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KBC IoE Webinar - Southeast Asia Downstream

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Southeast Asia is one of the highest economic growth regions, has increasing demand for refined products and petrochemicals, and has some of the largest product deficits, with some of the least amount …

Southeast Asia is one of the highest economic growth regions, has increasing demand for refined products and petrochemicals, and has some of the largest product deficits, with some of the least amount of new capacity development. There remains an opportunity for one additional world-scale integrated refining and petrochemical facility within the Southeast Asia region. This 45-minute webinar explores the candidates and asks, in essence, where will the next Singapore be?

Presented by Ed Kleinguetl: Ed is the Executive Vice President of Consulting at KBC. Mr. Kleinguetl has over 30 years of executive experience. Prior to joining KBC, Ed was Partner in Ernst & Young's Transaction Advisory Services and Senior Vice President of Sales & Marketing at a $1.2 billion industrial services company serving the refining, petrochemical, and process sectors.

Published in: Technology, Travel, Business

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  • 1. Southeast Asia Downstream:Where is the next Singapore?Webinar Presented by Edward Kleinguetl 20 June 2012 © 2012 KBC Advanced Technologies plc. All Rights Reserved.
  • 2. Before We Begin…> This webinar is being recorded for future reference.> Questions can be asked in the chat box and will be answered at the end during Q&A.> An email will be sent within 24 hours with download details of the webinar materials. 20 June 2012 PROPRIETARY INFORMATION 2
  • 3. Agenda> The case for Southeast Asia> Investment modality> Intra-regional strategies of the Majors> Capacity rationalisation> Extra-regional influences> Investment opportunity analysis> Where is the Next Singapore? 20 June 2012 PROPRIETARY INFORMATION 3
  • 4. The Case for Southeast Asia20 June 2012 PROPRIETARY INFORMATION 4
  • 5. Why an Interest in Southeast Asia?> High economic growth> Huge projected deficits in refined products and petrochemicals> Limited firm capacity development Latest GDP Growth Projections (2012-15) 7.8 % 6.3 % 5.7 % 4.1 4.0 % % 3.4 % 2.7 % 1.5 % China India SE Asia FSU Latin Middle USA Europe America East 20 June 2012 PROPRIETARY INFORMATION 5
  • 6. Product Deficits(SE Asia and ANZ)Refined Products > Refined Products kbpd 0 Considered -500 -1,000 -1,500 -1,079 – LPG -2,000 -2,500 – Naphtha -3,000 -3,500 -2,989 – Motor Gasoline -4,000 -3,586 2012 2025 2030 – Jet/KerosenePetrochemicals – Gas/Diesel Oil 000 Tons 0 – Other -500 -1,000 -743 > Petrochemicals Considered -1,500 -2,000 – Polyolefins -2,500 -3,000 -3,054 – Aromatics -3,500 -4,000 -3,605 2012 2025 2030 * Deficits before considering capacity adjustments 20 June 2012 PROPRIETARY INFORMATION 6
  • 7. Plus the Neighbor to the North (China)Petrochemicals Assumptions: 000 Tons 0 > Self-sufficient on -5,000 refined products -10,000 > Still requiring -15,000 -16,331 petrochemical -20,000 -25,000 -20,450 -21,800 imports 2012 2025 2030 20 June 2012 PROPRIETARY INFORMATION 7
  • 8. How SEA / ANZ Deficit Will be Satisfied kbpd 2030 SEA / ANZ Deficit 3,586 KBC assumed net SEA / ANZ capacity additions/closures* 1,107 Extra-regional: Indian surplus capacity 1,000 Arabian Peninsula – new capacity* 1,127 Extra-regional deficits to be filled from new capacity (450) Remaining net deficit 802 2030 product balance 3,586 * Capacity assumptions at 85% of nameplate Refined Products Only 20 June 2012 PROPRIETARY INFORMATION 8
  • 9. KBC Assumed Capacity AdjustmentsCountry Assumptions kbpdBrunei Zhejiang Hengyi project 135Indonesia Three announced revamps; no new refineries 152Malaysia Project RAPID and Port Dickson expansion 300Philippines Shell upgrade --Thailand Sriracha Refinery expansion to 300 bpd 25Vietnam Five projects move forward 830ANZ Capacity closures (140)Adjustment of nameplate capacity to 85% operating rate* (195) Net capacity additions assumed 1,107 * Capacity assumptions at 85% of nameplate Refined Products Only 20 June 2012 PROPRIETARY INFORMATION 9
  • 10. Investment Modality20 June 2012 PROPRIETARY INFORMATION 10
  • 11. Three Possible Investment Modes > Invest > Acquire > Joint Venture (Motiva Port Arthur model) 20 June 2012 PROPRIETARY INFORMATION 11
  • 12. Major Southeast Asia Investment Risks> No perfect investment> National aspirations> Extra-regional players> The (over)courtship of Vietnam> China economic slowdown> Classic petrochemical over-expansion> Workforce challenges in certain locations> Political and economic stability 20 June 2012 PROPRIETARY INFORMATION 12
  • 13. Intra-Regional Strategies of the Majors20 June 2012 PROPRIETARY INFORMATION 13
  • 14. International Super Majors> Focused on Mega-Centres> Increasing emphasis on upstream operations 20 June 2012 PROPRIETARY INFORMATION 14
  • 15. Chinese Majors> Expanding Trading Capacity 20 June 2012 PROPRIETARY INFORMATION 15
  • 16. Indian Merchant Refiners> Leveraging the Corporate Advantage 20 June 2012 PROPRIETARY INFORMATION 16
  • 17. Saudi Aramco Asia Corporation> More than just crude: Leveraging engineering expertise (Dhahran) and large project experience 20 June 2012 PROPRIETARY INFORMATION 17
  • 18. Capacity Rationalisation20 June 2012 PROPRIETARY INFORMATION 18
  • 19. Capacity Adjustments Country Rationalisation Asset Intra-regional Australia Capacity Closures Exit of the Super-Majors Thailand Rumoured sale Esso Refinery Extra-regional* Japan Closure / curtailment IKC: Tokuyama Refinery JXE: Muroran Refinery Sale Petrobras Nansei Refinery Tonen General (Exit of a Super-Major) Korea Capacity rationalisation Hyundai Oilbank * Niche players could exploit available assets 20 June 2012 PROPRIETARY INFORMATION 19
  • 20. Extra-Regional Influences20 June 2012 PROPRIETARY INFORMATION 20
  • 21. Arabian Gulf: A Surge of Products 1,000 kbpd 776 kbpd 351 kbpd 20 June 2012 PROPRIETARY INFORMATION 21
  • 22. Planned Ethylene Capacity (2014-2018)*> Targeting China and Southeast Asia 1.5 million tonnes 1.4 million tonnes 1.2 million tonnes1.3 million tonnes Est. 1.0 million tonnes * Excludes new Iranian ethylene capacity: 1.0 million tonnes under construction and 3.0 million tonnes under engineering 20 June 2012 PROPRIETARY INFORMATION 22
  • 23. Chinese Influences> Refined product self- sufficiency> Foreign petrochemical expansion> Involvement of smaller Chinese companies 20 June 2012 PROPRIETARY INFORMATION 23
  • 24. North Asia Influences: Heading South> Limited exports to Southeast Asia> But, likely investors in regional opportunities 20 June 2012 PROPRIETARY INFORMATION 24
  • 25. Investment Opportunity Analysis20 June 2012 PROPRIETARY INFORMATION 25
  • 26. Vietnam: Heavily Courted > Binh Son Refinery Expansion – 55 kbpd – PDVSA (?), SK Energy, JX Energy (?) > Nghi Son Refinery & Petrochemical LLC – 200 kbpd Nghi Son Refinery – Idemitsu, Kuwait Petroleum, PetroVietnam, Mitsui > Long Son Refinery Project – Petrochemical Facility Binh Son Refinery • Siam Cement, QPI, Thai Plastics, PetroVietnam, Vinachem – Refinery Project (240 kbpd) • Aramco (?), Total (?), PetroVietnam Nhon Hoi Refinery > Project No. 4: Van Phong Bay Refinery Van Phong Bay Refinery – 200 kbpd – Petrolimex and others Long Son Refinery > Project No. 5: Nhon Hoi Refinery – 200 kbpd – STFE (?); PTT (?); other private Chinese (?) 20 June 2012 PROPRIETARY INFORMATION 26
  • 27. Indonesia: Always a Bridesmaid? > Three Proposed Revamps (Existing Refineries) – Balikpapan, Cilacap, and Dumai – Capacity Increase: 152 kbpd > Balongan Refinery, West Java – Location: Near Existing Balongan Refinery – MoU with Kuwait Petroleum – Proposed Capacity: 400 kbpd Balongan Refinery > Tuban Refinery, East Java – Location: Tuban, Indonesia Tuban Refinery – MoU with Aramco – Proposed Capacity: 400 kbpd 20 June 2012 PROPRIETARY INFORMATION 27
  • 28. Malaysia: Interesting Possibilities > Port Dickson Expansion – Expansion capacity not defined – Potential for additional growth Port Dickson Refinery Project RAPID > Project RAPID – Location: Johor, Malaysia – Proposed Capacity: 300 kbpd – Integrated refinery and petrochemical facility • Joint agreements: PTTGC and Itochu Corporation • Petrochemicals MoU: BASF – Ground broken: May 2012 20 June 2012 PROPRIETARY INFORMATION 28
  • 29. Thailand: Interesting Assets > Esso Thailand Refinery (Sriracha) – Excellent asset; rumoured for sale – Potential for additional growth – Integration possibilities Esso > Star Petroleum Refining Company Ltd. Thailand (Rayong) – Joint venture: Caltex and PTT Star Petroleum – Good asset – Integration possibilities – Potential expansion challenges due to air quality issues in Rayong area 20 June 2012 PROPRIETARY INFORMATION 29
  • 30. Brunei: Potential Projects to Leverage > Zhejiang Hengyi Refinery – Proposed Capacity: 135 kbpd – Proposed Location: Pulau Muara Besar – Paralxylene back to China PetroBru Zhejiang Hengyi Refinery > PetroBru – Proposed Capacity: 200 kbpd – Proposed Location: Pulau Muara Besar – Feasibility study completed in 2009 > Investment Considerations – Would need additional crude supply – Political and economic stability – Could leverage one of the proposed projects to expand to world-scale capacity (200-300 kbpd) 20 June 2012 PROPRIETARY INFORMATION 30
  • 31. Other Possible Locations / AssetsIntra-Regional> Singapore> Philippines – Petron Refinery Expansion – Shell announced upgrade> MyanmarExtra-Regional> Sri Lanka 20 June 2012 PROPRIETARY INFORMATION 31
  • 32. Poll Question #1> Where would you site a new world-scale integrated refinery-petrochemical facility within Southeast Asia? a) Brunei e) Singapore b) Indonesia f) Thailand c) Malaysia g) Vietnam d) Philippines h) Other 20 June 2012 PROPRIETARY INFORMATION 32
  • 33. Where is the Next Singapore?20 June 2012 PROPRIETARY INFORMATION 33
  • 34. Extra-Regional: Arabian Peninsula > Major Middle East expansion over the decade > Replaces India as the global refined products arbitrage hub > Becomes a major petrochemicals producer 20 June 2012 PROPRIETARY INFORMATION 34
  • 35. Intra-Regional: Malaysia and Brunei> Even with dominance of Arabian Peninsula, the region has room for at least one world-scale integrated refinery-petrochemical merchant centreCountry Location CommentaryMalaysia Project RAPID Subsequent expansion beyond 300 kbpdMalaysia Port Dickson Expansion Significantly greater expansion; possible Motiva-type JVMalaysia Grassroots: Sarawak or Sabah Petronas is a solid operating companyBrunei Pulau Muara Besar Leverage either Zhejiang Hengyi or PetroBru Project 20 June 2012 PROPRIETARY INFORMATION 35
  • 36. Intra-Regional: Runners-Up> Other possibilities for considerationCountry Location CommentaryThailand Esso Refinery (Sriracha) Existing asset; likely one of the highest quality existing assetsVietnam Long Son Refinery Project Grassroots project; proposed integrated facility 20 June 2012 PROPRIETARY INFORMATION 36
  • 37. Conclusions> Southeast Asia – Strong economic growth – Increasing demand for refined products and petrochemicals – Least amount of capacity development compared to other high growth regions> The “Next Singapore” – Likely “extra-regional” as Arabian Peninsula becomes dominant production base – Still room for at least one regional world-scale integrated refining and petrochemical complex (merchant centre)> Various investment opportunities and models exist> Risks need to be carefully assessed and managed 20 June 2012 PROPRIETARY INFORMATION 37
  • 38. Players to Watch Relative to SE Asia> CNOOC > Pertamina> Private Chinese > Petronas Companies > PTT (Thailand)> Japanese Energy > Qatar Petroleum Companies International> Japanese Trading > San Miguel Group Companies > Saudi Aramco Asia> Korean Energy Corporation Companies > Siam Cement> Kuwait Petroleum > Trading Companies (e.g., Corporation Trafigura, Vitol, Concorde)> PDVSA 20 June 2012 PROPRIETARY INFORMATION 38
  • 39. KBC Reports Supporting this Presentation See the KBC Website for details www.kbcat.com 20 June 2012 PROPRIETARY INFORMATION 39
  • 40. A Quick Survey> Was this topic valuable? > How do you rate the – Yes webinar overall? – No – Excellent> Was the presentation – Good clear? – Fair – Yes – Poor – No> Would you be interested Please send any further questions and feedback to: in future webinars? kbc-marketing@kbcat.com – Yes – No 20 June 2012 PROPRIETARY INFORMATION 40
  • 41. Closing> Questions?> Future webinar topics: – Asian gas and LNG markets – Market conditions – Asset optimisation for competitive advantage – Investment support – Sustainable workforce development> We welcome suggestions for future topics – please email kbc-marketing@kbcat.com> Next webinar information will go out shortly.> Thank you for joining us! 20 June 2012 PROPRIETARY INFORMATION 41