Factors Impacting Residual Fuel Oil
Supply and Demand Through 2015
October 2010
2010 Energy Buyers Conference
Miami Beach, Florida
© Poten & Partners 2010
Page
Fuel Oil Production
1
Residual Fuel Oil Production by Region
2009 / E 2010 / E 2015
ASIA/PACIFIC
150
135
2009
120
E 2010
E 2015
million mt
105
90
MIDDLE EAST
75
UAE and Saudi Arabia
growth in crude oil
refining capacity
60
45
30
FSU
15
Russia and Belarus
increase in resid
conversion capacity
OCTOBER 2010
Africa
N. America
FSU
Middle East
S.America/Carib
*Excluding FSU
*Europe
Asia/Pacific
0
© POTEN & PARTNERS
Drop in Japan and S.
Korea production is offset
by increase in China and
India
S. AMERICA/CARIB
Colombia and Brazil
growth in crude oil
refining capacity
Page
2
Fuel Oil Production - Continued
Top Fuel Oil Top Producting Countries, 2009
68
Russia
36
USA
Japan
27
India
26
Iran
25
22
Saudi Arabia
21
South Korea
17
Mexico
15
Italy
0
OCTOBER 2010
• The U.S. has 17.2 MBD of crude
oil refining capacity over 55%
resid conversion capacity
19
China
© POTEN & PARTNERS
• Russia has about 5.8 MBD of
crude oil refining capacity and
only 18% resid conversion
capacity
15
30
Million MT
45
60
75
Page
Residual Bunker Fuel Burn – no Scrubber Scenario
3
Residual Bunker Fuel Consumption by Region
2009 / E 2010 / E 2015
90
•
80
70
million mt
60
2009
50
E 2010
E 2015
40
30
20
10
OCTOBER 2010
*Excluding FSU
Africa
FSU
N. America
Middle East
S.America/Carib
© POTEN & PARTNERS
*Europe
Asia/Pacific
0
China and Singapore are
expected to drive the
Asia/Pacific residual bunker
fuel sales growth to nearly
90 million mt by 2015
If marine exhaust scrubbers
are not widely utilized by
2015, residual bunker sales
in Europe, the FSU
countries and North
America are expected to
decline as a result of 0.1%S
max marine fuel in the ECAs
Page
4
Residual Bunker Fuel Burn - Continued
Top Residual Bunker Fuel Consuming Countries, 2009
35
Singapore
21
USA
13
Netherlands
13
China*
8
South Korea
8
Spain
• UAE bunker fuel sales are driven by
Fujairah. Vopak Horizon’s terminal
expansion is expected to attract more
bunker fuel suppliers
7
Russia
5
Hong Kong
0
OCTOBER 2010
• U.S. residual bunker fuel sales are
nearly equally divided between the
East, West and Gulf Coasts.
8
Belgium
© POTEN & PARTNERS
• Singapore bunker fuel sales continued
to grow through the global economic
slow-down. Bunker fuel sales
increased 5% in 2009 compared to the
11% jump in 2008
14
UAE
5
* China excluding Hong Kong
10
15
20
Million MT
25
30
35
Page
5
Residual Bunker Fuel Specifications
Quality
Year
2009
Sulfur (%)*
6 Mo 2010
2009
Viscosity (cSt)
6 Mo 2010
2009
Al+Si (ppm)
6 Mo 2010
Average Fuel Quality Overview
ISO 8217:2010
Limits for RMG 380
World
4.50
2.32
Regional Requirements
2.34
380
308
380
317
80
26
60
25
Singapore Rotterdam
2.76
1.87
2.78
1.94
323
328
346
359
30
42
30
36
Source: DNV Petroleum Services
*Number average, not weighted average basis
• Al + Si fines are abrasive to fuel pumps, injectors and cylinder
liners.
• Global Al + Si average is only about 25 ppm, so ISO’s 60 ppm
limit is a formality
• Increased IFO blending to meet the July 2010 1%S marine fuel
restrictions has increased the levels of Al + Si
© POTEN & PARTNERS
OCTOBER 2010
Page
6
North Europe ECAs – No Scrubber Scenario
1.5%S Max (Nov 2007) / 1%S Max (Jul 2010) / 0.1%S Max (Jan 2015)
North Europe ECAs
International Bunker Fuel Sales
million mt
40
32
41
34
7
35
8
27
27
2008
E 2011
9
24
16
32
8
0
>1.5%S IFO
< 1.0%S IFO
© POTEN & PARTNERS
OCTOBER 2010
• Beginning 2015, to meet 0.1%S
max bunker fuel restrictions,
vessels would turn to marine
distillates or install scrubbers.
E 2015
1.0%S - 1.5%S IFO
≤ 0.1%S MDO/MGO
• Russian refineries near the Baltic Sea
appear to have enough nameplate
capacity to fill a fair portion of the
estimated marine gasoil demand
Page
7
North America ECA – No Scrubber Scenario
1%S Max (Aug 2012) / 0.1%S Max (Jan 2015)
North America ECA
International Bunker Fuel Sales
million mt
25
22
20
23
24
5
6
18
18
15
10
22
5
0
2009
>1.0%S IFO
© POTEN & PARTNERS
OCTOBER 2010
E 2013
E 2015
≤1.0%S IFO
≤ 0.1%S MDO/MGO
• Post mid-2012 N. America 1%S
max IFO demand is projected at
23% of total IFO sales. Industry
will adjust to this swing via
marginal crude slate changes
and blendstock imports
• In 2015, from a macro
perspective, N. America should
have no problem meeting the
new marine distillates demand
Page
8
Marine Exhaust Scrubbers
Possible Scrubber Fuel Cost Savings
Scrubber Fuel Savings,
Million $/year
7
6
5
4
3
2
1
0
2,000
4,000
8,000
16,000
mt Bunker Fuel Used in ECA per Year
$50/mt spread
$100/mt spread
Spread = Gasoil 0.2%S - FO 1%S
• Scrubbers still
seeking wider
commercial
acceptance
© POTEN & PARTNERS
OCTOBER 2010
•
$200/mt spread
The price differential
between 0.1%S gasoil
and 1%S residual bunker
fuel drives scrubber
economics
•
$400/mt spread
High vessel fuel
consumption generates
significant fuel cost
savings
Page
9
NOx Emission Limits
MARPOL Annex VI Fuel NOx Emission Limits
18
16
NOx Limit, g/kWh
14
Tier I Global - vessels built
between 1/2000 - 12/2010
12
10
Tier II Global - vessels built
between 1/2011 - 12/2015
8
6
Tier III ECAs - vessels
built starting 1/2016
4
2
1,
00
0
1,
20
0
1,
40
0
1,
60
0
1,
80
0
2,
00
0
2,
20
0
80
0
60
0
40
0
20
0
13
0
0
0
Rated Engine Speed, rpm
© POTEN & PARTNERS
OCTOBER 2010
• Tier I - no
• Tier II – engine
additional
manufacturers
technology is
have modified
required to
their engines to
meet limits
meet upcoming
regulation
• Tier III – vessels operating in the ECAs and
built after 2015 may require 0.1%S MGO
to meet NOx restrictions, since most
exhaust scrubbers have not yet reached
the NOx reductions levels.
Page
10
Fuel
Oil Prospects
2010-2015
Near-Term
Tanker
Shipping
Expectations
A Medium-Term Outlook on the Residual Fuel Oil Market
Marine Fuel Regulations
•Still bullish on China and India
Pollution
Abatement
Technology and Vessel Operating Cost
•Lower than ‘expected’
GDP
growth
assessments do not necessarily denote low
Spot Tanker Transportation
growth
by Route and Type of Tanker Fixture
Fuel Oil/Crude Oil Annual Price Outlook (2010-2015)
Regions
•Cash injections World
by certain
governments
Asia/Pacific
will help support shipping
industry in Middle East
certain markets, particularly
Europein the East
FSU
S. America/N. America/Carib
Africa
For Each Region (2010-2015)
•Demand in OECD markets
to Capacity & Resid Conversion Capacity
Crude expected
Oil Refining
recover slowly throughAnnounced
the remainder
of Projects
Refining
2009 bolstering tankerFuel
demand
Oil Production
Fuel Oil Inland Consumption
•Economic recovery will
be largely
Bunker
Fuel Sales
dictated by policy
Published May
© POTEN & PARTNERS
OCTOBER 2010
•Banking sector regulation
•Stimulus and deficit
2010•Taxes
•Likelihood of the ‘double-dip’ recession
Page
11
© POTEN & PARTNERS
OCTOBER 2010
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