PETROLEUM COKE VS STEAM COAL The Fundamentals Phillip H. Fisher Coal Trans 2001 Prague
Phillip H. Fisher 2 years coke consulting experience with producers, resellers, and logistics companies 31 years with Chevron; most recently: 5 years managing Chevron s pet coke business; 3+ MM tons/year 4 years managing Chevron s short term refinery and marketing operating plan Contact phfisher@home.com
World Fuel Grade Petroleum Coke Production 80 Million MT 61 73 60 40 40 20 0 1999 2004 2009 PACE
Additional World Coker Capacity 2000-2004 excluding China & FSU 20 18 Millions MT/year 16 14 12 10 8 6 4 Annual Total Other U.S. Venezuela PACE 2 0 Mexico 2000 2001 2002 2003 2004
US Green Petroleum Coke Exports Canada 0.24 MMT 0.34 MMT Total 19.2 MMT 19.0 MMT Japan 3.13 MMT 2.70 MMT Estimated 2000 vs. 1999 Major Export Destinations Europe 0.14 MMT 0.15 MMT 0.24 MMT 0.62 MMT PACE Europe 2.10 MMT 1.93 MMT Japan 0.40 MMT 0.70 MMT 1.58 MMT 2.18 MMT Europe 7.78 MMT 7.47 MMT
Quality Comparison Steam Coal Fuel Grade Coke (Typ So Africa) Ash, % 14-15 < 1.0 Moisture,% 8-8.5 8-12 BTU/# 10,800-11,500 14,000-15,000 Sulfur, % <1 0.75-8.0 VCM 20-25 8-10 HGI 50 35-80
Quantity vs Quality Producer Guarantees Steam Coal Fuel Grade Coke Producer Mine Refinery Coker Quantity Guarantee? Quality Guarantee? YES seam depth, width, extent all known YES Assay the cores NO Mechanical breakdowns, weather, storage limits, NO Crude dependent
Price Comparison Fuel grade coke prices on a delivered $/BTU basis is typically less than steam coal: Higher BTU/# Generally higher sulfur Coke production is not discretionary Occasionally have coke on coke competition
Price Comparison (Pace) Delivered ARA $/MMBTU 4.50 S. African Coal USGC Petcoke (>50 HGI) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 - Jan-95 Apr-95 Jul-95 Oct-95 Jan-96 Apr-96 Jul-96 Oct-96 Jan-97 Apr-97 Jul-97 Oct-97 Jan-98 Apr-98 Jul-98 Oct-98 Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Delivered Price $/MM BTU
Contract Terms Comparison Term Pricing Quantity & Quality Steam Coal from mine to coal buyer Spot to long term up to 10 yrs Tied to index or escalator Guarantee Fuel Grade Coke from refinery to coke buyer Some spot, most 1-3 yr term; some 10 yr term Negotiated quarterly or tied to an index No guarantee
Key contract philosophies from the producer s point of view: Coal: I ll sell you known quantities of coal at known quality from my named mine for a price that will escalate using typically published indices
Key contract philosophies from the producer s point of view: Coal: I ll sell you known quantities of coal at known quality from my named mine for a price that will escalate using typically published indices Coke: I ll sell you coke of variable quality and quantity from my coker. Price can relate to forecast quality and quantity, but you cannot refuse to lift it. I will not make up shortfalls.
Coke Economics to Refinery 20-40% of crude is the heavy fuel oil (FO) fraction Cokers feed the FO and convert 75% of it into lighter products: gasoline, jet, and diesel Remaining 25% of coker yield is coke It is economic to run the coker and make coke even if coke value is low or negative
Coke Price vs Coker Margin $5.00 Coker Margin, $/bbl $4.00 $3.00 $2.00 $1.00 $0.00 ($1.00) ($2.00) ($3.00) $10.00 $0.00 ($10.00) ($20.00) ($30.00) Coke Price $/Ton $16/bbl Lt prod to FO diff $12/bbl Lt prod to FO diff ($40.00) ($50.00) ($60.00)
What a Coking Refinery Needs from Coke Buyer Priority differs by Refinery but all want: Reliable Lifting Market price (Quality adjusted) Safe and Clean Handling Product Stewardship
What a Coke End User needs from a Coke Supplier Priorities differ by end user, but all want: Meet quality requirements Reliable deliveries Competitive market price
End User Coke Quality Sulfur Plant specific Ash Can be an issue Sizing 2 max preferred Hardness Grinder dependent Cement Power Bricks, ceramics, space heat, etc Very Price sensitive Can be an issue 2 max preferred Grinder dependent Price sensitive May be needed for grate coating Important to stokers, grates, etc Lump coke is usually soft
What it Takes to be a Coke Reseller Many sources of coke to match end user requirements Good logistics operations to move, store, blend Track record of delivering on promises
Major Coke Resellers Year 2000 millions of tons US Exports Total coke Aimcor 3.3 7 Koch Carbon 2.4 7 Oxbow 1.4 7 SSM 2.0 6 TCP 4.9 9 Others 5.8 Total 19.8
Type Moistuire, % Vol, % Ash, % HV, KB/# S, % Coke 8-11 9-13 <1 14.6 1-8+ Anthracite 2-3 3 7 13.5 <1 Semianthracite 2 12 18 12.3 <1 Bituminous 3-12 18-40 4-10 11.5-14 SubBituminous 16-25 25-40 4-11 8.5-10 Lignite 35 28 6 7 <2 <2