Crude Oil in Europe: Production, Trade and Refining Outlook

30 Pages·2013·1.04 MB·English

by  Alasdair Anderson

Crude Oil in Europe: Production, Trade and Refining Outlook

Steve Cooper,
Senior Downstream Analyst

Wood Mackenzie, London

StocExpo - Antwerp
March 2013
www.woodmac.com
Contents
1 European crude production outlook
2 Crude oil production from near neighbours
3 European refinery crude needs
4 Evolving crude oil trade patterns
5 Implications for the storage industry
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North Sea crude / NGL production declined sharply in recent years; mid-term
outlook is flat, with further declines post-2020
Europe Crude Production
North Sea output makes up 88% of
7.000
Netherlands
Europe’s crude / NGL production, down 8.000
Netherlands
Denmark
from 93% in 2000 6.000
7.000 UDKenmark
Norway
Norway accounts for over half of total
5.000 UK
6.000
European output
Norway
4.000
Medium-term rate of decline dependent on d 5.000 Total Europe
nmeawtu dree vfeieloldpsm ents surrounding largest, /b 000'd/b 00 3.0004.000
0
'
2.000
Recent discoveries have arrested near- 3.000
term UK decline
1.0002.000
UK output generally from mature fields
01.000
with lower exploration potential than
2000 2005 2010 2015 2020 2025 2030
Norway
0
2000 2005 2010 2015 2020 2025 2030
Source: Wood Mackenzie
Source : Wood Mackenzie

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Different types of crude oil are of very different quality…

Crude Oil Distillation (assay basis) Crude Oil Price Differential
0,03% 0,95% 1,92%
100%
0,00
LPG
14% 2005 2006 2007 2008 2009 2010 2011 2012
90% 18%
-2,00
29%
7%
80% Naphtha
-4,00
10%
s
d 70% 16%
l -6,00
e
iY 9% Kerosene le
r
no 60% 27% rab -8,00
ita 50% / $
l 22% Gasoil / -10,00
l
i
t
s Diesel
iD 40% -12,00

e
d 63% Residue
u 30% -14,00
r
C
44%
20% 38% -16,00
Differential, Maya FOB vs Dated
10%
Source: Argus Brent FOB, $/barrel
0%
Maya Azeri Light Brent Not all refineries can process heavier,
;
more challenging crude oils

Heavy Medium Light
This leads to market discounts / premia
for different grades
Source: Wood Mackenzie
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Refinery profitability is driven by ability to convert less profitable residue into
more valuable light products
Crude Oil Distillation (assay basis) Refinery Output
0,03% 0,95% 1,92% 2%
100% 100%
14% LPG 6% LPG
90% 18%
90%
29%
7% Naphtha
80% 20%
80%
10% Naphtha

t
w 70% 16% Gasoline
% 70%
9% 7%
,
s
60% Kerosene
d Jet/Kerosene
27%
le 60%
iY
n 50% 22% Diesel/Gasoil
o 50%
Gasoil /
i
t
a 40% Diesel 39%
l
lit 40% Fuel Oil
s
63%
iD 30%
Residue

ed 44% 30% Other
u 20% 38% products
r
C t
w
10% % 20% 11% Refinery Fuel
& Loss
,
s
d 10% 8%
0% l
e
Maya Azeri Light Brent iY 6%

.f 0%
Heavy Medium Light e
R NWE, 2012
Source: Wood Mackenzie
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Value of crude derived from value of refined products;
residue is upgraded in order to minimise lower-value fuel oil production
Value of heavy fuel oil (FO) products is NWE Crackspreads (Product vs Brent, FOB)
consistently below crude oil cost
40
Light products trade at a premium to crude

oil . 30
lb
b
/ 20
$
Value of crude oil ultimately derived from
t
n
value of refined products e 10
r
B

s 0
• Supply-side: crude oil quality v

d
a-10
e
• Light / Medium / Heavy r
p
s-20

• Sweet / Sour k
c
a
r-30
• Demand-side: availability of refining C
-40
capacity to match crude quality to
5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5
9 9 9 0 0 0 0 0 1 1 1 1 1 2 2 2
refinery processing capabilities 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0
1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2
Challenge for refineries is to minimise FO
Jet Diesel Gasoil
output through careful selection of crude
1 wt%S FO 3.5 wt%S FO
oil grades (and therefore costs)
Source: history Argus Media , forecast Wood Mackenzie

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European crude oil production to become heavier as output declines;
some rebalancing of trade flows required to maintain current crude quality

Crude Oil Production, proportional Crude Oil Production, volume
Extra light Light Medium Heavy Extra heavy
100% 8.000
90%
7.000
80%
6.000
70%
d
p 5.000
60% b
0
0
50% 0 4.000
‘
40%
3.000
30%
2.000
20%
1.000
10%
0% 0
0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0
0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3 0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Note: does not include forecast crude volumes / commercial adjustments of unknown quality
Source: Wood Mackenzie

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Average sulphur content of European crude is forecast to remain largely
unchanged
Crude Oil Production, proportional Crude Oil Production, volume
Sour Medium sweet Sweet
100% 8.000
90%
7.000
80%
6.000
70%
5.000
60% d
p
50% b 4.000
0
0
40% 0‘ 3.000
30%
2.000
20%
1.000
10%
0% 0
0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0
0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3 0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Note: does not include forecast crude volumes / commercial adjustments of unknown quality
Source: Wood Mackenzie

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Contents
1 European crude production outlook
2 Crude oil production from near neighbours
3 European refinery crude needs
4 Evolving crude oil trade patterns
5 Implications for the storage industry
© Wood Mackenzie 9
Delivering commercial insight
www.woodmac.com
Growing production in other regions will have impact on trade flows and
storage within Europe; incremental sour crude provided by Middle East

Crude Oil Production, volume
Latin America Caspian FSU West Africa North Africa
40
35
30
25
d
b/
m 20

15
10
5
0
0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0
0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Source: Wood Mackenzie
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