Operating Expenses and Margin Analysis of the European Union (EU) Refineries vs Regional Peers
Tracy Ellerington Third Meeting of the EU Refining Forum 22 May 2014
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Gas Processing Plants Liquid Pipelines
Fuels Refining
Petrochemicals Aromatics
Lubes Refining
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Companies in more than
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2012 Fuels Study
Hundreds of refineries, representing more than 85% of the worldwide crude refining capacity, voluntarily
participated in Solomon’s 2012 Fuels Study.
Business Environment
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Crude Price History EUR
Dubai
Urals
Sources: EIA and Platts
Brent
WTI
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013
Crud
e Pr
ices
, USD
/bbl
Dubai
Urals
Brent
WTI
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-75
-270
37
256
168 154
281
119164
-333
-488
-181
663
981
389
49
215 197
North America Europe
Former Soviet Union
Asia
Middle East
Latin America
2013 (Forecast) 2012 2011
Global Oil Demand Growth, M bbl/d 2011 0.85 1.0% 2012 0.80 0.9% 2013 0.87 1.0%
4
104 109Africa
Global Oil Demand (IEA) Annual Changes Since 2010 (k bbl/d)
Source: http://omrpublic.iea.org/omrarchive/12dec12full.pdf
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Worldwide Oil Products Trade Flow 2012
Sources: IEA, EIA, and BP
500+
500+
300+
200
800+
300+
200
150
200+
1,500
300
650+
200+
900
300+ 500
600
150+
Thousand barrels per day
60
Refining is becoming a global commodity business with a significant growth in product trades across regions. Global Supply is competing with each other to keep up with Global Demand.
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Drivers for Competitiveness
Location Cost Base− Crude, Energy,
Salaries, & Wages
Market Constraints
Refinery Size and
Configuration
Product Yields
Operating Efficiency−
Energy, Maintenance, Personnel
Efficiency Drivers
Refining Performance Trends (2000–2012)
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Average EDC per Refinery Operating Years 2000–2012
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
EDC
per
Refin
ery,
%
India
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28
Average EDC per refinery for all regions indexed relative to EU-28 = 100 in Year 2000
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Gross Margin Operating Years 2000–2012
0
100
200
300
400
500
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Gro
ss M
argi
n, U
SD/b
bl
EU-28
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
Gross Margin in USD/bbl for all regions indexed relative to 100 in Year 2000
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Gross Margin Operating Years 2000–2012
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Gro
ss M
argi
n, U
SD/b
bl
India
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28
Russia
Gross Margin in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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Cash OpEx Operating Years 2000–2012
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Cash
OpE
x, U
SD/b
bl
India
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28 Russia
Cash OPEX in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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OpEx – Personnel Cost Operating Years 2000–2012
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Pers
onne
l Cos
t, U
SD/b
bl
India
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28 Russia
OPEX – Personnel Cost in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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OpEx – Energy Cost Operating Years 2000–2012
0
100
200
300
400
500
600
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Ener
gy C
ost, U
SD/b
bl
India
US Gulf Coast Korea/Singapore
Middle East
US East Coast
EU-28
Russia
OPEX – Energy Cost in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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Energy Cost 2012 Study – EUR/ME
0
2
4
6
8
10
12
14
16
18
Ener
gy C
ost, U
SD/G
J
Average Prices: Middle East 2.3* USA 4.0 CSEUR 9.5 WEUR 11.8 PAC Region 16.4
2 3 1 4 * Middle East energy price as used in Solomon Study. Many Middle East refiners actually have much lower energy costs.
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OpEx – Other Cost Operating Years 2000–2012
0
100
200
300
400
500
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Oth
er C
ost,
USD
/bbl
India
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28
Russia
OPEX – Other Cost in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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Cash OpEx Operating Years 2000–2012
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Cash
OpE
x, U
SD/b
bl
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28 Russia
India
Cash OPEX in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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Net Cash Margin Operating Years 2000–2012
-100
0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Net
Cas
h M
argi
n
US Gulf Coast
Korea/Singapore
Middle East
US East Coast
EU-28
Russia India
Net Cash Margin in USD/bbl for all regions indexed relative to EU-28 = 100 in Year 2000
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EU-28 Refining Margin and Costs Operating Years 2000–2012
Average EDC per refinery for all regions indexed relative to EU-28 = 100 in Year 2000
62
37
6453
4528
43
11
20
12
1213
18
13
20
30
1727
3443
36
7 13 8 8 9 12 9
0102030405060708090
100
2000 2002 2004 2006 2008 2010 2012
Perc
ent
of G
ross
Mar
gin
Net Cash Margin Personnel Cost Energy Other Cost
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US Gulf Coast Refining Margin and Costs Operating Years 2000–2012
Average EDC per refinery for all regions indexed relative to EU-28 = 100 in Year 2000
5338
5665
5242
64
12
19
119
1220
1425
2925
1927
23
10
10 15 8 7 10 15 11
0102030405060708090
100
2000 2002 2004 2006 2008 2010 2012
Perc
ent
of G
ross
Mar
gin
Net Cash Margin Personnel Cost Energy Other Cost
How Do Refineries Compare?
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Gross Margin Operating Year 2012
-50
50
150
250
350
450
550
EU-28 India Korea/Singapore
MiddleEast
Russia US GulfCoast
US EastCoast
Inde
xed
Gro
ss M
argi
n, U
SD/b
bl
Gross Margin in USD/bbl indexed relative to EU-28 Peer Group Avg = 100 in Year 2000
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Cash OpEx Operating Year 2012
0
100
200
300
400
500
600
700
800
EU-28 India Korea/Singapore
MiddleEast
Russia US GulfCoast
US EastCoast
Inde
xed
Cash
OpE
x, U
SD/b
bl
Cash OPEX in USD/bbl indexed relative to EU-28 Peer Group Avg = 100 in Year 2000
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Net Cash Margin Operating Year 2012
-200
-100
0
100
200
300
400
500
600
700
EU-28 India Korea/Singapore
MiddleEast
Russia US GulfCoast
US EastCoast
Inde
xed
Net
Cas
h M
argi
n, U
SD/b
bl
Net Cash Margin in USD/bbl indexed relative to EU-28 Peer Group Avg = 100 in Year 2000
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Conclusions Net Cash Margin, Operating Years 2000–2012
-200
-100
0
100
200
300
400
500
600
700
2000 2002 2004 2006 2008 2010 2012
Inde
xed
Net
Cas
h M
argi
n, U
SD/b
bl
US Gulf Coast
Korea/Singapore
Middle East
US East Coast EU-28
Net Cash Margin in USD/bbl for all regions indexed relative to 100 in Year 2000
around the world.
Improving Competitive Performance