Andrew Bonnington, Platts Editorial Director, Strategic Oil Markets Development, discusses how European jet fuel market can remain competitive in the new import environment at IATA Aviation Fuel Forum in Prague, 17-19 May, 2016.

1. IATA 2016
KEEPING EUROPE
COMPETITIVE IN AN IMPORT
ENVIRONMENT
Andrew Bonnington
Editorial Director, Strategic Oil Markets
Development
May 2016

2. • Jet fuel market weakness explained
• Examining trade flows – new supplies coming online
• Analysing European import infrastructure
• Pipeline networks
• Conclusions
AGENDA

3. PLATTS – AN INTRODUCTION
Enabling the markets to perform with greater
Transparency & Efficiency
Since

4. PLATTS – AN INTRODUCTION
Editorial and market assessments are conducted
with complete Independence & Impartiality

5. EUROPEAN JET PRICES FALL SHARPLY
0
200
400
600
800
1000
1200
Dec-2013 Apr-2014 Aug-2014 Dec-2014 Apr-2015 Aug-2015 Dec-2015 Apr-2016
$/mt
Source: Platts

6. JET FUEL REFINING PROFITS UNDER PRESSURE
0
5
10
15
20
25
30
Aug-2012 Jan-2013 Jun-2013 Nov-2013 Apr-2014 Sep-2014 Feb-2015 Jul-2015 Dec-2015
$/barrel
Diesel Gasoline Jet
Source: Platts

7. REFINING MARGINS STILL RELATIVELY ROBUST
-6
-4
-2
0
2
4
6
8
10
12
$/barrel
Forties ARA Cracking Netback Margin Close Oman Singapore Cracking Netback Margin Close
Source: Platts

8. 11.09
12.4
9.50
10.00
10.50
11.00
11.50
12.00
12.50
13.00
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
OECD Europe
MARGINS SUPPORT ELEVATED THROUGHPUT
MONTHLY EUROPEAN REFINERY THROUGHPUT (MILLION B/D):
6% YOY INCREASE THROUGH NOVEMBER UTILIZATION RATES BY COUNTRY: 2014 VS. 2015
(THROUGH NOVEMBER)
79%
92%
68%
78% 77% 75%
84%
95%
77%
83%
85% 84%
0%
20%
40%
60%
80%
100%
1 2 3 4 5 6
2014 2015
Source: International Energy
Agency (IEA)

9. EUROPEAN JET DEFICIT GROWS
-0.7
-0.4
-0.1
2010
2011
2012
2013
2014
2015p -0.4
-0.2
0.0
2010
2011
2012
2013
2014
2015p
0.0
0.1
0.2
2010
2011
2012
2013
2014
2015p
-0.2
-0.1
0.0
2010
2011
2012
2013
2014
2015p
Source: Eurostat

10. MIDDLE EAST REFINERY EXPANSIONS
Source: Market Sources
Yanbu
Jazan
Rabigh
Duqm
Sohar
FujairahRas Laffan
11
Ras Tanura
Jubail
Al Zour
Ruwais
1
2
3
4
5
6 7
11
8
9
10
Refinery
Yanbu
Rabigh
Jazan
Al Zour
Jubail
Ras Tanura
Ras Laffan
Fujairah
Sohar
Duqm
Ruwais
Aramco/Sinopec
Aramco/Sinopec
QP/Total
Aramco
KNPC
Aramco/Total
Aramco
IPIC
QRPIC
IPIC/OOC
ADNOC
400kdb
Upgraded (Phase
2)
+146kbd
400kbd
615kdb
400kdb
Upgrade
200kbp
+86kbd
230kdb
+417kbd
2014
2016
2016
2018
2019
2013
Relaunch
2016
2015
Owner Capacity/
Expansion
Est.
Completion
1
2
3
4
5
6
7
8
9
10
11

11. 1,433,626 1,381,856
1,461,784
1,555,856
1,654,132 1,661,766
1,852,194
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
2,250,000
2009 2010 2011 2012 2013 2014 2015*
MIDDLE EAST REMAINS TOP JET SUPPLIER TO
EUROPE
(Mt / month)
RUWAIS IMPACT: UAE JET EXPORTS SURGE 70% FROM 2014
Source: Eurostat
Saudi Arabia
Kuwait
India
UAE
South Korea
Other

12. 175,629 mt
204,238 mt
264,332 mt
284,283 mt
316,697 mt
EU-28 MONTHLY JET IMPORTS/EXPORTS
Source: Eurostat
TOP 2015 IMPORTERS (MT/MONTH)
UAE
316,697
Kuwait
264,332
Saudi
Arabia
284,283
AG/Far
East flow
USA flow
26,257
Baltic flow
Spain
(165,480)
France
(367,380)
UK
(663,545)
Holland
(269,279)
Italy
(144,346
)
1,852,592 mt
663,545 mt
367,380 mt
262,990 mt
165,480 mt
TOP 2015 EXPORTERS (MT/MONTH)

13. 4.144
4.601
5.095 4.867
4.221
4.753
5.589 5.247
35.3%
38.3%
39.5%
33.9%
32.9%
42.5% 41.9%
36.9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
EUROPEAN DEMAND SURPRISES TO THE
UPSIDE...
Source: International Energy Agency (IEA), Eurostat
Sep: Record imports of
2.6 million mt
EUROPEAN JET DEMAND RISES 5.5% THROUGH OCTOBER
Other
Germany
United Kingdom
France
Italy
Import as %
of demand

14. UK NOW HUGELY RELIANT ON IMPORTS
0
2
4
6
8
10
12
14
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Milliontonnes
Imports Domestic Production
Source: UK DECC

15. US JET EXPORTS STABLE BUT NOTEWORTHY
0
50
100
150
200
250
300
000's/bd
Source: US EIA

16. US JET – MARGINAL ROLE IN EUROPEAN MARKET
Jet A Jet A-1
Freeze Point, ºC -40.0 Max -47.0 Max
Flash Point, ºC 38 Min. 38 Min.
Sulphur, total, Wt. % 0.3 0.3
10% Distillation, ºC 205 Max. 205 Max.
Final Boiling Point, ºC 300 Max 300 Max
• Many US refineries capable of producing A-1
material
• Jet A does not usually contain static dissipator
additive
• In making A-1, a refiner will give up some of
the lower end kerosene material to the diesel
pool
• Shell Deer Park, ExxonMobil Baton Rouge and
Lake Charles heard to be some of the USGC
jet export refineries
0
10000
20000
30000
40000
50000
60000
70000
80000
2009 2010 2011 2012 2013 2014 2015
EU imports from US (mt per month)
Source: Eurostat

17. RUSSIA EXPORT GROWTH ADDS WEIGHT
0
100000
200000
300000
400000
500000
600000
FINLAND SWEDEN DENMARK UNITED KINGDOM
Tonnes
2014
2015
Source: Eurostat
Russia-EU jet flows
increased 115% in 2015

18. CHINESE EXPORTS TO THE EU IN 2015
0
20000
40000
60000
80000
100000
120000
Italy UK Spain France
mt
Source: Eurostat

19. MAIN NWE IMPORT LOCATIONS
Immingham
Shell Haven Isle of
Grain
Royal Portbury Docks
Hamble
Fawley
Le Havre
Ghent
Rotterdam
Amsterdam
Antwerp
Flushing
Milford Haven

20. • Puma Energy buying Milford Haven from Murco
• Isle of Grain and Shellhaven
• CLH buying GPSS in UK
• Vitol investment in Antwerp storage
• Floating storage
PORT INFRASTRUCTURE DEVELOPMENTS

21. OVERVIEW OF CURRENT EUROPEAN STORAGE
• Stocks at close to record highs
• Structure supports storage
• Milford Haven also well stocked
Source: PJK International

22. LOOKING AT EU PIPELINE INFRASTRUCTURE
5,500 km running through Belgium, France, Luxembourg,
Germany and the Netherlands
Pipeline Length
30 NATO depots, military and civil airfields (including
Brussels, Frankfurt and Zurich), refineries, civil depots
and sea ports
Network
Approximately 2,000 kmPipeline Length
Heathrow and Gatwick airports, significant military
airfields, and distributes about 40% of all aviation fuel
within the UK
Network
The UK Ministry of Defence sold the GPSS to CLH in March
2015 for £82 million
Misc.
Central European Pipeline System
CLH-PS

23. LOOKING AT EU PIPELINE INFRASTRUCTURE
2,140 km (LHP: 1,380 km; PMR: 760 km)Pipeline Length
LHP: 28 pumping stations and 27 delivery terminals. Ties
into two other pipeline networks, 5 refineries and supplies
33 depots
Network
The LHP is Europe’s oldest and largest civilian pipelineMisc.
Pipeline Length 4,000 km
Network Main pipeline links 16 airports and five oil refineries
Misc. Jet throughput around 500,000 cubic metres per month
PMR & LHP pipelines
CLH

24. • High refinery margins lead to higher domestic output
• Middle East remains largest supply to European market
• New supplies from US, Russia and China providing competition
• Infrastructure investments provide more competition of imports
• Complex pipeline infrastructure serves industry well
CONCLUSIONS