Impact of shale gas, tight oil and oil sands on European refining and petrochemical Industry

Transcription

1 Impact of shale gas, tight oil and oil sands on European refining and petrochemical Industry Brussels, Sep.20 th, 2013 OMV Refining & Marketing 1 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

2 Legal Disclaimer This presentation is prepared in order to outline our expression of interest. Nothing in this presentation shall be construed to create any legally binding obligations on any of the parties. Neither party shall be obligated to execute any agreement or otherwise enter into, complete or affect any transaction in relation to this presentation. All figures and information in this presentation are strictly confidential, they are by no means binding and thus indicative only OMV Aktiengesellschaft, all rights reserved, no reproduction without our explicit consent. 2 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

3 OMV Refining & Marketing as European Company is Supplying over 200 mn People with Energy OMV filling station network 4 Refineries in Austria, Germany, and Romania with total capacity ~22 mn t/a Germany: Burghausen (3.5 mn t ), Bayernoil (4.5 mn t, JV, on sale) Austria: Schwechat (9.6 mn t) Romania: Petrobrazi (4.2 mn t) 20% market share in the Danube region High product quality and environmental standards Strong retail brand and high-quality, innovative non-oil business (VIVA) Active in 13 countries with around 4,400 filling stations in 2012 (incl. Petrol Ofisi) Total ~ 3,300 employees 3 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

4 Unconventional oil and gas has the potential to change the refining and petrochemical industry globally. 4 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

5 And these are the reasons Lower energy costs Lower production costs Light crude re-routing - 68 % - 63 % 2.4 mbd Gas price advantage [EUR/MWh] Q1/08 Q1/09 Q1/10 Q1/11 Q1/12 Platts Japan Korea Marker (LNG Price) Net Connect Germany (NCG) Henry Hub (US) -68% Q1/13 Sources: Amercian Chemistry Council (ACC); EIA, NCG, Platts, IHS: America s Energy Future: The Unconventional Oil and Gas Revolution and the US Economy, Oct. 2012; Reuters Ethane cracker production cash cost advantage Production cash costs [USD/t] % Cum. ethylene capacity [Mta] source: HIS-CMAI, various years Light sweet crude supply to the US potentially re-routed to Europe 2011 future Re-routing to Europe In total, 2.4 mbd of light crude supply to the US in 2011 (14 % of consumption) source: BP statistical review of world energy OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

6 There are huge reserves of unconventionals - globally. 6 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

7 Unconventionals - Shale Gas & Gas Liquids, Light Tight Oil, and Oils Sands are distributed globally Oil sands Shale gas Light tight oil source: HIS 2013, EIA 2012, Hart Energy et al. 7 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

8 and the estimated production costs are in the range of other production methodologies. Gas reserves and production costs Oil reserves and production costs production cost [USD/MBtu] remaining technically recoverable gas resources [tcm] Conventional gas Coal bed methane Tight gas Shale gas Sour gas Arctic Deepwater Source: IEA, Resources to Reserves 2013 production cost [USD/bbl] remaining technically recoverable oil resources [bn bbl] MENA conventional oil Other conventional oil CO2-EOR Non-CO2-EOR Arctic Extra heavy oil & bitumen LTO Ultra-deepwater Kerogen oil Source: IEA, Resources to Reserves OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

9 Today, the main barriers are above ground: policy & public opinion, land access, and productto-processing site infrastructure. 9 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

10 Large volume flows of unconventional is currently limited by logistics not only in North America Current crude pipeline network is currently unable to handle the new situation... Canadian oil sand and Bakken US shale oil cannot be supplied to US refineries at the Gulf Coast. North American pipeline and expansion project but major projects are commissioned soon and planed for the midterm future Starting with the Seaway Pipeline reversal 2012, domestic light sweet crudes are entering the Gulf Coast region; an expansion is already planned The Canadian heavy crude pipelines capacity starts to increase from 2015 onwards, but full capacity expected in Major projects like Keystone XL discussed controversially due to environmental issues. 10 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

11 Current political boundary conditions in EU vary, but many of the countries are reluctant to shale gas production so far Indication of political / public opinion on shale gas / fracking The most important above ground issues include: more negative more positive Romania Policy / Public opinion United Kingdom Land access Business terms Supply Chain Midstream infrastructure Water availability and management Lithuania Poland Ukraine Spain Denmark France Other regulatory Germany sources : various 11 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

12 Advantaged feedstock affect petrochemical industry. 12 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

13 The cash costs for production of ethylene are affected by lower feedstock and lower energy costs, simultaneously Ethane based shale gas in the US shifts the global cost curve significantly. Production cash costs [USD/t] Ethane- Middle East margin Ethane - North America Naphtha Rest of the World 2006: ~ 60 USD/bbl 2012: ~ 100 USD/bbl Ethylene price 2012 Demand Cum. ethylene capacity [Mta] source: IHS WPC OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

14 There are on-purpose monomer production technologies available which are already competitive. 14 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

15 Propane Dehydration is the fastest emerging on-purpose technology Propylene to ethylene Price Ratio The shift towards ethane crackers in North America resulted in a supply gap for propylene and other higher molecular petchem products affecting local prices. 1,5 1,0 USA Western Europe forecast Propane is the most available gas liquid. 0, source: Nexant. 2ß12 Propane dehydration (PDH) is the most evolving technology in North America and North East Asia. Share of propane dehydration capacity of total propylene capacity North America North East Asia source: IHS-CMAI, OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

16 Unconventionals have already affected global crude price differentials. 16 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

17 North Americas light sweet crude production and the global demand for heavy crudes decrease the light-heavy-spread Due to global availability of light crudes, and increasing demand for heavy feedstock, shrinking differentials are observed Demand is still growing especially in Asia absorbing most of produced heavy crudes. Canada seeks an additional outlet to Chinas refineries for its oil sands. Global conversion capacities is still growing. More than doubling of US tight oil production (mainly light shale plays) expected. Price benefit in % of Urals and CPC to Brent 10,0% 5,0% 0,0% source: Platts 2013 Light sweet crude supply to the US potentially re-routed to Europe 0.6 Urals [%benefit] CPC [%benefit] -5,0% Re-routing to Europe Further North American light tight oil most probably re-routes light crudes to Europe 2011 future In total, 2.4 mbd of light crude supply to the US in 2011 (14 % of consumption) source: BP statistical review of world energy OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

18 Domestic refining and petrochemical industry will play a significant role in future, especially if vertical and horizontal integration exists. 18 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

19 Yield Shift to High Value Chemicals: Liquid Based Crackers are Competitive due to their By-Products production costs based on ethylene [costs/t ethylene] expenses 6.6 x by product credits expenses incl. feedstock costs, variable OPEX, fixed OPEX feedstock: ethane liquid source: internal data, OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

20 Strong business integration and further increased asset utilization Own crude oil % of refining capacity Competition % OMV % E&P Refining OMV 2015 Retail sales vol. % of refining capacity >25% Competition Refinery utilization rate 79% Refining Retail Competition OMV 2012 OMV % 42% >47% OMV 2012 OMV % ~90% Petrochemicals sales vol. % of refining capacity Refining Petrochemical Competition OMV s European competitors: BP Europe, ENI Europe, Exxon Europe, Lotos, MOL, Neste, NIS, Phillips 66 Europe, PKN. Orlen, Repsol Europe, Rompetrol, Shell Europe, Total Europe, Tupras. OMV 2012 OMV % 10% >13% Source: Annual reports, OMV analysis. 20 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

21 Summary Starting in North America, global unconventional oil and gas reserves have the potential to change our business. Low energy prices and low feedstock prices stimulate refining and petrochemical business incl. upcoming new technology to balance the limited supply of higher hydrocarbon petrochemical feedstock. Increasing domestic availability of light sweet crude pressurises the heavy-light differential. Integration into upstream, downstream, and in petrochemicals as well as cost performance leadership deliver the basis for a vital oil and gas business in Europe OMV as highly integrated oil and gas player is prepared to play a significant role in the future. 21 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013

22 22 OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013