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International S/D Dynamics & its Impact on European Refining

CEE & TURKEY REFINING & PETROCHEMICAL SUMMIT

13 October 2015

Alexander Pögl

Special Presentation

Disclaimer

All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements (including those depicted in graphical form)are statements of future expectations that are based on JBC Energy’s current expectations andassumptions and involve known and unknown risks and uncertainties that could cause actualresults, performance or events to differ materially from those expressed or implied in thesestatements. Forward-looking statements include, among other things statements expressingJBC Energy’s expectations, beliefs, estimates, forecasts, projections and assumptions. Theseforward-looking statements are identified by their use of terms and phrases such as‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’,‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, “forecast”, “predict”, “think”, ‘‘seek’’, ‘‘target’’, ‘‘risks’’,‘‘goals’’, ‘‘should’’ and similar terms and phrases. All forward-looking statements contained inthis speech/presentation are expressly qualified in their entirety by the cautionary statementscontained or referred to in this section. Readers/audience should not place undue reliance onforward-looking statements. Each forward-looking statement speaks only as of the date of thispresentation. Neither JBC Energy nor any of its subsidiaries undertake any obligation topublicly update or revise any forward-looking statement as a result of new information, futureevents or other information. In light of these risks, results could differ materially from thosestated, implied or inferred from the forward-looking statements contained in thisspeech/presentation. Any persons acting on information contained in this presentation does sosolely at their own risk. JBC Energy is not responsible for the accuracy of data collected fromexternal sources and will not be held liable for any errors or omissions in facts or analysiscontained in this presentation. JBC’s third party sources provide data to JBC on an “as-is” basisand accept no responsibility and disclaim any liability relating to reliance on or use of theirdata by any party.

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Agenda

• European Refining

• Supply, Demand & Balances

• Key Challenges

– Supply

– Demand

– Competition

– Refining


European Refining

We meet at a time where refiners in Europe look a bit more relieved than just a year or two ago


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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

NW Europe - Brent Cracking

NW Europe - Brent Cracking

Cracking Margins [$/bbl]

Source: Platts, JBC Energy

European Refining

The Mediterranean part of Europe has benefitted the most from the improved demand and margin environment


-20.0%

-15.0%

-10.0%

-5.0%

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5.0%

10.0%

15.0%

20.0%

25.0%

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

NW Europe Med Europe

Crude Runs: y-o-y Change by Region [%]

In spite of strong product flows from the Middle East, Med refiners saw the relatively stronges y-o-y increases in crude runs

Source: IEA, JODI

Global Oil Supply

According to our latest balances the world will see a continued oversupply of about 1 million b/d for the next three quarters before the market will start to tighten in H2 2016.


-2.0

-1.5

-1.0

-0.5

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0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16

JBC Energy Previous Month

JBC Energy Current

IEA Current

OPEC Current

EIA Current

Implied Stock Change [million b/d]

Source: IEA, OPEC, EIA, JBC Energy

JBC Energy OPEC production estimates are used for IEA and OPEC

figures as of Q3 2015.

Global Oil Supply

The surplus is also evident in observed stockbuilds (which increasingly switch to the refining product side). Ytd observed oil stockbuilds (crude + products) have amounted to some 1.7 million b/d.


-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15

Crude Gasoline Middle Distillates

Fuel Oil Other Total Crude and Products

World - Quarterly Observed Stock Change by Stream [million b/d]

Q3 15 stockbuild (preliminary July and August

data): +1.16 million b/dSource: IEA, EIA, JODI, Official customs data, Euroilstock, PAJ, KNOC, JBC Energy calculations

Global Oil Supply

While our spare capacity model implies that there is still around 300 million bbls of unused capacity, storage room is getting increasingly tight and the need for floating storage cannot be excluded (which would need deep front-end discounts).


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2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15

Spare Capacity* Actual Stocks Level Spare Capacity*, %

World - Crude + Fuel Oil, Spare Storage Capacity* [million barrels]

* Maximum storage capacity is defined as a sum of maximum inventory levels per

country in January 2010-present

Source: IEA, EIA, JODI, Official customs data, Euroilstock, PAJ, KNOC, JBC Energy calculations

Global Oil Supply

Irrespective of balances, the supply momentum is on the verge of a substantial change in non-OPEC markets. Besides the anticipated US output decline, we expect some baseline-effects due to the high output this year.


-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

US Europe FSU East

Asia Africa Middle East

North America excl. US Central & South America Total non-OPEC excl. US

Non-OPEC Crude Output Change Y-o-y by Region ['000 b/d]

Global Oil Supply

A currently projected stagnation of total liquid supplies in 2016 is not good enough to tighten the market (it is just reducing the oversupply to some 0.5 million b/d on an annual average).


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-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16

Non-OPEC NGLs, other & global processing gains

OPEC NGLs & other liquids

Non-OPEC Crude

OPEC Crude

Total liquids supply change annual average

Total Liquids Supply Y-o-y Changes [million b/d]

Key Challenges - Supply

Heavy oil producers have added massive volumes to global crude markets since 2014


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0

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2,000

3,000

4,000

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

Venezuela Iran

Iraq Canada

Colombia Brazil

Rest of the World

Crude Supply Growth (y-o-y) ['000 b/d]

Since 2014, supply additions of key heavy oil producers have risen strongly

Source: Various, JBC Energy

Key Challenges - Supply

Volatility in crude markets creates opportunity, with the flexibility to process a wide range of crudes adding meaningfully to refining margins


0.0

2.0

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6.0

8.0

10.0

12.0

14.0

16.0

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15

5% Maya

5% of Most Attractive Crude

The Benefit of Being Flexible [$/bbl]

Instead of simply adding 5% Maya to our NWE crude basket, we added the most attractive crude out of the following group:

Boscan, Maya and Merey

Source: Platts, JBC Energy

Total margin benefit over the period Jan-14 through Sept-15: $0.35 per barrel

Oil Demand

After a year of strong demand growth (especially for gasoline), we see the pace of demand growth coming down, while gasoline and middle distillates should grow in a more balanced fashion


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-500

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500

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2,000

2,500

3,000

Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15

LPG Naphtha Gasoline Jet/KeroGas Oil/Diesel Fuel Oil Other products Total

World - Oil Demand Growth (3-Month Moving Average) ['000 b/d]World - Oil Demand Growth (3-Month Moving Average) ['000 b/d]

Source: IEA, JODI, National Statistics, JBC Energy calculations , SuDeP

Based on observed monthly statistics, as available. Missing data estimated, extrapolated, or substituted with SuDeP.

All data from September 2015 onwards is estimated.

Oil Demand

We see only about 40% of world oil demand susceptible to price changes – with most of gas oil/diesel not falling into this group. The spike at the beginning of the year was largely driven by one-off factors.


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Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16

EUROPE NORTH AMERICA C&S AmericaOECD ASIA China IndiaOther Non-OECD Asia MIDDLE EAST AFRICA

Gas Oil-Diesel - Oil Demand Growth ['000 b/d]

Source: IEA, JODI, National Statistics, JBC Energy calculations

Based on observed monthly statistics, as available. Missing data estimated, extrapolated, or substituted

with SuDeP. June figures are based on available preliminary information and JBC Energy estimates.

Oil Demand

The bulk of this growth comes from Turkey (and Poland) and a highly dieselised transportation sector there, with the baseline effect kicking in and concerns over the general economic development we expect some months of flat growth to only pick up in H2 2016 again.


-350

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-50

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Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15

LPG Naphtha Gasoline Jet/KeroGas Oil/Diesel Fuel Oil Other products Total

Selected Central European Countries - Oil Demand Growth ['000 b/d]

Source: IEA, JODI, JBC Energy calculations

Includes Austria, Czech Republic, Hungary, Poland, Slovakia,

Slovenia, Turkey and Ukraine.

Oil Demand

In fact, outside Europe gas oil/diesel demand growth was non-existent over the last half year.


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0

500

1,000

1,500

Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16

Europe Rest of the World

Gas Oil-Diesel - Demand Growth (3-Month Moving Average) ['000 b/d]

Source: IEA, JODI, National Statistics, JBC Energy calculations, SuDeP


with SuDeP. All data from September 2015 onwards is estimated.

Forecast

Key Challenges - Demand

We think that gasoline demand growth will come down sizably in the coming months as a period of 12 strong months is already behind us (baseline effects) and specifically the US gasoline growth boom comes to an end.


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Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16

EUROPE NORTH AMERICA C&S America

OECD ASIA China India

Other Non-OECD Asia MIDDLE EAST AFRICA

Gasoline - Oil Demand Growth ['000 b/d]

Source: IEA, JODI, National Statistics, JBC Energy calculations


with SuDeP. June figures are based on available preliminary information and JBC Energy estimates.

Key Challenges - Demand

Longer-term outlook for gasoline has improved, with the recent VW related diesel scandal clearly having the potential to cause further demand shifts to gasoline


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WORLD NORTH AMERICA

OtherRef FuelBunkerIndustryPetchemPowerAgricultureRes/CommTransport

Mogas - Demand by Sector ['000 b/d]

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15, 000

20, 000

25, 000

30, 000

WORLD NORTH AMERICA

20202015

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3,000

WORLD NORTH AMERICA

Demand Change

Key Challenges - Competition

The fast pace of Russian refining throughput growth seen over the last years has been slowing lately, while the focus is on conversion units


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-0.4

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Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

Crude exports

Refinery throughput in Russia

Refinery throughput (outright) - right scale

Y-o-Y Changes of Russian Crude Exports and Refinery Throughput [million b/d]

Source: Russian Ministry of Energy


Gasoline-focussed projects are coming onstream around the world with a particular focus in Russia. Conversion and VDU capacity additions have led to a marked shift in Russian product yields this year, a trend we expect to continue next year


-4

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-2

-1

0

1

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3

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15

Jet/Kero Fuel Oil Gas Oil/Diesel Gasoline

Y-o-y Changes in Selected Russian Product Output Shares [percentage points]

Source: Russian Ministry of Energy, SuDeP

2016

Historical figures are 3-month moving averages


Pressure on gasoil/diesel to persist, especially if Middle Eastern plants were to maximise their throughput (instead of favouring crude exports)


-400

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0

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Avg 10-14 2012

2013 2014

2015 2016

Middle East - Gasoil/Diesel Balance ['000 b/d]

Source: JBC Energy estimates, IEA, JODI, national statistics


Available data suggest that Saudi Arabia has limited crude intake at older refineries; possibly either to keep crude exports stable or because the older refineries are in a relatively poor state (see 2013 runs).


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2,800


YASREF SATORP Other Refineries

Saudi Arabia Crude Runs ['000 b/d]

SATORP and YASREF runs are JBC estimates based on company and news reports

Source: JODI, Aramco Report, JBC Energy


An emerging tightness in the Asian market. Strong gasoline demand growth has forced Chinese refiners to shift yields quite strongly and further increases might be more difficult to implement (blending component imports).


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Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

Gasoline Demand Growth (y-o-y) Gasoil Demand Growth (y-o-y)

Gasoline Yield - rhs

China - Product Demand Fundamentals (3 MAvg) ['000 b/d]

Source: NBS, JBC Energy


The combination of refinery revamps, demand developments and seasonality should eat into the import demand of key South American players early next year. As for Brazil, we still have to see whether the reported near-disappearance of imports is more than a short-term blip.


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Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Brazil

Ecuador

Colombia

Selected CSA Implied Product Imports (Demand - Crude Intake) 3M Avg. ['000 b/d]

Cartagena & Esmeraldas revamp

Source: JODI, IEA, ANP, JBC Energy calculations

Brazil demand excludes hydrous ethanol

Key Challenges – Refining

2014 and 2015 have seen low capacity additions and have clearly tightened refined product markets; the outlook is roughly balanced between capacity and demand, speaking in favour of solid margins in the years ahead


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2014 2015 2016 2017 2018 2019 2020

Chart Title

Europe FSU Asia

Middle East Africa North America

C&S America Total Demand Growth

Annual CDU Capacity Increase ['000 b/d]


Lower demand growth over 2013/2014 has seen many Asian refining projects getting cancelled or postponed. Vertically integrated players in C&S America have also scaled back refining projects


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2014 2015 2016 2017 2018 2019 2020

Chart Title

EUROPE FSU EAST ASIA

MIDDLE EAST AFRICA NORTH AMERICA

CENTRAL & SOUTH AMERICA

Annual CDU Capacity Increase: Current Estimate vs Nov-14 ['000 b/d]


The amount of effectively available spare capacity to meet product shortages in international markets is much smaller than largely perceived – just about 3 million b/d



High margins were required to bring the effective utilisation levels in Europe to above 90% and satisfy global demand


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Refining Margin (NWE)

Refinery Utilisation

Refining Margins and Effective Utilisation [$/bbl; %]

Utilisation was adjusted for maintenance in order to reflect "effective" utilisation levels

Source: IEA, Platts, JBC Energy

Outlook

Good margins should keep runs high in Q4, leading to further product stockbuilds. After crude runs rose by+1.8 million b/d this year, limited capacity additions and the likely impact of stronger turnarounds should keep upticks in crude runs in check next year ( +0.65million b/d)


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68,000

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Capacity Additions 2016 - rhs 5-Year Avg

2012 2013

2014 2015

2016

Crude Intake: WORLD ['000 b/d]

Source: IEA, JODI, Euroilstock, JBC Energy estimates

Outlook

Maintenance levels more closely matching previous years could pressure European crude runs by up to 400,000 b/d next year


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Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Estimate Known

Last year 3-Year Average

Total European (NW Europe & Med) Refinery Maintenance & Outages ['000 b/d]

Offline refining capacity figures will be subject to changes as refinery turnaround plans are reported

and additional information becomes available

Source: JBC Energy estimates based on various official and industry sources

Outlook

Crude in take growth should stabilse in the coming years, after a very strong year 2015

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2013 2014 2015 2016 2017 2018 2019 2020

FSU Central & South AmericaNorth America AfricaMiddle East OECD AsiaNon-OECD Europe OECD EuropeNon-OECD Asia Total

Y-o-y Change in Refinery Crude Intake by Region ['000 b/d]


Thank you!

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