European oil market with focus on CEE – situation and … · 2020-02-13 · The declines are...

European oil market with focus on CEE – situation and perspectives to 2030/2050

for 4th Janaf Conference

19 November 2018

Eugene Lindell

Special Presentation

Disclaimer

All statements other than statements of historical fact are, or may be deemed to be, forward-lookingstatements. Forward-looking statements (including those depicted in graphical form) are statements offuture expectations that are based on JBC Energy’s current expectations and assumptions and involve knownand unknown risks and uncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in these statements. Forward-looking statements include, amongother things statements expressing JBC Energy’s expectations, beliefs, estimates, forecasts, projections andassumptions. These forward-looking statements are identified by their use of terms and phrases such as‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’,‘‘probably’’, ‘‘project’’, ‘‘will’’, “forecast”, “predict”, “think”, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ andsimilar terms and phrases. All forward-looking statements contained in this speech/presentation areexpressly qualified in their entirety by the cautionary statements contained or referred to in this section.Readers/audience should not place undue reliance on forward-looking statements. Each forward-lookingstatement speaks only as of the date of this presentation. Neither JBC Energy nor any of its subsidiariesundertake any obligation to publicly update or revise any forward-looking statement as a result of newinformation, future events or other information. In light of these risks, results could differ materially fromthose stated, implied or inferred from the forward-looking statements contained in this speech/presentation.Any persons acting on information contained in this presentation does so solely at their own risk.JBC Energy is not responsible for the accuracy of data collected from external sources and will not be heldliable for any errors or omissions in facts or analysis contained in this presentation. JBC’s third party sourcesprovide data to JBC on an “as-is” basis and accept no responsibility and disclaim any liability relating toreliance on or use of their data by any party. Data sourced as SuDeP (JBC’s in-house Supply-Demand-Priceforecasting model) or JBC Derived Data may be partly based on EIA and various national statistical entities;JODI; the MODS, ADS or MGDS (http://data.iea.org) services developed by the IEA, © OECD/IEA 2017; OPEC;and other industry sources, but the resulting work has been prepared by JBC Energy and does notnecessarily reflect the views of the original data providers. To the extent that JBC Energy comments or opineson data obtained from third party sources, these comments or opinions shall be understood as JBC Energy’sown comments or opinions unless a third party is quoted as their source.

Monday, 19 November 2018 www.jbcenergy.com Slide 2

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Agenda

• EU getting increasingly serious about reducing CO2

• European Oil Demand by Sector– Which sectors are most prone to demand

reduction?

– Transportation demand under attack

– Electrification

• Impact of reduced demand on product balances and crude intake


Introduction

• EU 2030 Climate & Energy Framework adopted by EU leaders in 2014

• Key targets:– 40%+ cuts in greenhouse gas emissions (from

1990 levels) and is legally binding

– share of renewable energy set at a binding 27%

– 27% improvement in energy efficiency targeted• EU Parliament: CO2 reduction target of 35% for new

trucks sold after 2030 (yet to be approved by MS)

• What does this mean for oil demand?


European Demand by Sector

Transport is the key sector with road, air, and water (=bunker) transport accounting for around 65% of total European demand. The policy choices we make now will have a massive affect on the 2030-50 period. JBC sees only Aviation and Petchem posting longterm growth with demand in other sectors set to fall even before 2030.


Transport (Aviation)9%

Transport (Road)49%Residential Commercial

7%

Agriculture3%

Ref fuel4%

Bunker7%

Industry4%

Petchem9%

Power2%

Other6%

Transport (Aviation)

Transport (Road)

Residential Commercial

Agriculture

Ref fuel

Bunker

Industry

Petchem

Power

Other

Europe: Demand by Sector in 2018 [%]

SuDePTotal European demand = 15.2 million b/d

Transport Demand – Dieselgate

The Dieselgate scandal has triggered a rapid and sustainable decline in diesel passenger cars. Sales of new diesel cars are in free fall mode and this will only continue as new CO2 rules kick-in. The impact on oil demand, however, is softened by an uptick in new gasoline-fuelled vehicles.

www.jbcenergy.com Slide 7

20%

30%

40%

50%

60%

70%

80%

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

France Italy Sweden Austria

Germany UK Spain Europe*

Europe: Diesel & Gasoline Share of New Car Sales [% 3MMA]

Dieselgate

*based on monthly sales from selected countries, representing roughly 75-85% of European market

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Diesel Share

Source: JBC Energy calculations based on Statistik Austria, CCFA, KBA, SMMT, UNRAE, BIL, Anfac

Gasoline Share

Transport Demand - Electrification

Automotive battery prices continue to fall, cutting the cost of electric vehicles. Prices are expected to continue to fall as development is focusing on cost-cutting measures such as reducing high-priced cobalt content. The tipping point is likely to be met within 5-years.


0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

EV price parity Historic prices

DOE estimate 2010 Bloomberg survey 2012

Deutsche Bank; Cairn ERA 2016 EV industry forecast 2017

Bloomberg forecast 2017 WoodMac 2018

Nissan Renault

Tesla Audi

Hyundai GM

Automotive Battery Prices [$/kWh]

Source: Various media and industry reports

$100/kWh for automotive batteries is seen as the tipping point at which

EVs have a price advantage compared to combustion engines

LG Chem's NMC-811 battery Introduction of solid

state batteries:Fisker - 2020Toyota - 2022

VW - 2025

Transport Demand - Trucks

There is more potential for electric truck uptake in the EU as the majority of trucks travel less than 500 km per deployment.


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015

>50km

50-149

150-299

300-499

>500 km

EU Road Freight Transport by Distance Class 2015 [% (million tonne-km)]

Source: JBC calculations based on Eurostat and BTS

2015

over 3220 km

2414-3219

1610-2414

1205-1610

805-1205

400-805

160-400

Below 160 km

60% of EU road freight tonne-kilometers are done by trucks deployed for 500 km trips or

shorter. In the US we estimate around 40% go on trips

shorter than 500 km

EU total: 1,750 billion tonne-km US total: 3,470 billion tonne-km

Electric trucks:Daim FUSO eCanter 100 km (2019)MAN eTruck - 200 km (2020)Volvo FL Eletric - 300 km (2019)Tesla Semi Truck480 - 800 km (2019)Nikola Two (Fuel Cell)800 - 1600 km (2019-2020)Daimler Freightliner

eCascadia - 400 km (2021) eM2 106 - 370 km (2021)

Transport Demand - Trucks

European trucking demand will be driven by GDP and population growth on the one hand, and efficiency and carbon intensity on the other. We continue to see tkm demand growing throughout the forecast period, in line with GDP.


-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

1

2

3

4

5

6

7

8

9

10

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

CO2 efficiency of Goods Vehicles (tkm/kg CO2)

Growth in Tonne-Kilometre (tkm) transportdemand based on GDP growth -Right Scale

Long-term Demand Growth Factors Impacting European Transport Dynamics [tkm/kg CO2; %]

SuDeP

Strong efficiency gains seen on the back of green legislation (e.g. electrification) but also industry

preference (i.e. better consumption boosts profit)

Transport Demand – Biofuels

Efficiency gains will dwarf the impact of biofuels, however, higher blending ratios will also negatively impact demand.


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

50

100

150

200

250

300

350

400

2010 2015 2020 2025 2030 2035 2040 2045 2050

Ethanol

Biodiesel

Ethanol - r.s.

Biodiesel - r.s.

Europe: Biofuels Demand & Blending Ratios ['000 b/d; %]

SuDeP

Road Transport Demand Outlook

We see most of the diesel disruption limited to passenger cars, with the bigger GV (trucking) section still growing due to growing tonne-kilometre (tkm) demand. On the gasoline side, Dieselgate stems the decline until around 2030, when fleet electrification really takes root. 2018-2050: -2.2 million b/d


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2001 2006 2011 2016 2021 2026 2031 2036 2041 2046

Diesel Demand -Goods VehiclesDiesel Demand -Passenger CarsDiesel Demand -BusesGasoline Demand (Passenger Cars)

European (EU-28) Road Transport Demand [million b/d]

SuDeP

Other Sectors

The Residential/commercial sector will also see a solid loss in demand as more people avoid heating with oil-based products.


0

200

400

600

800

1000

1200

1400

1600

1800

2010 2015 2020 2025 2030 2035 2040 2045 2050

Other Products NaphthaLPG Fuel OilJet/Kero Gas Oil/DieselGasoline

SuDeP -150

-130

-110

-90

-70

-50

-30

-10

10

30

50Y-o-y growth

EUROPE: Res/Comm Demand by Product ['000 b/d]

Other Sectors

• The only sectors expected to exhibit growth over the period are Aviation and Petchem

• Naphtha demand seen largely flat in 2050 vs 2018

• Jet/Kero set to grow by 190,000 b/d


Demand Growth by Product

The declines are clearly led by gasoil/diesel and gasoline, while there is some upside for jet/kero and naphtha before a declining trend sets in around 2036.


-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

2010 2015 2020 2025 2030 2035 2040 2045 2050

LPG Naphtha

Gasoline Jet/Kero

Gas Oil/Diesel Fuel Oil

Other Products

Europe: Demand by Product (Y-o-y Change) ['000 b/d]

SuDeP

Demand by Product

After peaking in 2019, European Oil Demand is set to fall by almost 3 million b/d by 2050, led by gasoil/diesel with most of thedisruption stemming from the road transportation sector


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2018 2023 2028 2033 2038 2043 2048

Other Products LPG Naphtha Fuel OilJet/Kero Gasoline Gas Oil/Diesel

Europe: Demand by Product ['000 b/d]

SuDeP

Conclusion

The decline in passenger demand as well as ongoing declines in heating oil demand from the residential/commercial sector will eventually shift the European gasoil/diesel balance from short to long. The lengthening total products balance will put massive pressure on refiners.


-3,000

-2,000

-1,000

0

1,000

2,000

3,000

2010 2015 2020 2025 2030 2035 2040 2045

Other Products Fuel Oil

Gas Oil/Diesel Jet/Kero

Gasoline Naphtha

LPG Total Products

Europe: Product Balances ['000 b/d]

SuDeP

Conclusion

This in turn will result in lower crude runs, eventually triggering refinery consolidation, such as was seen at the start of this decade.


66%

68%

70%

72%

74%

76%

78%

80%

82%

84%

86%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Refinery Capacity Crude Runs Refinery Utilisation - right scale

Europe: Refining Sector ['000 b/d; %]

SuDeP

Thank you!

European oil market with focus on CEE – situation and … · 2020-02-13 · The declines are...

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