58 9.55 9.84 9.96 9.97 9.97 9.91 9.91 9.92

Cat Reforming:Utilizations 70.0% 69.2% 69.1% 70.0% 70.1% 70.0% 69.7% 69.6% 69.7%

Total Hydrogen Plant million SCFD

Hydrogen:Base Capacity (data) 23,635 24,402 23,732 23,732 23,732 23,732 23,732 23,732 23,732

Hydrogen:Known Projects (data) - - 3,704 3,704 3,704 3,704 3,704 3,704 3,704

Hydrogen:Debottlenecking (WORLD) - - 619 1,670 1,822 1,935 1,265 1,358 1,430

Hydrogen:Major New Units (WORLD) - - - - - - - - -

Hydrogen:Total Operating Capacity 23,635 24,402 28,055 29,106 29,258 29,371 28,701 28,794 28,866

Hydrogen:Throughput 17,093 18,111 20,976 22,311 22,469 22,591 21,957 22,057 22,120

Hydrogen:Utilizations 72.3% 74.2% 74.8% 76.7% 76.8% 76.9% 76.5% 76.6% 76.6%

Total Sulphur Plant STPD

Sulphur:Base Capacity (data) 128,181 128,181 128,181 128,181 128,181 128,181 128,181 128,181 128,181

Sulphur:Known Projects (data) - - 13,366 13,366 13,366 13,366 13,366 13,366 13,366

Sulphur:Debottlenecking (WORLD) - - 310 8,830 9,560 10,190 7,700 8,360 9,180

Sulphur:Major New Units (WORLD) - - - - - - - - -

Sulphur:Total Operating Capacity 128,181 128,181 141,858 150,378 151,108 151,738 149,248 149,908 150,728

Sulphur:Throughput n.r. 65,213 69,131 78,798 79,352 79,824 78,354 78,749 79,371

Sulphur:Utilizations n.r. 49.8% 48.7% 52.4% 52.5% 52.6% 52.5% 52.5% 52.7%



July 15, 2016

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Exhibit 5-16 WORLD Premises & Results – Crude & Product Prices

Actual Prices, Projected Marginal

Prices / Supply Costs & Differentials

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

SAUDI LIGHT (input marker crude price) $49.50 $49.50 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03

WTI - Brent ($3.32) ($2.63) ($2.15) ($1.30) ($1.31) ($1.60) ($2.04) ($2.13) ($2.18)

Brent - Dubai $3.44 $2.97 $3.16 $5.96 $6.15 $6.39 $5.32 $5.50 $5.70

Brent - Mayan $8.56 $7.04 $10.04 $20.66 $21.70 $22.58 $15.88 $16.27 $16.74

US Gulf Coast $/barrel

Gasoline - CG Regular $67.28 $64.32 $100.42 $115.36 $118.12 $121.25 $108.85 $110.50 $113.53

Diesel ULS $67.96 $65.67 $109.92 $132.65 $137.05 $142.14 $128.53 $132.45 $137.39

MGO 1% / 0.5% $57.85 $56.53 $86.36 $95.25 $96.80 $99.80 $92.01 $93.15 $95.80

IFO380 HS $44.84 $45.76 $71.55 $57.05 $57.32 $58.47 $63.17 $63.94 $65.13

Gasoline - IFO380 HS $22.44 $18.56 $28.88 $58.32 $60.80 $62.78 $45.67 $46.56 $48.41

Diesel ULS - IFO380 HS $23.12 $19.91 $38.37 $75.61 $79.73 $83.66 $65.36 $68.51 $72.26

Marine Diesel - IFO380 HS $13.01 $10.78 $14.82 $38.20 $39.48 $41.33 $28.83 $29.22 $30.67

$/tonne (using standard gravities)

MGO 1% / 0.5% $413 $404 $617 $681 $692 $713 $658 $666 $685

IFO380 HS $287 $292 $457 $365 $366 $374 $404 $409 $416

Marine Diesel - IFO380 HS $127 $112 $160 $316 $325 $340 $254 $257 $268

Price Changes ($/barrel basis)

Gasoline vs 2020 Base Case 15% 18% 21% 8% 10% 13%

ULS Diesel vs 2020 Base Case 21% 25% 29% 17% 20% 25%

Marine Diesel vs 2020 Base Case 10% 12% 16% 7% 8% 11%

IFO380 HS % vs 2020 Base Case -20% -20% -18% -12% -11% -9%

Northwest Europe $/barrel

Gasoline - EURO V 95 RON $64.54 $61.24 $95.70 $109.86 $112.38 $115.57 $103.76 $105.29 $108.15

Diesel ULSD $67.22 $64.95 $109.00 $130.85 $135.25 $140.33 $126.75 $130.59 $135.77

MGO 1% / 0.5% $62.83 $61.31 $96.71 $108.63 $111.26 $114.21 $103.97 $105.81 $108.63

IFO380 HS $46.78 $47.26 $73.71 $62.07 $62.12 $62.97 $65.83 $66.70 $68.31

Gasoline - IFO380 HS $17.76 $13.98 $21.98 $47.79 $50.26 $52.60 $37.93 $38.59 $39.84

Diesel ULS - IFO380 HS $20.44 $17.69 $35.29 $68.77 $73.13 $77.36 $60.92 $63.89 $67.46



MGO 1% / 0.5% $449 $438 $691 $776 $795 $816 $743 $756 $776

IFO380 HS $299 $302 $471 $397 $397 $402 $421 $426 $437







Singapore $/barrel

Gasoline ULS Regular $66.10 $63.34 $101.21 $116.49 $119.33 $122.48 $109.94 $111.60 $114.65

Diesel LSD $68.04 $65.86 $108.98 $131.59 $136.28 $141.31 $127.14 $130.80 $136.07

MGO 1% / 0.5% $59.22 $58.37 $91.66 $101.82 $104.45 $108.06 $97.51 $99.38 $102.83

IFO380 HS $45.30 $46.59 $73.25 $60.20 $59.86 $61.04 $64.86 $65.71 $68.23

Gasoline - IFO380 HS $20.80 $16.76 $27.96 $56.29 $59.46 $61.45 $45.08 $45.89 $46.42

Diesel - IFO380 HS $22.75 $19.27 $35.72 $71.39 $76.42 $80.28 $62.27 $65.08 $67.84



MGO 1% / 0.5% $423 $417 $655 $728 $746 $772 $697 $710 $735

IFO380 HS $289 $298 $468 $385 $383 $390 $415 $420 $436







2015 Actual Prices from Bloomberg other than MGO $/tonne prices which are from Clarkson Research Services Shipping Intelligence Network (SIN)



July 15, 2016

119

Exhibit 5-17 WORLD Premises & Results – Price Differentials & Crack Spreads

Actual Prices, Projected Marginal

Prices / Supply Costs & Differentials 2015

Actual

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch

Low MDO

2020:

High

Switch

Low MDO

SAUDI LIGHT (input marker crude price) $49.50 $49.50 $49.50 $49.50 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03

DIFFERENTIALS $/barrel

USEC

Distillate - Gasoline $1.84 $0.62 $1.33 $8.76 $9.45 $17.22 $18.86 $20.81 $19.62 $21.88 $23.79

Gasoline (CG Regular) - Resid HS $22.80 $25.73 $20.51 $29.34 $32.54 $77.08 $81.64 $88.33 $51.55 $54.34 $57.98

Distillate (ULS) - Resid HS $24.64 $26.35 $21.83 $38.09 $41.99 $94.30 $100.50 $109.14 $71.18 $76.22 $81.77

USGC


Gasoline (CG Regular) - Resid HS $22.16 $22.44 $18.56 $24.85 $28.88 $58.32 $60.80 $62.78 $45.67 $46.56 $48.41


NW EUROPE


Gasoline (Regular) - Resid HS $25.06 $17.76 $13.98 $18.20 $21.98 $47.79 $50.26 $52.60 $37.93 $38.59 $39.84


Asia - Singapore

Distillate - Gasoline n.a. $1.95 $2.51 $6.97 $7.76 $15.10 $16.96 $18.83 $17.19 $19.19 $21.42

Gasoline (CG Regular) - Resid HS n.a. $20.80 $16.76 $22.37 $27.96 $56.29 $59.46 $61.45 $45.08 $45.89 $46.42


CRACK SPREADS $/barrel

USGC 3-2-1 WTI $16.86 $16.97 $14.30 $25.05 $24.96 $37.60 $40.59 $44.31 $33.47 $35.69 $39.19

USGC 2-1-1 WTI $17.01 $17.08 $14.53 $26.52 $26.54 $40.48 $43.75 $47.79 $36.75 $39.35 $43.16

USGC 3-2-1 Saudi Hvy $18.26 $20.86 $17.56 $28.73 $30.88 $51.77 $55.44 $59.46 $44.05 $46.41 $50.19

USGC 2-1-1 Saudi Hvy $18.41 $20.97 $17.79 $30.20 $32.46 $54.65 $58.60 $62.94 $47.33 $50.07 $54.16

USGC 3-2-1 Mayan $21.44 $22.21 $18.71 $29.37 $32.85 $56.96 $60.98 $65.29 $47.31 $49.83 $53.75

USGC 2-1-1 Mayan $21.58 $22.32 $18.94 $30.84 $34.43 $59.84 $64.14 $68.77 $50.59 $53.49 $57.72

NW Europe 3-2-1 Brent $13.64 $11.57 $9.38 $18.83 $19.35 $32.03 $34.85 $38.32 $27.44 $29.47 $32.88

NW Europe 2-1-1 Brent $13.81 $12.02 $10.00 $20.92 $21.57 $35.52 $38.66 $42.45 $31.27 $33.69 $37.48

NW Europe 5-2-2-1 Brent $8.70 $8.20 $6.83 $16.03 $15.84 $23.87 $26.32 $29.45 $21.39 $23.44 $26.75



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120

Exhibit 5-18 WORLD Premises & Results – Product Supply Costs

(excludes internal costs for refinery fuel

consumption)

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

LPG & Naphtha $1,002 $968 $1,310 $1,399 $1,425 $1,455 $1,361 $1,374 $1,407

Gasoline $1,645 $1,578 $2,576 $2,980 $3,052 $3,141 $2,801 $2,847 $2,928

Light Distilates (Jet/Kero) $454 $442 $787 $946 $978 $1,014 $914 $941 $977

Middle Distillates (excluding bunker fuels) $1,718 $1,670 $2,964 $3,565 $3,689 $3,826 $3,448 $3,551 $3,689

Residual Fuels (excluding bunker fuels) $171 $172 $276 $244 $246 $251 $269 $274 $282

Other Products $255 $253 $427 $439 $446 $459 $444 $453 $466

Marine Bunkers Fuels $282 $285 $487 $565 $619 $681 $552 $601 $660

Total $ million / day $5,528 $5,369 $8,828 $10,139 $10,455 $10,828 $9,789 $10,041 $10,410

Total $/bbl of world demand $59.01 $57 $89.00 $102.46 $105.24 $108.57 $98.93 $101.07 $104.38


consumption)

2015: Base

Case

Calibration

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

LPG & Naphtha $1,310 $89 $115 $145 $51 $64 $97

Gasoline $2,576 $404 $476 $565 $225 $271 $353

Light Distilates (Jet/Kero) $787 $159 $191 $226 $127 $153 $190

Middle Distillates (excluding bunker fuels) $2,964 $601 $725 $863 $485 $587 $725

Residual Fuels (excluding bunker fuels) $276 ($32) ($30) ($25) ($7) ($2) $6

Other Products $427 $11 $19 $31 $17 $26 $39

Marine Bunkers Fuels $487 $78 $132 $194 $64 $113 $172

Total $ million / day $8,828 $1,311 $1,627 $2,000 $962 $1,213 $1,582

Total $/bbl change vs Base Case $13.46 $16.24 $19.57 $9.93 $12.07 $15.38

Total $billion / year Change vs Base Case $479 $594 $730 $351 $443 $577


consumption)

2015: Base

Case

Calibration

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

LPG & Naphtha 7% 9% 11% 4% 5% 7%

Gasoline 16% 18% 22% 9% 11% 14%

Light Distilates (Jet/Kero) 20% 24% 29% 16% 19% 24%

Middle Distillates (excluding bunker fuels) 20% 24% 29% 16% 20% 24%

Residual Fuels (excluding bunker fuels) -12% -11% -9% -3% -1% 2%

Other Products 3% 4% 7% 4% 6% 9%

Marine Bunkers Fuels 16% 27% 40% 13% 23% 35%

Total Percent Impact 14.9% 18.4% 22.7% 10.9% 13.7% 17.9%

Projected Product Supply Costs 2015/2020

Projected Product Supply Costs - Changes vs 2020 Base Case

Projected Product Supply Costs - Changes vs 2020 Base Case



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121

5.2 Over/Under Optimisation Factors and Risks

WORLD is a detailed model of the global supply system, encompassing crudes and non-

crudes supply, (natural gas liquids, biofuels, CTL’s, GTL’s, petrochemical return streams),

refining, crude and product transportation, product demand and quality. Almost invariably,

it is run to simulate average conditions in a given year, such as 2020 or 2025. Also, in

simulating refining and trade activities – and thus economics – under a given

supply/demand/world oil price scenario and horizon, e.g. 2020, we are implicitly simulating

the industry once it has adapted to the scenario, i.e. has reached a relatively steady state.

Put another way, we are normally modelling and generating results for a situation in which

the industry has gravitated toward a relatively stable situation in terms of operations and

economics, under the scenario premises for global supply, demand etc.

In this Marine Fuels Study, the interest is, however, more particular. EnSys and Navigistics

understand that the primary interest centres on assessing how the global industry is likely to

operate and cope in early – or at least the first half of – 2020, given an assumed change to

the MARPOL Annex VI Global Sulphur Cap on January 1st 2020, and also assuming full

compliance. If the IMO goes ahead and makes a 2020 versus 2025 decision at MEPC70 in

October 2016, shippers and refiners will have been given three years’ notice of the

implementation of the rule – assuming 2020 is set as the date. This and other studies have

already helped to narrow the uncertainty regarding the outlook for scrubbers in 2020. As

time progresses to 2019, the situation with regard to scrubber penetration and hence

switch volume should become more sharply defined. Then, during especially the latter half

of 2019, refiners would build their expectations for the Global Sulphur Cap into their

refinery planning cycles – and shippers would be expected to reflect the impending rule in

their purchasing plans.

In undertaking cases which examine (a) a range of switch volume and (b) a range of MDO

use (versus heavier fuels), we have aimed to examine key uncertainties. Again, the High

MDO scenario can be considered as equating to a situation early in 2020 on the basis it will

take time for new heavy fuel formulations to be accepted or to a situation where

operational issues relating to heavier fuel formulations prove to be major such that their

acceptance remains low.40 The Low MDO scenario could be considered as capturing a

situation later in 2020 or even in 2021 wherein it has been possible for the shipping sector

to successfully prove and accept 0.5% sulphur IFO formulations (light and/or heavy) and for

refiners to have adapted to supplying them in large volumes.

40 Recent presentations and press reports have referred to operational difficulties on vessels relating to the use of heavier ECA fuel formulations while the standard was 1% sulphur and to their relative disappearance when the standard changed to 0.1% requiring use mainly of marine diesel.


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However, even though refiners would plan for the Global Sulphur Cap, and even though we

have covered different scenarios, we are using a model which intrinsically reacts instantly to

changes whereas it will take time for the refining and blending industry to react to the

Global Rule. The sections below review first factors within the modelling methodology itself

that could lead to our under or over estimating the challenges in meeting the rule and

second external parameters (which translate into Model premises) that could materially

impact the outlook.

5.2.1 Factors Intrinsic to the WORLD Model

5.2.1.1 Model Inherent Crude and Product Trade Flexibility

Section 5.1.4 showed Model results which highlighted the very substantial changes that

could occur to both crude oil and product trade and routings as part of the adaptation to

the Global Sulphur Cap. As noted in that section, such changes would take time. Further,

the WORLD Model is generally operated with only limited crude movements – and very few

product movements - ‘locked in’. Generally constrained or forced crude movements – other

than those limited by logistics – are only limited for a few known geopolitical situations and

otherwise where it is clear local crudes must be run in particular refineries. In reality crude

– and product – movements can be executed under term contracts, and can be affected by

ownership interests, both of which impart lag or inertia when there is a need to make

changes. Thus there is potentially more flexibility inherent in the WORLD Model cases to

reallocate crudes and products than exists in the real world, especially in the near term after

an event such as implementation of the Global Sulphur Cap. Therefore, if anything, the

Model results arguably overstate the ease with which the crude oil market could adapt (at

least in a period of a few months) and understate the difficulty and costs.

5.2.1.2 Model Inherent Refinery Operations & Blending Flexibility

WORLD, as other models, intrinsically responds totally to a new imposed scenario such as

the Global Sulphur Cap. The modelling results indicate the industry would need to

undertake a range of actions in order to optimally respond. As discussed in Section 5.1.4.1,

these actions would include altering operating rates, feedstock modes and

severities/conversion levels on key units throughout the refinery, also maximising

throughput on key units, notably cokers, in short a significant range of operational changes.

While much of the world’s refining industry operates at a very sophisticated level in terms of

economic planning, it is not necessarily the case either that the industry in total will react

(which is implicitly assumed in the Model) or that all affected refineries would react swiftly


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123

or fully. For these reasons, if anything, the Model results are also likely to overstate the

ease and speed with which the industry would react in terms of refining adjustments and

thus again understate the supply and market impacts.

5.2.1.3 Model Inherent Product Logistics Flexibility & Quality

A related factor is that refineries in WORLD are aggregated into large regional groups. Over

time, EnSys has applied methods to offset the resulting implicit risk of over-optimisation.

However, in the Model, all refineries within a region are implicitly inter-connected and can

share units, capacities and also blend streams. In reality, that is often not the case since

refineries may be dozens or hundreds of miles apart. Thus the Model intrinsically tends to

overstate the ease with which blendstocks can be shared or traded within a region and thus

may understate the costs of meeting a regulation such as the Global Sulphur Cap. Even to

the extent refineries are coastal and can ship blend stocks to other refineries, doing so adds

costs which are not reflected in the Model.41

In addition, the advent of the Global Sulphur Cap will tend to increase the number of

distillate and /or heavy fuel grades refiners need to supply and hence the number of grades

that need to be segregated and separately stored. These adjustments are likely to take time

and to raise storage and distribution costs. Local tankage and blending restrictions could

limit the number of marine blends that can be offered in specific locations, especially in the

short term after the Rule has come into effect.

5.2.1.4 Inland versus Coastal Refineries

EnSys conducted an evaluation of refineries worldwide by location to address a question

raised in the Terms of Reference of the IMO study – and applicable here – regarding the

extent to which refineries are inland and therefore may have a reduced or nil ability to

contribute to marine fuels production. However, it is a not a simple case of – if it is inland it

cannot supply. Many inland refineries are connected via waterways or pipelines to coastal

markets. (Examples include refineries along major waterways in Europe and the United

States.) In addition, refiners are adept at entering into geographic exchange type

arrangements which could enable inland refineries to indirectly contribute to coastal marine

41 The flexibility that is inherent in the Model is particularly relevant in this study with regard to vacuum residua streams. Model results have shown a clear incentive and need to maximize coker throughputs to meet the changes required under the Global Fuel cases. In the Model, we do not allow the transport of vacuum residua between regions (although we do allow movement of finished HFO products and atmospheric residua). Intrinsically, though, the Model does allow movement of vacuum residua within regions. Again, to the extent this is not achievable in the real world, the Model tends to overstate the ease and understate the challenge and cost of adapting to the Global Fuel Rule.


July 15, 2016

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fuel supply (e.g. by increasing inland diesel production under an exchange which frees the

coastal counter party to raise marine diesel production).

Clearly though, if a large proportion of refineries across the world could not contribute to

marine fuels production, that would have a significant impact on the sector’s ability to

respond to the Global Fuel Standard. To assess the degree of significance of this effect,

EnSys evaluated each refinery worldwide according to its location and assessed logistical

capability. Firstly, the many refineries that are coastal were identified as such. Then any

inland refinery was assessed in terms of its logistical ability to flow products to the coast.

Where refineries were clearly on major river systems or on product pipelines, they were

assessed as “Inland not Isolated”. Conversely, refineries that were clearly inland and had no

visible means to supply their products to anywhere other than local markets were assessed

as “Inland Isolated”. Inland refineries where the situation was unclear were initially placed

into an “Inland May Be Isolated” category. To be conservative, these were then added in to

a “Total Inland Isolated” category.

Finally, the WORLD Model contains relatively detailed logistics for the refineries that are

inland in the United States and Canada. These were identified as “Inland Isolated Captured

in WORLD”. In other words, the Model captures their ability – or lack thereof – to link to

coastal markets. These groups were, where appropriate, subtracted out of “Total Inland

Isolated” to arrive at a net category of “Total Inland Isolated Not Captured in WORLD”. In

short, it is the capacities in this category which, in WORLD, are implicitly counted as

effectively coastal and able to contribute to marine fuels production because of the regional

aggregation of refining capacity (e.g. Western Europe, China, etc.) whereas in reality, these

are sufficiently inland and isolated from coastal markets that they are extremely unlikely to

be able to contribute. Put another way, the limitations in the current Model formulation

lead to a potential for over-optimisation in this respect. The issue is whether this effect is

significant or small.

Exhibits 5-19 and 5-20 summarise our analysis. Nearly 12% of the world’s capacity was

assessed as Inland Isolated, with over 25% Inland Not Isolated and over 62% on the water

(coastal). The regions with the largest populations of Inland Isolated Capacity are the

United States, Europe, FSU and China. Allowing for the fact that the WORLD Model

explicitly captures the logistics of inland refineries in the United States and Canada, results

in a reduction to a net of 9 mb/cd of capacity, just over 9% of the global total, that is Inland

Isolated [but] Not Captured in WORLD. Thus, we are allowing in the Model for 9.2% of the

world’s refinery capacity to contribute to marine fuels production when in fact those

refineries cannot.

Since secondary capacity is critical in this study, we extended the assessment to cover

corresponding upgrading and desulphurization capacity. Per Exhibit 5-20, some 6% of total

upgrading and also of distillate and heavier desulphurization capacity is Inland Isolated. We


July 15, 2016

125

did not attempt to isolate out secondary capacity in the Inland Isolated Captured in WORLD

category but, based on the impact on distillation capacity, we estimate the net Inland

Isolated Not Captured in WORLD secondary capacity would be around 4-5% of the global

totals.

The ‘bottom line’ of this assessment is that the effect of isolated inland refineries is small

but it nonetheless leads to a minor degree of over-optimisation in the WORLD Model

results. Restrictions of time and budget prevented EnSys from addressing this issue by re-

working the Model’s refining groups but this could be done in the future.

Exhibit 5-19 Isolated Refining Capacity - Distillation

Region On WaterInland Not

Isolated

Total Inland

Isolated

Inland

Isolated

Captured in

WORLD

Total

Inland

Isolated

Not

Captured

in WORLD

Total

Distillation

Capacity

On

Water

Inland

Not

Isolate

d

Inland

Isolated

Inland

Isolated

not

Captured

in

WORLD

United States 10,501,971 5,043,340 2,654,151 1,914,760 739,391 18,199,462 58% 28% 15% 4%

Canada 543,200 777,600 619,450 609,450 10,000 1,940,250 28% 40% 32% 1%

South America 5,774,692 1,804,934 387,700 - 387,700 7,967,326 72% 23% 5% 5%

Europe 10,715,812 2,880,481 1,853,300 - 1,853,300 15,449,593 69% 19% 12% 12%

FSU 1,317,113 4,607,533 2,100,941 - 2,100,941 8,025,587 16% 57% 26% 26%

Middle East 7,007,933 2,019,770 458,850 - 458,850 9,486,553 74% 21% 5% 5%

Africa 3,530,906 152,680 417,600 - 417,600 4,101,186 86% 4% 10% 10%

China 5,488,926 5,605,029 2,006,845 - 2,006,845 13,100,800 42% 43% 15% 15%

Other Asia-Pacific 15,791,269 2,084,640 972,853 - 972,853 18,848,762 84% 11% 5% 5%

WORLD 60,671,822 24,976,007 11,471,690 2,524,210 8,947,480 97,119,518 62.5% 25.7% 11.8% 9.2%

Capacity %Crude & Condensate Distillation Capacity - b/cd

Refining Capacity - Capability to Contribute to Marine Fuels Production - Distillation

Grand total global capacity differs slightly from base data used in WORLD as this analysis does not include a small number of corrections

EnSys applied within the Model


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Exhibit 5-20 Isolated Refining Capacity – Upgrading and Desulphurisation

5.2.2 External Factors Impacting Premises

Several other factors which impact primarily premises used should also be taken into

consideration when assessing the Model results obtained.

5.2.2.1 2020 Refinery Available Capacity

There is inevitably a degree of uncertainty as to what total refinery capacity will be available

three and a half years from now at the end of 2019 since this will depend on both projects

Region On Water Inland Not

Isolated

Total Inland

Isolated Total On Water

Inland Not

Isolated

Inland

Isolated

United States 6,748,063 2,770,085 237,630 9,755,778 69% 28% 2%

Canada 269,500 304,630 - 574,130 47% 53% 0%

South America 2,084,477 791,722 121,000 2,997,199 70% 26% 4%

Europe 4,343,389 1,268,841 680,028 6,292,258 69% 20% 11%

FSU 548,718 1,183,750 391,711 2,124,179 26% 56% 18%

Middle East 2,041,650 483,041 33,820 2,558,511 80% 19% 1%

Africa 616,709 10,000 47,774 674,483 91% 1% 7%

China 1,243,753 885,800 361,000 2,490,553 50% 36% 14%

Other Asia-Pacific 4,492,098 664,289 226,520 5,382,907 83% 12% 4%

WORLD 22,388,357 8,362,158 2,099,483 32,849,998 68.2% 25.5% 6.4%

Includes: coking, visbreaking, FCC, hydro-cracking

Region On Water Inland Not

Isolated

Total Inland

Isolated Total ACU On Water

Inland Not

Isolated

Inland

Isolated

United States 4,948,393 2,289,468 323,050 7,560,911 65% 30% 4%

Canada 108,000 256,900 - 364,900 30% 70% 0%

South America 1,405,367 449,238 147,000 2,001,605 70% 22% 7%

Europe 4,859,173 1,527,775 616,917 7,003,865 69% 22% 9%

FSU 454,659 1,210,975 544,386 2,210,020 21% 55% 25%

Middle East 1,864,220 350,000 17,600 2,231,820 84% 16% 1%

Africa 549,882 15,000 55,798 620,680 89% 2% 9%

China 666,000 327,800 58,000 1,051,800 63% 31% 6%

Other Asia-Pacific 7,509,928 440,789 95,000 8,045,717 93% 5% 1%

WORLD 22,365,622 6,867,945 1,857,751 31,091,318 71.9% 22.1% 6.0%

Excludes naphtha, gasoline and lubes hydro-treating capacity

Capacity %

Capacity %

Total Upgrading b/cd

Distillate / VGO / Resid Desulphurisation b/cd

Refining Capacity - Capability to Contribute to Marine Fuels Production - Total

Upgrading and Distillate/Heavy Desulphurisation


July 15, 2016

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and closures. We do see potential for some changes to projects in the next year or two but

we do not expect those to be of a scale that would substantially alter the total capacity in

2020. As and when the IMO does take a decision on 2020 versus 2025 timing, one major

uncertainty relating to the Global Sulphur Cap will be removed. However, the perception

that the rule’s entry into effect would bring a surge in scrubber installations, (our WORLD

Model results in this analysis reinforce this prospect because we assess a wide expansion in

diesel – IFO price differentials to result from the Global Sulphur Cap), is likely to curb

investments by refiners specifically for the marine fuels market.42

Also, our assessment of refinery projects assumed that the majority (75%) of the significant

number of projects that are at mid-status would go ahead and do so on time. Again, this

outlook could be affected either way by market developments such as world oil price level

and perceived economic and product demand growth. That said, we do not see scope for

the overall effect on 2020 installed capacity to be major. We are too close now to 2020 for

many large new projects to emerge that could be placed on stream by the end of 2019.

Conversely, there is still time for new minor projects to appear and be implemented. We

captured much of that possibility in our 2020 WORLD Model cases by allowing for modest

levels of capacity debottlenecking and revamping over and above assessed projects.

5.2.2.2 Impact on Crude Runs & Prices

As illustrated in the Model results, a key component in the refining industry adapting to the

Global Sulphur Cap is the indicated need to increase crude runs, potentially by of the order

of 0.25 to 1.25 mb/d (approx. 12.5 – 62.5 mtpa). In the Model cases, we held marker crude

price constant in order to maintain consistency across cases. Yet it is clear that a (relatively

rapid) increase in crude oil demand at a non-trivial level would almost certainly lead to an

increase in global crude oil prices. This is a factor we have not taken into account but it

would further raise supply costs across all products worldwide as a result of the

implementation of the Global Sulphur Cap. Extensive academic work has been undertaken

on short and long term price elasticities of demand for crude oil but today’s tendency for

crude prices to respond to limited changes in the market signifies this is an effect that

should not be ignored in the assessment of supply cost impacts of the Global Sulphur Cap.

42 One exception to this is that the Swedish refiner PREEM has just announced a cooperation agreement with a United States company to develop a design basis for a residue hydrocracker (a very high cost process unit) with one of the stated driving forces being the impact of the pending Global Sulphur Rule is reducing the market for heavy fuel oil (http://www.constructionboxscore.com/project-news/preem-signs-major-cooperation-agreement-with-beowulf-energy.aspx). We are adding this project into our database but at a low classification level because of its early stage. Moreover, the announcement states that analysis and permitting stages alone would take 2 to 3 years; so, if the project were to go ahead, it would not be on stream until after 2020 given necessary construction time.

http://www.constructionboxscore.com/project-news/preem-signs-major-cooperation-agreement-with-beowulf-energy.aspx

http://www.constructionboxscore.com/project-news/preem-signs-major-cooperation-agreement-with-beowulf-energy.aspx


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Again, by not including an estimate for this effect, our analysis understates the cost of

compliance with the Global Sulphur Cap.43 Even a $1/barrel increase in crude oil price

would add on the order of $35 billion/year to global petroleum product supply costs, a

$5/barrel increase around $180 billion / year to cost increases already assessed at $400 to

$600 billion / year per Model cases depending on the scenario. (See Section 5.1.3.2.) The

market would eventually adapt and price elasticity effects would bring supply costs down.44

However, the potential for damage to the world’s economies from petroleum product price

spikes is well known.

5.2.2.3 Level of Global Demand and Call on Refining

The level of total global demand in 2020 is clearly a key factor that will influence the ease or

difficulty in adopting the Global Sulphur Cap; the higher the demand the greater the

difficulty and vice-versa.

As discussed in Section 4.3.2, in March, EnSys selected the November 2015 WEO New

Policies outlook which had 2020 global demand at 98.8 mb/d. We noted that the more

recent February 2016 MTOMR projected 2020 demand at a much higher 100.5 mb/d but felt

at the time this single outlook might be an outlier and thus opted for the WEO as more

‘central’. In mid-May, the EIA released its 2016 International Energy Outlook (IEO). This

projects 2020 demand at 100.3 mb/d, i.e. almost identical to the MTOMR projection. The

EIA has also made public its 2016 AEO Early Release. This has 2020 demand at 101.5 mb/d.

In addition, in a May 16th Wall Street Journal article, Daniel Yergin stated that “by 2020

world oil consumption could be 5.7 million barrels per day higher than this year’s 95.6

million”. This would appear to refer to a current IHS forecast for 2020, one that would total

101.3 mb/d.

In short, the most recent demand outlooks are shifting toward higher global demand

projected for 2020. There is of course uncertainty in these but, were EnSys to re-run WORLD

43 The aggregate supply costs projected in Section 5.1.4.2 include the changes in costs for marine as well as other fuels. We would note though that these cost increases will be reflected as increases in freight rates. To give one example, for a VLCC carrying medium sour crude from the Middle East to Japan, the freight rate increase in going from the 2020 Base Case to the Mid Switch High MDO case would be of the order of $0.25/barrel. (EnSys did not adjust up freight rates in the Global Fuel cases since we considered this would have brought in potential for double-counting given we do report the increase in supply costs across marine and other fuels.) 44 The WORLD Model is run on a ‘deterministic’ basis, i.e. with nearly all supply and demands fixed. We are thus simulating how the global refining, blending and logistics system can be expected to operate under that scenario. We do not generally incorporate elasticity effects. That said, petroleum product demand is known for being relatively price inelastic. Thus the sharp open market price increases envisaged under the Global Fuel cases would be unlikely to lead to rapid reductions in demand. The strain on markets could therefore be expected to persist for an extended period of time.


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cases with 2020 demand in the 100 – 101 mb/d range to be more in line with the latest

agency outlooks, the higher demand level would further exacerbate the difficulties being

projected. Again, the implication is that the current WORLD Model results may be

understating the difficulty and challenge to implement the Global Sulphur Cap.

Potentially offsetting this is the fact that perspectives on 2015 ‘demand’, allowing for

product inventory builds as well as actual consumption, have also been revised upward; and

the same has occurred for assessed 2015 refinery crude runs. Had EnSys 2015 WORLD

Model case been calibrated to these revised higher assessments, we would have adjusted

upward selected allowed maximum utilization rates in order to ‘hit’ supply costs and

differentials that were closely in line with published price data for 2015. These higher

allowed utilisations would have carried through into the 2020 cases, reducing to some

degree the added economic impacts from the Global Sulphur Cap. Overall, our view is that

these two global demand / refinery runs effects broadly offset each other.

As mentioned in Section 4.4, lower oil prices are tending to curb growth in non-crudes

supplies, adding to the load on refining. Again, the latest projections have lower supply, at

least for biofuels, than the WEO figure we are using. Reduced biofuels availability versus

our assumptions slightly tighten the Base Case outlook and raise Global Fuel case costs, all

else being equal.

On the other side of the ledger, we note that the WORLD Model 2020 Base Case shows

appreciable tightening in diesel–IFO price differentials versus 2015, i.e. levels that are at the

high end of recent history. One implication is that we may be overstating inland

diesel/gasoil demand (and / or that for jet and kerosene). Several recent press articles have

referred to a ‘diesel glut’. For example, a December 2015 Report (Issue 115) by BMI

Research states, “We expect persistent oversupply in the global diesel market, sustained

weakness in the Chinese economy and weaker European consumption growth to keep a lid

on diesel prices up to 2018, before a gradual easing of the global oil supply glut leads to a

modest uptick in diesel prices over 2018-2019.” Conversely, recent publications, including

the IEA in its latest Oil Market Report, point to how demand in India is rising strongly, thus

offsetting the slower pace of demand growth in China. Secondly, the same diesel glut

articles have referenced the possibility that a perceived diesel glut could lead to refinery

project deferrals. In that event, any reduction in projected 2020 diesel demand could well

be offset by reductions in capacity to produce the diesel, leaving us rather back where we

started.

Versus our original (April) demand assessment, EnSys did introduce a 0.25 mb/d reduction

in inland diesel demand and a corresponding increase of 0.25 mb/d in 2020 gasoline

demand to reflect the trends for a softening in diesel demand growth and a strengthening

(short term) in gasoline demand. To test the sensitivity of results to the level of diesel

demand, EnSys undertook 2020 sensitivity cases in which we reduced total global (inland)


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diesel fuel demand by a further 0.25 mb/d and raised that for gasoline by a further 0.25

mb/d. Thus total global demand remained unchanged. Also no elements in supply, refining

capacity or other premises were changed. The demand shift did bring gasoline and diesel

supply costs projected by the Model more closely into line than in our main case series.

Distillate – Gasoline differentials narrowed from $10.19/barrel (US Gulf Coast, Northwest

Europe, Singapore average) in our main series 2020 Base Case to $5.30/barrel in the

Diesel/Gasoline Adjusted Demand case.

Correspondingly, in the Global Sulphur Cap cases the impacts on total distillate product

supply costs were moderately lessened versus those in the main series cases; this because

the reduction in diesel demand created a less tight situation in the Base Case which then

also affected the Global Fuel cases. However, product supply costs for gasoline (and also

naphtha) were higher than in the main series cases because the higher gasoline Base Case

demand created to tighter starting point for gasoline for the Global Fuel cases. The net

effect was that switching diesel demand to gasoline led to no overall benefit in terms of

total global supply costs across all products combined. This, in our view, is because the first

order impact in the Global Fuel cases is a shift from heavy material to light and total light

product demand was not altered between the main series and the adjusted cases.

5.2.2.4 Global Crude Slate

As also noted in Section 4.4, there is uncertainty surrounding the outlook for crude oil

production, and light/medium/heavy mix. Reductions versus current expectations in output

from Canada, Venezuela, Mexico and/or Brazil would cut the volumes of heavy sour crude

on the market, with replacement potentially by lighter but still sour Middle East crude

grades. A return to prices above those projected in the WEO for 2020 (around $80/barrel

for IEA average import price) could lead to a resurgence in output of United States light

sweet tight oil. However, US E&P companies are currently declaring bankruptcy at a rapid

pace and so a conservative outlook would arguably be that any price increase would be met

by a relatively guarded increase in resources and development, not the supply surges seen

in the past few years. Also, producers of light sweet crude in Africa are currently struggling.

These and other trends could appreciably impact the global crude slate in either direction

but we believe it would not be appropriate to optimistically assume and plan on a scenario

in which quality improves substantially from where it stands today.

5.2.2.5 Marine Fuel Total Demand

The Navigistics marine fuel demand projections are based on the IMO 3rd GHG study with

allowance for a degree of vessel speedup. The overall impact on Base Case global marine

fuel demand is, however, modest; an increase from 5.7 mb/d (311 mtpa) in 2015 to 6.244


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mb/d (341 mtpa) in 2020. Any further increases, as through added global maritime trade

and/or vessel speed-up, would raise both total 2020 marine fuel demand and switch

volumes. Based on our analysis, it appears there could be more scope to the upside for

demand and switch volume than to the downside, i.e. for added rather than reduced

impacts from the Global Sulphur Cap. (The IMO 3rd GHG study, which was the basis for our

marine fuels demand outlook, was undertaken when oil prices were still above $100/barrel,

arguably constraining assessed outlooks for vessel speed-up and economic and trade

growth versus an evaluation based on today’s lower oil prices.)

Overall, our assessment is that the majority of the factors either inherent in the modelling

analysis or which would impact key premises regarding the 2020 outlook point to these

current Model results if anything understating rather than overstating the challenges in

meeting the Global Sulphur Cap in 2020.

5.3 Summary of Findings & Conclusions

Our demand analysis projects that a limited fraction of ships will be running with onboard

scrubbers by end 2019 and therefore that the bulk of the compliance load will fall on

refiners to supply 0.5% sulphur Global Fuel.

Given this outlook, Model results point to extreme difficulty – and indeed potential

infeasibility - for the refining sector to supply the needed fuel under the Global Sulphur Cap

and to simultaneously meet all other demand without surpluses or deficits. Market impacts

are projected as very substantial across all products and regions worldwide, not just marine

fuels, and, consequently, to have potentially significant impacts across economies and

sectors. Moreover, as stated above, we see the Model results if anything understating

rather than overstating the challenges in meeting the Global Sulphur Cap in 2020.

The WORLD Model results themselves indicate the global refining industry is unlikely to be

able to meet the needed extra sulphur removal demand because 2020 sulphur plant (and

hydrogen plant) capacity will not be adequate based on current capacity plus projects. The

projection is that these capacity limitations would prevent the industry from supplying the

volumes (and qualities) needed to achieve full compliance with the Global Sulphur Cap.

The Model results further show that, even if sufficient added sulphur plant and hydrogen

capacity were to become available, the industry could potentially meet the Global Fuel

volumes but only with attendant severe economic impacts in the form of substantial

increases in supply costs not only for marine fuels but also for nearly all fuels (except high

sulphur HFO) across all regions of the world. Refining economics would also be impacted

with potential adverse consequences for simpler refineries that could lead to more closures.


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Should the shipping industry be able to accept relatively new IFO 0.5% sulphur fuel

formulations, (versus marine distillate), that would moderately alleviate the economic

impacts of the fuel switch but this would almost certainly take time and is not guaranteed

given recent ship operational issues with 1% sulphur fuels. It should be born in mind that

achieving compliance using a higher proportion of LS IFO fuels does little or nothing to

change the issue regarding potentially inadequate sulphur plant capacity; this because the

sulphur removal load is unchanged.

In summary, we conclude that a full-on switch to the Global Sulphur standard in January

2020 does not look to be workable.

This study has been focussed on one question – if the Global Sulphur Cap is implemented in

full in January 2020 what is the impact? Any rigorous analysis of the follow-on implications

of our findings on this question is beyond the scope of this assignment. However, our

findings clearly beg the question of what would or could happen. Our judgement and

experience indicate that, if the rule were in full force with all refiners and shippers

attempting to comply, the impacts across all products (not just marine) worldwide would be

severe. Refiners would not be able to put capacity in rapidly to resolve the market strain –

even minor projects take one to two years to implement and major ones often three to as

much as seven.

Also, investment decisions specifically to address the marine fuels market are not

straightforward since the projected extreme price differentials caused by the shift to 0.5%

sulphur marine fuel would greatly enhance the economics of and arguably orders for

scrubbers. This would create the prospect of the proportion of vessels able to use HS marine

fuel growing over time, in turn cutting the volumes of Global Fuel needed. An expectation

of such a scenario would create a perceived risk that marine-fuel-specific refinery

investments could become ‘stranded’. This, in its turn, would cut the justification for and

likelihood of such investments occurring. For these and the other reasons elaborated here,

the refining industry would need time to adapt to the Global Sulphur Cap and the adverse

market impacts from the rule would take time to fade, with potential widespread economic

consequences in the interim.

We do not see any easy resolution of this situation. Even the possibility of alleviating the

market strain through the expansion of markets for HS HFO is uncertain, would take time

and would bring its own consequences including increases in crude oil and – potentially -


reallocation of HS fuel and emissions from ships to land rather than a net reduction in

sulphur emissions.


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6 Appendices

6.1 Background on the EnSys WORLD Model

The fuels availability analysis requires an advanced methodology which:

captures the producibility of marine fuels at different 2020 demand levels but also

the impacts on other fuels worldwide

correctly balances the whole global system while capturing the refining, blending

and trading flexibilities and interactions inherent in the system

i.e. is a fully integrated model of the complete global system and

enables different scenarios to be efficiently examined and quantified.

The methodology must also embody all the changes that are expected to occur between

today and 2020 encompassing: crude slate, non-crudes supply, refinery capacity, product

demand and quality shifts and logistics developments.

The EnSys WORLD Model embodies these capabilities and features. For over 27 years,

WORLD has been used to evaluate supply, demand, refining, trade and regulatory

developments in the global ”downstream” encompassing crude oils and non-crudes supply,

refining, trade and demand. Across at least 50 studies, WORLD clients and applications

include the following. For:

the European Commission, 2012 and 2015 assessments related to the Fuels

Quality Directive and to high biofuels scenarios

the OPEC Secretariat, a global downstream outlook every year since 2000 and

the downstream section of each OPEC World Oil Outlook since 2007

the United States Department of Energy, multiple studies since 1988 concerning

both reformulated fuels policies and disrupted markets (Office of Strategic

Petroleum Reserve)

the United States Department of State, 2010, 2011 and 2014 evaluations of the

United States and global refining and market impacts of Keystone XL and other

potential logistics scenarios

the American Petroleum Institute on studies of ultra-low sulphur diesel

regulations, climate bills (including Waxman-Markey in 2009) and of the United

States crude exports (2014)

the World Bank, a 2009 review of the ability of sub-Saharan African refineries to

meet tighter sulphur regulations for gasoline and diesel as part of a plan to

improve health in the region


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a European process technology supplier, 2010 evaluation of the outlook for

hydro-processing capacity additions and the associated regional and global

catalyst market

various major oil companies, assessments ranging from the impact on refinery

GHG emissions of processing more Canadian synthetic crude oil to the market

impacts of rising GTL liquids supply to detailed assessments and implications of

refining developments in the United States and in Asia.

Within this body of experience is contained an array of major projects focussed specifically

on marine fuels, notably:

for the United States EPA, 2006 through 2009 studies in support of the United

States ECA submission to the IMO. This was a landmark set of studies for EnSys

and Navigistics in terms of building the capability for rigorous marine fuels

demand and availability analyses which we have since applied. Navigistics led a

project to develop rigorous fleet and trade based projections of marine fuel

demand, an update for which was completed in 2015.

for the IMO as input to MARPOL Annex VI, an evaluation of a range of 2020

partial and total conversion (to distillate) scenarios with emphasis on the impacts

on incremental refining investments needed, total and incremental supply costs

across all petroleum products (not just marine fuels) and effects on marine fuel

and refinery CO2 emissions45,46

for the American Petroleum Institute and IPIECA, related studies at the same

time examining alternative regulations, including for a 1% instead of 0.5%

sulphur standard

a 2015 fuel supply evaluation in support of Mexico’s planned ECA submission

a 2015 initial assessment of alternative marine fuels supply/demand outlooks in

2020 and 2025 under the Global Sulphur Cap.

Unlike “refining” models, WORLD encompasses total “liquids” supply and demand; so

including the important contributions of biofuels, GTL/CTL liquids and Natural Gas Liquids

(NGL’s) as well as crude oil. The Model is designed to work with and to sum to the total

global “top down” projections produced by the IEA, EIA and others. New projections from

these institutions are integrated into the WORLD Model as a matter of course.

45 See Analysis of Impacts on Global Refining & CO2 Emissions of Potential Regulatory Scenarios for International Marine Bunker Fuels, Final Report, Prepared for International Maritime Organisation Expert Fuels Group, EnSys Energy & Navigistics, Nov 2007. 46 We note that the volume of IFO switched to marine distillate under the total conversion case was 6.75 million b/d.


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WORLD embodies “bottom up” detail on the global downstream, including nearly 200 crude

types, breakdown of NGL’s and biofuels, process capacity data on every refinery worldwide,

detailed representation of refinery investment options, detailed representation of inter-

regional crude, non-crudes, intermediates and product movements – pipeline, marine (with

freight based on WorldScale) and other modes such as rail, detailed representation of

products with grade breakdowns and associated qualities across key specifications. Every

WORLD case combines a top down global price/supply/demand outlook (e.g. from the IEA

MTOMR or WEO) for a given horizon, such as 2020, with the bottom up detail and generates

a simulation of how the industry is likely to operate under this scenario.

Key WORLD outputs include:

physical data on refinery throughputs and crude slates, secondary operations, product

blending, yields/production by product, CO2 emissions, refinery capacity additions by

process (for longer term cases), crude and products inter-regional trade and

economic data on cost of refinery investments, crude and product open market prices by

region by crude and product, (based on an input world marker crude price), hence price

differentials and refiner crack spreads/margins and regional and global product supply costs

with breakdown by major product group.

Inputs and results are presented for each of the current 23 regions in the model, with

facilities to aggregate reports to the “super region” and global levels.

Because WORLD integrates within one modelling framework all the elements in the global

downstream industry, it captures within every case the interactions between regions and

between products. Also, supply and demand must balance. Crudes and resulting blend

stocks have be dealt with / absorbed with the global system; they cannot be simply

rendered surplus or deficit. Such capabilities are essential in this study, as others, in order

to capture both the efficiencies and flexibility that can be present in the industry (which

depends largely on the balance existing at the time between crude slate, refinery capacity

and demand make-up) and the impacts that a change in regulations in one sector, in this

case marine fuels, can have on other sectors, notably product price differentials and supply

costs for non-marine fuels, especially diesel and other distillates.

WORLD is geared to be able to address a range of different horizons or scenarios efficiently.

This provides substantial power in enabling an array of sensitivity cases (variations in

premises / scenarios) to be evaluated off a base case. Again, such capability is critical in this

study since it is essential to provide not just one “centre line” case but a range of cases that

cover the spectrum of plausible fuels demand / switch volume and availability scenarios in

2020.


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The WORLD Model is capable of addressing questions related to essentially any aspect of

the global downstream but embodies specific features and capabilities regarding marine

fuels. As indicated above, EnSys built a series of key enhancements into the WORLD Model

during our 2006 – 2009 work for the EPA, API and IMO. As documented in our March 2009

report for the EPA47, these included:

o a major expansion of the detail with which WORLD represents marine

bunker fuels, their demand, types, specifications, and blending

o the ability to switch between “IEA” and “IMO” marine fuel demand bases

o a detailed review of actual marine bunker grades and qualities in the

marketplace

o blending and processing constraints to ensure bunker fuel stability

o extensions to compute CO2 emissions from refineries and from the

combustion of marine fuels, based on their type.

All these features have been maintained and underpin this study.

Additional information on WORLD is available from EnSys Energy. A Features brochure sets

out the detail of refinery processes and modes, product types and specifications and other

relevant factors.

47 Global Trade and Fuels Assessment— Additional ECA Modeling Scenarios Final Report, Prepared for Barry Garelick, Russ Smith, the United States Environmental Protection Agency, Office of Transportation and Air Quality, March 2009.


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6.2 Refinery Projects Detail

6.2.1 Projects 2016-2019 Included

The following table list the main refinery projects considered by EnSys as potentially being completed between the beginning of 2016 and the

end of 2019. As discussed in Section 4.10, these include projects we have assessed as Class 5, 4 or 3 and exclude less certain projects we have

classified as 2 or 1. Major projects are listed individually by region together with aggregate distillation capacity for minor projects. The totals

for each region sum to the unadjusted totals presented in Exhibit 4-17.

Region Country Company Location/Refinery Capacity ('000 bpcd)

Estimated Completion

Class 3 Projects (*)

Asia Pacific China Yatong Petrochemical Dongying 100 2016 Asia Pacific China CNOOC Zhongjie 70 2016 *

Asia Pacific China CNOOC Shandong Haihua 60 2016 Asia Pacific China CNOOC Taizhou 60 2016 *

Asia Pacific China CNOOC Huizhou 200 2017 Asia Pacific China PetroChina Anning, Kunming 200 2017 *

Asia Pacific Others(1) CPC Talin/Dalin (Kaohsiung City) 150 2017

Asia Pacific Republic of Korea Hyundai Oilbank

Daesan Refinery (south of Seoul) 140 2017

Asia Pacific India NOCL Cuddalore 120 2017 *

Asia Pacific India BPCL Kochi 120 2017 *

Asia Pacific China PetroChina Renqiu (Huabei) 100 2017 *

Asia Pacific Viet Nam Petrovietnam JV Nghi Son, Thanh Hoa 200 2018 Asia Pacific China Sinopec Hainan (Yangpu Zone) 100 2018 *

Asia Pacific China Huajin Petrochemicals Lianoning 80 2018 *

Asia Pacific China Sinochem Quanzhou 60 2018 *


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Asia Pacific China Hengli Petrochemical & Refinery Changxing Island, Liaoning 380 2019

Asia Pacific China Sinopec Caofeidian, Hebei 240 2019 *

Asia Pacific China Sinopec Shanghai Gaoqiao 140 2019 *

Asia Pacific China Sinopec Jingmen 100 2019 *

Asia Pacific India BPCL Numaligarh 120 2019 *

Asia Pacific India IOCL Koyali, Gujarat 86 2019 *

Asia Pacific Sri Lanka Ceylon Petroleum Sapugaskanda 50 2019 *

Minor Projects (aggregated) 219

Total Projects 3095 (1) Taiwan Province of China




Europe Turkey SOCAR Izmir, Aliaga (STAR) 207 2018 *


Total Projects 207




FSU Russian

Federation Tatneft (Taneco) Nizhnekamsk 140 2017


Total Projects 305


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Middle East Qatar Laffan Refinery Co. Ltd. Laffan 139 2016

Middle East

Islamic Republic of Iran Persian Gulf Star Bandar Abbas 120 2016

Middle East

Islamic Republic of Iran Persian Gulf Star Bandar Abbas 120 2017 *

Middle East Oman Orpic Sohar 82 2017 Middle East Saudi Arabia Saudi Aramco Rabigh 50 2017 Middle East Bahrain BAPCO Sitra 93 2018 *

Middle East Iraq Quiwan Baizan 50 2018 *

Middle East Saudi Arabia Saudi Aramco Jizan (Jazan) 400 2019 Middle East Kuwait KNPC Mina al-Abdulla 184 2019

Middle East

Islamic Republic of Iran NIOC (Siraf Refinery) Assaluyeh 120 2019 *

Middle East Iraq KAR Oil Refining Erbil 60 2019 *


Total Projects 1,478


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Africa Egypt Midor Alexandria 60 2018 *

Angola Sonangol Lobito 120 2019

Algeria Sonatrach Tiaret 90 2019


Total Projects 295




Latin America Brazil Petrobas Pernambuco (Abreu e Lima) 115 2018


Total Projects 176


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Region Country State Company Location/Refinery Capacity ('000 bpcd)



North America United States TX Phillips 66 Sweeny 100 2016 North America United States TX Valero Energy Houston 90 2016 North America United States TX Valero Energy Corpus Christi 70 2016 North America United States TX Buckeye and Trafigura Corpus Christi 50 2016 North America United States TX Magellan Corpus Christi 50 2016 North America United States TX Centurion Terminals Brownville 50 2016 North America United States TX Castleton Commodities Corpus Christi 100 2017 *

North America Canada - Northwest Redwater Redwater 50 2018 North America United States TX Marathon TexasCity/Galveston Bay 50 2019 *

North America Mexico - PEMEX Tula Hidalgo 40 2019 *


Total Projects 845


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6.2.2 Projects Post 2019 Excluded

Region Country City or Project Name Company Capacity (thousand bpd) Completion Date* Comment

2020-2021 Total 2020-2021 3,450

Africa Nigeria Olokola Dangote Group 400 2020 reports vary from 400 to 650

Africa South Africa Mthombo

PetroSA /

Sinopec 360 2020

Asia Pacific China Zhanjiang, GD Sinopec / KPC 300 2020

Asia Pacific India Mumbai, MH BPCL 60 2020

Asia Pacific India Bhatinda (Bathinda)

HPCL / Mittal

Energy 50 2020

Asia Pacific India Mumbai, MH (Mahul) HPCL 70 2020

Asia Pacific Malaysia

Johor, Pengerang (RAPID

Project) Petronas 300 2020

Latin

America Ecuador Manabi (Pacific Refinery)

Petroecuador /

CNPC 200 2020

Middle East Saudi Arabia Ras Tanura and Rabigh Saudi Aramco 0 2020 Clean fuels program

Asia Pacific China Jieyang CNPC / PDVSA 200 2021

Asia Pacific Viet Nam Nhon Hoi, Binh Dinh

PTT / Saudi

Aramco 660 2021

Asia Pacific Viet Nam Dung Quat, Quang Ngai

Petrovietnam /

Gazprom Neft 70 2021

Latin

America Brazil

Rio de Janeiro (COMPERJ

project) Petrobras 165 2021

Middle East Kuwait Al Zour KNPC 615 2021

Selected Major Refinery Projects with Uncertainty ("Class 3")


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6.3 WORLD Model Results – Detail

6.3.1 Refinery Operations – 2020 Base Case


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REPORTS 2020 REFINERY INVESTMENT $BILLION ($2015)

Global United States CanadaLatin

AmericaEurope FSU Africa Middle East Pac Ind China Other Asia

REVAMP 1.33$ 0.14$ 0.05$ 0.21$ 0.11$ 0.34$ 0.05$ -$ -$ 0.14$ 0.29$

DEBOTTLENECKING 2.92$ 1.68$ 0.08$ 0.03$ 0.48$ 0.44$ 0.05$ 0.03$ 0.02$ 0.06$ 0.04$

MAJOR NEW UNITS -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

API REVAMP -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

TOTAL REFINING 4.26$ 1.82$ 0.13$ 0.24$ 0.59$ 0.78$ 0.10$ 0.03$ 0.02$ 0.20$ 0.34$

REPORTS 2020 ATMOS DISTILLATION

Capacity & AdditionsGlobal United States Canada

Latin


million bpcd nameplate capacity

Base Capacity (data) 95.66 18.23 1.83 7.97 15.27 8.03 4.21 9.15 3.73 13.15 14.10

Additions

Known Projects (data) 5.64 0.69 0.05 0.21 0.15 0.28 0.28 1.36 0.14 1.69 0.78

Debottlenecking (WORLD) 0.36 0.19 0.02 0.00 0.02 0.00 0.00 0.03 0.01 0.04 0.04

Major New Units (WORLD) - - - - - - - - - - -

Total Additions 6.00 0.88 0.07 0.21 0.17 0.28 0.28 1.39 0.15 1.73 0.82

Total Operating Capacity 101.66 19.11 1.90 8.18 15.44 8.31 4.49 10.53 3.89 14.88 14.92

Crude Throughput 82.03 15.65 1.66 6.10 13.16 6.63 2.53 7.900 3.38 12.35 12.66

Refinery Utilisation 80.7% 81.9% 87.4% 74.6% 85.2% 79.8% 56.3% 75.0% 87.1% 83.0% 84.9%

Average API 33.86 32.17 33.03 29.40 35.84 33.84 35.75 35.10 35.87 33.25 34.16

Average Sulphur 1.22% 1.4% 1.0% 1.1% 1.0% 1.3% 0.9% 1.6% 1.2% 0.9% 1.4%

REPORTS 2020 VACUUM DISTILLATION


Latin




Additions

Known Projects (data) 1.41 0.02 - 0.23 0.08 0.01 0.10 0.36 - 0.51 0.10

Debottlenecking (WORLD) 0.04 0.00 0.00 0.00 0.00 - 0.00 0.01 - 0.02 0.01


Total Additions 1.44 0.02 0.00 0.23 0.08 0.01 0.10 0.36 - 0.53 0.11


Throughput 25.45 5.42 0.40 2.26 4.65 2.00 0.52 1.95 0.81 4.32 3.12

Utilizations 66.4% 63.2% 67.3% 59.2% 70.8% 62.2% 45.2% 67.8% 48.4% 75.8% 75.1%


July 15, 2016

146

REPORTS 2020 TOTAL COKING


Latin




Additions

Known Projects (data) 1.14 0.04 0.05 0.26 0.08 0.17 0.02 0.28 - 0.16 0.07

Debottlenecking (WORLD) 0.02 0.02 0.00 0.00 0.00 0.00 0.00 - 0.00 - 0.00


Total Additions 1.16 0.06 0.05 0.26 0.08 0.17 0.02 0.28 0.00 0.16 0.07


Throughput 6.18 2.55 0.09 0.67 0.57 0.32 0.06 0.16 0.08 1.14 0.54

Utilizations 67.3% 83.3% 88.4% 63.3% 72.3% 66.1% 58.6% 27.8% 82.4% 56.6% 59.9%

REPORTS 2020 TOTAL FCC


Latin




Additions

Known Projects (data) 0.75 0.02 - 0.05 - 0.13 0.05 0.10 0.04 0.23 0.12



Total Additions 0.84 0.08 0.00 0.06 0.01 0.14 0.05 0.10 0.04 0.24 0.13


Throughput Total million bpd 14.03 4.81 0.40 1.12 1.78 0.67 0.16 0.60 0.83 2.22 1.44

Utilizations 76.2% 83.8% 78.9% 66.6% 81.6% 74.1% 52.2% 65.2% 77.8% 69.4% 75.7%

As % of Nameplate Calendar Day Capacity

Resid feed million bpd 3.49 1.25 0.12 0.29 0.13 0.19 0.03 0.19 0.26 0.71 0.32

Resid as % Total 25% 26% 30% 26% 7% 29% 21% 31% 31% 32% 22%

Conversion bbls mb/d 1,021.95 350.17 29.44 81.72 128.16 47.43 11.52 42.86 60.03 166.70 103.92

Conversion % 72.8% 72.8% 73.9% 72.9% 72.1% 70.3% 72.3% 71.7% 72.6% 75.0% 72.0%

REPORTS 2020 TOTAL HCR (VGO+RESID)


Latin




Additions




Total Additions 1.04 0.15 0.02 0.03 0.10 0.25 0.07 0.12 0.00 0.29 0.01


Throughput 7.66 1.83 0.15 0.18 1.58 0.50 0.13 0.67 0.13 1.43 1.07

Utilizations 78.0% 87.6% 87.4% 66.3% 78.1% 75.8% 52.7% 68.8% 80.5% 76.3% 78.1%


July 15, 2016

147

REPORTS 2020 TOTAL DISTILLATE DESULFURIZATION


Latin




Additions


Debottlenecking (WORLD) - - - - - - - - - - -


Total Additions 1.81 0.11 0.04 0.26 0.07 0.33 0.14 0.40 0.03 0.24 0.20

Total Operating Capacity Net 29.14 5.60 0.57 2.38 5.33 2.37 0.96 2.61 2.30 3.20 3.84

Throughput 22.47 5.10 0.50 1.34 4.28 1.77 0.51 1.80 1.52 2.57 3.08

Utilizations 77.1% 91.0% 88.7% 56.3% 80.2% 74.8% 53.8% 69.1% 66.1% 80.2% 80.3%

REPORTS 2020 VGO/FCC FEED HDS


Latin




Additions

Known Projects (data) 0.41 - - 0.04 - 0.08 - 0.18 0.01 0.04 0.06



Total Additions 0.41 - - 0.04 - 0.08 - 0.18 0.01 0.04 0.06


Throughput 5.23 2.06 0.08 0.27 1.08 0.23 0.02 0.21 0.40 0.15 0.73

Utilizations 70.0% 77.8% 57.0% 63.7% 67.4% 66.7% 53.2% 70.7% 54.4% 65.7% 71.8%

REPORTS 2020 TOTAL RESID HDS


Latin



Base Capacity (data) 1.85 0.18 0.04 - 0.13 - 0.01 0.26 0.46 0.20 0.57

Additions

Known Projects (data) 0.19 - - 0.01 - - - 0.15 - 0.01 0.01



Total Additions 0.19 - - 0.01 - - - 0.15 - 0.01 0.01

Total Operating Capacity 2.04 0.18 0.04 0.01 0.13 - 0.01 0.41 0.46 0.22 0.58

Throughput 1.25 0.16 0.03 - 0.07 - - 0.26 0.14 0.16 0.44

Utilizations 61.4% 89.1% 86.5% 0.0% 50.3% 0.0% 0.0% 62.7% 29.3% 74.8% 75.3%


July 15, 2016

148

REPORTS 2020 TOTAL HYDROGEN PLANT

million SCFD Basis


Latin


million SCF/cd nameplate capacity

Base Capacity (data) 23,732 5,879 414 1,413 4,302 1,107 407 2,405 956 2,656 4,193

Additions

Known Projects (data) 3,704 138 53 285 140 314 112 840 - 1,303 519

Debottlenecking (WORLD) 619 400 10 - 127 75 7 - - - -


Total Additions 4,323 538 62 285 267 389 120 840 - 1,303 519

Total Operating Capacity 28,055 6,417 476 1,698 4,569 1,496 527 3,244 956 3,959 4,712

Throughput 20,976 5,567 393 666 4,334 1,106 225 1,817 830 3,084 2,956

Utilizations 74.8% 86.7% 82.6% 39.2% 94.9% 73.9% 42.7% 56.0% 86.8% 77.9% 62.7%

base capacity adjusted to include known or estimated merchant plant capacity

REPORTS 2020 SULFUR RECOVERY ST/D


Latin


STPcd nameplate capacity

Base Capacity (data) 128,181 38,865 1,874 7,738 18,050 6,514 3,634 12,940 8,354 8,594 21,619

Additions

Known Projects (data) 13,366 230 175 1,061 163 1,441 575 2,913 - 4,865 1,944

Debottlenecking (WORLD) 310 - - - 60 220 30 - - - -


Total Additions 13,676 230 175 1,061 223 1,661 605 2,913 - 4,865 1,944

Total Operating Capacity 141,858 39,095 2,049 8,799 18,272 8,175 4,239 15,853 8,354 13,459 23,563

Throughput 69,131 21,700 1,177 3,460 9,374 4,070 739 7,260 3,516 6,224 11,611

Utilizations 48.7% 55.5% 57.4% 39.3% 51.3% 49.8% 17.4% 45.8% 42.1% 46.2% 49.3%

REPORTS 2020 TOTAL CAT REFORMING


Latin




Additions




Total Additions 0.59 0.00 - 0.03 0.02 0.02 0.06 0.21 - 0.18 0.06

Revamps RFH/RFC Net - - - - - - - - - - -


Throughput 9.84 2.81 0.27 0.44 1.70 0.76 0.26 0.78 0.57 0.92 1.33

Utilizations 69.1% 73.6% 78.1% 61.7% 72.7% 64.1% 47.1% 63.8% 61.5% 70.3% 72.8%


July 15, 2016

149

6.3.2 Refinery Operations – 2020 Mid Switch High MDO Case


July 15, 2016

150

REPORTS 2020 REFINERY INVESTMENT $BILLION ($2015)

Global United States CanadaLatin


REVAMP 1.93$ 0.15$ 0.05$ 0.25$ 0.53$ 0.35$ 0.04$ 0.09$ -$ 0.18$ 0.29$

DEBOTTLENECKING 11.84$ 2.47$ 0.13$ 0.13$ 3.50$ 1.38$ 0.24$ 0.94$ 0.79$ 1.25$ 1.00$

MAJOR NEW UNITS -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

API REVAMP -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

TOTAL REFINING 13.77$ 2.62$ 0.19$ 0.38$ 4.03$ 1.73$ 0.28$ 1.03$ 0.79$ 1.42$ 1.30$

REPORTS 2020 ATMOS DISTILLATION


Latin




Additions




Total Additions 6.09 0.91 0.07 0.23 0.20 0.30 0.28 1.39 0.15 1.73 0.82


Crude Throughput 82.73 16.32 1.66 6.12 13.15 6.68 2.49 7.900 3.38 12.37 12.66

Refinery Utilisation 81.3% 85.2% 87.3% 74.7% 85.1% 80.2% 55.4% 75.0% 87.0% 83.1% 84.9%

Average API 34.05 31.53 33.75 29.73 35.00 33.99 36.95 35.95 34.84 32.74 35.66

Average Sulphur 1.21% 1.4% 0.9% 1.1% 1.1% 1.3% 0.8% 1.6% 1.3% 1.0% 1.3%

REPORTS 2020 VACUUM DISTILLATION


Latin




Additions


Debottlenecking (WORLD) 0.06 0.01 - 0.00 0.01 0.00 0.00 0.01 - 0.02 0.01


Total Additions 1.47 0.03 - 0.23 0.08 0.01 0.10 0.36 - 0.53 0.12


Throughput 26.50 5.67 0.41 2.43 4.74 2.25 0.60 1.95 0.94 4.32 3.20

Utilizations 69.1% 66.0% 68.4% 63.7% 72.1% 69.7% 52.4% 67.8% 55.8% 75.8% 77.1%


July 15, 2016

151

REPORTS 2020 TOTAL COKING


Latin




Additions




Total Additions 1.20 0.08 0.05 0.26 0.09 0.17 0.02 0.28 0.00 0.17 0.07


Throughput 7.32 2.74 0.09 0.74 0.64 0.36 0.06 0.40 0.08 1.49 0.71

Utilizations 79.4% 88.8% 88.4% 69.8% 81.5% 74.7% 58.6% 70.8% 82.4% 73.8% 77.9%

REPORTS 2020 TOTAL FCC


Latin




Additions

Known Projects (data) 0.75 0.02 - 0.05 - 0.13 0.05 0.10 0.04 0.23 0.12



Total Additions 0.85 0.09 0.00 0.06 0.01 0.14 0.05 0.10 0.04 0.24 0.13


Throughput Total million bpd 14.04 4.85 0.40 1.13 1.74 0.67 0.16 0.60 0.90 2.19 1.41

Utilizations 76.2% 84.3% 78.9% 67.0% 79.9% 74.1% 51.1% 65.1% 84.2% 68.4% 73.9%

As % of Nameplate Calendar Day Capacity

Resid feed million bpd 4.67 1.44 0.12 0.32 0.47 0.19 0.04 0.18 0.28 1.07 0.56

Resid as % Total 33% 30% 31% 28% 27% 28% 28% 31% 31% 49% 39%

Conversion bbls mb/d 1,018.33 354.37 29.55 80.82 123.14 47.60 11.32 44.17 61.20 164.36 101.80

Conversion % 72.5% 73.1% 74.2% 71.6% 70.8% 70.6% 72.6% 74.0% 68.4% 75.0% 72.3%

REPORTS 2020 TOTAL HCR (VGO+RESID)


Latin




Additions




Total Additions 1.05 0.15 0.02 0.03 0.10 0.25 0.07 0.12 0.00 0.29 0.01


Throughput 7.77 1.83 0.15 0.18 1.60 0.50 0.13 0.68 0.13 1.43 1.15

Utilizations 79.1% 87.8% 87.4% 66.3% 79.1% 75.8% 52.7% 69.9% 80.5% 76.3% 83.8%


July 15, 2016

152

REPORTS 2020 TOTAL DISTILLATE DESULFURIZATION


Latin




Additions




Total Additions 1.81 0.11 0.04 0.26 0.07 0.33 0.14 0.40 0.03 0.24 0.20


Throughput 22.27 5.12 0.51 1.37 4.24 1.75 0.51 1.77 1.56 2.44 3.01

Utilizations 76.4% 91.4% 89.8% 57.5% 79.4% 73.9% 53.7% 67.9% 68.0% 76.2% 78.4%

REPORTS 2020 VGO/FCC FEED HDS


Latin




Additions

Known Projects (data) 0.41 - - 0.04 - 0.08 - 0.18 0.01 0.04 0.06



Total Additions 0.41 - - 0.04 - 0.08 - 0.18 0.01 0.04 0.06


Throughput 5.58 2.11 0.08 0.26 1.19 0.25 0.02 0.21 0.56 0.17 0.74

Utilizations 74.8% 79.4% 56.8% 61.9% 74.2% 72.9% 53.9% 70.7% 76.1% 74.5% 72.6%

REPORTS 2020 TOTAL RESID HDS


Latin



Base Capacity (data) 1.85 0.18 0.04 - 0.13 - 0.01 0.26 0.46 0.20 0.57

Additions

Known Projects (data) 0.19 - - 0.01 - - - 0.15 - 0.01 0.01



Total Additions 0.19 - - 0.01 - - - 0.15 - 0.01 0.01

Total Operating Capacity 2.04 0.18 0.04 0.01 0.13 - 0.01 0.41 0.46 0.22 0.58

Throughput 1.32 0.16 0.03 0.01 0.10 - 0.00 0.18 0.21 0.16 0.46

Utilizations 64.8% 89.1% 86.5% 66.5% 77.4% 0.0% 63.8% 45.2% 44.5% 74.8% 79.1%


July 15, 2016

153

REPORTS 2020 TOTAL HYDROGEN PLANT

million SCFD Basis


Latin


million SCF/cd nameplate capacity

Base Capacity (data) 23,732 5,879 414 1,413 4,302 1,107 407 2,405 956 2,656 4,193

Additions

Known Projects (data) 3,704 138 53 285 140 314 112 840 - 1,303 519

Debottlenecking (WORLD) 1,822 482 17 - 589 166 21 - 233 314 -


Total Additions 5,526 620 70 285 729 481 134 840 233 1,617 519

Total Operating Capacity 29,258 6,499 483 1,698 5,031 1,588 541 3,244 1,189 4,273 4,712

Throughput 22,469 5,621 401 673 4,783 1,181 237 1,996 1,032 3,495 3,050

Utilizations 76.8% 86.5% 83.0% 39.6% 95.1% 74.4% 43.8% 61.5% 86.8% 81.8% 64.7%

base capacity adjusted to include known or estimated merchant plant capacity

REPORTS 2020 SULFUR RECOVERY ST/D


Latin


STPcd nameplate capacity

Base Capacity (data) 128,181 38,865 1,874 7,738 18,050 6,514 3,634 12,940 8,354 8,594 21,619

Additions

Known Projects (data) 13,366 230 175 1,061 163 1,441 575 2,913 - 4,865 1,944

Debottlenecking (WORLD) 9,560 220 20 - 2,700 1,140 190 1,970 - 1,180 2,140


Total Additions 22,926 450 195 1,061 2,863 2,581 765 4,883 - 6,045 4,084

Total Operating Capacity 151,108 39,315 2,069 8,799 20,912 9,095 4,399 17,823 8,354 14,639 25,703

Throughput 79,352 23,652 1,226 3,810 11,140 4,621 1,000 8,160 4,264 7,876 13,603

Utilizations 52.5% 60.2% 59.3% 43.3% 53.3% 50.8% 22.7% 45.8% 51.0% 53.8% 52.9%

REPORTS 2020 TOTAL CAT REFORMING


Latin




Additions




Total Additions 0.59 0.00 - 0.03 0.02 0.02 0.06 0.21 - 0.18 0.06

Revamps RFH/RFC Net - - - - - - - - - - -


Throughput 9.97 2.91 0.28 0.44 1.71 0.78 0.26 0.78 0.54 0.92 1.36

Utilizations 70.1% 76.2% 80.9% 61.8% 73.3% 65.7% 47.1% 64.0% 57.5% 70.3% 74.4%


July 15, 2016

154

6.3.3 Refinery CO2 Emissions

2015: Base

Case

Calibration

2015: Base

Case

Adjusted

2020: Base

No 0.5%

Fuel

2020: Low

Switch High

MDO

2020: Mid

Switch High

MDO

2020: High

Switch High

MDO

2020: Low

Switch Low

MDO

2020: Mid

Switch Low

MDO

2020: High

Switch

Low MDO

Global Refinery CO2 Emissions million tonnes / year

ex H2 Plant 104 110 127 135 136 137 133 134 134

ex RFO 0 0 0 0 0 0 0 0 0

- Natural Gas 249 253 261 266 267 268 262 264 265

- Process Gas 373 375 385 397 397 397 393 392 392

- Resids 68 68 59 59 59 59 59 59 59

- FCC Coke 125 122 126 137 139 139 132 132 133

- Other 0 0 0 0 0 0 0 0 0

Total ex RFO 814 818 831 859 862 864 846 847 848

ex Sulfur Plant Tail Gas Unit 3 3 3 3 3 3 3 3 3

ex Flare Loss 43 43 46 46 46 46 46 46 46

Total ex Refinery 964 973 1006 1043 1048 1050 1028 1030 1032

Total ex Petroleum Coke 362 356 354 447 447 447 428 424 421

Total ex Refinery Incl Petroleum Coke 1326 1329 1360 1490 1495 1498 1455 1454 1453

Change vs 2020 Base Case million tonnes / year (excl pet coke) 37 41 44 21 24 25

Change vs 2020 Base Case % 3.7% 4.1% 4.4% 2.1% 2.4% 2.5%

Change vs 2020 Base Case million tonnes / year (incl pet coke) 130 134 137 95 94 92

Change vs 2020 Base Case % 9.5% 9.9% 10.1% 7.0% 6.9% 6.8%



July 15, 2016

155

6.3.4 Crude and Product Movements – 2020 Base Case


July 15, 2016

156

Case Horizon: 2020 Description: 2020: Base No 0.5% Fuel

Crude Oil Movements MILLION BPD

Total

Exports

Total

Local +

Exports

Producing Regions 43.03

United

StatesCanada

Latin


Middle

EastPacInd China Other Asia/Pac

United States 0.98 9.00 8.01 0.29 0.20 0.00 0.00 0.00 0.00 0.49 0.00 0.00

Canada 3.10 4.01 2.37 0.91 0.00 0.00 0.25 0.00 0.00 0.13 0.35 0.00

Latin America 5.53 10.12 2.46 0.16 4.59 0.01 1.44 0.00 0.00 0.00 0.58 0.89

Africa 4.80 6.40 0.10 0.24 1.22 1.60 2.59 0.00 0.00 0.21 0.33 0.11

Europe 0.58 3.04 0.00 0.00 0.00 0.00 2.46 0.00 0.00 0.58 0.00 0.00

FSU 5.98 12.73 0.00 0.06 0.00 0.23 3.25 6.75 0.10 0.00 2.34 0.00

Middle East 20.99 28.81 2.70 0.00 0.11 0.72 3.19 0.00 7.82 1.86 3.90 8.50

PacInd 0.67 0.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.24 0.43

China 0.00 4.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.36 0.00

Other Asia/Pac 0.38 3.15 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.08 0.29 2.76

Total Imports 43.03 7.65 0.75 1.54 0.96 10.73 0.00 0.10 3.35 8.03 9.93

82.35 15.67 1.66 6.13 2.56 13.19 6.75 7.92 3.40 12.39 12.69

NON CRUDES PRODUCTS & INTERMEDIATES TOTAL TRADE - MILLION BPD

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 3.86 25.13 21.28 0.32 2.06 0.39 0.43 0.00 0.00 0.15 0.29 0.20

Canada 1.31 2.66 0.58 1.36 0.04 0.04 0.18 0.00 0.00 0.29 0.06 0.12

Latin America 1.25 7.76 0.37 0.16 6.51 0.08 0.22 0.00 0.00 0.10 0.13 0.19

Africa 0.78 3.33 0.31 0.00 0.04 2.55 0.33 0.00 0.00 0.00 0.00 0.11

Europe 3.33 14.75 0.65 0.19 0.82 1.07 11.42 0.14 0.04 0.07 0.12 0.23

FSU 3.28 7.11 1.01 0.00 0.00 0.26 1.52 3.82 0.00 0.06 0.01 0.42

Middle East 3.24 10.11 0.01 0.10 0.10 0.29 0.04 0.00 6.86 0.17 0.00 2.54

PacInd 0.40 3.95 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.55 0.06 0.34

China 0.43 12.45 0.00 0.00 0.00 0.00 0.00 0.00 0.33 0.11 12.01 0.00

Other Asia/Pac 1.87 13.96 0.07 0.02 0.00 0.08 0.01 0.00 1.03 0.47 0.19 12.10

Total Imports 19.74 3.00 0.78 3.06 2.22 2.72 0.14 1.40 1.41 0.85 4.16

101.20 24.28 2.14 9.57 4.77 14.14 3.96 8.27 4.96 12.86 16.26

REFINERY PRODUCTS & INTERMEDIATES + NON CRUDES PRODUCTS & INTERMEDIATES

(INCLUDING US PETCOKE EXPORTS)

Consuming Regions

Consuming Regions


July 15, 2016

157

Refined Products Movements MMBPD PETCHEM NAPHTHA

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.23 0.43 0.20 0.02 0.00 0.00 0.09 0.00 0.00 0.12 0.00 0.00

Canada 0.00 0.06 0.00 0.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.01 0.43 0.00 0.01 0.42 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.15 0.20 0.00 0.00 0.00 0.06 0.12 0.00 0.00 0.00 0.00 0.02

Europe 0.15 0.91 0.00 0.00 0.00 0.00 0.75 0.00 0.00 0.00 0.00 0.15

FSU 0.08 0.46 0.00 0.00 0.00 0.00 0.05 0.38 0.00 0.00 0.00 0.04

Middle East 0.90 1.07 0.00 0.00 0.00 0.00 0.00 0.00 0.17 0.00 0.00 0.90

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 1.37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.37 0.00

Other Asia/Pac 0.41 1.81 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.41 0.00 1.41

Total Imports 1.93 0.00 0.03 0.00 0.00 0.26 0.00 0.00 0.53 0.00 1.11

6.74 0.20 0.09 0.42 0.06 1.01 0.38 0.17 0.53 1.37 2.52

Refined Products Movements MMBPD FINISHED GASOLINE - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 1.31 9.24 7.93 0.25 0.94 0.08 0.00 0.00 0.00 0.00 0.00 0.04

Canada 0.23 0.61 0.22 0.38 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.07 1.55 0.07 0.00 1.49 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.05 0.57 0.02 0.00 0.03 0.52 0.00 0.00 0.00 0.00 0.00 0.00

Europe 1.65 3.76 0.44 0.15 0.31 0.56 2.11 0.12 0.00 0.07 0.00 0.00

FSU 0.28 1.42 0.10 0.00 0.00 0.00 0.00 1.14 0.00 0.00 0.01 0.17

Middle East 0.00 1.61 0.00 0.00 0.00 0.00 0.00 0.00 1.61 0.00 0.00 0.00

PacInd 0.20 1.42 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.22 0.00 0.20

China 0.00 2.58 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.58 0.00

Other Asia/Pac 0.59 2.62 0.00 0.00 0.00 0.00 0.00 0.00 0.58 0.00 0.00 2.04

Total Imports 4.38 0.85 0.39 1.29 0.65 0.00 0.12 0.58 0.07 0.01 0.41

25.38 8.78 0.77 2.78 1.17 2.11 1.26 2.19 1.28 2.59 2.45

Consuming Regions

Consuming Regions


July 15, 2016

158

Refined Products Movements MMBPD JET/KERO

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.17 1.51 1.35 0.00 0.02 0.11 0.00 0.00 0.00 0.00 0.00 0.04

Canada 0.12 0.18 0.09 0.06 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.08 0.34 0.01 0.05 0.27 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.03 0.17 0.03 0.00 0.00 0.14 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.28 1.47 0.00 0.00 0.15 0.11 1.19 0.00 0.00 0.00 0.00 0.01

FSU 0.14 0.51 0.14 0.00 0.00 0.00 0.00 0.37 0.00 0.00 0.00 0.00

Middle East 0.20 0.77 0.00 0.00 0.00 0.00 0.00 0.00 0.56 0.10 0.00 0.11

PacInd 0.09 0.64 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.55 0.00 0.09

China 0.00 0.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.60 0.00

Other Asia/Pac 0.11 1.26 0.00 0.00 0.00 0.05 0.00 0.00 0.06 0.00 0.00 1.15

Total Imports 1.21 0.28 0.06 0.20 0.29 0.00 0.00 0.06 0.10 0.00 0.23

7.45 1.62 0.12 0.47 0.43 1.19 0.37 0.62 0.65 0.60 1.39

Refined Products Movements MMBPD DISTILLATES - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.83 5.37 4.54 0.02 0.54 0.16 0.07 0.00 0.00 0.02 0.00 0.02

Canada 0.06 0.59 0.04 0.53 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.12 2.34 0.00 0.03 2.21 0.03 0.07 0.00 0.00 0.00 0.00 0.00

Africa 0.06 0.98 0.02 0.00 0.00 0.92 0.04 0.00 0.00 0.00 0.00 0.00

Europe 0.53 5.29 0.00 0.00 0.32 0.19 4.76 0.00 0.01 0.00 0.00 0.01

FSU 1.15 2.10 0.00 0.00 0.00 0.08 1.01 0.94 0.00 0.06 0.00 0.00

Middle East 0.52 2.58 0.00 0.00 0.09 0.23 0.00 0.00 2.05 0.00 0.00 0.19

PacInd 0.00 0.86 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.86 0.00 0.00

China 0.42 5.16 0.00 0.00 0.00 0.00 0.00 0.00 0.33 0.09 4.75 0.00

Other Asia/Pac 0.23 4.35 0.00 0.00 0.00 0.03 0.00 0.00 0.17 0.03 0.00 4.12

Total Imports 3.93 0.06 0.05 0.96 0.74 1.19 0.00 0.51 0.20 0.00 0.22

29.62 4.60 0.58 3.17 1.66 5.95 0.94 2.57 1.06 4.75 4.34

Consuming Regions

Consuming Regions


July 15, 2016

159

Refined Products Movements MMBPD Distillate Bunkers All (MGO, ECA MGO, Gl.obal MDO)

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.17 0.45 0.27 0.02 0.04 0.02 0.07 0.00 0.00 0.02 0.00 0.00

Canada 0.00 0.01 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.00 0.16 0.00 0.00 0.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.03 0.29 0.00 0.00 0.00 0.01 0.26 0.00 0.01 0.00 0.00 0.01

FSU 0.17 0.22 0.00 0.00 0.00 0.02 0.09 0.05 0.00 0.06 0.00 0.00

Middle East 0.01 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.08 0.00 0.00 0.01

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.21 0.00

Other Asia/Pac 0.03 0.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.00 0.27

Total Imports 0.41 0.00 0.02 0.04 0.05 0.16 0.00 0.01 0.11 0.00 0.02

1.75 0.27 0.03 0.19 0.08 0.42 0.05 0.09 0.11 0.21 0.29

Refined Products Movements MMBPD RESIDUAL FUELS - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.03 0.50 0.47 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Canada 0.02 0.09 0.00 0.07 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.11 0.88 0.00 0.02 0.77 0.03 0.04 0.00 0.00 0.00 0.00 0.02

Africa 0.00 0.43 0.00 0.00 0.00 0.43 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.09 0.95 0.00 0.00 0.00 0.06 0.86 0.00 0.03 0.00 0.00 0.01

FSU 0.26 0.61 0.00 0.00 0.00 0.04 0.12 0.36 0.00 0.00 0.00 0.10

Middle East 0.06 1.50 0.00 0.00 0.00 0.00 0.00 0.00 1.44 0.00 0.00 0.06

PacInd 0.00 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.00 0.00

China 0.02 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.63 0.00

Other Asia/Pac 0.13 2.39 0.00 0.00 0.00 0.00 0.00 0.00 0.13 0.00 0.00 2.26

Total Imports 0.71 0.00 0.02 0.03 0.14 0.15 0.00 0.16 0.02 0.00 0.19

8.21 0.48 0.10 0.80 0.57 1.01 0.36 1.60 0.21 0.63 2.45

Consuming Regions

Consuming Regions


July 15, 2016

160

Refined Products Movements MMBPD RESID Bunkers HS IFO 180+380

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.03 0.39 0.36 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Canada 0.00 0.03 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.01 0.27 0.00 0.00 0.26 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.00 0.66 0.00 0.00 0.00 0.00 0.66 0.00 0.00 0.00 0.00 0.00

FSU 0.12 0.31 0.00 0.00 0.00 0.00 0.12 0.20 0.00 0.00 0.00 0.00

Middle East 0.06 0.51 0.00 0.00 0.00 0.00 0.00 0.00 0.45 0.00 0.00 0.06

PacInd 0.00 0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.00 0.00

China 0.02 0.64 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.62 0.00

Other Asia/Pac 0.00 1.38 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.38

Total Imports 0.23 0.00 0.00 0.03 0.01 0.12 0.00 0.00 0.02 0.00 0.06

4.49 0.36 0.03 0.29 0.21 0.77 0.20 0.45 0.13 0.62 1.44

Summation of 2 products HS IFO 180 and HS IFO 380

Refined Products Movements MMBPD LS VGO/IFO TO GLOBAL FUEL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle


United States 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Middle East 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other Asia/Pac 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Imports 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Summation of 2 products LS Hybrid and LS IFO

Consuming Regions

Consuming Regions


July 15, 2016

161

6.3.5 Crude and Product Movements – 2020 Mid Switch High MDO Case


July 15, 2016

162

Case Horizon: 2020 Description: 2020: Mid Switch High MDO

Crude Oil Movements MILLION BPD

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 1.30 9.00 7.69 0.37 0.33 0.00 0.00 0.00 0.00 0.38 0.23 0.00

Canada 3.15 4.01 2.05 0.86 0.00 0.00 0.26 0.00 0.00 0.00 0.77 0.07

Latin America 5.41 10.12 2.76 0.09 4.72 0.00 1.01 0.00 0.00 0.00 0.98 0.57

Africa 4.86 6.40 0.18 0.24 0.99 1.54 2.55 0.00 0.00 0.21 0.47 0.22

Europe 0.43 3.04 0.00 0.00 0.00 0.00 2.61 0.00 0.00 0.43 0.00 0.00

FSU 5.93 12.73 0.14 0.10 0.00 0.23 3.02 6.80 0.10 0.00 2.34 0.00

Middle East 21.70 29.52 3.49 0.00 0.10 0.74 3.74 0.00 7.82 2.20 2.68 8.74

PacInd 0.67 0.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.19 0.49

China 0.04 4.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 4.32 0.00

Other Asia/Pac 0.54 3.14 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.44 2.60

Total Imports 44.03 8.64 0.79 1.43 0.97 10.57 0.00 0.10 3.35 8.09 10.09

83.05 16.33 1.66 6.15 2.52 13.18 6.80 7.92 3.39 12.41 12.69

NON CRUDES PRODUCTS & INTERMEDIATES TOTAL TRADE - MILLION BPD

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 4.50 25.75 21.25 0.33 2.19 0.58 0.57 0.00 0.00 0.20 0.35 0.29

Canada 1.32 2.65 0.59 1.33 0.05 0.04 0.18 0.00 0.00 0.31 0.04 0.11

Latin America 1.62 7.79 0.34 0.18 6.17 0.11 0.31 0.00 0.00 0.10 0.10 0.47

Africa 0.95 3.30 0.33 0.00 0.08 2.35 0.44 0.00 0.00 0.00 0.00 0.09

Europe 3.64 14.64 0.72 0.18 0.93 0.97 11.00 0.14 0.13 0.18 0.12 0.28

FSU 3.30 7.13 0.84 0.00 0.00 0.20 1.54 3.83 0.00 0.12 0.01 0.59

Middle East 3.55 10.04 0.11 0.10 0.18 0.32 0.03 0.00 6.49 0.06 0.00 2.74

PacInd 0.58 3.86 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.28 0.05 0.53

China 0.31 12.33 0.00 0.00 0.00 0.00 0.00 0.00 0.22 0.09 12.02 0.00

Other Asia/Pac 2.68 13.93 0.19 0.02 0.00 0.24 0.04 0.00 1.45 0.55 0.19 11.25

Total Imports 22.44 3.12 0.80 3.44 2.45 3.12 0.14 1.80 1.61 0.85 5.11

101.40 24.37 2.13 9.61 4.80 14.12 3.97 8.29 4.88 12.87 16.36

REFINERY PRODUCTS & INTERMEDIATES + NON CRUDES PRODUCTS & INTERMEDIATES

(INCLUDING US PETCOKE EXPORTS)

Consuming Regions

Consuming Regions


July 15, 2016

163

Refined Products Movements MMBPD PETCHEM NAPHTHA

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.27 0.47 0.20 0.02 0.00 0.00 0.13 0.00 0.00 0.11 0.00 0.00

Canada 0.00 0.04 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.03 0.45 0.00 0.03 0.42 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.17 0.23 0.00 0.00 0.00 0.06 0.15 0.00 0.00 0.00 0.00 0.03

Europe 0.05 0.71 0.00 0.00 0.00 0.00 0.66 0.00 0.00 0.00 0.00 0.05

FSU 0.11 0.49 0.00 0.00 0.00 0.00 0.07 0.38 0.00 0.00 0.00 0.04

Middle East 1.00 1.17 0.00 0.00 0.00 0.00 0.00 0.00 0.17 0.00 0.00 1.00

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 1.37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.37 0.00

Other Asia/Pac 0.51 1.91 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.51 0.00 1.40

Total Imports 2.14 0.00 0.05 0.00 0.00 0.35 0.00 0.00 0.62 0.00 1.12

6.83 0.20 0.09 0.42 0.06 1.01 0.38 0.17 0.62 1.37 2.52

Refined Products Movements MMBPD FINISHED GASOLINE - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 1.40 9.30 7.90 0.25 0.94 0.16 0.00 0.00 0.00 0.00 0.00 0.05

Canada 0.24 0.62 0.22 0.38 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.10 1.50 0.10 0.00 1.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.12 0.59 0.04 0.00 0.06 0.47 0.02 0.00 0.00 0.00 0.00 0.00

Europe 1.70 3.79 0.51 0.14 0.36 0.41 2.09 0.10 0.00 0.18 0.00 0.00

FSU 0.25 1.41 0.01 0.00 0.00 0.00 0.00 1.17 0.00 0.00 0.01 0.23

Middle East 0.13 1.60 0.00 0.00 0.00 0.12 0.00 0.00 1.47 0.00 0.00 0.01

PacInd 0.31 1.41 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.10 0.00 0.31

China 0.00 2.58 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.58 0.00

Other Asia/Pac 0.74 2.59 0.00 0.00 0.00 0.01 0.00 0.00 0.72 0.00 0.00 1.85

Total Imports 4.98 0.88 0.39 1.38 0.70 0.02 0.10 0.72 0.18 0.01 0.60

25.38 8.78 0.77 2.78 1.17 2.11 1.26 2.19 1.28 2.59 2.45

Consuming Regions

Consuming Regions


July 15, 2016

164

Refined Products Movements MMBPD JET/KERO

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.21 1.55 1.34 0.00 0.03 0.11 0.00 0.00 0.00 0.00 0.00 0.06

Canada 0.12 0.19 0.09 0.07 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.11 0.35 0.02 0.05 0.25 0.01 0.03 0.00 0.00 0.00 0.00 0.00

Africa 0.04 0.17 0.00 0.00 0.00 0.13 0.04 0.00 0.00 0.00 0.00 0.00

Europe 0.28 1.40 0.00 0.00 0.16 0.12 1.12 0.00 0.00 0.00 0.00 0.00

FSU 0.18 0.54 0.18 0.00 0.00 0.00 0.00 0.36 0.00 0.00 0.00 0.00

Middle East 0.22 0.74 0.00 0.00 0.00 0.01 0.00 0.00 0.51 0.05 0.00 0.17

PacInd 0.10 0.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.60 0.00 0.10

China 0.00 0.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.60 0.00

Other Asia/Pac 0.16 1.20 0.00 0.00 0.00 0.05 0.00 0.00 0.11 0.00 0.00 1.05

Total Imports 1.42 0.29 0.05 0.22 0.29 0.07 0.00 0.11 0.05 0.00 0.34

7.45 1.62 0.12 0.47 0.42 1.19 0.37 0.62 0.65 0.60 1.39

Refined Products Movements MMBPD DISTILLATES - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 1.12 5.92 4.80 0.02 0.60 0.23 0.15 0.00 0.00 0.08 0.00 0.04

Canada 0.07 0.63 0.05 0.56 0.01 0.02 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.48 2.77 0.00 0.02 2.29 0.05 0.14 0.00 0.00 0.00 0.00 0.26

Africa 0.08 1.03 0.02 0.00 0.00 0.95 0.06 0.00 0.00 0.00 0.00 0.00

Europe 0.56 5.73 0.00 0.00 0.35 0.20 5.17 0.00 0.01 0.00 0.00 0.00

FSU 1.23 2.34 0.01 0.00 0.00 0.04 1.03 1.11 0.00 0.12 0.00 0.03

Middle East 0.46 2.77 0.00 0.00 0.18 0.12 0.00 0.00 2.31 0.00 0.00 0.16

PacInd 0.01 0.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.86 0.00 0.01

China 0.31 5.58 0.00 0.00 0.00 0.00 0.00 0.00 0.22 0.09 5.27 0.00

Other Asia/Pac 0.62 5.38 0.00 0.00 0.00 0.18 0.04 0.00 0.40 0.00 0.00 4.76

Total Imports 4.94 0.08 0.04 1.13 0.85 1.41 0.00 0.63 0.28 0.00 0.51

33.03 4.88 0.60 3.42 1.81 6.58 1.11 2.94 1.14 5.27 5.27

Consuming Regions

Consuming Regions


July 15, 2016

165

Refined Products Movements MMBPD Distillate Bunkers All (MGO, ECA MGO, Gl.obal MDO)

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.34 0.89 0.55 0.02 0.10 0.01 0.14 0.00 0.00 0.08 0.00 0.00

Canada 0.00 0.03 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.31 0.66 0.00 0.00 0.34 0.03 0.02 0.00 0.00 0.00 0.00 0.26

Africa 0.00 0.13 0.00 0.00 0.00 0.13 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.06 0.84 0.00 0.00 0.00 0.05 0.78 0.00 0.01 0.00 0.00 0.00

FSU 0.24 0.45 0.00 0.00 0.00 0.00 0.12 0.21 0.00 0.12 0.00 0.00

Middle East 0.02 0.27 0.00 0.00 0.00 0.00 0.00 0.00 0.25 0.00 0.00 0.02

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.74 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.74 0.00

Other Asia/Pac 0.21 1.15 0.00 0.00 0.00 0.00 0.00 0.00 0.21 0.00 0.00 0.94

Total Imports 1.19 0.00 0.02 0.10 0.10 0.28 0.00 0.22 0.20 0.00 0.28

5.16 0.55 0.06 0.44 0.22 1.05 0.21 0.47 0.20 0.74 1.22

Refined Products Movements MMBPD RESIDUAL FUELS - TOTAL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.13 0.34 0.21 0.00 0.09 0.02 0.00 0.00 0.00 0.00 0.00 0.02

Canada 0.02 0.08 0.00 0.07 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.06 0.54 0.00 0.01 0.47 0.03 0.00 0.00 0.00 0.00 0.00 0.03

Africa 0.02 0.29 0.00 0.00 0.00 0.28 0.02 0.00 0.00 0.00 0.00 0.00

Europe 0.23 0.57 0.00 0.00 0.00 0.08 0.34 0.02 0.11 0.00 0.00 0.03

FSU 0.23 0.42 0.00 0.00 0.00 0.00 0.02 0.19 0.00 0.00 0.00 0.21

Middle East 0.14 1.24 0.00 0.00 0.00 0.02 0.02 0.00 1.10 0.00 0.00 0.10

PacInd 0.03 0.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.13 0.00 0.03

China 0.00 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.13 0.00

Other Asia/Pac 0.03 1.17 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.00 0.00 1.13

Total Imports 0.89 0.00 0.01 0.09 0.16 0.06 0.02 0.14 0.00 0.00 0.42

4.93 0.21 0.07 0.56 0.44 0.40 0.20 1.24 0.13 0.13 1.55

Consuming Regions

Consuming Regions


July 15, 2016

166

Refined Products Movements MMBPD RESID Bunkers HS IFO 180+380

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.01 0.08 0.07 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Canada 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.00 0.05 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.00 0.11 0.00 0.00 0.00 0.00 0.11 0.00 0.00 0.00 0.00 0.00

FSU 0.02 0.06 0.00 0.00 0.00 0.00 0.02 0.04 0.00 0.00 0.00 0.00

Middle East 0.11 0.19 0.00 0.00 0.00 0.02 0.02 0.00 0.09 0.00 0.00 0.07

PacInd 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00

China 0.00 0.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.12 0.00

Other Asia/Pac 0.00 0.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.21

Total Imports 0.15 0.00 0.00 0.01 0.02 0.04 0.00 0.00 0.00 0.00 0.07

0.85 0.07 0.00 0.06 0.04 0.15 0.04 0.09 0.02 0.12 0.27

Summation of 2 products IFO 180 and IFO 380

Refined Products Movements MMBPD LS VGO/IFO TO GLOBAL FUEL

Total

Exports

Total

Local +

Exports


United

StatesCanada

Latin


Middle

EastPacInd China

Other

Asia/Pac

United States 0.00 0.03 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Latin America 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00

Europe 0.00 0.01 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Middle East 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PacInd 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other Asia/Pac 0.00 0.27 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.27

Total Imports 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.36 0.03 0.00 0.00 0.03 0.01 0.00 0.00 0.02 0.00 0.27

Consuming Regions

Consuming Regions


July 15, 2016

167

6.3.6 Crude Movements by Type – 2020 Base Case

2020: REF-WEO - Base No 0.5% Fuel Crude Oil Imports United States million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports United States million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

United States 8.00 0.53 4.23 1.97 0.81 0.46 0.00 0.00 United States 8.00 0.53 4.23 1.97 0.81 0.46 0.00 0.00

Canada 2.37 0.00 0.15 0.00 0.25 0.00 0.67 1.30 Canada 0.29 0.01 0.28 0.00 0.00 0.00 0.00 0.00

Latin America 2.46 0.00 0.00 0.49 1.16 0.59 0.00 0.21 Latin America 0.20 0.11 0.09 0.00 0.00 0.00 0.00 0.00

Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.10 0.00 0.10 0.00 0.00 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Middle East 2.70 0.00 0.00 2.23 0.47 0.00 0.00 0.00 Middle East 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.49 0.08 0.31 0.10 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other Asia 0.02 0.00 0.02 0.00 0.00 0.00 0.00 0.00 Other Asia 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Refined 15.65 0.53 4.50 4.68 2.71 1.05 0.67 1.52 Total Supplied 8.98 0.72 4.91 2.07 0.81 0.46 0.00 0.00

Total Imports 7.65 0.00 0.27 2.72 1.89 0.59 0.67 1.51 Total Exports 0.98 0.19 0.69 0.10 0.00 0.00 0.00 0.00

2020: REF-WEO - Base No 0.5% Fuel Canada million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Canada million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.91 0.00 0.24 0.12 0.00 0.00 0.26 0.29 Canada 0.91 0.00 0.24 0.12 0.00 0.00 0.26 0.29


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.25 0.00 0.25 0.00 0.00 0.00 0.00 0.00

FSU 0.06 0.00 0.00 0.06 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.24 0.00 0.21 0.03 0.00 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.13

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.35 0.00 0.00 0.00 0.00 0.00 0.12 0.23





July 15, 2016

168

2020: REF-WEO - Base No 0.5% Fuel Latin America million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Latin America million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.16 0.00 0.00 0.16 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 1.44 0.69 0.05 0.46 0.00 0.24 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 1.22 0.09 1.11 0.00 0.03 0.00 0.00 0.00 Africa 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.01


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.58 0.00 0.00 0.00 0.00 0.06 0.00 0.52




2020: REF-WEO - Base No 0.5% Fuel Europe million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Europe million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.25 0.00 0.25 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 2.43 0.16 1.70 0.51 0.06 0.00 0.00 0.00 Europe 2.43 0.16 1.70 0.51 0.06 0.00 0.00 0.00

FSU 3.25 0.00 0.47 2.74 0.04 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 2.59 0.32 2.03 0.00 0.24 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.58 0.00 0.58 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00





July 15, 2016

169

2020: REF-WEO - Base No 0.5% Fuel FSU million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports FSU million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.06 0.00 0.00 0.06 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 3.25 0.00 0.47 2.74 0.04 0.00 0.00 0.00

FSU 6.63 0.19 1.27 4.72 0.45 0.00 0.00 0.00 FSU 6.63 0.19 1.27 4.72 0.45 0.00 0.00 0.00

Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Africa 0.23 0.00 0.00 0.00 0.23 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 2.34 0.00 1.52 0.64 0.18 0.00 0.00 0.00




2020: REF-WEO - Base No 0.5% Fuel Africa million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Africa million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.24 0.00 0.21 0.03 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 2.59 0.32 2.03 0.00 0.24 0.00 0.00 0.00

FSU 0.23 0.00 0.00 0.00 0.23 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 1.57 0.06 1.32 0.19 0.00 0.00 0.00 0.00 Africa 1.57 0.06 1.32 0.19 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.21 0.00 0.21 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.33 0.00 0.31 0.00 0.02 0.00 0.00 0.00





July 15, 2016

170

2020: REF-WEO - Base No 0.5% Fuel Middle East million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Middle East million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 3.19 0.15 0.00 3.05 0.00 0.00 0.00 0.00

FSU 0.10 0.00 0.10 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Africa 0.72 0.00 0.00 0.71 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 1.86 0.04 0.01 1.81 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 3.90 0.40 0.20 3.30 0.00 0.00 0.00 0.00




2020: REF-WEO - Base No 0.5% Fuel PacInd million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports PacInd million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.13 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.58 0.00 0.58 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.21 0.00 0.21 0.00 0.00 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.04 0.04 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.04 0.04 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.24 0.00 0.24 0.00 0.00 0.00 0.00 0.00





July 15, 2016

171

2020: REF-WEO - Base No 0.5% Fuel China million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports China million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.35 0.00 0.00 0.00 0.00 0.00 0.12 0.23 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 2.34 0.00 1.52 0.64 0.18 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.33 0.00 0.31 0.00 0.02 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.24 0.00 0.24 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 4.32 0.23 3.67 0.00 0.43 0.00 0.00 0.00 China 4.32 0.23 3.67 0.00 0.43 0.00 0.00 0.00




2020: REF-WEO - Base No 0.5% Fuel Other Asia million pbd 2020: REF-WEO - Base No 0.5% Fuel Crude Oil Exports Other Asia million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.11 0.00 0.10 0.00 0.01 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.43 0.32 0.11 0.00 0.00 0.00 0.00 0.00 PacInd 0.08 0.00 0.08 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.29 0.00 0.29 0.00 0.00 0.00 0.00 0.00





July 15, 2016

172

6.3.7 Crude Movements by Type – 2020 Mid Switch High MDO Case

2020: REF-WEO - Mid Switch MDO Crude Oil Imports United States million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports United States million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 2.05 0.00 0.17 0.00 0.18 0.00 0.46 1.24 Canada 0.37 0.01 0.36 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.14 0.00 0.00 0.00 0.14 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.18 0.00 0.17 0.00 0.01 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.38 0.03 0.25 0.10 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.23 0.23 0.00 0.00 0.00 0.00 0.00 0.00




2020: REF-WEO - Mid Switch MDO Canada million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Canada million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.86 0.00 0.22 0.12 0.07 0.00 0.30 0.16 Canada 0.86 0.00 0.22 0.12 0.07 0.00 0.30 0.16


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.26 0.00 0.26 0.00 0.00 0.00 0.00 0.00

FSU 0.10 0.00 0.00 0.10 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.24 0.00 0.21 0.03 0.00 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.77 0.00 0.00 0.00 0.00 0.00 0.28 0.48





July 15, 2016

173

2020: REF-WEO - Mid Switch MDO Latin America million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Latin America million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.09 0.00 0.00 0.09 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 1.01 0.47 0.05 0.18 0.03 0.27 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.99 0.01 0.96 0.00 0.02 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.98 0.22 0.00 0.00 0.00 0.29 0.00 0.46




2020: REF-WEO - Mid Switch MDO Europe million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Europe million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.26 0.00 0.26 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 2.58 0.16 1.85 0.51 0.06 0.00 0.00 0.00 Europe 2.58 0.16 1.85 0.51 0.06 0.00 0.00 0.00

FSU 3.02 0.00 0.41 2.57 0.04 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 2.55 0.24 2.07 0.00 0.24 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.43 0.00 0.43 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00





July 15, 2016

174

2020: REF-WEO - Mid Switch MDO FSU million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports FSU million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.10 0.00 0.00 0.10 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 3.02 0.00 0.41 2.57 0.04 0.00 0.00 0.00

FSU 6.68 0.19 1.33 4.85 0.31 0.00 0.00 0.00 FSU 6.68 0.19 1.33 4.85 0.31 0.00 0.00 0.00

Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Africa 0.23 0.00 0.00 0.13 0.10 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 2.34 0.00 1.52 0.51 0.31 0.00 0.00 0.00




2020: REF-WEO - Mid Switch MDO Africa million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Africa million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.24 0.00 0.21 0.03 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 2.55 0.24 2.07 0.00 0.24 0.00 0.00 0.00

FSU 0.23 0.00 0.00 0.13 0.10 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 1.51 0.06 1.26 0.19 0.00 0.00 0.00 0.00 Africa 1.51 0.06 1.26 0.19 0.00 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.21 0.00 0.21 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.47 0.14 0.31 0.00 0.02 0.00 0.00 0.00





July 15, 2016

175

2020: REF-WEO - Mid Switch MDO Middle East million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Middle East million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 3.74 0.00 0.00 3.74 0.00 0.00 0.00 0.00

FSU 0.10 0.00 0.10 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Africa 0.74 0.06 0.00 0.66 0.02 0.00 0.00 0.00


PacInd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 2.20 0.00 0.01 2.12 0.06 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 2.68 0.11 0.20 2.36 0.00 0.00 0.00 0.00




2020: REF-WEO - Mid Switch MDO PacInd million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports PacInd million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.43 0.00 0.43 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.21 0.00 0.21 0.00 0.00 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.04 0.04 0.00 0.00 0.00 0.00 0.00 0.00 PacInd 0.04 0.04 0.00 0.00 0.00 0.00 0.00 0.00

China 0.04 0.00 0.00 0.00 0.04 0.00 0.00 0.00 China 0.19 0.00 0.19 0.00 0.00 0.00 0.00 0.00





July 15, 2016

176

2020: REF-WEO - Mid Switch MDO China million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports China million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.77 0.00 0.00 0.00 0.00 0.00 0.28 0.48 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 2.34 0.00 1.52 0.51 0.31 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.47 0.14 0.31 0.00 0.02 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.19 0.00 0.19 0.00 0.00 0.00 0.00 0.00 PacInd 0.04 0.00 0.00 0.00 0.04 0.00 0.00 0.00

China 4.28 0.23 3.67 0.00 0.39 0.00 0.00 0.00 China 4.28 0.23 3.67 0.00 0.39 0.00 0.00 0.00




2020: REF-WEO - Mid Switch MDO Other Asia million pbd 2020: REF-WEO - Mid Switch MDO Crude Oil Exports Other Asia million pbd

Source Region

Refinery

Crude

Oil

Inputs

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY

Destination

Region

Crude

Oil

Supply

CONDEN

SATE

SWEET

<0.5S

LT/MD

SR >29

API >.5S

HVY SR

20-29 API

>.5S

XHVY SR

<20 API

>.5 S

SYN

CRUDE

LIGHT

SYN

CRUDE

HEAVY


Canada 0.07 0.00 0.00 0.00 0.00 0.00 0.00 0.07 Canada 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Europe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FSU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Africa 0.22 0.02 0.20 0.00 0.01 0.00 0.00 0.00 Africa 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


PacInd 0.49 0.32 0.17 0.00 0.00 0.00 0.00 0.00 PacInd 0.09 0.00 0.09 0.00 0.00 0.00 0.00 0.00

China 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 China 0.44 0.00 0.44 0.00 0.00 0.00 0.00 0.00





July 15, 2016

177

6.3.8 Marine Fuels Blends – 2020 Base and Mid Switch Cases

million bpdTotal HS

IFO

Total

0.5% IFO

/ Hybrid

Total

Original

MDO

Total ECA

MDO

Total

Global

0.5%

MDO

Total

Marine

Distillate

Total

Marine

Fuel

(DMA) (DMA) (DMB)

kerosenes 0.00 0.00 0.37 0.10 0.00 0.48 0.48

middle distillates 0.37 0.00 0.69 0.23 0.00 0.92 1.29

cracked stocks 0.65 0.00 0.12 0.02 0.00 0.13 0.78

VGO SR (non HDS) 0.23 0.00 0.00 0.08 0.00 0.08 0.31

VGO HDS 0.00 0.00 0.00 0.14 0.00 0.14 0.14

resid SR LS / HDS < 1% 0.04 0.00 0.00 0.00 0.00 0.00 0.04

resid SR MS 1-2% 0.07 0.00 0.00 0.00 0.00 0.00 0.07

resid SR HS > 2% 2.99 0.00 0.00 0.00 0.00 0.00 2.99

resid visbroken 0.13 0.00 0.00 0.00 0.00 0.00 0.13

Total 4.49 0.00 1.18 0.57 0.00 1.75 6.25

Total distillates (incl cracked stocks) 1.02 0.00 1.18 0.35 0.00 1.53 2.55

Total VGO 0.23 0.00 0.00 0.22 0.00 0.22 0.46

Total resid 3.24 0.00 0.00 0.00 0.00 0.00 3.24

Total 4.49 0.00 1.18 0.57 0.00 1.75 6.25

Total distillates (incl cracked stocks) 23% 0% 100% 61% 0% 87% 41%

Total VGO 5% 0% 0% 39% 0% 13% 7%

Total resid 72% 0% 0% 0% 0% 0% 52%

Total 100% 0% 100% 100% 0% 100% 100%

of which

atmos resid HS > 3% 2.30 0.00 0.00 0.00 0.00 0.00 2.30

vacuum resid HS > 3% 0.69 0.00 0.00 0.00 0.00 0.00 0.69

visbroken resid HS > 3% 0.12 0.00 0.00 0.00 0.00 0.00 0.12

Total resid HS > 3% 3.12

HS resid as % of total resid 96% 0% 0% 0% 0% 0% 96%

Marine Fuel Pool Blends 2020 Base Case


July 15, 2016

178

million bpdTotal HS

IFO

Total

0.5% IFO

/ Hybrid

Total

Original

MDO

Total ECA

MDO

Total

Global

0.5%

MDO

Total

Marine

Distillate

Total

Marine

Fuel

Change

vs. Base

Case

(DMA) (DMA) (DMB)

kerosenes 0.00 0.00 0.20 0.09 0.07 0.35 0.35 (0.12)

middle distillates 0.07 0.02 0.86 0.22 0.53 1.61 1.70 0.41

cracked stocks 0.19 0.04 0.12 0.04 0.43 0.58 0.82 0.03

VGO (non HDS) 0.09 0.09 0.00 0.07 0.70 0.77 0.95 0.64

VGO HDS 0.00 0.00 0.00 0.16 0.16 0.32 0.32 0.18

resid LS / HDS < 1% 0.00 1.48 0.00 0.00 0.00 0.00 1.49 1.45

resid MS 1-2% 0.01 0.17 0.00 0.00 0.00 0.00 0.18 0.11

resid HS > 2% 0.46 0.00 0.00 0.00 0.00 0.00 0.46 (2.54)

resid visbroken 0.03 0.00 0.00 0.00 0.00 0.00 0.03 (0.10)

Total 0.86 1.81 1.18 0.57 1.89 3.64 6.30 0.05

Total distillates (incl cracked stocks) 0.26 0.06 1.18 0.34 1.03 2.55 2.87 0.32

Total VGO 0.09 0.09 0.00 0.23 0.86 1.09 1.27 0.82

Total resid 0.50 1.65 0.00 0.00 0.00 0.00 2.16 (1.09)

0.86 1.81 1.18 0.57 1.89 3.64 6.30 0.05


Total VGO 11% 5% 0% 40% 45% 30% 20%

Total resid 59% 91% 0% 0% 0% 0% 34%

Total 100% 100% 100% 100% 100% 100% 100%

of which

atmos resid HS > 3% 0.33 0.00 0.00 0.00 0.00 0.00 0.33 (1.97)

vacuum resid HS > 3% 0.13 0.00 0.00 0.00 0.00 0.00 0.13 (0.57)

visbroken resid HS > 3% 0.03 0.00 0.00 0.00 0.00 0.00 0.03 (0.09)

Total resid HS > 3% 0.49 (2.63)


Marine Fuel Pool Blends 2020 Mid Switch Volume Low MDO Case


July 15, 2016

179

million bpdTotal HS

IFO

Total

0.5% IFO

/ Hybrid

Total

Original

MDO

Total ECA

MDO

Total

Global

0.5%

MDO

Total

Marine

Distillate

Total

Marine

Fuel

Change

vs. Base

Case

Change

vs. Low

MDO

Case

(DMA) (DMA) (DMB)

kerosenes 0.00 0.00 0.30 0.09 0.20 0.59 0.59 0.11 0.23

middle distillates 0.06 0.00 0.76 0.22 1.00 1.98 2.04 0.75 0.34

cracked stocks 0.17 0.02 0.12 0.03 0.62 0.76 0.95 0.17 0.13

VGO (non HDS) 0.10 0.01 0.00 0.06 1.42 1.48 1.59 1.28 0.64

VGO HDS 0.00 0.00 0.00 0.17 0.18 0.36 0.36 0.21 0.03

resid LS / HDS < 1% 0.00 0.30 0.00 0.00 0.00 0.00 0.30 0.26 (1.19)

resid MS 1-2% 0.02 0.03 0.00 0.00 0.00 0.00 0.05 (0.02) (0.13)

resid HS > 2% 0.48 0.00 0.00 0.00 0.00 0.00 0.48 (2.51) 0.02

resid visbroken 0.03 0.00 0.00 0.00 0.00 0.00 0.03 (0.11) (0.00)

Total 0.86 0.36 1.18 0.57 3.41 5.17 6.38 0.14 0.08

Total distillates (incl cracked stocks) 0.23 0.02 1.18 0.34 1.81 3.33 3.58 1.03 0.71

Total VGO 0.10 0.01 0.00 0.23 1.60 1.83 1.95 1.49 0.68

Total resid 0.53 0.33 0.00 0.00 0.00 0.00 0.86 (2.38) (1.30)

0.86 0.36 1.18 0.57 3.41 5.17 6.38 0.14 0.08


Total VGO 12% 3% 0% 41% 47% 35% 31%

Total resid 61% 92% 0% 0% 0% 0% 13%

Total 100% 100% 100% 100% 100% 100% 100%

of which

atmos resid HS > 3% 0.39 0.00 0.00 0.00 0.00 0.00 0.39 (1.91) 0.06

vacuum resid HS > 3% 0.09 0.00 0.00 0.00 0.00 0.00 0.09 (0.61) (0.04)

visbroken resid HS > 3% 0.02 0.00 0.00 0.00 0.00 0.00 0.02 (0.10) (0.01)

Total resid HS > 3% 0.50 (2.62) 0.01


Marine Fuel Pool Blends 2020 Mid Switch Volume Low MDO Case


July 15, 2016

180

6.3.9 Marine Fuels Global Average Densities – 2020 Base and Mid Switch Cases

Densitiesbbl /

tonnes.g.

API

Gravity

mmbpd mmtpa mmtpa mmbpd

2020 Base Case

3.5% IFO380 6.4589 0.9737 13.8 1 56.51 100 1.77

3.5% IFO180 6.5531 0.9597 15.9 1 55.70 100 1.80

0.1% ECA DMA 7.2163 0.8715 30.9 1 50.58 100 1.98

1%/0.5% DMA 7.2756 0.8644 32.2 1 50.17 100 1.99

2020 Mid Switch High MDO Case

3.5% IFO380 6.4509 0.9749 13.6 1 56.58 100 1.77

3.5% IFO180 6.5723 0.9569 16.4 1 55.54 100 1.80

0.5% Global IFO 6.5929 0.9539 16.8 1 55.36 100 1.81

0.5% Global IFO/VGO 6.7334 0.9340 20.0 1 54.21 100 1.84

0.1% ECA DMA 7.2271 0.8702 31.1 1 50.50 100 1.98

1%/0.5% DMA 7.2579 0.8665 31.8 1 50.29 100 1.99

0.5% Global DMB 7.0870 0.8874 28.0 1 51.50 100 1.94

WORLD Results - Global Weight Average Marine Fuel Densities &

Conversion Factors

mmbpd to mmtpa mmtpa to mmbpd

AIR POLLUTION AND ENERGY EFFICIENCY · 2016. 10. 31. · July 15, 2016 EnSys Energy with...

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