The future of oil refining refining in in Europe Europe

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1 The future of oil refining in Europe BP Forum

2 The future of oil refining in Europe 2

3 The future of oil refining in Europe In recent years Europe s refining sector has been hardpressed by a combination of different factors: Collapsing demand Burden of strong EC Climate and Engine efficiencies Slow investment environmental regulations Health and safety worker conditions High energy prices EU refinery closures to date 15 refineries shut-down Combined idled capacity 1.7 mb/d Capacity declined by 8% Utilization rates of many others significantly reduced Source: IEA EU Refining forum 12 April

4 And the future outlook doesn t look much better The latest IEA World Energy Outlook (2035) draws a gloomy picture: oil supply and demand confront refiners with an ever-more complex set of challenges, and not all of them are well-equipped to survive refiners need to invest to meet a surge of more than5mb/dindemand for diesel that is almost triple the increase in gasoline use over the period to 2035, nearly 10 mb/d of global refinery capacity is at risk, with refineries in OECD countries, and Europe in particular, among the most vulnerable. as the source of two-thirds of global greenhouse-gas emissions, the energy sector will be pivotal in determining whether or not climate change goals are achieved. 4

5 the future outlook doesn t look much better Although there is some good news on the horizon Most of the available forecasts foresee growth for total oil demand. In 2035 fossil fuels will still be at least 70-75% of primary energy demand. There will be big growth in demand for middle distillates.that means margins will have to be there. Cost differential between regional gas markets will narrow towards a more global l gas market due to developments in Asia, LNG exports from the USA, Gas reforms, non conventional gas etc. Prices in the US will still be below the rest of the world, but ratios between NBP and HH prices will improve. European demand, may not grow in absolute terms, but will still have a deficit of almost 2 m b/d of middle distillates and that puts the security of supply on the table. 5

6 Levers in the future of oil refining in Europe SAFE The future strategy for European companies must mean: SAFE, CLEAN and COMPETITIVE refining Health and safety have been and continue to be the number one priority for the refining industry in Europe. In addition to complying with strict european, national and local safety regulations, refiners operate under extensive self-imposed safety measures designed d toprovide maximum protection ti toour communities, workers and the environment. If we want to remain good neighbors, we have to keep our commitment to this priority CLEAN The refining Industry has to keep working with the European Commision i in issues related to Enviroment, Climate Change, Air Quality, but at a pace that remains competitive with the rest of the Clean World. We don t need governments to protect us but to create a competitive regulatory market for our industry 6

7 Levers in the future of oil refining in Europe The future strategy for European companies must mean: SAFE, CLEAN and COMPETITIVE refining COMPETITIVE Energy prices: Europe is lagging well behind other continents. Right slate of products: Europe will remain a net importer in the coming future of almost 2 Mbbd of middle distillates. That would help the latest concerns in some european countries towards the security of supply. Still Europe could improve the efficiency in their operations betting on innovation and technology. And has to work on the optimization of the systems through better model systems and approach to the international market. Reducing energy consumption, improving refinery optimization, decreasing operating costs, investing in technology and increasing organizational capability and effectiveness 7

8 The future of oil refining in Europe Refining is still an important industry in Europe Direct and indirect jobs Investments in technology and efficiency Income taxes for the administrations Security of supply: fossil fuels still represent 75% of total primary energy demandd 8