operating expenses and margin analysis of the … expenses and margin analysis of the european union...

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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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



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



-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



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.



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)



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



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



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



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



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



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



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.



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



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



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



EU-28 Refining Margin and Costs Operating Years 2000–2012


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



US Gulf Coast Refining Margin and Costs Operating Years 2000–2012


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?



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



Cash OpEx Operating Year 2012

0

100

200

300

400

500

600

700

800


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



Net Cash Margin Operating Year 2012

-200

-100

0

100

200

300

400

500

600

700


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



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

operating expenses and margin analysis of the … expenses and margin analysis of the european union...

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