10.55 jean jacques
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Paris, March 9, 2011
How to improve the long-term competitivenessof the European refining system
Jean-Jacques MOSCONISenior Vice President Strategy & Business Intelligence
TOTAL
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Oil demand driven by transport and growth in emerging countries
Increasing demand for light products: naphtha for petrochemicals, gasoline and diesel
for transport
Increasing need to upgrade refining units to meet the structure change of oil demand
2010-2030 evolutionof each segment
Transport +26%
Petrochemicals +40%
Power generation -35%
Industry and other -4%
Total +15%
10 30(e)
China
10 30(e)
Asia excl.China
10 30(e)
Middle East
10 30(e)
CIS
10 30(e)
Africa
10 30(e)
NorthAmerica
10 30(e)
SouthAmerica
10 30(e)
Europe
Oil products demand
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Oil products trade flows: unbalanced Europe
0.5NorthAmerica
AfricaAsia
Pacific
SouthAmerica
Europe
3
0.2
FSU
Total estimates
2009
Gasoline
Gas oil
0.2
0.2
0.7
Mb/d
MiddleEast
0.1
0.1
0.1
In 2009, Europe: 0.7 Mb/d of gasoline surplus and
0.85 Mb/d of gas oil deficit
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1
2
3
4
1990 1995 2000 2005 2010 2015 2020
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Falling demand of gasoline in the Atlantic basin
Gasoline demandin EU
Ethanol
Mb/d
Gasoline
Gasoline demandin the USA
Gasoline
Ethanol *
Mb/d
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0
1
2
3
4
5
6
7
8
1990 1995 2000 2005 2010 2015 2020
Fuel efficiency measures limiting diesel demand for light duty vehicles
Potential impact of the new International Maritime Organization regulation forbunkers in 2015 leading to the substitution of heavy fuel oil by low sulfur gas oil
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Diesel/gas oil demand to stabilize in the medium term in Europe
Diesel/gas oil supply/demand in EUMb/d
Demand
Production
Biodiesel
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New competitors
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New international competitors: India
Reliance Jamnagar refineriesBiggest world refinery complex : 1,24 Mb/d :2 refineries 660 kbd (1999) and 580 kbd(2008)
Very complex and flexible (very large FCC,coker, light cycle oil hydrocracker)
Jamnagar,Gujarat
Essar Vadinar refinery
Commissionned in 2008
Current capacity 300 kbd expected to reach400 kbd by september 2012
Upgrading units will be added with theexpansion of capacity
Recent development of new refineries in Jamnagar2 new Indian private refiners Reliance and Essar
More than 1,5 Mb/d of new capacities (more than 35% of India capacity) in theGujarat state
Highly competitive refineries
Export oriented (export subsidies and no CO2 tax)
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There are 88 refineries with a total crude distillation capacity of 9.2 mbd by the end of 2010Chinese refinery capacity is forecast to reach over 12.5 mb/d by 2015
China refineries: not export-oriented but meeting domestic demand
Main Chinese refineries projects
Qinzhou, Petrochina,200kb/d, 2010
Tianjin, Sinopec150kb/d expansion, 2009
Tianjin Rosneft, Petrochina 51%,
Rosneft 49% 260kb/d, 2014
Caofeidian, Sinopec200kb/d, 2014
Chendu, Petrochina,200kb/d, 2014
Beihai, Sinopec ,
88kb/d, 2011 Zhanjiang Sinopec 50%, KPC50%, 300kb/d, 2015
Kunming, Petrochina,
200kb/d, 2015
Jieyang, Petrochina 51%, PdVSA49%, 400kb/d, 2016
Dushanzi, Petrochina,
200kb/d, 2009
Fujian, Sinopec and Fujian gvt 50%,ExxonMobil 25%, Saudi Aramco
25%, 160kb/d expansion, 2009Huizhou CNOOC,
240kb/d, 2009
Quanzhou, Sinochem, 240kb/d,
2013
Huludoa, Petrochina
200kb/d, 2014
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What evolutions are needed to improve
the European refining system ?
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The key features of a competitive European refinery
Capacity:
A minimum size to reach economy of scales
Complexity:
Ability to deliver high value light products
Flexibility of feedstocks:
Ability to process different slates of crudes thanks to an efficient trading
unit and an adapted logistics system
High distillate yield:
Adapted to the European market with a strong demand for diesel
Energy efficiency:
Integration of the different units with optimizing energy use
Integrated with petrochemicals:Combined optimization of the feedstock streams, sharing units andtransfers of products between refining and petrochemicals
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The competitive European refinery : capacity/complexity
Wide range of refineries in Europe, in terms of size and complexity
Only a third of them are over 200 kbd in terms of capacity
20% of them are very simple refineries (usually with a smaller size)
Range of distillation capacities ofEuropean refineries
Range of complexity ofEuropean refineries
Source: WoodMackenzie 2011 capacity and complexity index
kbd
Complexity index
0
2
4
6
8
10
12
14
0
50
100
150
200
250
300
350
400
450
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The competitive European refinery : diesel oriented
Ability to maximize diesel output
Development of distillate hydrocracking (22 existing units, around 15 unitsprojected over the next few years)
4.6 Mt
2.5Mt
2Mt
2.3Mt
1.8Mt3.5Mt
1.5Mt
1.6Mt
Likely projects of new distillate hydrocrackers as of 1/1/2011
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The competitive European refinery : integration with petrochemicalplants
Exchange of products between refineries and petrochemical plants
Refinery
PetrochemicalPlant
Main feedstocks :Naphtha
LPGPropylene
VGO, gas oil and fuel oil
Key products:Hydrogen
Low sulphur fuel oil
75% of the European steamcrackers are linked with a refinery
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European refining and new regulations
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Strong regulatory pressure on European refining
Regulations Product quality
Potentiel impact level
CO2 ETS
Biofuels
Regulations Industrial emission directive Fuel quality directive Water framework directive /
SECABunker0.1% S
InternationalBunker 0.5% S
Heating Oil50 ppm S
2010 2015 2020
JetSulphur specs
InternationalBunker
Al+Si < 30 ppm
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ETS Phase 3 for European refineries :the benchmark of CO2 emissions
Source : Concawe16
*: CWT Complexity Weighted Ton
Average10 percentile
Ranking of European refineries
Emissions of CO2/complexity
Emissionskg CO2/CWT*
With the benchmark system adopted for ETS, EU refineries will have to payas soon as 2013 on average for 20% of their CO2emissions
As an exposed sector, refining sector is entitled to free allocations based on the performance of the 1st decile of the plants Methology is based on 98 refineries which have emitted on average 140 Mt CO2/year on 2007-2008.
Comparison with the 1st decile drives to a deficit of around 20% for european refining
20% differencewith benchmark
Benchmark value:Allocation equal to
emission performance
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Impact of CO2 ETS system on European refining
2005 202020132008PHASE 1 PHASE 2 PHASE 3
CO2a
llowances(MTe)
~20 %
[Progressive application]
Reduction linked to thebenchmark system
Free allocations ~140 MT,without atypical units
Immediate application
What system will the European refining sector face for its CO2 emissions ?
At a price of CO2of 25/t, ETS system will cost European refineries
around 1 billion/year, including the effect of CO2 on electricity
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Source: Europia, Concawe
Cost of electricity self generated or bought by European refining: around 10% of CO2 emissions