World Oil Outlook - Opec

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196 – because the US crude oil logistics system has been ‘caught off guard’ and has not had the capacity to get these rising volumes to markets beyond the US Petroleum Administration for Defense District 2 (PADD2) – has been a deep and widely publicized price discount (against Brent) for West Texas Intermediate (WTI), as well as essentially all inland crudes in the US plus Canada, since all are priced off WTI. These discounts have given support to refineries that process the discounted crudes, leading to a period of exceptional margins for almost all refineries that are inland. In the US Midwest, refineries are ‘awash’ with growing light crude production from the Bakken and older producing basins in places such as Texas, Oklahoma, and Kansas, as well as increasing supplies from heavy Canadian grades. As a result, capacity and throughputs in the Midwest are rising even though demand is falling and ethanol supplies are rising. Product movements from the US Gulf Coast into the Midwest have therefore been dropping, releasing additional supplies that Gulf Coast refiners are able to export and/or move up to the Northeast via pipeline. Despite delays and disputes over two major pipeline projects (Keystone XL and Northern Gateway), the US and Canadian logistics system is reacting by adding pipeline and, increasingly, rail and barge capacity to bring Western Canadian and especially Lower 48 crudes to the Gulf Coast markets, the West and East Coasts, and Eastern Canada. Given the pressure from continually rising production and the pace of the adaptation taking place in terms of logistics, some degree of inland crude price discounting could continue for several years, thereby supporting the economics of both inland and, to some degree, US and Canadian coastal refineries. Another factor that is boosting the competitiveness of US refineries, especially in the Gulf Coast, but potentially across other regions, is the availability of inexpensive natural gas at prices below $3/million British thermal unit (Btu) as a result of the shale gas boom. Thus, US shale (oil and gas) developments may act to give the US – and possibly Eastern, as well as Western Canadian – refineries a competitive edge in the medium- and possibly long-term, one that mitigates against closures. However, there are other factors that weigh in the opposite direction. Firstly, the shale gas boom is itself a two-edged sword. While cutting costs, it is also accelerating the displacement of heating oil and potentially transport fuels via CNG and, possibly, in the longer term, LNG and/or GTL liquids. Secondly, US and Canadian product demand continues to trend downward and new transport efficiency mandates, notably the US Corporate Average Fuel Economy (CAFE) standards, will help maintain this direction over the long-term. Similarly, renewable
fuels mandates call for the continued displacement of crude oil-based fuels, primarily gasoline by ethanol, thereby further reducing ex-refinery product demand. In addition, refiners in both the US and Canada are concerned about the impacts of a potential further tightening in standards for both products and stationary source emissions. The impact of this array of factors has seen a recent steady climb in US product exports, and by 2011 the country had become a net product exporter for the first time in many years. The competitive factors outlined should act to continue this trend, at least for the large Gulf Coast refining complexes, leading to few if any closures there, and likely at inland US refineries. This scenario should apply in the short- to medium-term, but, in the long-term, growing competition from newer refineries worldwide, as well as from existing plants in Europe, could curb the region’s ability to increase product exports, while declining national demand plus growing renewables could curb supply going into domestic markets. The implication is that there is scope for closures in the region in the long-term, but not in the short- to medium-term. The outlook for refineries on the East and West Coasts of the US and Canada is, however, more clouded. As discussed in Box 6.1, on the US East Coast, several refineries have recently closed. In addition, two refineries have narrowly averted closure. It remains to be seen whether the changes in ownership and processing/ commercial strategies will mean that these refineries stay open. The US West Coast represents a special case. Traditionally, the region has been relatively isolated, with limited competition for product markets from outside, partly because of the severe California Air Resources Board (CARB) product specifications that apply in the state. Similar to elsewhere in the US, demand for refinery-produced products is flat to declining, but this trend could be exacerbated by Law AB32 in California that calls for a Low Carbon Fuel Standard (LCFS) to reduce the energy intensity of transport fuels consumed in the state. AB32 is being challenged in the courts, but if it is upheld and implemented, it could lead to closures of refineries in California, a state that has 2 mb/d of capacity. Western Canadian refineries have the benefit of access to both local crude and growing regional demand, buoyed by oil sands developments. Conversely, most Eastern Canadian refineries do not appear to have the advantages of the US Gulf Coast refineries in terms of their ability to export products economically, or have access to low cost gas (although this could change). Therefore, inevitable demand declines in Canada for ex-refinery products indicate that some measure of additional closures is inevitable. 197 Chapter 6
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World Oil Outlook 2012 Organization
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OPEC is a permanent, intergovernmen
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Contents Foreword 1 Executive summa
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Section Two Oil downstream outlook
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Table 2.16 Growth in oil demand in
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Figure 2.8 Increase in number of pa
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Foreword
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2 It should be stressed, however, t
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4 with all stakeholders aimed at fo
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Executive summary
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e 6.3 6.1 8 that year. The impact i
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10 Total shale gas production in th
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12 Demand for OPEC crude stays esse
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14 6 4 2 OPEC Non-crude Non-OPEC No
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16 3 2 1 0 -1 almost 5 mb/d and mor
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6.2 6.3 .1 1,100 18 1,000 2.6 mb/d,
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20 energy sector. At that time many
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Section One
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Chapter 1 World oil trends: overvie
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Box 1.1 Regulatory reform: swap der
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of swaps, as well as a complete aud
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Medium-term economic growth This WO
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Domestic Product (GDP), Italy and S
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Figure 2 Exports from China to the
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which average global fertility decl
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India Nigeria gional increase conti
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Figure 1.6 Figure 1.6 Real GDP by r
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By 2035, the Chinese economy will b
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imported technologies. Trends in TF
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Figure 1.8 World supply of primary
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Figure 1.10 Coal: proven reserves a
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to accelerate, averaging more than
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Figure 1.15 Evolution of energy dem
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• The Reference Case assumes high
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• New policies since WOO 2011, sp
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Figure 1.20 OECD and non-OECD oil d
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Figure 1.24 Average annual global g
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Figure 1.26 Proven oil reserves at
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Table 1.7. 7 The growth in non-OPEC
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The total increase of non-crude liq
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Figure 1.30 Incremental OPEC and no
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1970 1975 1980 1985 1990 1995 2000
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2 0 Figure 1.36 Per capita CO2 emis
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76 Figure 2.1 Percentage shares of
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78 870 million cars across the glob
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80 Table 2.1 (continued) Vehicle an
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82 Figure 2.7 Figure 2.7 Passenger
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84 Commercial vehicles The projecti
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86 In terms of the ICE vehicle effi
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88 a key question concerns the exte
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90 Table 2.5 Oil demand in road tra
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92 Oil demand growth in this sector
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94 300 200 2,000 Developing countri
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96 particularly due to the movement
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98 China 0 0.1 0.2 0.3 0.4 0.5 mboe
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100 Table 2.14 Growth in oil demand
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102 Table 2.15 Oil demand in other
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104 developing countries, by 2009 i
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106 this sector was in these countr
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108 Table 2.19 Oil demand in electr
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110 Figure 3.1 Changes to non-OPEC
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112 I), Russkoye (Yamal-Nenets), Su
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114 Table 3.1 Non-OPEC crude oil an
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116 The medium-term Reference Case
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118 Table 3.4 Estimates of world cr
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120 oil resources, particularly giv
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122 further indication of the large
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124 Figure 3.3 Table 3.6 billion ba
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126 The Reference Case sees biofuel
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128 much OPEC oil will be needed) g
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130 Table 4.1 Oil demand in the LEG
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132 considerably swifter than in th
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134 24 2000 2005 2010 2015 2020 202
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136 The improved acquisition, treat
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138 While access to electricity for
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140 In September 2012, OPEC and Rus
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Section Two
Page 161 and 162: Chapter 5 Demand outlook to 2035 Re
Page 163 and 164: Figure 5.1 Figure 5.1 Global produc
Page 165 and 166: Figure 5.3 presents the details of
Page 167 and 168: At first glance, retrofitting scrub
Page 169 and 170: Moreover, as already underscored, p
Page 171 and 172: Regional product demand to 2035 Tur
Page 173 and 174: e el el* cts** 0 8 mb/d of addition
Page 175 and 176: Figure 5.7 Figure 5.7 Outlook for o
Page 177 and 178: The increases already highlighted a
Page 179 and 180: Demand for fuel oil will remain rel
Page 181 and 182: Shell Chemicals and Formosa Plastic
Page 183 and 184: equirement of 10 ppm. China is expe
Page 185 and 186: observed in several countries since
Page 187 and 188: Germany, provide tax incentives for
Page 189 and 190: Chapter 6 Medium-term refining outl
Page 191 and 192: Figure 6.1 Distillation capacity ad
Page 193 and 194: expansion, however, remains to be s
Page 195 and 196: Russia and other FSU countries Refi
Page 197 and 198: Europe For the next few years, refi
Page 199 and 200: came onstream during 2011, combined
Page 201 and 202: Box figure 1 Figure 1 Estimated dis
Page 203 and 204: Box figure 1 mb/d The situation on
Page 205 and 206: exceed the incremental ‘call on
Page 207 and 208: -1 2012 2013 2014 2015 2016 Figure
Page 209 and 210: Figure 6.7 Global secondary units a
Page 211: The situation in Europe is differen
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Page 217 and 218: 80 70 with 60 1.3 mb/d globally. Th
Page 219 and 220: One implication of this is that reg
Page 221 and 222: Chapter 7 Long-term refining outloo
Page 223 and 224: Table 7.1 Global demand growth and
Page 225 and 226: Europe lose 5.5 mb/d of throughput
Page 227 and 228: Figure 7.2 Figure 7.2 Total gasolin
Page 229 and 230: 2035. As a result, crude throughput
Page 231 and 232: Table 7.3 Global capacity requireme
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Page 235 and 236: 5 of the refining base and demand,
Page 237 and 238: Chapter 8 Downstream investment req
Page 239 and 240: Other Asia, in the long-term, the p
Page 241 and 242: Figure 8.3 also summarizes total in
Page 243 and 244: Chapter 9 Oil movements Generally,
Page 245 and 246: 60 Figure 9.1 In summary, the combi
Page 247 and 248: cant decline in US crude imports -
Page 249 and 250: The Seaway line used to flow north
Page 251 and 252: Ford crude east along the Gulf and
Page 253 and 254: 20 16 2011 2020 2035 For the Asia-P
Page 255 and 256: Figure 9.7 in these two regions. Th
Page 257 and 258: Chapter 10 Downstream challenges Th
Page 259 and 260: Shale gas developments could change
Page 261 and 262: Upgrading At around 18 mb/d install
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conversion. Advances have been made
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Section One 1. The OPEC Reference B
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Section Two 1. The World Oil Refini
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Abbreviations
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256 G-20 Group of Twenty GDP Gross
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Annex B
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OECD OECD America Canada Puerto Ric
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Côte d’Ivoire Rwanda Democratic
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Gibraltar Turkmenistan Kazakhstan U
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World Oil Refining Logistics and De
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270 Bolivia (Plurinational State of
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272 Eastern Europe Albania Poland B
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Annex D
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276
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278 EnSys Energy & Systems, Inc Eur
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280 Petroleum Economist PFC Energy
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Organization of the Petroleum Expor
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