Global Markets Developments · All analysis and opinions, data, projections and forecasts provided...

Global Markets Developments

by Jeet Bindra, February 2018in support from Argus Consulting Services

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Argus Media group notices

GDP

Crude

Natural Gas

Electric Vehicles

Petroleum Products

Petrochemicals

Petroleum Coke

LPG

Vision

Global market developments

Global growth underpinned by Asia-Pacific

Copyright © 2018 Argus Media group. All rights reserved.

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America

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Global GDP growth projections – 10 year CAGR Synchronized global

activity boosting near term prospects for most countries

Chinese GDP growth trending lower as drivers of growth transition

India to underpin longer term growth

Global Crude demand


Crude demand growth to remain strong until the latter stages of 2020’s

Consistent growth in Indian oil demand to become the main driver of growth

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2020

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Rest of World India Rest of Asia

Global oil demand

mln bbl/d

Crude prices


Strong US supply response should help keep prices within the Tight-light oil (TLO) band in the medium term


US tight light oil (TLO) has become the major US oil product.

Production has surpassed 5,100 thousand bpd in December, 2017.

Over the past 6 months, US TLO production has been growing at a rate of 2% per month.

Most UD TLO – today - is being produced in the Permian basin.

Main sources of US oil production


Bakken and Niobrara production has also been growing.

We expect continued growth in US TLO production as long as monthly average oil prices remain above ~ $55/bbl.

The Permian basin is the largest producer

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6 million bpd

US Tight Oil Production History (through December, 2017)

Total Permian (TX& NM)

Eagle Ford (TX)

Bakken (MT & ND)

Niobrara-Codell (CO, WY)

Utica (OH, PA & WV)

Haynesville

Marcellus (PA,WV,OH &NY)

Woodford (OK)

Granite Wash (OK & TX)

Austin Chalk (LA & TX)

Monterey (CA)

US crude exports beyond Canada soar after ban lifted

Copyright © 2018 Argus Media Ltd. All rights reserved.

China buying about two-thirds of US exports to Asia


US shipments to Europe also rising substantially


Natural Gas Demand growth


Lower prices have spurred greater demand in the US and elsewhere

Rapid growth in China is absorbing fresh LNG supply

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US

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Global natural gas demandBcm

Electric Vehicles


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Asia Pacificmln

EV’s set to account for all of long term increase in fleet in North America and Europe

Growing share of EV’s in Asia, but strong growth in total fleet

India looking to phase out sales of gas and diesel vehicles by 2030, but strong growth projected in the interim

Worldwide, both distillate and gasoline growth are robust


– Data from IEA, EIA and Argus

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G/D ratiomn b/d

Worldwide Gasoline & Distillate Demand History (2017 data are averages through 3Q 2017)

Gasoline Distillate G/D Demand Ratio

CAGRs 2000 to 2008 2009 to 2017

Gasoline 2.61% 1.80%

Distillate 0.29% 1.34%

CAGR – compound annual growth rate


Major growth has been in non-OECD countries


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OECD non-OECD USA China Canada

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Comparison of Year 2016 Demand Levels

Gasoline Demand Distillate Demand

-0.2% 0.2% 4.8% 2.5% 0.4% 2.8%-0.4% 7.6% 0.3%1.6%

2009 – 2017 CAGRs

The non-OECD, and especially Chinese growth rates, will gradually drive significant changes in product and crude oil flows.

Chinese gasoline demand is growing at high rates



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G/D ratiomn b/d

China Gasoline and Distillate Demand History


CAGRs 2000 to 2008 2009 to 2016

Gasoline 8.07% 7.61%

Distillate 10.54% 2.76%

US products demand has plateaued, exports are surging


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G/D ratiomn b/d

US Gasoline and Distillate Demand

History (2017 data are average through 3Q 2017)


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US Distillate Export Destinations

Latin America

Other (predominatly EU)

Canada

US refiners will need to serve export markets to sustain output levels

Transportation fuel - India


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Gasoline

Distillate

Long term growth in demand

year-on-year

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Gasoline Distillate

Net Import balance for products

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Sustained growth in products demand will see India become a large net importer

MARPOL VI set to destroy high S bunker demand


Marine fuel standard of 0.5pc sulphur in 2020

High proportion of 3mn bpd of resid will need to find a new home or be converted to low-sulphur material

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World Bunker Fuel & Resid Demand

Resid bunker fuel demand Total world resid demand

Wider light-heavy crude spreads


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Light-Heavy Crude Price Differential[Brent/North Sea Dated vs. Maya (USGC). Yearly avg. prices. 2017 data through May 22, 2017]

?

1 Argus Scenario from Argus MARPOL VI effects model

Wider crude spreads should benefit refineries with plans for heavy crude processing, although little new capacity announced on the back of MARPOL VI

India’s deficit of petrochemicals is growing


Footnote: 1 Petrochemicals includes olefins, aromatics, and polymers


India Polyethylene (PE) Outlook

India is adding capacity for PE production, but will still import more than 25 pc ofdomestic demand; Growth in demand near 10 pc per year


India Polypropylene (PP) Outlook

After becoming balanced in 2016, India is forecast to be importing 400+kt/yrto supply domestic demand in 2020; Demand is growing more than 10 pc/yr

India petroleum coke market balance


2013 2014 2015 2016 2017E 2018F 2019F

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Net Imports

Domestic production

Apparent demand ex-gasifier

Indian supply of petcoke

Source: Argus estimates

mn t RIL gasifier coming on

stream over next 12 months

Regional curbs on usage in some industries likely to impact imports

Domestic output continues to expand, more refiners considering gasification technology

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mn tRefinery Production Gas Processing

— Argus Consulting

Notes: 2016 data is provisional

Global LPG production by source


Global LPG consumption

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mn tAfrica Asia Pacific Europe

Latin America Middle East North America

Russia and Central Asia

Growth area


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— Argus Consulting, 2017

Asia is the key center of incremental demand


US LPG export market

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Residential Agricultural

Industrial Commercial

Transport Refinery fuel

Petrochemical Other non-energy Consumption


Global outlook for LPG consumption by sector


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Latin America Middle East North America


Global regional LPG consumption outlook


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mn t Total Consumption Total Production Net Position


Global LPG structural balance, 2010-2027

The next decade will be long LPG


Some Random Thoughts

Near Term Priorities

Successful Completion of:

1. West Coast Refinery Project

2. Rajasthan Refinery Project

3. Kakinada Petrochemical Complex

4. HMEL Bathinda Petrochemical Project

5. BS VI Projects

Upstream

Continue aggressive pursuit of Hydrocarbon Exploration & Licensing Policy (HELP) in line with OALP

Identify & participate in promising exploration blocks outside India

Encourage participation in blocks outside India that offer NGLs (feedstock for petrochemicals)

Focus: Reduce Crude Oil Imports!

Midstream

Rationalize pipeline network

Consider establishing a National Pipeline Company on a Common Carrier basis to maximize asset utilization

Encourage Undivided Joint Interest (UJI) concept for new pipeline projects

Streamline & expedite permitting of LNG/LPG/Naphtha Import Terminals

Encourage Shared Terminal Facilities

Downstream

Successfully implement BS VI

MARPOL, consider Condo Desulfurizers/Take advantage of light/heavy differential

Maximize use of opportunity crudes

Benchmark, gap analysis with focus on net cash margin

Establish “Safe Operating Envelop” for each process unit & maximize asset utilization

Implement Energy Conservation (Stochiometric firing of furnaces, steam leaks/usage, flare, etc.)

Higher Octane – explore Ionic Alkylation, a Chevron Technology

Identify projects to integrate petrochemicals/fertilizers

Crack diesel, kerosene and move as feed to petchem

Explore Waste to Biofuels

Operational Excellence

Reliability Centered Maintenance

Technology to Predict Failures/Condition Monitoring

Advance Process Controls/AI

Safety & the Environment

Treat everyone with dignity & respect

Implement Incident & Injury Free initiatives (Behavior Based Safety, Reinforcement Based Leadership, etc.)

Any human being who enters our premises MUST enjoy the fundamental GOD given right to go back to their families injury free at the end of each shift, every day.

Protect Water Aquifer

All Hydrocarbon tanks (including Petrol pumps) to be inspected periodically for leaks

All new hydrocarbon tanks must have double bottom with leak detection

Consider a National Drug & Alcohol Policy

Pre-employment screening for all at Hydrocarbon facilities, including tank truck drivers

Random tests using “Single Barrel” data process

Technology

Centre for High Technology should leverage talent at IITs & other institutions

Champion Waste to Fuels, Cellulose to Fuels and other renewable energy sources

Technologies to reduce Carbon Footprint

Thank you

by Jeet Bindra, February 2018with support from Argus Consulting Services

Global Markets Developments · All analysis and opinions, data, projections and forecasts provided...

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