Refinery Planning & Economics

Topics

1- Oil Markets
2- Crude Oil Pricing
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 Oil Markets

• Crude Oil Markers (Benchmarks)

• World Refining Centers
• Oil Movement & Trade Paths
• Petroleum Trade Markets
• Petroleum Stocks
 Crude Oil Markers

The Three Main Crude Oil Markers are:

• West Texas Intermediate - America

• Brent - Europe & Africa
• Dubai - Asia/Pacific
 Crude Oil Prices
40
$/BBL
36.1 Dubai Brent WTI
35

30
25.9
25

20

15

10

0
77 79 81 83 85 87 89 91 93 95 97 99 01 03
 Contango & Backwardation
Brent Crude Oil Prices
27
$/BBL
Dated Brent Current (Month 1)
Future (Month 2)
25

23
WHEN FUTURE
21 PRICE IS HIGHER

19

WHEN FUTURE PRICE IS

17 LOWER THAN TODAY'S

Source: Platt's - 2001

15
1 Jan 9 Jan 17 Jan 25 Jan 2 Feb 10 Feb 18 Feb 26 Feb 6 Mar 14 Mar 22 Mar
WORLD REFINING CENTERS

NWE

US
MED
ASIA
OIL MOVEMENT & TRADE PATHS

BRENT

WTI

DUBAI
 Arbitrage

• The Trade Between Geographical Areas to Earn

Profit

• The Arbitrage is Open When the Price in the

Loading Port Plus Freight is Less Than the Price at
the Discharge Port
Arbitrage

Demand
 Naphtha Arbitrage (Japan/MED)

$21/MT
$228/MT
$177/MT $14/MT
$200/MT

$14 /MT

$30 /MT

MAR ‘97 “THE ARB IS OPEN”

 Naphtha Arbitrage (Japan/MED)

– $5/MT
$200/MT
$177/MT
$176/MT $7/MT
$180/MT

$13 /MT

$29 /MT

SEP ‘97 “THE ARB IS CLOSE”

Saudi Aramco International
Crude Oil Storage
 Petroleum Stocks Reports

American Petroleum Institute (API)

– Weekly Report Covering the US

Energy Information Agency (EIA/DOE)

– Weekly Report Covering the US - Official

International Energy Agency (IEA)

– Monthly Report Covering OECD
 API Report
API STATISTICS
API NATIONAL PETROLEUM REPORT - SUMMARY
(STOCKS THOUSAND BARRELS) CHANGE ON
08/06/99 07/30/99 08/07/98 WEEK YEAR
CRUDE OIL STOCKS 323073 326234R 344736R -3161 -21663
DISTILLATE STOCKS 139050 139697R 144358R -647 -5308
GASOLINE STOCKS 206627 210103 215351 -3476 -8724
JET NAPHTHA STOCKS 126 43 49 +83 +77
JET KERO STOCKS 45468 45303 40987 +165 +4481
CRUDE RUNS 15366 15371 15247 -5 +119
PCT OF CAPACITY 95.0 99.1 97.8 -4.1 -2.8

API NATIONAL PETROLEUM REPORT - SUMMARY

(OUTPUT/IMPORTS THOUSAND B/D) CHANGE ON
08/06/99 07/30/99 08/07/98 WEEK YEAR
CRUDE PRODUCTION 5950 5950 6285R +0 -335
GASOLINE OUTPUT 8236 8157 7892 +79 +344
REFORM MOGAS OUTPUT 2548 2535 2576 +13 -28
OXYG MOGAS OUTPUT 567 528 421 +39 +146
OTHER MOGAS OUTPUT 5121 5094 4895 +27 +226
JET KERO OUTPUT 1590 1589 1479 +1 +111
August 6, 1999
 Stocks’ Impact On Prices
1,000 BBL $/BBL
400,000 18
16
350,000 14
12
10
300,000
8
6
250,000 4
2
200,000 0
3-Aug
10-Aug
17-Aug
24-Aug
31-Aug
27-Jul

5-Oct
7-Sep
14-Sep
21-Sep
28-Sep

12-Oct
19-Oct
26-Oct
US Total Crude Stocks (API) WTI Cushing Mth1
 Topics

1- Oil Markets
2- Crude Oil Market
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 Crude Oil Market

• Evolution of Crude Oil Pricing

• Crude Oil Value
• Petroleum Oil Price Reporting
• Crude Oil Contracts
• Crude Oil Supply & Demand
 Evolution of Crude Pricing

• Posted Price:
– Set by Governments of Producing Countries
– Price Changes Infrequently & Varies by Producer
• Netback Price:
– Based on Product Prices Less Refining Fee
– Guaranteed Refiners a Positive Margin
• Market-Related Price:
– Related to Published Quotation of a Marker Crude
– Differentials Applied are Standard
– Refining Margins are not Protected
 Crude Oil Value

Crude Oil Value is Related to the Value of

the Refined Products
• API
• Sulfur Content

Other Factors
• Refinery Type (Configuration)
• Paraffinic/Naphthenic
 Oil Price Reporting

• Who Report Oil Prices?

– Platt’s

– Petroleum Argus

– London Oil Reports (ICIS-LOR)

 Oil Price Reporting

• How are Oil Prices Published?

– Published Quotations Represent Fixed-Price Spot
Transactions, Confirmed Bids & Offers and Market
Talk.
– Price Reporting Agencies have Different Bases for
Trade Reporting, Freight Assessment and Freight
Calculation
 Platt’s Crude Oil Marketwire
Report

PLATT'S CRUDE OIL MARKETWIRE VOL. 21 NO. 167 AUG 26, 1999
New York (Platt's)--26AUG99

BRENT(SEP)+20.69-20.73+ DUBAI(OCT)19.94-19.99 WTI(OCT)21.09-21.11

BRENT(OCT)+20.65-20.67+ DUBAI(NOV)19.72-19.80 WTI(NOV)21.14-21.20
BRENT(NOV)+20.43-20.47+ DUBAI(DEC)19.50-19.60 P-PLUSWTI2.71-2.73
BRENT(DTD)+20.34-20.38+ OMAN (OCT)19.97-20.08 WTI(MID)20.89-20.94
FORTIES +20.38-20.44+ OCT "MPM" 0.27-0.30 WTS 20.02-20.08
EKOFISK +20.24-20.33+ URAL(MED) 19.71-19.80 EUGENEI 20.32-20.38
STATFJORD +20.23-20.29+ URAL(RDAM)19.76-19.82 BONITO 20.49-20.56
OSEBERG +20.37-20.45+ ILT(SIDI) 19.12-19.18 MARS 19.42-19.48
FLOTTA +19.69-19.78+ IHVY(SIDI)18.66-18.72 POSEIDON19.42-19.48
BONNY LT +20.52-20.59+ SUEZBLEND 18.42-18.50 LLS 21.26-21.32
QUA IBO +20.54-20.62+ ESSIDER 20.18-20.24 HLS 21.07-21.13
 Platt’s Crude Oil Marketwire
Report

CRUDE QUALITY AT RUSSIAN BLACK SEA PORT OF

NOVOROSSIISK HAS FALLEN IN RECENT WEEKS AS A RESULT
OF INTERRUPTED FLOW OF AZERI LIGHT CRUDE THROUGH
BAKU-NOVOROSSIISK PIPELINE, TRADING SOURCES SAID
THURS. TRANSNEFT-OPERATED PIPELINE, LINKING AZERI OIL
FIELDS INTO URALS SYSTEM THROUGH DAGESTAN AND
SEPARATIST REPUBLIC OF CHECHNYA, HAS SUFFERED
REPEATED STOPPAGES THIS YEAR FROM SABOTAGE IN
CHECHNYAN SECTION. ALSO, RUSSIAN FORCES ARE BOMBING
INSIDE CHECHNYA IN PURSUIT OF MUSLIM REBELS IN AREA.
A HEAVIER MIX OF SOUR CRUDES ENTERING URALS PIPELINE
SYSTEM IN RUSSIA MEANT A SHIPMENT LOADED ON AUG 23
HAD AN API OF 30.48, COMPARED WITH EXPECTATIONS OF
AROUND 32.4, TRADERS SAID.
 Contracts
• Contract Types:
– Term
– Spot

• Sales Types:
– FOB Free On Board
– CIF Cargo, Insurance & Freight
– C&F Cargo & Freight
– Others Lightering, ex-ship, ex-storage, …
 Saudi Arabia

Production: 8.3 MBD

Consumption: 1.8 MBD
Export: 6.5 MBD

Far East: 48%

Europe: 25%
US 22%
Others 5%
2000 Data
 Saudi Arabia's
5-Year Crude Production Plan
Million BBL/Day
8.60

8.40
8.30
8.20 8.20
8.10
8.00 8.02 8.00
8.00
7.90
7.80

7.60

7.40

7.20

7.00
2001 2002 2003 2004 2005 2006 2007
 Saudi Arabia's
5-Year Crude Production Plan
(by Grade)
Million BBL/Day
9

5
Actual

4 ASL

AXL
3
AL
2
AM
1
AH
0
2001 2002 2003 2004 2005 2006 2007
 Top 10 Oil Production -2002
9 Million BBL/Day

6
Saudi Arabia

5
Russia federation

4
TOTAL WORLD: 73.94 Million BBL/Day
USA

3
Mexico

Norway
2

Venezuela
China

Canada
Iran

UK
1

0 Source: BP * Production
 Oil Production -2002
FSU Asia Pacific
11% 11%

Africa
10%

North America
Europe 19%
10%

Other
Americas
9% Middle East
30%

Total World Oil Production: 73.94 Million BBL/Day

Oil Production -2002

OECD
25%
Non-OPEC
42%

OPEC
33%

Total World Oil Production: 73.94 Million BBL/Day

 Top 10 Oil Consumption -2002
25
Million BBL/Day

20

Total World: 75.8 Million BBL/Day

15
USA

10
China

Japan

South Korea
Germany

Canada
Russia

France
India

Italy
0 Source: BP Amoco Statistical Review - 1999.
 Oil Consumption - 2002
Europe
22%

Asia Pacific
27%
Other Americas
6%

Middle East
6%

FSU
5%
North America
31% Africa
3%

Total World Oil Consumption: 75.8 Million BBL/Day

World Total Oil Consumption

25
Million BBL/Day
US A

20

Total World: 75.8 Million BBL/Day

15

10
Japan
China

Saudi Arabia
Germany

S Korea

Canada
Russia

Canada

Ukrania
5

France

Mexico
Brazil
India

Italy

Spain
0 Source: BP Amoco Statistical Review - 1999.
 Global Supply/Demand
Balance
2.0
Million BBL/Day

1.5

1.0
SURPLUS
0.5

0.0
1992 1993 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
-0.5

-1.0
DEFICIT
-1.5

-2.0
0
100
150
200
250
300

50
Saudi Arabia

264
Iraq

113
UAE

98
Kuwait

Iran

Venezuela

Russia

Libya

USA
2002

Mexico

China

Nigeria

Norway

Algeria

Kazakhstan
World Total: 1,034
Proven Oil Reserve by country

Brazil
Billion Barrel

Azerbaijan
Proven Oil Reserve by region
 Reserve/Production Ratio 2002
100
Ye ars
90
87
80
70
60
50
40
41
30
20
10
0
N o rth Oth e r Eu ro p e Afri ca FS U As ia Mid d le Wo rld
Am e rica Am e rica s P a cific Ea s t Av e ra g e
 Organization of the Petroleum
Exporting Countries (OPEC)
• Founded in Baghdad in
1960

• Objective:
To Coordinate and
Unify Policies Among
OPEC COUNTRIES:
the Members in Order
to Secure Fair and IRAN, IRAQ, KUWAIT, SAUDI
ARABIA, VENEZUELA, QATAR,
Stable Prices for INDONESIA, LIBYA, UAE,
Petroleum Producers ALGERIA, & NIGERIA
 OPEC PRODUCTION LEVEL
30 40
Million BBL $/BBL
29
35
28
30
27

26
25

25 20

24
15
23
10
22

21
5

20 0
Apr 01 Jun 01 Aug 01 Oct 01 Dec 01 Feb 02 Apr 02 Jun 02 Aug 02 Oct 02 Dec 02 Feb 03
 TOPICS

1- Oil Markets
2- Crude Oil Pricing
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 REFINING

• Refined Products Supply/Demand

• World Refining Capacity
• Refined Products Applications
• Refined Products Specifications
• Regional Quality Variations

Refined Products supply/demand figures are based on Purvin & Gertz report (March 2001 update)
World refining capacity date are based on BPAmoco Statistical Review - 1999
 World Supply & Demand
Refined Products
2015
N a p h th a
2009

2007
Ga s o lin e
2005

2003 J e t/Ke ro

2001
Ga s o il
1999

1997
Fu e l Oil
Deficit 1995 Surplus
(1,500) (1,000) (500) 0 500 1,000 1,500 2,000 2,500
Thousand BBL/Day
 World Supply & Demand
Refined Products by Region
2015 Mi d d le
Ea s t
2009
FS U

2007
As i a

2005
Eu ro p e

2003
La ti n
Am e ric a
2001
Afric a
1999
Ca n a d a
1997
Net Net U n it e d
Importer 1995 Exporter S ta te s

(6,000) (4,000) (2,000) 0 2,000 4,000 6,000

Thousand BBL/Day
 World Refining Capacity
90 Million BBL/Day
82.0
80 74.86

70

60

50

40

30

20

10

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
North Ame rica Other Americas Europe Former Soviet Union Middle East Africa Asia Pacific
Refined Products Applications

• Propane: Petrochemical Industry/Home

• Butane: Petrochemical/Home/Gasoline
• Naphtha: Petrochemical/Gasoline
• Jet: Jet Fuel/Domestic Appliances
• Gasoil: Automotive Fuel/Heating Oil
• Fuel Oil: Bunker/Power/Industrial Boilers
 Products Specifications
• Naphtha
– Naphthenic / Paraffinic
• Gasoline
– Octane Number (RON/MON)
– Sulfur Content / Olefins Content
• Gasoil
– Sulfur Content
– Cetane Number
• Fuel Oil
– Sulfur Content
– Viscosity
– Straight-Run vs. Cracked
 Regional Quality Variations

• End Use Requirement

• Climate Conditions

• Refinery Technology

• Environmental Issues
 Regional Quality Variations

• Gasoline
– Lead-Free
– MTBE Concern
– Benzene Content
– Volatility

• Diesel
– 0.05% Sulfur

• Fuel Oil
– 1.0% Sulfur NORTH AMERICA
 Regional Quality Variations
• Gasoline
– Lead-Free
– Benzene Content
– Following the US

• Diesel
– 0.05% Sulfur

• Fuel Oil
– 1.0% Sulfur
WESTERN EUROPE
 Regional Quality Variations
• Gasoline
– Leaded/Unleaded
– MTBE

• Diesel
– 1.0 - 0.25% Sulfur

• Fuel Oil
– 4.0% Sulfur

ASIA/PACIFIC
 TOPICS

1- Oil Markets
2- Crude Oil Pricing
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 REFINED PRODUCTS
(ASIA/Arab Gulf)
• Regional Products Balance
• Products Seasonality
• Spreads
• Refined Products Sales
• Refining Margins
 Regional Products Balance -
2002
1.2
Million BBL/Da y

1.0

0.8
D EF ICIT
0.6

0.4

0.2

0.0
Au s t ra lia

Ch in a

In dia

In don e s ia

J apan

Malay s ia

P akis t an

P h ilippin e s

Sin ga pore

S. Kore a

Taiw an

Th a ila n d

Vie t n am

Ot h e r
-0.2

-0.4
SU R P LUS
-0.6
LP G N a ph th a Moga s Ker ojet Diesel F u el Oil
 Regional Products Balance -
2005
1.6
Million BBL/Da y
1.4

1.2

1.0
D EF ICIT
0.8

0.6

0.4
0.2

0.0
Au s t ralia

Ch in a

In dia

In don e s ia

J apan

Malay s ia

P a kis t a n

P h ilippin e s

Sin g apo re

S. Kore a

Ta iw a n

Th ailan d

Vie t n am

Ot h e r
-0.2

-0.4

-0.6
SUR P LU S
-0.8
LP G N aph th a Mogas Ker ojet Diesel F u el Oil
 Refined Products Sales

• Naphtha
– Naphtha C&F Japan - Freight (Japan/AG) + Premium

• Jet
– Arab Gulf Jet Quotation + Premium
– Singapore Jet Quotation - Discount

• Gasoil
– Singapore Gasoil 0.5%S Quotation - Discount
– Arab Gulf Gasoil 0.5%S Quotation + Premium
– Quality Adjustment is Incorporated as Premium/Discount
 Refined Products Sales

• Straight-Run Fuel Oil

– Singapore HSFO 180 Quotation - Freight (Singapore/AG) +
%Premium (Gasoil - Fuel Oil)

• Cracked Fuel Oil

– Singapore HSFO 380 Quotation - Discount
– Quality Adjustment is Incorporated in Discount
 Saudi Arabia Products
Supply & Demand - 2004
1200
Thousand BBL/Day
Exports

1000 Demand

800

600

400

200

0
LPG Naphtha Gasoline Kero/jet Diesel Fuel Oil
 Saudi Arabia Products
Demand 1970-2010
600
For ec a s t

500

400

300

200

100

-
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2007
LP G Na ph t h a Ga solin e Kero/jet Ga soil F u el Oil
 TOPICS

1- Oil Markets
2- Crude Oil Pricing
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 World LPG Demand
Million MT 240
250

200
Ocea n ia
Africa
150
Middle E a st
110
F SU / E E u rope
100
La t in Am erica
West Eu rope
50 Asia
North Am erica
0
1985 1990 1995 1998 2000 2005
 World LPG Demand
70 Millio n MT

60
1985 2005

50

40

30

20

10

0
N o rth As ia We s t La tin F S U / E Mid d le Afric a Oc e a n ia
Am e ric a Eu ro p e Am e ric a Eu ro p e Ea s t
 Asian LPG Demand

70 Million MT

60

50

40
In dian
30 Su bcon tin en t
Sou th east
20 Asia
F ar East
10

0
1990 1995 1997 1998 2000 2002 2005
 Asian LPG Demand
by End-Use
Million MT
70

60

50 Town Gas

40 Ch emicals

30 En gin e F u el

20 In du str ial

10 Residen tial/
Commer cia l
0
1990 1995 1997 1998 2000 2002 2005
 10
20
30
40
50
60
70

0
Japan

Ma la y s ia

Ko re a

Ta iw a n
Kilo gram s LP G p e r Ca p ita

S in g a p o re

Th a ila n d

P h ilip p in e s

Ch in a

In d ia
Residential/Commercial
Asian LPG Demand

In d o n e s ia

P a k is ta n
 Asian LPG Import

Millio n MT
35

30 Ot h er F a r
E a st
25
In dia n
Su bcon tin en t
20
Ch in a
15

10 Korea

5
J a pa n
0
1990 1995 1997 1998 2000 2002 2005
 Major LPG Exporters
Million MT
80 75

70
58 F SU
60 53
L Am erica
50 46
40 Au st ra lia
40 S E Asia
27 Ca n a da
30
Nort h Sea
20
25.6
29.6 Africa
23.6 22.1
10 19.6
12.5 Middle E a st

0
1985 1990 1995 1998 2000 2005
 Middle East LPG Exports
Millio n MT
30

25
Ba h ra in
20 Om a n
Ira q
15
Ira n
Qa ta r
10
Ku wa it
14.3 13.8 13.0
12.4 11.0
5 U.A.E .
7.9
Sa u di Ara bia
0
1985 1990 1995 1998 2000 2005
Local Petrochemical Demand
 Local Petrochemical Demand

12 Million MT/Year

10

8
PROPANE
6

4 BUTANE

2
NG
0
1997 1998 1999 2000 2001 2002
 TOPICS

1- Oil Markets
2- Crude Oil Pricing
3- Refining
4- Refined Products Prices (Asia/AG)
5- LPG
6- Shipping
 SHIPPING

• Tanker Types

• Freight Calculations
 AFRA

• “AFRA” - Average Freight Rate Assessment

• Compiled Monthly by London Tanker Broker

Panel (LTBP)

• Mainly Used in Oil Trade Transactions

• Represents the Weighted Average of the

Commercially Chartered Tonnage Employed in the
Transport of Oil
(16th Day of the Month - 15th Day of the Next Month)
 Tanker Types

Coastal Tankers
Aframax
Suez-max

VLCC

ULCC
 AFRA

AFRA is Assessed for Six Deadweight Groups:

1 General Purpose: 16,500 - 24,999

2 Medium Range: 25,000 - 44,999
3 Large Range 1 45,000 - 79,999
4 Large Range 2 80,000 - 159,999
5 VLCC 160,000 - 319,999
6 ULCC 320,000 - 549,999

above figures are in metric tons

 Freight Calculation

Freight =

Worldscale x AFRA