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Global Asian Oil Market Outlook    Dec 2002
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Global Asian Oil Market Outlook Dec 2002

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It is a report about opportiunities for investment in Asia

It is a report about opportiunities for investment in Asia

Published in: Business, Travel
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  • 1. Global and Asian Oil Market Outlook December 2002 FACTS Inc. by
  • 2. Global Oil Demand and the Asia-Pacific Region
    • It is clear that global oil demand is weak.
    • IEA estimates that global demand grew by only 230 kb/d in 2001. In 2002 it is projected to grow by 200 kb/d, down from its projection of 420 kb/d only a few months ago.
  • 3.  
  • 4.  
  • 5. Oil demand growth is weak in the short term but it will recover in the longer term...
  • 6.
    • Meanwhile, OPEC capacity continues to grow.
      • OPEC capacity grew by around one million b/d in 2001 alone.
      • Between 2002 and 2005, we expect OPEC capacity to go up by around 0.5 to 1 million b/d per annum, including condensates.
      • This excludes huge potential growth in Saudi Arabia and Iraq.
    • Combined OPEC and non-OPEC capacity will grow by around 1.5 million b/d of new capacity per annum until 2005/2006.
    • These forces are already in motion!
    Oil Demand, Production Capacity, and Price
  • 7. OPEC and Oil Prices
    • Beyond 2002 additional OPEC capacity plus non-OPEC additions will act to keep a lid on prices. Most OPEC members have spare capacity and an incentive to cheat.
    • In the 2003-2005 period, the price should settle into the $15-20/b range.
  • 8.  
  • 9.  
  • 10.  
  • 11.  
  • 12.  
  • 13. Role of China
  • 14. Energy and the Economy
    • High official GDP growth but a weak linkage with primary energy consumption growth.
    • Official GDP growth is exaggerated.
    • Huge energy production and consumption.
    • Coal production and consumption declined substantially between 1996 and 2000; a slight rebound emerged in 2001 and continues in 2002.
    • Growth of oil and gas use is strong.
    • Structure of primary energy use will continue to change significantly over the next fifteen years.
  • 15.  
  • 16.  
  • 17.  
  • 18.  
  • 19.  
  • 20.  
  • 21.  
  • 22. East of Suez Product Flows
  • 23.  
  • 24.  
  • 25.  
  • 26.  
  • 27.  
  • 28. GTL: Is Asia Ready for GTL Premiums?
  • 29.
    • GTL technology has not changed much since 1923, but new catalysts have reduced costs and allowed more flexibility to produce desired fuels.
    • Given project proposals, some 400 kb/d of GTL diesel could be in the market by the end of the decade.
    • As a result, many plants look set to take off commercially.
  • 30.
    • Most GTL projects target ultra-low sulfur, high cetane diesel fuels.
    • Global excitement on GTL has been enormous, but there are serious misconceptions too.
  • 31.  
  • 32. Are all of these projects really viable?
    • At $30/b oil everything works.
    • At $10-12/b oil GTL projects are dead on arrival.
    • At $18-20/b prospects are uncertain.
    • Key –
      • Gas cost
      • Premium for environmentally clean fuel
  • 33.
    • At $18-20/b oil and no premium, projects are only viable if gas cost is $.50-$.75/mmBTU or less.
    • As a consequence, projects may not be viable in Asia (where gas cost is generally higher) if there is not a substantial premium.
      • Some have talked of premiums of upwards of $10/bbl for diesel. We do not believe this for one moment!
    Are all of these projects really viable? (cont’d)
  • 34. Will there be a substantial premium? Consider the case of Japan...
    • Some believe that GTL could command a substantial premium in Japan, but they are probably mistaken.
      • Although officially diesel sulfur standards are to change in January 2005, Japanese refiners will start manufacturing 50 PPM diesel this winter and all inventories in the Tokyo metro area will be 50 PPM by April 2003.
      • It is expected that 10 PPM diesel will follow, probably well before 2010.
  • 35. Will there be a substantial premium? (cont’d)
      • Refiners seem set to meet more stringent diesel sulfur standards with additional upgrades and investment.
      • For a typical refinery the cost of getting from 50 PPM to 10-15 PPM is only approximately $0.75-$1.50/b.
      • In general, the government provides ample lead time for the refiners to make adjustments, as well as providing subsidies.
  • 36.
    • Thus the economics of GTL diesel versus hydrotreating may not bode well for GTL in the near term.
    • In the longer term, the move toward a zero sulfur specification may give the best incentive for GTL diesel.
  • 37.  
  • 38. GTL-Key Conclusions
    • Projects targeting the Asia-Pacific region may not materialize as planned.
      • Gas costs are relatively high
      • Premiums may be quite low
      • Viability depends on oil price
  • 39. GTL-Key Conclusions (cont’d)
    • The natural home for GTL projects is the Middle East, particularly Iran and Qatar.
      • Large reserves
      • Relatively low price
    • Overall, the introduction of sulfur-free diesel in the E.U. and the U.S. by 2009-2010 may be the best chance for GTL.
  • 40. Middle East Product Trade
  • 41.  
  • 42.  
  • 43.  
  • 44.  
  • 45. Outlook for Margins
  • 46.  
  • 47. X
  • 48. X
  • 49. Specs and Refining Margins
    • Historically, Asian margins were the highest, followed by Europe and the U.S., respectively.
    • In the past few years, the situation has reversed itself, with the U.S. showing the best margins and Asia the worst.
  • 50. Specs and Refining Margins
    • Asian prices for gasoline and diesel fuels are now sharply below those of the U.S., and cracking margins are much lower. Generally, there is an unsustainable and extreme difference between the regions.
    • Why is there such disparity? The answer is in the product specifications, which has resulted in a globalized jet fuel trade and regionalized gasoil and gasoline markets.
  • 51. Specs and Refining Margins
    • As far as specs are concerned, a decade ago, Asia was divided in three camps:
    • The rich countries of Asia: Japan, South Korea, Taiwan, which followed the U.S. and Western Europe.
    • The middle income developing countries of Southeast Asia.
    • The low income countries: China, Indochina, and India.
  • 52. Newly Globalized Product Markets
    • By 2010, product specifications in Asia, the U.S., and Europe will be very close to each other. The convergence of these product markets has important implications for the product trade.
    • For the first time, the key markets will have similar specifications, providing the basis for a globalized product markets. This means products will move from one region to another if economics permits.
  • 53. Thank You!

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