STUDY ON OIL REFINING AND OIL MARKETS

Prepared for:

EUROPEAN COMMISSION

Prepared by:

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Buenos Aires – Calgary – Dubai – Houston London – Los Angeles – Moscow – Singapore

January 2008

L2293/mg

Table of Contents -- i

TABLE OF CONTENTS

I. II

INTRODUCTION .......................................................................................................................... 1 EXECUTIVE SUMMARY .............................................................................................................. 3 DEMAND OUTLOOK .............................................................................................................. 3 CRUDE OIL PRODUCTION OUTLOOK .................................................................................. 9 REFINING INDUSTRY IN THE STUDY REGION................................................................... 13 BIOFUELS ........................................................................................................................... 16 REFINED PRODUCT TRADE FLOWS, AND IMPLICATIONS FOR EUROPE ........................ 18 CRUDE OIL PRICES ............................................................................................................ 22 REFINING MARGINS ........................................................................................................... 28 OTHER EU POLICY-RELATED ISSUES ............................................................................... 32

III A – HISTORICAL MARKET DEVELOPMENTS ................................................................................. 35 A-1 A-2 A-3 A-4 A-5 A-6 A-7 A-8 HISTORICAL DEMAND ......................................................................................... 35 PRODUCT SPECIFICATIONS AND TAXATION POLICIES .................................... 53 WORLD CRUDE OIL PRODUCTION ..................................................................... 72 EUROPEAN CRUDE OIL TRADE FLOWS............................................................. 81 EUROPEAN UNION REFINED PRODUCT TRADE FLOWS................................... 88 REFINERY DEVELOPMENTS ............................................................................. 101 REFINERY INVESTMENTS................................................................................. 119 REFINERY ECONOMICS .................................................................................... 125 NORTH AMERICA PRICES AND MARGINS........................................................ 130 NORTH WEST EUROPE .................................................................................... 131 ASIA ................................................................................................................... 133 III B – NEAR-TERM OUTLOOK: 2007-2012 ....................................................................................... 149 B-1 WORLD CRUDE OIL SUPPLY ............................................................................ 149 NON-OPEC CRUDE OIL PRODUCTION ............................................................. 150 OPEC CRUDE OIL PRODUCTION ...................................................................... 160 CRUDE OIL PRODUCTION OUTLOOK BY TYPE................................................ 163 B-2 REFINED PRODUCT DEMAND........................................................................... 169 EUROPE ............................................................................................................ 169 NORTH AFRICA ................................................................................................. 176 CHINA ................................................................................................................ 177 INDIA ................................................................................................................. 182 MIDDLE EAST .................................................................................................... 186 RUSSIA .............................................................................................................. 188 UNITED STATES OF AMERICA.......................................................................... 190

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ii -- Table of Contents

B-3

DEMAND, REFINERY SUPPLY AND TRADE ...................................................... 213 THE NEAR–TERM CAPACITY AND PRICE RELATIONSHIPS ............................ 231 IMPACT OF ENVIRONMENTAL CONSTRAINTS ON REFINERY PROJECTS...... 234

B-4

CRUDE OIL AND REFINED PRODUCT PRICE OUTLOOKS ............................... 272 CRUDE OIL PRICE OUTLOOK ........................................................................... 272 REFINING ECONOMICS AND PRODUCT PRICES ............................................. 278

III C – LONG-TERM OUTLOOK: 2013-2020 ....................................................................................... 303 C-1 WORLD CRUDE OIL SUPPLY ............................................................................ 303 NON-OPEC CRUDE OIL PRODUCTION ............................................................. 304 OPEC CRUDE OIL PRODUCTION ...................................................................... 308 LONG-TERM CRUDE OIL PRODUCTION OUTLOOK BY TYPE .......................... 310 C-2 C-3 DEMAND, REFINERY SUPPLY AND TRADE 2013-2020..................................... 316 IMPACT OF BIOFUELS AND OTHER ALTERNATIVE FUELS ............................. 354

GLOSSARY........................................................................................................................................ 373

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I. Introduction -- 1

I.

INTRODUCTION

The European Commission has concerns regarding the current high oil price environment, and the EU’s increasing reliance on trade to balance its refined product demand. The history of the refining industry from the mid 1980s is characterised by over capacity and a sustained period of low profitability, such that investment in the industry in Europe and the U.S. has primarily been focussed on making mandatory improvements to product quality and emissions rather than adding new capacity. A combination of demand growth and refinery capacity rationalisation has resulted in a much closer balance between refinery capacity and the demand for refined products. Recent disruptions caused by extreme weather events in the U.S., losses of refinery capacity as a result of operating problems and a period of rapid demand growth have resulted in the current exceptional crude oil prices and refinery margins. The concerns about the future availability of refinery capacity and its potential impact on crude oil prices and the European economy has prompted the Commission, along with OPEC, to seek a study that examines the likely future developments in the oil industry. This study originated from the ongoing Energy Dialogue between the European Commission and OPEC, which in December 2005 recognized the effects of the tightness in the global refining system on world markets and market stability. This report documents the results of this study, which has been prepared in response to the terms of reference issued by the Commission. The study region is defined to include the following countries/areas: The European Union (E.U.): unless otherwise noted, this comprises the current 27member state Union. Historical data for the EU shall also refer to this definition where the data is available. Where deemed appropriate and so noted, for example for crude oil production, this shall be expanded to “Europe” which includes Norway, Switzerland, Turkey, and other non-EU countries of Europe. North Africa: Algeria, Egypt, Libya, Morocco, Tunisia The Middle East: Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates (UAE), Yemen Russia and the Commonwealth of Independent States (CIS) China India United States of America (U.S.) The study report is presented in three main parts. These cover the historical period from 1990 to 2006 and provides a background to the current situation (Section IIIA), an analysis of the near term future in the period 2007 to 2012 (Section IIIB), and the longer term developments in the

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2 -- I. Introduction

period 2013 to 2020 (Section IIIC). The subdivision of the future is made to recognise that little impact resulting from uncommitted investment can be made before 2012. Certain topics, notably future refined product demand and refinery economics, are covered in one section as these tend to respond to gradual trends and environmental changes. Section II presents an Executive Summary of the study, which provides an overview of the study and more importantly the main conclusions of the work. Section III is split into the three subsections discussed above. This report has been prepared for the sole benefit of the client and co-sponsors of the study. Neither the report nor any part of the report shall be provided to third parties without the written consent of Purvin & Gertz. Any third party in possession of the report may not rely upon its conclusions without the written consent of Purvin & Gertz. Possession of the report does not carry with it the right of publication. Purvin & Gertz conducted this analysis and prepared this report utilizing reasonable care and skill in applying methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review is based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. Some of the information on which this report is based has been provided by others including the client. Purvin & Gertz has utilized such information without verification unless specifically noted otherwise. Purvin & Gertz accepts no liability for errors or inaccuracies in information provided by others.

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II – Executive Summary -- 3

II

EXECUTIVE SUMMARY

DEMAND OUTLOOK
The countries in the study region represented around 74% of world refined products consumption in 2006, with consumption estimated at 2.58 billion tonnes (56 million B/D). Consumption in the study region is expected to grow to 3.37 billion tonnes in 2020 (73 million B/D), representing 77% of global consumption by 2020. The inclusion of some of the fastest growing economies results in the study region results in the higher than average growth. The following summary shows the growth of consumption in the individual countries/regions of the study area, both historically and for the forecast.
TOTAL REFINED PRODUCT CONSUMPTION (Millions of tonnes per year) 1995 European Union USA China India Middle East North Africa Russia Total 679 809 152 79 187 50 136 2092 2000 702 897 206 108 209 57 129 2308 2005 727 942 316 121 254 68 133 2561 2006 728 926 332 124 264 65 144 2582 2010 747 969 439 139 283 71 164 2812 2012 756 986 490 146 297 74 173 2921 2020 789 1039 731 173 346 88 200 3366

Figure II-1 illustrates the differences in scale of growth in the study regions, with the largest growth taking place, perhaps unexpectedly, in China and the smallest in North Africa, which is also the smallest market of the study regions.
FIGURE II-1 CONSUMPTION CHANGE (Million Tonnes) 500 400 300 200 100 0 -100 EU 27 USA China India Middle East North Africa Russia
1995-2006 2006-2020

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is reducing the overall growth of jet/kerosene combined. The projected pattern of consumption presents a significant challenge to the world refining industry.II Executive Summary The forecast assumes slowing growth in the U.8 million B/D). .4 -. compared to 330 million tonnes (6.S. Figure II-3 shows the pattern of demand change over the period 2006 to 2020 and compares it with the natural yield of products from Arab Light crude. The higher growth for gasoline in the future compared with the historical period reflects the accelerating car penetration in China and India. In the period to 2006 consumption in Russia fell as the economy restructured following the break-up of the Soviet Union. . In the early part of the last decade consumption in India grew very rapidly. reflecting in part the substantial conservation opportunities and a significant shift to natural gas away from fuel oil for power generation and district heating. which is typical of the average world crude in terms of quality and product yields. substitution of burning kerosene by alternatives. Since the economy has recovered consumption growth has been small. Figure II-2 shows the forecast of growth for the study regions by product. which will be offset by a continuing decline in Europe and be supported by only limited growth in the U. Europe and a slight reduction of growth in the Middle East relative to a similar historical period.6 million B/D) for gasoil/diesel. FIGURE II-2 STUDY REGION CONSUMPTION CHANGE (Million Tonnes) 900 800 700 600 500 400 300 200 100 0 -100 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil 1995-2006 2006-2020 Other Total The highest volume of additional demand is forecast to be for gasoil/diesel fuel. The yield would be similar to that produced by a hydroskimming refinery processing the crude. mainly LPG and electricity. although this was boosted by subsidized prices. The withdrawal of subsidies and the orientation of the economy towards service industries result in slower growth in the forecast period. There is limited growth to 2020 in gasoline of 120 million tonnes (2. Although we expect demand for jet fuel to be strong..S.

The forecasts for demand reflect Purvin & Gertz’ view that crude prices will stabilize in a range of $50-55/barrel in 2007-dollar terms. the refining industry will have to reconfigure to match supply and demand. oriented towards the production of gasoil/diesel to be added. an increase in the intensity of refining operations and continuing growth of lubricating oils and asphalt. petrochemicals feedstocks and naphtha. to produce EU specification gasoline that will be required in most countries by 2020. They are not at a level.II – Executive Summary -. generally through taxation policies in respect of oil products and other fuels. coke. that causes extreme conservation measures. further increasing the imbalance. As the natural yield from crude potentially exceeds the volume of consumption. This policy lever can be used to both shift demand away from more polluting fuels and to curb the absolute level of demand. however. other blending components will be required. increasing the amount produced. This will require fuel oil conversion capacity. asphalt. the required yield from the refining industry will reduce. POLICY IMPACTS Government policy can have a significant impact on petroleum demand. . As the blending of ethanol is increased. Prices at this level are sufficiently high to encourage conservation measures by consumers and make limited quantities of alternative fuels such as biofuels economic. large volume substitution or significant reductions in consumption. However.5 FIGURE II-3 DEMAND CHANGE VS CRUDE YIELD (Percent) Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Crude Oil Dem and The natural yield of naphtha from the crude is around 20%. This need shows up clearly in the refinery balances discussed later. All of this could be converted to gasoline or could be some used directly in the petrochemical industry. lubricating oils and waxes. Some of these products will reduce fuel oil production (asphalt and lubes) and the diversion of naphtha to petrochemicals reduces the production of gasoline. . The growth in the other category includes refinery fuel and gas. This reflects expected strong growth in the petrochemicals industry. Fuel oil forms a much lower proportion of demand growth than the natural yield from crude.

0 7. is at a similar price to three of the four European markets. and the U.II Executive Summary In terms of absolute demand and the impact of tax policy. 1997-2005 (Litres / 100 km ) 6.K.5 9. FIGURE II-5 AVERAGE US AND UK NEW CAR FUEL ECONOMY.4 1.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 US UK .8 1.0 6.0 0. Figure II-5 compares the fuel efficiency of the new gasoline engined cars registered by year since 1997 in the U. Figure II-4 compares the consumer price for gasoline in the U. which is ten times higher in Europe than the U. .2 1. resulting in a much lower consumer price.S. little tax is applied.0 France Germ any Italy UK Tax P roduct US The actual product cost.6 0.4 0. FIGURE II-4 GASOLINE PRICE FOURTH QUARTER 2006 ($ per liter) 2.6 -.5 7. The higher fuel cost has resulted in European consumers demanding more economical vehicles.S.S.0 8. and four main European markets. As a result the consumer price is 2.2 0.5 times higher in Europe. cars. The main difference is in the tax take.6 1.S. one of the best examples is the comparison between the efficiencies of European and U. In Europe gasoline is taxed relatively highly whereas in the U.8 0. which includes wholesale and retail costs in the US.5 8.S.0 1. Italy with its un-rationalised distribution system has higher costs.

FIGURE II-6 FUEL EXCISE DUTY DIFFERENTIAL VS DIESEL SHARE OF REGISTRATIONS. but as fuel prices rose and engine technology improved. which will further encourage more efficient cars such as diesels.S. vehicle efficiency will improve modestly.S. construction and industry. The resulting lower price of diesel encouraged car makers in Europe to produce and market diesel engined cars. This can be . many countries are following vehicle tax policies that penalize high CO 2 emissions. there is a clear correlation with the tax differential. .S. In general. we expect that U. If the Commission is to maintain its current position regarding the lowering of CO2 emissions. Figure II-6 shows the uptake of diesel cars in European countries compared with the tax differential between gasoline and diesel in the country. in response to consumer wishes and pressure from the European Commission. and therefore it is in this regard that the Commission may wish to consider the future direction of its policies. Although there are other factors that will influence the uptake of diesels.II – Executive Summary -. In that regard. In the forecast. Initially the quality of the engines was poor and only standard models were accepted by those drivers that covered a high mileage. although it is unlikely that the U. However. In view of concerns regarding greenhouse gas emissions. diesel cars became more widely accepted and premium models are now generally available with diesel engines. have improved the efficiency of the vehicles they sell.7 European fuel economy has steadily improved throughout the period as car manufacturers. The structure of fuel taxes between products has also resulted in demand patterns changing in Europe and elsewhere. government will raise gasoline taxes to discourage consumption. it should look to encourage as large a consumer uptake of diesels as possible. offering fuel economy levels approaching those of diesels. The latest advances in gasoline engines have helped to close the gap on diesels. No such economy gains have been seen in the U. 2006: (Diesel Tax as % of Gasoline Tax) 50 Belgium 60 70 80 Greece 90 100 0 10 20 30 40 50 % Diesels in New Registrations 60 70 80 UK Sw eden Germ any Italy France Spain Austria Lux. In many countries gasoline has been taxed as a consumer “luxury” whilst diesel has been taxed at a lower level reflecting its importance to the economy in transport. CO2 emissions from these latest gasoline engines remain higher than those from their diesel-powered equivalents. the fuel cost savings that the driver can realize relative to gasoline would justify the additional cost for the vehicle. in an environment of higher crude prices. current moves to increase CAFE standards have stalled.

Efficiency improvements are also expected in other markets. can and does influence consumer behavior. the trend is away from central fuel depots towards bunkering in the retail network using international fuel cards. The issue of differential excise duty rates for commercial diesel is likely to encompass a broader area than just the relative pump price of diesel compared with gasoline. in particular North Africa and the Middle East. although large fleet haulage firms may have their own fuelling depots. reflecting continuing relatively cheap fuel. on the other hand. Consideration needs to be given to the effectiveness of policing such a program: for example. an improvement in vehicle efficiency is expected but at a slow rate. Increasing the taxes and duties on diesel relative to gasoline. the Commission can help further the acceptance of diesels and therefore continue to reduce CO2 emissions across the EU. City centre controls on vehicle types are also expected to grow. and if these higher costs are passed on directly to the consumer in terms of higher prices they are likely to discourage further purchases of diesel cars. the examples above show how government policy. In the U. These effects have been incorporated into the forecast through improving efficiency assumptions and reducing miles traveled per vehicle. owing to the greater complexity of the engines and the additional exhaust treatment processes required.. . Furthermore. The demand forecast for the European Union assumes further government moves to encourage more efficient vehicles and discourage less efficient models. which would encourage hybrids and other low emission vehicles. and will be reluctant to make a substantial purchase of a new vehicle based on tax breaks for the fuel alone.S. the removal of price controls and a move to cost related fuel pricing will act to curb demand. or diesel for road cars compared with diesel for commercial vehicles. It is apparent that the further development of diesel power-trains is proving increasingly expensive to manufacture.II Executive Summary achieved through taxation policies regarding fuels and the vehicles themselves.8 -. However. Attempting either to differentiate at which pump they should fill or how much duty would be paid at the retail level. Congestion charges are also expected to reduce city centre use. or ensuring that private cars do not use the same pumps for smaller commercial vehicles could prove quite cumbersome. and would therefore ultimately result in higher CO2 emissions from the car parc. as high prices clearly encourage efficiency developments and consumers to switch to cost effective fuels. although it should be noted that consumers are generally wary of tax incentives that may be withdrawn in the future. In the less well-developed markets modernization of the existing vehicle fleet is likely to offset some of the fuel demand growth. Circulation taxes based on CO2 emissions are expected to become widespread. . In other markets. would make diesels less attractive. many small and medium sized vans and other vehicles of smaller commercial enterprises refuel at the same roadside filling stations as private vehicles. By allowing tax breaks either through lowering the purchase price of diesel vehicles and/or adopting an EU-wide policy of lower diesel fuel duty compared with gasoline and a general acceptance of diesel cars. particularly in respect of fuel tax.

For the remainder of the current decade. OPEC’s contribution to world oil supply is expected to move through two significant transitions over the next 15 years. One of the key factors affecting crude oil markets and crude oil prices is the relationship between petroleum demand. With these factors considered. This surplus capacity has now fallen to low levels.II – Executive Summary -. . the projected increase in crude oil supply averages 1. After 2010.2 million B/D in 2012. The petroleum industry must now face the challenge of finding. NGLs and nonconventional fuels. such that OPEC’s production and market share will increase (see Figure II-7). OPEC crude oil supply and non-OPEC crude supply. For the purposes of this study. taking into account changes in supply of condensates.9 CRUDE OIL PRODUCTION OUTLOOK Over the study period. this is lower than the rate of demand growth over the period reflecting the increase in condensates and NGL supplies. From the early 1980s to the late 1990s. Out to 2012. developing. crude oil supply will increase to match the growth in demand for petroleum products. As OPEC has chosen the role of swing producer. the increase in non-OPEC supply is projected to slow markedly. by 2020 total supply will need to be increased by over 20 million B/D. the challenge of OPEC and all producers was managing the large overhang of production capacity. our outlook is for crude oil production to increase from 73.6% a year. market dynamics have centred around the relationship between changes in demand and changes in OPEC crude oil supply – the “call on OPEC”.5 million B/D in 2006 (excluding OPEC and Non-OPEC Condensates and NGLs) to 81. FIGURE II-7 WORLD CRUDE PRODUCTION (Million Barrels per Day) 100 90 80 70 60 50 40 30 20 10 0 1990 1995 2000 OPEC % of Total 50 40 Non-OPEC 30 20 OPEC 10 0 2005 2010 2015 2020 (Percent) 60 . This excess capacity developed because of the decline in demand following the large price increases in the 1970s and increased supplies that were developed in anticipation of continued high prices. and financing increases in supply while at the same time offsetting the natural decline of mature producing provinces. non-OPEC output is expected to continue growing.1 million B/D by 2020. and the call on OPEC will remain reasonably moderate. and supply and demand are in near balance. Angola is included with OPEC production. and then to 90. Even at the rather modest growth rates forecast.

9 million B/D currently.54 1.52 14.87 2010 8. Following the end of the Soviet Union. However.67 0. These increases will be necessary.33 6.22 2015 8.57 13.00 2.II Executive Summary NON-OPEC SUPPLY Increases in non-OPEC supply are widely distributed. Other regions where production is set to increase include Brazil.82 7.69 2. we anticipate production from China will reach 4.67 37.74 3. and the Baku-Tbilisi-Ceyhan (BTC) pipeline in 2006.72 7.61 1.43 45.51 2012 8.77 11.84 7. compared with about 3.46 2006 7.70 0.23 4.04 3. These developments are expected to result in Canadian production increasing from about 2.8 million B/D by 2012 and 4. NON-OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 1990 North America Latin America North Sea Africa (1) Middle East CIS Region Asia Other Europe Total (1) Excludes Angola 9.80 1.24 0.44 44.85 0.45 43. Output from the Tianjin. . is where the largest increases in non-OPEC production are expected.09 4.52 38. China.0 million B/D as western technology was introduced and well-funded companies invested in expansion plans. including Russia and the Caspian countries.23 1.63 6.13 1.35 11. where there is considerable development of the offshore fields.2 million B/D. the principal area of increasing production being Sudan. Gulf of Mexico are in steady decline.47 6.21 7.60 1.31 6.99 3. have been increasing steadily. The CIS region.99 1.90 6.58 3. such that the combined total from these three regions has reached over 1.98 0.04 6.29 5. There have been some considerable increases in production from China in recent years.83 2020 8.54 5.61 35.75 6.08 7. .73 6. but in Latin America as a whole these increases are expected to be offset by continuing declines from Mexico in the near term. more mature.86 2.79 0.46 41.49 15.40 2.01 0.60 2000 8.29 7.01 4. which are expected to continue.70 1.42 45. from 2000 to 2006 production from Russia alone increased by over 3.43 0.26 2005 7.10 4.57 0. as well as crude oil in the east of the country.41 1. with the heavy oil sands expected to be the main area of production increases.79 2.10 4.78 2007 8.73 3.S.19 2.19 6.000 B/D by 2012. crude oil production from this region fell dramatically in the first half of the 1990s. areas such as the North Sea and the U.23 3.89 6.94 0.67 11.75 7.49 41.15 1.0 million B/D in the same period.46 42.41 46.10 7.23 1995 8. as a result of the stalling of exploration and development programs. with the major contributions coming from Canada.61 6.51 6.00 1. By 2012.32 2. Greater increases are expected from Africa.66 5.23 2.59 12.06 3.50 1.44 43. with further increases likely towards 2020.04 4. Production from the Caspian region increased by a further 1.09 4.54 13.55 7. as production in other. supported by the opening of the Caspian Pipeline Consortium (CPC) pipeline in 2003.33 1.61 12.69 1. Africa and the CIS Region. Xinjiang and Shaanxi provinces has grown rapidly since 1995.92 0.48 2009 8. where production is expected to increase by 600.8 million B/D by 2020.44 In Canada.97 2008 8. the developments of the heavy crude/bitumen and synthetic crude.38 0.7 million B/D currently to 3.96 5.10 -.26 7.3 million B/D.64 12.

Both regions have seen some new fields come on line in recent years.50 0.37 1.70 1995 0.43 31.30 1.26 0.66 2.49 31.52 0.45 43.97 11.00 2. In the longer term.37 0. although the largest increases are likely to be seen in Saudi Arabia.S.62 1. for example in the Gulf of Mexico recent shallow and deepwater developments have added about 300.91 9. As Saudi Arabia is expected to maintain its role as being able to counterbalance any disruptions in crude supply from other producers.91 3.94 0.15 2.7 million B/D.75 0.000 B/D over the past ten years.12 0.82 2. only two OPEC countries – Indonesia and Iraq – have recorded a decline in production.50 2.64 2005 1.04 2.54 2. Libya and the UAE are projected to result in significantly higher production and capacity levels by 2020.55 2.88 38.74 0.43 2.41 2.95 2.77 2009 1.S.13 3.07 2.97 1.96 4.88 2.97 0.98 2020 1.00 0.91 9. OPEC SUPPLY In the near term.89 2.33 1.12 0.82 3.53 36. increases in OPEC production are expected to come from Africa and the Middle East countries.60 0.68 2.97 2.11 2.79 2000 0.08 2.13 2.64 2.59 2.26 1.70 2.72 0.71 31.53 2. because of the strong outlook for Angola’s near and long-term production.69 0.92 0. Some of this decline may be moderated by some recent finds and developments.60 2.41 1. it will be important for it to maintain surplus productive capacity.76 2.74 3.17 2.36 33.37 3.72 2007 1.23 0. More recently.15 0.38 2. output has fallen from Nigeria and Venezuela.II – Executive Summary -.21 3.75 0.49 2.41 6.40 1.75 1.56 31.89 8.33 0.88 2.95 1.11 Offsetting these increases will be expected declines from traditional producing areas such as the U.74 1. .81 1.92 9.11 0.70 2.62 The long-term outlook for OPEC capacity assumes some degree of resolution in those countries where production has suffered owing to conflicts.78 0.56 2.95 0.62 2.70 1.88 4.05 2008 1.90 2.65 7.43 3.12 3. and although several new developments are pending these will be insufficient to offset the declines in onshore U.27 2.35 2010 1.07 2012 1.32 0.75 3.24 0.07 2015 1.70 2006 1.72 3.16 3.90 8.96 2.43 1. The change in momentum will also be helped by Angola’s accession to OPEC.39 0.27 0. non-OPEC crude output is expected to grow more rapidly than OPEC output.81 0. In addition to these. investments in countries such as Angola.66 3.19 1.62 2.31 2.09 22.40 0.57 3. In the longer term.47 2.89 28. although these are also a result of political or social disputes and not a result of declining capacity.75 3.55 2.86 2.14 2.47 1. and the North Sea.45 7.16 0.89 8.57 2.91 2.79 3. .76 25.04 3.75 0.15 2.53 2.05 2. the balance of production is expected to shift significantly towards OPEC owing to the forecast slowing down in non-OPEC production. Since 1990.45 2. however.68 0.95 4. but in the longer term the established decline trend is expected to continue.42 0.39 1.45 0.33 1. such as the Buzzard field which came on-line early this year.53 2.70 0.30 34.80 1.09 1.55 2.81 2. OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 1990 Algeria Angola Indonesia Iran Iraq Kuwait Libya Neutral Zone Nigeria Qatar Saudi Arabia UAE Venezuela Total 0.39 1.75 0.02 13.42 0.44 0. in the case of Iraq owing to the political situation rather than any resource constraints. production and that from Alaska.08 1.81 1.85 3.85 2. European production peaked in 2000 but has since declined by about 1.03 3.94 10.

10 1.II Executive Summary As a result of the slowdown in non-OPEC production. heavy sour.14 1. and heavy sweet high TAN (Total Acid Number) crudes.18 1.08 . Brazil. Increases in production of heavy.12 -. production of segregated condensates is projected to increase strongly.5 32.1 API in 1990 to 32. sweet. but achievable. Chad and China. another has to be made more optimistic.20 1. average crude oil gravity is forecast to change very little. In addition.5 33. to 32. Of course.4 API in 2006. as seen in Figure II-8.2% by 2020.5 1990 1995 2000 2005 2010 2015 2020 Sulfur (%) 1. technology and the discovery of new producing regions have made forecasts of peaking production wrong. the average sulfur content is also expected to change only little. the call on OPEC from about 2010 onwards will continue to grow. Factors unknown to us now may generate more oil production. Overall. In the past. sour oil are expected from Venezuela and possibly Saudi Arabia. light sour. from 33. CRUDE OIL QUALITY Purvin & Gertz classifies crude oil quality into four grades. remaining below 1. mostly from OPEC countries but also from the CIS Region and a small proportion of synthetic crudes from Canada and Venezuela. or may curb demand to a greater extent than expected. high TAN crude oil production is forecast to increase from areas such as Angola. light sweet.0 31. therefore. The change in the crude balance is also expected to result in OPEC’s market share increasing towards 50% by 2020. However.16 1. other production scenarios could meet demand.0 32. and the forecast call on OPEC production approaching 44 million B/D. A peak in world production less than 20 years in the future has been predicted almost continuously since oil was first produced commercially in 1859. but for each element made more pessimistic.22 1. Detailed descriptions of these are provided in Section A-3.1 API by 2020. The projected balances appear challenging. The average quality of crude oil is not expected to change significantly over the forecast period. Likewise. FIGURE II-8 CRUDE OIL QUALITY (API Gravity and Percent Sulfur) Gravity (Degrees API) 33.12 API Gravity % Sulfur 1. most of the incremental production increases are expected to be of lighter crude oils. . and heavy.

This increase is due in part to rationalization of smaller capacity and part to the addition of new. .13 REFINING INDUSTRY IN THE STUDY REGION Analysis of the refining industry within the areas studied shows that whilst the number of refineries declined in the period between 1993 and 2007 the average capacity per refinery increased by nearly 30%. mainly straight-run fuel oil from Russia.. The data for Europe reflect an allowance for purchased feedstocks. Utilization remained high through to 2002 when a fall in demand. In China. processing locally produced crude and residue. the sustainable capacity utilization for the industry as a whole is between 90% and 95%. Utilization in Europe increased steadily from the mid 1980s. slowdowns. A similar situation has existed in the U. Refineries that remain are expected to upgrade and expand. The rationalization of the number of sites is expected to continue into the future as competition and tightening product qualities force a greater economy of scale. FIGURE II-9 REFINERY UTILISATION (Percent) 95 85 USA Europe Asia 75 65 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 It is generally accepted that after allowing for unscheduled outages. For example the average capacity per refinery in India increased by over 100% in the historical period and now is the highest in the world. larger refineries. reduced refinery throughput levels.S. reaching a peak in 1994 of 93%.II – Executive Summary -. combined with some capacity additions. the number of “official” refineries has declined but in practice many continue to operate. which is processed instead of crude oil in some refineries. the impact of maintenance outages and the impact of differing crude slates. . utilization has remained in the 90% to 95% range although gasoil imports from Russia have resumed and grown over the period. Since then. Over the last ten years refinery utilization has increased worldwide in response to growing demand. This trend has not been followed in all regions. which coincided with a period of very low exports of Russian gasoil. as seen in Figure II-9. and in Russia both overall capacity and capacity per site also declined. with refinery utilization climbing to levels of 90% in 1993.

14 -- II Executive Summary

In Asia utilization grew steadily through the early part of the 1990s as demand in the region grew. In 1998 it fell as regional demand fell, but recovered again in 2003 and rose sharply in 2004 as demand surged. Despite this utilization is below levels seen in Europe and the U.S., as there is more simple capacity that is not well matched to meeting regional demand. Surplus fuel oil from the Atlantic Basin is exported to Asia, meeting demand in the region and reducing the incentive for simple refinery operations. The conclusion from this analysis is that the surplus refinery capacity that led to very poor profitability during the 1980s and early 1990s has gone from the major European and U.S. markets. Some spare capacity remains in Asia, but as this is distillation capacity that does not provide yields consistent with market needs, it cannot be used economically. The recent improvements in refinery profitability have encouraged refiners to start a programme of expansions, with the result that over 200 refinery expansion and upgrading projects have been announced. These have been classified into those that are considered likely to proceed and those that we consider speculative and therefore subject to delay and cancellation. The likely projects have been compared with the capacities required to meet the projected supply and demand balances in each region, and the resulting comparison is shown below in Figure II10.
FIGURE II-10 STUDY REGION CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 6,000 5,000 4,000 3,000 2,000 1,000 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases

Announced likely distillation capacity increases total 4.7 million B/D compared with a requirement of 5.3 million B/D. The additional capacity required is well within the potential for debottlenecking of existing capacity and consequently utilization levels should remain acceptable. Additional capacity beyond that currently announced is required for all upgrading processes. In the cases of catalytic cracking and hydrocracking the additions required above announced projects are substantial. In the current business environment of project cost increases and project delays, this indicates that a tight market will continue through to 2010 and possibly to 2012. Although there appears to be a shortfall of investment, some regions are expected to over-invest in the period to 2012 and have surplus product that could meet a shortfall elsewhere.

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By 2010, India is expected to have refinery capacity that is well in excess of its needs and will have the capability to supply shortfalls in Asia or elsewhere if projects are delayed. Similarly, early completion of some of the larger Middle East projects would potentially lead to a surplus which could meet shortages elsewhere. However if the announced projects and the additional capacity that is shown as required goes ahead, some regions will have a surplus that could undermine profitability. In the period after 2012 further capacity additions will be required, but there should be sufficient time for the required projects to be developed and constructed. Figure II-11 shows the capacity changes that are required by 2020 above those already announced.
FIGURE II-11 ALL REGIONS CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 12,000 10,000 8,000 6,000 4,000 2,000 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases

The level of additions required between 2007 and 2020 is roughly double the level already announced for crude distillation, gasoline quality and production, hydrocracking and residue upgrading. The rate of cat cracking additions slows later in the period. As in the period to 2012, China needs to add most of the capacity. The long-term future rate of capacity additions is broadly consistent with the rate of likely additions in the period to 2012 in most markets. Whilst this is considered achievable, it indicates that refining margins will need to remain at levels sufficient to continue to justify ongoing investments. In Europe the period after 2012 is characterized by slower growth and a growing gasoline surplus. No projects are required to expand crude capacity, but investment in hydrocracking and residue conversion will be needed to maintain the supply balance. The rate of capacity additions is well within historical levels.

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REFINING INVESTMENTS
The historical investments made in the refining industries of the EU, the U.S., the Middle East and Asia have been estimated for the period 1995 to 2007. The results of this analysis are illustrated below in Figure II-12.
FIGURE II-12 ANNUAL REFINING INVESTMENT BY REGION (Billion US Dollars) 60 50 40 30 20 10 0 1995 EU25 USA Middle East Asia & Far East

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

As might be expected the largest amount of investment has been made in Asia as new refineries have been built in the region. Investments in Europe and the U.S. have been similar and mainly reflect the investment required to meet changes to product quality. This accounts for the peaks seen in 2001 and 2006, which are years following specification changes as a result of the methodology used. Overall investment in the industry in the EU, United States, Middle East, Asia and the Far East since 1995 is estimated to have averaged $30 billion per year.

BIOFUELS
The development of alternative fuels for transportation use has been receiving a considerable amount of attention, with the primary focus being on biofuels. The European Commission has declared as an objective a target of a minimum biofuel energy content of 10% of motor fuels by 2020; this replaces the current directive, adopted in 2003, which had the objectives of replacing 2% by energy content of gasoline and diesel for transport by biofuels by 2005, which was not met, and 5.75% by 2010. Other countries, such as the U.S., China and Brazil are also promoting the use of biofuels, especially ethanol. The main biofuels under discussion are ethanol and biodiesel. In the Americas, ethanol is the principal biofuel, and is sourced from different products; for example in the U.S. its source is corn, to the extent that fuel ethanol production currently accounts for over 20% of U.S. corn supply. In Brazil the principal source is sugar cane. By contrast, in Europe the main focus is towards biodiesel, especially considering the increasing demand for diesel. Ethanol is currently used in small quantities, primarily as ETBE as a replacement for MTBE, although pure ethanol blending is increasing. Total biofuel use in 2005 is estimated at approximately 27 million tonnes, the majority being ethanol use in the U.S. By 2020, however, our outlook is that demand will increase to over

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100 million tonnes, led by increasing biodiesel demand in Europe as well as greater ethanol use in the U.S. and Latin America, and greater development of ethanol and biodiesel use in Asia (See Figure II-13).
FIGURE II-13 WORLD BIOFUEL DEMAND (Million Tonnes) 120 100 80 60 40 20 0 2005 2020 Africa Latin Am erica Canada Asia U.S. Europe

Politically, increasing use of biofuels has its attractions, especially in countries that import refined products to meet demand. Most biofuel manufacturing facilities are based in the country of demand, and therefore increasing biofuel usage increases domestic supply thus reducing import requirements, and can therefore be seen as increasing a country’s security of product supply. However, there are considerable cost implications for governments to consider, as some biofuel manufacturing currently requires substantial subsidies to make it economically viable compared with mineral oil-derived fuels. Increasing demand for corn and vegetable oils resulting from the growth in biofuels has resulted in prices for these commodities rising sharply. The increasing use of biofuels will also have a significant impact on regional refiners, as incorporating biofuels in the demand pool will reduce the need for conventional mineral fuels. This in turn lowers the need for refinery supply, thus potentially changing the outlook for capacity requirements. For example, increasing use of biodiesel would help meet the worldwide demand increases for middle distillate, thus reducing the need for additional refinery conversion capacity. In Europe, increasing use of biodiesel would potentially have the additional advantage of reducing the region’s gasoil/diesel import requirements. Conversely, increasing the share of biogasoline blendstocks such as ethanol in the European gasoline pool would have implications for the refining industry. Already facing a growing production surplus owing to declining gasoline demand, higher bioethanol use would reduce further the market for refinery-produced gasoline. Increasing ethanol demand in the U.S. is also likely to affect European refiners, as it would reduce U.S. gasoline import requirements. The particular characteristics of ethanol also make its incorporation into the gasoline pool costly. There are, however, significant issues to be addressed regarding the viability of biofuels in the quantities currently envisaged. In the U.S. there are many proposals that, if enacted, would increase the ethanol requirements beyond the level that is feasible from corn. In the longer term,

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it is widely thought that ethanol will have to be produced from cellulosic feedstocks in order to increase production significantly in the U.S., even though cellulosic ethanol is not yet commercially viable. In Brazil and elsewhere there are increasing concerns about the clearing of forests to make room for the growth of more energy crops, and there are also environmental issues about the sourcing of biodiesel feedstocks such as palm oil. Overall, however, the biggest concern is that of diverting food crops to manufacturing fuels and the reassignment of agricultural land away from food production. Considering these issues, we do not believe it will be possible to meet current EU targets without the use of secondgeneration biofuels, such as biomass conversion, and furthermore it is not clear that true second generation biofuels can be achieved technically or commercially and with a positive contribution to reducing greenhouse gas emissions. Our forecasts have assumed that tax incentives and biofuel mandates/obligations in EU countries will encourage the development of biofuels; however, our projection is that biofuel usage in 2020 will fall short of the revised target of 10%. Although considerable research effort is being directed at the production of second generation biofuels (biomass to liquids) it is likely that biomass can be used more efficiently in stationary applications such as power and heat generation. This would release the energy from the biomass directly and avoid energy-intensive processing to produce liquid fuels.

REFINED PRODUCT TRADE FLOWS, AND IMPLICATIONS FOR EUROPE
Refined products trade is key to balancing regional refinery supply with product demand. For those countries or regions that are too small for a refining industry, or which have an industry that is either insufficiently well configured to match local demand or has not been able to match changes in demand patterns, trade flows of refined products are relied upon to meet demand requirements precisely. Such patterns have been particularly evident for at least the past ten years in Europe, as demand for gasoil (including diesel) has increased strongly while that for gasoline has declined, and at the same time demand for gasoline in the U.S. has been increasing strongly. As European refinery production has been unable to match the strong changes in domestic demand trends, additional gasoil has been imported from the CIS region and the surplus gasoline production has been exported mainly to the U.S. (with other major export markets including Africa and the Middle East). Although refinery investments can effect changes in the production profile and the relative yields of products, these are costly and require several years lead time. In the immediate term, therefore, trade flows are the only way to balance market requirements, and in the longer term they may represent a more economically attractive option than refinery investments. Structurally, there are significant patterns of product trade flows worldwide. The product with the largest share of world trade both in absolute volumes and in relation to world demand is that for heavy fuel oil (see Figure II-14). As it is largely used for international bunkering it is traded broadly with many regions acting as both importers and exporters, although there are significant export volumes from Russia. The largest individual trade flows of particular products are those of gasoil/diesel from the CIS region to Europe (estimated to be about 29 million tonnes

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in 2006, or 600,000 B/D), naphtha from the Middle East to Japan and Asia (28 million tonnes in 2006, or 680,000 B/D) and gasoline from Europe to the U.S. (26 million tonnes in 2006, or 600,000 B/D).
FIGURE II-14 TRADE AS A SHARE OF WORLD DEMAND, 2006 (Percent) 60 50 40 30 20 10 0 Gasoline Naphtha Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil

In some countries, government policy has been to attempt to minimise trade – or in some cases, such as China, actually ban trade in certain products – and steer the refining industry towards adapting to domestic demand patterns. However, as manufacturing is a relatively inflexible way to meet changes in demand, such policies invariably induce strains on the supply system. The near- and long-term outlooks for product demand and refinery supply are discussed elsewhere in this Summary; however, the key trends are that European gasoline and heavy fuel oil demand is forecast to continue to decline and that demand for middle distillates – jet/kerosene and gasoil/diesel – is expected to continue increasing. Some additional refinery conversion capacity projects are expected to come online in the near term, but although these may help to moderate the increase in required gasoil imports they are not expected to lower gasoil imports, and they will not fully address the decline in gasoline demand (see Figure II-15). Some additional capacity is also likely in the U.S., but most of the refinery additions are forecast to take place in the Middle East and Far East.

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FIGURE II-15 NET EUROPEAN TRADE FLOWS (Million Tonnes: +ve = Im ports) 120 100 80 60 40 20 0 -20 -40 -60 -80

Gasoline Gasoil/Diesel

Jet/Kerosene Heavy Fuel Oil

1995

2000

2005

2010

2012

2015

2020

NEAR TERM OUTLOOK: 2007-2012
As the majority of refinery investments likely to take place by 2012 have already been announced, it is possible to draw reasonably firm conclusions regarding trade flows for the nearterm period. Over the period of the next five years, we do not envisage any structural shifts in the European trade balance. Rather, established trade patterns are expected to continue, with increasing trade volumes. As demand for gasoline in Europe is in structural decline, European refiners are facing an increasing production surplus. It is likely that in the near term this surplus will find ready markets in the U.S. as well as in Africa and the Middle East. Although some additional refining is expected to come on line in the U.S., this is not likely to affect gasoline trade flows from Europe significantly. Gasoline exports from Europe to the Middle East are likely to be affected by the increases in Middle East and Indian refining capacity towards the end of the near term period, however, such that the overall rate of increase in European gasoline exports is expected to slow. Such an impact on export markets will be more critical for inland refiners; coastal-based refiners will be readily able to export surplus product to overseas markets at prevailing FOB prices, but inland refiners will be faced with the difficulty of transporting surplus product from their location to a suitable point of export. Continued availability of gasoil/diesel from the CIS region is such that exports to Europe are expected to continue. Although some additional hydrocracking will be coming on line in Europe by 2012, European import requirements are expected to continue increasing, although at a slower rate. Similarly, import requirements of jet/kerosene are also projected to increase, with the majority of the trade sourced from Middle East refineries. These are expected to increase further as new Middle Eastern capacity comes on line. There is considerable trade of fuel oil in Europe, both as cracked, finished product and as unfinished refinery feedstocks. Similar to gasoil trade flows, the CIS Region is the primary supplier of fuel oil to Europe; however Libya is also a large supplier as it produces a good quality

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low sulfur residue for upgrading. Principal export markets include power plants in the United States and Asia, as well as overseas bunkers markets. The trade balance is expected to remain broadly similar in the near term, as the reduction in refinery output resulting from the conversion projects that are added will balance the expected reduction in demand.

LONGER TERM OUTLOOK: 2012-2020
The major additions in refinery distillation and conversion capacity are expected to take place in China, India and the Middle East. Fewer additions are likely to take place in the more mature markets of Europe and the U.S. Although these additions are being built primarily to meet increases in local demand, they will also result in increased product being placed into export markets. These expected changes will have major implications for European markets. Increasing product volumes in export markets will have the effect of putting downwards pressure on prices, thus reducing the economic incentive for further refinery investments. In many cases, it will be less expensive for markets to import products rather than invest to increase local supply. Furthermore, as has been seen in Europe in the current decade, changing trade patterns are a far more flexible and less expensive way to meet demand trends than changes in refinery configuration. Indeed, continuing exports will be essential for European refiners for disposing of the increasing gasoline surplus. Even so, by 2020 markets are expected to tighten considerably. In the U.S., a combination of some additional conversion capacity, easing gasoline demand growth and increasing use of biofuels is projected to result in a slight easing of U.S. gasoline import requirements by 2020 compared with current levels. For European exporters, the expected fall in European demand, compounded by the increasing use of bio-ethanol in gasoline, is such that it is likely that some gasoline-manufacturing units, such as reformers or some FCC units, will need to be shutdown, as even export markets will be unable to absorb the projected surplus with the existing refinery configuration. European refiners will be facing increased competition from the new Middle Eastern and Indian refiners, which are targeting gasoline sales to the U.S. markets and diesel to Europe as well as capturing local Middle East demand. These new refineries will be configured to produce a high yield of middle distillates from heavier crude grades, therefore increasing the availability of products for the world market. The long-term outlook is such that the European market will continue to rely heavily on trade to balance demand. We do not expect it will be in a position to increase security of supply by reducing its dependence on trade; rather, the option is most likely to be to increase the diversity of product imports. We do not see that product quality requirements in the EU will act as a material barrier to the future trade flows as the convergence of international product qualities is facilitating easier movement of products between regions.

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CRUDE OIL PRICES
Ultimately, crude oil prices are determined by two factors: in the long term by the cost of finding and bringing oil reserves to market, and in the short term by the supply/demand balance and the actual or perceived tightness of the market in its ability to supply crude and feedstocks of different grades to meet product demand. The oil industry is highly fragmented and the range of upstream capital investment costs is very large. These vary from the relatively low-cost onshore developments in areas with existing infrastructure and benign climate and terrain, to offshore production in far more hostile environments such as the Arctic Circle or in very deep water. As oil prices have increased, more expensive-to-develop resources such as bitumen deposits and synthetic crude oils are increasingly exploited, with higher development costs as a consequence. Upstream investment costs have been rising from 1996 and have accelerated sharply since 2006. This is due to inflation in the construction industry due to both higher costs for raw materials and also the shortage of skilled manpower in the contracting industry. Higher crude prices have encouraged companies to target higher cost prospects such as oil sands and ultra deep water field in areas where there is little or no infrastructure. The increase in underlying costs coupled with the pursuit of more difficult to develop targets has combined to increase the overall cost of finding and developing new resources. Furthermore, the weakness of the dollar in recent years has also contributed to the higher costs in dollar terms. On a three-year rolling average basis, the costs of production and reserve replacement have risen from about $17/barrel in 1995 to $40/barrel in 2005. These cost increases have therefore essentially set the floor for oil prices, such that it is difficult to envisage a return to a $15-$20/barrel oil price environment certainly considering current demand growth rates, as these prices do not support the kinds of exploration and development now required to bring more oil to market. The other key factor in setting prices is the spare capacity available in the industry to make up for the shortfall in production outages, whether caused by maintenance, disputes or hurricanes and other weather-related incidents. As non-OPEC production is essentially running at full capacity the balance of the market is met by OPEC production, and therefore the amount of spare capacity available in the industry can be measured by spare OPEC capacity. As seen in Figure II-16, spare capacity has fallen significantly from levels of about 5-6 million B/D prior to 2002 to a low of just over 1.0 million B/D in 2005. At levels in the order of 5-6 million B/D, the industry could absorb disruptions to crude supply such as those seen in Nigeria, Iraq, Venezuela or the U.S. Gulf of Mexico; or, for example, the loss of production in Kuwait in 1990. However, with lower spare capacity, of about 3.0 million B/D, this ability is reduced. Furthermore, considering the current situation in Nigeria and Venezuela, it is debatable as to how much of the spare capacity is readily available.

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FIGURE II-16 OPEC PRODUCTION AND SPARE CAPACITY (Million Barrels per Day) Production 50 40 30 20 10 0 1995 2000 2005

OPEC Production

Spare Capacity

Spare Capacity 7 6 5 4 3 2 1 0 2010 2015 2020

The effect that changes in spare capacity have on the market was very keenly illustrated over this period; production capacity was lost owing to disruptions first in Venezuela from 2002, and then through hurricane damage to U.S. Gulf of Mexico facilities in 2004 and 2005, while demand soared in 2004 owing to rapid economic expansion and growth, particularly in China. Over this time, the price of Dated Brent doubled from $30/barrel to $60/barrel. This role of spare capacity has been a major part of the pricing debate over the past two years, and the recent increase in prices suggests a supply squeeze and a difficulty in meeting current demand. However, the question that has been often been raised is at which part of the supply chain are the greater constraints: crude oil production or refining capacity? It is important to establish that the world is not “short” of crude oil or refined products. There have not been any queues at filling stations, for example, waiting for fuel deliveries, nor have refineries had to reduce throughput owing to a lack of crude oil. What has changed over the past three years is that the amount of spare capacity – crude productive capacity and refining capacity – has fallen. In addition, most of the spare crude oil productive capacity that does remain is mostly, but not exclusively, heavy crudes that are ill-suited to the remaining spare refining capacity, which is of simple configuration with little or no capability for heavy oil conversion to light products. In addition to the generally higher crude oil prices that are a current feature of the market, price volatility has also increased markedly. There is much debate concerning the potential roles of traders, hedge funds, etc., in the current market, but it is indisputable that the reduced level of spare capacity has increased the industry’s sensitivity and exposure to potential disruptions compared with the late 1990s and the earlier part of the current decade. For example, analysis of light and heavy crude price increases since 2004 compared with spare crude production capacity helps to provide some indications of the drivers behind the large increase in headline crude oil prices. As a result of the reduction in OPEC spare capacity to levels of 1.0-1.5 million B/D from 2004 through to 2006, contingencies for production disruptions elsewhere were severely reduced, as discussed above. Since 2007, however, our analysis suggest that OPEC spare capacity has begun to increase again, and having recovered from just over 1.0 million B/D is now over 2.0

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million B/D, having at times approached 2.5 million B/D (see Figure II-17). This analysis takes into account only spare capacity considered available for immediate production, and therefore does not include some of the nominal spare capacity in Venezuela, for example.
FIGURE II-17 OPEC PRODUCTION AND ESTIMATED SPARE CAPACITY* (Million Barrels per Day) Production 33.0 32.5 32.0 31.5 31.0 30.5 30.0 2004
* Excludes Angola

Production

Spare Capacity

Spare Capacity 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2005 2006 2007

Although spare capacity has increased slightly, crude prices have continued to climb sharply, especially in the fourth quarter of 2007. These movements suggest strongly that despite higher spare production capacity the level is still insufficient to cover market concerns over a potential large-scale supply disruption, also in the event of a large increase in oil demand above the trend rate, such as that seen in 2004, the call on this capacity could increase sharply. In such an event, the remaining spare capacity for contingencies would be very low indeed. Future increases in crude production capacity should ease pressure on crude oil prices in the medium term, although in the longer term there is a considerable degree of uncertainty regarding spare capacity from OPEC. Current reserve levels certainly support the ability to build spare capacity back towards 5-6 million B/D, although actual rates may be tempered by geopolitical factors, and a possible reluctance to invest if actions of consuming governments are likely to result in falling demand. However, even with aggressive conservation and substitution programs, developing countries are likely to increase crude oil consumption at a rate that results in increasing global demand. Crude Oil Markets, and the Impact of Products Markets on Crude Oil Prices The principal marker crudes, such as Brent and WTI, are light, sweet and have a high naphtha content. When processed in a conversion refinery, they produce a high gasoline yield as a result not only of their naphtha content but also because of the quality of their vacuum gasoil (VGO) fraction for fluid catalytic crackers. Heavier crude oils may not have such a high naphtha content but can still make suitable feeds for conversion refineries. Owing to their favourable economics, conversion refineries are usually running at full utilization, excluding shutdown periods. Simple distillation capacity, on the other hand, does not always run full, owing to the configuration’s high yield of low-value products such as heavy fuel oil.

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As a result, the spare refining capacity that is underutilized is of relatively simple configuration. At times of perceived shortage of light products, such as gasoline in the United States, the market signal through higher prices is to increase gasoline output. The higher prices result in higher price differentials between gasoline and crude oil, encouraging higher refinery runs. With full utilization of conversion capacity the only way to increase light product output, apart from a yield shift within the limits of technology, is through the use of the underutilized simple refinery capacity. Processing more crude oil in such simple refining capacity results in more gasoline production but also more heavy fuel oil production, which is not required by the market. As a result, heavy fuel oil prices weaken relative to light products and crude oil, and the light-heavy product spread widens. In turn, refiners then see more incentive to buy light crude oils such as Brent and WTI because of their higher yields of light products and lower yields of heavy fuel oil, and the price of these crudes then gets bid up relative to heavy crudes. As a result, the price spread between light and heavy crudes also widens. Market sensitivities are at their highest during and in the run-up to times of peak seasonal demand, the most visible example of which is the increase in U.S. gasoline prices ahead of the summer driving season. As the United States is a net importer of gasoline and gasoline components it is both reliant on and sensitive to supplies from Western Europe and other export markets. Although such a situation may not normally be regarded as a cause for market volatility, at 45 million tonnes / 1.0 million B/D (in 2006) the volume of U.S. gasoline and gasoline blendstock imports is the largest movement of products, and is sufficiently large to influence crude oil prices. A further influence on prices since 2000 has been changing fuel specifications. Gasoline prices spiked sharply in 2000, as tighter specifications were introduced in the EU. These tighter specifications had the effect of reducing European gasoline production, thus reducing the availability of suitable components for export. The situation was repeated in 2001 as U.S. specifications tightened, but in 2002 gasoline markets remained flat. Since then, markets have peaked each year, with the most recent peaks resulting from the removal of MTBE as a blending component in U.S. gasoline and its replacement by ethanol – which has itself raised some technical issues regarding the suitability and availability of components for gasoline blending. These instances of peaking product prices have been in reaction to limited spare refining capacity. Perversely, as it may seem, such occasions have also resulted in rising crude oil prices – not what would be expected if the concern were over a shortage of products. However, analysis suggests that if limited spare refining capacity is a factor behind higher crude oil prices, especially the lighter, market crudes, its contribution is relatively small. If there were to be an appreciable lack of conversion capacity, that would be reflected by a significant widening of the light-heavy crude oil price spread. Figure II-18 compares the difference between Dated Brent and two crudes that represent average world crude quality: Urals and Arab Light. A further plot shows the differential between Louisiana Light Sweet (LLS) and Maya – two crudes representing the more extreme differences in refinery processing in the U.S. Gulf of Mexico, where several refineries are specifically designed to process very heavy crudes. Comparison between Brent and both Arab Light and Urals shows that the average discount for the two sour crudes relative to the North Sea benchmark widened from about $1.50/barrel up to the fourth quarter of 2003 to about $3.80/barrel from 2005 to the end of 2006

.

The most visible example was in September 2005. These changes in price spreads indicate that whatever the limitation in surplus conversion capacity there may be. In both markets. as this market is closely tied to Venezuelan crude production.II Executive Summary (Urals underwent some additional discounting in late 2004 / early 2005. Increases in refinery conversion capacity.00 4. A combination of this factor and the increased cost of finding and developing marginal crude oil resources (approximately $40-$50/barrel) suggests. shown by the peak in the chart). It should be noted that adding distillation capacity by itself would do little to ease the current imbalance.S. but within days they fell equally quickly as markets determined that despite the physical removal of crude oil production and refining capacity.00 Q102 Q302 Q103 Q303 Q104 Q304 Q105 Q305 Q106 Q306 Q107 Q307 LLS-Maya Brent-Urals NWE Brent-Arab Light NWE LLS-Maya Difference 20. FIGURE II-18 LIGHT-HEAVY CRUDE OIL PRICE SPREADS (US Dollars per Barrel) Arab Light and Urals Differences to Brent 10. that a large part of current high crude prices remains market psychology and concerns over supply disruptions. which incrementally reduced heavy crude oil production. as simple distillation results in considerable extra volumes of heavy products. when Hurricanes Katrina and Rita resulted in the loss of about 1.00 16. therefore. Gulf Coast. Contributing factors included higher trade flows from Western Europe and institutions such as the International Energy Agency (IEA) making strategic stocks available to meet short-term demand.00 8.00/barrel in the same time periods. and that OPEC cut production earlier in the year. with the LLS-Maya differential rising from an average of about $6.00 8. . or about $10. there are indications that the spread has started to narrow again since late 2006.00 0. disruptions to supplies in this region will also have contributed significantly to this increase. supplies would still be adequate. the difference has been greater. .00/barrel to $16.00/barrel for discounted very heavy crude oil.S.00/barrel for average crude oil quality. as opposed to distillation capacity. In the U. the latter at a time when regional utilization was already over 95%. however. demand was about to decline as the summer driving season was ending.26 -.00 6.6 million B/D of refining capacity. rather than any actual shortages.00 0. this would be expected considering that additional conversion capacity has been coming on line.5 million B/D of crude oil production and 1. its direct contribution to the increase in higher crude oil prices is limited to about $4. Gasoline prices rose rapidly in response.00 4.00 12.00 It is also important to stress that in such cases markets have been reacting to potential issues. are required to reduce the pressure on light crude oil prices and help to narrow the light-heavy crude oil price spread.00 2. putting additional pressure on the light-heavy spread. as well as the fact that U.

In the past few years. which regard current levels as insufficient cover in the event of either a major supply disruption or an above trend increase in demand. This increase reflects the tighter balance between demand and supply and the continuing need to develop new and alternative energy supplies. the response to any disturbance becomes more pronounced as an actual or perceived limit in capacity is approached. FIGURE II-19 BRENT CRUDE OIL PRICE FORECAST (Dollars per Barrel) 80 70 60 50 40 30 20 10 1985 1990 1995 2000 2005 2010 2015 2020 Current Dollars Constant 2007 Dollars Sometime after 2010-2015. Of these factors. Price Outlook As discussed. but a review of historical Brent prices shows a close relationship with costs over time. a substantial volume of capacity. we expect that market perceptions of the relative tightness of the supply/demand balance will ease as both crude oil production capacity and refining conversion capacity increase. The extreme behaviour of the oil market over the last three years indicates that participants believe that capacity limits are close. and in recent years the rate of addition has accelerated. We do not anticipate any single event to precipitate lower prices. Crude oil prices have been much more volatile than costs.27 The refining industry continually adds conversion capacity. as shown in Figure II-19. with Brent prices stabilizing at around $50/barrel (in constant dollars). . and have responded accordingly. has been lost through hurricane damage and operational problems. we project that crude prices in real terms will begin to increase. Restoration of this lost capacity should reduce the light-heavy spread. The magnitude of these future . prices decline over the next few years to levels that are more consistent with the long-term cost trend. we believe that the issue of spare crude supply capacity is having the largest influence on markets. rather. In our opinion.II – Executive Summary -. developing and producing new reserves shows that oil prices above $40/barrel (in constant dollar terms) are needed to support the necessary development of new reserves. In our forecast. The oil market is highly liquid and transparent and like all markets. the analysis of the cost of finding. which in turn should ease pressure on light crude prices. especially in the United States. the type of refining capacity that currently remains as spare capacity. and the low level of spare crude capacity since 2004. the reasons for higher crude oil prices include a combination of the marker crudes used to represent international prices.

S. have been impacted by the Asian financial crisis in 1997-1998. In the early 1990s refinery profitability was generally quite good. because it is unlikely that spare capacity will return to levels seen in the late 1980s and early 1990s. energy prices could remain flat or even decline in real terms. and to increase the efficiency of energy consumption. Price trends in Asia. and which process the regional marker crude to produce the typical grade mix of products required. HISTORICAL TRENDS Margins have moved through several short-term cycles in recent years. we anticipate that only small real increases in world energy prices will be required. “yardstick” refineries have been defined. however. Product prices generally reflect sale to local markets. at a time when significant amounts of additional refining capacity was coming on line. but in Europe and the U. In each region.II Executive Summary price increases will depend on the success of technology development to supplement traditional energy supplies. In 2004.S. although Singapore is an FOB (export) location. only to spike upwards again in late 2002 and 2003. If significant technological breakthroughs are achieved.S. The cost structure for the yardstick refineries represents competitive but not pacesetting operations. but fell sharply in 1999. have been deducted.28 -. Based on the success of technology development over the past several decades. we have also developed refinery economics for representative refineries in the Arabian Gulf and for the main refining centre in Russia. REFINING MARGINS Purvin & Gertz analyzes refinery economics in three main areas: the U. if technological advancement slows. while the initial phase of the gasoline sulfur reduction program reduced import availability. Gulf Coast. In addition. and high levels of speculative activity in futures markets resulted in very strong gasoline prices. Gulf Coast they have followed very similar patterns. In any event. However. the MTBE bans in New York and Connecticut reduced supply and tightened supplies of high quality blending components. a combination of factors resulted in very high margins in the second quarter: continuing low product inventories. A strong recovery in 2000 continued into mid-2001. . much larger increases in energy prices would be required in order to induce the necessary investments in energy conservation and development. . due in part to low inventories and the effects of changing gasoline specifications in Europe and the U. For this study. helped by the cold weather and high heating oil prices. it is most likely that prices in future will continue to exhibit the volatility and instability that have characterized the market for many years. with weaker demand during 2002 margins eased again considerably. However. Northwest Europe and Singapore. strong demand. which reflect the main tiers of capacity and configuration in each region. The economics presented here reflect a net margin that assumes that all the cash costs of operation. including fixed costs such as manpower and maintenance.

00 1. and although margins fell sharply in late summer the trend has been repeated in 2007. Refineries have traditionally provided an incremental supply function to the Asian market.29 These factors continued to affect margins through mid-2005. before falling back. refineries filled downstream conversion capacity but generally spared hydroskimming and topping capacity.00) (3. the U. During this period. and the associated loss of volume and octane.00 (1. and supply smaller markets and incremental volumes to balance shortfalls that the local refineries cannot meet economically.00) 1990 1995 2000 2005 2010 2015 2020 NW Europe Cat Cracking USGC Cat Cracking Singapore Hydroskimming . Singapore also serves the region as an important bunkering and trans-shipment location. although the delayed restart of several affected refineries resulted in a tight capacity balance in the first quarter of 2006.00 5.00) (5. The resurgence of Asian demand in 2003-2004 greatly improved Singapore and other refinery utilization rates and margins. The hurricanes sparked sharp increases in refined product prices and sent margins to record levels. and roughly 800. as well as a move to 50ppm diesel in European markets.S. the region has a large proportion of non-conversion refineries. In Singapore. Gulf Coast and in Europe.S. and utilization rates have averaged in the high-80s% despite weak hydroskimming and topping margins. A comparison of the margin trends for Europe. Gulf Coast and Singapore is shown in Figure II-20. and were compounded by the continuing phase-out of MTBE in the U. Hurricanes Katrina and Rita resulted in the temporary shutdown of almost 5. FIGURE II-20 COMPARISON OF WORLD REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 7. As a result of the Asian financial crisis. Simple refinery margins were heavily negative and conversion margins were only slightly positive. at least in the export markets of Singapore and Korea.S.II – Executive Summary -. the refining structure is slightly different to that in the U.00 3. .0 million B/D of refining capacity in late September 2005.000 B/D was still closed at year-end. The elimination of MTBE in gasoline and supply logistics problems with ethanol contributed to very high gasoline prices in the first half of 2006. As a result. refinery margins collapsed in the 1998-2002 period along with refinery operating rates.

00 -4. The additional refining capacity scheduled to come on line in the Middle East and India is likely to depress complex margins in Singapore. By 2012 the effect of new complex refining capacity worldwide will be to restore a more comfortable supply and demand balance. as we are not assuming a change in the Singapore-related pricing basis.00 1990 1995 2000 2005 2010 2015 Hydrocracking Hydroskimming Margins in the Middle East are expected to remain closely related to those in Singapore. in the first half of 2007 have continued the strength seen over the past few years. but the much lower tax on fuel results in simple refining remaining profitable even on an export basis. and therefore we expect hydroskimming margins will improve in 2007 and beyond.II Executive Summary NEAR TERM OUTLOOK: 2007-2012 Margins for conversion refineries in Europe and the U. narrowing the gap to hydroskimming margins (see Figure II-21). As the tax regime calculates the tax on products as a percentage of the tax on crude. as additional refining capacity comes on stream to ease supplies. to positive variable cost levels. higher crude prices increase the incentive for the domestic refiner that is exporting. As our longer-term demand outlook is for continued growth in diesel demand and declining gasoline demand. As crude prices reduce the value of the tax incentive reduces. Our projection is that the above trend margin environment will persist in 2008. refineries. changes to the export tax regime in 2004 have made refining for export extremely profitable.00 0.00 -2.S. In Russia. In Asia. The current net margin for simple refiners that are exporting are in excess of $5 per barrel and for conversion margins nearly $8/barrel. helped by the unscheduled outages at several U. the fundamentals of supply and demand do not warrant sustained negative hydroskimming margins in the future. Korea and India.00 2. FIGURE II-21 COMPARISON OF SINGAPORE REFINERY MARGINS (Forecast in Constant 2007 Dollars per Barrel) 6. .S.30 -. but then margins are expected to start declining in the 2009-2010 period. The consequence of the tax regime is that there is little incentive to upgrade . Simple refining capacity is projected to be required to meet demand even in export locations like Singapore.00 4. resulting in margins falling to a trend level. hydrocracking margins are expected to remain greater than those for catalytic cracking.

00 1.00 4.00 1990 1995 2000 2005 2010 2015 2020 Hydrocracking Catalytic Cracking . owing to this type of refinery’s more capital-intensive nature.S. Margins will also need to average higher than past levels owing to refineries themselves becoming more capital intensive to meet enhanced product specifications. will be more economically challenging. as shown in Figure II-22. but to be much stronger than the levels seen in the 1990s. . reflecting the expected poorer economics of this mode of operation owing to the decline in gasoline demand. Middle East and Far East. reflecting the increasing gasoline production surplus and increasing middle distillates shortfall. LONG TERM OUTLOOK: 2012-2020 Longer term refining margins are expected to reach equilibrium at lower levels than in recent years. This is therefore expected to result in a continuation of the trend of more favourable economics for hydrocracking refineries compared with catalytic (FCC) refineries.00 5. with the equilibrium value being reached in the early part of the next decade. Hydrocracking margins are also expected to remain above those for FCC refineries in long term.00 6. for example – margins will need to average higher levels than those previously in order to maintain a sufficient return on capital for the industry to invest.II – Executive Summary -.31 refineries that are making exports. lower incremental returns on capital than the current high levels are expected. FIGURE II-22 COMPARISON OF CIF NWE REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 8.00 3. reflecting continued high capacity utilization and higher replacement costs. FCC additions. but upgrading to supply gasoline to the local market is attractive. however.00 7. It is important to note that as we expect capital and project costs to remain high for much of the forecast period – certainly higher than the average seen in the 1990s. The equilibrium level is expected to be sufficient to encourage investments in hydrocracking capacity in Europe where the location is favorable and capacity sufficiently large. As new conversion capacity comes online in the U.00 2. RELATIVE HYDROCRACKING AND CATALYTIC CRACKING ECONOMICS The changing demand trends in Europe are expected to result in an increase in the price of diesel relative to gasoline in the medium and long term.00 0..

but if higher imports are required it is likely.II Executive Summary OTHER EU POLICY-RELATED ISSUES A factor behind past trends and projected outlooks both for demand patterns and the refining industry business environment is the effect of policies initiated by the European Commission and member state governments. The consequence of this is likely to be greater CO2 emissions globally. Refinery emissions would be higher and the freight would also result in increased global emissions of CO2 and other pollutants beyond that which would have been incurred by the upgraded refinery in Europe. .32 -. it may not be economic for refiners to invest. refined product quality and biofuels. In general. The advantage of including the entire European airline industry in the ETS is that it should provide a level playing field for all airlines. which are modest by historical standards acknowledge that high fuel costs and other tax related curbs will force higher efficiency on the airlines. Those policies with the most visible impact include those regarding refining industry CO2 emission caps. that incremental diesel imports would come from Russia. where refineries are extremely inefficient. For example European airlines flying across the Atlantic will compete with American carriers who may . which is mainly hydrocracking and hydrotreating. The type of upgrade that European refineries need to invest in to match supply and demand. Europe would then become more dependent on imports. hydrogen is not a clean fuel when the CO2 emissions from its production are accounted for as most refineries produce CO2 from the partial oxidation of a hydrocarbon. and worse results in a loss of income for the affected carrier which potentially postpones the replacement of older. The principles of extending the European ETS to other areas such as airlines has been considered in the study and the forecasts of jet fuel consumption. Such an approach would be justified on an overall global minimization of emissions. CO2 EMMISSIONS CAPS The introduction of CO2 emissions caps under the European Emissions Trading Scheme (ETS) has placed a new constraint on the European refining industry. This principle would also apply to airlines that compete internationally. particularly if the production of additional hydrogen is required. the European refining industry is quite efficient from an energy perspective. for example. If the price of carbon increases to a high level and governments do not allow an increased CO2 emission allocation for refiners that are seeking to upgrade. It would therefore suggest that CO 2 caps should recognize the need for the refining industry to expand and upgrade and allow some additional permits to cater for this. less efficient aircraft. results in relatively high CO2 emissions. it is clear that it is impacting the ability of refiners to expand and upgrade their facilities. At present some governments are taking unilateral action on aviation taxes which results in a potential distortion of competition. Whilst the scheme encourages efficient operation and places a value on carbon emissions. Before an additional allocation was granted a refinery would need to demonstrate that its underlying operation had an acceptable level of efficiency. Contrary to popular opinion.

If.000 ppm sulfur such a problem as to justify the additional CO2 emissions that will result from its removal? As vehicle and exhaust after-treatment technology has advanced. . and the benefits derived from any such change would need to be judged against this offset. The provision of advance warning of changes to avoid abortive investment has been of considerable benefit. The diversion of food crops into fuel manufacture is apparently resulting in increasing food prices. Further tightening of specifications would almost certainly come at the cost of higher CO2 emissions that would result from the more severe processing requirements. such stringent qualities are no longer needed. the availability of imported crops for biofuel manufacture will reduce. it may be beneficial in terms of reduced CO 2 emissions and for other refinery development to relax the quality specifications. Even with substantial advances in technology. REFINED PRODUCT QUALITY There is no doubt that EU policies with respect to refined product quality have delivered considerable environmental benefits both directly as fuels are burned and indirectly in enabling highly efficient exhaust gas after-treatment.33 not be subject to carbon taxes. and as no secondary processing is required more of the energy is recovered usefully. BIOFUELS The introduction of biofuels is having a growing impact on oil markets and also the consumer. Given the substantial amounts of fossil fuels that are burned in the heat and power industries. and the expectation is that biomass to biofuels technology will be able to make up the difference. . As many countries are looking to biofuels to reduce their dependency on mineral oil. for example. Some of the changes to product quality have resulted in the need for high-severity processing in refineries. with one consequence being poorer fuel economy as lower energy-containing biofuels are blended in greater quantity. Consequently the carbon tax would reduce the cash available to European carriers for aircraft replacement. Conversion of biomass to liquid fuels appears to be a much less effective alternative. If biomass conversion is not realized. the most effective means of recovering the energy potential from biomass is likely to be through direct burning. although there are many other factors that are also affecting the price of agricultural commodities. In some areas the benefits may be questionable.II – Executive Summary -. the biofuels targets may not be achievable without significantly impacting food supplies. there is likely to have been a decoupling between fuel quality and exhaust emissions. is the very small amount of sulfur emitted from burning heating oil with 1. It has been recognized that Europe would not be easily able to provide sufficient crops to support the target levels of biofuels through “conventional” means. with some possible “capital credit” available for companies that compete internationally to offset carbon tax payments against fuel efficiency investments. The European model has been copied around the world as it gives clear signals to both the refining and automotive industries. the conversion to liquid fuels will be highly energy intensive and costly. Biomass to biofuel presents a significant technical and commercial challenge. as the vehicle fleet modernizes. This factor should be considered in future policy formulation.

.

Data is provided from 1995 to 2006 inclusive. diesel/gasoil and fuel oil as requested. with large long distance vessels able to select their bunker locations depending on price. bitumen. In this analysis we have provided historical consumption of all petroleum products. lubricating oils and waxes. and therefore price. The following table summarizes total refined product consumption in the seven study regions. Overall annual consumption increased by 490 million tonnes (11 million B/D) between 1995 and 2006.III A – Historical Market Developments -. they represent an outlet for the local refining industry. and also refinery fuels. availability and schedule issues. naphtha. This sector of consumption is relatively poorly reported and closing a global balance around bunker fuel is almost impossible. fuel oil consumption has been split between low and high sulfur grades. .7 million B/D). Some proportion of bunker demand is supply. driven. representing an average growth rate of 2 % per year. such as petrochemical feedstocks.35 III A – HISTORICAL MARKET DEVELOPMENTS A-1 HISTORICAL DEMAND This section reviews historical petroleum consumption in the seven study regions. This represents an estimated 74 % of world consumption. In some countries the 2006 consumption is estimated as full year data was not available at the time of writing. Low sulfur is defined as an oil containing less than 1% sulfur by mass. jet fuel. petroleum coke and other minor products are shown as an “other” category in the tables.582 million tonnes (55. As requested. . TOTAL REFINED PRODUCT CONSUMPTION (Millions of tonnes per year) 1995 European Union USA China India Middle East North Africa Russia Total 679 809 152 79 187 50 136 2092 2000 702 897 206 108 209 57 129 2308 2001 713 884 211 106 218 57 130 2319 2002 704 889 226 112 226 59 126 2342 2003 712 897 248 116 234 59 126 2393 2004 718 936 287 120 246 64 127 2499 2005 727 942 316 121 254 68 133 2561 2006 728 926 332 124 264 65 144 2582 Total consumption in these regions in 2006 was 2. Whilst these fuels are not related to the market from which they are supplied. In many countries gasoil and fuel oil are supplied to the international marine industry as bunker fuel. identifying the main products of gasoline. The remaining products that include LPG. Large bunker demands have grown at waiting points for ships such as either end of the Suez Canal and at Fujairah outside the straits of Hormuz. The consumption figures include transformation.

a.5% p. the majority of the increase results from increasing use in the commercial transport sector. FIGURE A-1-1 EUROPEAN UNION 27 CONSUMPTION CHANGE (Million Tonnes) 40 30 20 10 0 -10 -20 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 Overall consumption has increased by 50 million tonnes (1 million B/D) over the last eleven years.Historical Market Developments EUROPEAN UNION The historical petroleum consumption for the EU27 countries is shown in Table A-1-1 in both tonnes and barrels. Within the gasoil/diesel category heating gasoil consumption has declined.1% p. . Bunker consumption has grown by 19 million tonnes (325. respectively. dieselization of the car and light commercial fleet and some limited migration to alternative fuels. Jet fuel and gasoil/diesel have shown more moderate growth over the period of 3.000 B/D) over the period. and 2. These trends are discussed in more detail elsewhere in the report. the overall figure masks some significant trends in the consumption of individual products Possibly the most significant trend is in the consumption of motor gasoline. such as more efficient gasoline vehicles. Inland fuel oil consumption reduced by over 40% over the historical period. with this decline being offset by stronger road diesel growth. This is due to a number of factors. In 2003 the ban on high sulfur fuel used inland resulted in a switch from high to low sulfur grades. The remaining high sulfur consumption is in facilities where the flue gas is treated to remove sulfur.III A -. The following illustrates the change in consumption between 1995 and 2006 by main product. representing an annual growth rate of 0. Most of the 36 million tonne (615.36 -. Although the move to diesel cars will have impacted diesel fuel growth. This peaked in 1992 and has been in a steady decline since the end of the 1990s. . As illustrated above.a.000 B/D) fall is for high sulfur fuel. This in part reflects increased trade and also the increased availability of low cost fuel. The reduction in inland fuel oil consumption resulted in surplus product some of which has been diverted into the bunker fuel market.67% per year.

. Turkey and countries of the former Yugoslavia.4 % per year.7% per year. Total petroleum consumption in the region (Table A-1-3) reached 64. an average rate of 4. In Morocco there has been a switch away from oil to coal for power generation The following shows the demand change by product over the historical period.06 million B/D) in 1995. The remainder of this report considers supply and demand issues in the various regions and for convenience and consistency the European region is expanded to include the EFTA countries plus Albania. Egypt and Tunisia also produce crude but on a smaller scale. The main growth in this category has been for LPG and petroleum coke. NORTH AFRICA The region of North Africa defined in this study comprises Egypt. Coke is widely used as a low cost fuel in the cement industry. FIGURE A-1-2 NORTH AFRICA CONSUMPTION CHANGE (Million Tonnes) 10 8 6 4 2 0 -2 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 The predominant transport fuel in the region is diesel.a. Algeria and Libya are significant producers and exporters of crude oil. Tunisia. The resulting total is given in Table A-1-2. .37 Other products increased by 17 million tonnes (340. which has grown by nearly 10 million tonnes (200. The slow oil consumption growth in part reflects the growth of alternative fuels. This represents average growth of 2. Libya. Algeria and Morocco. All the countries except Morocco produce natural gas.6 million tonnes (1.000 B/D) over the period since 1995. a growth rate of just over 0. Two countries. EUROPE In the previous section the historical consumption in the EU 27 was discussed. Jet and fuel oil have been almost flat and gasoline has grown only modestly.9% p.000 B/D) over the period.III A – Historical Market Developments -. which has been used preferentially in power generation and industry. The result is to add approximately 60 million tonnes per year of consumption.4 million B/D) in 2006 having grown from just under 50 million tonnes (1. which is subsidized for cooking use. The robust growth in the other category relates mainly to LPG.

4% per year. About 40% of the inland fuel oil consumed is 1% sulfur or less. The costs of ownership are low but the sheer size of the Chinese population is likely to limit growth rates of the vehicle fleet. Liberalization of air transport and growing economic activity has stimulated growth in jet/kerosene. In 2003 growth was limited by the SARS outbreak. Other products have grown by over 68 million tonnes (1. although growth since 2000 has been fastest. . which reduced the amount of domestic and international travel. having declined between 1995 and 2002 as its use in industry and power generation was substituted by coal and other energy sources.III A -. About one third of this growth is accounted for by the increase in consumption of naphtha for petrochemicals. As manufacturing migrates to China. with the rate of growth markedly accelerating after 2000 as private car ownership started to expand. car ownership levels are low at 20 vehicles per thousand population. China.54 million B/D) over the historical period. The surge in consumption in 2004 of 39 million tonnes (480. averaging over 8. Currently.3% per year.Historical Market Developments CHINA Historical petroleum consumption in China is shown in Table A-1-4 for the period 1995 to 2006. which adds to consumption but is unlikely to grow as diesel comes to dominate this sector. FIGURE A-1-3 CHINA CONSUMPTION CHANGE (Million tonnes) 130 110 90 70 50 30 10 -10 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 Gasoline consumption has grown by 22. Chinese oil consumption is dominated by gasoil/diesel.8 million tonnes (534. Ten years ago there were virtually no private cars in China. fuel oil consumption has grown very little. like Russia has a relatively large fleet of gasoline engined commercial vehicles. The acceleration of economic growth in 2003 and 2004 resulted in a sharp rise in fuel oil demand to meet the rapid increase in power demand.000 B/D) over the past 11 years. Over this period consumption grew by an average of 7. the demand for polymers is driving large .000 B/D) was one of the main contributory factors to the worldwide increase in crude oil and refined products prices.38 -. Over the historical period. which accounts for 35% of current consumption and is the fastest growing product. In 2006 there was some moderation as alternative generation capacity was commissioned. compared to 120 in Thailand and 250 in South Korea.

representing just over 10 cars per thousand population. India has enjoyed robust economic growth. Asphalt consumption has also grown very strongly at an average rate of 17% per year. importers and local manufacturers . This has increased from 3.4 million (4. driven by infrastructure developments and building. In 2006 total petroleum consumption was 124 million tonnes (2. INDIA Historical petroleum consumption in India is shown in Table A-1-5 for the period 1995 to 2006.66 million B/D). High oil prices and the withdrawal of subsidies from domestic fuels in 2001 have reduced demand growth. this reflects the composition of GDP which is heavily oriented to the service sector. The current level of vehicle ownership is very low with 11. Figure A-1-4 shows the change in consumption for the major products for the historical period. averaging 6. .7 million cars in circulation. growth over the period as private car ownership expands. FIGURE A-1-4 INDIA CONSUMPTION CHANGE (Million Tonnes) 35 30 25 20 15 10 5 0 -5 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 The figure illustrates the slowing of petroleum demand growth in the latter half of the period despite robust economic situation. More recently. In 2006 alone. Gasoline consumption at just over 9 million tonnes (216. and which itself is the fastest growing part of the economy.3 million tonnes (100. recording 6. Despite the high economic growth petroleum consumption growth has been more moderate at an average of 4.000 B/D) represents only 7% of total consumption compared to diesel. and since 2003 has been the second fastest growing major economy after China. Gasoline is the fastest growing product.a. which is 47 million tonnes (908.2% p.a. naphtha use increased by 4.5% per year over the historical period. LPG consumption has grown rapidly as it has replaced kerosene for cooking and healing.000 B/D).III A – Historical Market Developments -.0 cars/thousand) in 1995.000 B/D).4% p.39 petrochemicals expansions.

as well as those bordering the Red Sea and Mediterranean of Yemen. Jet/kerosene consumption has been relatively static over the historical period.a. and declined from 2001 to 2004 as rural electrification and a switch to LPG reduced consumption in rural areas. Most diesel is used in commercial vehicles. which grew at 2% p. Oman. Kuwait. MIDDLE EAST The Middle East region presented here includes the Arabian Gulf countries of Bahrain.6 million B/D) over the historical period. Economic growth rates in the region declined in 2001 and 2002 as oil prices fell. Syria and Israel.Historical Market Developments have started to supply diesel-engined cars to the market. generating a high demand for naphtha. accounting for 10. Jet fuel has grown modestly and growth has increased rapidly in the last 3 years as a result of growing international travel and the emergence of low cost regional carriers. The following figure shows the growth in consumption for the main products over the historical period. The recovery in oil prices in 2004 and thereafter has resulted in higher economic growth despite the continuing conflicts with recent growth running at around 6% p. LPG is being used to substitute kerosene for heating and cooking and continues to be sold at subsidized prices. Iraq. Jet fuel growth in the last six years has failed to offset the decline in burning kerosene. and at present Iraq is still in turmoil and Israel and Lebanon have engaged in campaigns which have left the Lebanese economy severely damaged. Indian companies have aggressively developed petrochemicals production. Both are growing at rates of 10% per year. This region has suffered several major conflicts over the historical period.6% of petroleum consumption. Iran.a.4 million tonnes and 13.40 -. In the “Other” category LPG and naphtha are dominant. Jordan. limiting the consumption of fuel oil. representing overall growth of 3. This has grown by 76 million tonnes (1. Lebanon. over the historical period. although improving efficiency and the withdrawal of subsidies on fuel resulted in much lower diesel fuel growth. Petroleum coke consumption has also increased rapidly although this reflects the increase in supply available from the new coking refineries. India produces coal that is used in industry and power generation. . Total petroleum consumption is currently 264 million tonnes (5. .III A -. over the historical period the commercial vehicle fleet grew by an average rate of 7% per year.5 million B/D).1% per year. Saudi Arabia. which may result in moderation of gasoline consumption in the future. UAE and Qatar. Fuel oil forms only 8. In these years growth was reduced to 2-3% p. Diesel fuel consumption grew rapidly between 1995 and 2000 and then declined until 2004 when growth resumed again.a.7 million tonnes respectively.

Diesel use is mainly for road transport and construction machinery. with growth accelerating later in the period. Consumption rebounded in 1999 and 2000 and has continued to grow to the current 144 million tonnes per year (3. In most of the countries in the Gulf region gasoline prices are very low. Naphtha use has grown at nearly 12% p.III A – Historical Market Developments -. Currently gasoline represents just under 20% of total consumption. Increasing trade volumes has also added to bunker fuel consumption. over the historical period. representing 27% of total consumption.8% p. in which the consumer price is well below the cost of supply.41 FIGURE A-1-5 MIDDLE EAST CONSUMPTION CHANGE (Million Tonnes) 55 45 35 25 15 5 -5 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 Gasoline is the fastest growing product in the region. In 1995 consumption was still declining after the economic collapse that followed the break up of the Soviet Union. and reached a low point in 1998 coinciding with the rouble devaluation and loan default. Consumption for jet/kerosene has been relatively modest and growth limited.4 million tonnes (1.6 million B/D) represents 30% of total oil consumption. This reflects the uncertain political situation. In 2006 total fuel oil use was estimated at 72. This has encouraged a rapid increase in consumption and probably smuggling as well. It is noted that there is no direct . . with growth of over 6% per year recorded since 2000. averaging growth of over 4% per year since 2000. as the Gulf countries have aggressively pursued petrochemicals expansion. Heavy fuel oil consumption has increased steadily through the historical period.a. In some countries. water desalination and in industry.32 million B/D). Iran is the largest market. RUSSIA Petroleum consumption in Russia has been volatile through the historical period as shown in Table A-1-7.08 million B/D). Other product consumption has grown by an average rate of 4.6 million tonnes (1. The largest components in this category are LPG and naphtha. lack of natural gas or supply limitations of indigenous gas has resulted in increasing fuel oil use for power generation. Current consumption of 78. There is some diesel fuelled power generation in remote areas in some countries.a. Diesel has also grown strongly.

Jet/kerosene consumption has increased by 1. diesel consumption has started to increase and has grown by just under 3% per year. Petroleum consumption growth has been relatively sluggish in comparison. In the period since 2000 growth accelerated to 2.42 -. with most figures being derived from production and trade. gasoline engined trucks were replaced by more efficient diesels. Gasoline consumption rose by an estimated 5 million tonnes between 2000 and 2006. Since 2000 the rapid economic growth has resulted in a substantial increase in the private car population. This approach leads to unreliable results owing to misreporting and unrecorded border trades. reflecting in part the large increase in the vehicle fleet. Five million cars were added between 2000 and 2005. . However. largely as a result of increasing commodity prices. FIGURE A-1-6 RUSSIA CONSUMPTION CHANGE (Million Tonnes) 20 15 10 5 0 -5 -10 -15 Gasoline Jet/Kerosene Gasoil / Diesel Fuel Oil Other Total 1995-2000 2000-2006 In Russia gasoline is used in both passenger cars and also quite large commercial vehicles. Continued restructing of the economy has moderated diesel growth.8% per year over the whole historical period.Historical Market Developments measure of consumption in Russia. The following figure shows the change in consumption for the main products over the historical period. growth is expected to accelerate. After declining slightly between 1995 and 2000. The Russian economy has grown strongly since 2003.III A -. a low figure compared to Europe. but as the economic base diversifies and more gasoline trucks are replaced. demand declined over the 1995-2000 period. more importantly. This reflects the much higher consumer prices that have been introduced and which have provided an incentive for conservation and a switch to gas for heating and electricity generation. before recovering. Consumption reduced until 2000 as commercial activity declined and. . The current ownership level is 180 cars per thousand population.8% per year. reflecting the economic recovery. owing to increasing costs and declining military use.

Consumption of other products has risen sharply. but 2006 saw a further decline. economy has grown at an average rate of 3. Growth since 2000 has been slower at 0.6% per year.2% p.III A – Historical Market Developments -.6 million B/D). with declining consumption through to 2003.2% p. FIGURE A-1-7 U. Higher fuel prices are beginning to reverse the trend and the prospect of fleet efficiency improvements as buyers move to more efficient vehicles is now more likely. U.S. resulted in a sharp fall in jet fuel demand. Over the historical period consumption has grown by 1. The U. UNITED STATES The USA is the largest single oil consumer in the world.S. Consumption recovered in 2004 and 2005. the prospect of significant diesel penetration of the passenger car fleet is low. The increasing popularity of large sport utility vehicles (SUV) has resulted in a reduction in the overall passenger vehicle fleet efficiency.a. Strong growth is reported for refinery fuel gas. The following sets out the changes in consumption over the historical period.7%. Over the historical period jet/kerosene grew only 0. diesel quality is generally poor and consumers are resistant to diesel engines. Over the period 1995 to 2006 oil consumption increased by 117 million tonnes (2.43 Fuel oil consumption has fallen steadily over the period by a total of nearly 18 million tonnes. oil consumption. a trend opposite to that in most other markets where average vehicle efficiency has improved. an average growth rate of 1. . LPG and naphtha. CONSUMPTION CHANGE (Million Tonnes) 80 60 40 20 0 -20 Gasoline Jet/Kerosene Gasoil / Diesel 1995-2000 2000-2006 Fuel Oil Other Total Gasoline represents nearly 40% of U. . over the historical period.a.S.a. using approximately 25% of world demand. Unlike Europe and other markets. associating them with the poor performance diesel vehicles sold in the 1980s.S. which includes a period of slowdown in 2001 and 2002. The incidents of September 11.5% p. 2001. however this may be the impact of unreliable historical data. This reflects restructing in the economy and a significant shift to gas for district heating and power generation.

5 million tonnes (314. Nearly half of the fuel oil used inland is low or very low sulfur material.S. representing 20% of total oil consumption. Current consumption is 204 million tonnes (4.2 million B/D). High natural gas prices in 2004 and 2005 as supplies from the hurricane-impacted southern states were reduced resulted in a sharp increase in fuel oil consumption.Historical Market Developments Although the U. Consumption fell back substantially in 2006 as gas prices fell as a result of restored supplies. In the bunker sector there are no plans currently to create a SECA in U. Road transport represents over 70% of gasoil/diesel consumption with heating and industry making the balance.44 -. Other products include large quantities of LPG.III A -. The U. Fuel oil consumption has been volatile. coastal waters. asphalt and petroleum coke. diesel/gasoil has grown 50% faster than gasoline over the historical period. LPG consumption has remained flat over the historical period. . reflecting its use as a swing fuel in power generation.000 B/D). .S. is considered to be a “gasoline” market. petrochemical industry is mainly gas based and consequently naphtha consumption is small at 13. Refinery gas accounts for 32 million tonnes of the total.S. although this has been discussed.

6 34.1 7.3 2005 110.0 9. Germany.3 27.3 7.7 1998 132.074 490 727 3.623 14.3 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.617 2002 2.037 5.276 14.3 42. Portugal.9 2000 2001 2002 2003 2004 115. Sweden. Italy.0 47.3 173.9 33. Latvia.2 126.9 31.6 52.6 118.726 545 360 3. Cyprus.2 727. Lithuania.6 2006 108.5% Total 131.1 718.5 0. Spain.6 47. Romania.9 8.6 30.Ireland.631 2003 2.4 239.6 28.9 49.446 1997 3.080 3.4 33.0 36.6 0.4 240.582 1.6 38.4 1997 132.0 30.4 273.837 571 352 3.9 695.915 1.1 53.5 54.958 1. Netherlands.092 968 5.913 2006 2.9 29.6 43. Luxembourg. United Kingdom .7 1.4 48.785 14.649 1999 3.105 15.4 168.112 5.2 163.2 260.585 584 370 3.588 1998 3.1 9.053 5.006 5.9 163.9 258.2 154.980 15.0 699.3 45.390 1996 3.030 14.0 7.910 586 981 3.7 156.9 713.595 2000 2.4 226.9 679.9 19.2 37.006 5.1 9.0 704. Greece.7 8. Estonia.4 46.055 505 932 3.8 40. Finland.6 1.333 543 679 3. Poland.4 245.0 165.280 15.819 14.7 51.8 165.4 1.897 554 892 3.6 49.5% Total 3. Belgium.7 178.5 285.638 579 1.2 29. Denmark.642 2001 2.6 124. Bulgaria.178 5.0 1996 132.4 26.6 39.0 714.102 857 4.8 29.865 1.074 814 4. Malta.0 705.7 59.7 164.7 122.995 14.8 8.291 530 608 3.038 5.157 5. Czech Republic.1 1.5 48.9 701.2 32. France.9 267.1 45. Slovakia. . Slovenia.1 47.3 1.798 2005 2.1 1.020 514 826 3.8 9.0 20. Hungary.780 1.3 172.45 TABLE A-1-1 REFINED PRODUCT DEMAND EUROPEAN UNION (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.537 1.3 19.707 2004 2.088 1.3 712.7 1.0 39.8 28.4 1999 132.6 280.276 Note: Comprises EU 27 Countries of Austria.0 38.6 31.718 15.0 1.III A – Historical Market Developments -.0 0.7 247.847 14.2 727.2 33.0 8.465 693 402 3.092 898 4.0 40.1 166.3 22.6 55.3 32.773 179 522 17 185 556 16 191 605 17 196 632 18 183 615 19 185 658 19 187 683 17 176 712 14 164 732 18 156 798 20 152 845 21 155 872 22 14.2 9.8 37.702 1.9 248.8 1.

363 570 1.6 168.6 52.8 193.941 1.0 791.059 558 1.274 6.7 48.Historical Market Developments TABLE A-1-2 REFINED PRODUCT DEMAND EUROPE (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.5 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.102 583 524 4.2 25.0 1.0 9.9 32.014 1.1 311.4 8.8 187.2 27.0 761.1 129.7 1.9 46.378 941 5.1 56.098 16.5% Total 142.918 2000 3.2 790.4 262.996 1999 3.8 29.4 47. Turkey .462 487 1.106 3.9 305.789 537 850 3.5 60.9 267. .9 29.151 16.931 16.156 1.2 1998 144.0 9.1 180.0 8.8 56.46 -.5 31.2 0.7 42.0 53.6 0.6 177.7 9.258 2006 2.739 1997 3.2 65. Serbia and Montenegro.214 1.9 1997 144.378 1.4 1.059 5.1 762.197 3.137 3.383 987 5. Bosnia-Herzegovina.1 133.515 488 892 4.1 180.6 2000 2001 2002 2003 2004 125.769 532 782 3.137 5.1 34.121 5.172 2005 2.162 16.6 298.5 772.7 37.0 183.829 1.360 1.9 756.1 9.2 28.3 181.022 3.7 188.3 291.2 26.485 16.5 29.4 43.2 2006 119.057 2004 2.9 28. Switzerland. Norway.351 16.7 8.0 269.284 3.0 1.905 1998 3.967 689 585 4.6 260.288 16.2 37.643 16.6 42.9 736.2 1999 143.3 0.8 8.6 137. Croatia.200 6.7 1.981 2003 3.7 27.2 46.094 5.8 283.6 31.137 187 517 17 193 551 16 201 601 17 206 626 18 194 609 19 197 652 19 197 675 17 189 704 14 177 724 18 172 793 20 167 840 21 171 864 55 15.3 1.039 16.461 495 1.9 32.250 6.2 282.4 30.5 9.003 2001 3.6 70.6 39.9 1.498 15.639 Note: Comprises Countries of EU27 plus Albania. FYR Macedonia.962 2002 3.0 177.5 9.335 16.4 165.0 766.6 10.4 9.123 5.6 49.5 135.0 776.669 1996 3.6 179.786 1.7 62.4 1.8 775.1 782.3 3.8 46.2 60.368 569 470 4.9 766.110 1.5 30.0 58.091 5.6 35.252 542 507 4.4 31. Iceland.5% Total 3.9 1996 144.335 890 5.2 29.5 44.5 33.5 267.8 51.3 38.0 247.318 538 1.6 53.9 51.III A -.9 26.9 2005 121.

3 1999 6.9 3.4 3.6 2.5 2.1 10.8 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.5 18.4 3.2 10.9 8.3 2.III A – Historical Market Developments -.0 0.5 0.2 24.178 1.3 20.2 3.0 11.5 3.0 57.0 3.8 2.1 12.2 21.0 57.221 1.0 9.3 0.0 0.8 3.0 59.6 2002 7.0 67.216 1.8 0.1 0.3 13.2 14.0 10.3 10.9 1997 6.4 0.7 7. Morocco.0 58.0 64.3 2.9 2.5 0.7 0.6 3.3 0.3 15.5 2.0 49.1 23.2 12.459 1.1 0.1 2.4 3.1 0.287 1.8 0.3 0.9 0. .5 2006 7.5 12.6 14.0 56.7 9.9 9.8 11.0 2001 7.266 1.1 9.7 0.8 9.8 24.0 1996 6.2 3.3 2.7 3.3 2.3 3.3 2.075 1.7 3.224 1.0 3.5 3.0 55.4 16. Tunisia .2 2003 7.7 11.382 1.3 2.1 0.0 23.6 11.8 2004 7.4 3.1 0.0 3.6 2005 7.7 0.3 14.0 0. Egypt.0 0.4 1998 6.7 2000 7.0 50.5 3.5% Total 6.1 0.5% Total 152 71 304 58 183 232 1996 154 71 316 56 180 233 1997 152 74 331 57 200 248 1998 156 70 359 55 218 271 1999 160 74 383 54 205 282 2000 163 79 401 52 178 293 2001 163 71 419 51 159 310 2002 163 69 448 49 168 322 2003 164 65 472 49 137 340 2004 168 66 489 47 207 363 2005 174 67 501 57 229 386 2006 182 59 504 55 185 376 9 46 0 8 57 0 8 56 0 7 41 0 6 51 0 6 52 0 5 43 0 6 42 0 6 54 0 5 37 0 5 39 0 5 38 0 1.0 12.0 10.7 19. Libya.3 0.0 0.0 3.055 1.9 2.3 2.7 3.5 3.0 53.8 8.125 1.47 TABLE A-1-3 REFINED PRODUCT DEMAND NORTH AFRICA (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.0 64.3 2.3 17.404 Note: Comprises Algeria.

1 57.234 2.154 4.5 225.3 18.48 -.7 315.5% Total 29.3 51.7 67.4 15.5% Total 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 680 742 774 779 791 820 842 879 954 1.2 0.5 116.6 332.0 0.145 6.3 2000 35.0 18.7 2003 40.969 4.5 96.445 1.5 14.3 3.0 48.534 4.7 14.3 24.0 0.389 1.0 0.2 3.862 5.752 7.4 73.0 151.8 21.0 17.378 1.8 8.0 43.501 3.268 1.0 0.1 8.9 75.295 1.188 1.2 83.1 0.6 0.1 62.8 20.9 58.099 1.378 381 331 310 290 269 274 256 261 271 292 322 297 273 292 334 358 350 331 344 340 390 455 432 406 862 1.978 2.2 5.216 3.949 2.3 47.0 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.6 163.238 1.1 3.547 1.6 8.2 16.074 1.1 1999 33.096 .5 11.6 0.3 16.2 17.3 2002 37.8 1998 33.3 6.7 19.7 0.2 1997 33.7 0.6 105.8 193.4 0.III A -.0 0.2 7.4 1.2 8.9 1996 31.5 0.2 184. .6 0.0 36.5 46.3 50.1 6.7 14.017 1.575 1.8 9.2 8.6 70.2 96.2 286.427 4.770 3.2 1.214 107 118 135 139 172 185 185 190 192 227 223 239 875 949 966 1.2 52.8 0.2 3.6 2001 36.4 18.0 0.9 15.Historical Market Developments TABLE A-1-4 REFINED PRODUCT DEMAND CHINA (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.3 2004 2005 2006 47.7 248.0 8.0 0.369 1.130 1.0 18.6 10.9 19.1 5.2 3.8 5.0 0.0 83.1 14.706 1.6 55.6 66.6 0.258 2.5 52.6 15.2 0.341 6.2 0.7 205.7 210.9 10.0 18.9 23.4 2.7 22.8 176.400 8 31 0 7 44 0 6 58 0 4 29 0 2 64 0 4 65 0 4 68 0 4 67 0 4 94 0 5 139 0 5 149 0 5 159 0 3.8 110.0 0.6 16.730 1.0 0.0 42.0 0.

1 0.3 16.8 0.49 TABLE A-1-5 REFINED PRODUCT DEMAND INDIA (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.0 92.9 8.0 101.2 10.0 12.6 0.0 2002 7.596 2.0 0.5 0.3 5.0 2005 8.6 12.0 16.4 17.9 11.5 121. .0 42.0 2004 8.2 11.0 2001 7.7 39.4 5.9 116.0 120.1 16.5 30.9 12.0 0.0 0.1 6.6 13.6 16.0 0.8 8.7 0.0 0.4 5.7 11.1 0.4 6.0 78.0 0.2 0.3 0.2 13.6 22.9 4.9 43.9 17.0 8.3 42.0 0.0 8.0 0.4 40.0 2006 9.2 4.1 6.849 1.1 124.3 12.306 2.0 6.0 0.9 6.2 34.392 2.9 9.1 0.0 87.271 2.1 40.1 38.7 2000 6.6 0.1 0.0 0.0 0.0 0.0 0.0 0.5 40.0 0.0 2003 7.8 34.4 1998 5.2 13.0 83.951 2.3 10.7 42.1 14.1 16.9 13.3 44.0 0.0 0.0 0.6 37.7 18.0 0.580 2.5% Total 109 256 713 87 148 341 1996 116 262 781 89 152 364 1997 121 280 808 91 152 396 1998 129 306 825 90 159 442 1999 138 300 885 108 174 546 2000 155 289 859 120 175 708 2001 164 270 820 113 191 713 2002 177 270 825 121 185 813 2003 185 271 836 122 193 872 2004 193 260 861 114 208 943 2005 204 274 862 108 213 935 2006 216 288 908 98 194 956 1 2 0 1 2 0 1 1 0 1 1 0 0 1 0 0 1 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1.0 39.5 1996 5.6 10.4 111.5 14.5 40.660 .1 0.4 17.7 10.3 1999 5.763 1.0 12.6 30.5 40.0 0.3 1997 5.III A – Historical Market Developments -.7 12.5% Total 4.6 9.5 5.1 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.1 0.479 2.8 0.654 1.2 108.0 0.7 41.2 5.151 2.3 15.7 0.1 106.

4 14.858 3.173 1.3 0. Iraq.0 0.1 1998 33.3 14.0 2003 42.3 13.516 Note: Comprises Bahrain.0 2006 51.8 17.4 53.4 200.1 18.574 4.156 1.7 36.976 4.1 2.8 2. Jordan.9 204.6 51.0 0.0 0.393 1.5% Total 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 712 731 751 792 810 851 896 948 1.6 246.7 28.0 0.7 58.000 1.002 1.6 54.7 18.3 14.4 2.887 5.5 263.4 11.5 55.0 0.3 14.3 18.225 4.2 218.9 18.9 68.8 0.2 0.4 192.2 47. Saudi Arabia. Syria.4 45.9 48.0 0.9 0.309 1.4 0.6 1996 31.0 0.9 40.2 38.0 0.447 1. Israel.1 0.1 64.0 209.5 233.4 37.8 2004 46.8 0.1 2.062 4. Iran.4 78.4 66.146 5.0 0.3 18.4 43.9 0.3 54.6 18.4 19.3 54.3 57.0 187.4 2. Lebanon. Qatar.8 27.322 5.4 2.6 2000 36.3 14.1 2002 40.5 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.2 29.0 0.0 1. .9 196.50 -.4 1999 34.084 1.0 0.356 4.758 4.2 73. and Yemen .7 0.3 13.3 12.8 19.4 18.606 35 41 44 43 40 50 53 50 48 47 43 46 814 836 798 824 874 862 882 902 944 988 1.2 2.201 1.9 28.173 1.500 1.0 0.6 24.1 61.093 1.4 2.8 2.4 226.255 1.8 49.4 254.1 57.3 14. UAE. Oman.112 1.353 1.211 397 393 394 389 380 389 388 395 383 399 412 416 1.4 34.Historical Market Developments TABLE A-1-6 REFINED PRODUCT DEMAND MIDDLE EAST (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.8 47.2 45.2 1997 32.6 2.4 0.6 17.4 13.4 2.0 0.3 13.6 70.5% Total 30.003 554 613 639 677 661 704 815 887 868 897 933 956 7 256 0 6 244 0 7 255 0 7 260 0 6 253 0 7 238 0 6 224 0 7 215 0 7 245 0 7 268 0 7 270 0 7 271 0 3.0 0.0 41.5 18.166 4.9 44.III A -. Kuwait.2 29.9 2001 38.5 2005 49.

4 0.809 2.0 0.0 0.0 0.5 2003 25.0 0.5 9.0 0.0 26.5% Total 611 203 523 0 782 690 1996 578 190 527 0 716 607 1997 579 188 508 0 639 631 1998 571 175 474 0 675 579 1999 569 181 490 0 622 691 2000 544 191 510 0 532 948 2001 583 196 531 0 501 937 2002 596 203 491 0 465 934 2003 601 207 493 0 438 965 2004 2005 2006 619 624 661 210 223 247 520 569 601 0 0 0 396 368 443 995 1.0 27.0 37.0 0.3 11.4 2001 24.0 0.5 143.3 50.0 0.0 0.9 0.6 2004 26.0 0.0 0.3 23.872 3.128 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.0 25.0 0.4 0.0 42.0 24.0 0.6 25.0 28.0 0.0 0.0 34.554 2.1 31.8 9.6 24.690 2.1 0.0 0.8 130.0 0.0 39.0 0.080 .6 24.51 TABLE A-1-7 REFINED PRODUCT DEMAND RUSSIA (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.0 0.0 0.5 42.6 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.6 0.7 24.0 0.3 128.7 43.704 2.0 25.0 24.0 0.545 2.749 2.1 1997 24.0 0.0 0.0 0.8 0.5 27.0 0.618 2.0 0.2 26.2 122.III A – Historical Market Developments -.088 1.0 0.4 1999 24.0 29.1 48.0 20.5 9.740 2.7 29.9 9.2 127.7 2005 26.2 2006 28.8 1998 24.7 10.0 0.0 0.8 8.0 35.3 126.2 42.0 0.0 0.9 32.3 2000 23.0 25.0 126.2 1996 24.0 0.0 136.5 41.9 25.4 8.4 8.0 42.4 119. .0 0.474 2.9 24.0 21.0 0.0 0.2 126.0 0.8 122.726 2.0 0.8 0.0 0.0 0.2 9.3 9.7 9.2 0.5% Total 26.3 2002 25.3 133.3 28.

1 198.6 28.584 2003 8.506 1999 8.427 2002 8.7 0.8 926.0 809.461 259 628 4.0 0.0 16.8 82.9 0.694 4.496 18.0 0.551 3.2 180.592 2006 9.1 0.1 13.4 30.050 19.0 22.4 202.9 897.633 3.9 190.1 188.0 0.0 191.814 2000 8.732 2001 8.3 84.5 941.496 1998 8.901 20.0 0.0 0.206 1996 7.0 17.911 1.1 0.5 204.0 191.452 1.8 883.3 34.7 17.528 2004 9.7 24.7 0.0 17.1 0.4 80.1 19.2 14.3 14.0 15.701 3.5 896.4 174.5 838.6 0.4 383.781 20.4 30.0 20.1 77.0 0.9 885.0 17.7 192.9 16.5 343.2 338.726 19.7 168.0 17.1 78.629 1.3 201.6 33.5% Total 7.749 4.5 0.0 20.435 243 553 4.0 19.0 390.172 292 389 4.52 -.1 169.779 2005 9.2 184.038 1.7 30.0 195.7 0.122 1.045 18.0 27.7 18.273 1.0 156.2 379.4 79.0 361.572 272 558 4.9 73.207 348 504 4.0 827.7 20.0 0.0 858.0 0.358 1997 8.7 12.0 0.0 13.6 0.0 0.3 392.178 1.1 16.743 19.927 323 449 4.951 1.836 20.6 363.8 888.637 3.058 340 524 4.664 3.1 186.0 (Thousand Barrels per Day) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.866 1.7 25.6 201.722 294 615 4.Historical Market Developments TABLE A-1-8 REFINED PRODUCT DEMAND UNITED STATES OF AMERICA (Million tonnes) 1995 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.2 16. .664 3.5% Total 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 334.632 .0 189.365 294 554 4.3 195.677 4.9 79.492 1.252 1.131 19.1 82.6 30.0 0.7 30.060 20.3 369.793 3.748 3.0 185.9 164.7 395.847 251 560 4.III A -.0 0.118 368 552 4.810 1.525 0 420 0 0 378 0 0 312 0 0 303 0 0 365 0 0 403 0 0 283 0 0 312 0 0 248 0 0 318 0 0 360 0 0 324 0 18.0 23.2 21.3 175.4 78.776 231 469 4.4 0.1 13.0 0.9 354.5 81.8 182.4 935.728 3.917 20.4 76.

It is worth noting that other markets. especially in built-up areas. The principal changes were reductions in maximum allowable sulfur levels. the U. which in turn require minimum fuel sulfur levels as sulfur acts as a poison for both management systems and exhaust gas catalysts. markets has been their respective approaches towards improving air quality. aromatics content and vapor pressure limits for gasoline. Other specifications included limits for oxygenates and distillation points (see below). These qualities came into effect from January 2000. tighter limits on aromatics content and gasoline volatility in European markets. the introduction of reformulated fuels and oxygenates and the subsequent removal of methyl tertiary butyl ether (MTBE) in U. as the necessary reductions in exhaust emissions required of motor vehicles needs the use of sophisticated engine management systems. however. Furthermore.S. . . but especially motor fuels. A reduction in sulfur levels has been the most notable change in world fuels specifications since 1995. as directive 98/70/EC. refining industry has generally modified its units to conform to the changes only shortly before their introduction. In Europe. the United States and other world markets. Other changes specific to particular markets have also taken place. A principal difference between European and U. The primary reasons for introducing tighter specifications have been to reduce exhaust emissions and airborne pollutants in an effort to improve air quality. Much of the drive towards so-called cleaner fuels has been as a result of pressure from the motor industry. have tightened considerably in the European Union. gasoline. This had the twin benefits of limiting price spikes at times of significant product changes and minimizing potential product shortages. such as Middle East and Asian countries. and lower sulfur and polycyclic aromatic content limits for diesel. specifications of most refined products. more efficient combustion techniques and exhaust treatment processes.S.S. with additional targets for January 2005 and 2009. resulting in prices suffering “spikes” as markets tried to adjust to changing inventories and new purchasing requirements. CHANGING PRODUCT SPECIFICATIONS Europe As part of the European Union’s Auto Oil program. precise targets for fuels parameters have been specified. Across much of Europe. and especially in northern European countries. compared with the adoption in the United States of broader.III A – Historical Market Developments -. industry-average approaches towards sulfur limits. and the general move towards European-style specifications among other markets. have favored the European approach. changes to motor gasoline and road diesel specifications were announced in 1998. several national governments introduced tax and excise duty incentives to encourage the adoption of the newer. such as in Asia. cleaner fuels ahead of the official timetable. although it is not the only parameter to have been tightened.53 A-2 PRODUCT SPECIFICATIONS AND TAXATION POLICIES Since 1995.

% @150 C min RVP Summer. such as with the introduction of 50ppm gasoline in the UK (see below) the changeover did not happen until the differential was deemed to be large enough. several northern member states adopted timetables for the early introduction and exclusive use of 10ppm fuels ahead of the 2005 and 2009 targets. Date is indicative (2) Depends on Class (sales area) (3) Relaxation to 70 kPa being considered for ethanol blends The timetable as presented in the 1998 directive called for maximum sulfur levels of 10ppm to be available by 2005 and to be the exclusive grade from 2009 onwards. kg/litre max o Distillation. ppm max Cetane Number. % @100 C min o Distillation.7 46 75 60 50 1 35 18 2. .05/liter and applied to the rates payable at the point of exit of bonded storage (e. C max (1) 2000 2005 2009 500 5 n/s n/s n/s n/s 70 150 1 42 18 2. wt% max o (2) Distillation. Therefore. in order to facilitate the early adoption of these ultra low sulfur fuels.7 46 75 (3) 60 500 49 n/s 0.54 -.845 360 50 51 11 0. These differences were set so as to be sufficient to enable refiners/marketers to recover some of the costs required to produce the lower sulfur fuels and still be able to market the lower sulfur fuel at a lower pump price than the conventional fuel. The lessons learned from the phase-out of lead in gasoline.III A -. refinery gate). as in some cases. T-95. The differences in excise duties payable were typically in the order of €0. vol% max Olefins. These were critical to the introduction of the lower-sulfur fuels. • Governments increased excise duties and taxes payable on standard specification fuels compared with lower-sulfur fuels.845 360 n/s = Not specified For use in "High Biofuel Petrol". vol% max Aromatics.7 46 75 60 10 1 35 18 (1) 3. allowing up to 10% vol.845 360 10 51 8 0.860 370 350 51 11 0. These tax incentives generally followed a similar pattern across the different member states. kPa max AUTOMOTIVE DIESEL Sulfur. • . were applied to the introduction of low-sulfur grades. of ethanol.03-€0. vol% max Oxygen. wt% max Density. ppm max Benzene.Historical Market Developments EU FUELS QUALITIES Pre-2000 MOTOR GASOLINE Sulfur.g. However. min Polyaromatics. these jurisdictions used tax incentives to encourage refiners and marketers to switch to the newer fuels. where excise taxes were increased on the leaded grades to give the consumer an incentive to switch fuels (where possible).

However. state and county level. California. following the discovery of traces of MTBE in ground water resulting from spills and leaking tanks and pipelines its use has been phased out. As a result. fuels specifications can be set at the federal. with specific target dates for tax changes set.S. more formal timetables were put in place for the fuels transition.S.S. Energy Policy Act of 2005 removed liability protection for MTBE blenders at terminals. and the United Kingdom. gasoline. independents and super/hypermarkets – keen to increase market share at times of very small retailing margins. . many blenders chose to discontinue its use. The polyaromatics specification for diesel has been tightened with the intention of reducing particulate matter in exhaust emissions. which in addition to increasing the oxygen content was also a relatively easy and inexpensive way to increase gasoline octane. with an oxygen content higher than the current standard. This was especially helpful to all classes of retailers – majors. Generally the results of these endeavors were disappointing with consumers apparently reluctant to pay a premium for “environmental” fuels. the approach taken to achieving them and their implementation differs. . Although specific targets for fuels are set. All motor fuels were encouraged by a substantial tax break to have a maximum sulfur content of 50ppm by 1 November 2001. the market share of 50ppm sulfur gasoline rose rapidly. Furthermore.55 • The fact that low-sulfur fuels retailed at a lower pump price than conventional fuels enabled the market to switch over to the cleaner fuel in a relatively short space of time. with the introduction of 50ppm sulfur gasoline. An indicative target date of 2009 has been set for the introduction of a high-oxygen content biogasoline. Examples include Sweden. which specified a minimum fuels oxygen content of 2. In Germany. with ethanol being used to meet the required gasoline oxygen content. To best effect this the additive MTBE was used as a blendstock.03/litre (€0. blenders and retailers.7% by volume. • The introduction of lower-sulfur fuels by retailers and marketers also offered them the opportunity to differentiate their product and use their position as a supplier of a perceived cleaner fuel to gain competitive advantage. the largest U. as there are different targets for average refinery production. MTBE has almost completely disappeared from U. falling to a maximum of 10ppm sulfur by 1 January 2003. from under 25% in January 2001 to over 95% by December of that year once the tax incentive was increased to £0. One of the more major specification changes in the period of this study was the introduction of reformulated gasoline (RFG). with the introduction of MK1 diesel. thus limiting potential bottlenecks in the distribution system. as did other populous states such as New York and Connecticut.04/litre). gasoline market. as well as those refiners able to manufacture the newer-specification fuels. banned its use from 2003. In the case of the UK. United States The approach adopted by the United States towards cleaner fuels and their implementation has differed from that in Europe.III A – Historical Market Developments -. and concern future gasoline oxygenate levels and polyaromatic hydrocarbons in diesel. The most recent changes to the European fuels specifications were announced in January 2007. and as the U.

The hardship factor is determined more by the company size than the capacity of the refinery. this would represent a reduction from the previous level . The EPA has determined that small refiners would have greater hardship in meeting the new limits with the high capital cost associated with installing more desulfurization capacity. Some small refiners. and includes all employees of the company. GPA refiners who manufacture 100% 15ppm sulfur diesel by the 2006 deadline can receive an additional twoyear extension of the Tier II gasoline requirements. Any refiner that downsizes after the start of 1999 to below 1. 2006 30 n. for both conventional gasoline and RFG. For on-road diesel. The gasoline sulfur standard is a nation-wide standard set at 30ppm. The new sulfur standard was phased in from 2004 and reached the final standard in January 2006.500 employees combined are not considered.S. New Mexico. Environment Protection Agency (EPA) in December 1999. a small refiner’s deadline for Tier II gasoline compliance may be extended as late as January 1. gasoline. Depending on their ability to manufacture 100% 15ppm diesel.500 employees will not be eligible. Regarding diesel. are given additional time to comply. and for company pool averages. The wording in the final regulations concerning the transition to 30ppm sulfur gasoline contains special considerations for refiners in North Dakota. Small refineries within larger companies will not be considered small refiners under the proposal. Colorado. a major step was the announcement of the Tier II motor vehicle emission and gasoline sulfur standards by the U. These states fall under the Geographic Phase-in (GP) program. The regulations set limits on the maximum sulfur content for any batch of gasoline. as well as those in some Western states. 2009. 2005 30 90 300 326 Ja nua ry 1. and Alaska. These adopt stricter exhaust emission standards for motor vehicles and began in 2004.S. qualifying refiners do not have to meet the Corporate Pool Average. 1999. Wyoming. The Refinery or Importer Average is defined as the lower of 150ppm or the refinery’s 1997-1998 sulfur baseline plus 30ppm.56 -.a. Therefore. Idaho. a 90% reduction from previous national levels. Utah. Under the program. Montana. Small Business Administration. and the gasoline must be labeled as GPA (Geographic Phase-in Area) gasoline. 80 95 The pool requirements shown above are valid only for large refiners. and joint ventures in which the parent companies have more than 1.Historical Market Developments Regarding sulfur specification changes to U. a small refiner is defined to be a refining company with less than 1. but the per-gallon cap remains the same at 300ppm. This definition is consistent with the criteria used by the U. the EPA announced plans to require a 90% cut in the sulfur in diesel fuel.500 employees as of January 1. .III A -. 2011. for refinery annual averages. further pushing the 30ppm refinery average and 80ppm cap to January 1. in May 1999.S. 2004 Refinery or Importer Average Corporate Pool Average Per-Gallon Cap Downstream Retail Per-Gallon Cap -120 300 378 Ja nua ry 1. The table shows the limits as they appear in the final regulations: GASOLINE SULFUR LIM IT S (ppm) Ja nua ry 1. Refiners in these states qualify for the program if they sell more than 50 percent of their gasoline within the state.

The most significant feature of the European passenger car fleet over the past 20 years has been the widespread adoption of dieselpowered vehicles (see Figure A-2-1). This has been stimulated by some carmakers seeking competitive advantage by marketing high quality diesel-engined cars that can take advantage of lower-cost fuel. only the 2007 and later model vehicles will be required to use the new fuel. with many European countries applying preferential taxation for diesel fuel such that prices at the pump are typically 20%-25% less than that those for gasoline.000ppm to 500ppm sulfur for off-road. The reason for this was to help commercial trucking and haulage by reducing their running costs. THE ROLES AND EFFECTS OF TAXATION ON VEHICLE TRENDS AND FUEL USE As discussed earlier. the EPA issued regulations in December 2000 to cover fuel used by on-road vehicles. The EPA also raised the possibility of increasing the cetane number and reducing the aromatics content of onroad diesel. In most countries.III A – Historical Market Developments -. effective June 1. taxation policy has also been used across Europe by various countries to facilitate the introduction of cleaner fuels and to encourage the use of lower-emission vehicles. Subsequently.57 of 500ppm to 50ppm sulfur. depending on world oil prices. and different annual road charges. as well as different rates of purchase/sales taxes on cars dependent on size or fuel type. moving to 100% in 2010. The rules set new stringent emissions requirements for heavy-duty vehicles and reduced on-road diesel sulfur levels to 15ppm. No other on-road fuel specification changes or improvements in off-road and heating oil specifications were included. and the role that reduced logistics costs play in keeping inflation under control. though no specific plans were announced. However. and from 5. FIGURE A-2-1 DIESEL SHARE OF REGISTRATIONS. and most continental European countries adopted similar policies so as to minimize cross-border . the levy of lower excise tax on diesel fuel recognizes the dominant use of the fuel in commercial transport. At that time 80% of each refiner’s or importer’s sales of on-road diesel must meet the 15ppm specifications. . 2006. 1990-2006: EUROPEAN AVERAGE (Percent) 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 Fuel excise taxes have played a large part in the increase in the number of diesel cars. Many countries have large differences between gasoline and diesel pump prices.

FIGURE A-2-2 DIESEL SHARE OF REGISTRATIONS. to a point where they have surpassed the 70%-level in Belgium. high pressure direct-injection diesel engines from the mid to late 1990s. averaging a few percent in the 1970s and 1980s. but the greater changes at this time were seen from vehicle technology. the uptake of diesel-powered private vehicles was low. Although diesel car registrations started to increase in the 1990s. performance and economy. As a result. Initially. although this rate was highest in Belgium and France.III A -. Taxation policy remained broadly unchanged. direct injection turbocharged engines was introduced. France and Luxembourg.Historical Market Developments refueling. as drivers considered that they could take advantage of the lower fuel cost without sacrificing comfort and performance (see Figure A-2-2). where they reached 42% and 48%. thus increasing their acceptance to a section of the public that had hitherto resisted the technology. These provided much greater levels of refinement. which in many cases proved . diesels tended to concentrate in mid-range models. As a result. and rarely featured towards the higher end of manufacturers’ offerings. An indirect result of this policy was that private diesel-powered cars could also take advantage of a lower-cost fuel. Compared with gasoline cars they were more noisy and offered less performance even though they offered superior fuel economy. Even those countries that do not have considerably less expensive diesel fuel (such as the UK) have seen a substantial increase in the share of diesel in new registrations. their share remained relatively low. as the superior fuel economy compared with a gasoline-powered car – by about 25%-30% – is sufficient to offset the higher initial cost of diesel cars demanded by some motor manufacturers. Germany and the United Kingdom started to decline as health concerns over diesel particulates became more prominent. as the next generation of common rail. .58 -. the share of diesels in new registrations increased significantly. 1990-2006: SELECTED EUROPEAN COUNTRIES (Percent) 80 70 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 France Italy Sw eden Germ any Spain United Kingdom Fuel cost and fuel economy have been major factors behind the increasing popularity of diesel cars in the European market. despite the lower fuel prices. mainly because the diesel technology at the time was such that the vehicles themselves had limited driver appeal. This trend was especially evident since the advent of the turbocharged. The rising trend of diesel car registrations stalled in the mid-1990s as markets such as France. By 1994. the share of diesels in new car registrations averaged about 24% across most of the European Union.

Finland and Sweden. with the possibility of financing the change by increasing the excise duty on road diesel. 2006: (Diesel Tax as % of Gasoline Tax) 50 Belgium 60 70 80 90 100 0 10 20 30 40 50 60 70 80 % Diesels in New Registrations Greece Austria UK Sw eden Germ any Italy Spain France Lux. However. however. Generally.59 to be more agreeable to drive compared with their gasoline equivalents. especially as these driving characteristics are available with major fuel savings. such that annual road taxes are to be determined by CO2 emission levels – similar to the system used in the United Kingdom – and NOx emissions. and therefore it has introduced a sliding scale of annual road tax. Those countries with the largest difference between gasoline and diesel pump prices have also seen the largest share of diesels in new registrations. lower CO2 emissions than gasoline engines for similar levels of perceived performance. where diesels have been banned in Athens (except for taxis) in an effort to reduce pollution. despite having lower taxes on diesel fuels. These have been achieved mainly through measures such as additional sales taxes. reflected by the share of diesels in new registrations. which distort the picture. As diesel engines offer better fuel economy and. rather than through lower pump prices. there is a broad correlation between the difference in fuels taxation levels and the acceptance of diesel cars in different EU countries. as shown in Figure A-2-3. such as in the UK where diesels are favored through lower annual road charges and company car benefit taxation rates in some cases. Fuel excise taxes do not provide the whole story. therefore. . FIGURE A-2-3 FUEL EXCISE DUTY DIFFERENTIAL VS DIESEL SHARE OF REGISTRATIONS. In Denmark. with the result that the use of private diesels is very small (under 20% in Sweden). and Germany has had a markedly lower take-up of diesels since 1990 mostly through historical consumer preference for gasoline-powered vehicles. In the United Kingdom itself. the government’s policy is to encourage low vehicle CO 2 emissions. Greece and Sweden also have their own distortions. taxation levels on private diesel vehicles remain high because concerns over diesel particulate exhaust emissions have prompted governments to discourage their use. the taxation policy has helped to increase the share of registrations of diesels.III A – Historical Market Developments -. irrespective of the technology employed. . Many drivers prefer the perceived performance and superior torque that modern diesel engines provide. fuels taxation policy has kept gasoline and diesel prices broadly similar. for example. At one extreme is the example of Greece. as discussed there are additional taxation tools. The Swedish government is likely to amend the taxation regime.

60 -- III A -- Historical Market Developments

Changing European Patterns in LPG use for Vehicles In addition to gasoline and diesel, LPG has also featured quite strongly as a transportation fuel in certain countries. The use of LPG for vehicles (or “autogas” as it is more commonly known) in some countries grew during the 1980s and 1990s, and autogas has most recently been promoted as a “green” fuel, as specific carbon emissions from LPG are lower than those for gasoline and diesel. However, the fortunes of autogas across Europe have been mixed. The three principal markets through the 1990s and early 2000s were France, Italy and the Netherlands. Since then, however, despite the favorable pump price and autogas’s image as an environmentally friendly fuel, all three markets have declined. Poland and Turkey have since emerged as the largest growth markets, with the UK market showing limited signs of growth as well. Taxation has certainly played a role in the development of these markets, although not necessarily as directly as for the switch from gasoline to diesel. Consumer preferences have ultimately determined the state of both autogas and diesel markets; but unlike that for diesel, the autogas market in France and Italy, and to a lesser degree the Netherlands, has declined despite favorable taxation regimes. Unlike gasoline and diesel motor vehicles, a large part of the autogas market is realized by after-market engine conversions to existing gasoline-powered cars. Specifically, an LPG storage tank is mounted in the vehicle and the gasoline engine is modified by the addition of LPG fuel pumps and injectors. Some (but not many) motor manufacturers also offered LPG-ready cars as part of their product range, although these had a higher initial cost than their gasoline-only counterparts. In each of these three markets, governments promoted the use autogas in the 1980s and 1990s through the use not only of lower excise duties for the fuel at the pump compared with gasoline and diesel – autogas has been about 50% of the price of gasoline and about 60% of the price of diesel (Figure A-2-4) – but also through subsidies of after-market conversions. These subsidies helped to reduce the break-even distance of the vehicle (i.e. the annual distance the vehicle has to travel before the benefits in fuel costs offset the costs of either the initial conversion or the higher initial purchase price), and therefore the levels of these subsidies and the subsequent running costs of LPG vehicles – fuel cost savings and vehicle road taxes – have a significant influence on potential consumer uptake.

.

III A – Historical Market Developments -- 61

FIGURE A-2-4 COMPARISON OF FUELS PRICES: 2000-2005 (Euro / Litre) 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 France Italy

LPG

Gasoline

Diesel

Netherlands

Demand for autogas increased steadily in France during the late 1990s, reaching a peak of 220,000 tonnes in 2000. In Italy, the market peaked in 1987 at 285,000 tonnes, and again in 1995, but in both countries demand declined thereafter, despite the lower pump price of autogas. Further incentives were put in place, especially in Italy where incentives for after-market conversions increased in 2001 through to 2003, but by then autogas sales had already started their steady decline and the program was stopped in 2004 as retrofits (about 80,000 vehicles) were being out-numbered by scrappages (about 180,000 vehicles). Until recently, the largest European market has been the Netherlands, which reached 930,000 tonnes in 1989; after that date, however, and once autogas vehicles accounted for 10% of total registrations, the Dutch government effectively backtracked on its support for autogas by doubling the vehicle road tax on these cars to an equivalent €635/year, compared with €318/year for conventionally-fuelled cars. As a result, demand for autogas began to decline, and despite a reduction in road tax in 1997 (although it still remained 30% higher than for gasoline or diesel cars) and a further reduction in 2000, demand has continued to decline. Sales of conversion kits also suffered, falling sharply in 2002 following comments by government officials regarding the potential dangers of LPG filling stations.

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62 -- III A -- Historical Market Developments

FIGURE A-2-5 COMPARISON OF FUELS PRICES: 2000-2005 (Euro / Litre, adjusted for specific energy content) 1.00 0.80 0.60 0.40 0.20 0.00 France Italy

LPG

Gasoline

Diesel

Netherlands

Autogas markets have been affected by three factors. First, the increasing popularity of diesel cars meant that fewer and fewer gasoline cars were entering the fleet, with the result that new LPG-ready cars were being outnumbered by scrappage rates. Second, consumer confidence was impacted quite severely following widespread reports of explosions of automobile LPG tanks, leading to safety concerns. One result of these incidents has been the banning of the use of autogas cars in underground car parks, which is still in force in some countries. Last, it must also be considered that although autogas has a higher energy content than either gasoline or diesel its density is much lower, and therefore as fuels are purchased at the pump on a volume basis the price per energy-litre rises compared with the other fuels. Although the price of autogas remains low compared with gasoline by this measure, it starts to approach parity with diesel (see Figure A2-5), thus further minimizing its appeal compared with diesel cars. Comparisons with the United States In addition to the approach adopted by the United States towards new fuels specifications, another difference compared with the approach of the European Union is that the U.S. changes implemented so far have been done so without the use of any tax incentives to help ease the transition – with the exception of large subsidies for ethanol producers. The scope for authorities at the federal, state or county level to use taxation as a policy tool is more limited compared with European countries, as in Europe taxes account for about 50% to 85% of the pump price for gasoline and diesel (depending on the absolute level of crude oil and product prices), whereas product taxation levels in the United States are significantly lower, currently accounting for under 20% of the pump price (see Figure A-2-6).

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III A – Historical Market Developments -- 63

FIGURE A-2-6 COMPARISON OF FUELS TAXATION RATES: 2006 (Tax Percent of Total Pum p Price) 70 60 50 40 30 20 10 0 France Germ any Italy Spain

Gasoline

Diesel

Sw eden

United Kingdom

USA

Owing to the large dependence on the motor vehicle in the United States, and a relatively less-developed public transportation system compared with some European and other countries, U.S. policy has historically been to minimize taxes on motor gasoline. The topic of gasoline taxes is very politicized, to the extent that increasing fuels taxes is regarded as politically unacceptable. There are arguably two results of this policy regarding fuel taxation in the United States compared with most European countries. First, as there is a much lower fixed price element of product prices, pump prices in the United States fluctuate much more widely than they do in European countries, as changes in the wholesale price are much more readily apparent. This was particularly the case in 2000 and 2001 when gasoline prices rose considerably in the second and third quarters, and on a more consistent basis since oil prices rose steadily from 2004. Indeed, the sharp rise in gasoline prices was the primary reason for a fall in U.S. gasoline demand of about 3% in 2006. Second, notwithstanding the increase in crude oil prices since 2004, the low price of gasoline compared with other consumer goods and the general standard of living has provided little incentive for the U.S. automobile industry to devote resources towards increasing the average fuel economy of the car parc. Average U.S. vehicle efficiency has not improved significantly since 1990, as U.S. consumers have preferred heavier vehicles with larger engines and more power to more fuel-efficient vehicles. In particular, the move in the late 1990s and the early part of this decade towards sports-utility vehicles (SUVs) and light trucks was dramatic, helped by the fact that SUVs are classified as “light trucks” and can therefore comply with much lower Corporate Average Fuel Economy (CAFE) standards – 21.6 U.S. mpg (10.9 l/100km) in 2006, compared with 27.5 U.S. mpg (8.6 l/100km) for cars, the latter having been unchanged since 1990. As a result, average U.S. vehicle efficiency fell in the early part of the current decade as SUVs started to represent a greater proportion of the U.S. car parc (see Figure A-2-7).

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64 -- III A -- Historical Market Developments

FIGURE A-2-7 AVERAGE US CAR PARC FUEL ECONOMY, 1990-2006 (Litres / 100 km ) 11.4 11.6 11.8 12.0 12.2 12.4 12.6 1990 1992 1994 1996 1998 2000 2002 2004 2006

Following the recent rise in crude oil prices and the associated increase in pump prices in the United States, consumer preferences are gradually shifting to more fuel-efficient vehicles. Sales of large SUVs have been declining as the market moves towards more economical small and mid-size SUVs, and U.S. automakers attempt to employ new structural materials and technologies to reduce vehicle weight and improve the efficiency of conventional vehicles. Even so, excluding the effects of SUVs on the market average, the fuel economy of new cars registered in the United States has changed little over the past eight years; this compares markedly with the average economy for new cars registered in the United Kingdom, which may be regarded as a good proxy for the European Union in this example (see Figure A-2-8). A principal reason for this is the general move towards diesel-powered cars has improved the average economy of new vehicles, and those countries, such as Italy, which have seen an even faster increase in the share of diesel cars will have seen an even larger improvement. Equally, however, such a change has been encouraged by the better economy offered by diesels in countries that have much higher fuel prices than in the United States.
FIGURE A-2-8 AVERAGE US AND UK NEW CAR FUEL ECONOMY, 1997-2005 (Litres / 100 km ) 6.0 6.5 7.0 7.5 8.0 8.5 9.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 US UK

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III A – Historical Market Developments -- 65

From the above comparisons, it may be concluded that taxation policy, either through differential pricing between products or in determining absolute prices, has played a key role in the development of both vehicle technology and consumer habits. Autogas cars have increased market share in certain European countries when prices of the fuel and conversion were favorable, both a result of government taxation and subsidy policy, but equally have lost market impetus when such favorable conditions were removed. The most visible evidence of the effects of taxation policy, however, has been the increase in the share of diesel cars across much of Europe. Those governments that have sought to increase the share of diesels in their country have used taxes either to make diesel fuel or diesel cars priced more favorably compared with their gasoline equivalents, or by reducing the annual road tax for diesels. Similarly, in cases such as in some countries governments have either increased or maintained high taxes on diesel fuels and/or vehicles in order to discourage their use. In all cases, though, a high-tax environment combined with commitments by motor manufacturers to lower CO2 emissions has encouraged the development of increasingly more economical vehicles. Gasoline technology continues to improve, and the latest generation of engines is offering economy improvements of 10%-15% compared with the previous generation, and diesel engines are continuing to improve as well. In European countries, where, on average, fuel costs in the order of €1.10- €1.30/litre, consumers benefit directly from these improvements. The example of the United States, however, with its low taxes and fuel costs of approximately €0.55- €0.60/litre, shows there to be little incentive or market demand to increase fuel economy

CHANGING FUEL SPECIFICATIONS IN ASIAN MARKETS
Both China and India are discussed in greater detail below, but initially they may be included as part of a broader overview of developments in Asian fuels markets. Fuels quality in Asia has also become increasingly stringent as more specifications are introduced to lower vehicle emissions, and the more developed countries have been adopting new and tighter specifications progressively. To achieve the vehicle emissions targets, the main “clean fuels” quality limits include sulfur, benzene, aromatics and olefins for gasoline, and sulfur, cetane number and 90%-point distillation for diesel. For most countries, the timetables to progress to the next sulfur targets coincide with changes in gasoline sulfur specifications. Asian markets are, in general, advancing lower sulfur and higher quality gasoline but each country has a distinct starting point and each is progressing at its own pace. Many countries currently have clean fuels programs in place to reduce gasoline sulfur levels. Beyond sulfur, each country has developed its own gasoline compositions in terms of benzene, aromatics and olefins content to achieve similar goals of lowering vehicle emissions. Japan, South Korea, Taiwan and Australia are most advanced in their gasoline clean fuels programs, with gasoline sulfur levels equivalent to those of EU 2005. China and most other countries in Southeast Asia are at gasoline sulfur levels equivalent to those of EU 1996 (500 pm sulfur) or below. The gasoline specifications for the larger economies are provided in the table below.

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66 -- III A -- Historical Market Developments

ASIA GASOLINE SPECIFICATIONS Singapore Commercial Sulfur Benzene Aromatics Olefins (2) RVP
(1) (2)

China 1,000 3 40 35 70

S. Korea 50 1 30 18 65

(1)

India 1,000 5 60

Japan 50 1 45 30 50

EU 2000 150 1 42 18 60

EU 2005 50 1 35 18 60

EU 2009 10 1 35 18 60

1,000 5

70

Effective 2006 Summer Specifications

One feature of the larger markets has been the introduction of higher quality city grades followed by later implementation on a national scale. Most notably, this approach has been used in both China and India for gasoline and diesel in recent years. Significant progress in diesel quality has occurred in just a few short years, and similar to gasoline progress of “clean fuels” specifications in diesel varies among countries, generally with countries in North Asia being further advanced. The predominant common 0.5wt% sulfur diesel is now replaced with 500ppm or lower sulfur. There is a general drive to reduce diesel sulfur to ultra-low sulfur level, but specifications will vary among countries. The large advanced economies now have ultra-low sulfur diesel and although China and India have not yet reached these standards (see below), they are expected to be at or near 50ppm by 2012. While a few countries do provide a lower tax on diesel fuel, there has been no sustained effort to dieselize the private vehicle fleets, as has been the result in Europe. China A summary of fuels specifications in China is shown in the table below.
Gasoline

Refineries in China stopped producing leaded gasoline in 2000 and also stopped production of the low octane (66-70 RON) grade in most regions. Officially all gasoline sold must be at least 90 RON and the 90 RON grade is the primary grade sold. Other octane grades are available, at least in most cities, including 93, 95, 97 and 98 RON. Due to the domestic crude slate and refinery configurations, gasoline is comprised of a large fraction of FCC naphtha and therefore the olefins content is high, averaging 30-40%, and the aromatics content averages only about 20%. Beijing, Shanghai and Guangzhou have adopted more stringent gasoline specifications ahead of the national requirements. Beijing is the most advanced with strict sulfur, benzene, aromatics, and olefins limits similar to Euro III adopted in mid-2005. In mid-2006, Shanghai and Guangzhou followed with similar regulations. Beijing is expected to adopt Euro IV or similar specifications this year ahead of the Olympics.

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67 In March 2004. Gasoline olefins content was particularly difficult to meet during the 2003 implementation of the tighter olefins specification. China will continue to struggle to meet fuels and energy needs and can be expected to continue blending ethanol.0%. In addition to Beijing. China is now the world’s third largest ethanol producer after Brazil and U. China implemented a new standard specification for light diesel oil (GB2522000). Gasoil/Diesel More than 95% of the gasoil/diesel fuel burned in China is light diesel. . The countrywide adoption of National 3 gasoline specification will require significant changes in China’s gasoline formulation in order to meet the maximum olefins content of 18%. Arable land is limited and the government has real fears that biofuels production will disrupt self-sufficiency of food supplies. which targets Euro III emissions target countrywide by 2010. In China. The light diesel is blended from straight run diesel and a significant amount of FCC cycle oil. . In 2002. had to embark on RFCC upgrading projects to reduce their RFCC gasoline olefins content.S. the new standard mandates all light diesel oil to be of one standard grade equivalent to the old premium diesel. Hong Kong gasoline quality is very high meeting Euro IV (50 ppm) specifications and further improvements to lower sulfur are likely. Ethanol production will likely increase. 0. MTBE and other gasoline extenders. requiring the city to market Euro III equivalent (“National 3”) gasoline and diesel in 2005 and Euro IV (2005) (“National 4”) equivalent motor fuels by 2008. While the old diesel specification differentiates between regular and premium grades (1. It is conceivable that China may target a different combination of olefins and aromatics content to achieve similar emission targets. Shanghai and Guangzhou cities now both have effectively National 3 quality as well with plans to move to the National 4 quality in the next few years. and ethanol is blended to gasoline in regions where this blendstock is produced. China’s Emissions Control Center established a clean fuels program. MTBE is also commonly used. The nationwide diesel sulfur specification remains at 2000 ppm. but 500 ppm is widely available in most major cities. gasoline specifications will remain at the current GB17930-1999 specification until 2010 when adoption of National 3 gasoline specifications is to be implemented. many refineries. replacing the old specifications set in 1994. particularly the ones in the Northeast provinces. more stringent than the national standards. a large fraction of gasoline is accounted for by FCC gasoline blendstock. For the rest of the country. Ethanol is not expected to replace MTBE due to natural limits on ethanol production in China.III A – Historical Market Developments -. although not officially allowed. but its role in gasoline production will remain limited. Methanol is also used in rural areas. As most Chinese refineries produce gasoline from RFCC units containing over 40% olefins content. The program set an aggressive motor fuels target for Beijing.2% sulfur). with the remaining 5% made up of heavy diesel used for industrial purposes. Sulfur in gasoline and diesel has intermediate steps with gasoline being reduced from 800 ppm to 500 ppm S in July 2005.

the more relaxed SG specification avoids the relatively high investment cost required to upgrade LCO to Euro III diesel. Shanghai and Guangzhou diesel qualities have generally lagged Beijing. however. . an equivalent Chinese diesel standard (GB/T19147-2003) drafted in 2003 based on the Euro III production specification for EN590.845. but the product specific gravity (SG) is specified to be from 0. Beijing. This new diesel grade was partly aimed at reducing emissions from older commercial vehicles. representing only a small percentage of the country’s diesel consumption.III A -. adopted Euro III specification in July 2005 but it is unclear if the product specification target countrywide in 2010 will follow Beijing in adopting Euro III specification.860. but tax incentives reduced sulfur to this level several years early. a more relaxed target compared to Euro III diesel’s 0. unlike gasoline specifications. Given the large number of FCCbased refineries. moved to the modified specification in October 2004. Hong Kong diesel has been of very high quality for many years. As a result of this specification. This is a premium light diesel grade introduced together with the tightening of emissions specifications to Euro II standard for commercial vehicles over 3. For the rest of the country. This standard requires sulfur specification similar to Euro III diesel of 500 ppm. Sulfur levels were reduced to 500 ppm in 1997. thus keeping these vehicles on the road. Beijing. Euro IV equivalent (50 ppm) diesel was mandated in 2002. the diesel quality is expected to meet Euro III equivalent specification by 2010 (350 ppm S).5 MT.2 wt% specification. Consideration for 10 ppm sulfur diesel is being discussed. .820 to 0. 500 ppm diesel is relatively widely sold so the national average sulfur level is well below the 0. There is.Historical Market Developments In line with China’s recent clean fuels program.68 -. which could not pass Euro II emissions standards with conventional diesel. which have kept pace with the capital city. shortly thereafter. thus allowing a higher percentage of LCO in the blend. China has implemented Euro III equivalent diesel specifications for Beijing in July 2005 and has targeted the city’s diesel quality to meet Euro IV (2005) equivalent (50 ppm S) specification before the Olympics in 2008.

25 100 5 20 Smoke Point. Solid Point.Winter. max 50% Point.2 (53. cst @ 20 Kinematic Viscosity. max Cetane Number.8-3. oC. max Aromatics. psi 10% Point oC.0 7. oC.005 8.8 70 120 190 205 800 2. max Freeze Point.III A – Historical Market Developments -.%.0 42 18 Euro III Beijing 90/93/95/97/98 --RON-5 0. max 95% Point.1 --20 104 ----F.0 355 365 (1) 7 grades depending on location and season (2) Viscosity at 37.0-8. max 90% Point.5 (2) --350 C.2 45 12-(44) 55-45 10-(50) o o GB/T19147-2003 0. ppm max Benzene. vol. o o GB252-2000 Countrywide 0. max 1. wt.0) 20 . . 49 for grades above -10 C. .7 12. vol % max GB17930-1999 Countrywide 90/93/95/97/98 --RON-5 0. Key changes in motor gasoline specifications included the reduction and phase-out of lead additives and the elimination of phosphorous containing additives.0-8. India India has been active in implementing new product quality regulations in recent years. min Olefins. max Jet A-1 0. oC. vol % max Olefins.005 10. psi RVP . max End Point Sulfur.0 355 365 Euro III 0. min F.05 45-49 (3) 12-(44) 55-45 10-(50) 1.0 (2) 4.0 7. max RVP . vol % max Aromatics.2 KEROSENE/JET FUEL Grade Sulfur.8-3. max GASOIL/DIESEL Standard Application Sulfur. max (1) Flash Point. vol. %. min C (min) C (max) C.7 10. 45 for -50 C solid point. wt.8 oC (3) Cetane number specification depends on seasonal grades.69 CHINA REFINED PRODUCT SPECIFICATIONS GASOLINE Standard Application RON MON (R+M)/2 Lead Content. %.035 51 0-(44) 55 --2.Summer. g/l. oC. min CFPP.5 40 35 210 150 1. mm. Flash Point. %. o o Kerosene 0. cst @ 20 90% Point. max Kinematic Viscosity.

5 wt% sulfur.8 wt%. On April 1. Gasoil/Diesel Sulfur levels for High Speed Diesel (HSD) have been reduced in phases. The current schedule calls for the national specification to increase to Bharat III in 2008 and the eleven major cities to move to Bharat IV in 2010. Some select cities may adopt these regulations on a more aggressive schedule.70 -. in 1999. 1994. The government has been encouraging the production and use of ethanol. the four major metropolitan cities and Taj Trapezium were required to produce HSD with a maximum 0. The recent product quality improvements have been implemented through the Bharat Stages program. The current schedule calls for a shift in 2010 for the cities to Bharat IV (50 ppm) and for the remaining country to move to Bharat III.III A -.56 g/l to the 0. . Finally.Historical Market Developments India adopted the National Auto Fuel Policy in December 2003. Bharat Stage III calls for 150 ppm sulfur. but initial plans to mandate a 7.15 g/l level in the four major metropolitan cities on June 6. The Bharat program is similar to the European emission targets with somewhat different parameters and engine test cycles. Stage II quality limits include 500 ppm sulfur and 5% benzene in cities and 3% in metros. all diesel sold nation-wide was required to be below 0. Gasoline The phase-out of lead in motor gasoline began with the phased reduction of tetra-ethyl lead from 0. 1996. MTBE is used in the higher-octane grades. A series of reductions in the cities and nationwide occurred over the years with a total phase-out of lead only occurred nationwide on April 1.25 wt%.5% volume have since been rescinded. A summary of India’s key product specification is provided in the Table below. Recent revisions of the specifications for HSD for motor vehicle use have been instituted along the Bharat Stages as follows: Nationwide is set at Bharat II (500 ppm sulfur) and major metro areas are at Bharat III (350 ppm). 2000. India has implemented stringent specifications in the key cities first with later adoption at the national level. Implementation of new regulations in the cities followed by countrywide mandate is likely. There is real concern in India that biofuels will compete too strongly with food production and it is likely that ethanol usage will remain moderate. . In 1996 HSD sold in Taj Trapezium was reduced to a maximum of 0. The minimum cetane index specification of 48 was also implemented in April 2005 (see table for more details). 1% benzene and adds aromatics and olefins limits (see table). which includes the socalled Bharat Stage emissions targets.25 wt%. Industrial diesel or light diesel oil (LDO) will not be required to follow the sulfur reduction program and will maintain maximum sulfur levels of 1. Currently the countrywide gasoline specifications are set at Bharat Stage II and the major eleven cities are at Bharat Stage III.

max Sulfur.01 158 257 374 8.71 INDIA REFINED PRODUCT SPECIFICATIONS GASOLINE Grade RON MON (R+M)/2 Lead.500. wt. 50% Point.0 84. max Viscosity. o o o Unleaded Regular 87 82.III A – Historical Market Developments -. psig. mm Flash Point.0 report Grade Sulfur. max Benzene. max RVP. wt.7 500 (150 city) 5 (3 city) F. Winter. max F. g/l. ppm.%.7 500 (150 city) 5 (3 city) F. max 10% Point. min 90% Point. cst.013 158 257 374 8.5 0. wt%. Summer.5 80-370 . 90% Point. max Fuel Oil 3.%.0 Diesel 500 (350 city) F 64 43 48 F 18 F F 95 691 95 o RESIDUAL FUEL OIL Low Sulfur Heavy Stock (LSHS) 1. max Pour Point. max Unleaded Premium 93 88 83 0. . max Cetane Index Smoke Point. max o o o Superior Kerosene 2. max GASOIL/DIESEL High Speed Grade Sulfur. ppm Pour Point.

was from Saudi Arabia. The largest production increase.72 -. This is presented in the customary units of thousand barrels per day.5 0. world crude oil production increased from just under 60 million B/D to just under 74 million B/D. with the remaining one third by non-OPEC. although it only became a member in 2006. The balance of supply to meet world consumption is met by a mixture of NGLs and condensates.7 million B/D.0 million B/D.0 0.0 -0. which in 2006 totalled about 12.Historical Market Developments A-3 WORLD CRUDE OIL PRODUCTION Total world crude oil production for the period 1990 to 2006 is shown in Table A-3-1.0 -1. was supplied by OPEC producers. In the case of Iraq this is due to the political situation rather than any resource limits.OPEC (Million Barrels per Day) 2.III A -. or about 9.0 A lge ria A ngo laIndo ne s ia Ira n Ira q Kuwa it Libya N e ut ra l N ige ria Z o ne Qa t a r S a udi A ra bia UA E V e ne zue la 1990-2000 2000-2006 Over the historical period two countries within the OPEC group – Indonesia and Iraq – have recorded a decline.0 1. OPEC includes Angola from 1990. two thirds. .3% per year. 2. FIGURE A-3-1 WORLD CRUDE OIL PRODUCTION (Million Barrels per Day) 100 80 60 40 20 0 1990 Total OPEC Total Non-OPEC 1994 1998 2002 2006 Over the 1990 to 2006 period. which .5 -1.5 1. For the purposes of this analysis. an average increase of 1. The table is split between nonOPEC production and the production from the twelve OPEC members. Of this increase.6 million B/D FIGURE A-3-2 CRUDE OIL PRODUCTION GROWTH .5 -2.

New developments in the UK are expected to result in moderation of the decline in the near term. Over this period crude from the Caspian region also increased substantially. Hungary and Italy. Between 2000 and 2006 Russian production increased by over 3 million B/D.0 -1.4 million B/D in 2006.0 -5.NON-OPEC (Million Barrels per Day) 5. which runs from the Tengiz field in Kazakhstan to Novorossiysk by the Black Sea.000 B/D in 1990 to nearly 1. FIGURE A-3-3 CRUDE OIL PRODUCTION GROWTH .4 million B/D in 2000 to 2. with smaller contributions from Denmark.0 Africa China Other Asia Europe Russia / CIS Latin Am erica Other Middle East Canada United States 1990-2000 2000-2006 In Canada. the Netherlands and Germany. production from non-conventional heavy crude has increased from 422. but this could be expanded if additional crude were available. There are small and declining amounts of onshore production in a number of countries including Austria. The Baku-Tbilisi-Ceyhan (BTC) pipeline started operations in 2006.9 million B/D in the period 1995 to 1999. This is largely because in the early part of the period Russian production was still in steep decline as the industry restructured. France.7 million B/D.0 1.73 has maintained a policy of holding spare production capacity to moderate the market.0 -3. The CPC pipeline. After a plateau of 5. Figure A-3-2 shows the change in OPEC production by country over the historical period. started operation in 2003 and is now running at around 0. but longer term the established decline is expected to continue.III A – Historical Market Developments -. but this was largely due to recovery from the Gulf war in 1990/91. Russian production started to grow strongly as western technology was introduced and well-funded companies were able to invest in expansions. this line carries crude oil from the Baku area of Azerbaijan to Ceyhan in southern Turkey and has the advantage of bypassing the congested Bosporus. A number of large projects will increase this source . . Germany.7 million B/D since then. Both of these pipelines have allowed the development of large new reserves. The implications of this are discussed in other sections of this report.0 3.4 million B/D in 2006. The planned capacity for the line is 1 million B/D. Most European production comes from the UK and Norway. from around 1. Kuwait recorded the second largest increase. European crude oil production reached a peak in 2000 and has declined by 1. Non-OPEC production increased more rapidly in the six years from 2000 than in the previous decade.

” In the broad sense. many people use the term “condensate” to describe a variety of light petroleum commodities that range from natural gas liquids to light crude oil. Condensates are produced from many different hydrocarbon reservoirs around the world. most light crude oil streams would not be classified as condensates under this definition. There are many different types and grades of condensates. but condensate and natural gas liquids also meet part of the demand. there are several different meanings applied to the term “condensate. Natural gasoline typically meets gasoline distillation specifications. Production of condensates has been steadily growing over the past 10 to 15 years as new gas condensate fields have been brought on line. . We do not include heavy condensates in our definition. Condensate is a very light. Natural gasoline is generally much lighter (80° API or higher) and does not require fractionation prior to blending into finished motor gasoline or use in olefin crackers designed for naphtha feed. although the Oso condensate stream in Nigeria is a notable exception.Historical Market Developments of supply in the forecast period. For this analysis. and the physical and chemical properties can vary significantly from field to field. The propane and butane constituents are normally recovered and sold as LPG whereas the heavier compounds are normally recovered and sold as a separate product or blended with crude oil. Despite this increase China is still a large and growing crude oil importer. the term “condensate” is applied to light condensates produced from gas condensate fields. condensates are becoming increasingly important feedstocks for the global refining and petrochemical industries. CONDENSATE PRODUCTION The world demand for oil products is supplied mainly from crude oil. Gulf of Mexico have added around 300. Therefore. In general. Natural gasoline produced from the processing of natural gas is not included in the condensate supply presented in this section as it has very different characteristics than most light condensates in the 50°-65° API gravity range. while other condensates generally have a kerosene/gasoil fraction.S. Chinese production has increased in the period 2000 to 2006 with the start of offshore production from the Bohai Bay area. liquid hydrocarbon stream that is recovered from the processing of gas and the gas from oil reservoirs.000 B/D over the last ten years and several large new developments are pending. As a result.74 -. . The liquids produced in conjunction with natural gas from gas condensate fields include propane. Offshore developments in both shallow and deep water in the U. condensates are mixtures of hydrocarbons that exist in a gaseous state in underground reservoirs. However this new production has not been sufficient to offset declines in onshore U. In addition.S. production. Heavy condensates with lower API gravity are more easily blended with crude oil and are often mixed with crude oil and marketed as such. light condensates have been designated to be condensates with an API gravity of 50° or greater. These condensates are generally kept segregated and move in world trade. butane and heavier compounds.III A -. In the strict sense.

In making our refinery analysis we classify the world crude supply into four categories. light sour. However.2 million barrels per day in 1990 to a production level of about 2. API gravity. they are not likely to be able to realize the value in the market place. Venezuelan. light sweet.III A – Historical Market Developments -. 4. on a global o basis. or California heavy crudes. 2.7 million barrels per day currently (Table A-3-2). CRUDE OIL QUALITY Table A-3-1 shows an estimate of the historical average crude quality in terms of API gravity and sulfur content. Total Acid Number (TAN) In this report. This indicates a slight heaving of the world production slate over the period. generally increase as the crude becomes heavier and further increase the processing severity required to convert the heavy crudes to light products. This analysis is based on our regional database of crude oil supply and an assessment of the main quality of crude oils produced in each region. heavy sour and high TAN. In 1995 the average crude gravity was 33 API and sulfur o content was 1. These crudes (except for those blended off to reduce TAN) will most likely be processed in refineries that have the capability to handle . by 2006 this had changed to 32. There is considerable inertia in the world crude supply and consequently. has increased significantly over the past decade. They are medium gravity crudes when compared to Mexican. 3. Segregated condensate supplies have expanded from about 1.14%.4 API and 1. In spite of the difficulties in classifying heavy crude oils. it is useful to define a group of crude oils that are generally competitive and interchangeable for analysis purposes. such as nitrogen and metals. light sweet crude is defined as those crudes generally above 30ºAPI with a sulfur content of less than 1%. Percent of vacuum residue (VR).75 Worldwide production of light condensates. changes occurs only very slowly. This is consistent with increasing production from Middle East OPEC to balance supply as the marginal Middle East crude tends to be heavier and higher sulfur. . 2. produced from gas condensate fields and kept segregated.8% sulfur) are considered to be heavy crude refineries. This classification considers: 1. Even though the heavy/sweet/high TAN crudes have a low sulfur content. Canadian. high sulfur crudes. such as Saudi Arabian heavy (28ºAPI. In this report. heavy sour crude oil is defined as those crudes that are 28ºAPI or less with a sulfur content greater than 1%. the Middle East crudes are heavy only in comparison to other crudes produced in the region. The impurities in heavy. Sulfur content.2% sulfur. Most refineries that have crude processing capability designed for the Middle Eastern heavy grades.

76 -. As oil prices have increased. and higher cost objectives in terms of the resources being targeted in a high oil price environment. Most of the heavy sour high conversion refineries are so equipped and the refineries that process light sour crude can easily be modified. the BP Statistical Review.Historical Market Developments high TAN crudes. There is no single authoritative source on upstream investments and. Onshore U. which include national statistics. Inc.S. and the industry press. from the relatively low cost onshore developments in areas with existing infrastructure and benign climate and terrain to offshore production in the Arctic Circle or in very deep water. Firstly. The following shows estimates of finding and development costs since 1995 for selected provinces.III A -.S. more expensive-to-develop resources such as bitumen deposits and synthetic crude oils are increasingly exploited. the costs of raw materials. FIGURE A-3-4 FINDING AND DEVELOPMENT COSTS ($/boe) 60 50 40 30 20 10 0 1996 U. John S Herold.S. All other crudes are then classified as light sour.S. only estimates of expenditure can be made. the sharp increase in demand for equipment and . . Worldw ide 1998 2000 2002 2004 As may be seen the increase since 2003 in the U. Secondly. which has accelerated sharply since 2004. as a large part of the industry is controlled by national oil companies. with consequently increased development costs. Offshore Non-U. Upstream investment costs have been rising from 1996 because of both inflation in project costs. The industry is highly fragmented and the range of costs is very large. offshore is particularly sharp and arises for a number of reasons. Investment is also made to decommission and abandon facilities at the end of their producing life. Light sweet cracking refineries are not likely to be modified to handle high TAN crude since their economics do not provide enough cash flow to justify the investment and the high bottoms content of the heavy/sweet/high TAN crudes is not desirable. In making an estimate of historical upstream capital expenditures upstream by the industry we have drawn on data from a variety of sources. such as steel and cement. the IEA.. UPSTREAM CAPITAL INVESTMENT The oil industry invests to find and develop new resources and also to expand and maintain production in existing fields. used in development have risen.

costs have sometimes been initially underestimated and budgeted figures significantly exceeded. have been estimated from data provided in the BP Statistical Review. although this was sharply escalating from 2004. and where available these costs have been used as a check on the estimates that have been developed. There is no one source that aggregates the costs for finding and developing reserves. As the previous chart demonstrates. have also led to cost increases as demand for these scarce resources continues to increase. . In addition. We have then estimated the total expenditure by applying the estimates of finding and development costs to the reserve additions. we believe the additions have been claimed for political purposes.980 billion. . Over the 1995 to 2006 period. In most cases.III A – Historical Market Developments -. The sharp acceleration in costs is clearly illustrated.77 manpower as companies have sought to boost output in response to increased prices has driven up costs. including company reports. allowing for annual production. we have adjusted these reserve increases if. expenditure in the North Sea (UK and Norwegian sectors) was reported at $159 billion. Deepwater exploration and production is also more expensive and developing projects in areas where there is little or no infrastructure has boosted costs. Year-on-year increases for proven reserves. expenditure on oil sands was $36 billion. drilling rig hire rates increasing by as much as 400% since 2002. exacerbated by previous years of cost cutting and rationalisation. In some areas. and adjusted the total accordingly to come up with an overall estimate for the period 1996 to 2005 of $1. The weakness of the dollar has also contributed to the higher costs.S. with almost half of this spent in the 2003 to 2005 period. Demand for drilling rigs in particular has driven up rates dramatically.S. Using various estimates of finding and development costs. for example. offshore. as the complexity of projects has grown and more unconventional sources such as tar sands have been exploited. costs are aggregated and reported. with offshore U. We have then compared this figure with other estimates of capital expenditure. increases have occurred everywhere but have been particularly sharp in areas such as the U. In Canada. Figure A-3-5 shows the cumulative reserves additions and the cumulative expenditure estimates. Where appropriate. we have attempted to estimate the total of upstream capital expenditures in the following manner. figures are reported as an aggregation of the costs for both oil and gas. Shortages of skilled manpower and engineers.

500 . .500 Cost $ billion 2.III A -.000 1. billion barrels 600 500 400 300 200 100 0 1996 1.Historical Market Developments FIGURE A-3-5 CUMULATIVE RESERVES CHANGES AND FINDING AND DEVELOPMENT COSTS Reserves change.78 -.000 500 0 1998 2000 2002 2004 Cum ulative Reserves Cum ulative Cost 2.

032 1.253 1.206 3.468 5.154 3.615 343 27 3.391 1.17 43 32.531 41.795 1.18 44 32.726 72.029 2.853 2.780 3.720 1.704 368 44 3.269 948 4.886 2.420 435 2.490 465 9.115 2.15 39 32.001 966 3.388 1996 806 679 1.049 2.047 6.175 2.963 2.595 61.108 3.575 1.684 2.712 2.906 2.179 2.663 2.948 64.082 3.507 232 34 2.792 28.0 % Sulphur 1.384 2.601 565 5.066 516 8.0 1.596 740 1.546 607 5.725 40.937 38.502 410 2.407 1.439 2.742 1.661 2.891 28.009 65.502 1.538 5.III A – Historical Market Developments -.148 2.7 1.137 2.975 1.106 5.499 230 41 3.945 1.107 2.815 2.273 1.437 885 4.847 494 8.516 583 5.093 64.628 1.029 2.063 686 8.603 1.641 1997 846 714 1.4 1.5 1.722 2.767 3.4 1.429 205 44 3.240 875 1.697 368 46 2.681 6.794 3.514 360 29 3.20 43 32.774 2.501 Estimated Crude Quality Processed API 33.6 1.075 1.339 2.852 3.293 37.352 1.293 1.20 43 .964 69.241 1.391 6.153 2002 1.426 1.554 376 30 2.14 Opec % 42 33.923 2.813 1.594 1.144 2.378 1.461 73.973 2.812 1.572 2.550 2.984 974 5.130 3.888 2.15 42 32.336 1.033 2.949 1.158 2006 1.904 1.188 1.240 2.509 5.284 2.121 648 7.903 1.006 2.006 3.042 1.757 2.252 1.655 35.241 41.597 2.785 1.165 2.6 1.572 2.643 28.892 2001 923 740 1.008 2.217 2004 1.636 1.297 469 1.821 3.668 2.176 7.096 2.692 1.254 809 8.248 2.139 5.071 2.212 5.366 2.085 2.104 2.818 40.8 1.078 5.068 1.653 1999 750 748 1.120 28.256 66.968 2.181 1.244 3.161 3.149 3.854 1.964 67.17 42 32.108 2.020 5.232 3.363 7.965 2.261 5.706 31.534 510 2.113 6.813 1.454 909 9.913 2.949 7.810 1.228 617 7.500 2.486 293 32 2.158 3.793 1.156 2.272 847 7.804 1.469 520 6.416 506 2.399 409 2.899 785 6.808 2.985 649 7.18 41 32.970 1.155 2.969 37.300 6.17 42 32.834 2.049 2.571 2.79 TABLE A-3-1 WORLD CRUDE OIL PRODUCTION (Thousand Barrels per Day) 1995 OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Neutral Zone Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC Non-OPEC Africa China Other Asia Denmark Netherlands Norway UK Other Europe Russia CIS Region Latin America Other Middle East Canada United States Total non OPEC Total World 753 617 1.813 2003 1.800 27.416 186 54 2.078 65.782 25.937 1.200 1998 827 739 1.880 6.240 1.274 2.759 1.033 894 994 3.936 6.905 2.281 505 6.616 545 2.009 30.409 1.092 1.570 36.957 2.696 2.446 471 1.904 1.166 504 7.899 38. .588 365 31 2.197 41.325 1.689 523 5.155 448 7.626 390 42 2.558 31.254 2.418 841 8.751 490 2.7 1.335 888 8.799 6.513 6.066 2.577 1.264 522 7.752 2.395 453 2.867 994 5.9 1.714 2.118 27.168 3.542 600 5.509 472 2.646 5.696 2.389 2005 1.645 1.229 1.160 3.16 42 32.127 1.468 2.640 486 9.755 25.685 531 2.384 1.9 1.785 3.161 2.978 2.846 2.792 1.350 3.150 2.779 73.288 62.803 1.322 2000 943 746 1.553 36.784 3.712 3.936 26.431 1.20 42 32.595 737 1.092 1.

III A -.994 2003 506 673 452 122 15 44 221 2.Historical Market Developments TABLE A-3-2 WORLD SEGREGATED CONDENSATE PRODUCTION (Thousand Barrels per Day) Country Africa Middle East Asia/Pacific Europe North America South America CIS Region Total 1990 411 83 316 37 51 323 1.973 2001 570 570 420 150 25 56 205 1.787 1997 544 389 449 165 21 42 190 1.081 524 72 5 62 260 2. .80 -.673 .523 1996 624 341 426 124 37 47 188 1.318 2005 615 985 526 83 10 60 257 2.832 1999 585 416 431 167 36 41 190 1.997 2002 552 596 435 127 26 42 217 1.866 2000 611 520 413 146 45 38 201 1.801 1998 571 419 432 156 25 41 189 1.222 1995 579 140 399 107 63 44 191 1.534 2006 668 1.034 2004 520 870 500 117 13 59 240 2.

but an important trend since 1999 has been the increasing share of crude oil imported from Russia and CIS countries.III A – Historical Market Developments -. IMPORT REQUIREMENTS Although it benefits from North Sea and some onshore production. The chief sources of imports have been the North African and Middle East OPEC countries.81 A-4 EUROPEAN CRUDE OIL TRADE FLOWS European crude oil imports. imports from the region remained broadly unchanged until 1995. As North Sea production reached its peak in the late 1990s the share of imports fell to 51%. exports and runs are shown in Tables A-4-1 (million tonnes) and Tables A-4-2 (thousand barrels per day). . Switzerland. before the recovery in CIS production in the second half of the 1990s resulted in substantial increases of imports of the Russian Urals export blend into Europe from 1998-1999 (Figure A-4-2). falling from over 11 million B/D in 1990 to about 7 million B/D in 1996. The tables represent data for the EU 27 countries plus Albania. Apart from a dip in 1991. 1990-2005 (Million Barrels per Day) 16 14 12 10 8 6 4 2 0 1990 1992 1994 1996 1998 Domestic Production Net Imports 2000 2002 2004 Owing to the proximity of most northern European refineries to the North Sea the greater share of seaborne crude oil imports from outside Europe has been by refineries near the Mediterranean Sea. Europe has to import the majority of its refinery crude oil requirements. As discussed in the previous section. the CIS region and other countries/regions. Norway. but since 2000 this has increased steadily. exports are subdivided by region. Russian/CIS crude production declined markedly in the early 1990s. . Iceland. Turkey and countries of the former Yugoslavia. FIGURE A-4-1 NET EUROPEAN CRUDE OIL BALANCE. The origin of crude oil imports is subdivided into imports from OPEC countries. reaching 63% in 2005 (see Figure A-4-1). Northern and Central European refineries also receive crude oil imports from Russia through the Druzhba (Friendship) pipeline.

The opening of rail routes and trans-Caspian pipelines to the Black Sea allowed crudes from Kazakhstan and Azerbaijan to be shipped separately from Urals and. following higher production rates and increasing capacity of the CPC pipeline and start-up of the BTC pipeline. The principal markets for these crudes are Mediterranean refineries. but such production was blended into other Russian crude oils in the Transneft system and exported as part of the Urals blend. The opening up of these alternative export routes has changed European crude oil trade flows considerably. with the share of CIS region crudes of total European imports rising from 24% in 1998 to 46% in 2005. Principal export routes for these Central Asian crudes are by tanker from Black Sea ports and thence through the Bosporus to the Mediterranean. but the opening of the Baku-TbilisiCeyhan pipeline in 2006 bypassed the Bosporus and has allowed tankers to load directly in the Mediterranean.Historical Market Developments FIGURE A-4-2 NET EUROPEAN CRUDE OIL IMPORTS. exports from these two countries have increased markedly (Figure A-4-3). 1990-2005 (Million Barrels per Day) 12 10 8 6 4 2 0 1990 OPEC 1992 Russia / CIS 1994 Non-OPEC Africa 1996 1998 2000 2002 2004 Other Non-OPEC Latin America Non-OPEC Middle East Also since 1999.III A -. . although Urals still maintains a strong market presence in both Mediterranean and Northern European markets through exports via Baltic Sea terminals and the Druzhba pipeline system to refineries in Germany and central Europe. BY REGION / ORIGIN. crude exports from CIS countries marketed separately from Urals have been appearing in world markets. Crude oil from CIS countries had been exported beyond Russia prior to that date.82 -. .

principally owing to their geographical proximity.0 2.0 3. where domestic production is in decline. which is a good fuels and specialty products crude. whereas many Mediterranean refineries import crude oil from Algeria and Libya.5 1. this provided a large volume of the Iraqi light sour Kirkuk crude.III A – Historical Market Developments -. Imports from Algeria have been broadly constant over the 1990-2005 period.S.5 0. The Middle East OPEC share of European crude oil imports has fallen from a high of 43% in 1993 to 25% in 2005.83 FIGURE A-4-3 EUROPEAN RUSSIA / CIS CRUDE OIL IMPORTS. On the other hand. with disruptions to local production and demand from the Asian market being the chief causes. Historically. recommencing in 1996-1997 with the United Nations sponsored Oil-for-Food program.5 2.0 1.0 0. Middle East OPEC crude has had to find alternative markets. either by national oil companies or through equity production from resident European and U. higher import volumes from Saudi Arabia and the UAE helped to offset the loss of supplies from Iraq and Kuwait. Libya is the major supplier of crude to refineries in Italy. During these disruptions. oil companies. As a result. as well as meeting increasing refinery demand in Asia. 1990-2005 (Million Barrels per Day) 5.0 4. placing increasing volumes into the United States. . and although European imports from Kuwait recovered to preinvasion levels by 1993 since then little Kuwait crude oil is imported into Europe as higher netbacks can be achieved by selling into the Asian market. . as well as to equity-owned refineries in Germany and Switzerland. and have approached levels last seen in the early 1990s (see figure A-4-4). Nigeria is a key supplier to many northern European refineries.5 3.0 1990 Azerbaijan Kazakhstan Russia / Other CIS 1992 1994 1996 1998 2000 2002 2004 The consequence of higher CIS region crude production and exports into Europe has been the displacement of Middle East OPEC crude – historically the principal import source of crude oil into Europe. while those from Nigeria have fallen since 1998. Of the Middle East OPEC suppliers. Supplies from Kuwait were disrupted in 1990 following the invasion by Iraq and subsequent damage to upstream infrastructure. the largest has been Saudi Arabia. followed by Iran. African member nations of OPEC have historically been key suppliers to European refineries.5 4. in line with the increase in CIS crude production. imports from Libya have been increasing from 2000. Imports from Iraq were also disrupted at the same time. The civil unrest in Iraq following the invasion in 2003 has resulted in the almost permanent loss of exports through the pipeline to Ceyhan.

for the production of asphalt. was largely determined based on U. and therefore less suitable to those refiners who have invested in large levels of desulfurization capacity and/or deep conversion capacity. averaging about 9. some crude from outside Europe has necessarily been imported to supply specific needs for the production of specialty products such as lubricating oils and asphalt. such as that in France. . Although crude oil imports declined with the increase in North Sea production.Historical Market Developments Crude oil from Venezuela is also processed in European refineries. and the specialty producer Nynas AB also imports Venezuelan crude into its manufacturing operations in Sweden and the United Kingdom. There are very few exports of inland European crude production. Some shipments have moved eastwards since the mid 1990s. Some is processed in German refineries. primarily to China but also to India on occasions and Singapore. netbacks. Consequently these refiners prefer to process less expensive heavier and sourer crudes. Italy and Romania. North Sea crude oil is mostly light and sweet. BY COUNTRY. By far the largest overseas markets for European crude exports are Canada and the United States (see Figure A-4-5). the North Sea marker crude. Most North Sea crude trade flows are westwards. . Indeed. most of which is used by local or regional refineries. 1990-2005 (Million Barrels per Day) 7 6 5 4 3 2 1 0 1990 1992 Algeria Iran 1994 Iraq Libya 1996 Nigeria 1998 Saudi Arabia 2000 Other 2002 2004 EUROPEAN EXPORTS Although European refineries import the majority of their crude supplies. North Sea and Russian crudes are not suitable for asphalt production.S. although this is in relatively small quantities. FIGURE A-4-4 EUROPEAN OPEC CRUDE OIL IMPORTS.III A -. The small quantities of exports to Africa were mostly to South Africa.0 million B/D over the 1990-2005 period. mainly to North America but with some volumes moving also to Latin America. and although some lubricating oil are produced from North Sea crudes the economics generally support the use of Middle East crude oils that give better yields. such were the volumes exported to North America that up until a few years ago the price of Dated Brent. Europe has also been a consistent exporter of crude oil – almost exclusively from the North Sea. resulting from the historical Rühr Oel joint venture between Veba (now owned by BP) and PDVSA. with the result that 25%-35% of European crude oil production is exported outside the region.84 -. with exports to Asia peaking at about 200.000 B/D in 1999.

BY COUNTRY / REGION.4 0.85 In the early 1990s. only 66% of the 2000 peak. and as a consequence some production had to be exported – mainly to Canada and the U. FIGURE A-4-5 EUROPEAN CRUDE OIL EXPORTS. European crude oil exports have been declining quite sharply.8 0. such that by 2005 exports totaled about 900. to refineries that were better able to handle its unusual properties. However. United States imports of North Sea crude were increasing at a time of higher domestic product demand and refinery utilization and declining domestic crude production. . The European refining industry has only limited capacity to process such crudes. .2 million B/D. with trade to North America totaling 1. Trade volumes to all markets have declined.S. the production of heavy crudes with a high acid content (TAN) commenced and started to increase rapidly as new fields were developed. This necessary rebalancing has resulted in a higher level of European exports than would otherwise have been the case.4 1.6 0. and both Canada and the United States importing less. since then and in line with declining North Sea production. The one exception is Latin America.000 B/D.2 0.2 1.0 1990 1992 United States 1994 Canada 1996 Latin America 1998 Asia 2000 Africa 2002 Middle East 2004 Total exports peaked in 2000 at 1. 1990-2005 (Million Barrels per Day) 1. where exports have been increasing to the Caribbean refineries. with China being the only market in Asia importing European crude.III A – Historical Market Developments -.4 million B/D.0 0.6 1.

108 47.010 9.693 91.075 13.586 693.681 46.9 34.283 6.551 13.699 35.971 228.252 163 2.781 50.647 4.185 2002 305.246 80 10.340 1998 308.418 9.262 783 268 224 43.788 1999 313.537 21.9 35.827 274.623 2.785 47.311 48.368 45 65. Iceland.472 387 8.915 120 502 32.122 7.050 15.434 16.110 280 24.072 45.281 46.760 177.728 64.341 444.746 9.272 437.196 530 9.866 15.023 235.598 17.5 0.832 18.280 2005 253.028 2.875 9. Croatia.271 16.910 70 4.098 14.180 17.862 39.218 24.249 45.014 724.9 34.853 17.060 92.322 232.050 46.251 24.671 285 3.730 4.201 61.944 1.216 139.817 74 92.462 443.297 27.885 13.0 0.378 16.9 34.378 2.798 15.8 0.252 30.181 132 67.523 37.820 415.258 258.243 53.923 276.990 50.826 52.203 209.111 17.154 32 477 16.653 16.737 53.810 65.475 12.053 114.613 201 6.819 20.620 57.404 68 4.916 27.718 7.744 42 2.808 87.392 423.456 678 2.571 725.311 56.420 42.132 29 6.355 664 13.070 114.423 427.439 265 1.628 3.555 64.129 692.413 16.458 24.421 135.III A -. FYR Macedonia.261 494.8 0.288 679 991 31.798 169.0 1.552 157.424 535 11.952 624 8.287 709.228 108.305 4.076 39 262 12.146 112.605 57.576 65.265 312 42.149 5. Turkey .094 155.283 15.319 47.662 52.812 119.656 94.920 122.298 211 208 626 31.030 13.224 2. Serbia and Montenegro.072 4.805 17.170 15.272 269 54.657 36.494 19.144 50.358 44.028 431.299 14.219 1. Norway.645 435 39.0 0.896 12.233 12.149 19.104 10.315 9.291 162 1.007 2.997 39.895 6.788 51.353 690.843 6.9 * Other CIS production shipped via Russian Urals system Note: Comprises Countries of EU27 plus Albania.407 726.538 1.579 10.942 6.489 271 1.420 13.86 -.690 245 10. Switzerland.811 82 5.950 44.869 147 6.067 468.972 3.642 1.139 348 7.060 105.188 3.005 46.810 238.880 696.939 28 57.953 1.647 8.127 19.756 57.768 4.492 297.223 16.714 20.208 17.509 2. Bosnia-Herzegovina.053 108.650 47.9 0.825 8.640 35.104 36.146 114.300 19.869 7.3 0.488 37.010 58.170 232.406 165 119 10.008 2.374 15.714 15.160 1996 314.129 679 41.967 35.9 35.237 796 1.710 16.581 278.290 8.182 13.768 51.163 172.108 21.757 2004 279.559 41. .347 11.343 15.288 31.9 35.946 257.503 29.876 55.741 8.215 29.963 15.466 3.033 264 950 12.549 46.200 309 12.555 2003 291.519 17.9 34.981 3.156 4.119 508.485 2001 308.026 4.400 52.169 37.203 129 8.0 35.441 35.Historical Market Developments TABLE A-4-1 EUROPEAN CRUDE OIL SUPPLY/DEMAND (Thousand Tonnes per Year) 1995 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Russia / Other CIS* Kazakhstan Azerbaijan Total CIS Other Non-OPEC Africa Asia Canada China Japan Latin America Middle East United States Other / Non-Specified Total Other Non-OPEC Total Imports Exports Africa Asia Canada China Japan Latin America Middle East United States Total Exports Total Crude Oil Supply Estimated Crude Quality Processed API % Sulphur 295.741 14.600 8.863 197.9 35.487 2.9 0.609 35.345 1.212 2000 319.097 2.125 53.020 19.877 15.639 43.012 5.851 662.591 267 13.228 23.740 3.681 10.025 22.650 462.397 1997 311.220 691.727 16.267 7.021 354 9.167 13.259 675.8 0.384 45.872 42 7.228 105.988 30.035 7.489 16.707 92.9 34.1 0.374 59.244 134 68.882 225.292 6.234 13.426 257 24.

87 TABLE A-4-2 EUROPEAN CRUDE OIL SUPPLY/DEMAND (Thousand Barrels per Day) 1995 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Russia / Other CIS* Kazakhstan Azerbaijan Total CIS Other Non-OPEC Africa Asia Canada China Japan Latin America Middle East United States Other / Non-Specified Total Other Non-OPEC Total Imports Exports Africa Asia Canada China Japan Latin America Middle East United States Total Exports Total Crude Oil Supply Estimated Crude Quality Processed API % Sulphur 6.9 0.463 271 5 203 204 51 734 9.209 417 1.337 1999 6.853 13 160 6.429 987 267 4.247 2003 5.9 35.852 1.069 489 3 1.588 410 86 5 1.695 35.366 1 80 4.9 35.099 440 1.329 13.850 11 187 5.108 618 1.903 8 161 5.074 6 244 1.953 2004 5.339 13. Croatia.306 2002 6.944 288 235 275 1 53 853 9. Iceland.1 0.9 34.352 341 1 130 331 79 883 8.638 430 68 833 280 128 1. Norway.298 4 126 4. Turkey .0 0.008 9.0 35.3 0.257 361 85 6 837 207 121 1.373 581 164 3.270 2.9 34.745 7 147 5.687 388 3 2 200 333 6 76 1.972 3.9 0. Switzerland. Bosnia-Herzegovina. Serbia and Montenegro.9 34.150 240 1.190 14.099 720 1.513 304 3 168 340 82 897 8.5 0.399 1998 6.992 1 10 340 54 9 806 1.250 376 77 785 711 191 1.087 2.775 613 177 3.001 1 5 256 25 29 730 1.641 356 43 1.676 2005 5.543 332 42 939 337 192 1. .265 33 6 275 4 4 13 655 990 13.467 6 25 286 2 10 664 993 13.0 1.199 327 3 1.105 1996 6.521 3.143 23 42 317 14 50 5 494 944 14.025 324 40 934 802 148 1.9 35.8 0.123 8.065 550 1.965 323 233 457 2 107 1.155 170 4.304 316 179 343 86 924 8.160 499 1.320 1 92 4.113 494 1 1.113 601 2 1.682 356 1 152 332 92 933 8.369 13 270 14 20 646 964 14.9 35.051 5 19 249 64 14 838 1.608 283 2 201 306 88 879 8.565 3.785 324 144 613 380 122 944 403 1 1.382 3 128 5.149 2.062 8.696 31 43 302 81 75 31 776 1.709 2.235 7 166 4.8 0.715 428 130 822 267 150 1.270 2.970 261 257 186 3 24 731 10.831 2.694 3 58 352 16 5 5 890 1.977 45 354 16 23 6 498 943 14.367 974 180 4.130 662 180 3.457 1997 6.087 2.425 2000 6.118 2.8 0.0 0.9 34.212 330 133 729 417 154 1.176 340 96 1.149 2.013 718 212 1.683 11 233 5 25 471 746 14. FYR Macedonia.046 14.230 145 59 2.522 2001 6.III A – Historical Market Developments -.9 * Other CIS production shipped via Russian Urals system Note: Comprises Countries of EU27 plus Albania.219 14.269 331 110 2.800 306 217 424 116 1.434 2.309 155 5.831 1.9 34.

The most notable changes have been a growing surplus of gasoline and an increasing shortfall of gasoil/diesel. The destinations of imports and exports are subdivided into trade with OPEC countries (where data is available).III A -. FIGURE A-5-1 NET EU GASOLINE TRADE.S. Strong economic growth and the expansion of its refining industry has seen Asia emerge as a source of imports of middle distillates and a destination for exports of heavy fuel oil. accounting for about 75% of net EU exports in 2005. imports and exports of gasoline. to a lesser degree. a result of the increasing popularity of diesel-powered private vehicles and growth in commercial diesel. 1990-2005 (Million Tonnes: -ve = Exports) 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 Other / Non Specified Latin America Middle East Non-EU Europe CIS Asia North America Africa 1990 1992 1994 1996 1998 2000 2002 2004 . GASOLINE Europe has consistently been a net exporter of gasoline for many years. as have other OPEC states Libya and Nigeria. Trade to the U. making the region ever more reliant on trade flows to balance demand with supply. The Middle East. has been importing increasing levels of European gasoline in recent years. jet/kerosene. Saudi Arabia.88 -. but the surplus increased steadily in the 1990s and has grown significantly in the current decade to the level where in 2005 Europe exported 20% net of its gasoline production.Historical Market Developments A-5 EUROPEAN UNION REFINED PRODUCT TRADE FLOWS EU refinery production. . Latin American and Middle Eastern markets. gasoil (including diesel) and heavy fuel oil are shown in Tables A-5-1 to A-5-8. Asia has recently emerged as a trading partner. The rapid growth in aviation over the past ten years has also seen an increase in jet/kerosene imports as demand has outstripped regional supply. The largest market for EU gasoline exports is the United States. the size of this market relative to total net exports shown in Figure A-5-1 below. Although Europe’s principal trading patterns have not broadly changed in this timeframe. dominates European patterns. especially Iran and. Over the past ten years the European refining industry has become increasingly out of balance with domestic demand. Data are provided in units of both millions of tonnes and thousand barrels per day. with the remainder sold into Africa. the CIS region and other countries/regions.

Europe was essentially self-sufficient in jet/kerosene in the early 1990s. rising from around 2 million tonnes up to 1997 to about 14 million tonnes in 2005 (see Figure A-5-2).000 B/D).S.S. each exporting 6-7 million tonnes net (140.S. on imports from outside has also thrown into focus the relative sizes and configurations of U. octane values but also added significantly to total U. The dependence of the U. Another factor that has impacted the import requirement has been the progressive removal of the additive methyl tertiary butyl ether (MTBE) from the U.S. The principal EU gasoline exporting countries are France.III A – Historical Market Developments -. U. market for placing its surplus gasoline production.000 B/D).000 B/D) of gasoline supply.S. refinery is felt that much more strongly. resulting in the rapid growth of budget and “low-cost” airlines and a boom in leisure travel. Although the blending of ethanol in U. changes to EU diesel specifications from 2000 required a lower density fuel. net imports increased rapidly in the second half of the 1990s. . . Although the domestic U. refineries are approximately twice the size on average and also have about twice the yield of gasoline than European refineries. and the United Kingdom with about 5 million tonnes of net annual exports (115. in turn necessitating more jet/kerosene to be blended into the diesel pool. Italy and the Netherlands. as in 2002 it represented about 12 million tonnes (275.89 The European refining industry is heavily dependent on the U.000-160. This resulted in demand for jet fuel increasing at rates of over 5% per year – far higher than the European refining industry could meet. underlining the strategic significance of the U. and European refineries.S. gasoline demand has been growing by rates of up to 3% per year. U. as to make up the loss of gasoline production requires an increase in output equivalent to four European refineries. with a resulting rapid increase in jet fuel demand. and export volumes to the United States have doubled since 2001.S. gasoline has offset some of this volume loss. gasoline volumes. refining industry has been expanding to meet the demand growth. gasoline pool since 2005 (following bans in several states since 2003). Furthermore. As a result.S. the availability of imports from Europe did not require further expansion of refining capacity. The impact of the temporary loss of a U. but the second part of that decade was notable for significant liberalization of European air travel. the removal of MTBE created a need for additional supply. JET/KEROSENE EU jet/kerosene trade has changed significantly over the past ten years.S. as a result of increasing disposable income and the large rise in popularity of the low-economy sports-utility vehicle segment of the car market.S. MTBE not only boosted U.S.S. gasoline market to the European refining industry. thus drawing in more imports.

Some imports are resold as exports to some African markets as well as the United States. The CIS is also a supplier of EU jet/kerosene. most of the increase in total gasoil demand has been met through increasing imports. . which imports approximately 7 million tonnes net annually (150. Towards the end of the 1990s. especially countries such as Kuwait. although net imports from both these areas rose in 2005 compared with 2004. the preferred strategy of most refiners was to invest in hydrotreating and other desulfurization processes and import high-sulfur gasoil streams for upgrading into diesel. as it has a high .III A -.90 -. However. although supplies from this market are more structural and have not seen the rapid increases that Middle Eastern markets have seen. GASOIL/DIESEL The increasing levels of European private diesel car ownership and higher road haulage volumes have resulted in diesel fuel demand increasing by rates of approximately 5% per annum on average since the mid-1990s.000 B/D) respectively. As shown in Figure A-5-3. especially in the key German market.Historical Market Developments FIGURE A-5-2 NET EU JET / KEROSENE TRADE. As Russian gasoil is straight-run material from distillation units it is very suitable for desulfurising into diesel compared with cracked gasoils. as the penetration of natural gas has increased. with only minimal trade from other markets. The largest EU market for importing jet/kerosene is the United Kingdom. Jet/kerosene trade between Asia and Europe has also grown as a result of increasing Asian refinery production. at times of relatively poor refinery margins. Some of this increase has been offset by declining in demand for heating gasoil over this period. the size of the transportation market is such that despite this decline the combined gasoil/diesel market has been increasing by about 2% a year since the late 1990s.000 B/D) and 2 million tonnes (43. the principal source of EU gasoil imports is the CIS region. and is continuing so to do.000 B/D). This compares with Germany and France. Saudi Arabia and the UAE. which report net imports of about 4 million tonnes (86. 1990-2005 (Million Tonnes: +ve = Imports) 20 Other / Non Specified Non-EU Europe CIS Asia North America Middle East 15 10 5 0 -5 -10 Latin America Africa 1990 1992 1994 1996 1998 2000 2002 2004 The chief source of these imports has been the Middle East. Although there have been some refinery investments in Europe to increase diesel yields through residue destruction.

resulted in the Utilities increasing their fuel oil use and consequently higher levels of imports from Europe were seen.III A – Historical Market Developments -. CIS gasoil imports currently average about 30 million tonnes annually. As with jet/kerosene. Germany are the largest EU importers of gasoil/diesel.S refiners also purchase straight run fuel as refinery feedstock. The balancing trade for fuel oil is the export of cracked and straight run fuel oil to Asia. 1990-2005 (Million Tonnes: +ve = Imports) 40 30 20 10 0 -10 -20 1990 1992 1994 1996 1998 2000 2002 2004 Other / Non Specified Latin America Africa Non-EU Europe CIS Asia North America Middle East France and. It is almost impossible to disaggregate the quantities used as feedstock due to lack of statistical data. mainly to meet seasonal heating oil requirements and increasing diesel demand. some gasoil/diesel has also been imported from Asian countries in the current decade. Europe also exports large volumes of fuel oil. The reduction in gas prices in 2006 reduced fuel oil burn and imports returned to historical levels. This trade is typically into Italy to provide ultra low sulfur fuel that is used as power station fuel. The U. about double the level of ten years ago. . Most of the Russian supply is straight run.S.91 cetane number and contains very low levels of aromatics. Some of the fuel exported is Russian imports that are re-exported from the main oil port of Rotterdam. East coast Utilities import low sulfur fuel on a seasonal basis from Northern Europe and U. to a lesser extent. This trade flow has grown from less than one million tonnes in 1998 to nearly five million tonnes in 2005. . with import from this source having grown to over 17 million tonnes in 2005. although some is also used as feedstock to refineries in the region.S. FIGURE A-5-3 NET EU GASOIL / DIESEL TRADE. In 2004 and 2005 the high level of gas prices in the U. The second most significant supplier is Libya. which is used both as refinery feedstock and as bunker fuel. HEAVY FUEL OIL The largest supplier of heavy fuel oil to the EU is Russia.

92 -. 1990-2005 (Million Tonnes: +ve = Imports) 40 30 20 10 0 -10 -20 -30 1990 1992 1994 1996 1998 2000 2002 2004 Other / Non Specified Latin America Africa Non-EU Europe CIS Asia North America Middle East .III A -. .Historical Market Developments FIGURE A-5-4 NET EU HEAVY FUEL OIL TRADE.

0 3.4 1. Estonia.5 0.8 0.4 0.5 0.7 0.0 0.0 5.1 6.3 0.0 0.6 0.6 0.1 25.0 1.1 0.2 0.7 0.0 0.7 6.III A – Historical Market Developments -.6 0.2 0.3 1.0 0.5 0.0 0.7 0.0 1.3 0.2 0.6 0.0 0.9 0.1 2.3 0.2 2003 167.0 0.0 0.0 23.2 1.3 9.8 10.7 0.3 0.2 0.0 4.0 1.1 0.4 0.0 0. Romania.0 0.8 0.0 0.1 0.4 0.1 0.9 0.0 5.9 7.6 0.7 1.2 0.1 0.0 1.0 0.3 0.0 0.2 0.2 0.0 0.0 0.5 0.2 0.0 0.6 6.6 0.5 0. Sweden.1 0.3 0.0 0. Denmark.9 2002 167.1 1.5 6.7 0.1 0.1 0.1 0.2 0.1 0.7 0.1 0.7 0.0 0.0 0.0 0.3 4.2 8.6 EU 27 Countries of: Austria. Bulgaria.2 0.1 0.0 0. Czech Republic.9 9.7 14.9 5.2 0.4 0.1 0.1 0.3 0.2 0.2 0.1 0.6 0.2 1.0 2.2 7.2 2000 162.5 5.1 0.4 4.1 0.9 0.4 0.4 0.0 0.0 0.7 6.0 0.8 36.0 1.2 0.0 0.7 0. Spain.3 31.0 0.1 1.6 0.0 0.9 4.2 0.3 0.7 45.6 0.9 0.6 12.0 0.5 23.9 0.6 1998 174.6 1995 167.1 6.2 0. France. Cyprus.1 0.0 2.0 0.0 0.6 1.0 0.7 0.4 5.2 0.3 1.2 0.1 0. Slovenia.4 0.2 0.1 3.5 0.7 7.0 0.0 0.7 0.0 0.4 1.2 0.6 0. Italy.7 5.7 1.0 5.9 2004 173.2 5. Netherlands.1 1.9 4.1 0.7 0. Portugal.2 0.1 0.2 0.7 10.7 0.7 8.0 2.0 3.7 0.2 0.4 4.8 0.1 0. Luxembourg. Lithuania.3 0.1 0. Greece.0 0.5 0.93 TABLE A-5-1 EUROPEAN UNION: GASOLINE TRADE FLOWS (Million Tonnes per Year) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 161.1 16. Belgium.0 0.2 0.0 3.5 5.5 1.1 0.7 0.0 0. Malta.1 0.1 0.1 0.1 0.3 12.9 0.1 0.5 0. Germany.8 17.5 0.2 0.5 6.7 0.1 0. Latvia.1 0.1 2.0 0.4 17. Ireland.7 0.6 48.7 0.4 1.2 0.5 8.8 1999 164.0 1.8 0.0 3.8 0.2 14.0 1.1 0.0 0.0 1.6 0.0 0.1 0.9 12.7 0.6 0.1 0.1 3.0 1.2 0.7 0.1 0.0 0.0 0.1 0.8 1.1 0.0 0. Hungary.8 1.0 1.2 0.0 0.1 0.0 1.1 0.1 0.8 0.8 0.8 0.0 0.3 0.0 1.0 0.7 0.0 1.0 0.0 0.1 2005 170.0 0.1 0.8 0.0 0.1 0.2 1.0 2.1 0.0 0.1 0.0 4.6 0.7 7. Slovakia. Finland.0 0.9 0.1 10. Poland.3 1996 170.0 0.6 0.0 0.2 1997 172.1 0.2 1.5 0.0 0.7 11.0 1.5 0.4 5.6 5.0 0.2 0.0 0.0 0.0 1.9 0.4 22.1 0.6 0. United Kingdom *: OPEC countries for which data is available .0 0.6 5.4 0.7 0.0 0.0 0.6 0.7 0.1 0.0 0.4 6.1 0.0 0.5 2.0 0.0 0.0 0.0 0.8 7.0 4.0 5.6 0.8 6.7 5.6 0.2 0.0 0.9 23.2 0.2 0.7 2001 163.1 7.0 0.7 23.9 0.3 0.0 0.3 0.0 0.4 0.7 21.1 0.3 0.1 0.9 1.0 0.7 0.6 0. .4 0.

United Kingdom *: OPEC countries for which data is available .792 2001 3. Portugal. Denmark. Germany. Greece. Netherlands.III A -. Malta.838 2000 3.Historical Market Developments TABLE A-5-2 EUROPEAN UNION: GASOLINE TRADE FLOWS (Thousand Barrels per Day) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 3. Luxembourg. Belgium. Bulgaria. France.966 1997 4. Cyprus. Estonia. Slovenia. Czech Republic.979 14 1 4 5 14 1 1 38 18 4 2 51 17 3 10 108 289 - 8 - 6 - 6 1 0 7 9 2 0 0 40 0 0 59 125 - 2 0 1 2 5 15 0 0 44 0 0 1 84 154 5 0 3 9 13 1 1 45 0 4 1 0 79 162 - 3 2 4 1 - 2 1 2 0 5 23 4 0 25 4 1 0 114 181 - 10 3 14 4 2 0 2 0 13 6 0 1 6 3 0 5 1 0 21 23 13 4 - 1 0 9 2 3 0 29 0 1 1 121 173 4 0 1 4 4 0 3 1 0 26 21 16 0 54 0 4 2 2 85 237 6 3 2 34 0 0 1 0 112 163 10 31 2 1 0 47 0 8 1 2 76 187 17 27 15 0 40 3 0 1 90 211 - 23 28 14 3 0 53 0 4 0 0 88 237 44 4 1 4 119 252 16 1 1 11 2 10 7 95 1 8 1 110 150 413 3 14 8 0 40 13 1 8 117 1 14 20 106 156 502 1 15 12 1 34 12 15 121 13 17 165 151 557 0 1 14 5 39 20 1 21 131 18 16 162 102 530 17 12 2 1 24 11 0 12 133 1 31 17 163 134 557 15 17 3 20 23 0 14 133 0 17 11 160 139 551 1 16 18 3 1 6 22 3 8 120 11 26 179 138 550 0 22 9 3 16 0 10 110 13 16 199 188 586 1 25 17 1 1 1 14 4 17 123 5 23 17 265 217 730 2 30 28 3 2 2 16 3 16 0 122 1 12 21 287 298 843 - 1 3 36 51 1 3 17 9 26 139 1 16 25 390 343 1. Hungary. Finland.908 2003 3. Slovakia.94 -. Latvia.033 1998 4. Romania.830 2002 3. Ireland. Lithuania.084 1999 3.035 2005 3. Italy. Sweden.924 2004 4. Poland.777 1995 3.137 EU 27 Countries of: Austria. Spain. .060 20 36 43 4 3 19 10 24 0 135 2 53 43 402 342 1.911 1996 3.

1 7.0 0.0 0. France.0 2.1 1.8 2002 45.0 0.6 0.5 0.9 0.5 1998 50.0 0.0 1.0 8.5 0.7 1.5 1.5 0.1 0.1 0.8 0.9 0.2 0.0 0.0 0.5 0.3 5.8 2.4 0.0 0.3 0.0 0.0 0.5 19. Finland.2 1.4 8.0 0.0 0.1 0. Belgium.1 0.3 0.5 1.3 1995 46.0 1.2 0.9 0.6 0.8 6.8 0.0 0.0 0.2 0.4 0.3 0. Spain.6 0.1 0.5 2.0 0.0 0.7 0.0 0.5 0. Italy.0 0.7 0.5 0.5 0.4 5.7 0.2 3.2 0. Ireland.2 0.8 2.7 0.2 0.1 0.1 0.0 0.7 0.2 1.7 2003 47.0 0.0 0.1 2. Portugal.1 0. Latvia.0 0.6 0.7 0.0 0.9 0.0 0.2 0.0 0.8 0.6 0.2 0.4 1.0 0. Poland.0 0.2 0.0 0.3 0.5 0.3 0.1 1. Netherlands.4 0.4 0.0 0.8 2.0 0.7 1.2 0.8 0.5 0.2 0.1 0.1 0.2 0.3 1.0 0.2 0.0 0.III A – Historical Market Developments -.0 0.1 1.0 0.2 0.0 0.5 3.0 2.0 0.0 0.2 2.9 0.2 0.7 0.0 0.1 4.5 0.1 1.3 1.2 0.1 1.2 0.5 19.5 0.0 0.5 0.3 0.8 1.2 1.0 0.2 1.9 1.1 0.2 0. Malta.0 0.1 2. Cyprus.0 0.5 2.5 0.6 1.6 2004 51.2 3.5 0.0 0.0 2.1 0.9 0. Greece.0 0.0 0. Lithuania.2 1.0 0.5 1999 50.2 0.1 0.5 1.0 0.3 0.1 0.6 0.1 0.0 0.5 3.0 0.3 2005 49.2 1.4 0.3 0. Slovakia.3 0.4 0.0 0.0 0.6 8.3 18.8 2001 46.3 0.4 3.0 0. Denmark.2 0.2 1.0 0.0 0.0 0.2 0.0 0.3 0.0 0.2 0.1 0.0 0. Estonia. Bulgaria.1 0.4 0.3 7.0 0.3 0.0 0.0 0.0 0.1 0. .0 1.4 0.1 0.0 0.0 0.1 0.1 1.0 0.3 4.0 0.0 0.3 0.1 0. Sweden.2 0.6 3.9 23.8 1.4 0.1 0.6 1.0 0.0 0.9 0.1 0.2 0.0 0.0 0.8 0.4 0.3 0.4 0.4 0.2 0.0 0.1 0.5 0.5 0.0 0.0 0.0 0. Luxembourg.3 25.4 0.6 0.5 0.2 0.2 0.1 1.0 0.2 0.5 1.1 0. Germany.0 0.0 0. Slovenia.6 0.0 0.2 0.3 2.2 0.0 0.7 0.0 1.1 0.2 0. Romania.9 3.4 0.2 0.2 0.3 10.0 0.0 4.1 0.0 0.5 0.0 0.0 0.0 0.0 0. Hungary.0 0.4 6.9 0.6 0.0 2.0 0.3 0.0 1996 49.0 0.1 0.5 0.2 0.0 0.0 0.1 0.4 0.0 3.0 0.0 2000 48.0 0.0 0.3 0.1 0.3 0.4 1.6 3.2 0.5 0.0 0.0 0. United Kingdom *: OPEC countries for which data is available .2 3.0 0.5 0.4 0.5 0.7 1.4 0.5 0.95 TABLE A-5-3 EUROPEAN UNION: JET/KEROSENE TRADE FLOWS Million Tonnes per Year) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 44.0 0.0 0.0 0.0 0.8 0.8 0.2 14.6 0.8 2.3 0.7 0.6 0.2 0.3 1.3 3.2 0.1 0.3 0.0 0.2 1997 49. Czech Republic.3 0.2 0.0 0.8 0.1 2.3 0.6 EU 27 Countries of: Austria.0 0.

III A -. Slovakia. Italy. Slovenia. Lithuania. Malta. France. Ireland. Sweden. Latvia. Czech Republic. United Kingdom *: OPEC countries for which data is available . Portugal. Spain.009 2002 984 2003 1.088 1999 1. Hungary.074 0 0 2 10 8 0 20 6 1 1 1 10 0 4 2 22 88 - 4 8 1 3 16 11 2 0 5 1 4 0 21 75 - 3 - 8 - 10 17 15 10 1 1 54 19 2 0 7 0 6 5 31 176 - 10 15 15 16 - 10 - 14 28 11 17 44 17 132 25 9 6 1 5 5 10 7 71 404 - 10 42 13 1 17 44 8 134 17 11 7 3 8 4 1 98 417 - 11 36 9 2 51 64 13 186 25 7 14 4 5 7 13 9 41 497 4 0 3 3 0 3 11 13 2 1 26 17 1 0 7 1 0 1 27 70 1 5 2 29 110 5 4 10 1 32 11 1 0 19 24 8 38 22 2 0 32 50 6 161 21 4 0 6 1 7 13 2 25 2 6 18 2 53 429 39 14 1 50 49 22 179 38 11 23 4 5 12 14 20 72 555 17 5 11 72 28 2 0 5 4 9 5 27 226 111 22 3 0 0 - - - - - - - - - - - 302 4 2 0 0 9 11 5 25 3 9 2 25 67 163 1 1 1 0 0 6 5 4 19 0 2 4 26 70 3 8 7 6 0 19 3 1 0 50 97 0 0 8 10 0 11 0 0 0 34 65 0 0 2 10 0 1 15 1 0 4 35 68 0 0 1 1 8 0 0 12 1 1 10 33 68 0 0 7 0 12 0 0 8 13 41 0 0 0 0 4 0 0 10 0 0 16 16 47 0 0 0 0 5 0 13 0 0 6 25 51 1 0 5 0 0 0 12 0 0 18 17 54 0 0 0 4 0 0 0 5 0 1 13 21 45 0 0 0 1 7 0 1 6 0 1 18 22 55 EU 27 Countries of: Austria. Cyprus. Belgium. Romania. Luxembourg. Bulgaria. Germany. Poland.025 2004 1. Netherlands.Historical Market Developments TABLE A-5-4 EUROPEAN UNION: JET/KEROSENE TRADE FLOWS (Thousand Barrels per Day) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 955 1995 990 1996 1.048 2001 1. . Estonia.102 2005 1.066 1998 1.057 1997 1.076 2000 1.96 -. Finland. Denmark. Greece.

1 2.8 21.3 1.5 7.0 0.2 1.1 1.1 0.1 0.3 9. Czech Republic.1 0.3 0.3 0.4 0.1 3.1 2.1 0.3 1.5 0.6 16.1 24.3 0.6 41.2 0. Denmark.9 0.4 38.III A – Historical Market Developments -.9 1997 274.1 0. Romania.0 2000 278.6 0.1 0.1 6.2 0.2 0.2 0.3 1.0 7.1 1.0 0.1 0.9 20.2 2.2 0.2 0.3 29.0 2.3 0. Greece.0 0. Luxembourg.1 0. Cyprus.8 8.8 14.2 0.0 0.6 0.0 0.0 6.9 13.1 1.1 0.4 0.5 0.0 1.4 23.5 0.9 8.0 1.2 0.0 0.4 0.6 0.0 0.1 0.2 6.2 0.0 0.6 0.0 0.3 2.2 1.5 0.8 4.0 0.0 0.0 0.0 1.7 3.2 0.1 18.4 15.7 1.1 0.4 0.2 20.0 0.0 0.2 0.2 8.2 1.1 1.7 0.2 20.7 0.2 0.8 0.6 2003 287.2 7.9 6.1 0.0 6.0 0.3 0.3 0.1 0.4 3.0 0.6 0.3 0. Slovenia.0 0.0 6.8 2.5 0.6 1.1 0.5 0.8 1995 257.2 0.5 0.6 6.1 21.3 8.3 0.7 7.2 25.9 0.1 0.2 0.3 4.3 0.8 1.7 0.9 2005 298.1 17.0 0.3 0.2 4.4 0.2 2001 281.0 0.8 0.0 1.0 1.4 35.0 2.0 0. Germany.0 0.4 8.0 0.3 0.3 0.0 0.4 0.1 0. Bulgaria.8 0.1 0.1 0.0 0.8 0.0 0.9 14.4 2.2 0.8 2.0 0.0 0.5 2.5 0.1 0.0 0.7 0. Estonia.4 32.0 4.1 0.4 0.9 0.1 0.0 30.0 0.0 0.0 0.9 39.0 0.6 0.2 0.7 9.4 0.4 0.0 3.2 1.9 18.0 0.1 6.8 24.0 1.5 0.8 0.1 11.1 0.0 0.4 6. Italy.6 0.2 0.6 0.5 0.2 0.1 0.0 6.0 2.4 0.7 41.9 0.1 0.1 0.0 7.0 0.2 0.1 2.0 2.0 0.0 0.0 0.1 0.2 0.9 0.2 0.1 2.0 7.7 22.1 0.2 0.3 0.0 1.7 1.3 4.1 0.1 0.7 0.6 20.1 0.3 0.2 0.3 0.9 0.3 0.0 0.5 27.0 0.6 0.9 20.0 0.0 0.0 0.0 1.1 0.1 6.0 0.7 1999 270.3 0. Hungary.0 6.3 46. Finland.0 0.2 1.0 0.1 1. Poland.2 0.3 0. France.5 2.5 2.4 2.5 0.4 0.4 0.7 0.5 19.3 0.1 0.4 3.8 18.8 2.6 7.2 0.1 0.0 0.2 0.0 0.4 1.0 2.9 0.3 0.0 0.0 7. Netherlands.2 0.5 6. Latvia.0 0.9 0.1 0.7 0.5 0.3 1.2 11.2 2.3 1.0 0.6 26.0 0.6 6.8 0.3 0.2 1996 270.5 0.4 1.1 1.3 0.1 0.1 0.1 0.1 1.1 3.1 1.2 9.0 1.1 0.3 2.9 1.0 0.8 EU 27 Countries of: Austria.6 0.0 0.4 0.7 1. Sweden.3 0.9 1.1 2.9 0. .1 0.7 18.4 2.1 2.3 0.1 0.3 0.7 2002 281.0 2.2 0.3 4. Belgium. Ireland. Spain.6 0.5 0.2 0.5 0.5 3.0 0. Malta.0 7.5 7.1 1.6 1998 283.4 0.9 0.0 0.4 0.1 0.7 0. United Kingdom *: OPEC countries for which data is available .7 2.0 0. Lithuania. Portugal.1 0.97 TABLE A-5-5 EUROPEAN UNION: GASOIL TRADE FLOWS (Million Tonnes per Year) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 237.4 2004 289.6 1.2 1.4 0.5 0.2 0. Slovakia.6 0.0 0.

Finland. Lithuania. Denmark. Luxembourg.754 2003 5.757 2002 5.671 2001 5. Cyprus.874 2004 5. . Sweden. Ireland.98 -. Malta. Spain. Portugal.518 2000 5. Poland. Italy. Greece.521 1997 5.Historical Market Developments TABLE A-5-6 EUROPEAN UNION: GASOIL TRADE FLOWS (Thousand Barrels per Day) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 4.257 1996 5.III A -.094 59 2 43 33 1 21 7 166 232 1 2 3 93 0 33 6 18 135 857 35 3 6 1 1 46 226 2 0 2 60 1 8 7 98 496 31 0 8 0 40 303 1 0 4 50 0 7 14 150 608 48 0 8 0 0 57 292 0 0 9 59 1 4 16 53 547 - 55 14 5 0 73 326 0 1 3 48 0 5 5 5 82 621 51 4 21 12 2 0 90 314 1 2 8 51 4 5 6 89 660 34 1 3 15 5 1 0 58 282 1 4 8 37 4 2 16 91 562 36 2 1 10 5 1 0 55 385 1 10 11 43 5 3 11 150 730 22 0 9 0 1 5 1 1 39 419 4 32 8 72 5 3 20 - 23 - 9 - 3 0 1 4 2 3 1 5 1 1 5 5 0 25 519 1 21 14 68 5 3 33 137 849 2 12 12 2 11 42 490 2 60 9 72 7 6 0 27 - 34 450 1 31 8 72 4 4 10 - - - - 152 790 160 809 189 947 5 7 2 20 6 1 1 128 1 21 5 34 188 419 2 1 8 2 0 2 28 39 3 0 131 0 43 20 19 171 470 0 0 6 3 0 0 6 38 39 1 127 0 34 10 5 164 434 1 6 6 42 26 1 1 137 32 8 5 155 419 - 1 2 1 6 46 3 0 156 41 10 7 141 414 0 0 3 2 1 - 6 0 1 53 1 2 43 2 2 130 1 5 2 16 167 377 - 1 3 1 45 2 1 140 14 4 24 189 423 1 0 - 1 9 1 65 4 169 4 24 30 140 446 3 - 5 1 7 38 0 0 138 25 6 13 142 373 2 55 1 0 1 144 4 11 22 139 382 10 47 8 0 147 5 19 11 152 405 1 145 5 6 24 125 363 EU 27 Countries of: Austria. Estonia. United Kingdom *: OPEC countries for which data is available .861 1995 5. Hungary. Bulgaria. Belgium. Germany.613 1998 5. France.798 1999 5. Czech Republic.909 2005 6. Slovakia. Romania. Latvia. Netherlands. Slovenia.

7 0.1 0.2 9.2 0. France. Cyprus.5 1.6 0.6 0.5 37.3 14. Italy.7 15.3 0.0 1.9 0.0 0. Malta.0 40.1 0.1 0.0 0.8 6.0 0.4 0. Ireland.1 2.6 35.0 0.1 0.2 0.7 0.5 0.0 2000 136.1 19.0 0.6 0.3 0.5 2.8 0.0 0. Romania.1 0.0 0.1 0. Bulgaria.0 0.5 24.6 0.3 0.0 0.9 39.0 0.0 0.2 0.0 0.0 2.5 2.1 2.6 0.5 6.5 1.0 6. Denmark.6 0.1 2.7 0.1 0.3 1.1 0.4 26.2 0.6 0.1 0.1 29.4 12. Germany.6 0.2 4.4 0.99 TABLE A-5-7 EUROPEAN UNION: HEAVY FUEL OIL TRADE FLOWS (Million Tonnes per Year) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 173.7 0.6 34.5 1.0 0.2 0.7 5.5 0.8 1.6 0.3 0.1 0.2 0.1 11.5 2003 128.1 0.2 0.1 1.0 1.5 0.1 0.5 32.4 15.3 10.7 34.0 0.4 0.2 3.1 1.1 0.5 0.3 0.0 0.1 2.7 7.9 0.5 0.5 8.3 15.1 0.5 0.2 0.1 0.0 5.4 0.6 0.0 2.9 0.9 0.1 2.4 0.1 0.0 0. United Kingdom *: OPEC countries for which data is available .0 0.1 0.3 5.0 2.1 0.4 0.1 0.1 0.1 0.0 0.2 6.2 0.2 4.3 7.3 3.1 0.4 0.2 0. Belgium.2 0.4 1.4 1. Slovakia.0 0.7 1.2 0.5 0.2 0.3 8.8 0. Estonia.2 0.2 0.9 0.3 4.3 0.0 0.6 0.6 1995 143.3 14.1 0.7 EU 27 Countries of: Austria.9 1.5 5.1 1.3 0.6 25.0 3.5 6.3 0.1 3.0 0.6 0.0 2001 134.5 5.4 0.0 0.3 0.1 30.2 0.3 0.6 0.9 0.1 0.7 15.2 0.2 2. Sweden.6 0.8 0.0 0. Czech Republic.1 8.4 3.2 0.0 2.8 0.0 0.8 0.2 0.3 0.1 4.2 0.0 0.4 0.0 0.1 0.2 0.6 0.3 1.0 0.2 1.5 0.1 0.1 2.0 1.0 0.1 2.7 1997 144.7 9.5 0.5 0.6 2.0 2005 129.1 12.9 0.1 0.0 17. Slovenia.6 0.6 0.9 1.3 8.8 8.7 0.0 1.3 0.8 25.3 9.4 0.2 1.4 0.2 0.0 2.4 15.4 2.3 17.8 0.0 1.1 6.6 0. Hungary.0 0.1 1.7 0.9 32.0 0.8 0.4 30.0 0.6 2.5 0.0 1.8 0.0 0.2 0.6 5.3 8.1 6. Finland.9 2.5 0. Netherlands.9 2.3 0.9 2004 133.1 0.1 0.7 1.0 0.0 0.1 9.5 0.2 0.6 5.7 0.1 1.7 0.2 0.8 0.4 0.0 12.2 20.0 2002 128.1 1.3 0.III A – Historical Market Developments -.5 0.5 0.1 0.1 2.3 0. Latvia.0 1.5 0.4 7.1 0.0 9.1 1.0 2.4 1.1 0.0 0.5 0.1 0.1 0.0 0.1 0.2 9.2 1.4 1.7 0.0 1.0 4.5 0.0 0.0 5.6 1999 136.3 1.1 4.4 30.7 26.9 5.1 7.9 0.9 0.5 3.6 0.0 0.1 0.0 3.0 0.4 5.5 7.8 4.0 0.3 0.3 0.1 0.0 0.5 7.7 1998 149. .2 0. Lithuania. Poland.0 0.0 4.2 0.0 0.9 0.0 1.5 0. Greece.9 7.1 6.1 0.0 5.2 7. Luxembourg.7 0.1 0.0 0.9 0.0 0.0 29.8 0.0 0.0 1.9 0.6 23.7 1.0 0.9 0.8 0.1 0.3 6.2 8. Portugal.8 0.4 5.3 1.1 2.0 1.4 6.4 1996 143.4 0.4 36. Spain.4 1.

Denmark.729 1999 2.476 2001 2. Malta. Bulgaria.367 11 2 5 15 35 3 31 34 136 100 18 1 40 12 13 7 - 18 2 17 16 26 - 14 17 39 2 1 6 79 155 16 42 12 15 6 - 3 22 1 45 5 8 11 94 138 10 1 1 1 0 54 3 2 0 35 97 170 16 0 37 12 2 13 92 538 3 1 0 - 2 - 8 9 42 2 1 36 97 278 16 1 2 37 19 5 27 - 14 11 - 4 9 3 - 5 1 33 6 7 40 123 116 27 1 1 43 1 35 9 31 - 0 38 2 46 0 43 93 235 11 0 1 26 21 20 15 81 596 - 1 39 0 2 1 9 54 235 6 0 1 28 8 14 21 42 0 41 1 3 61 259 7 30 11 4 7 - 33 0 2 1 1 42 316 12 0 12 94 153 31 1 42 22 12 4 2 25 93 218 9 1 28 10 9 9 44 10 37 5 34 11 2 6 273 736 139 648 175 629 128 533 117 549 - - 136 556 100 679 126 595 111 551 159 625 9 3 1 0 34 8 8 30 16 8 67 285 471 - 4 1 0 17 0 1 55 12 1 24 151 267 3 1 1 0 1 0 0 4 26 2 4 81 18 0 68 167 373 - 0 3 1 1 26 3 3 0 92 9 115 192 444 1 1 0 0 2 18 13 5 2 51 2 18 8 100 130 352 5 0 0 0 17 33 3 1 113 0 9 7 137 159 484 - 6 1 1 1 14 35 1 0 87 2 9 130 180 467 6 3 1 9 43 3 2 73 0 0 2 110 175 429 - 7 0 1 0 9 2 0 2 0 - 11 3 1 22 88 12 0 120 1 7 15 153 291 725 1 22 2 2 76 0 4 4 40 164 320 3 17 11 6 0 80 2 2 117 226 474 - 1 24 70 8 0 93 8 2 159 281 658 EU 27 Countries of: Austria. Hungary. Czech Republic. Latvia. United Kingdom *: OPEC countries for which data is available . Slovenia. Finland. Romania. Netherlands. Cyprus. Slovakia.100 -.616 1996 2. Ireland. Greece. Lithuania. Estonia.614 1997 2.445 2002 2.421 2005 2. Poland. Sweden. France. Germany. Spain. Belgium. Luxembourg. Portugal.III A -.167 1995 2.Historical Market Developments TABLE A-5-8 EUROPEAN UNION: HEAVY FUEL OIL TRADE FLOWS (Thousand Barrels per Day) 1990 Production Imports OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Exports Selected OPEC Countries* Algeria Indonesia Iran Libya Nigeria Saudi Arabia Venezuela CIS Region Other Africa Other Asia Canada China Other Europe Japan Other Latin America Other Middle East United States All Other Areas / Non-Specified Total Note: Comprises 3. Italy.344 2003 2.640 1998 2.481 2000 2.353 2004 2. .

This database has been used for the review of the development of the refining industry discussed below. The number of refineries in the study region has declined since 1995 although owing to expansions the crude processing capacity has increased by over 17%. In practice many of the smaller regional refineries continued to operate despite the “official” position that they had closed. industrial bodies and refinery owners. occurring from 1999 to 2004. The growth in the Middle East has been gradual and consistent. The nine regions shown above have increased refinery crude processing capacity by almost 625 million tonnes per year (13 million B/D) whilst reducing the number of refineries by 53 . as shown in Figure A-6-1 below. Europe and North America have seen the greatest reduction in the number of refineries. more recently. although as these are excluded from the study group they are not described in detail in the text below. government agencies.101 A-6 REFINERY DEVELOPMENTS Purvin & Gertz maintains a worldwide database of refinery configurations. adding one refinery every two to three years. although it appears to have now stabilized. while only the Middle East and India have increased the number of refineries since 1995. There was a large consolidation in reported refining sites in China at the turn of the century but the number of refineries has recently started to increase. Other regions of Asia had initially seen a growth in refinery sites until the late 1990s. from the merger of refining operations at sites in close proximity. . with just one new refinery started up in the last year by Essar at Vadinar. The decline in the number of refineries within Latin America has been more gradual. For comparison purposes the rest of Asia and the Far East aside from China and India are included in the Figures and Tables. India increased its refinery locations towards the end of the 1990s and has remained stable since. FIGURE A-6-1 REGION CHANGE IN NUMBER OF REFINERIES SINCE 1995 10 5 0 -5 -10 -15 -20 -25 -30 Europe Russia Middle East Africa North Am erica Latin Am erica India China Other Asia & Far East Much of the refinery count reduction in Europe and North America occurred in the mid1990s from refinery closures and. This is based on available data from publications. but following the Asian financial crisis the number of refinery sites declined.III A – Historical Market Developments -.

909 1. such as Reliance. However. and whilst India and China have substantially increased average refinery crude capacity since 1995.257 96% 6. where fixed costs account for a large proportion of operating costs.266 7.Historical Market Developments since 1995.499 34% Latin America 4.335 103% 843 (1.102 -.000 1.589 1.410 5.376 1. . they still only account for 4% and 9% respectively of the study region’s crude capacity. Latin America and the Middle East account for 10% and 9% respectively of the study region capacity. FIGURE A-6-2 REFINERY CRUDE CAPACITY PER REGION (Million Tonnes Per Year) 5. While this has reduced the average refinery size.III A -.392 416 14% 4.000 3.000 4.063 8. With the decline in refined product demand in Russia. indicating a consolidation towards larger sites. the large-scale refinery additions.000 2.000 0 1995 Other Asia & Far East China India Latin Am erica North Am erica Africa Middle East Russia Europe 1997 1999 2001 2003 2005 2007 .155 7.889) 16% -22% In India.834 6.226 8.976 3. Russian refineries previously had a high average crude capacity per refinery similar to that currently seen in India.651 3.743 28% 1995 2007 Increase/(Decrease) Percent of 1995 2. Economy of scale is important in the refining industry.394 6.109 18% Africa North America 4. it has also helped to increase the average level of conversion. have resulted in the average refinery capacity increasing by over 100% since 1995.220 6.078 24% India China Other Asia & Far East 3.561 4. it has the highest average refinery capacity of the regions in this study. AVERAGE CRUDE CAPACITY PER REFINERY Thousand Tonnes Per Year Region Europe Russia Middle East 5. Consequently.510 5. many Russian refineries have simple configurations that yield a large proportion of fuel oil residue.722 6. particularly for fuel oil. refineries have tended to decommission excess crude distillation capacity rather than close refining sites. Europe and North America each account for approximately 20% of the refinery capacity identified within the study region.897 1.

The topping refineries shown above. The types of refineries in Russia are summarized below.III A – Historical Market Developments -. . with one exception.000 B/D high conversion cracking refinery in the Netherlands. FCC capacity is 16% of crude distillation capacity and hydrocracking capacity is nearly 10% of crude capacity.051 21.135 116. Refineries may be found in 30 out of a total of 35 European countries (including countries of the Former Yugoslavia) and range in size from small topping refinery and specialty refineries that focus on such products as lubes and asphalts. Vacuum distillation capacity represents around 42% of crude distillation capacity. The refinery configurations in Europe are summarized in the table below: EUROPEAN REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 18 67 25 30 140 107. Total fuel oil conversion capacity is 40% of crude capacity. RUSSIA There are 58 refineries in the CIS Region and Russia accounts for 39 of them. RUSSIAN REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 6 8 13 12 39 83.514 31 31 29 8 100 . all produce specialty products such as lubricating oils or asphalt.213 27. representing about 65% of the total CIS Region capacity. to a 400.593 597.652 78. the high proportion of fuel oil conversion process capacity relative to crude capacity indicates a relatively complex refinery infrastructure.832 13 70 14 3 100 Much of the refining capacity has some degree of conversion with only 17% consisting of either hydroskimming or topping configurations. Whilst some hydrocracking units might also process a vacuum gas oil (VGO) fraction prior to further processing in an FCC.782 83.029 266. None produce gasolines.892 848.103 EUROPE There are 140 refineries in Europe with a combined capacity of 849 million tonnes per year (Tables A-6-1 and A-6-2).

MIDDLE EAST REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 2 22 10 15 49 18. Fuel oil conversion capacity represents approximately 29% of crude capacity with FCC and hydrocracking accounting for 18% of crude capacity.104 -. FCC is the favored VGO conversion technology in Russia and yet only represents 7.952 70. there is a significant level of fuel oil upgrading capacity.4% of crude capacity. .Historical Market Developments About 31% of Russian crude distillation capacity has coking facilities associated with it.356 221. this compares with fuel oil conversion capacity at just 12% of crude capacity in 1995. Consequently. As fuel oil demand has represented a reasonably high proportion of overall local demand. MIDDLE EAST Middle East refining capacity by refinery type is summarized in the table below. . The refining industry in Russia is relatively simple. the capacity rationalization that has occurred has been achieved simply by shutting down one or more trains. Apart from the coking refineries.8 million tonnes per year. Russian refineries were generally built with several duplicate hydroskimming trains of relatively small capacity. Only one of the six coking refineries does not include any other form of cracking in the refinery. Nevertheless. mainly concentrated in Saudi Arabia and Kuwait.520 50. Russia’s operating rate has increased from below 50% in 1998 to over 80% in 2006. with fuel oil conversion capacity representing just 20% of current crude capacity. Coking capacity currently totals about 5. In addition to the refineries identified above. The remaining refineries fall into the hydroskimming or topping categories. topping facilities are used near oil fields to produce products for local consumption.411 5 61 14 20 100 Half of the refineries in the region are toppers and hydroskimmers and most of the new refinery capacity added in recent years was condensate splitters. Typically the poor condition of the mothballed equipment would preclude restart.583 361. fuel oil upgrading investments have not been widespread.III A -. However. a number of small. in part due to the high bunker demand. there are eight refineries that include some form of catalytic cracking. such that several large refineries comprise five or more such trains.

The refinery industry is characterized by the exit of smaller uncompetitive entities and the expansion of efficient sites. and so Southern African refiners have needed to invest in fuel oil upgrading facilities. The feedstock for this plant is nearby offshore gas condensate production. South Africa and Morocco all have FCC units while the Khartoum refinery in Sudan and the Tema refinery in Ghana both have resid FCC units.726 53.329 11. although a pipeline from Mozambique to South Africa. although some capacity expansions have been announced in certain countries. AFRICAN REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 3 11 23 11 48 12.105 AFRICA Since Africa as a whole is already a net exporter of refined products. In contrast. Due to availability of locally produced coal. Algeria. a significant synthetic gasoline and diesel production industry was established in the country. enables the use of natural gas as a supplementary feedstock. Coking refineries are located in Egypt. The cracking refineries in Nigeria. .604 162. Now that the embargo on Libya has been lifted. South Africa has been aggressive in serving the small importing African countries in close proximity to its border. During South Africa's period of isolation. and Libya. and a large proportion of this capacity is located in the Northern African crude oil producing countries of Algeria. some expansion of its refineries can be expected. Angola.169 85.827 8 33 52 7 100 The lack of any significant fuel oil upgrading capacity in North Africa reflects the high proportion of light sweet crude produced in the region. there is little incentive to add new refinery capacity. completed in early 2004.III A – Historical Market Developments -. The Sasol plant in Secunda primarily uses coal as a feedstock. Southern Africa has no indigenous crude production and processes mainly Middle East light sour crude. and Nigeria have announced plans for large export refineries but not all of these projects are expected to go forward. a synthetic fuels plant based on natural gas was brought onstream by Mossgas (now known as PetroSA). Egypt. Most of the cracking capacity is located in Nigeria and South Africa. there is little heavy fuel oil demand other than bunkers. and the ability to sell the low sulfur residue into the Mediterranean market as feedstock or low sulfur fuel oil. . NORTH AMERICA The pace of refinery closures in North America has slowed. In 1993. About 60% of refining capacity in Africa is hydroskimming or topping.

983 14.732 43 47 6 3 100 . Coking capacity is 15% of crude capacity and enables the processing of heavy crudes from both the Middle East and from Latin America. and to a lesser degree in Argentina. The following table summarizes the types of refineries in Latin America. are fairly complex. In 2003. NORTH AMERICAN REFINERY CONFIGURATION: 2007 Crude Distillation Capacity kTPA 584.464 317. indicating a high degree of complexity with atmospheric residue able to be processed through several conversion technologies within the refinery. reducing capacity. .III A -.663 49. This is a major factor that has led to the predominance of coking refineries in the region.106 -. The refineries in Brazil.419 200. LATIN AMERICA Half of the refineries in Latin America are simple topping or hydroskimming configurations. Mexico’s Cadereyta refinery upgraded its residue conversion capability by adding a delayed coker. which has been substituted by natural gas and coal. Mexico.Historical Market Developments The majority of refineries have conversion processes because of the limited demand for fuel oil. and dominate the Latin American refining industry.090 Number Coking Cracking Hydroskimming Topping Total 60 64 10 30 164 Percent 60 33 2 5 100 The region has total fuel oil conversion capacity equivalent to 88% of the crude distillation capacity. A refinery in Guatemala and one in Panama closed in late 2002.557 969. although these refineries represent less than 10% of regional capacity.400 424.406 17.930 24. LATIN AMERICA REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 13 25 13 25 76 184. Venezuela.

representing about 90% of crude distillation capacity. The Government of India holds at least 51 percent ownership of the public companies or Public Sector Undertakings (PSUs). The Brazilian refineries dominate this category. while the remainder is fairly evenly distributed throughout the region. Almost 90% of the capacity is operated by the two state oil companies: China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec).709 85. . Hydroskimming and topping refineries account for the remaining 9% of crude distillation capacity. Of the PSUs three are integrated refining and marketing companies – Indian Oil Company (IOC).345 154. up from 27% in 1999 due to the start up of the new refineries. Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) – and three are refining companies: Cochin Refineries Limited (CRL). 38 refineries include either coking or some form of cracking.III A – Historical Market Developments -. The process configuration of the domestic refining industry can be classified as moderately complex.000 B/D (33 million tpy). In 2006 the new 210.035 0 11. Argentina has five refineries in this category. Fuel oil conversion capacity is about 38% of distillation capacity.000 B/D (11 million tpy) Essar Oil refinery at Vadinar started operations.4 million tpy) tonne per year Panipat refinery. CHINA China’s crude distillation capacity is the largest in Asia at about 386 million tonnes per year. INDIA The refining industry is comprised of public companies or joint ventures of private and public companies. Reliance refinery and the 125.089 37 55 0 7 100 The refining industry underwent significant expansion in the early 1980s and more recently with the addition of the 660. INDIAN REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 7 9 0 2 18 57. Madras Refineries Limited (MRL) and Bongaigaon Refineries and Petrochemicals Limited (BRPL). . Mexico also has a large share with six refineries.107 Out of the total. with 11 of Brazil's 13 refineries having FCC units.000 B/D (6.

. Most of the refineries in China were designed to process indigenous Chinese crudes.153 385.991 84. the straight run and hydrocracked distillates from Chinese crudes typically have poor cold temperature properties. However. CHINESE REFINERY CONFIGURATION: 2007 Crude Distillation Capacity Number kTPA Percent Coking Cracking Hydroskimming Topping Total 22 16 2 18 58 186. operating rates dropped nearly in half. These are created by municipal governments or private businesses.108 -. The economics of these refineries was seriously eroded in 2005 as the cost of imported straight run residue (and crude oil) increased more rapidly than the local price of middle distillates. mostly in a few coastal areas. otherwise known as “teapots”. amounting to 17% of crude capacity.752 48 28 2 22 100 . crude was difficult to obtain so they turned to running straight-run residue. There are 22 coking refineries with capacity equivalent to over 7% of crude distillation capacity. but now that runs exceed domestic production a number of these refineries are being converted to run imported crude.Historical Market Developments The remaining refineries are mostly unsophisticated “local” refineries. Most are simple topping refineries. and there is a large amount of catalytic cracking capacity in China. many of the FCC units in China process at least some residue and several process very deep residues.III A -. Consequently. such as gasoil. Based on import statistics. the VGO fractions from these tending to be well suited as FCC feedstock. straight-run residue utilization was about 10 million tonnes per year. and lie outside the control of Sinopec and CNPC.802 106. Chinese crudes are primarily low sulfur and paraffinbased. such that Chinese refineries are configured to blend FCC cycle oil into distillates to improve cold flow properties.806 7. but some are installing more sophisticated processing including conversion equipment. Most of the refineries operated by Sinopec and CNPC have FCC units. these refineries ran primarily crude oil. but beginning in 2003. Historically. including sour crude. The relatively high yield of low sulfur and low metals atmospheric bottoms from indigenous crudes has accelerated the development of Residue FCC (RFCC) technology in China. Conversion capacity is quite high.

642 24.832 340.863 13.799 8.880 26.847 66.107 6.870 334.198 4.558 248.363 115.378 8.454 8.831 63.895 13.000 2.157 38.451 23.514 211.878 7.6 .425 2.037 298.618 90.198 4.274 8.857 132.876 4.425 2.877 314.815 621 621 504 504 504 504 504 504 912 912 912 912 912 Dist Desulf.119 10.335 852.441 339.876 3.063 68.549 338.886 2.076 339.102 28.219 108.344 42.601 35.796 19.693 Europe 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 162 149 149 146 144 143 141 139 139 143 142 141 140 39 40 40 40 40 40 39 39 39 38 38 38 39 Number of Refineries 845.965 25.157 240.068 355.000 2.528 3.827 5.756 35.514 13.198 12.497 13.197 4.211 321.934 106.839 23.425 2.632 110.589 6.309 24.152 124.953 18.228 19.045 544 544 544 544 544 544 544 648 752 1.790 19.773 81.989 22.019 265.025 26.218 11. VGO(3) 25.201 6.250 18.201 6.000 2.647 115.954 12.497 84.1995 to 2007 Thousand Tonnes Per Year Region Year Number of Refineries Atm Distillation Vac 328.821 21.950 8.644 848.350 816.944 34.107 9.101 5.431 6.669 251.944 35.572 10.III A – Historical Market Developments -.169 340.418 108.957 28.459 33.107 60.296 3.076 341.754 1.462 265.703 123.754 2.546 13.950 7.219 105.938 266.631 1.367 1.022 9.295 130.573 8.230 26.889 11.749 257.381 123.218 11.766 29.306 266.565 89.932 58.945 13.876 3.950 8.250 17.059 325.147 270.155 11.751 1.107 4.969 2.005 63.099 834.198 4.395 104.975 6.561 109.303 260.023 29.895 24.656 24.732 135.651 211.198 12.016 2.444 64.852 105.048 324.709 217.599 32.599 19.995 20.831 58.423 25.203 268.155 11.436 2.198 4.244 295.436 Lube 10.335 112.049 129.659 811.357 35.035 851.000 Russia Region Year Thermal(1) Europe 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 162 149 149 146 144 143 141 139 139 143 142 141 140 39 40 40 40 40 40 39 39 39 38 38 38 39 91.107 6.551 19.950 8.827 Other 336 336 336 939 939 3.301 70 274 274 274 274 295 308 308 308 308 308 308 Alky(4) 11.584 326.569 127.008 88.329 77.303 112.298 325.220 3.878 7.659 848.919 3.201 6.895 11.293 89.250 47.187 18.101 6.000 2.000 2.005 63.980 29.201 6.768 10.665 84.573 6.447 239.796 19.261 34.201 6.997 274.528 3.920 7.281 9.063 66.170 831.101 6.365 35.489 111.173 15.597 17.320 90.682 2.552 18.597 17.920 7.734 34.782 13.995 Fuel Oil Conversion FCC Hydro(2) Coking 125.114 2.577 38.101 6.928 Gasoline Isom Oxygenates 18.749 10.411 71.000 2.562 23.606 34.790 19.950 8.425 2.436 2.000 2.977 834.640 24.152 19.517 20.843 2.107 6.875 25.015 23.888 313.198 28.852 104.436 2.118 10.436 2.861 24.145 137.601 35.754 43.853 127.057 8.039 12.107 6.487 108.859 111.597 19.051 90.572 10.672 9.934 352.824 63.474 20.406 138.101 6.893 836.693 10.156 26.932 36.287 4.282 25.432 89.459 34.673 11.287 - Aromatics 9.652 831.919 23.425 2.332 16.794 107.863 17.155 12.109 TABLE A .198 12.859 33.684 85.000 19.198 Russia .561 86.936 11.824 63.815 21.840 131.107 6.000 2.552 18.824 64.257 2.487 Ref 110.114 9.796 19.919 10.647 26.950 8.201 6.264 12.371 25.489 10.387 25.320 26.220 9.663 27.021 1.218 11.593 9.000 2.936 106.442 341.035 18.390 21.653 35.539 21.858 108.946 3.436 2.220 123.487 108.427 34.309 834.938 270.944 68.425 2.057 60.790 19.694 15.447 17.790 19.239 73.756 83.953 26.038 109.436 2.589 110.213 1.721 33.655 19. .008 9.351 11.303 10.198 Asphalt 29.767 29.679 13.846 26.369 42.198 4.528 3.1 HISTORICAL REFINING CAPACITY BY REGION .549 10.220 125.878 10.179 322.535 58.061 273.723 19.057 123.550 17.684 35.

138 2.266 3.396 13.455 281.142 1.599 4.387 20.060 1.347 161.042 18.144 5.442 331.357 2.271 7.827 40.883 8.359 Fuel Oil Conversion FCC Hydro(2) Coking 12.239 348.490 1.282 32.121 150.434 3.257 2.017 5.933 2.490 1.800 327.914 13.918 161.601 1.282 28.681 300.244 4.060 1.138 4.700 349.347 41.066 43.235 1.571 29.864 1.159 1.357 47.593 Other - Aromatics 936 936 936 936 936 936 936 936 936 936 936 936 936 295 295 325 390 390 390 390 390 390 690 690 690 690 Lube 1.601 1.531 5.668 16.514 3.290 2.488 1.466 159.327 355.738 84.529 5.864 1.482 4.807 157.107 4.625 4.531 4.550 44.351 18.552 15.366 1.029 1.017 5.113 Africa Region Year Thermal(1) Mid East 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 43 44 44 45 45 46 46 46 47 48 48 48 49 48 48 49 49 49 50 48 49 49 48 48 48 48 18.601 1.331 158.399 4.204 4.377 98.138 2.327 30.401 3.444 24.445 26.531 25.933 1.786 30.329 1.015 4.618 Mid East 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 43 44 44 45 45 46 46 46 47 48 48 48 49 48 48 49 49 49 50 48 49 49 48 48 48 48 Number of Refineries 269.377 4.364 15.206 2.535 307.899 20.042 19.653 107.531 25.III A -.138 2.029 1.074 14.138 2.514 4.138 2.843 142.489 95.942 19.895 7.366 1.415 47.618 2.226 5.226 5.683 508 508 772 758 909 1.750 22.213 26.445 28.601 1.117 9.017 5.213 1.112 4.110 -.908 23.100 4.952 151.549 1.Historical Market Developments TABLE A .566 Dist Desulf.196 4.093 1.623 11.077 25.845 326.196 4.566 1.275 2.601 1.693 31.377 3.354 4.273 6.745 40.196 4.257 2.862 3.863 38.689 16.010 47.218 13.690 361.275 3.339 16.476 1.275 2.170 4.560 19.778 56.514 7.048 49.060 1.226 954 954 954 954 954 954 954 2.998 18.502 1.1995 to 2007 Thousand Tonnes Per Year Region Year Number of Refineries Atm Distillation Vac 81.219 31.100 4.384 13.766 24.282 28.473 4.137 2.131 16.432 149.770 1.436 4.723 Ref 24.876 20.552 15.723 31.296 16.946 44.886 19.448 274.960 13.217 44.933 1.044 2.434 4.079 38.257 2.122 2.244 4.112 4.443 100.601 1.017 5.488 1.137 2.244 4.953 49.883 9.839 103.029 1.488 1.962 144.637 92.707 100.914 13.282 28.490 1.266 3.667 26.122 2.921 18.399 3.243 Gasoline Isom Oxygenates 1.282 28.914 4.447 15.170 16.079 38.601 1. VGO(3) 2.138 2.920 3.328 36.290 3.902 38.415 25.789 13.393 13.183 4.924 23.045 43.729 4.377 3.189 146.797 1.015 4.133 29.297 19.436 4.723 31.403 37.686 43.396 37.707 100.093 Asphalt 4.244 4.266 4.812 19.244 4.205 25.401 32.189 4.146 2.287 26.843 1.754 2.488 1.235 1.841 162.521 291.312 30.060 1.693 31.672 26.807 17.571 9.213 1.044 2.138 2.100 4.618 2.044 2.820 44.060 1.060 1.146 2.601 2.972 100.092 15.933 1.653 23.6 .015 1.413 22.443 103.411 142.933 1.527 14. .679 1.074 14.380 4.993 11.226 5.552 15.235 1.737 8.914 14.601 1.010 2.092 14.290 2.531 4.138 2.734 20.Cont 1 HISTORICAL REFINING CAPACITY BY REGION .205 28.476 1.359 4.871 2.283 37.230 2.018 1.889 16.093 1.839 107.748 11.228 4.992 39.170 Africa .359 4.067 4.993 13.243 1.122 2.015 4.482 2.998 25.476 1.540 9.257 94 127 127 127 127 427 427 427 427 427 427 427 427 - Alky(4) 1.566 1.439 46.060 1.1 .770 1.364 16.

787 2.565 28.148 4.334 4.623 419.017 412.597 955.062 18.002 12.096 4.1 .753 33.456 4.930 13.195 12.481 5.199 2.396 4.637 5.499 5.671 96.268 10.486 52.836 Ref 170.525 135.837 368.361 27.163 12.130 22.930 12.884 Alky(4) 52.139 5.066 139.387 476.705 1.596 84.163 12.227 5.673 57.242 122.163 97.637 172.000 12.853 9.215 26.823 33.950 16.829 3.Cont 2 HISTORICAL REFINING CAPACITY BY REGION .982 82.143 119.222 47.865 194.830 83.953 455.597 11.233 13.860 178.319 Fuel Oil Conversion FCC Hydro(2) Coking 294.857 424.820 207.671 106.199 94.160 181.110 436.980 326.319 27.900 301.701 12.528 2.751 3.504 467.812 7.703 7.714 11.447 116.812 1.199 2.557 1.319 56.683 1.690 192.644 81.950 15.703 7.809 9.905 5.873 193.623 111.831 298.450 27.786 895.878 447.594 31.746 7.787 17.369 180.164 2.738 71.192 184.111 TABLE A .715 7.661 31.683 1.658 870.381 27.769 1.485 84.340 12.936 Asphalt 49.374 296 680 680 916 1.720 90.243 28.684 183.300 50.342 28.322 404.262 169.954 102.046 11.927 23.888 69.227 5.068 104.284 103.472 51.425 80.007 53.013 224.811 417.878 25.809 342.824 6.033 61.734 106.371 2.520 5.182 10.820 208.060 370.045 969.499 865.884 1.519 9.895 144.073 106.782 28.121 11.645 94.120 130.787 52.224 12.333 18.481 3.391 11.870 128.523 2.725 21.267 48.348 263.746 87.456 170.769 Lube 11.670 97.980 238.754 26.255 24.085 28.175 29.231 243.751 Latin America .960 231.714 911.865 296.106 75.339 7.076 412.270 171.725 18. VGO(3) 91.580 23.003 31.922 344.968 Other 388 388 388 388 388 388 388 388 388 388 388 388 388 377 377 377 377 377 377 377 377 377 377 377 377 377 Aromatics 14.993 107.026 92.881 15.085 22.098 9.671 48.319 60.713 108.050 319.317 31.709 36.239 4.644 11.742 938.920 16.426 943.543 29.751 9.236 205.725 58.816 116.818 6.666 103.589 9.849 113.456 28.674 232.930 12.292 10.411 964.682 849.589 1.374 3.493 12.975 29.979 411.131 16.589 170.237 316.701 12.987 17.834 2.243 237.936 3.936 3.311 182.558 138.195 12.049 422.110 4.961 4.041 245.949 60.161 64.007 13.703 10.180 221.895 23.892 13.508 53.568 15.637 6.526 3.677 55.516 207.493 12.857 422.199 1.183 19.506 173.555 13.078 3.495 22.522 4.232 19.926 477.480 401.927 27.339 6.351 3.587 2.481 3.846 294.021 10.289 108.307 10.019 1.646 330.208 116.051 30.549 121.936 3.881 15.970 7.111 10.935 78. .570 31.475 5.056 Gasoline Isom Oxygenates 23.331 76.603 Dist Desulf.196 122.506 5.881 North America 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 192 183 181 179 176 174 173 170 167 166 165 164 164 82 82 82 83 80 79 78 77 77 75 76 76 76 Number of Refineries 846.922 56.497 54.578 1.691 387.398 49.660 2.648 5.006 13.255 446.611 10.825 167.493 12.666 27.561 18.260 7.799 22.129 27.090 369.846 4.811 23.327 181.833 1.363 23.342 5.032 272.560 18.651 53.227 19.332 100.041 419.617 924.149 56.619 112.142 93.421 5.256 431.116 4.769 1.842 4.593 29.263 58.897 10.227 5.281 207.219 170.297 918.034 2.147 56.906 137.486 10.660 2.867 55.806 77.301 58.810 30.523 5.273 36.732 209.331 13.417 53.121 144.756 390.424 2.481 3.823 28.842 5.758 24.1995 to 2007 Thousand Tonnes Per Year Region Year Number of Refineries Atm Distillation Vac 404.579 335.936 3.219 10.374 110.533 52.824 6.634 51.686 307.082 92.779 35.888 17.666 441.634 Latin America Region Year Thermal(1) North America 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 192 183 181 179 176 174 173 170 167 166 165 164 164 82 82 82 83 80 79 78 77 77 75 76 76 76 8.979 18.III A – Historical Market Developments -.587 2.015 91.322 16.605 29.701 12.471 129.269 172.554 322.194 99.847 91.650 104.093 1.660 2.6 .094 18.261 10.105 184.483 204.860 80.638 5.804 28.043 136.

643 20.503 2.564 11.III A -.361 1.778 1.723 6.367 16.703 10.112 -.024 2.099 46.252 6.564 11.853 22.138 16.821 9.766 14.386 3.802 277.601 54.207 3.672 49.118 318.492 1.941 1.703 9.568 10.378 1.666 9.710 2.206 7.669 19.467 1.094 226.656 25.602 277.973 361.729 2.615 18.766 13.941 1.101 6.705 5.249 3.506 India 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 13 13 14 14 15 17 17 17 17 17 17 17 18 65 65 66 66 65 65 55 55 55 55 56 56 58 Number of Refineries 54.212 19.114 32.036 9.Historical Market Developments TABLE A .370 3.207 3.077 Other 2.129 23.643 18.206 7.116 9.892 251.187 3.161 3.440 6. VGO(3) 6.187 3.941 1.207 3.101 6.854 1.766 13.116 2.690 6.185 3.289 2.941 China .024 3.954 4.933 66.854 1.492 1.537 12.506 5.871 Gasoline Isom Oxygenates 934 1.136 5.097 21.593 9.506 5.361 1.207 3.568 11.723 6.287 154.506 5.736 4.116 2.896 3.905 17.723 6.874 385.378 1.001 16.361 1.280 807 807 1.941 1.940 Aromatics 1.251 4.940 3.854 1. .018 3.378 1.643 18.187 3.669 21.729 1.837 Ref 1.207 3.492 1.954 4.503 2.361 1.689 23.941 1.034 8.492 1.101 6.378 1.097 21.856 3.782 49.304 7.356 62.807 9.955 13.252 6.752 1.101 6.703 9.024 3.378 1.356 68.252 6.018 1.736 19.590 5.207 3.941 1.187 3.024 3.207 3.207 3.963 28.598 221.705 6.1 .300 26.601 51.098 116.207 3.785 30.240 1.736 5.304 8.155 20.479 30.252 5.141 18.864 43.177 122.288 6.289 3.901 65.492 1.378 1.736 24.361 1.778 1.954 Fuel Oil Conversion FCC Hydro(2) Coking 7.805 228.703 9.089 3.275 98.278 11.750 297.251 4.240 1.065 14.564 12.757 11.705 5.585 4.147 58.854 1.089 3.723 6.723 6.882 11.940 3.440 8.954 4.440 6.492 1.954 4.495 2.941 1.206 7.194 9.207 3.141 18.378 1.854 1.367 14.150 8.370 2.207 3.857 255.564 11.129 3.032 66.853 23.569 1.370 3.989 5.954 4.116 2.953 62.180 77 77 77 77 77 77 77 77 77 77 77 77 77 60 60 60 60 189 189 189 189 39 39 39 39 39 39 39 39 39 39 39 Alky(4) 1.239 130.537 13.395 22.941 1.686 2.736 28.941 1.150 8.954 4.1995 to 2007 Thousand Tonnes Per Year Region Year Number of Refineries Atm Distillation Vac 23.129 3.778 1.231 120.704 22.280 1.189 47.759 6.506 5.378 1.666 10.636 18.584 China Region Year Thermal(1) India 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 13 13 14 14 15 17 17 17 17 17 17 17 18 65 65 66 66 65 65 55 55 55 55 56 56 58 3.669 19.636 19.507 12.206 7.779 7.378 1.267 46.207 3.212 23.150 8.941 1.187 3.849 18.313 55.034 8.689 24.194 3.865 14.854 2.778 8.378 1.418 136.954 4.766 13.742 123.705 5.953 58.089 220.925 15.185 3.503 5.485 10.138 20.150 8.378 1.129 3.136 6.954 4.960 7.047 65.202 3.089 3.778 18.805 26.778 1.116 2.802 286.187 3.207 Asphalt 2.833 23.002 3.914 62.438 Lube 556 680 680 680 680 680 725 820 820 820 820 1.967 59.605 2.370 3.354 14.507 11.954 4.467 1.778 23.615 11.954 4.933 55.001 18.704 24.Cont 3 HISTORICAL REFINING CAPACITY BY REGION .165 9.666 10.378 1.218 16.099 47.101 6.483 11.672 51.506 5.759 7.370 3.378 Dist Desulf.189 49.6 .

065 172.337 198.031 267.959 214.992 426.305 284.424.730 249.439 1.235 1.061 612.229 4.280 21.724 48.633 3.428 1.537.625 2.601 1.340 18.500 480.591 774.444 78.699 5.160 45.102.281 135.252 19.836 56.850 56.378 258.749 4.704 339.954 155.053 Study Region .907 7.757 4.617 634.485 8.639 77.607 53.440 3.020 13.737 71.817 94.181 1.115 652.814 71.854 196.967 71.319 6.327 Dist Desulf.978 3.416 12.642 6.735 4.161 50.618 7.414 11.078 63.730 143.866 659.201 14.928 10.367.376 6.454 42.772 277.196 659.525 5.399 176.501 7.557 70.614 124.394 12.916 164.932 711.662 57.641 60.272 371.512 1.370 6.468 189.017 293.049 10.413 19.629 4.435 719.576 67.886 187.049 10.107 16.512 20.429.913 4.142 680.012 801. VGO(3) 17.958 23.697 88.978 2.480 7.915 21.956 10.953 23.069 6.728 195.071 258.172 87.346 497.341 10.229 312.315 23.822 489.191 64.922 24.785.595 88.755 735.593 22.564 202.522 7.651 75.932 46.325 203.698 11.079 Other Asia & FE 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 86 88 90 90 91 87 88 86 85 85 83 84 85 730 712 715 712 705 701 685 678 675 675 673 672 677 Number of Refineries 529.820 78.167 Lube 5.589 10.958 2.619.899 187.694 70.293 18.695 86.504.847 20.310.580 8.623 698.582 45.963 12.195 101.553 114.307 169.961.431 5.663 389.453 12.480 7.620 128.992 Aromatics 10.007 48.549 1.384 694.682 136.961 Alky(4) 4.085 43.258 51.223 5.188 743.400 57.354 50.907 7.637 61.311 102.777 79.661 12.1 .158 465.601 87.197 624.757 47.541 10.648 1.830 6.480 7.413 19.835 115.115 76.982 20.348 71.368 352.113 201.704 650.607 5.662 45.342 220.401 23.310 12.878 9.497 1.109 254.438.235 11.660 194.215 665.873 251.454.942 105.210 3.915 2.761 69.784 216.186 119.990 251.270 44.473 232.773 667.755 11.366 6.556.821 176.226 1.595 882.473 58.138 653.678 Gasoline Isom Oxygenates 1.110 196.575 757.229 4.447 468.945 77.409 43.478.165 1.924 8.497 1.693 174.954 87.958 2.166 5.908 171.234 15.461 7.773 106.139 19.143 Ref 56.439 1.170 3.113 TABLE A .210 1.799 77.293 170.244.799 52.293 12.655 23.053.737 91.468 6.241 3.746 89.393 25.950 811.977.549 7.389 56.630 190.970 179.444 179.715 706.663 80.439 7.945 12.359 406.154 5.620.121 91.053 75.275 664.491 5.020 90.284 5.613 46.827 7.078 1.649 19.282 1.172 203.508 1.326 607.138 6.008 167.713 96.893 97.682 640.745 785.011 164.745 213.210 1.355 19.008 67.104 5.055 90.053 470.027.633 164.823 138.355 43.087 18.819 324 524 1.605 623.810 45.084 6.243 42.799 6.338.852 13.631 12.956 686.037 442.306.6 .791 7.633 671.770 17.690 13.944 1.646 224.048 171.278 3.820 243.075 68.009 10.501 6.594 443.955 204.886 22.060 45.992 126.890 7.905 663.953 21.296 557.880.415 175.826 794.402 320.100 53.055 13.653 9.907 10.191 4.385 5.775 81.904 505.274 9.172 76.791 7.835 3.183.625 2.639 5.011 101.327 Asphalt 4.141 740.302 4.483 60.832 4.241 8.645 207.884 87.784 Other 3.466 3.827 8.523 174.821 1.261 85.347 Fuel Oil Conversion FCC Hydro(2) Coking 49.896 18.014 4.III A – Historical Market Developments -.383 76.547 Study Region Region Year Thermal(1) Other Asia & FE 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 86 88 90 90 91 87 88 86 85 85 83 84 85 730 712 715 712 705 701 685 678 675 675 673 672 677 17.226 5.620 3.529 78.959.539 12.376 213.717 42.276 42.607 371.463 53.719.414 9.978 2.167 479.878 79. .474 81.326 10.753 129.933 76.915 20.341 118.399.071 51.763 112.209 19.992 8.963 11.011 2.683 6.467 229.273 4.Cont 4 HISTORICAL REFINING CAPACITY BY REGION .1995 to 2007 Thousand Tonnes Per Year Region Year Number of Refineries Atm Distillation Vac 142.553 13.557 610.665 4.203 79.461 43.752 206.650 126.652 835.448 515.032 452.955 79.165 763.927 493.841 11.262 161.106 57.500 1.127 160.262 24.436 1.274 9.534 12.973 1.737 634.297 11.

403 4.925 1.734 1.447 2.902 6.615 2.114 -.244 1.493 5.285 1.124 2.921 5.626 1.379 1.622 1.379 5.897 6.360 2.529 2.509 2.624 824 823 829 829 837 837 802 802 802 786 806 809 837 Gasoline Isom Oxygenates 473 486 498 495 483 509 558 621 673 694 702 754 756 14 14 14 14 14 14 14 17 20 27 32 36 46 38 41 41 66 62 67 68 75 76 69 69 77 77 2 6 6 6 6 7 7 7 7 7 7 7 Alky(4) 278 277 278 280 286 291 314 315 323 319 321 325 322 14 14 12 12 12 12 12 12 21 21 21 21 21 Dist Desulf.311 1.922 6.990 5.493 5.922 5.599 38 38 38 38 38 38 38 38 38 57 126 126 171 404 377 377 397 412 420 430 425 426 431 438 436 439 107 107 107 107 107 107 105 105 105 105 105 101 101 Other 6 6 6 16 16 61 61 61 67 67 67 74 74 - Aromatics 216 205 202 227 246 250 235 225 277 277 319 353 350 56 56 56 56 56 56 57 57 57 57 57 57 57 Lube 194 194 201 198 192 184 173 178 177 175 174 162 165 117 117 117 117 117 117 80 81 81 81 81 81 81 Asphalt 502 487 497 514 501 512 470 456 438 447 454 449 465 182 182 179 194 194 194 193 193 193 211 211 211 211 Russia .332 1.357 1.287 16.1995 to 2007 Thousand Barrels Per Day Region Year Number of Refineries Atm Distillation Vac 6.437 2.267 17.762 5.311 1.945 5.969 5.546 2.931 1.568 1.209 1.732 1.720 1.145 16.893 5.982 6.141 6.649 1.601 1.934 5.6 .311 1.350 4.343 5.922 17.443 5.013 2.991 1.357 1.394 2.2 HISTORICAL REFINING CAPACITY BY REGION .III A -.535 2.757 1.209 1.912 16.405 2.262 2.222 6.550 16.480 2.449 16.302 1.558 5.209 6.615 6.362 2.874 6.340 1.493 2.950 17.991 1.527 2.593 2.295 1.Historical Market Developments TABLE A .199 17.597 2.446 5.173 5.866 16. VGO(3) 482 511 479 433 441 383 511 676 669 644 736 820 832 172 172 172 172 172 172 152 152 151 151 151 205 205 Europe 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 162 149 149 146 144 143 141 139 139 143 142 141 140 39 40 40 40 40 40 39 39 39 38 38 38 39 Number of Refineries 17.397 Russia Region Year Thermal(1) Europe 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 162 149 149 146 144 143 141 139 139 143 142 141 140 39 40 40 40 40 40 39 39 39 38 38 38 39 1.718 1.534 2.850 16.768 5.874 6.483 2.125 1.463 6.062 6.462 1.234 1.098 1.649 2.349 4.118 2.571 2.725 350 380 380 380 380 411 337 337 337 373 393 403 403 Fuel Oil Conversion FCC Hydro(2) Coking 2.462 4.596 2.262 2.582 2.397 5.583 2.634 317 341 380 380 380 381 331 331 356 356 359 376 376 616 639 680 720 794 899 1.925 1.037 5.991 Ref 2.694 1.727 1.290 4.552 2.931 1.928 16.490 2.295 1.102 5.948 5. .219 1.

213 3.969 3.078 3.241 6.153 336 336 322 335 336 343 340 391 390 388 426 426 454 Africa Region Year Thermal(1) Mid East 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 43 44 44 45 45 46 46 46 47 48 48 48 49 48 48 49 49 49 50 48 49 49 48 48 48 48 352 353 391 423 483 483 542 542 542 542 542 621 621 63 63 63 85 85 91 88 89 78 84 84 84 84 Fuel Oil Conversion FCC Hydro(2) Coking 249 264 257 267 267 267 270 270 298 298 298 303 379 170 170 175 183 184 185 225 230 230 254 257 257 257 687 707 727 733 805 809 803 808 813 817 854 865 865 39 39 39 41 41 46 46 80 80 80 80 80 80 72 77 78 78 78 87 87 87 87 90 90 90 90 16 16 16 16 16 16 16 39 39 39 59 59 79 Other - Aromatics 22 22 22 22 22 22 22 22 22 22 22 22 22 7 7 8 9 9 9 9 9 9 16 16 16 16 Lube 34 34 37 37 37 37 37 41 41 41 35 36 36 20 20 20 20 20 20 20 20 20 20 21 21 21 Asphalt 76 76 68 73 72 76 78 89 91 119 125 130 130 67 68 61 71 71 71 71 71 72 72 72 72 72 Africa .896 2.751 1.844 1.849 1.554 1.301 829 849 757 782 782 789 766 772 913 985 1.844 1.906 1.070 7.976 1.023 1.Cont 1 HISTORICAL REFINING CAPACITY BY REGION .500 1.2 .327 2.281 3.898 2.6 .008 1.082 7.626 6.698 1.923 2. .708 5.849 1.1995 to 2007 Thousand Barrels Per Day Region Year Number of Refineries Atm Distillation Vac 1. VGO(3) 41 41 41 41 41 41 41 41 41 77 77 77 77 31 31 31 31 31 31 31 31 31 45 50 50 50 Mid East 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 43 44 44 45 45 46 46 46 47 48 48 48 49 48 48 49 49 49 50 48 49 49 48 48 48 48 Number of Refineries 5.III A – Historical Market Developments -.564 5.716 7.060 3.906 1.093 6.914 6.190 3.639 6.463 5.976 439 439 441 471 481 483 483 555 582 582 582 582 582 Ref 569 577 569 595 595 598 616 616 655 689 694 706 711 328 328 336 370 377 391 417 441 443 449 463 463 471 Gasoline Isom Oxygenates 44 49 53 53 53 60 60 60 88 88 88 107 122 13 13 20 20 24 32 46 56 56 59 59 59 59 2 3 3 3 3 10 10 10 10 10 10 10 10 - Alky(4) 24 27 29 29 29 34 34 34 35 35 35 35 42 28 28 31 32 32 35 35 35 35 36 36 36 36 Dist Desulf.023 3.211 7.271 3.242 3.115 TABLE A .817 1.

978 3.772 1.655 5.926 1.1995 to 2007 Thousand Barrels Per Day Region Year Number of Refineries Atm Distillation Vac 7. VGO(3) 1.914 8.331 2.873 1.381 3.577 6.815 3.919 2.415 2.974 4.861 7.416 7.408 113 113 113 133 233 238 239 235 240 237 239 244 247 Dist Desulf.501 303 323 323 376 388 386 413 413 479 583 616 626 638 Other 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 Aromatics 339 357 376 396 400 448 456 438 419 427 421 421 420 66 62 62 62 60 60 59 51 51 51 41 41 41 Lube 212 217 254 247 249 252 223 218 222 222 249 267 268 80 79 79 81 79 83 84 83 75 75 75 75 75 Asphalt 857 833 835 850 816 877 906 891 889 909 996 1.133 1.330 1.339 1.128 6.373 8.504 1.768 1.747 1.016 3.507 8.462 7.217 2.627 1.964 3.422 7.799 1.694 5.867 1.257 1.310 1.III A -.655 5.573 8.166 17.405 1. .760 4.895 4.755 8.176 2.582 1.815 1.476 18.440 6.624 18.325 2.742 1.892 6.994 5.564 1.965 3.494 2.017 4.626 2.061 6.328 3.746 1.194 6.559 3.246 1.772 4.622 4.578 7.786 5.647 7.934 1.264 6.012 118 118 120 125 136 178 183 174 164 166 169 168 168 Latin America .Cont 2 HISTORICAL REFINING CAPACITY BY REGION .533 3.788 1.278 1.833 Ref 3.151 1.353 3.210 8.199 4.006 1.759 3.041 5.113 2.768 3.Historical Market Developments TABLE A .659 7.498 7.654 18.137 1.133 2.691 1.236 2.541 4.844 1.6 .807 1.550 17.749 3.257 4.006 2.308 1.305 4.958 2.394 3.496 8.606 1.924 Latin America Region Year Thermal(1) North America 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 192 183 181 179 176 174 173 170 167 166 165 164 164 82 82 82 83 80 79 78 77 77 75 76 76 76 168 148 148 150 141 141 131 123 113 100 100 100 100 382 456 506 524 549 560 568 569 529 458 482 524 524 Fuel Oil Conversion FCC Hydro(2) Coking 5.573 8.890 4.553 1.121 2.361 3.082 1.016 8.223 17.154 4.574 3.638 2.2 .895 3.554 1.237 106 108 149 171 237 237 237 232 260 208 231 231 231 1.515 7.949 3.748 19.659 1.816 1.859 1.373 1.160 18.370 19.917 8.006 2.815 3.977 1.217 530 569 647 665 677 675 694 667 736 723 718 718 770 Gasoline Isom Oxygenates 602 594 605 630 687 717 741 735 750 737 807 822 822 44 44 47 56 62 63 66 72 80 91 91 91 91 120 128 128 129 128 132 131 129 129 105 89 79 79 7 16 16 21 24 25 37 36 40 42 43 44 44 Alky(4) 1.308 1.342 2.995 2.131 8.130 19.614 1.026 19.026 2.606 6.361 8.622 1.495 1.340 6.049 4.246 1.653 234 234 244 244 244 248 248 248 325 325 305 305 305 North America 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 192 183 181 179 176 174 173 170 167 166 165 164 164 82 82 82 83 80 79 78 77 77 75 76 76 76 Number of Refineries 17.405 5.466 1.988 4.611 4.235 2.249 1.777 1.302 1.682 1.221 1.061 2.111 8.579 8.204 8.039 2.116 -.234 1.014 2.333 8.545 19.488 2.

134 1. VGO(3) 117 117 117 117 117 130 150 180 58 58 58 58 48 48 48 106 106 106 106 106 106 India 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 13 13 14 14 15 17 17 17 17 17 17 17 18 65 65 66 66 65 65 55 55 55 55 56 56 58 Number of Refineries 1.247 1.206 1.264 1.114 1.266 1.632 5.084 264 264 294 294 345 345 438 438 417 417 446 486 566 Ref 29 29 37 52 74 77 157 157 157 157 157 162 179 157 157 170 170 187 187 200 214 225 246 246 276 346 Gasoline Isom Oxygenates 24 31 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 4 4 4 4 1 1 1 1 1 1 1 1 1 1 1 Alky(4) 32 32 32 32 32 32 32 32 32 32 32 32 32 Dist Desulf.763 3.Cont 3 HISTORICAL REFINING CAPACITY BY REGION .499 2.6 .337 7.182 5. .644 2.989 2.598 4.488 2.821 37 37 37 37 37 167 167 167 167 181 186 196 250 199 199 224 238 238 238 238 258 272 332 332 414 485 China Region Year Thermal(1) India 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 13 13 14 14 15 17 17 17 17 17 17 17 18 65 65 66 66 65 65 55 55 55 55 56 56 58 75 69 82 82 88 109 109 109 109 120 120 120 120 110 110 95 95 95 95 95 95 95 95 95 95 95 Fuel Oil Conversion FCC Hydro(2) Coking 138 138 138 138 152 342 358 358 358 387 400 457 514 953 953 990 990 1.632 5.106 5.124 4.III A – Historical Market Developments -.467 7.472 4.2 .264 1.436 2.356 2.058 1.279 44 44 77 99 99 124 124 124 159 223 223 336 336 341 341 361 361 361 386 386 391 416 476 570 37 37 37 37 37 167 167 167 167 181 186 196 250 199 199 224 238 238 238 238 258 272 332 332 414 485 Other 38 54 54 54 55 55 55 55 55 55 68 68 68 Aromatics 32 32 32 32 32 35 60 35 35 35 35 35 35 30 30 19 19 34 34 43 43 43 43 43 43 57 Lube 11 13 13 13 13 13 14 16 16 16 16 20 20 62 62 62 62 62 62 62 62 62 62 62 62 62 Asphalt 49 52 53 53 53 55 55 55 58 58 58 58 58 47 47 34 34 34 34 34 34 34 34 34 34 34 China .264 1.384 1.482 4.042 1.1995 to 2007 Thousand Barrels Per Day Region Year Number of Refineries Atm Distillation Vac 435 435 454 454 516 603 794 846 846 866 866 917 1.814 6.131 1.641 5.131 1.024 6.117 TABLE A .

299 4.017 4.564 25.746 1.172 12.III A -.1995 to 2007 Thousand Barrels Per Day Region Year Number of Refineries Atm Distillation Vac 2.623 1.362 2.027 3.586 3.941 3.795 Other 57 73 73 83 84 129 129 129 135 135 148 155 155 Aromatics 240 269 296 303 307 329 378 357 426 434 446 451 451 1.600 1.071 1.140 27.206 2.672 1.620 2.978 13.996 2.185 2.810 86.231 28.466 13.179 84.102 25.230 3.766 1.658 3.037 3.103 4.794 1.680 1.135 Study Region Region Year Thermal(1) Other Asia & FE 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 86 88 90 90 91 87 88 86 85 85 83 84 85 730 712 715 712 705 701 685 678 675 675 673 672 677 343 349 369 372 372 374 400 401 401 408 414 439 439 3.140 3.804 1.565 Ref 1.167 1.318 80.382 1.815 1.842 1.317 10.702 12.374 1.170 18.840 13.662 1.308 1.246 3.383 Study Region .318 13.362 14.535 7.020 1.854 10.099 2.138 2.698 26.899 3.189 83.742 78.339 1.195 14.848 2.631 3.379 13.549 1.858 15.451 1.197 11.055 15.409 75.091 4.520 14.058 23.564 1.653 1.862 1.294 12.595 11.685 1.362 1.695 27.792 1.401 1.066 3.835 1.151 26.965 4.988 2.Historical Market Developments TABLE A .346 3.Cont 4 HISTORICAL REFINING CAPACITY BY REGION .644 14.221 13.442 3.296 1.865 2.243 1. VGO(3) 341 328 364 449 459 459 422 396 447 449 497 465 465 3.576 1.656 82.752 3.394 3.053 113 130 136 136 160 160 162 162 206 206 212 212 212 12.677 4.272 6.570 1.254 3.318 1.246 24.643 81.118 -.774 1.643 12.661 1.761 3.817 1.773 1.948 1.039 1.874 4.613 15.111 Fuel Oil Conversion FCC Hydro(2) Coking 947 1.403 76. .409 11.436 1.153 2.139 3.916 3.779 1.242 1.572 16.488 13.561 14.804 14.598 3.096 2.151 3.900 10.839 10.872 7.484 12.481 12.008 1.126 1.795 13.136 2.672 80.438 1.253 1.766 5.908 3.060 2.243 13.294 10.448 Lube 98 100 99 108 109 109 121 112 116 122 125 143 143 826 836 881 883 897 877 814 811 810 813 837 866 869 Asphalt 82 85 142 147 177 191 232 223 214 216 222 234 234 1.201 3.111 14.922 6.766 5.104 1.609 73.342 2.199 7.185 2.277 80.167 3.022 3.981 1.328 17.530 10.739 3.897 1.622 4.866 3.406 26.231 2.894 113 130 136 136 160 160 162 162 206 206 212 212 212 2.166 11.892 3.040 1.949 11.018 2.508 1.511 6.425 1.567 1.737 3.851 1.861 6.054 2.439 1.868 12.474 1.221 2.640 1.408 4.009 Gasoline Isom Oxygenates 50 52 68 68 77 77 78 78 78 83 85 124 124 1.641 4.256 2.771 12.319 1.267 Dist Desulf.821 1.609 28.279 15.804 4.237 1.399 1.234 26.105 3.937 3.454 4.642 2.404 5.918 4.538 12.380 15.051 2.731 11.358 1.228 4.983 24.2 .292 1.816 4.236 5.489 11.873 Other Asia & FE 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 86 88 90 90 91 87 88 86 85 85 83 84 85 730 712 715 712 705 701 685 678 675 675 673 672 677 Number of Refineries 10.338 1.381 73.6 .051 8 12 28 28 29 29 35 35 33 33 34 34 34 174 202 223 254 252 272 290 294 297 272 256 255 255 Alky(4) 93 97 122 125 126 131 128 127 143 148 148 158 158 1.454 13.105 3.048 13.420 12.099 14.

reflecting different technologies. Refinery projects have been identified by using PGI’s worldwide refining databases presented in Section A-6. referred to as ‘offsite costs’. technical . referred to as ‘process costs’. import duties on equipment and other location specific factors. The offsite costs of the project have been estimated by applying the appropriate multiple to the process costs. Each process technology has a different multiple to estimate the offsite costs. An estimate of the annual refining investment within the EU25. This includes many elements such as management of the project.III A – Historical Market Developments -. ‘Project costs’ which relate to the cost incurred by the refinery owner to manage and successfully start-up the new processes • • Each of these three elements of a project’s investment have been estimated and included within our estimate of the refining industry’s annual investment in projects. . A given refinery technology generally requires similar offsite facilities to fully integrate it within the other refining assets. PROJECT INVESTMENTS There are three main elements that contribute to the total investment required for a project. This investment can be separated into two broad categories. A location factor has been applied to reflect the variation of capital costs at alternative locations due to factors such as exchange rate. It is found that the offsite costs of a process technology can be estimated as a multiple of the process costs.119 A-7 REFINERY INVESTMENTS The refining industry is constantly investing in its infrastructure. An increase in processing capacity from one year to the next is taken to signify a project investment. Project investment is considered to be investments in new equipment to enable greater throughput and/or greater profitability. local labor costs. Sustaining capital relates to capital investments that are required simply to sustain a refining asset’s current competitive position and to meet changing environmental and regulatory needs. project investment and sustaining capital. be it a new plant or an expansion of an existing asset. Middle East and the combined Asia and Far East has been calculated and is discussed below. Project costs relate to the cost of executing a project. provision of temporary accommodation and facilities. The curve-cost estimates have taken account of the escalation of engineering and contractor costs by reference to a construction cost index. the USA. The capital cost for the new or expanded process has been developed from curve-type cost data obtained from observation of the actual project cost experience of asset owners and engineering and construction companies. The capital cost to construct suitable support facilities so that the additional process can be fully integrated with the rest of the refinery. • The capital cost to install the new or expanded process.

taxes and insurance. Figure A-7-1 shows . It is generally found that these are proportional to the capital cost of the project and have been estimated at 15% of the capital cost – i. therefore. but excluding India) are detailed in Table A7-1. Improved energy recovery and projects to improve process reliability would also be considered examples of sustaining capital investment and to retain competitiveness in the market. It is not possible to reliably estimate the distribution of funds over a project life and thus the investment for a given project is assigned to the year when the project started up. which is the cost of ensuring the equipment continues to operate without improving the performance or competitiveness of the refinery. Process control investments might also be required to fulfill a stay-inbusiness need. As with project costs. as they are necessary to keep abreast of industry developments and sustain competitiveness. The refinery process capacity database provides a list of the assets at each refinery location. Offsite costs are calculated on the basis of the process costs. Middle East and Asia & Far East (including China and Japan. For this study. technology licenses and engineering fees as well as other administrative costs. Sustaining capital investments are generally either ‘stay-in-business’ investments or those required to retain competitiveness. and a location factor has been used to account for the variation of local cost factors. The replacement capital cost is then the sum of the process costs and offsite costs to replace the whole refinery. Depending on the scale of investment undertaken. Sustaining capital is distinct from the cost of maintenance. As stated. . the total project investment for a project is the sum of the process costs. sustaining capital investment has allowed for the escalation of construction costs using the construction cost index.III A -. the annual sustaining capital required is approximately 1% of the capital cost of replacing the refinery.Historical Market Developments support during construction and start-up. Stay-in-business issues might relate to the cost of improving environmental performance to meet new local requirements or to investment needs to secure local permits to operate. a project can take several years to complete and the actual cash outlay may occur over the life of the project. In general it is found that for a refinery to continue operating competitively in the long-term. The replacement capital cost has been calculated in a similar manner to project investments discussed above.e. The capital cost of the process units are then calculated using the same capital cost estimation techniques. The level of sustaining capital at refineries can vary.120 -. annual sustaining capital has been estimated as 1% of the replacement capital cost of refineries in the region. depending on the owner’s approach to the long-term future of the refinery. initial catalyst and chemical inventories. ESTIMATED ANNUAL REFINING INVESTMENT Our estimates of the annual investment in the refining industry for EU25. 15% of the combined process and offsite costs. SUSTAINING CAPITAL INVESTMENT Refineries need to invest constantly to retain their competitiveness. The regional estimate for annual refining investment in projects is the sum for all investments identified within the region. Consequently. offsite costs and the project costs. the USA.

which have in turn increase the sustaining capital required as replacement capital costs rise. There has been a marked increase in the sustaining capital investment of the refining industry since late 2003 as can be seen in Figure A-7-2. It is likely that these peaks would have been smoothed over several years prior to the peak. The investment is assigned to the year when the project was complete and confirmed as operational. Figure A-7-3 illustrates the rise in the construction cost index since late 2003. The actual cash flow for the project may have occurred over previous years.121 large annual variations in the annual refining investment. FIGURE A-7-2 ANNUAL REFINING INVESTMENT BY CATEGORY (Billion US Dollars) 60 50 40 30 20 10 0 1995 Sustaining Capital Project Investment 1997 1999 2001 2003 2005 2007 Costs of construction and engineering have risen steeply since 2003. reflect past investments to meet tighter fuel specifications that took effect in 2000 and 2005 respectively. .III A – Historical Market Developments -. FIGURE A-7-1 ANNUAL REFINING INVESTMENT BY REGION (Billion US Dollars) 60 50 40 30 20 10 0 1995 EU25 USA Middle East Asia & Far East 1997 1999 2001 2003 2005 2007 The investment peaks in the EU. such as those in 2001 and 2006. .

This reflects the growth in the number of refinery sites. The increase in contractor costs coincided with increasing commodity prices for fuels and metals. As a consequence.122 -. The need for additional refinery processing capacity has coincided with a high level of activity in the upstream stimulated by high crude and gas prices. After years of steady refined product demand growth it became apparent towards the end of 2003 that the excess refining capacity had reduced and that further investment in refinery capacity would be required to satisfy both the increasing demand and changing mix of refined product demand. requiring proportionally more investment in infrastructure than additional investment at existing sites.III A -. accounting for around 27% of investment since 1995. compared to 18-22% for the other regions. . which limited refining projects to mainly those that enabled refineries to meet tighter product specifications. FIGURE A-7-4 BREAKDOWN OF ALL INVESTMENT SINCE 1995 (Percent of Regional Total) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EU25 USA Middle East Asia & Far East Sustaining Capital Project Costs Offsite Capital Process Capital . Refining margins. EPC contractors’ workload increased dramatically and project costs escalated. The petrochemicals industry is also in a capacity build-up phase. also improved and appeared more sustainable than previously (see Section A-8).Historical Market Developments FIGURE A-7-3 CONSTRUCTION COST INDEX 700 600 500 400 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 During much of the late 1990s and the early part of this decade there was excess refining capacity. which further increased project costs. The Middle East has seen proportionally more investment in offsite facilities.

123 Sustaining capital investment has been around 20% of total investment since 1995 in each region. except for the Middle East where it has been estimated to be slightly higher at around 22%.III A – Historical Market Developments -. . .

019 7.523 2.166 2.372 2.085 8.771 4.081 5.252 1.544 1.623 2.1995 to 2007 Million Dollars REGION YEAR Capital Expenditure Process Offsites 2.770 13.982 2.973 2.440 15.251 5.845 1.781 4.010 1.361 10.741 7.381 4.422 1.965 10.837 2.680 1.125 2.430 1.873 14.108 677 1.507 4.380 1.156 1.370 1.412 19.446 10.360 1.195 6.031 1.202 1.359 1.025 7.065 16.999 1.069 4.031 8.III A -.166 5.865 9.452 4.603 1.051 1.782 6.676 266 273 285 295 307 319 332 335 352 408 474 557 651 935 979 1.218 4.286 1.536 3.224 11.936 3.569 3.683 11.487 3.132 2.949 751 1.574 1.385 18.897 6.219 778 604 818 877 620 586 706 807 322 454 1.761 6.647 1.233 1.257 7.379 US Mid East (Excl Cyprus) Asia & Far East .177 1.475 1.660 4.370 2.875 2.230 3.865 3.061 Sustaining Capital Total Capital Expenditure Project Costs Total Investment EU25 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 894 875 902 942 967 988 1.111 3.434 3.155 7.007 5.425 7.402 1.602 7.313 7.415 10.509 8.771 6.316 645 487 1.670 1.307 1.189 1.319 2.351 1.296 2.275 4.445 7.004 4.533 710 944 2.321 5.793 2.490 21.094 4.500 10.643 1.7 .419 12.028 215 661 988 2.898 1.104 1.855 5.041 700 1.849 1.124 -.521 2.104 10.387 5.938 9.806 7.813 4.245 970 1.802 9.329 1.744 6.916 1.255 1.427 3.294 3.518 3.858 648 206 117 253 196 208 178 243 62 216 279 98 290 505 998 850 2.272 1.144 1.237 1.213 596 370 609 1.345 4.645 16.035 6.799 1.691 1.006 732 290 275 557 576 433 966 114 363 1.145 1.153 1.078 830 436 1.574 12.214 2.657 1.538 17.458 577 516 993 820 525 384 756 1.491 4.588 6.895 2.586 7.206 449 1.809 12.453 1.648 6.100 5.409 751 808 751 651 303 1.134 6.862 1.173 5.638 1.503 1.621 24.500 4.240 3.517 5.390 1.273 2.708 1.681 2.394 9.468 9.629 6.266 1.495 18.1 HISTORICAL REFINING INVESTMENT BY REGION .770 3.070 16.683 1.460 3.518 3.729 3.118 5.362 14.288 699 1.359 5.457 1.009 2.958 6.191 814 2.016 1.133 1.221 1.180 6.Historical Market Developments TABLE A .769 6.416 710 1.622 7.941 8.777 3.524 8.287 12.115 1.627 7.389 4.360 2.167 2.969 1.950 1.793 2.784 7.011 1.436 2.715 5.210 1.861 3.946 2.829 4.322 4.999 1.072 1. .485 3.877 5.222 2.880 4.

Mediterranean Europe. a global overview of factors common to all regions is presented. Isthmus and Maya are used as indicators of Gulf Coast sour crude and heavy crude values.S. . The declining production of Dubai has made it less reliable as a marker crude oil. an iterative process is used to develop regional prices and margins.S.125 A-8 REFINERY ECONOMICS Refinery economics for representative refinery configurations are developed for the U. The pricing of WTI is quite complex as it depends on the direction of marginal . Margin analyses and price forecasts are made for the U. Northwest Europe. Nevertheless. which is the main pricing centre in Asia. Local market conditions in the U.S. most Middle East crude oils for Asian destinations are priced against Dubai and Oman.S. Gulf Coast. Light Louisiana Sweet (LLS) is an important Gulf Coast crude oil although the volume of trade (physical and paper) is much less than for WTI. Prior to covering the regional markets. In Asia. Our basic pricing mechanism equalizes West African crudes with Brent and other Atlantic Basin crude oils on the U.III A – Historical Market Development -. Thus. and as a point that has quoted prices for crude oils and refined products. primarily for Asian deliveries. Other trading centers are regarded as price takers from these major pricing centers. local crude oils are traded to a limited extent and often reflect special market situations. Crude oil from West Africa is the swing supply source serving both Asian and Atlantic markets. Tapis is used as an Asian price indicator although it is subject to some criticism as a marker crude oil. In the U. and with spot Middle East and Asian crude oils in Northeast Asia (Korea). market. The traded volume is many times the physical volume. that is the main pricing centre in Europe and Singapore. West Coast markets. but futures transaction values are tied to physical deliveries. Singapore.S. REGIONAL MARKER CRUDE OIL PRICES Brent and WTI continue to be the most actively traded spot crude oils in both the physical and paper markets. respectively.S. Although a separate analysis is carried out for each region. and the U.S. In addition we have also developed refinery economics for representative refineries in the Arabian Gulf and for the main refining centre in Russia. Dubai and Oman are traded to a more limited extent. Northwest Europe. Gulf Coast. Midcontinent determine the differential of WTI relative to domestic and international crude oils from the Gulf Coast. price differences between regions are constrained by the cost of interregional product movements. WTI WTI is the most widely traded crude oil in the world and thus has importance well beyond its physical volume. although their contract pricing structure can result in short-term price anomalies. Gulf Coast as the largest centre for refinery capacity in the U. GLOBAL OVERVIEW OF PRICES AND MARGINS Separate supply/demand and pricing analyses are carried out for the major consuming areas and trading centers.

WTI pricing has recently been depressed by high Mid-continent inventories and Canadian imports. . In fact.00 8. Dubai crude economics now reflect Asian values and are well above U. most Middle East crude oils are exported solely to Asia. Gulf Coast parity. and many other factors.126 -. high sulfur crude oil on the U. changes in pipeline capacities.00 1985 1990 1995 2000 2005 Asian Crude Oils Prior to the mid 1990s.00 2. Dubai crude has remained solely in Asia as a result of growing Atlantic Basin production and Asian demand.00 5. which were further amplified by the effects of Hurricanes Katrina and Rita in 2005. Isthmus/Maya Maya crude oil is used as an indicator for heavy. and an extremely tight refining environment resulted in record light/heavy differentials in late 2004. S. Since the mid-1990s. and thus reflects the declining volume of WTI. Gulf Coast. but light/heavy differentials widened dramatically in mid-2000 through 2001. FIGURE A-8-1 ISTHMUS/MAYA DIFFERENTIAL.Historical Market Development crude flows within the inland region. The price of Maya is developed by analyzing the differential to Isthmus. The OPEC crude production cutbacks in 1999 resulted in strong heavy crude prices through early 2000.00 7.00 4. We expect the spread to ease back towards equilibrium levels over the next several years towards levels consistent with continued expansion of conversion capacity. .00 3.00 9. USGC (Dollars per Barrel) 10. Gulf Coast were sufficient to maintain Dubai near parity there. The start up of several new refinery conversion projects and the cutbacks in Venezuelan production kept differentials low during 2002. Dubai sales to the U. high freight costs.III A .S.00 6. The disruptions in 2005 and 2006 also exacerbated difficulties in maintaining consistency in the price formulas for Maya and Isthmus. flows from the Gulf Coast and from Western Canada. The forecast for WTI pricing relative to Gulf Coast crude oils recovers as continuing delivery of Gulf Coast-sourced crudes are required to balance inland markets. High crude prices.S. with the exception of the destination-specific grades.

but the industry often uses the Brent-Dubai spread as an indicator.50) (1. The East-West differential has followed these movements in trade patterns.50 (0.50) (2.127 While African crude once moved sporadically to Asia to satisfy seasonal imbalances and quality requirements. FIGURE A-8-2 EAST-WEST DIFFERENTIAL (Dollars per Barrel) 1.III A – Historical Market Development -. cycles and random events. The key variables in this analysis are the margin for the marginal refinery and the regional light/heavy differential. which can be quite different due to significant quality differences. In 2005 and 2006 strong demand in Asia resulted in the East West differential increasing again to record levels. .50) (4. such as those seen in 2001 and in 2006. High freight rates contribute to high East-West differentials.50) 1985 1990 1995 2000 2005 The East-West differential shown is on a Dubai basis. As a result. Some examples are: . Refinery economics establish various grade differentials among products once the light/heavy spread has been determined. The strong Atlantic Basin crude market in 2004 temporarily reversed this long-term pattern. continuous flows are now required to balance the Atlantic Basin as well as to meet Asia market requirements. Gulf Coast to West Africa.50) (3. Dubai is the primary price-setting marker crude in the Asia-Pacific market and is priced through the mechanism of competitive equalization with African crudes described above.50 0. The logistic and quality relationships between Middle East and African crudes in Asia are thus the key factors driving the forecast of the East-West differential. the competitive equalization point between the Eastern and Western Hemisphere has shifted from the U.S. PRODUCT PRICES AND REFINING MARGINS Regional product prices are developed from a forecast of refining margins in each region as a function of refinery complexity. The supply/demand factors that determine refinery margins and product prices involve trends.

By the early 1990s. growth in product demand is forecast to be less than two percent per year worldwide and much lower in more developed markets. Because of the time lag for investments. the return on investment to refiners was sufficient to motivate new investment in capacity. Trends are the most important element of the forecast because they show the direction of supply/demand pressures. However. Cycle frequency follows from the rate of growth and the lag time for construction.III A . Light product versus heavy product growth rates. Except for several rapidly growing developing countries. Light/Heavy Differential The light/heavy differential is the difference in the prices of clean products (gasoline. As a result. The conversion capacity balance is a complex. The light/heavy differential depends on the availability and utilization of conversion capacity. the light/heavy spread will typically overshoot its equilibrium level.128 -. major cycles have occurred in the light/heavy spread about every ten years and minor cycles about every five years. the balance between conversion capacity and heavy feedstocks was tight. For example. In the late 1980s. . For example. and technological improvements provide sufficient capacity creep. kerosene and diesel) and fuel oil.Historical Market Development Trends Product Quality Crude Oil Quality Trade Patterns Cycles Major Capacity Additions Heavy Crude Projects Other Capital Projects Random Events Weather Refinery Outages Supply Disruptions In our long-term forecasts. incremental expansions along with major investments for conversion capacity and clean fuel projects. As a result. very low growth rates typically lead to less severe but more frequent cycles. Product price differentials and the difference in price between light and heavy crude oils follow one another and so the light heavy differential can also refer to the difference in price between light and heavy crude oil. with little or no excess capacity. the rate of addition of conversion capacity considerably exceeded the required level. refiners often will not add conversion capacity until margins reach levels sufficient to justify the investment. this rate of growth can be met without long lead-time major capital projects. such that higher growth rates lead to shorter cycles. The unusually high returns generate even more investments ultimately leading to an overreaction in the opposite direction. the industry can adapt to the trends as well as to random events. It is the main driver of the variation of refinery profitability with complexity. Amount of conversion capacity. debottlenecking. The cyclic elements typically involve the industry under or over reacting to the trends. involving the following factors: • • • • Product demand and crude oil runs. Instead. Crude oil quality. naphtha. we do not attempt to forecast cycles except from the current point in the cycle to the cycle average. Since 1980. Many crude producers added .

an overbuilding of such capacity resulted. as did the tight supply/demand balance for light products. The light/heavy differential remained wide through the middle of 2001. but reduced production resulted in very weak differentials in 1999. . Many refiners in the U. increasing heavy crude production from Mexico and Venezuela.00 4. The over abundance of conversion capacity drove up demand for heavy feedstocks and resulted in a narrowing of the light-heavy differential through 1995.00 1985 1990 1995 2000 2005 Light Products .129 this capacity with the intention of processing heavy crude into low sulfur diesel and reformulated gasoline. $/Bbl) 12. The same conditions that created the high margin environment in 2004 contributed to very strong light/heavy differentials as well. In 2000. In late 2004. A modest recovery in the light-heavy differential occurred in 1996 through 1998 driven mainly by the rising output of heavy crudes in the Western Hemisphere.00 . as well as increased OPEC production overall.Resid Isthm us Maya (Isthm us-Maya. resulted in a strong increase in the light/heavy differential.00 5.00 10. but recovered late in the year. and production of heavier OPEC grades increased residual availability. but fell sharply and remained low through 2002 as a number of coker projects came onstream to absorb the surplus of residue.00 30.00 20.00 25.Resid $/Bbl) 35.00 0. high freight rates reduced netbacks for fuel oil shipments out of the Atlantic Basin. The disruptions in Venezuelan crude production also contributed to low differentials in 2002. However.00 8.III A – Historical Market Development -. These pressures continued into 2006 with the supply impacts of MTBE phase out in the U. The high price environment and hurricane-related disruptions contributed to extremely wide light/heavy spreads in 2005.S.S.00 0. found the most economic way of accomplishing this was to combine various refinery modifications made in response to regulatory changes with expansions of conversion capacity. FIGURE A-8-3 LIGHT/HEAVY DIFFERENTIALS (Light Products . it was believed that increasing it was the most effective way to maximize the return on product quality improvement investments.00 15. Differentials moderated in mid-year. Since conversion capacity is generally the most profitable increment of refining. because so many refiners recognized the potential benefit of increasing conversion capacity.00 2.00 10. continuing into early 2003.00 6. Tight product markets resulted in a sharp increase in differentials in late 2002.

00 1. ranging from direct catalytic cracking of "clean" residues to hydroprocessing and coking. GULF COAST The marginal U.00 4. and so must only recover variable costs plus an incentive element.00 8.Historical Market Development NORTH AMERICA PRICES AND MARGINS U.00 10. The margins for more complex yardstick refineries processing key sour crudes are monitored to gain insight into conversion economics and industry-wide trends in refinery economics.S.00 6.00 6. Our analysis shows that virtually all U. . Gulf Coast refinery has continually become more efficient and has reduced the output of its lowest value product residual fuel oil. light sweet crude cracking presents the marginally available capacity in a more complex facility.00 0.III A . Production of residual fuel oil by U. Operating costs have steadily been reduced.00 3.00 5.00 7. FIGURE A-8-4 USGC LLS REFINING MARGINS (Dollars per Barrel) 8.00 (1.S.130 -. Gulf Coast refineries have some form of residue conversion.00 14. Gulf Coast refineries has now fallen to only 4% of crude runs. Today.00 0. the marginal refinery had no bottoms upgrading and long-term margins needed to support full cost economics of the cracking refinery (FCC with no residue upgrading).00 2.00 4.00) 1985 1990 1995 2000 2005 Coking Cracking FIGURE A-8-5 USGC SOUR CRUDE REFINING MARGINS (Dollars per Barrel) 16.S. In the late 1980s.00 (2.S.00 2.00 12.00) 1985 1990 1995 2000 2005 Maya Coking Isthm us Coking Isthm us Cracking .

the delayed restart of several affected refineries resulted in a tight capacity balance in the spring. Longer term. the MTBE bans in New York and Connecticut reduced supply and tightened supplies of high quality blending components. Brent is used for assessing Northwest European refining economics on sweet crudes. but fell sharply in 1999. insurance and loss. The use of CIF product prices corresponds to a transfer price between refining and marketing based on the alternative cost of purchased product to an inland marketer and implies that refinery products are used locally in inland markets. The refinery economics presented reflect configurations that change to meet new product specifications in 2004 and 2007.131 Margins have moved through several short-term cycles in recent years. Refining margins for each of the representative refinery configurations are forecast based on marginal economics of supplying products. The sour crude slate is 30% Arab Light and 70% Urals from 2000 in the tables. due in part to low inventories and the effects of reformulated gasoline (RFG) specification changes. In 1997 and 1998 profitability was good. catalytic cracking and hydrocracking (Table A-8-3).000 B/D was still closed at year-end. and roughly 800. and high levels of speculative activity in futures markets resulted in very strong gasoline prices. Prices fell as imports flooded in and refinery operations moved back toward normal.III A – Historical Market Development -. Following the September 11 attacks. In addition. A sharp drop in margins in late summer persisted through year-end. Margins for each refinery are calculated using CIF (cargoes ARA) product prices in Rotterdam and delivered crude prices to Rotterdam based on spot FOB prices plus the costs of freight. Hurricanes Katrina and Rita resulted in the temporary shutdown of almost 5. the light/heavy differential and other relationships between product prices. The elimination of MTBE in gasoline and supply logistics problems with ethanol contributed to very high gasoline prices in the first half of 2006. Historical net cash margins for the key Northwest Europe refinery configurations are presented in Table A-8-3 and are also illustrated graphically in Figure A-8-6. . The economics of processing a mixed sweet and sour crude slate are also analyzed. strong demand. NORTH WEST EUROPE NORTHWEST EUROPE REFINING MARGINS The three key refinery configurations used to characterize the industry in Northwest Europe are hydroskimming. The hurricanes sparked sharp increases in refined product prices and sent margins to record levels. However. A strong recovery in 2000 continued into mid-2001. Purvin & Gertz regularly updates these models to ensure that they reflect current refinery operations. These factors continued to affect margins through mid-2005. while the initial phase of the gasoline sulfur reduction program reduced import availability. with margins falling towards the long-term cycle average levels. Early 2004 maintained the 2003 margin momentum. but a combination of factors resulted in very high margins in the second quarter. Product prices and margins spiked upwards in late 2002 through 2003 assisted by cold weather and high distillate prices. the recession and weak demand resulted in poor profitability in 2002. Continuing low product inventories.0 million B/D of refining capacity in late September. . slowing demand growth and expected capacity additions should ease supply tightness.

.00) (3.III A . a mixture of sweet and sour crudes is typically processed. margins were weak in 1999 and 2002.Historical Market Development FIGURE A-8-6 CIF NWE REFINING MARGINS (Dollars per Barrel) 7. annual average hydroskimming margins are expected to be below breakeven on a full cost basis.00 3. Although similar in basic configuration to those used in Northwest Europe.132 -. and around breakeven on a variable cost basis. The same three types of refinery configurations are analyzed in the Mediterranean market as in Northwest Europe: hydroskimming. In the Mediterranean region. The sour element of the crude slate is assumed to be 33% Arab Light and 67% Urals. and hydrocracking. but rebounded sharply in 2003 and strengthened further in 2004-2005.00 5. the Mediterranean refineries differ in several important ways. and hurricane-related disruptions have combined to result in record high margins. and in 2005.00) 1985 Sweet/ Sour Hydrocracking Sweet/ Sour Cat Cracking Sweet Hydroskimming 1990 1995 2000 2005 Following worldwide trends. the specific configuration of the Mediterranean yardstick refineries reflect slightly less complex operations and are somewhat smaller in capacity than in Northwest Europe. First. the change to 50 ppm diesel in Europe. reflecting the average size and specific configuration of the refineries in the two regions.00 1. and so the yardstick refining economics are based on a mixture of 40% North African sweet crude oil (Brent quality equivalent) and 60% sour crude. MEDITERRANEAN REFINING MARGINS The methodology used to forecast product prices in the Mediterranean market involves the analysis of crude oil price relationships and yardstick refining economics in the region as well as key product price relationships relative to Northwest Europe and other adjacent markets. the worldwide strength of middle distillates. European margins were supported by the strong market for gasoline in the United States. High utilization rates have been needed to meet current demand. The margins for the residue conversion refineries have been projected based on the outlook for hydroskimming margins and the expected incremental economics of cracking over hydroskimming. continued wide light/heavy price spreads. catalytic cracking.00 (1. Strong margins continued into the first half of 2006 but the absence of hurricane activity in 2006 resulted in a drop in margins compared to 2005. As discussed above. .00) (5.

It spans a large geographical area and a number of countries of varying sizes and stages of economic development. The strong 2004 demand .00 3.000 to 800.00) (3. accounting for 700. demand increased by about 500. Looking forward.00 1. or European market.000 B/D as China and Indian demand growth was offset by declines in OECD countries. refinery utilization in Asia fell from 85% in 1997 to about 80% from 1998 through 2002.7 million B/D starting up in 1999 and 2000. reflecting the poorer economy of scale and relative weakness of some product prices longer in supply in this region than in the North (e.000 B/D in both 2002 and 2003. Utilization finally improved back to 85% in 2003. much of this capacity entered operation just as demand began to falter. . The Asian market is much more diverse.S.000 B/D of which about half was in China.00 (1. In 2006. with about 1. Unfortunately for the industry. demand was again lower at less than 400. however. primarily due to stronger demand growth for light products and the regional weakness in Mediterranean crude oil prices caused by the impact of increasing Russian and Caspian crude oil supplies. naphtha. FIGURE A-8-7 CIF MED COMPOSITE REFINERY NET MARGINS (Dollars per Barrel) 9. China is projected to remain a primary source of demand growth over the next 20 years.000 B/D of annual growth.00) 1990 1995 2000 2005 Cat Cracking Hydrocracking Hydroskimming ASIA Rapid petroleum demand growth in Asia has made it one of the world's most important markets.000 B/D in 2004. despite the high level of capacity additions.00 7. Mediterranean refinery margins have been strengthening relative to Northwest Europe. After a slowing of demand growth in the 1998-2001 period.133 The historical and forecast refinery economics for the Mediterranean are shown graphically in Figure A-8-7 and detailed in Table A-8-4. Mediterranean refining economics have been slightly below margins in Northwest Europe. we expect Asia to account for 40-50% of world demand growth. More recently.III A – Historical Market Development -. REFINERY OPERATIONS A measure of market strength in Asia has been the willingness of regional refiners to expand capacity. Growth in 2005 returned to around 600. As a result. Over 4 million B/D of refining capacity started up in the 1995-2002 period.00) (5.00 5. Demand has reached just over 20 million B/D.g. followed by over 900. making it larger than either the U.. kerosene and gasoil). Historically.

refinery complexity in Asia has lagged behind Europe and North America. and continued at high rates through 2005 and into 2006. Capacity and crude run levels for the region are summarized in Figure A-8-8. refinery runs were also influenced by Atlantic Basin refinery utilization and margins due to the loss of capacity in the U. FIGURE A-8-8 ASIA REFINERY CAPACITY AND CRUDE RUNS (Million Barrels per Day) 30 25 Effective (90%) Nameplate Crude Runs 20 15 10 2000 2001 2002 2003 2004 2005 2006 Crude runs approached effective capacity in 2004. Gulf Coast. including inland capacity.Historical Market Development surge raised capacity utilization to near 90%. In 2005. with the exception of Japan. The role of hydroskimming and topping capacity in Asia is much more pronounced if Japan and China's capacity is excluded. makes it difficult to take advantage of spare capacity elsewhere in the region to address local shortfalls. Effective refining capacity in Asia is estimated to be in the low 90% of nameplate. That said. which has reduced runs in line with declining domestic demand. . since the dispersion of the industry. few standalone topping or hydroskimming refineries remain in Asia outside of niche inland markets and most of the simple capacity is found in refineries with more sophisticated processing such as cracking or vacuum residue upgrading.III A . Due to the greater proportion of residual fuel oil in the demand slate. low conversion refinery capacity continues to represent the incremental refining configuration in Asia as shown in Figure A-8-9. Simple. Refinery utilization has remained high in 2006 in most key Asian refining centers despite very poor simple refining margins (see below). .S. Many Asian countries include significant topping or hydroskimming capacity in their refining systems.134 -.

135 FIGURE A-8-9 ASIA REFINERY CAPACITY BY TYPE (Million Barrels per Day) 25 20 15 10 5 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Coking Hydroskimming Crude Runs Cracking Topping A review of conversion capacity as a fraction of crude oil indicates that substantial residual fuel feedstock is not converted.III A – Historical Market Development -. Asia has only a very modest gasoline trade but is a substantial net naphtha importer. . These refineries provide all the supply for some of the smaller markets and elsewhere supply incremental volume to balance shortfalls that the local refineries cannot meet economically. gasoline and fuel oils. Vietnam and China among other markets depending on the product and season. the shortfalls are typically distillates. and that the incremental configuration is simpler than cracking. In the less developed countries. and naphtha exports are widespread. SINGAPORE REFINING MARGINS Singapore refineries have traditionally provided an incremental supply function to the Asian market. even though this capacity is located in more complex refineries. Singapore also serves the region as an important bunkering and transshipment location. Singapore export trade is commonly to Indonesia. . Most of this export naphtha is light paraffinic material and the heavy naphtha is generally upgraded to gasoline or aromatics via reforming. All regions of Asia except North Asia have surplus naphtha. These trade and processing patterns indicate that hydroskimming can be considered the incremental configuration.

Simple refinery margins were very negative and conversion margins were only slightly positive as shown in Figure A-8-10. Gulf Coast and European markets. . Utilization fell to about 84% in 2006 as poor simple refining margins reduced runs. refineries filled downstream conversion capacity but generally spared hydroskimming and topping capacity.III A . reducing conversion returns. As a result.S.00) (4. Because of the distances involved and the limited gasoline trade in Asia. the effect was muted in the Asian market. while the Atlantic Basin is a net exporter. During the years 1998-2002. During a period of poor margins. it is common for hydroskimming and topping margins to remain negative on a full cash cost basis for extended periods. utilization was 87% for the full year.00) 1985 Topping Hydrocracking Hydroskimming 1988 1991 1994 1997 2000 2003 2006 As shown above.S. As the historical record shows. The very tight gasoline market in the United States has driven the Atlantic basin improvement. at least in the export markets of Singapore and Korea. Singapore utilization exceeded 88% in 2004. refinery margins collapsed along with refinery operating rates.00 2. .Historical Market Development FIGURE A-8-10 SINGAPORE REFINING MARGINS (Dollars per Barrel) 6. Despite very poor hydroskimming and topping margins in late 2005. but not to the levels seen in the U. During this period. as well as by the mechanism of shifting light and heavy crude flows to ease regional imbalances. Singapore margins and conversion returns improved sharply during 2004 to 2006. fuel oil prices tend to be stronger in Asia.00 0. Conversion economics around the world are linked by the large trade flows of residual products. Figure A-8-11 compares conversion returns in the U.00 (2.00 4. Conversion returns in Asia tend to be somewhat lower and less volatile than in the Atlantic Basin. Gulf Coast and Singapore markets. the Asian market has a large portion of simple topping and hydroskimming capacity combined with more complex cracking and deep conversion. conversion returns are highly cyclical. The resurgence of Asian demand in 2003-2004 greatly improved Singapore and other refinery utilization rates and margins.136 -. Asia is a large net importer of residual fuel oil.

Singapore's role is discussed below. The region. has become an established product export centre with the start-up of the Reliance refinery in 1999. Southeast Asia. which was a traditional importing market. % CRF USGC Coking. The Middle East has traditionally been an exporter of products to Asia and the two markets are therefore closely linked. dominated by India. will need to export light products to Europe and the Americas as Asia will not provide a large enough import market. with the expansion of the Korean and Taiwanese refineries over the past ten years. like the Middle East export refineries. fragmented product specifications and numerous trade barriers. residue and LPG). but in recent years. Our balances indicate that India. Reliance was the only significant products exporter from the region. but contains the key Singapore trading and pricing location and the two rapidly growing import markets of Indonesia and Vietnam. it is only one of several key markets that are separated by vast distances. Exports from South Asia flow not only to Southeast and Northeast Asian markets. Exports will expand rapidly with the start-up of the Essar and second Reliance Petroleum refineries. South Asia and the Middle East. % CRF 1990 1995 2000 2005 MAJOR EAST OF SUEZ MARKETS While Singapore provides the primarily product-pricing discovery centre. . Before the strong margins in 2003-2005. South Asia. is now surplus in most products (exceptions being naphtha. but also to African and Atlantic Basin markets. Northeast Asia is the largest market in terms of demand and trade. . but the other markets are actually larger markets and are in some ways growing in influence. The Southeast Asia market is relatively small in size. Growth in Middle East to Asia trade has slowed over the past few years as more production has remained in the Middle East to meet growing demand. This market includes three of Asia's four largest markets and accounts for about two-thirds of total Asia demand. The East of Suez market can be divided into four major markets: Northeast Asia. other companies in India are now exporting naphtha and other products.137 FIGURE A-8-11 SINGAPORE VERSUS USGC CONVERSION RETURNS (Percent CRF) 100 80 60 40 20 0 1985 Singapore Hydrocracking.III A – Historical Market Development -.

which is now traded in both directions with exports from China being sold to Singapore and Singapore moving to the Middle East to meet Middle East gasoline demand. The analysis shows that the economics of exporting from the Middle East.00) (3. a cat cracking refinery that converts the vacuum gasoil from the crude oil to primarily gasoline and a hydrocracking configuration that produces primarily diesel fuel. The hydroskimming refinery produces gasoline rather than exporting all the naphtha. Despite the imports some gasoline continues to be exported as structural trade from the foreign owners of export refineries.00) (4.00) (2.Historical Market Development Middle East refinery exports will increasingly target Atlantic Basin markets.00 2. Pricing in these markets is closely tied to Singapore and generally represents trade patterns and freight.00 3. with the simple refineries (topping and hydroskimming) achieving better than breakeven in only two or three years out of the last . The economics of these configurations are shown below.138 -. Two conversion refineries are also analyzed. . FIGURE A-8-12 ARAB GULF REFINING MARGINS (Dollars per Barrel) 5. where surplus product was supplied to the growing Asian markets. Rapid demand growth in the Middle East has resulted in a shortage of gasoline and from 2000 the region became a net importer from Europe and latterly India. but trade to Asia will remain structural for some time. is generally poor. Prices are therefore the lowest in the Middle East and highest in Northeast Asia. Topping is the simplest configuration studied as it produces untreated products and naphtha for petrochemical feedstock rather than gasoline.00 1. Crude pricing also follows this pattern.00) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Topping Hydrocracking Hydroskimming FCC Four yardstick refineries are defined for the region. which is the basis for the product prices reported. This has historically reflected the patterns of trade from the region.00 0. ARABIAN GULF REFINERY ECONOMICS The Arabian Gulf prices reported by Platts are in most cases reflective of export netbacks from Singapore or other Far East markets.00 4.00 (1.III A . Most product flows are from the Middle East to South Asia to Southeast Asia and onward to Northeast Asia. The notable exception is gasoline. all processing Dubai crude as being representative of light sour crude produced and exported from the region.

RUSSIA PRICES AND MARGINS The Russian domestic oil market is characterized by substantial overcapacity of refining. The former centrally planned economy resulted in refineries located in regions close to the sources of crude supply but distant from product markets. Most of the refineries in the region are government owned and as such do not have to operate under the strict commercial criteria that refineries in Europe or the U. removing some crude from the market and supporting prices. control the majority of the crude oil production. The cat-cracking refinery was not as profitable. In making the analysis presented here it has been assumed that the price of crude into a given refinery is at equilibrium with the value that would have been achieved had the crude been exported to the world market. although less spare capacity exists in certain areas. Domestic Crude Price Outlook The definition of a domestic crude price is a significant issue in Russia as vertically integrated companies. essentially removed all of the capacity constraints from the crude export system and resulted in domestic crude prices increasing to an export netback based on transport by pipeline. . For the purpose of this analysis we have assumed that the price is for rail export until 2004. In many cases the local refineries provide an outlet for crude oil. The transition to a market based economy has already resulted in substantial changes to the operation and economics of Russian refineries. In 2004 the start up of the Baltic Pipeline System (BPS) that conveys crude to an export terminal at Primorsk in the Gulf of Finland and the subsequent rapid expansion of this system. Consequently the price that is charged to their refineries may not reflect the “market” price. with losses in five of the last eleven years. Also the local refineries provide products for the local market and exports are marginal volumes that would be accounted for at a variable cost. Prior to this there were capacity constraints in the export pipeline system for crude oil and in this situation crude producers either had to make export by rail or sell to local refineries.139 eleven. This situation prevailed for the period from about 2000 onwards. have to meet.III A – Historical Market Development -.S. Analysis of crude prices paid by independent Russian refiners shows that prices have moved into this export netback equilibrium from 2004. That said most of the national markets price products to the consumer at or below the cost of production. For some there will be opportunities to develop profitably and supply a logical market enclave. It is also noted that there are no significant quality differentials for crude oil in Russia as producers export through commingled systems without compensation or penalty for better or worse quality crude oil. For others downsizing will be necessary. which also own refinery capacity. During this period the domestic crude price appears to have oscillated between the netback that the seller could achieve by exporting by rail and the amount that a refiner was prepared to pay to breakeven on processing additional crude to export all of the production from it under simple refinery yields. As would be expected the conversion refineries have fared better with the hydrocracker breaking even in all but four of the last eleven years. .

It is interesting to note that the predictability of the system now leads to companies delaying or advancing exports to take advantage of the change in tax rate.00 (2. which form the basis for negotiation for sales to domestic customers. conversion refineries essentially broke even on a full cost basis and simple refineries did not make a profit. based on a netback to Europe for refineries other than those in the Far East regions or remote regions.00) (4.140 -.00) 2000 2001 2002 2003 2004 2005 2006 Hydroskimming Domestic Hydroskimming Export Cat Cracking Domestic Cat Cracking Export Until the tax incentives that were introduced in 2004. the majority of exports are to Western Europe.00 6. . Each domestic refinery posts prices. In the analysis of historical margins an export parity price has been taken for all products apart from LPG and high-octane gasoline.00 2. The change to the tax system. which itself increases with crude price means that as crude prices increase the tax differential in absolute terms between crude and products widens. As the refining industry is primarily located in the east of the country. Refined Product Prices As discussed above there has not been a transparent price discovery system in Russia until very recently. The system has evolved and for some time now the export tax has been calculated using a formula that relates the amount of tax levied to the price of Urals crude quoted in Rotterdam and the Mediterranean over the prior two months.00 8. LPG is sold at a price that reflects natural gas value and also is reflective of the high cost of export.00 4. Analysis of product pricing in refineries in Russia indicates that the domestic price for all products other than high octane gasoline tend towards the export parity.III A .00) (6.00 0. coupled with the change to the tax system resulted in refinery profitability rising sharply from 2004.Historical Market Development One of the most significant influences on the domestic crude price is the export taxes levied by the Russian government. The tax mechanism whereby the tax on products is calculated as a percentage of the crude tax. The system has not been tried in a sharply falling market where it could be conceivable that the tax payment would be greater than the price received. increasing . FIGURE A-8-13 RUSSIA REFINING MARGINS (Dollars per Barrel) 10. The formula is progressive with the tax take increasing to a marginal rate of 90% once the crude price is above $35 per barrel. A review of the refined product balances for Russia shows that the level of crude processing far exceeds the demand in the local market and consequently a large proportion of the refining industry output is exported.

This is illustrated with the convergence between the hydroskimming margins. The cost to market for products from NovoKuibyshev is estimated at over $6 per barrel. The economics presented above. which converged in 2006. compared to a much more efficient refinery in N.W.141 the margin for domestic refiners. The internal market in Russia has become progressively more economically driven with domestic prices converging with the export netbacks for most products except gasoline.III A – Historical Market Development -. and in Tables A-8-8 reflect those for a refiner located a considerable distance from the Russian border. although investment progress to improve efficiency and yields is still slow. made a margin of $7.30 per barrel. The completion of the new export pipeline to Primorsk will allow increased volumes and the export of EU quality diesel rather than the lower valued gasoil. A refinery such as Tuapse would enjoy a margin that would be in the order of $5 per barrel more than that illustrated here. In many instances logistics limit the export of greater product volumes. where the domestic price is higher but below import parity. Europe that made only $4. The domestic gasoline premium over export resulted in the domestic cat cracking margin being stronger than the export case The large tax incentive that prevails currently has encouraged Russian refineries to increase processing. In 2006 a relatively inefficient cat cracking refinery selling export products.35 per barrel. . .

70 0.32 23.35 0.53 1.88 4.19 0.65 0.92 8.64 7.S.18 (0.66 0.93 Note: Margin projections incorporate production of ultra-low sulfur gasoline (30 ppm) in 2005 and Note: ultra-low sulfur diesel (15 ppm) in 2007 .96 67.03 2.72 14.60 0.45 22.67 1.63 0.72 29.76 0.17 1.17) 0.67 0.85) Interest on Working Capital 0.30 14.44 0.34 3.30 2.30 2.45 1.28 56.74 13.34) 8.Historical Market Development TABLE A-8-1 U. % of Replacement Cost Light Sweet Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.72 1.11 6.78 6.16 3.62 1.75 74.12 1.44 6.34 0.89 29.20) 0.12) Light Sweet Cracking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.65 22.06 Variable Costs 0.69 53.03) (0.18 3.39 33.11 2.13 0.16 0.53 0.82 0.83 1.31 31.40 0.18 41.46 0.28) (1.16 19.95 20.19) (1.12 0.51 10.78 16.25 (2.81 1.29 2.38 0.19 0.16 2.01 0.28 47.59 0.77 10.70 1.13 13.31 1.10) 1.48 20.14 1.83 1.33 27.92 10.43 (0.11 7.83 26.70 1.16 (0.07 Fixed Costs 0.39 26.73 31.15) (0.09 0.14 1.84 Net Refining Margin (1.43 0.28 0.58 0.13 0.10 0.15 (0.89 (0.92) 1.81 6.67 14.31 0.98 8.61 1.35 46.26 1.43 1.00 26.67 2.14 1.94 0.05) 0. .15 0.84) (21.47 0.51 0.85 25.68 16.26 6.20 1.16 7.92 67.44 0.84 34.16 8.60 12.16 0.98 (0.54 56.61 (17.15 (2.18 3.15 0.84 14.09 0.07) (14.30 31.29 20.14 0.36 1.96 Cracking/Coking 8.68 24.52) (5.13 0.47 14.40 0.04 25.25 21.66 52.19 0.05 31.97 1.37) 3.58 1.68 1.10 0.54 23.76 1.30) 1.64 0.32) 1.05 30.97 22.45 0.65 0.10 23.85 0.14 0.64 45. % of Replacement Cost 20.65 0.25 32.00 0.22) (0.58 1.65 0.12 0.70 0.69 0.14 0.53 41.11 1.79 18.65 22.13 23.01 1.56) (18.78 0.45 0.38 1.15 0.26 Gross Margin (0.65 0.85 65.27 50.45 3.44 Return.85 3.70 19.05 0.39 1. % of Replacement Cost (16.45 19.23 41.91 40.94 18.05 30.40) (0.32 Crude Cost 18.31 67.54 4.86 1. GULF COAST LIGHT SWEET CRUDE MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Light Sweet Hydroskimming Refinery Product Sales Realization 18.02 67.89) 6.39 0.34 0.31 (1.85 26.11 0.74 18.51 1.70 1.06) (0.44 28.24 0.44) (7.29 20.98) 1.87 0.42 0.67 0.16 60.05 30.44 29.15 0.17 33.52 0.93 35.54 20.11 2.39 1.45 26.20 0.64) (15.25 (1.56 18.86 1.39 5.36 1.33) (1.77 0.89 13.95 1.94) (0.16 14.16 2.01 0.82 14.11 3.68 0.54 1.142 -.54 0.13 0.11 0.65 22.09 20.23) 7.40 0.26 25.26 9.30 0.30 14.67 2.33) 1.29 1.41 0.III A .53 0.51 4.16 9.23 0.29) (12.57) (1.78 (0.85 4.06) (4.60 Light Sweet Incremental Capital Recovery Factors (%) Hydroskimming/Cracking 14.87 0.21 67.16 0.62 0.00 0.27 19.06 41.34 20.93 34.26 1.64 0.34 20.68 56.17 1.68 0.54 5.91) (4.59 22.88 76.

55 44.79 0.37 17.32 21.25 28.96 2.36 19.83) (9.59 14.46 36.16 0.07 33.23 14.32 2.71 38.57 0.26) (0.30 7.64 74.90 1.83 75.83 1.69 (1.96 24.00 2.07 23.06) (2.54) 1.59 1.46 27.54 5.40 Note: Margin projections incorporate production of ultra-low sulfur gasoline (30 ppm) in 2005 and Note: ultra-low sulfur diesel (15 ppm) in 2007 .56) 1.13 0.43 1.08 1.10) (1.92 10.79 0.31) (1.90 1.60 1.58 15.77 1.24 12.80 (0.14 3.20 51.15 2.15 18.33 0.73) 8.69 34.49 33.14 0.84 2.53 14.10 12.10 6.26 17.17 0.02 15.16 1.23 0.44 0.62 0.85 20.06 (0.61 1.76 0.68 29.91 5.08 18.59 0.45 0.10 1.89 6.97 12.45 38.27 1.16 37.74 3.30 14.30 25.42 21.49 4.10 1.73 0.11 2.143 TABLE A-8-2 U.87 22.84 10.79 1.11 3.72 24.80 1.50 0.41 60.04 1.34 23.02 21.75 0.22 14. GULF COAST SOUR CRUDE MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Light Sour Hydroskimming Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.25 19.54 1.04 1.19) (0.13 0.85) (22.38 1.68 3.89 10.47 1. % of Replacement Cost Heavy Sour Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.99 1.87 0.90 48.09 0.15 15. % of Replacement Cost 17.13 1.96 2.63 0.91 1.65 0.67 1.78 26.13 8.29 40.94 0.96 28.74 28.10 7.51 0.III A – Historical Market Development -.10 0.35 22.57 0.79 1.95 0.32 1.13 1.55 0.36 42.67 28.75 31.29 18.98 9.01 24.18 0.88 12.13 0.44 1.00 0.15 3.06 2.60 0.94) (29.68 41.14 1.54 0.37 1.13 7.83 24.63 4.88 3.85 52.37 61.21 0.95 4.S.56 0.94 20.09 11.56 0.11 22.23) (1.55 0.80 13.24 7.11 8.90 2.10 0.89) (0.23 30.15 0.99 22.14 1.95 0.42 Light Sour Incremental Capital Recovery Factors (%) Hydroskimming/Cracking 11.78 1.29 4.98) (4.56 0.27 0.85 10.73 1.71 0.09 1.47 34.91 4.97 23.40 (13.84) (0.97 3.40 1.50 17.07 0.14 21.98 25.23 0.25 21.36 13.53 32.12 0.28 28.63 22.77 14.55) 18.89 33.68 2.40 0.17 29.07 17.75 10.63 22.69 10.42 3.50 25. % of Replacement Cost Light Sour Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.62 1.84 16.63 Cracking/Coking 13.13 0.77) (0.93 1.23) (3.70 1.55 0.13) (1.88 16.51 36.68 1.39 1.70 0.50) (11.76 0.82 1.43 15.40 4.51 0.09 38.96 3.77 1.80 7.54 1.75 0.47 0.43 19.85) 0.33 1.57 0.51 17.54 7.06 0. % of Replacement Cost Light Sour Cracking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.06) 1.72 1.48 60.42 (1.23 0.61 0.85) 0.08 62.10 4.30 51.13 0.09 4.80 (0.22) (1.28) 2.16 2.19) (13.57 2.89 1.14 26.66 32.97 4.05 17.56 2. .90) (1.26 21.47 41.13 0.92 29.05) (1.74) 0.23 1.16 13.33 1.57 3.13 3.84 53.79 0.16 17.10 (0.59 0.56 1.69 1.88 1.48 21.86 4.30 44.31 32.43 29.05 20.97 1.94) (23.37 1.67 2.22 20.24 17.86 24.02 0.10) (0.16 27.42 23.06 0.15 17.76 17.38 0.47 1.59 2.40 2.63 23.09 3.15 7.65 0.32 21.30 60.97 23.33 0.15 18.27 0.79 24.61 28.40 0.07 0.10 0.76 65.70 68.13 0.88) (12.14 1.95 59.51 0.31 1.34 1.05 0.86 8.69 0.10 1.03 19.07 1.94 33.56 0.15 Maya Coking/Coking 14.61 2.14 (2.40 59.70 29.56 19.57 17.01 63.46 0.10 3.01 0.13 51.86 9.16 1.08 14.06 23.00 0.92 22.79 6.09 0.08 (0.07) (0.11 1.56 0.59 45.17 6.03) (5.57) (13.14 (2.54 0.47 2.72) 0.28 35.01 0.12 5.56 0.57 2.43 0.31 0.12 0.54 0.67 28.15 6.91 1.13 5.11 13.50 0.14 12.66 39.42 14.96 0.13 0.84 18.21 0.78 71.88 14.83 1.58 17.58 0.67 0.88 26.

12 3.27 28.12 0.10 1.94 2.20 31.66 25.08 2.97) 0.91) 0.58 0.21 1.02 7.22 21.44 1.95 22.65 19.27 0.94 0.40 45.26 43.34 0.28 0.35 3.69 3.58 (4.10 0.11 1.06 0.21 1.17 1.21 1.89 0.19 5.20) 0.90 0.81 63.93 25.70) 30.21 1.23 1.01 0.41 24.38 20.01 0.III A .54 1.66 0.33 15.21 25.57 3.60 0.66 2.42 0.77 0.84 6.57 0.71 25.22 28.21 19.06 0.26 18.92 5.24 56.08 0.42) (0.64 40.69 6.57) 31.67 0.78 24.74 0.63 16.04 (2.53 (2.81 2.11 (0.33 1.04 (1.23 1.20 25.18 3.25 (0.35 (0.87 28.23 1.51 2.35 2.44) 20. FOB Prices Sweet Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs Sweet H'skim (%) Sweet (70%)/Sour (30%) Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs.51) 1.32 55.99 12. and 2007 to reflect product quality changes.19 15.11 0.94 39.55 49.14 0.63 42.32 24.09 28.73) 0.53 0.59 0.49 33.00 2.26 2.52 0.22 23.21 22.76 1.08 0.57 19.41 35.51 17.90 19.99 9.53 1.24 1.99 29.54 1.42 0.53 0.50 28.55 0.23 2.19 9.23 1.66 45.92 5.68 9.67 Notes: Based on CIF cargoes NWE product prices unless noted.01 14.62) (0.79 0.44 4.30 0.21 24.27 61.34 0.28 0.15 21.64 22.15 0.32 7.56 14.53 38.65 40.21 23.68 7.18 25.19 8.39 32.62) 0.21 0.43 22.20 1.72 8.45 22.69 0.17 0.19 1.09 0.24 1. Sweet H'skim Sweet (50%)/Sour (50%) Hydrocracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs.86 3.54 0. Sweet H'skim 18.40 0.00 62.19 20.25 5.17 1.67 0. Notes: Configuration changes in 2000.34 4.11 0.83 14.23 2.73 25.26 33.01 21.06 14.00 71.03 25.20 32.83 19.12 4.26 17.25 3.76 16.88 0.55 15.60 0.56 12.13 0.49 2.23 1.07 0.43 34.43 35.02 0.65 25.59 7.68 9.08 0.52 18.63 (2.09 0.20 1.23 29.83 3.33 22.94 (0.15 25.50 0.18 4.91 0.38) (0.99 20.55 0.23 1.54 1.02 0.11 1.34 0.59 51.01 28.15 0.78 20.25 20.65 5.03 7.18 23.14 15.78 19.91 25.59 0.22 1.18 1.28 24.93 11.64 0.19 23.62 0.22 23.57 50.73 0.61 0.15 15.22 2.80 0.82 0.26 1.66 25.26 0.74 54.18 3.99 4.23 1.71 (14.21) 0.95 0.16 17.42) 0.40 0.09 1.08 (7.34 0.28 0. .77 27.49 0.35 2.62 16.21 19.26 13.92 17.98 23.88 21.17 6.42 48.05 62.28 28.144 -.36 64.18 26.35 1.82 0.92 2.89 43.25 2.72 12.55 2.67 36.52) 0.94 4.65 24.20 1.76 4.33 0.62 15.25) 0.89 (0.14 25.22 1.67 0.68) 0.24 1.46 0.22 1.23 1.34 1.52 0.90 0.19 25.10 1.34 22.13 6.85 12.59 0.10 1.10 1.63 0.22 14.04 2.15 25.04 20.88 7.60 33.18 5.13 (0.54 13.25 0.38 0.49 18.90 10. .51 71.05 0.14 0.77 0.54 33.84 72.14 23.05 (0.90 8.21 31.22 22.92 17.43 23.52 0.54 14.08 0.14 1.41 39.97 33.43 0.46 13.88 3.59) (0.25 3.63 18.44 0.40 0.35 1.48 (3.15 22.65 0.58 22.21 2.03 0.15 17.76 53.76 5.06 14.25 3.60 35.23 1.20 23.18 23.55 (7.24 18.51 2.97 4.87 27.15 2. 2004.64 24.96 0.11 0.26 2.96 12.20 1.61 66.22 37.13) 0.21 15.29 0.01 49.57 6.18 0.22 5.47 0.28) 0.10 22.73 0.19 23.21 1.11 5.61 45.18 45.92 64.40 0.66 0.20 1.21 1.13 25.38 35.68 13.70 28.18 15.52 0.13 (1.33 14.15 29.73 55.29 0.62 2.60 17.68 0.43 1.04 3.22 16.10 (2.29 1.23 1.41 37.25 1.11) 0.91 8.95 3.35 6.77 0.11 5.28 52.48 0.11 1.71 0.47 (5.21 1.00) 0.80 0.29 0.72 13.15 22.26 2.10 0.31 24.15 28.20 1.32 27.51 0.32) 25.38 16.18 0.05 0.76 4.88 29.06 16.50 19.44 1.94 18.28 21.14 23.86 3.65 40.33 0.10 1.57 0.70 1.23 66.64 1.Historical Market Development TABLE A-8-3 NORTHWEST EUROPE REFINING MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sweet Hydroskimming Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest onWorking Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Variable Cost Margin.54 0.58 3.43 1.23 0.52 17.85 22.

93 45.41 13.12 28.40 0.41) 0.77 0.06 18.43 0.88 4.63 0.46 0.85 0.25 2.61 1.62 15.77 (7.14 29.49 1.15 1.83 0.59 22.145 TABLE A-8-4 MEDITERRANEAN REFINING MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Refinery Economics (40% Sweet/60% Sour).20 20. .12 40.09 19.65 0.42 22.42 4.26 1.61 20.70 53.90 (4.94 (0.40 0.67 9.76 (3.28 0.70 1.66 3.77 0.47 Notes: Based on CIF cargoes Med product prices Notes: Yardstick configuration changes in 2000.12 0.84 2.41 2.86 44.48 0.25 1.21 25.29 1.64 0.35 0.51) 0.15 8.34 2.14 15.76 0.23 58.12 1.67 27.33 0.73 28.30 17.21 14.64 0.32 2.35 4.94 0.66 24.05 19.54 (6.54 20.01 0.70 7.11 4.38 24.25 1.41 0.96 27.97 63.80 0.14 1.18 25.46 1.58 0. 33% Arab Light + 67% Urals from 2000 onwards.22 1.24 1.67 4.13 0.86 12.09 52.38 0.63 0.61 21.40 31.87 32.23 0.00 (0.16 60.45 0.22 27.01) 19.32 15.05 70. Notes: Sour component: 100% Arab Light before 2000.36 17.40 18.61 0.19 13.34 3.15 (0.89 0. $ per barrel unless noted Hydroskimming Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Variable Cost Margin (inc.18 13.23 1.00 0.04 14.15 18.25 18.25 1.85 3.44 12.23 (1.66 27.19 20.77 2.23 1.29 1.35 (0.12 23.42 0.74 0.20 35.64 71.83 6.42 63.61 18.97 23.92 7.41 0.24 20.26 1.30 0.34 60.23 7.08) (2.35 36.95 0.26 9.14 26.19 12.28 1.13 13.41 0.84 0. 2005.71 0.70 7.61) 0.41 14.23 1.84 5.34 3.22 24.19 0.96 27.32 24.84 6.48 1.20 14. WC) Hydrocracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Hskim/Hcrk (%) Incremental Hskim/Ccrk (%) 17.98 5.05 0.52 0.40 (2. .20 22.24 0.85 1.13 23.90 10.84 7.34 1.25 0.50) (0.54 23.11 5.45 0.98 0.92 0.72 36.35 0.19 23.64 27.04 (0.65 4.22 17.27 1.02 0.20 13.29 13.26 21.24 2.26) 0.33 24.27 0.35 32.41 3.43) 0.92 5.84 0.32 25.84 1.92 16.13 0.84 17.13 25.65 34.00 6.41 24.59 0.32 28.53 (5.21 63.08 36.49 27.25 0.86 28.20 33.47) 0.17 0.71 0.14 17.14 24.64 8.79) 0.24 61.62 21.29 (0.01) 29.21 23.26 2.90) 0.71 (7.74 2.88 0.27 1.29 15.60 17.85 3.45) 0.01 5.24 17.06) 29.32 0.15 1.24 26.40 30.47 17.36 0.55 56.78 15.25 0.62 34.67 8.88 1.02 (0.09 5.83 62.83 33.41 1.09 0.34 17.62 0.13 1.68 12.88 4.14 28.39 44.11 2.22 0.15 1.12 0.49 0.28 1.25 2.91 52.42 1.22 0.75 0.40 59.15 1.57 0.12 0.27 1.42 15.61 1.79 20.71) 0.84 2.10 2.57 0.01 24.66 0.41 2.16 10.70 0.90 1.III A – Historical Market Development -.89) 0.25 1.19 23.50 0.37 14.30 0.76 0.95 0.49 14.58 20.81 33.11 0.11 17.21 (16.84 27.84 2.28 1.13 1.53 0.90 (4.11 1.20 25.37) 0.24 2.70 0. and 2008 to reflect product quality changes.12 1.66) 0.04 13.67 0.35 37.21 23.17 0.80 4.46 (6.85) (0.24 1.44 52.84 2.86) 0.15 2.18 22.00 4.24 1.23 7.84 19.11) 0.13) 0.06 (0.56 1.03 1.76 20.12 1.79 0.61 12.62 36.81 33.48 23.93 20.52 41.

90 0.01 19.08 1.02) 0.25) 0.01 2.50 1.41 6.64) 0.11 (0.19 8.15 0.30 22.56 1.26) 1.20 6.60 (2.32 0.48 0.34 0.54 1.42 0.71 Incremental Capital Recovery Factors (%) Topping/Hydroskimming 11.31 2.18) 1.65 (1.32 1.60 17.59 (0.14 2.57 8.64 1.46 21.13 (8.69 0.77 0.65 (0.64 0.16 (9.95) 29.61 (1.37 (15.54) 23.97 0.60 (0.15 0.58 0.06 1.35) 19.24 12.17 3.66 1.67 52.04) 15.19 (2.10 16.12 (0.21) 0.29 1.57 1.03 1.71) 23.32 0.64 0.55) 0.17 1.32 2.28 (4.60 (0.43 27.68 1.22 52.35) 4.45 1.24 12.13 23.81 0.91 (2.26) 26.62 1.13 0.65) 37.61) 7.63) 0.10 1.95 12.19 2.16 1.67 (0.49) 0.67 0.36 (10.59 3.13 (1.38 3.84 24.14 2.06) 0.63 0. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.19 (0.59 (0.90) 0.81) 0.21 11.83 (2.17 2.18 (0.57 1.63 0.48 1.66 4.23) 0.17 (4.41 19.49 .68 3.08) 0.92 26.68 1.38 0.85) 13.38 0.33 0.13 (0.35 (6.49 0.12 (5.19 0.11) 31.50) 33.37 0.52 20.63 0.13 (1.90 1.68 1.96 1.52 2.54 (21.99 24.58 0.66 1.57 1.73) 13.89) 24.47 0.68 (0.87) 0.22) 62.75 23.25 16.46 1.08 1.52) 3.35 0.54 (19.13 (8.59 7.41 2.23 3.37 0.33) 20.17 7.06) 62.38 16.58 0.III A .09 18.11 (0.68 50.41 0.66 2.87) 0.98) 8. .89 0.13 0.43 27.19 14.24 50.18 (10.48 20.17 2.61 (5.38 11.35 0.37 0.146 -.93 24.09 0.42 0.41 0.50 (2.06 0.40 1.61 0.06) 0.66 0.21 24.94 0.28 35.78) 18.66 0.72 0.32 62.Historical Market Development TABLE A-8-5 SINGAPORE REFINERY MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Topping Refinery Product Sales Realization Dubai.91) 17.08 4.86 1.13 (3.09 1.62 35.77 23.62 (0.06 2. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.94) 18. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.68 0.19 9.20 21.36 0.09 Hydroskimming/Hydrocracking 10.61 0.81 (0.37 69.01 2.18 (11.96 1.78 0.46 1.77) 0.59 (0.27 27.19 2.66 0.17 2.80 27.66 0.42) 28.48 3.16 (10.33 (1.05) 0.04 1.26 0.17 1.26 35.90 17.38 0.64 0. % of Replacement Cost Hydrocracking Refinery Product Sales Realization Dubai.01 17.52 0.62 0.12 (5.46) 15.73 1.89 0.37 35.97) 24.70 42.86 62.64 0.95) 28.61 (0.82) 31.28 (4.63 0.66 (0.69 0.74 (0.02 13.11 3.00 1.01 0.28 35.72 (3.07 0. % of Replacement Cost Hydroskimming Refinery Product Sales Realization Dubai.70 58.02 50.35 0.41 0.48 1.64 18.08 1.49 1.77) 0.58 0.66 (1.28 4.91) 29.40 0.57 0.42 19.42 0.24 27.24 16.77 (8.01 5.31) 9.12 1.85 0.10 0. % of Replacement Cost 18.70 0.18 0.03 18.65 0.35 (8.19 6.23 27.03 14.41 62.71) 37.03 0.56) 0.53 0.78 0.57 1.

72 (0.94 (3.24 1. % of Replacement Cost Cat Cracking Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.69 0.75 (1.12 (4.89) 0.64 0.09 2. % of Replacement Cost Incremental Capital Recovery Factors (%) Topping/Hydroskimming Hydroskimming/Hydrocracking 16.29 1.69) 49.85 1.98 0.85) 34.88) 0.24 (0.52 (1.18 (2.73 (1.87) 0.75 0.24 3.09 0.16 1.24 0.01 0.56 1.66 26.41 1.31 .26 (0.18 0.28 1.18 0.31) 21.47 (7.54 6.41) 59.06) 0.23 0.33 1.14 (0.50) 16.13 2.44 1.09 0.96 0.13 1.21) 0.74 0.83) 27.40 23.65 61.97) 0.66 49.05 0.15 0. .08 0.27 12.27 (6.08 16.75 0.99) 29.55 1.23 0.99 17.21 (8.27 0.45) 19.01 22.50) 0.46 0.17 (6.75 0.70 23.12 (4.12 (9.16) 0.67 33.31) 0.77 0.79) 0.33 1.17 2.40 63.71 12.57) 18.52 37.24 0.16 (0.18 (1.22 16.76 18.96 33.60 0.76) 34.27 1.12 (2.10 0.17 (16.25) 0.62 0.20 0.30 0.17 (1.11 0.77) 20.17 0.16 (4.19 0.22 (15.10 0.15 (10.07 16.11 0.14 17.66 (0.19 0.24) 12.74 33.64 0.23 0.92 (1.72 26.04) 0.15 (11.56 4.94 41.67 (1.82 (0.54 3.26 0.51) 21.18 4.48) 28.18 7.13) 0.99 0.85 (0.18 10.18 (1.46 0.79 (7.71 0.22) 0.27 (6.67 0.90 0.64) 0.15 (0.13 0.55 1.29 1.09 0.34 (9.11 (8.25 0.36 1.12 12.20 26.09 2.41 49.23 0.30 0.69 13.50) 17.97) 0.75 (0.77 49.55 1.26 0.67 26.17 (3.54 (0.19 0.88) 0.52 5.26 18.22 1.34) 0.33 1.12 (9.67 (0.23 0.18 12.60 1.84 (1.91 0.15 (10.56 (12.68 (0.17 21.74 (1.53) 0.30 1.20 22.85 (0.59 0.10 26.72 (8.21 0.17 0.18 10.10) 0.33 23.56 4.97 (18.23 18.82 13.18 5.85 0.66) 7.39 26.16 67.76 2.69 4.25 0.83 22.61) 18.70 0.23 0.53) 0.69 0.97 22.07 0.38 4.56) 20.39 0.18) 18.55 1.18 5.56 1.29 49.85 55.03 (3.13 0.23 0.05) 0.30 (0.98 0.49) 59.147 TABLE A-8-6 MIDDLE EAST REFINERY MARGINS (Dollars per Barrel) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Topping Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.III A – Historical Market Development -.24) 0.77) 49.52) 7.73 (1.17) 0.47) 29.48 0.39 18.16 0.87) 24.18 4.68 61.56 1.27 61.26 0.56 2.59 0.23 0.27) 0.15 (0.19 0.12 (4.20) 0.54 (0.63 23.11 (8.28 0.80 0.17 (2.55 1.18 0.72) 28.36) 0.25 (0.28) 0.20 18.24 (0.64 0.61) 27.67 (1.87 18.45 1.63 0.69 (0.19 4.27 1.64 1.56 18.30) 17.46 0.54) 13.23 0.99 (3.16 (0.45 23.18 2.77) 26.99) 0.19 2.80 1.34) 37.09) 0.34 0.15 18.09 0.28) 0.69 1.04) 0.22 26.18 (3.18 4.28 2.76 0.76 (0.16 (1.56 1.13 0.44 0.19 0.13 52.18 14.55 0.35 0.58 0.80 (0.61) 19.52 (19.60 18.16 1.27 0.06 0.01 (10.02) 23.23 0.12 0.01) 0.76 1.80 (0.35 3.10 61.13 0.60) 0.23 0.57 17.52 (18.76 21.52 (1. % of Replacement Cost Hydrocracking Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.33 (10.16 (0.55 (2.31 0.17 (16.20 1.33 1.13 3.81 22.27) 0.99 17.61 (0.40) 12.32 18.93 20.20 0.99 16.55) 25.33 1.84) 23.11) 9.38) 43.67 18.06 39.33 1.52 1.57) 1.84 0.23 0.69 6.45 1.74 0.13 0.30 (0.74 3.84) 0.29 1.31) 17. % of Replacement Cost Hydroskimming Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.63 26.06 0.39 1.77 33.16 (0.45 1.58 13.18 5.15) 0.42 0.68 (1.76 0.31) 0.44 23.24 0.48) 0.10 1.17 12.86 0.81) 16.02) 26.62 1.

17 6.59 9.04 0.76 1.62) 16.23 18.87 (4.67 1.83 19.15 0.21 2.52 1.52 0.08 19.15 36.09) 14.88) 0.25 0.25 17.28 0.60 (2.39 29.05) 18.33 22.33 0.76 (0.34) 20.08 0.17 1.14) 31.38 4.60) 0.83 0.32 40.12) 26.86 (2.95 (1.51 (0.54 2.54 0.96) 16.87 (0.76 1.41) 22.60 22.10 30.22) 0.76 16.02 (1.28 0.36 .12 (1.78) 15.09 30.22) 0.56 1.27 36.64 29.17 7.76) 16.33 0.54 (1.16 0.08 0.III A .51 (4.39 22.48 15.89) 13.41 17.17) 0.95) 30.58 22.75 0.26 12.21 0.25 4.67) 0.29) 0.72 18.38 5.34 30.51 1.26 5.67 (2.94 0.86 (2.60 (0.47 0.94) 0.68 0.47 0.45 1.08 1.48 0.21 0.25 3.03 15.26 22.54 0.17) 18.02 (0.84 0.67 1.65 (2.36 0.04) 0.21 1.21 0.19 (1.60 15.95 (2.72) 0.Historical Market Development TABLE A-8-7 RUSSIAN REFINERY ECONOMICS (Dollars per Barrel) 2000 2001 2002 2003 2004 2005 2006 Hydroskimming Refinery Domestic Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Hydroskimming Refinery Export Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Cat Cracking Refinery Domestic Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Cat Cracking Refinery Export Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin 15.148 -.20 0.41) 25.17 2.90 17.78 29.51 1.21) 19.52 (0.87 3.80 (3.88 1.26 5.88 1.19 0.42 0.85 29.70 19.65 2.12 (0.08 35.07 0.91 19.47 0.19 3.12 (2.07 42.19 35.56 1. .19 4.61 0.69 18.59 7.22 0.46 0.98 18.67 (3.12 (0.36 0.70 19.17) 18.74 30.39 0.26 9.30 18.52 (2.16) 0.80 (1.76 1.25 0.87 (1.45 1.39 0.42 0.76 15.46 17.29 15.

The low energy prices in the period around 2000. This growth in the call on crude supplies represents an annual growth rate of 1. coupled with the expected changes in other hydrocarbon sources results in a call on the world crude supply of 81 million B/D in 2012. This is lower than the rate of demand growth over the period and reflects increasing supplies of condensate and NGL and higher volumes of non-conventional fuels. These disruptions and uncertainties caused crude oil prices to reach very high levels in 2006. Crude supply will increase to match the growth in the demand for petroleum products whilst account is taken of changes in the supply of condensates. Since OPEC has chosen the role of swing producer. discussed in Section B-2. However. which have put pressure on an already tight market. Against a backdrop of sharply increasing demand there have been a number of events that have resulted in reductions in crude oil production. keeping the supply/demand balance tight (see Section B-3 for further discussion on these topics). The analysis of demand. continuing unrest in Iraq and resource nationalization in Latin America. As a result the supply/demand balance tightened and prices increased.5 million B/D. putting pressure on the world crude supply. FIGURE B-1-1 WORLD CRUDE OIL PRODUCTION: YEAR TO YEAR CHANGES (Million Barrels per Day) 3 2 1 0 -1 -2 -3 2000 2002 2004 2006 2008 2010 2012 Angola Other OPEC Non-OPEC . NGLs and non-conventional fuels.III B – Near-Term Outlook -. OPEC production has been varied to meet demand while non-OPEC output was essentially produced at capacity. coupled with a recovery in the Asian economies resulted in demand increasing rapidly. If non-OPEC crude increases as expected in 2007. an increase over the 2006 level of 7. political disruptions in Nigeria. beyond 2007 we expect that the call on OPEC will accelerate (Figure B-1-1). These have included hurricane damage in the Gulf of Mexico in 2004 and 2005. the call on OPEC production will be less in 2007 than in 2006.6% per year.149 III B – NEAR-TERM OUTLOOK: 2007-2012 B-1 WORLD CRUDE OIL SUPPLY In this section the short-term crude supply outlook to 2012 is analyzed. .

3 85.2) 199. Some are already producing. NON-OPEC CRUDE OIL PRODUCTION Non-OPEC crude oil production is poised to increase in 2007.5 2006-07 240. compared with the light sweet crude that is common in the shallow water areas of the Gulf.3 31.6 2007-08 124.1 111.2 61.5) 305.5 (18.1) 339.3) 1.0) 579.1 (13.7 2010-11 144.0) 299. but future production trends in the Gulf of Mexico will have far-reaching implications for crude flow patterns and infrastructure needs in the whole Atlantic Basin. Improved technology is also helping to discover new reserves in the shallow Gulf. .6) 412.7) (135. the very early state of exploitation creates significant uncertainty about the quality of future production.. many large discoveries have been made in deep water (>1. Gulf of Mexico.3) 193.8 million B/D around 2010 before beginning to decline.9) 434. Since 1990.2) 67.5 (8.4 (30.9) 317.5) 190.4 87.5) (145.3 (1.9 176.1) (190. As a result.5 44. Non-OPEC production is expected to increase by about 1. primarily due to operating problems in the North Sea and hurricanes in the U.1 (8.1 11. with many more scheduled to begin production over the next few years. Future deepwater production is expected to remain predominantly sour.4 50.1 (4.6) 2005-06 92.7) 67. Partial recovery in the Gulf Coast plus increases in other areas resulted in non-OPEC production increasing by about 315.S.1 (491.7) (264.150 -.2 (372.III B – Near-Term Outlook Forecasted crude production by country is shown in Table B-1-1.4 (40. Much of the deepwater region is still untested.7) 396. the Gulf of Mexico is already one of North America’s most important oil and gas producing areas. Production partially recovered in 2006 and will peak at about 1.192.9 (7.7 (106.5 (21. the Gulf of Mexico has been transformed into one of the world’s most active exploration and development regions.9 195.5 (43.1) (213. and high levels of reserve additions are expected to continue.7) 289. This rebirth has been driven by rapid advancement in deepwater drilling and production technology.S.5 (13.8) 41.7 128. and to enhance recovery from known reservoirs.3) 9.0) 392.3) (143.4) 290.000 B/D in 2006.0) 511.1 (15.9) 82.0 million B/D in 2007.4 NORTH AMERICA In the U. The major contributors to the increase in non-OPEC crude production in the immediate term are shown in the following table. Figure B-1-2 .2 138.1 (25.7 (20. However.5) 356. primarily due to the large increase from the CIS Region (Caspian and Sakhalin). For the purposes of this report.5 2011-12 57.0 (5. NON-OPEC CRUDE OIL PRODUCTION INCREASES (Thousand Barrels per Day) 2004-05 North America Latin America North Sea Africa (1) Middle East CIS Region Asia Europe Total (1) Excludes Angola (319. Many of the deepwater discoveries have been sour.4 (6. Non-OPEC crude (excluding Angola) declined in 2005.000 feet). augmented by improved seismic imaging technologies.0 2008-09 56.6 (4.7 (34. Angola is included within OPEC.3 (24.1 2009-10 282.2) 635.

III B – Near-Term Outlook -. FIGURE B-1-3 UNITED STATES CRUDE OIL PRODUCTION BY TYPE (Million Barrels per Day) 7 6 5 4 3 2 1 0 2000 2002 2004 2006 2008 2010 2012 Light Sw eet Light Sour Heavy Sour . Californian production is also expected to continue its steady decline.S. owing to the decline of the very large Prudhoe Bay field. which is expected to last until 2010.5 0. production cannot be reversed. some developments in very deep water.0 million B/D by 2012 (Figure B-1-3). averaging 800.000 B/D in 2006 compared with a peak of about 2. FIGURE B-1-2 GULF OF MEXICO CRUDE OIL PRODUCTION (Million Barrels per Day) 2. but the decades-long decline in U.S.151 shows the remarkable increase in production that has been achieved in the Gulf of Mexico. although that in Louisiana. Alaskan North Slope production has continued to decline. . production is projected to be down to 5. Production in Texas continues to decline.0 0.5 Sw eet 2. is undergoing modest growth.5 1.0 2000 Sour 2002 2004 2006 2008 2010 2012 Overall. total U. production of crude oil from the deepwater fields in the Gulf of Mexico will partially offset production declines in other areas for a few years. and unless significant new discoveries are made in the Alaskan National Wildlife Reserve or other areas further declines are expected.0 million B/D back in 1998. Combining these trends.0 1. which includes the central and eastern Gulf of Mexico.

000 B/D in 2006. The main area of production.000 B/D by 2010. is from heavy oil sands.0 million B/D by 2010. Conventional heavy crude oil production in Alberta is off from its peak level of about 270.000 B/D in 2006. Production in British Columbia.000 B/D before 2010 and then slowly decline. synthetic crude and east coast crude have been partially offset by declines in light sweet and light sour crude oil production. and production is forecast to continue to decline slowly. and despite a slip in 2005 production increased further in 2006 to average 635. the Syncrude expansion and other new oil sands projects will bring total oil sands production to about 1.000 B/D in 1995 to about 465.8 million B/D by 2012 as bitumen and synthetic crude production expand. These increases in heavy crude production will also change the quality profile of Canadian crude production (Figure B-1-4) FIGURE B-1-4 CANADA CRUDE OIL PRODUCTION BY TYPE (Million Barrels per Day) 4 Light Sw eet 3 2 1 0 2000 Light Sour Heavy Sour Hi TAN 2002 2004 2006 2008 2010 2012 . increasing from 150.000 B/D. by about 400. with the Cold Lake/Primrose area potentially adding another 200. averaging about 185. About 50. Oil sands synthetic crude production increased from about 270.000 B/D in 2004. additional new oil sands projects are in the very early stages of project development. Gains in heavy/bitumen.000 B/D. of the main areas. as is heavy crude oil production in Saskatchewan. Bitumen production is forecast to continue to increase rapidly. and where further increases are expected. . Production is expected to increase rapidly over the forecast period.7 million B/D in 2006. East coast production is expected to peak at about 400.000 B/D from 2006 to 2010. Bitumen production has increased rapidly since 1995. reaching 2.III B – Near-Term Outlook Crude oil production from Canada has increased steadily in recent years.000 B/D in 1995 to about 565. It is anticipated that Suncor’s Millennium project.152 -. nearly doubling to 900. potential capacity is projected to rise the fastest in Athabasca.000 B/D is used in field upgraders but the requirement for diluent causes the diluted bitumen stream to exceed raw bitumen production.000 B/D in 1997. such that actual syncrude production is expected to be significantly lower than the total announced capacity. Northwest Territories and Manitoba/Ontario is also expected to continue declining. However. reaching 3.

. such gains are being offset by declines in most of the other countries in Latin America. Others have announced that the impact to their operating costs due to Kyoto would be insignificant due to a cap on emission cost and are proceeding with project development. Known reserves have not been developed owing to a lack of adequate pipeline capacity to deliver the oil to the coastal export terminal.3 million B/D in 2006 compared with about 9. Most of the crude produced in Latin America is sour – 45% is heavy sour.0 0. The balance is comprised of 20% light sweet plus condensate and 8. Production has since been beset by difficulties.153 In December 2002.000 B/D by 2010.0 4. Brazil and Ecuador account for 84% of total output.1mg KOH/g). but the deepwater reserves could likely support higher rates. LATIN AMERICA Production slipped to 9.1 million B/D since 1995.0 Others 10.8 million B/D in 2005. Large emitters of CO2 in the oil and gas sector have expressed concern that these restrictions and the additional cost they could create would delay or cancel some of the oil sands projects. strikes and civil disorder.0% heavy sweet/high TAN (Figure B-1-5).III B – Near-Term Outlook -. FIGURE B-1-5 LATIN AMERICAN CRUDE OIL PRODUCTION (Million Barrels per Day) 12. Mexico.0 6. The rate of development is the key issue. the new offshore fields in Brazil are being developed rapidly and production is expected to increase by about another 400. Venezuela.0 2. Production is projected to reach 2. Most of Brazil’s new crude is heavy sweet (20°API) but is medium-high TAN (1. A 400. and is expected to continue to decline through to 2010 before picking up again towards 2012.0 8. Production averaged • . and although output in Brazil and Ecuador is growing rapidly. Production has increased by about 1. The Fort Hills Bitumen Mining project announced early in 2003 that the project would be delayed indefinitely due to uncertainty surrounding the Kyoto protocol costs and other escalating project costs.000 B/D pipeline was completed in 2003 which could allow production to essentially double over the long term. the Government of Canada ratified the Kyoto Accord signaling its commitment to reduce CO2 emissions below 1990 levels. Ecuador.2 million B/D by 2012. and 26% is light sour.0 2000 Brazil Mexico Venezuela Ecuador 2002 2004 2006 2008 2010 2012 • Brazil. including disruptions due to shipping schedules.

Sudan began production of high TAN crude in 2006. and deepwater wells are being drilled in the Noxal area. but heavy sweet high TAN production is increasing rapidly.154 -.2 million B/D in 2006 (Table B-1-1). • Mexico. Mauritania have become important exporting countries (see Figure B-1-6). but being landlocked it has presented logistical problems. Nearly 90% of all crude oil produced in Africa is light sweet. The last major development was the completion of the nitrogen injection program in the Cantarell field that resulted in increased Maya production.7 million B/D by 2012.000 B/D pipeline was completed in . most recently. to about 3. The country’s potential has been known for a long time. the African upstream oil industry was dominated by the three OPEC nations – Algeria. If successful. AFRICA CRUDE OIL PRODUCTION Historically. assuming no major production or political disturbances. FIGURE B-1-6 AFRICA NON-OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 4 Other Non-OPEC 3 2 1 0 2000 Chad Equatorial Guinea Sudan Mauritania 2002 2004 2006 2008 2010 2012 • Chad. Libya. Pemex has already made a discovery of heavy oil on the Nob deepwater prospect further to the east.1 million B/D by 2012 compared with about 2. and again in 2006. indications being that this could be light oil. Sudan and.III B – Near-Term Outlook 550. deepwater exploration efforts are being stepped up. and Nigeria – plus Egypt. such that Angola (now also a member of OPEC). However. . Production declined slightly in 2005 for the first time since 1999. a 250. Equatorial Guinea. Significant production increases have occurred elsewhere in Africa. which confirms the extension into deeper water of the heavy oil trend.6 million B/D by 2012.000 B/D in 2006 and is forecast to increase slowly. However. but this appears to have begun to decline once again. Non-OPEC African production is expected to increase strongly. Exploration and development programs have not been expanded sufficiently in order to increase production. Plans call for nitrogen to be used to stimulate other heavy oil fields in Mexico but these are not expected to reverse the decline. such that our outlook is for total Mexican output to continue declining towards 2. production could begin in the 2010-15 period. which includes the Cantarell field. and high TAN production is projected to increase to 1.

Production will increase by about 600.0 million B/D by 2012. which will allow exports to increase even further. some light sweet and heavy sour production will remain segregated. Production is forecast to increase towards 370. and although production has increased it has been affected by disputes between Chad and the World Bank over how revenues are to be spent. Sudan.000 B/D by 2012. Production has ramped up in recent years to over 400. This excludes 250.000 B/D. The first crude oil production has started at the Chinguetti oilfield and output in May 2006 was about 75.000 B/D by 2012 from about 150. most of it is blended to a light crude with moderately high sulfur content. and between Chad and some of the producers regarding tax payments.000 B/D in 2007 following both the start-up of the new Sakhalin production (250. Mauritania has become the newest oil producing country in Africa.000 B/D in 2006.000 B/D in 2005. • • CIS REGION Crude oil production bottomed out at about 7. Crude oil production began in 1996 and increased rapidly to about 350.000 B/D in 2006. but has since increased to 11. condensate is railed to refineries to be . .000 B/D of condensate production.7 million B/D in 2006. Plans call for production to increase to about 145. and is expected to exceed 1. The new pipeline capacity is expandable if the crude oil reserves support expansion.000 B/D) and increased shipments through the BTC pipeline. New pipelines and export terminals are being added.155 2003 to bring oil from Chad through Cameroon to a loading facility. However. These disputes have been resolved and production is forecast to increase to 330.000-300.III B – Near-Term Outlook -. Although the quality of crude oil varies widely in the CIS region. FIGURE B-1-7 CIS REGION CRUDE OIL PRODUCTION BY COUNTRY (Million Barrels per Day) 16 14 12 10 8 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 Russia Azerbaijan Kazakhstan Other By 2012. • Equatorial Guinea.000 B/D by 2012. production is forecast to increase to about 14 million B/D (Figure B-1-7).0 million B/D in 1996.

although the line is expected to fill up over the next few years. however. bringing Russian production to 10. Non-OPEC production in Asia is expected to continue to slowly increase over the forecast period (Figure B-1-8). Production increased from 700. delays and tariff disputes postponed shipments until mid-year 2006. This line began operations in June 2006. production is declining significantly in Australia. around 2010.4 million B/D.000 B/D for transport through the BTC pipeline is also being considered. and a pipeline to China was completed late in 2005 with a capacity of over 200.000 B/D in February 2007.156 -.III B – Near-Term Outlook processed as it is not transported in the pipeline system because most of it has a high mercaptan content. and the completion of the line has enabled the further development of the Azeri-ChirazGunashli (ACG) fields. and is also expected to increase further. • Kazakhstan. although the rate of increase has slowed in recent years owing to infrastructure constraints and structural industry changes. to ship at least 600. However. In contrast. • ASIA Non-OPEC crude oil production in Asia has increased by about 700. . However.0 million B/D since 2000.000 B/D. the new Sakhalin-1 production began in 2006 and averaged 250. Production from Kazakhstan is expected to continue to increase as the Karachaganak and Tengiz fields are expanded and the super-giant Kashagan field comes on stream in the next decade. B-1-10 CIS REGION CRUDE OIL PRODUCTION BY COUNTRY • Azerbaijan. Production is expected to increase more rapidly now that the BTC pipeline to Ceyhan is operating.000 B/D since 2000. and is likely to go ahead if the CPC expansion continues to be delayed.3 million B/D in 2006. with most of the increase accounted for by China. Russia. such that it is not likely to take place before 2010. the owners continue to be unable to reach an agreement on the expansion.000 B/D in 2006.6 million B/D by 2012. BTC throughput was up to 400. A proposal to build a pipeline to a new Caspian Sea port.000 B/D by year-end 2006 and production is expected to be about 1.000 B/D in 2000 to about 1. . Most of the crude oil is exported via the CPC pipeline and plans have been announced to expand the capacity of CPC to 1. Exports are expected to increase further once the export line eastwards to China and the Pacific Coast to deliver Siberian crude oil is completed. Production has increased by about 3. known as the Kazakhstan Crude oil Transportation System (KCTS). Crude from Kazakhstan is also exported through the Transneft system and by rail.2 million B/D by 2012. Most of the crude oil production in Asia (including China) is light sweet but China produces both heavy sour and high TAN crude oils. with the result that shipments averaged only about 70.

despite a new enhanced oil recovery and infield-drilling program. This increase has occurred even though offshore production in the South China Sea and production in China’s two largest onshore fields (Daqing and Shengli) are all in decline.000 B/D. Production is forecast to decline slowly owing to mature fields and a lack of new discoveries. sweet (0.000 B/D currently. Daqing is a heavy sweet.5 and 1.000 B/D. but has declined to about 500.III B – Near-Term Outlook -. Production peaked in 1995 at 310. Crude oil production has increased in recent years to about 200. to slow the decline production is forecast to continue to fall.000 B/D and has declined to current levels of 250.3 million B/D by 2012.7°API). The crude quality is split about 60/40 between light sweet and heavy/medium sour grades. Shengli (Liaoning Province) is produced by Sinopec. Production peaked at 700. and is approaching levels seen in the early 1980s before a conservation policy was instituted to save oil for future generations. and although efforts are being made by CNPC. began production in 1959 and has produced 40% of China’s crude oil. Crude oil production in China has increased from under 3. produced by CNPC. and is discussed by field/province below: Daqing (Heilongjiang Province).8 million B/D currently. the producer.18%S) and medium TAN. paraffinic crude oil.000 B/D during the 1990s. China. is the third largest field in China and is medium heavy (28.000 B/D • . is the second largest crude field in China and is a heavy medium sour crude oil with medium TAN (between 0. but low in TAN. Tianjin Province is rapidly becoming one of the largest crude oil producing provinces. Liaohe (Liaoning Province).157 FIGURE B-1-8 ASIA NON-OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 10 China 8 6 4 2 0 2000 Other Asia 2002 2004 2006 2008 2010 2012 • Brunei. the largest field in China. from an average of about 160. Production is forecast to reach 4.2 million B/D in 1990 to below 900.000 B/D in 1990. Production has declined from 1. and which resulted in reduced output levels. .0 for most fields).000 B/D. such that production has increased rapidly to over 400.0 million B/D in 1995 to about 3.

although most appear to fall into the light sweet category. having increased from less than 100. India’s crude is predominantly high-pour sweet but about 20% is naphthenic sweet and 10 to 15% is condensate. Only modest growth is forecast as some of the fields are in decline. Shaanxi Province is the next largest crude oil producer in China with about 350. Dagang is increasing slowly but most of the increase is the new offshore Bohai Bay heavy sweet high TAN crude. Drilling is ongoing in the Indian offshore regions. rather than oil. The largest production comes from the ageing Mumbai (Bombay) High field with additional onshore production in Gujarat and in historic fields in the northeast of the country. • India. The quality of the fields varies widely from light sweet to heavy sour.000 B/D in 1995. The region has shipped excess crude above refining capacity to eastern regions for many years by rail and pipeline. both from domestic production and Kazakh imports.158 -. Bohai Bay production has passed 200. Cairn Energy has made a sizable discovery in Rajasthan with an announced 1.000 B/D and new discoveries could keep production near current levels. It is doubtful that India can find enough new reserves from onshore sources to result in production increasing significantly above current rates. abandonment of the government conservation policy. Major crude grades include Tapis. In addition. Both major fields — Changqing and Yanchang — are growing rapidly. the Kikeh • . Production is currently above 700.000 B/D and is currently around 660.7 billion barrels in place. in which the Tarim Basin is located. Xinjiang Province. . Guangdong: production in the offshore fields in the Pearl River Mouth Basin produces about 300. For example. These logistical systems are being expanded to accommodate anticipated growing volumes.000 B/D of output. of which Karamay is the largest with production of about 230. Bohai Bay fields are produced either by the China National Offshore Oil Company (CNOOC) or as joint ventures between CNOOC and foreign oil companies. the most significant hydrocarbons discovered thus far have been gas. Malaysia produces about 150.III B – Near-Term Outlook currently. such that production will likely decline slowly in the longer term.000 B/D. Malaysian crude is split about evenly between very light sweet paraffinic and medium sweet naphthenic crude grades. produces over 500. Labuan and Miri.000 B/D in the longer term. and although it is premature to dismiss the prospect of major finds. most of which is processed at Aromatics Malaysia or in Petronas’ refineries. Crude production has been as high as 700. Dulang.000 B/D. up from only 250. There are a number of fields.000 B/D currently.000 B/D and is expected to increase to 500. Current announced production rate estimates are upwards of 150.000 B/D in 1995.000 B/D. Malaysia. Crude oil production was stimulated by liberalized production contract terms.000 B/D of condensate. and renewed activity by Petronas and foreign oil companies.000 B/D.

.2 million B/D by 2012.000 B/D of production. Norway. which have not been fully exploited. There are still some regions. Germany.5 million B/D in 2006. Romania. to fall to 1.2 million B/D in 1999 but has since declined. FIGURE B-1-9 NORTH SEA CRUDE OIL PRODUCTION BY COUNTRY (Million Barrels per Day) 8 6 4 2 0 2000 Norw ay UK Denm ark 2002 2004 2006 2008 2010 2012 • United Kingdom.III B – Near-Term Outlook -.2 million B/D by 2012. to 4.7 million B/D in 1999 to below 1. new fields continue to be brought onstream and some reserves have been upgraded. a light sour crude which is blended into the Forties stream.159 field (Murphy Oil and Petronas) is expected to come on stream in late 2007 and will add over 100. However. there are several large fields for which development plans have or will shortly be submitted. have been in decline since the early to mid-1980s. Turkey and several other European countries.3 million B/D in 2006. Some uncertainty surrounds the timing of several major new developments.0+). Production has declined to about 2.1 million B/D. However. North Sea production peaked at about 6. NORTH SEA Although there are some small areas of onshore and offshore production from Italy. despite this and the additions to reserves. these are of minor significance compared with crude oil production from the North Sea. Production has declined from its peak of about 2.4 million B/D in 2006 compared with peak rates of 3. but despite these Norwegian production is forecast to continue to decline. although a number of new fields are sweet but heavy (20°API) with high TAN (1.000 B/D. The most significant of the new fields to be brought on line is Buzzard. production is forecast to continue to decline. A continuation of the decline is forecast (Figure B-1-9) with production falling to about 3. Commencing operations in late 2006. such as Forties and Brent. as most of the large fields that commenced production in the second half of the 1970s. Most production is light and of low sulfur content. • . Buzzard is now reaching its plateau production rate of 200.

160 -. A production cut was implemented in November 2006. excluding its share of the Neutral Zone.0 million B/D of capacity by 2015. but onerous terms in production-sharing agreements that have been offered have discouraged widespread take-up by international companies.0 million B/D in 2006. It is important for Saudi Arabia to maintain surplus productive capacity in order to be able to counterbalance any disruptions in crude supply from other producers. with further expansion of 3. Kuwait is confident that with the help of • • .1 million B/D in 2005-2006.7 million B/D in 2006. There are plans in the country’s fourth five-year economic development plan (2005-2009) to increase oil production capacity from the current level. FIGURE B-1-10 OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 50 Middle East 40 30 20 10 0 2000 Africa (inc Angola) Venezuela Indonesia 2002 2004 2006 2008 2010 2012 OPEC is currently expanding its capability to increase production for when it is required: • Saudi Arabia.5 million B/D. Proven reserves are estimated to be 264 billion barrels and the country is estimated to have a current sustainable capacity of over 11. .000 B/D less owing to its quota-related cut. Excluding its share of the Neutral Zone. but Iran recognizes it needs an infusion of cash and technology if it has any hope of achieving higher production targets.III B – Near-Term Outlook OPEC CRUDE OIL PRODUCTION OPEC production averaged 31. Kuwait. Iran.000 B/D each year. Some foreign investments have been made by non-U. but output in 2007 will be about 500.4 million B/D in 2006.S. Non-OPEC production increases are expected to supply much of the world’s demand growth in 2007 but after that OPEC will be required to increase production significantly (see Figure B-1-10). Production has increased steadily to about 4. Reserves are estimated at 101 billion barrels and production has slowly increased to 2. although considerable drilling is needed to offset the decline rate of about 300. production was about 9.5 million B/D. Proven reserves estimates are about 132 billion barrels. similar to that in 2005. Crude oil production capacity was rapidly restored after the 1991 Gulf War and is now able to sustain an output of up to 2. although the primary reason was the shut-in of the Forcados field in Nigeria because of civil disorder. companies.

0 billion barrels on 1 January 1997. • Iraq.1 million B/D by 2010-2012.161 international oil companies its production can be increased further.55 million B/D. and capacity is estimated to be 3.000 B/D. Reserve estimates are 36 billion barrels. With a program of actively encouraging investment by international oil companies to rejuvenate older marginal fields. Reserves are estimated to be 115 billion barrels but the potential is probably even higher. Several large new fields have come onstream over the past few years. Production will be lower in 2007 than in 2006 as Kuwait complies with its quota commitments.000 B/D). similar to current levels.0 million B/D. but another 200.000 B/D of condensate is produced.4 million B/D in 2006.5 billion barrels. Iraq estimates its current production capacity to be about 2.45 million B/D. Abu Dhabi has the largest reserve base (94 billion barrels) in the UAE and is the dominant producer with production reaching about 2. United Arab Emirates (UAE). Nigeria.000 B/D in 1987 and currently stands at about 900. Dubai.0 million B/D.000 B/D) and the EX field (120.000 B/D. However. Production has grown significantly since bottoming out at about 220. Total production in 2006 from the federation’s three oil-producing states – Abu Dhabi. As a result. but we expect the oil industry to be restored to pre-war capability over the long term. With its reserve base of 79 billion barrels higher capacity is certainly justified.000 B/D in 1988 to current levels of about 115. but rebel activity has shut in the large Forcados field (over 400.000 B/D of crude oil plus around 40. Only about 6.5 million B/D by 2012. but these have not been revised since then even though they are being depleted. As a result. the only question being timing.000 B/D by 2012. Production is projected to increase by about 50. Dubai. Reserves were estimated at 4.0 million B/D by 2012. No significant increase in capacity is expected as reserves are estimated at only 1.5 million B/D. explore new provinces and develop the Orinoco heavy oil reserves. Production is currently down to below 2. This country has the smallest reserve base (15 billion barrels) of any of the Middle East OPEC members. . Qatar. production is likely to average 2. with plans to increase capacity to over 5. and Nigeria • . as little exploration has been undertaken in the recent past. However.3 million B/D from the 2005 average of 2. fewer disruptions will be required to raise exports substantially. with most of the increase accounted for by production by foreign companies.000 B/D is scheduled to be on by 2009 and capacity could increase further towards 3.III B – Near-Term Outlook -. Sharjah. Production has been declining steadily from its peak of about 420.0 million B/D by 2015. sustainable capacity could have exceeded 6.8 million B/D. • • • Venezuela. and Sharjah – was 2. Sustainable capacity is estimated to be 2. Heavy crude (18°API) will make up a significant portion of the increase in production. production in 2006 fell to 2. foreign investment is now being discouraged by changes in tax and regulatory rates and most of the cash flow is being diverted away from PDVSA to fund social programs.

4 million B/D in 2006. Even so. As overseas oil companies return. Reserves are slowly declining and are currently about 4. sanctions.III B – Near-Term Outlook could reach 3. with our outlook of about 700.0 million B/D of sustainable capacity by the middle of the next decade.1 million B/D by 2012. Reserves are estimated at 39 billion barrels.000 B/D.000-800.0 billion barrels.0 million B/D but the recent imposition of a windfall tax on profits is likely to slow outside investment. but actual development is likely to proceed at a slower pace. output is expected to reach 2. Production capacity may be increased towards 2. although civil unrest is such that lower production rates are more likely. and new reserves have been added to the current base of 11 billion barrels.7 million B/D by 2012 (Figure B-1-11). .000 B/D of condensate is produced. Crude oil production remained in the 750. especially as the country is no longer under U. 350.000 B/D in 2012 comparing with current levels of about 900. Angola. production is likely to increase. with the application of new deepwater technology having a significant impact.N. Production increased to 1.75 million B/D in 2006 and there is significant potential to expand Libya's production capability. especially as Angola has joined OPEC. and our projections are for production to reach 2. . Algeria opened its upstream sector to foreign companies. • • FIGURE B-1-11 ANGOLA CRUDE OIL PRODUCTION (Million Barrels per Day) 3 2 1 0 2000 2002 2004 2006 2008 2010 2012 • Indonesia.000 B/D range for many years before climbing to over 1.0 million B/D by 2008.4 million B/D in 2005-2006. Algeria.000 B/D to the output.S. production is also forecast to continue to decline. such that major discoveries would be required for production capacity to expand significantly. In addition to crude oil production. Condensate output contributes another 140.162 -. Some very aggressive production plans have been announced following recent offshore discoveries. Production is continuing to decline.000-400. increasing from 1. or U. increasing further to 2. and Libya has announced plans to add a further 20 billion barrels of reserves by 2015. such that production is increasing. Therefore. having been recently revised upwards. • Libya.

even though its precise market share will vary somewhat as OPEC changes its quota. Production of non-segregated condensate.1% per year.000 B/D and is expected to nearly double by 2015. Also in this category is production of synthetic light sweet crude. light sour crude oil is expected to increase by 2.163 CRUDE OIL PRODUCTION OUTLOOK BY TYPE Based on our forecast of crude oil production by region.III B – Near-Term Outlook -. Condensate has been divided into two parts – segregated and non-segregated. Light sour crude will account for just less than half of supply while heavy sour crude will account for about 15%. FIGURE B-1-12 WORLD CRUDE OIL PRODUCTION BY TYPE (Million Barrels per Day) 100 Light Sw eet 80 60 40 20 0 2000 Light Sour Heavy Sour High TAN 2002 2004 2006 2008 2010 2012 The major trends in crude oil quality trends are as follows: • Light sweet crude oil production (excluding condensate) continues to increase at a slow pace – about 1. and will account for about 5% by 2012 (Figure B-1-12). currently averages about 770. . Several new condensate fields are under development and it appears that world-segregated condensate supplies will continue to expand rapidly and exceed 3. Production in Canada is up to about 550.000 B/D of light sweet synthetic crude is from the Sincor project in Venezuela. An additional 180. The share of heavy sweet high TAN crudes is increasing.6 million barrels per day by 2012 (Table B-1-3).000 B/D and is not expected to change significantly.4 million B/D out of a total crude oil increase of about 7. mostly from Canada.8 million B/D compared with 2006. Production is forecast to increase by 3. condensate production will increase. Included in this outlook is about 100.000 B/D of Canadian synthetic light sour crude. it can be seen that light sweet crude is expected to continue to account for about 35% of the total (Table B-1-2). By 2012. Light sour crude oil will maintain its dominant role with about 45 to 50% of total production.0 million B/D by 2012 compared with 2006. which is blended with crude and marketed as crude oil. As more countries develop their gas reserves by building LNG plants or other monetization schemes. • • .

5 million B/D has important implications. Production of this type of crude is slated to continue to increase rapidly as new fields are brought onstream in Angola. Brazil. . as the additional 3. including Venezuelan synthetic heavy sour crude projects. Also included is about 125. This increase of 1.8 million B/D in 2004 but declined to 9.III B – Near-Term Outlook • Heavy sour crude oil production peaked at about 9.000 B/D of synthetic heavy sour crude production from Canada Heavy sweet high TAN production has increased rapidly increasing from about 260.9 million B/D by 2012.0 million B/D of capacity planned by Saudi Arabia will be predominantly for the heavier grades. This type of crude can best be handled in refineries designed to handle heavy sour crudes (many of which are high TAN as well) so the heavy sweet high TAN crudes will compete with the heavy sour crudes.4 million B/D in 2006 due to the cutbacks by Venezuela and declines in Mexico.0mg KOH/g presents difficult operating challenges for refiners.000 B/D in 1995 to about 2.0 million B/D by 2012 as these two countries are expected to increase production. as crude oil with a TAN of over 1.164 -.4 million B/D in 2006. However. • . to reach 3. There is the potential for further increases above this. Chad and China. total heavy sour production is expected to increase by 1.

813 540 2.518 944 10.126 4.390 1.810 1.178 43.129 2.300 1.500 755 3.913 2.17 42 32.121 648 7.144 2.068 1.4 1.080 2.366 2.726 72.106 5.775 4.454 909 9.108 3.550 2.092 1.531 36.723 6.500 2.365 33.602 2.103 1.367 924 9.774 2.504 457 9.353 2.069 3.16 38 32.071 2.5 1.468 2.261 900 8.113 702 1.729 1.418 841 8.175 2.927 2000 943 746 1.440 449 9.333 1.640 2.437 885 4.096 2.156 2.157 406 6.469 520 6.232 59.988 2.176 7.074 2.794 3.2 1.494 31.256 66.744 2.114 1.408 3.815 2.937 38.501 2007 1.502 1.197 41.7 1.242 430 10.III B – Near-Term Outlook -.165 TABLE B-1-1 WORLD CRUDE OIL PRODUCTION (Thousand Barrels per Day) 1990 OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Neutral Zone Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC Non-OPEC Africa China Other Asia Denmark Netherlands Norway UK Other Europe Russia CIS Region Latin America Other Middle East Canada United States Total non OPEC Total World 784 474 1.089 1.427 3.646 5.389 313 2.924 548 2.14 43 32.490 465 9.608 4.354 1.234 787 3.815 2.624 2.397 5.661 2.102 1.727 3.779 73.447 2.881 5.584 371 27 2.612 3.350 3.391 37.509 5.751 490 2.202 42.273 1.941 7.241 890 8.166 3.158 2006 1.176 7.668 1.963 2.009 30.384 2.16 42 32.130 3.803 1.828 668 10.049 2.258 1.431 1.20 43 32.853 2.949 1.750 533 2.700 2.085 22.599 376 21 2.363 7.696 1.740 525 2.949 7.880 2.973 45.782 3.538 5.164 43.029 5.14 44 .15 43 32.763 2.543 3.636 1.409 1.3 1.390 443 9.969 820 3.558 31.626 390 42 2.412 7.149 44.875 77.335 888 8.322 908 9.483 75.291 Estimated Crude Quality Processed API % Sulphur Opec % 33.696 2.325 1.950 1.021 2008 1.685 531 2.469 2.338 438 9.092 1.099 5.638 2.680 719 3.514 360 29 3.065 1.722 2.572 2.353 1.367 1.622 7.198 122 70 1.20 42 32.684 2.241 41.1 1.846 2.040 2.706 31.4 1.890 2.880 2.149 3.000 2.075 1.691 7.189 2.4 1.950 2.391 1.531 41.668 2.663 2.703 852 3.269 948 4.232 3.152 1.640 486 9.500 2.645 1.617 2.240 1.510 78.594 352 14 2.429 31.847 494 8.255 2.554 376 30 2.860 2.118 3.588 365 31 2.599 355 16 2.391 6.3 1.389 2005 1.336 1.737 3.20 43 32.834 2.426 1.300 34.120 4.972 74.903 1.135 2.17 43 32.420 435 2.107 2.585 300 7 2.461 73.550 2.973 2.798 4.892 2004 1.585 2012 1.986 1.600 2.155 2.124 563 2.680 2.042 1.900 2.227 2010 1.102 2.113 2.190 1.2 1.001 966 3.572 3. .672 2.032 1.249 2009 1.222 81.400 1.766 2.891 28.026 1.590 3.992 4.340 2.616 545 2.

239 12 1 3.419 2.481 4 6.785 2.894 3.541 640 5.148 1.283 36 0 3.531 1.226 2.459 305 641 6.237 323 1.502 2.479 3.102 2009 176 1.669 532 5.051 9.164 2.968 703 584 4.436 572 5.878 2.975 22.259 4.202 1.282 382 1.098 2.304 3.444 4.189 2010 167 1.667 68 3.483 77 3.778 515 5.572 552 5.734 21.147 293 1.133 5 7.141 9.988 2008 186 1.652 25.983 472 210 298 8.152 2.230 406 175 1.341 2.281 4.797 497 5.997 2.224 36 0 3.340 .787 2.881 118 1.199 1.886 368 156 1.538 106 1.592 2.294 23.III B – Near-Term Outlook TABLE B-1-2 WORLD CRUDE OIL PRODUCTION BY REGION AND TYPE (Thousand Barrels per Day) 1990 United States Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Canada Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Latin America Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Middle East Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Africa Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Asia Condensate * Light Sweet Light Sour Heavy Sour High TAN Total China Condensate * Light Sweet Light Sour Heavy Sour High TAN Total 237 3.155 2004 218 2.391 10.392 4.100 441 193 443 9.626 125 1.472 2.401 4 9.391 946 200 475 1.689 2.072 421 183 802 9.396 616 5.083 1.025 708 607 4.011 2.406 64 3.391 3.736 300 9.261 2.500 2005 219 2.397 124 1.868 2.211 3.023 3.129 22.790 481 4.193 2.937 984 263 859 2.710 394 169 1.080 2.043 0 5.355 4 0 3.391 4 0 3.333 4.166 -.922 4 8.813 685 10.365 201 394 21.311 885 9.884 2.967 82 3.617 11.867 2.030 22.136 6.571 4.287 4.799 693 497 3.517 478 217 262 8.338 394 1.644 2.085 1.748 193 458 20.065 1.344 2. .684 2006 213 2.164 1.714 689 444 3.879 2.099 122 1.327 3.662 16.046 689 8 2.200 4 9.900 4 9.399 1.457 634 64 3.846 2007 197 1.891 2.267 4 8.319 24 0 3.384 390 2.029 120 1.550 2.234 4.316 2.359 143 456 19.517 200 386 22.574 4 1 3.130 322 1.246 36 0 3.436 2.303 2012 153 1.973 1.006 22.559 11.242 945 9.580 375 160 1.623 2.885 2.539 1.531 203 404 20.445 200 390 21.132 2.222 315 1.027 2.597 205 410 19.525 24.000 9.106 89 2.415 5 0 3.814 182 14.508 4 0 3.241 1.631 659 211 3.182 77 3.000 705 598 4.998 5 7.380 24.611 2.014 2.956 22.197 1.557 768 9.171 9.068 289 1.369 2.997 5 8.987 75 3.775 126 1.869 696 536 4.042 152 486 19.750 4 8.732 3.744 2000 226 2.001 3.098 9.865 2.925 700 565 4.463 4.100 925 7.646 115 1.310 594 5.453 202 399 21.657 677 350 3.149 1.166 1.178 1.469 3.129 3.387 2.650 207 416 20.349 2.175 504 257 85 7.509 113 1.891 2.622 26 1.255 2011 159 1.270 350 1.201 36 0 3.383 67 3.736 67 3.367 821 9.025 65 3.674 12.559 783 5.478 80 3.273 383 164 1.874 2.084 1.088 67 3.

532 10.632 3.254 111 235 496 4.468 11.387 73.032 10.402 38.548 2.146 103 228 481 4.567 9.902 81.888 38.281 9.227 50 3.639 111 2.119 9.590 146 313 679 4.062 265 372 770 6.782 102 1.639 36.750 26 59.564 162 275 585 4.550 722 27.095 46 3.443 115 2.080 9.380 1.238 75.III B – Near-Term Outlook -.311 30 13.431 10.719 170 285 631 4.357 2.208 37.005 118 3.249 51 3.048 9.418 137 261 576 4.357 97 669 10.176 98 1.585 48 3.389 59 3.687 32.614 752 25.226 31 12.729 773 24.167 TABLE B-1-2 (CONT'D) WORLD CRUDE OIL PRODUCTION BY REGION AND TYPE (Thousand Barrels per Day) 1990 Europe Condensate * Light Sweet Light Sour Heavy Sour High TAN Total CIS Region Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Total World Condensate * Light Sweet Light Sour Heavy Sour High TAN Total 2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 35 3.892 55 4.815 74.218 66.340 3.858 37.256 10.857 32 11.571 3.e.273 167 378 804 5.449 2.740 78.842 31.962 72.294 119 2.927 54 5.429 35.898 136 297 785 5.501 55 3.531 77.996 32 11.193 731 26.939 9.904 36.237 31 13.701 35.969 4 7.777 1.325 126 248 546 4.664 684 23.332 769 24.641 35.274 30 13.234 460 20.855 3.522 103 587 6.308 762 25.127 10.081 9.401 9.903 737 26.807 10.898 728 24.021 53 3.599 9.688 16 10.809 80. blended with crude oil) .205 32 12.923 8.158 55 3.780 304 220 18 4.215 31 12.449 10. .145 118 3.860 107 1.345 9.889 713 27.850 6.965 10.131 3.201 73.676 113 1.291 * Nonsegregated Condensate * (i.

673 2007 749 1.973 2004 520 870 500 117 13 59 240 2.318 2005 615 985 526 83 10 60 257 2.533 2012 977 1.168 -.493 676 78 2 67 327 3.534 2006 668 1.619 .399 629 89 2 69 305 3.162 543 86 3 64 271 2.081 524 72 5 62 260 2.229 582 94 2 66 283 3.222 2000 611 520 413 146 45 38 201 1.315 609 93 2 68 294 3.446 650 84 2 68 317 3. .448 2011 966 1.III B – Near-Term Outlook TABLE B-1-3 WORLD SEGREGATED CONDENSATE PRODUCTION (Thousand Barrels per Day) Country Africa Middle East Asia/Pacific Europe North America South America CIS Region Total 1990 411 83 316 37 51 323 1.122 2009 901 1.282 2010 955 1.878 2008 866 1.

Albania and Turkey. China is the fastest growing consumer.5%. This covers all of the countries to the west of Belorussia. the Baltic States and other former Eastern European countries such as the Czech Republic.. By 2020 the U. much as Ireland did in the late 1990s and early 2000s. TOTAL REFINED PRODUCT CONSUMPTION (Millions of tonnes per year) 2006 Europe USA China India Middle East North Africa Russia Total 791 926 332 124 264 65 144 2645 2007 796 943 356 127 261 66 149 2698 2008 802 952 379 130 269 68 154 2753 2009 808 960 410 136 276 70 159 2819 2010 815 969 439 139 283 72 164 2880 2012 825 986 490 146 297 75 173 2991 2020 864 1039 731 173 346 88 200 3442 EUROPE In this section we have defined Europe to include the EU27 plus EFTA and also included the former Yugoslavian countries. . with growth in Europe the slowest as high prices and a relatively mature economy coupled with aggressive conservation measures restrain consumption.645 million tonnes per year (57 million B/D). resulting from moves to conserve energy largely prompted by higher prices. with the strongest growth being seen in countries such as Ireland.S. with China increasing to 21% from 12. The forecast assumes slower growth in the U. Since 2003. Hungary and Poland. Unlike other aspects considered in the study the forecast of consumption is best dealt with as a continuous forecast as changes in consumption evolve gradually in most markets and under most circumstances. is forecast to represent 30% of total consumption.III B – Near-Term Outlook -.169 B-2 REFINED PRODUCT DEMAND In this Section we provide a forecast of refined product consumption for the study regions for the period 2006 to 2020. In 2006 the total petroleum consumption in the countries covered by this study was 2. Ukraine and Moldova. The analysis of supply and demand does include the distinction between these time periods. accession countries are likely to show the strongest economic growth in the region as they benefit from inwards investment. . Overall demand growth to 2020 in the study region is 797 million tonnes (17 million B/D). We have therefore presented the forecast of consumption as a single section rather than make a distinction between the period up to 2012 and the period to 2020. economic growth has been consistent and quite strong.S. which represents 35% of the total in 2006. Consumption is dominated by the U.S. Over the next few years. Energy and economic assumptions are given in Table B-2-1. This region has been set as the internal product trade flows between these additional countries and the EU are significant and their inclusion adds to the clarity of the analysis.

These models incorporate assumed changes to the vehicle parc in terms of both numbers and type of vehicle. Over the forecast period this proportion is projected to remain broadly constant.III B – Near-Term Outlook The forecasts of refined product demand in Europe have been developed on a country-bycountry basis. miles driven and the changes to vehicle technology which are expected to be introduced and which will significantly impact future demand. 56% 2006 791 Million Tonnes 2020 865 Million Tonnes AUTOMOTIVE FUEL DEMAND The transport sector accounts for just over 56% of the oil consumed in Europe at present.170 -. . For each country. The share of middle distillate demand. Bunkers): 2006 VS 2020 G a s o line 15 % G a s o line 9% O t he r 24% O t he r 24% F ue l O il 13 % M iddle D is t . including bunkers. In preparing the energy balance consideration was given to the expected future development of each primary energy source and expected changes to energy efficiency and the type of economic activity. as a percent of total refined products demand. is expected to decline slightly in absolute terms. Figure B-2-1 illustrates the changing pattern of demand in Europe. . rising to 57% by 2020. The main uses in the transport sector are in private cars and commercial vehicles. The results of this in-depth analysis have been used in making the country-by-country forecasts of transport fuel demand. 48% F ue l O il 11% M iddle D is t . including buses. a forecast energy balance was developed which was consistent with the forecast of economic activity. including jet/kerosene. Gasoline demand share is projected to fall from 15% to 9%. The forecast for oil demand was then developed on a basis consistent with overall energy requirements. resulting in its share declining to an estimated 11% of total refined products. is forecast to increase from 48% to 56% over the period from 2006 to 2020. where oil faces only minimal competition from other energy forms. from a current level of 13%. Developments in vehicle emissions regulations and also vehicle technologies are covered later in this section. The following summarizes the key assumptions used in the forecasts. the forecasts were made using transportation fuel models. These are discussed in detail later in this section. In the transport sector. Historical patterns of demand were reviewed and projections made considering the historical perspective. The development of regulations and technology affecting these will have a significant influence on the future demand for and qualities of transport fuels. FIGURE B-2-1 TOTAL EUROPE PRODUCT DEMAND (Incl. Fuel oil demand.

are expected to be hybrid powered. The forecast assumes that by 2010. where diesel cars are effectively banned from the main Athens market. Hybrids have been assumed to be about 40% more efficient than conventionally powered gasoline vehicles. where over 77% of new vehicles have diesel engines. The significant improvements in the efficiency of gasoline and diesel engine cars which are expected over the coming years further reduces the incentive to use gaseous fuels and consequently. . The use of LPG. This proportion is forecast to rise to 15% by 2020. The uptake of gasoline direct injection (G-DI). increasing the annual distance that has to be driven before the conversion cost is recovered by fuel cost savings.III B – Near-Term Outlook -.or natural gas (CNG)-powered vehicles has been forecast on a countryby-country basis. If successful. There are several factors that are likely to result in an increase in the level of diesel car registrations in the future: • Tightening of exhaust emissions standards has dramatically reduced the environmental impact of diesel vehicles. although the current generation of hybrids does not achieve this level of economy in practice. or if legislation makes conventional-engined vehicles more expensive or unable to be used in city centers. the relative cost of the vehicles. Highest penetration is in Luxembourg. Lowest is in Greece. such that all of the diesels registered from 2002 are assumed to be direct injection. The study has assumed minimal uptake of fuel cells over the forecast period. fuel cell powered vehicles may enter the parc more quickly. The rate of uptake depends on the taxation policies of the country and the existence or development of a fuel distribution infrastructure. . develop fuels and their distribution infrastructure and win customer acceptance. in the longer term. hybrids may become popular as a city center commuter vehicle. however. Assuming successful resolution of these. if technology moves faster than anticipated. A pessimistic view on the rate of introduction of non-conventional fuel vehicles (mainly fuel cell vehicles) has been taken in the study. As vehicle engines have become more complex the cost of conversion to LPG or CNG has risen. By 2010. This rate of introduction could be speeded up significantly if traffic restrictions are introduced for inner cities that require low or zero emission vehicles. The level of uptake of diesels in any country depends on the relative prices of gasoline and diesel at the pump. a small number. however. has been slower owing to several technical problems. they are expected to decline as a proportion of the parc in those countries where they are established.171 The production and uptake of common rail diesel systems has occurred rapidly. less than 3% of registrations. essentially all new smaller gasoline engines are G-DI. Diesel Vehicles The penetration of diesel engine cars varies considerably from country to country. Research activity has continued but there is still much to be achieved to reduce the cost of the vehicles. the relative levels of circulation and other annual vehicle taxes and the extent to which diesel cars are promoted by car manufacturers. uptake of G-DI is forecast to occur towards the end of this decade.

.000 people by 2020. diesels will continue to be favored by consumers unless governments act to change the relative pricing of gasoline and diesel through taxation. In many countries. Total vehicle ownership in Europe is projected to increase from about 420 per 1.172 -. thereby helping to meet the European Commission’s targets. small-capacity gasoline engines has higher CO2 emissions than the next generation of diesel engines. passenger car diesel remains a relatively small proportion of road diesel consumption (Figure B-2-3). FIGURE B-2-2 EUROPE PASSENGER VEHICLE OUTLOOK Million Cars 360 300 240 180 120 60 0 2000 2005 2010 2015 2020 400 350 300 Gasoline Other Diesel Cars per 1000 people Cars per 1000 People 550 500 450 Total diesel vehicles in Europe are forecast to increase from around 56 million to 118 million by 2020. Despite the increase in the number of diesel-engined cars. recognizing local factors. In our view. New technology diesel engines are quieter and more powerful than previous generation vehicles. • • The forecast of diesel registrations has been made on a country-by-country basis. governments would also recognize and accept that even the next generation of twin-charged (turbocharged and supercharged). diesels are being encouraged as one of the strategies to reduce CO2 emissions. By proceeding upon such a course of action. with most of the increase reflecting changes already in progress. . The overall trend of the estimated number of diesel cars in circulation on a regional basis is shown in Figure B-2-2. As fuel prices rise. making them much more attractive to the prospective purchaser.000 people in 2005 to approximately 490 per 1.III B – Near-Term Outlook • The greater efficiency of diesels reduces CO2 emissions that help manufacturers meet Kyoto-related targets. diesels become more economically attractive. such that gasoline-powered cars become considerably more attractive financially to the consumer.

in Turkey the current level is 70 per thousand people. Despite the forecast increase in the diesel car population. By 2005. the European car population has increased by about 22 million vehicles. some diesel buyers are expected to be attracted to the higher efficiency of fuel cell or hybrid cars. the total car population is still growing slowly. . there is wide variation in the car population across Europe. Car ownership levels in Europe are forecast to rise to 490 per thousand by 2020. The forecast assumes that by 2020 the European car population rises to 270 million. representing a growth rate of 1. to 63% by 2020. representing an increase of 1. which is approximately in line with the average rate of economic growth over the same period. By contrast. 68% of road diesel is estimated to have been used by commercial vehicles. and commercial diesel is forecast to grow faster than car registrations. As new technology vehicles become available.1% per year. the number of vehicles per thousand people had risen to 420.III B – Near-Term Outlook -.1% per year. This implies a significant slowing of growth relative to recent history and assumes that tighter roadworthiness and in-service emissions testing will result in earlier retirement of vehicles. However. Vehicle Population Since 2000. although it remains unlikely that fuel cell vehicles will be developed on a commercial scale during the forecast period. The proportion of diesel-engined cars in the fleet is expected to increase to 44% from the current 25%. the proportion of diesel used in commercial vehicles is projected to decrease only slightly. This is due to vehicle efficiency improvement.2% per year. Italy has the highest level of car ownership at around 580 per thousand people but a number of these vehicles are known to be dormant. . Even in countries that have high levels of vehicle ownership. representing a growth rate of 2.173 FIGURE B-2-3 EUROPE DIESEL CONSUMPTION PROFILE Million Tonnes 350 300 250 200 150 100 50 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 Com m ercial Vehicles Passenger Vehicles In 2005.

In the forecast. Gasoline continues to decline but growth in diesel and jet kerosene will continue. a continuing reduction in heating oil . Total consumption was about 315 million tonnes (6. by an estimated 2. such as France. rail and domestic marine use. many European countries are using preferential tax policies to encourage diesel use over gasoline.III B – Near-Term Outlook PRODUCT DEMAND By 2006. with annual variations being driven by weather patterns. Gasoil/Diesel Gasoil/diesel is used primarily in the residential/commercial sector as a heating fuel and in the transport sector for road. Bunker fuel consumption is forecast to grow modestly as regional supplies reduce. but minimal use for power generation.K. The use of heating gasoil has been in general decline for many years.1 million B/D of bunker demand (Figure B-2-4). and although other technologies are also likely to be required gasoline demand is projected to remain in structural decline. Overall growth from 2000 to 2006 was 0. petroleum demand in Europe grew to an estimated 790 million tonnes (16. There is also use in the industrial and agricultural markets.7% per year. Italy and the U. consumption in Europe are forecast: Gasoline The following trends in product Gasoline demand in Europe has declined to about 119 million tonnes (2. FIGURE B-2-4 TOTAL EUROPE TOTAL REFINED PRODUCT DEMAND (Million Tonnes) 900 700 500 300 100 -100 2006 2008 2010 2012 2014 Gasoil/Diesel Int'l Bunkers 2016 2018 Low Sulfur Fuel Oil 2020 Gasoline High Sulfur Fuel Oil Jet/Kerosene Other Products Product consumption is shown in Table B-2-2.5% annually on average. The forecast assumes continued modest growth of less than 1% per year to 2020.174 -. Germany.6 million B/D) plus about 1. and gasoline demand is in structural decline in all of the major markets. . As discussed earlier in this study. The result will be that gasoline demand will continue to decline over the forecast period. Car manufacturers are expected to continue encouraging sales of diesel-powered cars and improved-efficiency gasoline-powered cars in order to help meet their commitment to reduce average CO2 emissions.4 million B/D) in 2006 plus about 8 million tonnes of bunker demand.7 million B/D) as more diesel is used in the automotive fleet.

Despite downward pressure on the agriculture sector through surplus production. Gasoil usage for much of the industrial sector. Limited quantities of gasoil are used in power generation as standby fuel for gas turbines and for small-scale island power plants. Transport diesel is expected to continue growing quite strongly as economic growth results in increased use of commercial diesel and the number of diesel cars in use increases. jet fuel demand is expected to grow at an average rate of 2. . mostly in the UK and Ireland where it is used for domestic heating systems rather than gasoil.3 million B/D) in 2006. This market is expected to increase very slightly. However.S. Limited growth is expected in this market.4% per year for the rest of the current decade. including machinery. However. with drying likely to be a higher share in northern countries. will be switching to ultra-low sulfur fuel (10 ppm) from January 2010. the decline in use across Europe is expected to continue in all sectors . Overall. housing development outside of city and town centers (beyond the gas distribution system) is likely to result in some new demand.175 use is expected because of continuing substitution by natural gas and improving efficiency by existing users as old systems are replaced. with the largest falls in electricity generation and the industrial sectors. but growth resumed in 2003 and has been very strong in the past couple of years. In the forecast. In the forecast period. although in the short term further expansion of natural gas is expected to constrain growth. although once such developments reach a certain size it is probable that the gas network would be expanded to accommodate them. Gasoil use in industry has shown a very moderate rate of increase for the last seven years. Fuel Oil Overall fuel oil use has declined steadily for many years. The limited data available indicates an approximately equal split. growth in bunker fuel use has partially offset that decline. The use of gasoil/diesel in the agriculture sector is split between use as a vehicle fuel and use for heating and crop drying. some growth in the use of gasoil/diesel in this sector is forecast particularly in the East. Jet/Kerosene Jet/kerosene demand grew very strongly over the latter half of the 1990s. total European gasoil/diesel demand is projected to reach about 400 million tonnes (8. Much of the de-regulation of the airline industry has already taken place. There is still a limited market in Europe for burning kerosene (about 7 million tonnes). rising to an estimated 60 million tonnes (1. The forecast assumes that consumption continues roughly at current levels. although this varies considerably between countries. in some markets.III B – Near-Term Outlook -. Robust demand growth continued into this decade but the impacts of the 2001 terrorist attacks in the U. although assumed consistent economic growth is expected to continue to support jet fuel demand growth. on international travel were felt keenly in Europe. Demand fell from late 2001 and in 2002.2 million B/D) by 2020. supported by the liberalization of the aviation industry and the arrival of many low-cost carriers. as farmers increase automation. before slowing down towards 2015.

As might be expected the energy mix in the region is dominated by oil and gas. Growth over the 2000 to 2006 period averaged 3% per year. Gasoline Gasoline represents only 12% of current petroleum consumption reflecting very low levels of car ownership.III B – Near-Term Outlook except for bunkers. . Growth was moderated by essentially static consumption of heavy fuel oil. which together account for over 90% of primary energy supply. REFINED PRODUCTS DEMAND Refined product demand in the region reached 67 million tonnes (1. the balance is made up of solid fuels.46 million B/D).000. total petroleum consumption is expected to increase by an average of 2. Oil represents 48% of primary supply. and in other cases political difficulties are hampering growth. No significant changes in the patterns of energy consumption are forecast.1% per year. the rate of decline is expected to ease. as in the past.6% over the last five years.5% S). In some countries bureaucratic impediments.176 -. The forecast assumes an average rate of GDP growth of between 4% and 5%.4% per year. This relatively modest growth reflects the expected move to market related prices from the current heavy subsidies in some of the countries. Despite three of the five countries being significant oil and gas producers. restructuring in Eastern Europe contributed significantly to the very rapid declines. Increasing the fuel cost to the consumer will promote improvements in vehicle efficiency. the countries are relatively poor. The forecast is summarized in Table B-2-4 and key assumptions for the main products are discussed below. In the forecast period. Growth over the forecast period is expected to average 1. Bunker fuel (47 million tonnes) is expected to continue to grow as the European economy expands and as world trade increases. which is above historical averages but assumes continued difficulty in sustaining market oriented policies to promote economic growth in the face of growing oil and gas revenues. Overall we anticipate that some 12 million tonnes per year of the current consumption will move to the low sulfur grade. which supports a large proportion of the population. mainly rural populations there is an over-dependency on low value agriculture. Following the implementation of Annex VI of the Marpol 73/78 convention. Any industrial and power general growth will be taken by gas. with GDP/capita in 2006 averaging under $2. where available. The outlook for energy and economic growth is given in Table B-2-3. a proportion of this demand will move to low sulfur (<1. NORTH AFRICA The five countries in this region have a combined population of 155 million and quite rapid population growth which has averaged 1. hydro and renewables. With large. However. In 2005 the average for the region was just 42 vehicles per thousand . which came into force in May 2006 in the Baltic and will extend to the English Channel and North Sea in 2007.

1%. Wide ranging reforms have been introduced since then. which is higher than policy makers would like.S. Furthermore in several countries. The unreliability of Chinese statistics (a long-recognized issue) leads some analysts to question the true growth rate.III B – Near-Term Outlook -. First quarter 2007 growth was 11. This masks a continuing decline in the use of burning kerosene for cooking and lighting.. Jet fuel demand is expected to grow more rapidly at 3. the majority of new cars registered are diesels. .. Whilst a strong growth in the vehicle population is forecast. banks accumulated around four trillion Chinese Yuan (about $480 billion) of bad debts. Fuel Oil There is limited use of fuel oil in the countries other than Morocco and Egypt as gas is used extensively for power generation where it is available. which could be even higher than reported. China's banking sector remains a key concern for the country's economic stability. as business and tourism expands. Growth is expected to be robust at 4.3% per year. Banks have started to modernize . which does not have indigenous gas uses fuel oil for power generation and industry. China holds a large trade surplus with the U. gasoline growth is expected to be modest at an annual rate of just over 1%. Southeast and Northeast Asia). Morocco. Until 1995. Jet/Kerosene Jet/kerosene consumption is expected to grow by an average of 2% through the forecast period. This is mainly being replaced by LPG and rural electrification. As a result. reflecting expansion in commercial transport and the growing use of diesel cars.S. CHINA ECONOMY China’s economy registered annual growth of over 10% in the period 2003-05 with only a slight slowdown in 2006 (between 9 and 10%). notably Morocco and Algeria. A move to international market related pricing will also help to depress demand. as the ratio of problem loans had been rising. banks paid considerable attention to national policies in determining the allocation of bank credit.2% per year. This strong growth further encourages discussion of potential overheating. The forecast assumes a modest decline. and is a “demand sink” for imports from other countries and regions (U. mostly as a result of loans made up to 1999. The country continues to be the world’s most rapidly expanding major economy. Gasoil/Diesel Gasoil/diesel is used mainly in the transport sector with only limited use in agriculture and power generation. reflecting the high proportion of new diesels and improving efficiency as the fleet renews.177 population less than one tenth of the European level. although it has converted existing power stations to coal and built new coal capacity to replace oil.

. Other planned LNG projects not yet under construction include CNPC projects in Dalian. China has completed its first LNG import terminal in Guangzhou and two others are under construction and ideas for perhaps fifteen other terminals have been announced. China in July 2005 delinked its currency from the U. Additional bank recapitalizations have been needed.8 gigawatts to LNG. dollar.85 billion TOE in 2006. A nuclear power plant started up in 1993/94 but contributes less than 1% to supply. The most difficult problems associated with overheating would be avoided and China’s goals of becoming a developed country later in this century would be attainable. Hydropower continues to grow and is about 2% of supply. Both petroleum and gas consumption have grown rapidly. While the Yuan is not entirely free. The West to East pipeline was something of an investment disappointment for international investors as China did not arrange gas contracts sufficiently in advance of construction to allow for ordinary gas economics to be clear. Breaking with previous policy. Gas in accessible areas in north China and in the offshore areas is being developed. resulting in a revaluation of 2. 320 megawatts gas fired power plants. and a Sinopec project in Shandong. CNOOC projects in Zhejiang and Shanghai. increasing domestic production in traditional areas. A second LNG terminal is under construction in Fujian province. Ground was broken on a new CNOOC Shanghai LNG terminal in January 2007. China’s primary energy demand reached 1. ENERGY Demand for energy has reflected the rapid economic development. and converting existing oil-fired plants with a capacity of 1. We believe that this level of GDP growth will provide a sustainable base that would allow for social stability. slowing slightly afterwards to maintain a steady growth of 7 to 8%.178 -. However. China continues its heavy reliance on coal. that source is far too small to meet demand growth expectations. Guangdong province is building six. but petroleum now accounts for about 20% of total energy supply. The huge Three Gorges hydropower plant is not entirely completed but is generating power. China has a threefold gas program. and is scheduled for completion in late 2007. it is far from clear that problems are solved. The West to East Gas Pipeline is intended to bring gas from the Tarim Basin and other western Chinese sources into mostly the coastal region.1 percent. Hebei. The Chinese Yuan now will float within a narrow band against a basket of currencies from the country's major trading partners. making up about 62% of energy supply.III B – Near-Term Outlook their lending and risk management practices. . We expect China’s GDP growth to continue at a steady rate of 8 to 9% through this decade. while biomass makes up 12% (Table B-2-5). and gas just 3%. Growing at 10% annually from 1995 through 2006. While reforms have been made. this policy change is in the appropriate direction to support continued economic expansion. and Jiangsu.S. the third largest in the world. Hence this pipeline was built entirely with Chinese funds. new interregional transfers by pipeline and imports in the form of LNG.

to. demand has increased from 206 million tonnes (4. Historical growth for the 1990-1999 period.6 15. NDRC has so far failed to update the Chinese prices.5 2004-05 28. .4 2001-02 15.5 9.0 million B/D) in 2000 to 332 million tonnes (7.4 5. Petroleum demand accelerated over recent years compared to prior periods as shown below. Considerable diesel demand was created by self-generation in many commercial and industrial establishments. In 2006 Chinese demand growth was far lower due to another unusual set of circumstances as well as alleviation of some of the problems from prior years. REFINED PRODUCTS The early stages of economic reform set the stage for rapid growth and during the past five years oil products demand has increased at an average rate of nearly 10% annually. Longer term. the possibility exists for higher or lower growth patterns depending on a variety of energy . It appears that China has entered a new phase of demand growth driven by its economic growth and vehicle sales.9 2003-04 38. The rapid increase in international petroleum prices has caused problems in China and has disrupted the planned pattern of more open price regulation. Over this period. Power availability improved due to more normal weather patterns and extremely rapid development of new coalfired power stations.1 2005-06 16.1 million B/D) in 2006.9 2.III B – Near-Term Outlook -. leading to very poor marginal profitability of refining internationally-acquired crude oil. Given the size of the Chinese demand and the growth rates. volumetric growth has been quite large as shown below.179 The Chinese gas projects were developed ahead of the associated regulatory and pricing infrastructure to support the industry. like many developing countries with cheap coal. for example averaged slightly more than 6% compared to recent demand growth which has approached 10%. Rapid growth in power demand and an unusual shortfall of hydroelectric availability due to low rainfall resulted in power shortages.2 The spectacular growth of 2003-2005 is attributable to an unusual set of circumstances that are unlikely to be repeated. For much of 2005. Further. Demand growth has been across a number of products.2 2002-03 22. Consequently there have been product shortfalls constraining demand growth. refiners could profit by exporting products rather than supplying domestic markets.2 7. has some difficulty justifying the high price of clean burning LNG. China. CHINA REFINED PRODUCT DEMAND GROWTH Year.8 10.Year Change 2000-01 Million tonnes Percent Growth 4. We anticipate a return to more ordinary growth patterns over the next few years. China experienced increased demand for residual oil for feedstock to independent refineries.

For reasons that will be explained later in this section. averaging nearly 8% annually over the past five years (2002-06) period as vehicle registrations escalated. Thailand has about 120 private vehicles per thousand population and Korea has about 250. China commissioned the world’s largest ethanol plant (600. usage of LPG as a residential/commercial fuel has grown rapidly and has substituted some of the kerosene.0 million B/D) in 2004 and increased to about 52 million tonnes (1. wind. assuming that other sectors of the economy and energy sources expand as planned. Automobile penetration still is quite low. Attractive loans to purchase automobiles remain available. Demand growth for gasoline has been strong.3 million tonnes (50. Gasoline consumption exceeded 45 million tonnes (1.2 million B/D) in 2006. with the forecast summarised in Table B-2-6: Gasoline Gasoline use in the transportation sector is somewhat higher than diesel. China’s renewables policy is focused on ethanol. in contrast to other Asian nations that depend more heavily on diesel-powered vehicles. The following trends in the consumption of refined products in China are forecast.III B – Near-Term Outlook and economic factors. By way of comparison. Much of the focus on ethanol has been to utilize surplus corn and wheat crops.180 -.000 tonnes) in Changchun. . However. Consumption of LPG has increased from 13. Fuel and vehicle taxes are low and are not designed to create a barrier to expansion of the private automobile fleet. . China is estimated to have produced about 100. and other renewables. we anticipate rapid growth in private vehicle ownership and consequently continued growth in automotive fuel demand.000 tonnes of biodiesel in 2005. Expressed in private vehicles per thousand population. Biodiesel appears to be a secondary priority of the program. Chinese policies are generally favorable toward private automobile ownership.000 B/D) currently. Historically.000 B/D) in 2000 to around 2.000 B/D) in 2005. Because the Chinese private vehicle fleet is so small in comparison to population and because the national wealth is growing so rapidly. As the world’s third largest producer of ethanol. demand growth has been erratic from year to year.5 million tonnes (430. China ranks very near the bottom of large nations with less than 20 private vehicles per thousand population.000 B/D) in 2000 to over 22 million tonnes (700. more recent gasoline demand growth has been driven by private-sector automobiles and new heavy-duty trucks are mostly diesel-powered. Chinese private vehicle registrations have grown rapidly. as well as hydro. mostly gasoline. Jilin in 2004. Demand in 2006 now appears to have been around 6% but is expected to rebound to a growth rate of 7-8% in 2007 due largely to an expected increase in the use of naphtha for petrochemicals. Many vehicles are manufactured domestically and China is becoming an automobile exporter. China had a large fleet of gasoline-powered trucks. The forecast presented here reflects an assessment of the most likely outcome. As recently as ten years ago there were virtually no privately-owned automotive vehicles in China. Kerosene/Jet Fuel While residential/commercial kerosene demand has declined from over 3 million tonnes (70.

Strong growth is forecast to continue. being largely an extension of the government.7 million tonnes per year by 2020. respectively. per capita gasoil/diesel consumption remains low at 95 litres per capita. . CNOOC announced the construction of a 100.000 tonnes of biodiesel in 2005. Air travel has been growing steadily over the past five years with some interruption in 2003 as SARS took its toll. At least for the next few years. have endorsed the renewables policy with some action. There is no biodiesel specification in China and the diesel regulations are silent on the matter of blending biodiesel. Alternative energy policies are therefore more expected to favour coal-based fuels or other domestic resource-based fuels. Even with strong growth. new airports and additional aircraft is expanding very rapidly. China is very keen on self sufficiency of oil products but understands the limitation of biofuels as a large volume substitute to the countries large and rapidly growing oil and energy demands. but is usually not known by the enduser. The national oil companies. Given the relatively loose diesel specifications and quality enforcement. Future growth of gasoil/diesel will be driven by demand for transportation services. China is estimated to have produced about 100. A large percentage of trucks in China are gasoline-powered owing to the inadequate supply of gasoil/diesel. Biodiesel is reportedly sold at a 5% discount to petrodiesel.000 B/D) in 2004 and again in 2005. Demand growth in 2006 was about 6 million tonnes with total demand reaching 116 million tonnes (2.4 million B/D). with total jet/kerosene consumption reaching 24. Gasoil/diesel demand growth is forecast at about 6% annually through 2012. some biodiesel is blended into diesel.8% per year. The ratio of gasoline-powered trucks to diesel-powered trucks is expected to drop in coming years. Consumption increased by over 13 million tonnes (270. representing an annual growth rate of 5. .181 China has liberalized the air travel sector and air travel infrastructure in the form of the most modern.000 tonne biodiesel plant in Sichuan province. The longer-term biodiesel and ethanol demand in China is expected to be limited by available domestic feedstocks and arable land. Gasoil/Diesel Gasoil/diesel demand in China has grown about 10% annually since 2000 and has spread across all sectors of the Chinese economy. With unreliable power having become a regular fact of life in some of the most rapidly growing parts of the country. there has been a very considerable installation of private generators. Biodiesel appears to be a secondary priority of the alternative fuels program. Jet fuel consumption rebounded in 2004 with the booming economy and 2005/2006 has registered continued expansion to over 9 million tonnes per year (200. further boosting the demand for gasoil/diesel. The shortfall of reliable power led to substantial gasoil demand growth in 2004. per capita gasoil/diesel consumption in Korea and Taiwan is about 440 litres and 227 litres. By comparison. These are typically fuelled with gasoil and contributed appreciably to demand expansion in 2004/05. China’s rapid construction of coal-fired power plants may have curtailed gasoil consumption in this sub-sector.III B – Near-Term Outlook -.000 B/D).

primarily by the independent refineries.000-300. Economic growth over the 2003-06 period has averaged 7 to 8% annually. INDIA ECONOMY Economic policy reforms in the areas of production.III B – Near-Term Outlook China has embarked on an aggressive coal technology push to convert coal to liquids or other useful energy sources.182 -.000 B/D). Long-standing policies that encouraged self-reliance and selfsufficiency have been replaced by policies that encourage direct foreign investment. rapid increases in employment. trade and investment instituted in 1991 have led to a decade of strong economic growth. The service sector has also contributed strongly to India’s economy as has healthy industrial production. Most of the large increase in 2003/06 can be attributed to straight run residue being imported and used as refinery feedstock and increased use for power generation. Our overall fuel oil projections call for slow growth of residual fuel oil and feedstocks as declines in power plant fuel and industrial fuel are offset by increases in feedstock requirements and bunkering activity. Industrial fuel oil demand is projected to fall more slowly as alternatives make inroads against fuel oil in an environment of growing overall industrial fuel consumption. Demand in 2006 was about 38.000 B/D is consumed as refinery feedstocks. Oil-based fuels account for a small fraction of power sector fuel. Fuel oil use in the power generation sector is forecast to moderate as generation capacity based on coal.000 B/D) is used as bunker fuel and this use is increasing rapidly. see below. resurging consumer demand and strong export-led growth (Table B-2-7). although the volumes are still moderate. hydropower and nuclear is developed. and development. Even if crude purchases were allowed. Residual Fuel Oil Residual fuel oil demand (excluding bunkers) declined to about 32 million tonnes in 2000/02 but grew rapidly to 2004 as use for power generation surged. mostly by coal companies but also with oil company involvement in some case. reduction in poverty. a boom in exports and a decline in inflation. . about 9 million tonnes (150. industrial growth. Several pilot plants and a few larger-scale facilities are being constructed. Demand is concentrated in the industrial and the power generation sectors but about 200. .5 million tonnes (700. growth of the middle class. the larger of these independent refineries have too much conversion capacity for most crude types and would need feedstocks to fill their conversion units. led by strong growth in the industrial sector and expanding export growth. Foreign direct investment has soared in the past few years and now accounts for about 7% of total investment up from less than 1% just three years ago. In addition. Refinery feedstock consumption is likely to grow over the next few years as crude supplies remain restricted to over 1 million B/D of refining capacity that is in the independent sector.

the country is expected to experience strong economic growth over the forecast period of about 6% annually.90 TOE/capita.183 India has the second fastest growing economy in the world. and a well-educated workforce. Petroleum’s share in the energy mix has remained stable over the past five years at about 22%. non-commercial forms of energy still play a prominent role in India and are estimated to account for about 40% of total final energy consumption. strong fiscal reserves. Industrial production for transportation equipment is growing at an especially quick pace as the automobile manufacturing industry becomes established. respectively since 2000. only modest inroads into the energy economy have been made. This is still quite low compared to the regional average consumption of 0. Despite its high fiscal deficit. Growth in the industrial sector has averaged 1. Many of the country's fundamentals. telecommunications.5% annually. Despite efforts to promote natural gas. primarily at the expense of coal and hydropower. ENERGY India primary energy demand has grown at an average annual rate of about 3% since 2000. this amounts to 0.56 TOE/capita.6 and 2. Energy growth is expected to continue to track economic development over the near term but at a slightly reduced rate.III B – Near-Term Outlook -. Resolution of these constraints and long term sustained economic growth will depend on continued reforms and reductions in the extensive remaining government regulations that have restrained the country’s potential. The Indian energy supply continues to be dominated by biomass and coal. Imports into India are growing at a healthy pace. However. India’s economic growth has come without debilitating inflation. are healthy and recovery of the Asian economies will support higher export growth over the next few years. with moderate improvements in energy efficiency and robust economic growth. Our outlook assumes an eventual increase in the use of natural gas to the detriment of coal. and transportation bottlenecks continue to constrain growth. .5% annually since 2000 as India continues to turn to less energy intensive manufacturing. while petroleum use continues to expand modestly. Hydro contributed just over 1% and nuclear contributes just less than 1% to the energy mix. including high savings rates.8 for China over the same period. The transportation and residential/ commercial sectors have averaged growth rates of 2. which account for 35% of total commercial energy each.45 between 2006 and 2010. However. Power generation has accounted for a large proportion of recent energy growth and has averaged growth of about 5. Total energy growth over this time period is expected to average about 3% annually.2%. Increased use of natural gas for power . Barring droughts or natural disaster. Natural gas currently accounts for less than 5% and has only grown modestly over the past 10 years. energy. The recent high prices of crude oil and associated petroleum products may dampen demand somewhat. Our outlook calls for energy elasticity to average about 0. On a per capita basis. after China.5% compared to an energy elasticity of 0. a sign of robust domestic demand. Energy elasticity has averaged about 0.

However. This HBJ pipeline system is being expanded. The degree to which private vehicle ownership expands as the economy expands remains a key risk factor that could result in far greater gasoline consumption in India. which are well below €4. Numerous projects for importing LNG are still proposed.III B – Near-Term Outlook generation will account for most of the increase as the Government is encouraging the construction of gas-fired power plants at coastal locations that are intended to have access to imported LNG. per capita consumption of gasoline is very low. Product demand by product is shown in Table B-2-8. Maharashtra and Gujarat in the centre-west. The outlook for gasoline growth is better than for overall petroleum fuel as the car parc expands rapidly. Shell’s Hazira LNG plant. came on stream in early 2005 based on a spot purchase model. continued demand growth in the transportation sector will require significant expansion and improvement of the existing road infrastructure over the next few years. Total demand in 2006 was about 124 million tonnes (2.000 B/D) for the first time in 2006. commissioned its LNG plant at Dahaj in Gujarat in early 2004 and has been operated to import term contract gas from Qatar but plans to expand the facility are progressing slowly due to difficulty finding additional supplies at prices acceptable to consumers.184 -.66 million B/D). due to very low per capita ownership of personal vehicles. Pipeline gas projects to obtain gas from Bangladesh. and the following trends in the consumption of refined products are forecast: Gasoline Demand for motor gasoline has been growing at rapid rates. but the two existing terminals have had difficulty remaining utilized due to high international prices. One of the key factors improving vehicle penetration is the very low automobile prices for entry level cars. . the terminal has been used for only a handful of cargoes for the first few years but is now operating at higher levels. However. but large investments in other parts of the country are required. The country has a limited gas infrastructure with only one major trunk line that runs from the Mumbai (Bombay) High fields north and east to New Delhi.5% annually over the past five years and exceeded 9 million tonnes (216. and the heavy reliance upon mass transit and traditional forms of transportation.000 per vehicle. Infrastructure limitations will ultimately . Reliance plans to lay a cross-country pipeline from Kakinada in the centre of India's east coast to transport the gas to consumers in Andhra Pradesh. REFINED PRODUCTS Petroleum demand in India has grown at an average annual rate of about 3% since 2000. also in Gujarat. Gasoline and jet fuel have grown rapidly whereas kerosene has declined and diesel and residual fuel oil demand has stagnated. The government has finally begun to make changes in the complicated tax structures on petroleum and gas feedstocks to fertilizer manufactures and power plants to encourage fuel switching to gas. averaging 5. at less than 12 litres per capita. Myanmar and Iran are being pursued as well as more modest projects to enhance domestic production through new infrastructure and reduced flaring. Petronet LNG Ltd. As a result of high prices.

and is heavily subsidized by the government.6 million tonnes (365.185 control gasoline demand growth to more modest. jet fuel growth could be hampered by lack of adequate infrastructure. yet comparatively robust demand growth rates in the long term. growth rates will be much lower than for gasoline or jet fuel. Our forecast is for less then 2% annual diesel growth given the country’s limited infrastructure and its economic focus on service sector and light industries. Retail diesel prices are much lower than gasoline currently and diesel-engine automobiles are available. As with gasoline demand.000 B/D) in 2002 to 4 million tonnes (85. There are some signs that India is beginning to dieselize the private sector automotive fleet. . Gasoil/diesel is expected to remain the key product in India as rail.000 B/D) by 2020.000 B/D) by 2020. along with growing electricity and LPG use. offsetting much of the growth in jet fuel. Overall consumption of jet kerosene is expected to reach 14. The continued introduction and expansion of natural gas distribution systems in the cities of Mumbai.III B – Near-Term Outlook -. As with gasoline growth.000 B/D) in 2006. Our outlook is for gasoline demand growth to average 5 to 6% annually over the next ten years. This rapid increase is primarily the result of new discount domestic airlines along with growing individual wealth. then gasoline demand could exceed our forecast. Historical growth has been extremely strong but peaked at about 12 million tonnes (260. will result in a continuation of the slow decline in kerosene usage. gasoil demand could be higher than forecast if India completes significant infrastructure improvements.3 million tonnes (309. However.9 million tonnes (321.3 million tonnes (50.000 B/D) by 2012 and 14. However. demand has increased from 2. and increased use of LPG by the sector.000 B/D) in 1998. although growth has been rapid in a few locations. Consumption has averaged about 9 million tonnes (200. Prior to 2003. New Delhi and Kanpur. Natural gas for residential use has been fairly limited to date. It is too early to determine if the retail prices will remain divergent and if diesel cars .000 B/D) in 2012 and 15. the great majority (over 50%) of gasoil/diesel is used as transportation fuel. jet fuel had seen rather modest growth. Gasoil had been one of the fastest growing petroleum products in India. with average annual growth of 7% annually over the 1990-99 period As the industrial sector is heavily dependent upon coal. Consumption is expected to increase to 12. Its importance in the residential sector is declining due to a combination of rapid electrification that has caused electricity use by residential and commercial customers to grow at more than 7% annually. However. Gasoil/Diesel Gasoil/diesel is the dominant refined product in India accounting for over a third of total product demand. agriculture and commercial on-road sectors of the economy expand. primarily as a result of the economic slowdown in the region. our outlook is for continued strong growth of 4-5% per year.000 B/D) for the past few years but demand is forecast to decline slowly. Kerosene/Jet Fuel Kerosene is most commonly used as domestic fuel for cooking and lighting in India. A grand road construction project linking the major cities is underway and if similar programs were to be completed for city and suburban highway systems.1 million tonnes (283.

There is a major concern among policy makers that the manufacture of biodiesel could compete with India’s existing agricultural industry. as proposed. would include: • • • Establishment of large scale plantation of Jatropha Curcus trees Establishment of an expeller industry to extract inedible oil from jatropha seeds Establishment of an a biodiesel manufacturing industry based on jatropha oils feedstock Marketing of a blended biodiesel and petrodiesel product • The policy envisions the public sector oil marketing companies as the logical conduit for placing biodiesel into the Indian market. the Bio-diesel Purchase Policy was issued by the Ministry of Gasoline and Natural Gas. reflecting a growth rate of just under 2% per year. producer certification. . and then the crude oil price crash in 1999/2000 precipitated by the Asian Financial Crisis. A number of countries (including Kuwait.000 B/D in) 2012 and 58 million tonnes (1. This policy is part of the Indian Government’s broader initiative for a National Mission on biodiesel that. In October 2005. Saudi . The concept being promoted is a biodiesel industry based on new supplies of inedible oils as the primary biodiesel feedstock. The policy outlines a blending of only 5% biodiesel into the sales blend and also encourages research and development efforts to raise the portion of biodiesel in the future to 20%. This policy as outlined including the pricing principles.III B – Near-Term Outlook will be attractive to consumers. Residual fuel oil demand is expected to continue at about current levels or decline slightly if more gas can be obtained. the diesel demand could be higher although the higher efficiency of diesel versus gasoline would directionally reduce overall transport demand somewhat. Government of India. next by the crude oil price crash in 1986. There are no mandated volumes for biofuels and no other fuel incentives but instead an assurance that quality biodiesel will be purchased by the state oil companies. Consumption has been around 17 million tonnes (300. product quality requirements and the delivery point.186 -. Forecast consumption is expected to be 49 million tonnes (993. followed by the Iraq/Kuwait war in 1991/92. fuel for refineries and other uses.000 B/D) since 2000. If diesel automobiles become popular. with the balance split between power generation. The policy envisions that the economics of biodiesel should be generally self-sufficient without long-term subsidy. Oman. first by the long and protracted Iran/Iraq war.18 million B/D) in 2020. MIDDLE EAST ECONOMY The economic time series for the Middle East countries has been disrupted several times in recent years. Residual Fuel Oil Industrial use of fuel oil accounts for about 40% of total fuel oil demand.

000 B/D) in 2003. the high oil prices in 2004-06 stimulated the economies of the oil producers in the region and the overall GDP expanded by over 6% (Table B-2-9). Despite the disruption in a large country. However. VII-1 MIDDLE EAST TOTAL REFINED PRODUCT DEMAND The Iraq war has disrupted normal business. The Iranian government is now beginning to take unpopular steps to reduce consumption. which have included a modest price increase and the potential imposition of a rationing system.187 Arabia. Only two countries — Saudi Arabia (13. Regional demand was 263 million tonnes in 2006. . Prices weakened again in late 2001/early 2002 and the economies of most Middle East countries were negatively impacted. growth in consumption in neighbouring countries more than offset the decline in Iraq and overall the region showed a gain of about 7 million tonnes (140. which will impact in the region as Iran is the largest consumer.5 million tonnes) and Iran (18. Natural gas has displaced petroleum in many applications and has increased its share of energy supply from 25% to about 43% over the same period. This is reflected in the domestic consumption of refined products that grew at an annual average rate of about 4.0%.3 million tonnes) — consume more than 5 million tonnes of gasoline. Product consumption by sector for the Middle East is shown in Table B-2-9. ENERGY Petroleum is still the dominant energy form throughout the Middle East. and Syria) recorded a recession in 1999 and the GDP in Lebanon grew only 1.5% per year from 2003 through 2006. The invasion of Iraq disrupted the economies temporarily.0% over the 2001-03 period. but particularly so in Iran. The impact of these steps will be to significantly moderate consumption growth. reducing oil production substantially and also impacting consumption due to the political aftermath of the invasion. but petroleum's share has declined from 70% in 1985 to about 55% currently. Economic growth is expected to average 4 to 5% over the long term. . Gasoline prices are low in most of the countries in the region. Solid fuel use accounts for about 1. Currently. Saudi Arabia and Iran account for about 60% of total demand. The overall GDP growth rate for the Middle East slowed to about 2.5% and hydropower is quite small (0.0 million B/D) in 2003 for the first time despite the Iraqi disruption.25%) as few countries have the capability to generate hydropower. The following trends in product consumption in the Middle East are forecast: Gasoline Consumption of gasoline is growing strongly and exceeded 43 million tonnes (1. REFINED PRODUCTS DEMAND The increase in the crude oil price has resulted in booming economic growth in the Middle East oil exporting countries. This has resulted in Iranian consumption growing at nearly 10% per year over the period 2000 to 2004. As a result demand has exceeded the capacity of the local refineries to supply and Iran is now a substantial importer.III B – Near-Term Outlook -.

Gasoil/Diesel Distillate demand (primarily for diesel fuel) has grown at an overall rate of about 4% over the past five years and was about 80 million tonnes (1.6 million B/D) in 2020. with consumption reaching 117 million tonnes (2. The forecast assumes continuing modest growth as more efficient and larger aircraft are put into service Residual Fuel Oil Residual fuel oil demand has increased from 52 million tonnes (930. About 7 million tonnes is burned as fuel in the refineries. The major uses are for power generation and desalination plants (50%) and industry (35%). reaching 8. which together account for 60% of total consumption.5% per year over the last three years.000 B/D) including international jet bunkers.000 B/D) in 2000 to over 60 million tonnes (1.5 million tonnes). or about 50% of the total. growth in jet consumption has been modest. Failure to expand gas production could result in a significantly higher forecast for fuel oil.1 million B/D) in 2004. The forecast assumes some moderation in consumption as the current boom subsides to a more long term sustainable level of activity.7% per year.6 million B/D) in 2006. Transportation fuel accounts for over 40 million tonnes.000 B/D) is used for bunker fuel in the region. Despite the buoyancy of the regional economy. The Russian economy is dominated by natural resources . Consumption inland and for bunker fuels is expected to increase modestly at a rate of 0.III B – Near-Term Outlook Overall the regional consumption is expected to increase to 57 million tonnes (1.000 B/D) in 2006. Kerosene/Jet Fuel Consumption of kerosene for cooking and lighting purposes is slowly declining and in 2006 reached 9 million tonnes (195.4 million B/D) by 2020. In addition to the inland consumption. RUSSIA ENERGY Energy consumption bottomed out in 1998 at about 580 million TOE but recovered to about 670 million TOE in 2006. it is estimated that another 15 million tonnes (275. .3 million B/D) in 2012 and 67million tonnes (1. Consumption is forecast to remain essentially flat. As with gasoline.188 -. About 16 million tonnes is used for power generation. increasing by less than 2.8 million tonnes by 2020. The increase in purchasing power in the region resulted in the truck fleet expanding and the increase in industrial and construction activity resulted in diesel consumption expanding. The low rate of growth inland assumes that the current initiatives to increase the production of natural gas for use to meet growing power and desalination demand is successful. regional demand is dominated by two countries: Iran (25 million tonnes) and Saudi Arabia (24. with the balance split among the other sectors. Jet fuel demand averages about 12 million tonnes (270.

hydropower (2%) and biomass (1. but between 2004 and 2006 consumption grew by an estimated 7. this transition is expected to take some time as the turnover of the vehicle fleet is low and as yet large logistics companies have not been established to improve the efficiency of commercial transport. The spurt in economic growth in 2005 and 2006 resulted in an increase in petroleum consumption to around 140 million tonnes (3 million B/D).8 million tonnes (813. Solid fuel is third with 15% and the balance is composed of nuclear (6%).5% with some of the more remote regions losing people much faster. Although the larger vehicles are gradually being replaced by diesels. Over the last ten years the population has declined by 3. Consumption was static until 2004.000 B/D) in 2006. Data on consumption in Russia is very unreliable as there is no direct measure of consumption. Although the Russian government is seeking to diversify the economy. only an implied figure based on production and exports. By 2020 we expect car ownership levels to approach those in Europe today. The recent high oil prices have resulted in very strong economic growth in excess of 6% per year.5%) (Table B-2-11). Only a small amount is used for power generation with most of the balance used in the industrial and other sectors. The scope for double counting and “missing” consumption is considerable. The forecast is summarised in Table B-212. with essentially no growth registered between 2000 and 2004. .III B – Near-Term Outlook -.000 B/D). buses and agricultural vehicles. Russia supplies electricity to some of the former republics but exports represent only 1. Natural gas is the major fuel used with nearly 55% share of the energy supply. The forecast is for consumption to increase to 34. By 2020 consumption is expected to be 46 million tonnes (947. The Russian rail network is extensive and uses large volumes of diesel fuel. but is growing very quickly. Gasoline consumption is expected to continue to grow slowly.000 B/D) in 2020. Key elements of the forecast are discussed below. Growth is forecast to remain strong through the forecast period as the economy expands and more diesels replace gasoline commercial vehicles. nickel and uranium. The decline is expected to continue into the future. Another challenge facing the Russian economy is a continuing decline in its population. REFINED PRODUCTS DEMAND Product demand stagnated after the collapse following the break-up of the Soviet Union.3 million tonnes (965.5% per year.0% of electricity generation.000 B/D) in 2012 and 41. Petroleum accounts for just over 20%. it will be vulnerable to decreasing oil prices for some time to come. .189 including petroleum. Gasoil/Diesel The major end-uses for diesel are in the transportation and agricultural sectors. aluminium. with growth in use by private cars being offset by declining consumption by commercials. Gasoline Consumption increased to about 28 million tonnes (660. Russia also has a large number of gasoline engined trucks. Private automobile ownership is currently low at around 180 cars per thousand people. The transport sector includes road and rail.

. The policy of increasing the domestic gas prices will probably move some demand back to fuel oil in the short term.III B – Near-Term Outlook Kerosene/Jet Fuel Use of kerosene for burning is negligible since Russia has a fairly large production of LPG (mostly from gas processing) and most is used domestically. Table B-2-13 shows the forecast energy consumption for the U. Nuclear power is limited by regulations and financial problems. . Renewal of the aircraft fleet is expected to continue through the forecast period as higher fuel prices encourage conservation.S. Most of the kerosene is used as jet fuel. Through the 1990s. The forecast is for very modest growth with consumption reaching 29. most was used for military manoeuvres rather than commercial flight.. Russia is a very large country. Since the U. the increase in oil prices in 2004-2006 and a big decrease in fuel oil demand last year.43% from 2000 to 2006.190 -. but the higher fuel cost will encourage long overdue fuel efficiency investment that will curb demand growth. shifts from one energy source to another occur very slowly. Low gas prices have encouraged the use of gas for power generation but recent shortages of gas for export have resulted in an increase in fuel oil use. Residual Fuel Oil Following the collapse if industrial demand in Russia fuel oil consumption is now mainly in the power generation and bunker (unreported) sectors. petroleum is the dominant fuel and has maintained its market share of nearly 40% over the past decade. natural gas regained the market share it lost during the 1970s and 1980s when it was precluded from being used in new large boilers.7 million tonnes (542. The limited availability and high prices for natural gas since 2000 are expected to stem the growth in market share for natural gas for the remainder of this decade. The forecast assumes growth to just under 16 million tonnes (330. Hydropower's share is only about 1%. economy is so highly developed. but it continues to increase slowly and accounts for 9% of the total. Gas and solid fuels each have 20 to 25% of the energy market. The rate of growth is lower than might be expected as replacement of the inefficient Russian made aircraft with modern designs substantially reduces the fuel used. but the reduction in military activity and the expansion of the economy has resulted in steady growth. Historically. The lower rate of growth can be attributed to a weak economy in 2001/2002. Heavy (residual) fuel oil and thermal distillate use have already been reduced to practical minimums. Growth is expected to resume over the next few years as the economy continues to expand. and little potential growth remains. so natural gas for heating will increase as population and the economy grow.S. so coal and nuclear energy captured a larger share of the market.S. UNITED STATES OF AMERICA In the U. REFINED PRODUCTS Demand for refined products grew at an average rate of 0. requiring extensive air travel.000 B/D) by 2020.000 B/D) by 2020.

039 0.84 0.0 2012 414 85 228 58 202 986 0.S.7) 2007 400 80 211 57 195 943 1. PADDS IV V III II I .19 1. .9 2010 410 82 221 58 198 969 0.03 0.8 2008 403 81 214 57 196 952 1.05 1. These are shown below.S. Ultra low sulfur diesel is expected to show the strongest growth as the growing economy stimulates more demand.74 0. known as Petroleum Administration for Defense Districts (PADD).9 2011 412 84 224 58 201 978 1.43 0.04 0.7 Annual % Change 2006-12 2012-20 0. Jet fuel growth has stagnated and will likely have slow growth throughout the end of the decade due to more efficient airline fleets.37 0.37 1.66 Demand growth for clean transportation fuels will outpace demand growth for residual fuel oil. REFINED PRODUCT DEMAND (Million tonnes per year) 2006 Gasoline Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Other Products Total Demand Annual % Change 396 79 204 55 192 926 (1.191 U.8 2020 426 92 255 58 208 1.85 1. our analysis of supply and demand is by geographic areas. Because of the widely differing market dynamics within the United States.73 1.0 2009 407 82 217 58 197 960 0. Gasoline demand continues to increase but not at the high rates seen in the 1990’s.III B – Near-Term Outlook -. U.

they were only 1. In addition. . MOTOR FUEL DEMAND FORECASTS Vehicle Efficiencies Average fleet efficiency has not improved significantly in recent years with American consumers demanding heavier vehicles with larger engines and more power.III B – Near-Term Outlook U. We have begun to see a shift away from the large SUV segment to the more economical small and mid-size SUVs.S. most manufacturers provide warranty coverage for 8-10 years that would replace defective batteries. light weight steel and composite materials may also provide higher efficiency. the economics of owning a hybrid just to save fuel are not convincing. such as six-speed automatic transmissions. Consumer preferences are gradually shifting to more fuel efficient vehicles as fuel prices remain significantly above levels seen in the 1990s. The average light-duty vehicle fleet efficiency is projected to improve only slightly through 2010 because the large size of the existing fleet severely dampens the immediate effect of new technologies. The incremental price of similarly equipped hybrid vehicles varied widely but was generally in the range of $3.7% of new light duty vehicle sales in 2006. We calculated the time required to pay back the incremental price of several new hybrid models for varying gasoline prices and annual miles driven.192 -. In the near term. Emissions control catalyst systems in place currently cannot reduce NOx sufficiently due to the high sulfur level in today’s gasoline.000 to $4. the lean-burn mode results in much higher nitrogen oxides (NOx) emissions than conventional engines. the move toward SUVs and light trucks has been dramatic. However. but these costs are expected to decline significantly as more of these vehicles are produced. even without new government mandates. However. hybrids are expected to remain a small part (<7%) of the total vehicle fleet until 2020. These engines use lean-burn technology and precise fuel control to provide efficiency gains of 15-20% in typical vehicles. Automakers are expected to employ new structural materials and technologies to reduce vehicle weight and improve the efficiency of conventional vehicles. Battery costs were not included in our calculations. Current costs to replace a battery are about $3. Despite the recent press reports about the improved fuel economy of hybrid vehicles versus similarly equipped models.000 according to a listing of manufacturer’s suggested retail prices.000 to $5. An example is the gasoline direct injection (GDI) engine. Although demand for hybrid cars has been strong. . The reduction to 30 ppm (average) that began step-wise in 2004 may enable GDI technology to begin to enter the fleet as catalyst systems improve.000. Several manufacturers are now successfully selling hybrid vehicles in the United States. the use of hybrid propulsion systems appears likely to increase. but could be a significant cost when they need to be replaced. emerging vehicle technologies are expected to provide a boost to vehicle efficiency in future years. Other technologies. However.4% of new light duty vehicles sold by 2010 and 10% of new light duty vehicles sold by 2020. While these trends are not expected to be reversed. We expect that the share of hybrids will increase to about 3.

as well as increasing the general acceptance of diesels in the U. In addition. The extent of impact then is by no means a clear issue at this point. most of which was in the light truck segment. compressed natural gas.193 Dieselization of the light duty vehicle fleet is not expected to be significant in the U. its application is likely to be restricted to fleet vehicles for some . LPG (primarily propane) has contributed 30. Alternative Fuels Much discussion and concern recently has focused on the possible effects of alternative fuels such as hydrogen. diesel cars continue to have a poor image in the mind of most American consumers. If successful. Obviously. as high quality diesel engines are considerably more expensive than their gasoline equivalents and this would add to the cost of the vehicle and further discourage buyers.S. These have targeted light truck/SUV efficiency in particular. Our analysis still indicates that alternative fuels are not likely to have a significant effect on gasoline demand until after 2020. and hydrogen.6% of new vehicle sales in 2005. as has much lower cetane. the CAFE efficiencies yield about a 21. Though CNG is currently in use. will be overcome.000 B/D to the transportation sector. In most areas the quality of diesel at the pump is notably poorer compared with that in Europe. We expect that diesel’s market share will decline as more stringent NOx limits take effect for the 2007 model year.000 to 40. and diesel prices at the pump have been increasing considerably. Currently. Our forecast of new car efficiency changes results in an EPA-based average new car fuel efficiency in the year 2010 of 30 MPG and 32 in 2020 versus about 29 currently.000 B/D during this decade. It is important to note that these efficiencies are based on use of conventional gasoline without ethanol. and unlike European markets there are far fewer incentives for the consumer to switch to diesel.S. The primary alternative fuels presently at issue include methanol. If rapid changes occurred. and LPG on gasoline demand. increasing the amount of exhaust treatment required to meet the new standards. electricity.6 fleet MPG average in 2020 versus about 19. .5 currently. LPG. Reduced gasoline demand would change the outlook for capacity requirements. adding a further disincentive. these efforts could help reduce gasoline demand growth after 2015.III B – Near-Term Outlook -.S. and currently there is less urgency to reduce CO2 emissions compared with the government and business environment in Europe. Gasoline blends containing ethanol will have a slightly lower efficiency. This lower efficiency is taken into account in our gasoline forecasts. More aggressive increases in vehicle efficiency have been proposed by the U. Possibly the most important factor is the vehicle cost. however. but have not yet been enacted. It is possible that with the adoption of the latest diesel engine technologies some of these barriers. and this is projected to grow to about 55. our outlook is that the uptake of diesel cars will remain low. When translated to the fleet calculation. Congress and the President. significant penetration of non-gasoline vehicles would have very important implications for refiners. and could result in declining demand earlier than currently forecast. CNG. aiming to raise truck efficiency nearer to the levels of passenger cars. such as meeting tighter emissions. there could be a negative effect on industry profitability. New truck CAFE efficiencies are expected to gain as well. The market share of light duty diesel powered vehicles was 1.

. fuel cell vehicles are not expected to significantly affect gasoline and diesel demand until well into the future. The fuels which would power EZEV’s or HEV’s are not limited but they could include petroleum-based fuels manufactured in the California refining system. the economic slowdown and extended high prices hurt gasoline demand growth. growth slowed again early in the year as a result of the economy. unless full conversions were made. and economics. Methanol usage is also expected to be inconsequential. represent only a small portion of the overall fleet. and the effect on gasoline demand. In 2004. Furthermore. Due to these practical difficulties. however. and cost appropriate for the passenger car fleet. taking into account such factors as toxicity. Gasoline Gasoline demand patterns have moved through several distinct periods over the past 25 years. However.III B – Near-Term Outlook time. In addition to the problems involved in producing a fuel cell assembly with a size. the program has been modified to allow for production of equivalent zero emissions vehicles (EZEV’s) which have emissions profiles similar to the generating stations used to power hybrid electric vehicles (HEV’s). . A major portion of CNG use is also displacing diesel fuel rather than gasoline. Future sales of ZEV’s and other alternative fuel variants will depend on the ability of auto manufacturers to devise products incorporating those emissions characteristics while preserving performance and value parameters demanded by the auto-buying public. mandates for 1998 through 2002 were suspended. Much of that demand strength is believed to have resulted from a shift from air travel to automobile travel. the California Air Resources Board (CARB) mandated zero emissions or electric vehicles (ZEV’s) to comprise two percent of new vehicle sales by the 1998 model year increasing to ten percent by 2003. weight. severe winter weather and adverse reaction to the increased international turmoil. In 2003. CARB has delayed and modified the ZEV mandate.194 -. and widespread methanol use is likely to result in problems similar to those arising from MTBE. The use of liquid hydrocarbons as an onboard reformer feed is being widely studied. The oil price shocks of the 1970s resulted in strong conservation trends. the economic recovery helped increase gasoline demand by 1. the problems of fuel supply are also likely to delay the widespread use of fuel cell vehicles. Technological progress has not met the CARB expectations and only a few hundred ZEV’s have been licensed for highway use in California. would likely be small. 2001. In 1990. with the 1990s becoming a period of sustained high growth. The price collapse in 1986 accelerated the move towards higher consumption. logistics. Due to a failure for auto manufacturers to produce a viable electric vehicle. as also evidenced by the ongoing weakness in jet fuel demand. demand growth averaged 2.9% despite higher prices. Following the attacks of September 11. Fuel cells are the subject of extensive research.8% in 2002 resulting in consumption of almost 363 million tonnes. The West Coast has been a leader in mandating alternative fuels. therefore. Fleet vehicles. but this material will also require development of segregated storage systems to prevent contamination with gasoline. and have great technical promise as a potential replacement for internal combustion engines. Development of hydrogen storage and distribution systems is likely to be slow.

and has been subject to long-term encroachment by natural gas.6% increase in gasoline consumption was still registered. with the next decade averaging about 1.4%. Demand for distillate fuel oil in the residential/commercial sectors moves with short-term temperature trends. continued economic growth will increase the need for trucking and. Bunker use of distillate has not changed much over the last five years. a more robust outlook would result.0% per year through 2010.7 million B/D) by 2012 and 426 million tonnes by 2020 (10 million B/D) Gasoil/Diesel Fuel Consumption trends for diesel have not been subject to the trends in vehicle efficiency that have influenced gasoline demand. The bulk of diesel fuel demand is used in commercial transportation. . After 2010. Distillate Demand by Sector Distillate fuel oil market growth in the future will come mostly from increases in transportation consumption. Overall we expect consumption to reach 414 million tonnes (9. we expect a gradual slowing of growth as the effects of increasing fleet efficiency begin to be seen. Without this key assumption. Even higher prices in 2006 did not cause gasoline consumption growth to slow. was another record year. therefore. but should see moderate increases in the future. . but are much more closely tied to economic activity and weather changes.III B – Near-Term Outlook -. which moves directly with strength in the economy.5%. However. 2006. despite relatively warm winters. This forecast depends on new vehicle technology being introduced relatively quickly once fuel quality adjustments are made. Demand in 2004/2005 set all-time annual records for the U. Last year.195 High prices persisted into 2005 and this helped to minimize the growth in vehicle miles traveled but a 0. Annual average growth rates through the decade are expected to be 1.S. Gasoline demand growth is expected to average about 1. Diesel penetration of the personal automobile fleet is expected to be negligible. diesel fuel.

95 (0.06) 0. many refiners are able to produce 100% of this material. The market for distillate fuel oil in the residential sector has been relatively flat over the last few years.99 1.32 2007 18 10 8 2 12 2 12 7 129 1 10 211 3. commercial.49 2010 18 10 8 2 12 2 13 7 136 1 10 221 1.29 2009 18 10 8 2 12 2 12 7 134 1 10 217 1.52 1.11 1.43 Annual % Change 2006-12 2012-20 2. such as the farming and off-highway sectors. Total U.04 1. Beginning in June 2006. Residential Commercial Industrial Oil Company Farm Electric Utility Railroad Vessel Bunkering On-Highway Use Military Off-Highway U.60 2020 17 10 9 2 13 2 15 9 164 1 13 255 1. along with expected spill-over of lower sulfur fuels into high-sulfur consumption sectors. .S. Ultra-low sulfur diesel has penetrated other sectors that consume high quality diesel fuel. market shares of distillate in most other sectors have either declined or are growing more modestly.III B – Near-Term Outlook U.88 1.80 1. As shown below. Off-road diesel will move to 500 ppm in 2007 and to 15 ppm in 2010.000 B/D) over the past few years with modest growth forecast.85 0.96 1. Even so.05 wt%) specifications. etc.84 1.48 (0.72 1. DIESEL FUEL OIL DEMAND BY SECTOR (Million tonnes per Year) 2006 Total U.63 2012 18 10 8 2 13 2 13 8 142 1 11 228 1. Total Annual % Change 15 9 8 2 11 2 12 7 127 1 10 204 1. Consumption in the farm sector has increased in recent years to around 11 million tonnes per year (230. low sulfur diesel demand exceeded 70% of distillate use in 2005 while the on-highway portion is about 60% of total consumption. industrial and electric utility sectors has not continued as growth in domestic gas supplies has stalled.97 0. will result in the high sulfur demand share falling with the 15 ppm product growing rapidly. 80% of on-highway supply must meet the new 15 ppm spec.84 1.90 0. Faster growth in diesel demand relative to thermal consumption of distillate (residential. Changes in the sulfur level of the distillate pool have come from both shifting demand patterns and regulatory mandates.85 0. The trends of natural gas displacing distillates in the residential.) has resulted in a growing demand share of the 500 ppm on-highway product. moving to 100% in 2010.84 (0.000 B/D). Off-highway demand has increased to about 10 million tonnes per year (200.44 2008 18 10 8 2 12 2 12 7 131 1 10 214 1.48) 0. these factors.99 1.06) 1. as it is applicable to on-highway product. as a result of logistic constraints as well as strong marketing. Only about 60% of the distillate pool is required currently to meet the ultra-low sulfur (0.87 1. S.43 Whereas distillate used for transportation has been growing rapidly.S.S.78) (0.196 -. utility. .61 2011 18 10 8 2 12 2 13 8 139 1 11 224 1. commercial.

We expect modest growth to continue throughout the forecast with increasing airline travel.19 1.9 million tonnes (19.05 0.7 million B/D) in 2000. the September 11th attacks severely disrupted the airline industry late in 2001 changing the consumption pattern immediately.000 B/D).05 Kerosene-type jet fuel demand grew through the 1990s.6 million tonnes (206.6 million B/D).000 B/D) by 1995. which is being encouraged by higher fuel prices. .197 GASOIL/DIESEL DEMAND BY SULFUR LEVEL (Percent) 1995 High Sulfur Low Sulfur (<500 ppm) Ultra Low Sulfur (<15 ppm) 38 62 2000 31 69 2005 26 74 2006 23 52 25 2007 17 34 49 2008 15 36 49 2009 14 36 50 2010 14 12 74 2015 13 87 Assumes R ailways and Marine move to 15 ppm in 2010 Kerosene/Jet Fuel Growth in demand for aviation fuels has been one of the strongest among the refined products. The military began the phase-out of JP-4 in 1992 and it was totally phased out by the end of 1995. However the increase in air travel will be to some extent offset by a continuing trend of more efficient aircraft. The recovery of gas supplies resulted in a drop in consumption in 2006 as a result of a warm winter and ample supplies of natural gas.III B – Near-Term Outlook -. AVIATION FUELS DEMAND (Million tonnes per year) 2006 Jet A Aviation Gasoline Total Demand 75 1 76 2007 76 1 77 2008 77 1 78 2009 78 1 79 2010 78 1 79 2012 81 1 82 2015 84 1 85 Annual % Change 2020 2006-12 2012-20 88 1 89 1. led by commercial kerosene-type jet fuel. However. Air travel has still not fully recovered and it is expected that it will remain depressed for some years to come. but consumption typically averages about 0. U. Aviation gasoline usage trends are volatile. with demand exceeding 80 million tonnes (1. With lower prices relative to natural gas.89 1.S. Kerosene for burning is quite small (about 2 million tonnes per year) and there is minimal trade.19 0. .95 1. utility demand has strengthened considerably since 2003 compared to past years. Military consumption of jet fuels has been steadily declining. but declined to only 11. Residual Fuel Oil The demand for residual fuel in the utility industry peaked in 1977-1978 at about 90 million tonnes per year (1.

3) 2020 35 79 3 228 353 2 699 (0.3) Annual % Change 2006-10 2010-20 (0.08) (2.198 -.49) (1. Our forecast anticipates that bunker demand will continue to rise slowly with the growing amount of international trade.0) 2007 43 90 4 259 325 2 710 4.34 (1. .3) 2012 40 86 4 262 336 2 714 (0.27) Another major use of residual fuel oil is in the transportation sector for vessel bunkering.53) (3.42 1.59 3.34) (4.63 (1. . Total Annual % Change 42 100 5 209 324 2 681 (26.S. combined with the erosion of electric utility demand.86) 4.87 0.60) (0. this growth.3) 2010 41 88 4 252 331 2 718 (0. HEAVY FUEL OIL DEMAND BY SECTOR (Thousand Barrels per Day) 2006 Commercial/Other Industrial Oil Company Electric Utility Vessel Bunkering Military U.000 B/D) by 2010. Longer term.02) 0.III B – Near-Term Outlook U. will result in residual fuel oil demand remaining relatively flat over the forecast period. reaching about 20 million tonnes (350.48) (1.3 2008 42 89 4 272 327 2 722 1. The long-term declines in utility demand and the small amount of industrial demand result in the transportation sector becoming the dominant demand sector for residual fuel oil.7 2009 42 88 4 270 329 2 720 (0.3) 2011 40 87 4 264 334 2 716 (0.S. Consumption in the transportation sector is expected to grow slowly this decade.

296 2.353.903 107.00 0.810 375.13 3.180.482 113.493 278.626 124.653 49.118 578.180.943 55.188 114.63 0.946 494.13 3.332 801.790 117.42 2020 20.629 755.418 51.41 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 2010 2011 2012 2015 2020 749.215 2.11 1.976 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.52 0.340 528.821 827.931 2.723 2.947 821.566 498.559 126.121 416.666 432.958 388.033 554.40 600 0.661 413.783 590.723 2.682 2.976 .577 277.060.498 2.505 387.343 2.303 2.048 573.91 0.258 2.682 2.46 599 0.956 558.09 0.903 133.308 49.895 567.44 2015 17.654 475.967 381.033.463 369.496 2.50 2009 15.126 131.103 114.14 0./Com.134.177 110.382 768.110.01 1.11 1.536 829.048 2.060.12 3.11 1.47 2011 16.487 415.56 0.32 600 0.746 493.952 629.054 2.561 404.60 0.660 282.663 517.01 0.343 2.832 109.910 292.976 128.698 762.073 2.992 384.158.364 633.696 441.244 481.330 278.11 1.50 2007 14.818 109.199 TABLE B-2-1 TOTAL EUROPE ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 14.13 3.976 584.301 505.665 51.461 128.353 780.171 442.296 2.801 108.730 2.709 549.991 50.38 600 0.585 481.56 2008 15.498 2.027 115.810 487.48 2010 15.010 392.13 3.054 2.937 110.274 785.24 600 -0.126 131.14 3.45 0.158.995 108.03 0.977 286.979 119.941 48.066 2.008 579.485 53.344 395.247./Other Other Transformation Non-Energy Power Generation Total Energy 2010 2011 2012 2015 2020 363.98 0.37 0.033.962 2.073 2.46 2012 16.900 392.274 110.698 408.532 122.845 398.49 0.589 2.134.40 598 0.343 2.524 119.17 0.503 374.92 0.14 3.110.226 124.965 52.657 138.885 420.880 379.254 538.935 276.303 2.247.01 1.086.74 597 0.761 146.11 1.40 0.34 0. .086.531 607.327 130.694 560.022 774.757 417.14 3.74 0.50 599 0.25 0.906 368.353.777 528.753 111.37 600 0.303 112.180 423.844 2.III B – Near-Term Outlook -.985 280.275 281.14 3.

162 1.7 50.0 791.5 72.9 389.198 2008 2.786 1.8 68.3 12.III B – Near-Term Outlook TABLE B-2-2 REFINED PRODUCT DEMAND EUROPE (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.0 795.0 2012 100.9 324.586 184 992 235 18.0 365.0 0.737 174 900 182 16.8 197.9 64.639 173 883 128 16.5 21. .1 2007 116.355 1.4 199.0 27.335 6.3 3.3 330.5% Total 119.392 6.7 337.714 1. countries of the former Yugoslavia.6 50.0 8.6 25.881 1.207 178 928 220 17.0 343.3 23.068 Note: Comprises EU 27 plus Albania.0 11.5% Total 2.861 175 913 201 16.496 1.425 1.0 824.0 0.8 24.0 9.200 -.420 7.4 47. Turkey .0 8.0 807.4 7.305 6.1 12.568 1.274 2010 2.447 7.651 7.274 6.0 20.8 187.5 26.1 22.9 12.6 31.8 67.7 0.8 52.5 211.7 51.642 1.101 177 933 221 17.9 864.4 203.2 60.6 23.0 0.527 7.486 525 454 4.0 8.3 28.0 8.378 2015 2.0 8.897 480 425 4.296 180 948 224 17.973 176 925 219 17.6 2020 80.7 12.7 0.7 22.3 195.3 10.5 317.364 6.5 26.4 0.4 0.957 401 375 4. Switzerland.9 23.6 50.2 25.0 802.0 814.1 820.627 171 864 55 16.7 24. Norway. Iceland.0 12.368 569 470 4.142 458 409 4.0 8.0 8.9 2008 113.238 2009 2.9 2010 106.4 25.344 2012 2.1 62.755 492 433 4.8 194.5 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.5 2011 103.476 2020 1.5 49.1 61.3 0.5 48.137 2007 2.5 2015 92.3 22.8 65.0 8.1 311.0 54.9 190.2 2009 109.022 469 416 4.3 192.310 2011 2.623 506 443 4.3 349.5 77.472 429 391 4.3 839.6 0.

539 2010 72./Com.148 2015 31.693 66.414 3.019 66.187 71.171 30.399 10.693 24.673 1.71 160 1.830 37.664 16.90 0.485 11.529 14.770 1.807 161.84 0.283 5.597 6.08 177 1.40 165 1.59 3.65 2015 434 4.977 148.795 152.35 0.530 185.064 34.796 185.344 15.99 0.590 135.65 2010 353 4.428 1.92 0.839 174.49 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 65.407 3.481 6.64 155 1.839 9.326 135.248 10.624 34.201 TABLE B-2-3 NORTH AFRICA ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 294 5.982 62.428 3.03 0.73 0.468 6.452 3.661 2011 28.485 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.073 60.43 0.62 2020 525 3.371 3.38 2. .909 17.007 174.87 0.45 0.192 32.III B – Near-Term Outlook -.699 144.77 0.027 2020 34.42 0.20 1.947 25.425 9.398 3.638 10.947 68.027 2020 83.421 3.451 161.087 41.50 2.085 30.99 0.839 14.788 34./Other Other Transformation Non-Energy Power Generation Total Energy 24.113 12.62 163 1.388 3.64 2007 309 4.40 0.788 156.953 26.234 32.64 2009 338 4.91 0.020 1.187 26.89 0.774 33.465 78.02 0.92 158 1.325 35.940 64.95 0.105 7.465 34.905 1.63 0.363 33.124 15.828 2012 28.37 2.33 167 1.94 0.658 139.485 .088 25.060 5.856 31.63 2011 368 4.76 188 1.501 3.998 68.266 1.636 1.52 3.46 0.44 0.898 16.947 35.31 2.735 148.544 28.55 0.951 37.139 35.198 139.379 5.661 2011 75.314 29.75 0.425 19.705 14.011 70.14 0.161 31.749 27.43 0.764 152.27 170 1.022 10.539 2010 27.165 72.619 156.140 1.506 33.656 89.148 2015 83.090 144.580 36.64 2008 323 4.45 0.63 2012 384 4.54 3.473 5.035 9.57 3.557 44.828 2012 77.536 40.465 6.598 1.

442 6 38 0 1.5 41.1 3.9 15.3 2.0 68.5 0.1 31.521 6 39 0 1.0 69.0 71.0 10.4 0.0 12.3 2.0 15.0 11.639 6 41 0 1.0 73.8 25.0 75.1 0.7 19.3 2.202 -.0 2.7 2015 8.3 2.4 18.5% Total 182 59 504 55 185 376 2007 184 60 528 54 185 388 2008 185 61 552 54 184 401 2009 187 62 576 54 183 415 2010 189 63 601 54 182 428 2011 191 64 626 53 181 440 2012 193 65 651 53 179 453 2015 199 68 725 52 175 489 2020 212 74 845 50 164 543 5 38 0 1.404 6 38 0 1.3 2.5% Total 7.1 0.9 28.0 66.9 0.6 0.9 2.1 0.2 35.0 12.0 13.3 2.0 2009 8.8 24.0 88.3 2.4 0.938 Note: Comprises Algeria.6 0.9 27.5 3.0 2020 9.1 14.8 16.1 3.561 6 39 0 1.481 6 38 0 1.0 12. Libya.600 6 40 0 1.2 0.1 0. Egypt.5 0.7 3.0 0.0 80.8 0.3 2.0 64.2 3.0 30.2 0.1 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.III B – Near-Term Outlook TABLE B-2-4 REFINED PRODUCT DEMAND NORTH AFRICA (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.0 12. Morocco.8 2.3 3.3 2.5 2008 7.9 2.0 29.0 0.4 0.1 0.1 0.0 15.8 0.7 16. .2 14.2 0.9 2011 8. Tunisia .0 13.4 2010 8.8 0.3 2012 8.0 13.3 0.1 0.1 2007 7.8 0.2 0.756 6 43 0 1.

601 850.142.239 24.660 225.73 1.160 570.247 632.70 0.60 4.342 10.708 2.318 106.894 343.727 3.868.345 0.868 1./Other Other Transformation Non-Energy Power Generation Total Energy 520.130 230.227.996 1.811 1.374 497.237 194.80 1.306 446.404.069 472.005 215.872.641 227.73 2015 4.74 2009 3.360.699 1.080.53 0.619 427.781 641.404.00 1.786 43.190 67.271.395 0.928 3.836 228.545 26.65 2.478.604 1.237 230.144 566.782 217.134 2.055 2.320 0.998 229.15 0.566 192.150 210.382 223.868.641 1.18 0.056 136.65 0.223 1.872.569 230.76 1.203 TABLE B-2-5 CHINA ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 2.900 416.286 81.389 2.706 45.156 175.602 117.317 1.64 7.867 2.361 603.280 2020 793.75 1.56 2.961 2.838 2010 710.85 0.142.081 127.75 2010 3.160 389.258 2./Com.445.670 484.271.306 .30 1.716 138.280 2020 1.108.704 17.64 6.78 0.00 1.912 115.008.04 0.948 21.843 148.269.60 0.199 122.III B – Near-Term Outlook -.75 2008 2.64 2020 6.51 0.650 83.753 159.172.345 41.900 615.63 6.992 131.69 0.102 60.996.638 2.491 289.54 4.752 54.96 0.838 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.63 5.946 444.927 242. .694 2015 958.752 19.321 527.00 1.121 50.223 114.328 0.642 75.778 7.477 2009 2010 476.75 1.56 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 361.807 9.375 3.887 65.50 1.00 1.954 2.471 259.576 10.892 7.477 662.048 37.64 8.23 0.78 1.903 129.275 8.42 0.008.029 486.240 53.79 2007 2.108.532.032 8.259 459.434 0.337 0.694 2015 624.591 3.255 562.354 0.218 1.

118 5 189 0 8.328 253 2.8 161.8 15.2 105.5 2020 132.104 256 489 4.3 12.0 356.5 15.096 5 169 0 7.9 24.5 2010 73.8 0.2 8.858 281 433 3.8 0.548 6 246 0 12.7 2009 68.3 13.8 242.8 0.0 409.400 2007 1.0 0.1 2015 101.599 284 2.5 0.1 0.9 0.336 7 280 0 15.8 24.7 0.2 9.867 2015 2.727 301 3.804 5 199 0 9.4 0.6 23.5% Total 1.2 14.2 18.0 572.462 2011 1.220 270 453 3.3 22.468 268 2.1 0.990 5 219 0 10.418 267 461 3.III B – Near-Term Outlook TABLE B-2-6 REFINED PRODUCT DEMAND CHINA (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.525 290 416 2.799 2009 1.8 11.0 731.8 12.7 0.155 2010 1.8 167.0 439.214 239 2.0 2012 84.449 5 159 0 7.9 22.0 0.3 10.4 13.851 318 3.0 332.634 5 179 0 8.3 15.098 525 5.3 0.594 236 544 5.035 273 446 3.4 15.8 116.2 116.448 5 209 0 9.9 123.2 10.0 2008 62.6 0.0 157.7 138.1 2007 56.204 -.4 0.0 464.733 .6 25.0 26. .664 2012 1.5 24.5% Total 51.0 2011 79.3 16.474 2020 3.4 0.7 200.4 152.9 14.690 285 425 2.6 131.3 122.7 12.378 297 406 2.2 15.3 170.6 14.8 14.5 14.0 489.7 273.9 29.4 23.8 197.648 2008 1.4 139.9 11.0 378.1 0.5 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.365 397 4.974 337 3.3 0.6 15.1 148.2 9.3 11.

05 1.58 0.562 718.964 265.003 230.49 0.674 173.37 1.841 141.913 .932 249.79 1.479 268.769 41.37 0.028 190.602 2020 185.62 0.689 110.181 259.426 896.259 737.137 1.111 6.948 641.63 0.43 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 134.30 1.28 3.927 660.205 TABLE B-2-7 INDIA ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 813 8.098 33.426 28.48 2010 1.00 1.44 2020 1.08 0.727 50.971 42.74 0.421 2015 167.129 30./Com.109 1.528 31.421 2015 125.913 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.113 621.652 9.495 6.807 699.588 896.995 681.69 0.840 40.61 0.70 0.30 1.277 206.229 261.126 8.50 1.825 795.697 27.178 1.71 0.374 62.261 27.071 103.254 29.372 310.399 271.973 621.875 277.661 12.636 49.875 278.46 2008 929 6.718 29.165 1.078 44.249 681.57 0.673 227.53 1.130 28.45 2011 1.885 214.151 1.145 6.700 5.45 2012 1.375 11.312 2012 156.59 0.94 2.893 5.267 288.904 165.76 0.368 46.161 29.808 36.221 35.658 198.31 0.907 239.065 2010 112.496 293.52 2007 872 7.899 9.66 0.741 6.632 240.724 308.70 0.65 0.740 737.602 2020 137.60 0.898 31.065 2010 149.925 288.65 0.383 9.23 2.67 0.119 660.30 4.071 137.990 338.400 5.146 54.469 219.56 0./Other Other Transformation Non-Energy Power Generation Total Energy 100.57 0.53 0.26 2.194 242.45 2009 988 6.789 28.421 2011 153.318 233. .45 2015 1.380 27.970 795.123 1.177 5.395 5.130 43.384 282.533 38.631 29.689 146.70 0.230 1.290 0.250 699.25 3.34 0.09 2.94 0.241 40.906 240.133 8.706 30.994 47.032 66.841 106.752 641.573 259.400 8.947 31.421 2011 114.015 249.360 182.III B – Near-Term Outlook -.412 718.312 29.615 236.791 7.106 33.095 5.543 31.06 2.191 1.628 10.298 223.835 5.11 2.048 6.717 230.95 1.885 32.312 2012 117.140 9.431 363.

2 13.III B – Near-Term Outlook TABLE B-2-8 REFINED PRODUCT DEMAND INDIA (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.4 5.4 0.0 136.994 0 0 0 3.005 2008 238 295 932 92 188 1.7 0.0 0.7 51.0 0.9 0.2 14.1 0.1 14.0 139.0 0.0 55.0 0.1 10.0 127.7 13.0 0.0 5.9 57.5% Total 9.2 0.5% Total 216 288 908 98 194 956 2007 227 292 920 94 189 1.4 2008 10.0 173.727 0 0 0 2.0 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.5 45.0 124.7 45.2 11.660 0 0 0 2.8 53.0 67.0 0.0 0.787 0 0 0 2.2 47.7 41.206 -.383 0 0 0 3.0 0.0 2009 10.0 0.0 5.3 44.4 43.0 0.074 0 0 0 3.1 2007 9.0 0.927 0 0 0 2.1 10.0 0.7 51.6 5.1 10.5 2020 15.0 0.7 5.7 13.9 46.5 2011 11.270 2015 316 316 1.0 0.4 60.1 10.3 10.3 0.5 50.3 5.3 48.3 45.2 11.8 5.6 5.6 14.5 5.6 14.570 0 0 0 2.0 2010 11.0 0.0 47.052 95 208 1.1 10.747 .396 2020 365 321 1.149 0 0 0 3.179 94 219 1.1 12.5 0.0 0.0 0.148 2010 261 302 960 93 194 1.040 2009 250 299 946 93 191 1.0 0.2 13.0 156.0 143.183 2011 272 306 976 94 197 1.0 146.0 0.6 0.0 129.5 14.1 2015 13. .229 2012 283 309 993 94 200 1.5 2012 12.

464 10.316 58.910 654.54 3.55 2.939 65.924 10. .159 4.025 64.875 73.931 77.240 67.225 121.40 194 2.27 211 1.53 3.307 609.136 113.123 324.333 128.78 246 1.86 1.299 162.616 562.25 0.14 4.357 50.52 3.18 5.404 10.83 0.64 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 295.61 198 2.89 0.02 0.593 133.39 0.837 132.721 3.063 4.55 3.698 2.053 273.11 0.49 3.209 4.269 585.031 48.191 2012 365.289 147.433 138.71 0.371 538.83 1.662 1.91 3.472 331.69 2020 1.435 1.815 62.249 1.558 2020 443.56 2.033 293.71 2015 1.621 585.717 2.835 242.926 2015 171.55 2.265 115./Other Other Transformation Non-Energy Power Generation Total Energy 106.087 42.127 130./Com.717 263.963 123.004 136.46 0.734 2.845 11.05 4.123 136.746 1.06 0.016 5.536 673.472 130.625 10.539 2010 344.050 1.191 2012 151.06 227 1.595 1.207 TABLE B-2-9 MIDDLE EAST ENERGY AND ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 2007 2008 2009 2010 2011 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 964 5.617 2.341 632.382 252.108 117.230 562.106 110.260 4.729 283.81 0.149 57.01 0.613 53.657 84.126 161.003 120.035 229.557 2.859 111.494 736.539 2010 138.396 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.188 736.106 53.692 127.III B – Near-Term Outlook -.937 104.152 2011 355.655 9.220 113.558 2020 205.41 0.92 1.733 2.493 10.91 1.676 2.332 145.251 632.81 2.01 3.22 215 1.879 55.49 0.834 100.866 10.396 .617 60.90 1.608 836.256 1.14 0.009 55.374 654.225 318.152 2011 145.760 2.547 376.705 45.09 4.11 0.051 836.796 1.875 141.302 124.32 207 2.926 2015 396.925 11.95 0.218 149.85 190 2.95 3.406 673.82 2012 1.220 305.53 203 2.13 0.422 4.61 2.40 0.55 3.050 129.034 107.563 609.111 4.888 1.343 120.649 2.177 538.

8 19.104 2011 1.5 45.6 0.4 15.368 434 1.2 22.6 44.0 297.0 260.6 2.410 7 271 0 5.0 41.7 2.5 45.0 96.606 46 1.731 47 814 1.3 2015 70.7 20.4 0. Iran.4 15.4 16.316 428 1.0 289.0 2007 54.211 416 1.490 7 274 0 5.5% Total 51.3 43.0 318.4 2020 78.1 2009 58.208 -.4 78.0 0.4 15.8 20.280 8 288 0 6.8 50.8 0.7 81.166 2015 1.9 21.0 0.3 0.5 48. Jordan. Qatar.349 Note: Comprises Bahrain.3 47.4 15.048 2009 1. Syria.III B – Near-Term Outlook TABLE B-2-10 REFINED PRODUCT DEMAND MIDDLE EAST (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.6 2. and Yemen .9 0.7 0.419 439 1. Oman.0 0.0 346. Iraq.9 2.6 60.382 46 886 1.280 2020 1.2 87.915 47 830 1.740 9 301 0 7.003 956 2007 1. Kuwait.2 0.1 0.5 0.975 47 837 1.6 2.6 45.5 90.8 0.668 47 809 1.0 84.516 7 273 0 5.144 47 855 1.5 55.129 2012 1.517 450 1.854 46 826 1.3 14.653 465 2.075 2010 1.5% Total 1.5 2011 62.4 15.8 0.6 45.1 19.7 93.7 0.5 20.263 422 1.4 15.0 2008 56.8 116.000 2008 1.5 0.6 0. Saudi Arabia.7 2.7 21.7 2.0 268.122 8 281 0 6.818 8 278 0 5.665 7 276 0 5.7 2.4 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.6 2.9 55. UAE.6 44.7 104.828 487 2.0 282.4 15.469 445 1.0 46.0 263.6 46.5 48.2 2010 60. Israel. Lebanon.6 2012 64.6 45.973 8 280 0 6.4 0.0 275.793 46 820 1.3 20. .

611 15.36 2012 875 5.71 0.630 154.010 159.014 104.049 92.00 131 (0.53) 2.378 2011 168.288 35.24 0.158 140.625 686.631 104.30 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 145.328 449.397 141.91 5.144 28.479 33.657 105.31 0.391 41.173 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.143 766.673 155.158 95.85 138 (0.290 8.473 812.218 399.99 0.463 8.621 105.53) 2.882 15.427 735.981 40.38 2008 693 6.548 812.695 198.803 103.60) 1.832 105.301 751.488 114.01 4.38 2009 736 6.801 379.669 193.39 142 (0.723 130.53 135 (0.523 719.269 2010 153.49 142 (0.28 141 (0.915 84.46 1.54) 2.689 191.13 0.794 766.94 5.584 881.98 5.095 359.438 16.630 144.733 409.874 30.571 14.967 102.265 2012 173.739 42.400 187.010 148.00 0.706 15.96 139 (0.364 150.269 2010 164.07 139 (0.938 2015 174.202 91.162 122.977 38.378 2011 157.564 48.627 8.694 103.784 146.933 751.71 0.39 1.463 180.241 100.57 0.85 0.296 88.42 0.843 27.032 5.660 29.III B – Near-Term Outlook -.995 135.605 105.54) 2.825 118.158 149.279 7.111 670.808 686.822 205.237 87.173 .210 31.494 157.88 5.53) 2.027 43.45 2007 652 6.592 189.36 2015 1.86 0.539 703.209 TABLE B-2-11 RUSSIA ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 613 6.555 389.450 126.565 189.09 4.627 5.304 719.34 2020 1.37 2011 827 5.820 15.17 140 (0.110 86.265 2012 161.106 8.37 2010 780 6.858 53.975 369.385 2020 201.59) 2.656 15.761 15.588 703.79 6.086 16.057 30.921 8.154 109.66 6.701 881.102 735.58) 2./Other Other Transformation Non-Energy Power Generation Total Energy 135./Com.635 670.934 153.599 138.16 0.133 185. .510 39.109 169.913 8.196 142.60) 1.417 29.49 0.118 419.605 104.28 0.94 1.535 499.284 89.938 2015 185.814 183.05 4.253 44.779 8.330 5.385 2020 194.09 0.

0 0.0 2007 29.0 0.0 200.0 26.3 2011 33.1 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.301 .4 12.7 57.6 0.9 0.128 2007 688 255 631 0 453 1.236 2010 765 278 722 0 480 1.0 148.3 0.0 184.8 0.0 0.8 38.6 41.0 0.9 0.0 27.0 158.5% Total 28.8 54.0 29.0 0.0 0.8 0.0 0.0 153.6 2008 30.0 30.6 0.1 35.1 0.3 56.6 2012 34.0 28.7 0.0 0.201 2009 739 271 692 0 471 1.4 32.7 67.5 36.210 -.0 0.0 26.0 0.0 0.7 46.0 0.9 0.0 143.2 2020 41.513 0 0 0 3.0 168.0 0.0 25.0 0.0 0.3 0.3 15.7 0.0 24.3 53.0 25.8 13.708 0 0 0 3.0 0.8 33.4 0.3 62.0 172.7 13.516 0 0 0 3.0 0.0 24.080 0 0 0 3.0 0.405 2020 965 332 947 0 542 1.4 0.6 14.271 2011 789 285 751 0 488 1.2 58.967 0 0 0 4.7 29.0 0.6 12.0 163.192 0 0 0 3.3 11.8 2015 37.9 0. .300 2012 813 292 779 0 496 1.8 13.4 0.3 50.III B – Near-Term Outlook TABLE B-2-12 REFINED PRODUCT DEMAND RUSSIA (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.302 0 0 0 3.327 2015 880 311 855 0 517 1.5% Total 661 247 601 0 443 1.8 51.2 2009 31.8 2010 32.613 0 0 0 3.165 2008 714 263 662 0 462 1.410 0 0 0 3.5 12.9 0.

189 102.III B – Near-Term Outlook -.749 2.902 698.17 8.019.478.01 0.241 312.213 2.507 216.34 2010 14.89 0.269 2.476 567.529.424.02 0.935 539.30 299 0.693 106.394 655.974 2.868 531.30 307 0.25 PRIMARY ENERGY SUPPLY (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Petroleum Natural Gas Solid Fuels Nuclear Hydropower Other Total Energy 946.106 24.062 90.882 89.43 314 0.060 674.455 103.047 166.27 2020 19.424.049.500 95.743 662.17 8.17 0.977 2.208 637.650 611.19 8.354 2015 337.02 0.825 309.307 662.870 171.68 0.766 24.235 115.791 110.665 2.27 0.451.109 574.322 108.426 977.06 0.942 86.747 165.438 3.403 2.82 1.408 691.590 3.79 0.869 217.16 8.651 24.510 232.128 105.50 302 0.615 693.676 580.24 2008 13.901 24.353 642.09 0./Com.354 2015 1.025 3.503.81 1.60 0.838 2020 1.223 CONSUMPTION BY SECTOR (Thousand Tonnes Oil Equivalent) 2006 2007 2008 2009 Industry Transport Res.785 217.455 546.77 1.219 524.375 2.838 2020 352./Other Other Transformation Non-Energy Power Generation Total Energy 307.964 719.494 2010 319.651 2.843 563.400.825 960.494 2010 985.889 220.19 8.933 645.18 8. .385.625 549.871 23.738 546.50 309 0.359 168.040 3.33 321 0.471 556.211 TABLE B-2-13 UNITED STATES ENERGY AND ECONOMY ECONOMIC/ENERGY INDICATORS 2006 GDP Billion 2004$ GDP Growth Population (Million) Population Growth % Energy Growth % TOE/k$ GDP TOE per Capita Energy %/ GDP % 12.329 565.844 2.895 517.29 2012 15.611 2.562 2.225 92.937 609.732 2.724 165.455 219.052 583.909 100.694 169.526 3.34 2009 13.503.10 0.696 511.83 0.545 2012 999.984 100.814 2.426 316.241 969.856 670.83 1.517 667.543 23.22 0.385.212 167.670 592.12 0.31 2011 14.14 8.00 304 0.277 227.18 8.070 575.223 .344 94.206 562.400.221 554.263 677.852 223.39 2007 12.866 166.948 592.088 2.584 619.508 2.640 2.875 2.529.603.962 662.75 0.479 574.08 0.715.649 2.552 101.132 3.545 2012 326.133 655.524 586.715.03 0.761 87.47 312 0.603.18 8.451.852 648.565 3.76 1.430 222.439 3.867 164.84 1.815 745.12 0.478.147 107.04 0.861 684.328 23.03 0.307 2011 993.057 717.237 25.30 2015 16.15 332 0.294 24.307 2011 323.

0 978.800 4.8 213.0 21.0 20.2 18.655 339 376 4.172 292 389 4.339 1.785 1.957 1.1 18.784 2020 9.3 211.375 0 331 0 21.0 2010 409.6 80.9 18.9 2012 413.849 0 324 0 20.212 -.8 0.9 79.3 18.673 2011 9.0 960.6 20.605 2008 9.316 328 382 4.7 0.3 2009 407.3 0.5 20.6 20.2 255.3 0.768 0 336 0 21.703 4.776 4.9 (Thousand Barrels per Day) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.8 18.0 18.5 220.7 200.5% Total 9.430 1.7 0.6 20.8 227.0 2008 403.0 204.923 0 342 0 22.0 18.4 2011 411.751 4.8 198.515 1.359 0 353 0 23.9 2007 399.868 4.III B – Near-Term Outlook TABLE B-2-14 REFINED PRODUCT DEMAND UNITED STATES OF AMERICA (Million tonnes) 2006 Gasoline Jet/kerosene Gasoil/Diesel Low sufur Fuel Oil High sulfur Fuel Oil Other Products International Bunkers Gasoil/Diesel Heavy Fuel Oil of which sulfur < 1.8 0.667 1.8 0.7 88.3 0.732 4.6 201.8 0.0 196.559 0 334 0 21.031 .871 338 370 4.3 207.201 0 329 0 21.3 191.582 339 378 4.0 926.641 2010 9.0 18.957 5.0 985.635 2009 9.0 942.625 1.735 2012 9.9 195.751 2015 9.0 18.0 1038.1 0.372 338 384 4.0 18.2 0.8 2015 418.6 20.5 80.8 82.0 2020 426.0 19.999 0 327 0 21.5 21. .508 339 380 4.0 17.0 952.6 0.215 328 371 4.252 1.0 0.677 4.8 83.6 0.0 17.2 18.1 81.0 238.1 16.632 0 325 0 20.6 84.4 0.6 217.437 339 382 4.0 92.2 18.6 18.7 224.0 17.9 0.578 1.1 0.9 197.5% Total 395.0 0.0 20.0 1006.716 4.3 204.0 968.525 2007 9.

access to crude oil supply. efficiency gains due to operating changes or catalyst improvement. REFINERY INVESTMENTS All regions are expected to see increases in capacity. Purvin & Gertz monitors refinery project announcements for each refinery in the world and adds them to existing capacity based on projected completion dates to develop future capacities. Therefore. Project completion dates have been modified in some cases to more realistically reflect timing of likely capacity additions. for projected refinery capacity over the next several years.213 B-3 DEMAND. status of project development. There will undoubtedly be . The remaining announced projects were considered to be “speculative” and are listed in Table B-3-8. regional refinery supply and refined product trade. This capacity expansion is referred to as "capacity creep". Increases in refinery capacity are also expected to result in changes to the patterns of trade flow volumes between regions. the 186 crude distillation project announcements have been screened using a series of criteria to help identify which projects are likely to be completed. This will require increased refinery capacity but within this timeframe only projects that are already under development can have an impact on supply. history of building similar projects. although refinery capacity additions are expected to be the greatest in those regions with the strongest growth projections. it has been found that the creep is generally around 0. some capacity additions are added that never appear on project lists. These speculative projects are presented for completeness but are not included explicitly in the analysis that follows in this section. and other key factors. that unrealistic completion dates often are listed. etc. By comparing announced projects to actual capacity additions over the years. status of project approval by owners or board of directors. These criteria included the financial strength of promoters. This "creep" can occur as the result of projects completed by in-house maintenance groups. but most would not start up until well after 2012.III B – Near-Term Outlook -.0% per year. In this section we shall look at the global demand / supply balance. Experience has shown that project announcements tend to be optimistic. REFINERY SUPPLY AND TRADE In section B-2 we presented our product demand outlook for the key regions in detail. we add this creep to announced projects in our analysis of refinery economics. It is foreseen that some of the speculative projects may eventually be built. and many planned projects are delayed or abandoned. through capacity creep as well as new projects in some areas. This section covers the analysis of the period up to 2012. Over this period global refined product demand is forecast to grow by around 500 million tonnes per year (10 million B/D). Inevitably. As a result of this experience. with the current 186 major crude distillation project announcements compared with just 22 approximately one year ago. Refinery project announcements have increased markedly over the past two years. local demand for refined products.5% to 1. political stability of the country. . approximately 80 have been classified as “likely to be completed” and these are included in our analysis of required refinery capacity and the announced project tables for each region (Table B-3-1 to Table B-3-7). Of the 186 crude distillation project announcements. The first step in the analysis of future supply is therefore an analysis of refinery investments and the capacity that will be available to meet the market needs.

downstream conversion units and associated support facilities will also be required to meet the future product demand slate as well as changing product specifications. The utilization rates in the calibration case for each region were adjusted to reflect this "lost" capacity. the demand outlook for China would imply one or more of the “speculative” China refinery projects will need to move forward. demand for residual fuel oil is declining relative to demand for lighter products. Europe The following table shows the expected European crude slate through to 2012. For example. In addition to crude distillation capacity. In effect. . REFINERY MODELING The primary purpose of the regional refinery modeling is to determine the capacity necessary to meet each region's product demand and product specifications based on the projected crude slate available. but it is unclear at this time which projects will obtain final approval. as well as to reflect the effects of seasonality on annual average operating rates.III B – Near-Term Outlook other project announcements over the forecast period as refineries respond to demand requirements. This changing product slate combined with the changing crude slate will prompt investment in conversion capacity over the long term in addition to the projects already announced in the next few years. Most of this effect stems from the full interchange of intermediates inherent in an aggregated model. an aggregated model can route all produced vacuum gas oil to the available cracking capacity.214 -. Aggregated models such as these tend to predict a more efficient level of operation than a consolidation of individual models would otherwise yield. SUPPLY AND DEMAND BALANCES In the following sections the future supply and demand balances and refinery capacity changes for each of the study regions is discussed. but cannot recognize that vacuum gas oil produced in one location cannot economically be routed to all other locations in the region. EUROPE CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 6403 6851 772 711 2006 6328 6431 861 638 2007 6457 6355 837 562 2008 6374 6531 829 516 2009 6379 6574 817 506 2010 6513 6556 806 475 14350 2011 6604 6628 803 424 14460 2012 6660 6606 797 408 14471 14738 14259 14210 14250 14276 . Possibly two new refineries in addition to the announced “likely” ones will need to be built in China before 2012. Announced distillation projects and creep capacity growth appear to be sufficient through 2012 for most regions. When considering the world as a whole.

Future demand projections show relatively modest overall refined product demand growth. residue hydrocracking and solvent deasphalting. In the period to 2012 announced capacity additions for distillation. more efficient refining sites. A significant increase in hydrogen production capacity will be necessary to meet the requirements for additional hydroprocessing operations. The composition of the crude slate changes somewhat as the local production of high TAN crudes reduces. which is used extensively as refinery feedstock. . which results in the concentration of capacity into larger. The progressive upgrading of Russian refineries results in reducing availability of straight run fuel oil. Although overall crude runs in Europe are not expected to increase substantially. Such changes are consistent with the long-term rationalization of the refining industry. with the result that the region is increasingly reliant on trade flows to balance demand with supply. following many additions in the early part of this decade and the move of several countries to 10 ppm fuels ahead of the mandatory date of 2009. Many desulfurization/hydrotreating projects have been added in the past two years to meet upcoming 10 ppm gasoline and diesel quality specifications. but a continuing trend of increases in demand for middle distillates. but substantial additions of capacity for hydrocracking have been announced. but at the same time capacity may reduce in other locations where the economics may become unfavorable. This is substituted only to a small extent by crude oil. The gasoline category includes reforming alkylation and isomerisation and the hydrocracking category includes both full conversion and partial conversion units. reflecting the slow growth in European demand and the growing gasoline surplus in the region.215 The overall increase in crude runs forecast between 2006 and 2012 is a modest 212 thousand B/D. the European refining industry has become increasingly out of balance with domestic demand. The main new distillation projects are in Spain and Poland. gasoline production and residue conversion are adequate to meet the projected needs for the industry. with declining North Sea production largely resulting in reducing exports and increase imports from North Africa and the CIS. The analysis of the refinery balances shows a need for . Figure B-3-1 shows a summary of the refinery capacity additions that are given in Table B3-1. As discussed in Section A-5.III B – Near-Term Outlook -. such as jet/kerosene and diesel. and a decline in gasoline consumption. there is sufficient desulfurization capacity in place. Increasing supplies of Caspian crude entering the Mediterranean results in an overall increase in the light sweet runs as this crude is available locally and therefore at an attractive price. FCC capacity is reduced by the announced closure of unit in Germany. which are both growing markets. However. In the North of Europe the decline in North Sea production results in a slate that becomes heavier as local crude is substituted mainly by Russian crude from the Baltic. some countries with higher than average demand growth are likely to add distillation capacity along with conversion projects. with the sources of imported crude oil highlighted. such that all vacuum residue upgrading units are shown as a single category that includes coking. In the time frame to 2012 there is little change in the composition of the crude sources. Table B3-9 shows the crude supply outlook for Europe. The figure aggregates capacity into limited categories.

which balance supply with demand. FIGURE B-3-1 EUROPE CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 400 350 300 250 200 150 100 50 0 -50 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases The reduction in FCC capacity will serve to reduce European gasoline production to a limited extent. It is just feasible that an additional project could be realized within the 2012 timeframe.III B – Near-Term Outlook additional capacity for hydrocracking of 35.216 -. alkylation and isomerisation capacity for product quality reasons. especially in . This represents one additional unit. The supply and demand analysis results are presented in Tables B-3-10 and B-3-11. . but some refineries are also investing in additional reforming. FIGURE B-3-2 NET EUROPEAN GASOLINE TRADE. The tables show the refinery production by major product and imports and exports. In the future balances there is unutilized gasoline production capacity as the industry in those countries where demand has fallen and exporting is not logistically attractive. have to reduce production. resulting in the rationalization of some gasoline-making facilities.000 B/D (1. Supply adjustments also shown in the tables include transfers and backflows as well as the additional of biofuels shown as petroleum energy equivalents. beyond that already announced.8 million tonnes per year). The future trade for the main products is discussed below. 2005-2012 (Million Tonnes: -ve = Exports) 10 0 -10 -20 -30 -40 -50 2005 2006 2007 2008 2009 2010 2011 2012 Asia CIS Other Africa Latin Am erica Middle East North Am erica The decline in gasoline demand is likely to have a significant impact on several European refiners however.

Total exports rise by 10 million tonnes per year (226. overtaking the CIS region in volume terms before 2010. such that we see further increases in gasoline export volumes. of about 34 million tonnes (700. especially to the United States. As shown in Figure B-3-4 combined gasoil/diesel imports are projected to rise further. net European jet/kerosene imports are projected to increase from 16. European markets are projected to become increasingly reliant on gasoil imports from this region. France and Germany are the largest markets and are importing to meet both seasonal heating requirements and increasing diesel demand. The increase in imports over this early period reflects the current high level of investment in hydrocracking additions that is underway. as are Italy and the United Kingdom.0 million tonnes (345. to 47 million tonnes (950. are both net exporters.III B – Near-Term Outlook -.000 B/D) to 48 million tonnes per year (1. with their large refining bases compared with the sizes of their domestic markets. 2005-2012 (Million Tonnes: +ve = Im ports) 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 Asia CIS Other Africa Latin Am erica Middle East North Am erica Europe is already a large net importer of diesel/gasoil.000 B/D) by 2012. but increasing volumes are also projected to be required from Asia.000 B/D). the continued increase in European demand for middle distillates is forecast to result in increasing volumes of net imports for both jet/kerosene and diesel/gasoil. Other refineries will continue to rely on exports to balance their production. Belgium and the Netherlands. the CIS region is expected to remain the single largest source. but also to Latin America and Africa (see Figure B-3-2 showing the main trade flows). however the surplus in all of these markets is diminishing as domestic consumption increases. the Middle East is expected to remain the principal source. As seen in Figure B-3-3.000 B/D) in 2006 to 22 million tonnes (466. Despite the projected increases in hydrocracking capacity. . .12 million B/D) by 2012. such that although additional sources such as the Middle East and Asia may be available.000 B/D) in 2012. FIGURE B-3-3 NET EUROPEAN JET / KEROSENE TRADE.217 inland markets with few export opportunities. Of these import sources.

If these fail to materialize. the CIS Region is the primary supplier of fuel oil to Europe. There is considerable trade of fuel oil in Europe. as there is a high dependence in Europe on gasoil imports from the CIS region. which would require additional conversion capacity. FIGURE B-3-5 NET EUROPEAN HEAVY FUEL OIL TRADE. Morocco has no indigenous crude and imports from the Middle East . finished product and as unfinished refinery feedstocks.218 -. Similar to gasoil trade flows. By 2012 the trade balance remains about the same with the reduction in refinery output resulting from the conversion projects that are added balancing the expected reduction in demand. both as cracked. (see Figure B-3-5).000 B/D). 2005-2012 (Million Tonnes: +ve = Im ports) 30 20 10 0 -10 -20 -30 -40 2005 2006 2007 2008 2009 2010 2011 2012 Asia Latin Am erica Middle East Africa North Am erica CIS Other North Africa Most of the countries in the region are crude oil producers and consequently process their own crude oil production.III B – Near-Term Outlook FIGURE B-3-4 NET EUROPEAN GASOIL / DIESEL TRADE. . however Libya is also a large supplier as it produces a good quality low sulfur residue for upgrading. Europe is on average a net exporter of about 7 million tonnes (133. the alternatives are likely to be either increased imports from other sources or long residue feedstock. 2005-2012 (Million Tonnes: +ve = Im ports) 50 40 30 20 10 0 -10 2005 2006 2007 2008 Asia CIS Other Africa Latin Am erica Middle East North Am erica 2009 2010 2011 2012 Indeed. our outlook for capacity requirements also depends on assumptions regarding the make-up of refinery feedstocks in the future.

III B – Near-Term Outlook -- 219

and Russia. Egypt also imports some crude. The following shows the future crude runs and slate for the region. The sources of crude are shown in Table B-3-12.
N. AFRICA CRUDE SLATE (Thousand B/D)
2005 Light Sweet Light Sour Heavy Sour High TAN Total 788 523 189 0 1500 2006 862 409 163 0 1433 2007 842 456 156 0 1454 2008 864 461 149 0 1474 2009 841 566 144 0 1551 2010 842 604 141 0 1587 2011 787 678 138 0 1602 2012 771 711 136 0 1618

Refinery capacity for the five North African countries is currently 87 million tonnes (1.7 million B/D) and represents about 53% of total African capacity. A feature of the refining configuration in this region is relative lack of upgrading capacity; only Egypt and Morocco have any conversion capacity and the regional FCC equivalent average is only 6% of crude distillation. This reflects the high volume of light sweet crude produced in these countries (with the exception of Egypt, which has the most conversion capacity, including delayed coking and hydrocracking) and the ability to sell the low sulfur residue into the Mediterranean market as feedstock or low sulfur fuel oil. Publicly announced projects expected to be onstream by the year 2012 are reflected in Table B-3-6, and include 8.5 million tonnes (180,000 B/D) of additional crude capacity in Algeria, Libya and Morocco and a 1 million tonne (20,000 B/D) hydrocracker in Morocco. Beyond this period, we anticipate that some additional coking, FCC and hydrocracking capacity will be required, as well as some middle distillate hydrotreating and associated hydrogen and sulfur plant capacity.

FIGURE B-3-6 N. AFRICA CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 200 150 100 50 0 Crude Gasoline FCC Hydrocracking Residue
Additional Capacity Required Planned Increases

.

220 -- III B – Near-Term Outlook

There are quite active trade flows between North Africa and Mediterranean Europe in all products (see Tables B-3-13 and B-3-14). North Africa is a net importer of gasoline, the principal trade being exports from Italy to Libya, which has averaged about 1.5 million tonnes (35,000 B/D) in recent years. We are not expecting imports to increase substantially, as increases in demand are expected to be met by increases in regional refinery production. Trade between Europe and North Africa is greater in middle distillates and heavy fuel oil, with North Africa being a significant supplier of jet/kerosene to European markets. Net exports from the region currently average about 2.5 million tonnes (55,000 B/D), with each of Algeria, Egypt and Libya active exporters. Net exports are forecast to increase over the forecast period as refinery capacity expansions and additions are projected to outpace regional demand. The region is, however, a net importer of gasoil/diesel. Demand in the larger regional countries is reasonably well balanced by local refinery supply, but owing to its lack of production capability Tunisia is the principal importer, mostly from Italy. Net imports currently average about 3.6 million tonnes (74,000 B/D); however, despite the additional refining capacity anticipated to come on line, the projection of strong regional demand growth is such that net imports are expected to increase significantly to reach about 5.0 million tonnes (103,000 B/D). The largest trade flows are in heavy fuel oil, the region currently being a net exporter of about 9.5 million tonnes (175,000 B/D). As previously discussed, fuel oil is mostly low sulphur and is a good quality feedstock for further upgrading, with Libya being a significant exporter to Italy. Algeria also exports its residue, to U.S. markets as well as Europe. Net exports are projected to increase modestly in the longer term, with relatively static regional fuel oil demand and increasing refinery runs to meet growth in light products. China The forecast crude slate and processing for China are shown below:

CHINA CRUDE SLATE (Thousand B/D)
2005 Light Sweet Light Sour Heavy Sour High TAN Total 3406 1152 720 460 5738 2006 3266 1192 777 706 5941 2007 3703 905 786 945 6340 2008 3962 871 793 1102 6727 2009 4322 939 799 1247 7308 2010 4920 692 805 1333 7751 2011 5221 841 811 1352 8226 2012 5533 989 817 1367 8705

Crude runs are expected to increase from just under 6 million B/D in 2006 to 8.7 million B/D by 2012. The composition of the slate changes with an increase in the light sweet crude from 55% currently to 64% by 2012. This change reflects the increasing supplies from Russia and Kazakhstan that will be delivered by pipeline. There is also a significant rise in the processing of high TAN crude as production from the Bohai bay area increases and further imports from West Africa are made. The outlook for crude supply by source is given in Table B-3-15.

.

III B – Near-Term Outlook -- 221

To meet the rapid increases in Chinese demand, significant investment in both distillation and conversion capacity will be required. The following summarizes the announced capacity and compares it to the required capacity for 2012, based on the modeling balances.
FIGURE B-3-7 CHINA CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Crude

Additional Capacity Required Planned Increases

Gasoline

FCC

Hydrocracking

Residue

The analysis indicates that in addition to the projects already announced by 2012, China will require the addition of about 470,000 B/D (23.5 million tonnes) of primary distillation capacity by 2012. Our expectation is that China’s inland and unsophisticated refining capacity will continue to operate at relatively low utilization levels because of its geographic isolation, limited refining capabilities and lack of effective product transportation infrastructure. Some of the smaller, less efficient refineries are candidates for shutdown, but strong growth in product demand may keep these plants running for many years. Conversion capacity in the form of residual FCC (RFCC) units has historically been the process configuration generally favored by the Chinese refining industry. With a product slate becoming more middle distillate-oriented, we project that additional hydrocracking capacity will be required, in addition to FCC and desulfurization capacity growth. Delayed coking capacity has increased greatly in the last few years and some new capacity has been announced. Additional residue conversion capacity above that already announced will be required to balance supply and demand through 2012. Around 225,000 B/D (12.6 million tonnes) of additional capacity is estimated. China’s gasoline has long been composed of FCC naphtha and straight run components, resulting in relatively high sulfur, olefins and lead content. However, leaded gasoline has been phased out since 2000/2001, with a simultaneous reduction of sulfur, benzene, aromatics and olefins. Gasoline demand growth is projected to be met primarily by additional FCC naphtha, alkylate, hydrocracked naphtha and other straight run components. The country is also expected to require the addition of significant capacity for vacuum gasoil desulfurization by 2012, not only because of further tightening of product specifications but also because increasing imports of higher sulfur Middle Eastern crude oils will require additional desulfurization capacity. Announced increases in FCC capacity are only 125,000 B/D. This is far below the required level of capacity to balance supply and demand. The balances indicate a need for a

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further 600,000 B/D of cracking capacity by 2012. It will be challenging to build this amount within this timeframe and this represents a risk to the forecast. Limited increases in other gasoline production units have been announced, comprising mainly reforming units. Substantial additions of hydrocracking capacity are already announced and some further capacity will be required. By 2012 and additional 730,000 B/D of hydrocracking capacity will be required, just over half of which is in announced projects. Despite a number of years of project development and the formation of a number of Chinese/foreign joint ventures, the only completed grassroots refinery projects are the Dalian West Pacific (WEPEC) refinery that was commissioned in late 1996 and the Sinopec refinery at Hainan Island, which was completed in 2006. Other foreign joint venture projects that have been under consideration include the projects at Qingdao, Fujian, Qinzhou (which replaces the Beihai project), and others. Some of the factors hindering progress have included uncertainty over future pricing mechanisms, product export requirements, lack of access to domestic marketing assets and rights, as well as uncertainty about the regulatory climate. After several years of negotiations with little progress on the foreign joint venture projects, the Chinese government entities have relegated most of the future expansion of the refining system to the state-owned companies. The Chinese refining industry has historically been nearly self-sufficient in products, but still relies on substantial trade flows and is expected to continue so to do (see Tables B-3-16 and B-3-17). Imports have risen in recent years, particularly for heavy fuel oil, which comprised about 65% of refined product imports in 2006. China exports gasoline and naphtha but imports other principal refined products: jet fuel, diesel, and residual fuel oil. Chinese refineries include a great deal of gasoline-oriented processing, such that gasoline production exceeds domestic requirements. Exports of gasoline reached an all time high of about 7.5 million tonnes (175,000 B/D) in 2003 but have declined to about by about 3 million tonnes (72,000 B/D) as local demand increased and the government effectively applied an export tax (it eliminated a VAT rebate) to ensure that domestic demand was met. Due to low domestic prices, which are controlled, refineries had a large incentive to export gasoline instead of selling domestically. Exports are expected to decline over the next few years as demand grows, but are projected to increase again in the longer term as additional refining capacity is built. China has typically been in balance in kerosene but is becoming a net importer of jet fuel, such that net imports of jet/kerosene have increased to almost 2 million tonnes (36,000 B/D). Although demand for jet/kerosene is forecast to increase we projected this to be met by increased refinery production, such that no substantial shifts in jet/kerosene trade patterns are expected. Although China had historically been a net importer of gasoil/diesel, the government banned imports in late 1998 as part of a massive effort to curtail smuggling and corruption. As part of entry into the World Trade Organization, import bans were dropped and gasoil/diesel imports have since rebounded. They are projected to average about 3 million tonnes (57,000 B/D) in 2007, but falling in the longer term as additional refining capacity is brought on line. By far the largest volume of trade of Chinese products is that for heavy fuel oil. Net imports have increased significantly over the past few years as a result of rapidly increasing

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III B – Near-Term Outlook -- 223

demand, almost doubling since the beginning of the current decade to 25 million tonnes (465,000 B/D). Although significant extra refining capacity is expected to come on line, the high proportion of conversion capacity projected to be added will result in little overall change in the level of net heavy fuel oil imports over the forecast period. India The refining industry in India is comprised of public companies or joint ventures of private and public companies, such that the government holds at least 51% ownership of the public companies or Public Sector Undertakings (PSUs). Three of the PSUs are integrated refining and marketing companies and three are refining companies. The following table shows the forecast of crude runs and slate for India. Historically the slate has comprised mixture of light sweet crude, which was produced locally and imported crude that has been sourced mainly from the Middle East and is light sour. As refinery capacity has expanded and local production has declined import from other sources have been required. The main supplier of imports has been the Middle East, but West African imports have also increased.

INDIA CRUDE SLATE (Thousand B/D)
2005 Light Sweet Light Sour Heavy Sour High TAN Total 1110 1278 153 17 2557 2006 1029 1648 130 13 2820 2007 1046 1663 151 36 2896 2008 1063 1631 171 59 2924 2009 1079 1757 192 82 3110 2010 1095 1887 212 105 3299 2011 1110 1951 233 128 3422 2012 1125 1926 253 151 3456

The refining industry has recently undergone significant expansion with the addition of the 33 million tonne (660,000-B/D) Reliance refinery, the 6.5 million tonne (130,000-B/D) Panipat refinery and the 10.5 million tonne (210,000-B/D) Vadinar refinery. There are a number of significant refinery projects under consideration to come onstream by 2012 (Table B-3-4), including mainly expansions of crude distillation capacity, FCC, isomerisation, hydrocracking, delayed coking, and reforming, and it appears that many are moving into advanced stages of planning and/or engineering. Several expansions of crude distillation capacity are planned through 2012, but the largest is a 27 million tonne (540,000 B/D) expansion at the Reliance Jamnagar refinery, for start-up in 2009. Beyond 2010, the Mangalore refinery is expected to expand by 5.3 million tonnes (106,000 B/D) and the Hindustan Petroleum refinery at Visakhapatnam has plans to expand by 9 million tonnes (180,000 B/D). As a result India is moving from being a product importer to being a substantial exporter and merchant refiner.

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224 -- III B – Near-Term Outlook

FIGURE B-3-8 INDIA CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 1200 1000 800 600 400 200 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases

We believe that India will continue to trend toward cleaner fuels over the coming years, and as a result new capacity for reforming, isomerisation, alkylation and hydrotreating has been announced for start-up prior to 2012. In anticipation of the crude slate for Indian refineries becoming more heavy and more sour in the future, several projects have been announced to increase vacuum distillation, visbreaking and delayed coking capacity. These announced projects are expected to be sufficient to meet the region’s vacuum bottoms upgrading requirements through to the forecast period. Historically, India’s refining industry has been able to supply all of India’s gasoline demand with little trade (Tables B-3-19 and B-3-20). However, the refinery expansions since 1999 have resulted in India becoming a consistent net exporter of about 2.5 million tonnes (60,000 B/D). The additional capacity expected to come on line will certainly result in this surplus growing, almost doubling by the middle of the next decade. However, it is also likely that some of the new capacity will reduce the economics of other refineries, thus resulting in less of in increase in gasoline production than would otherwise be expected. Trade flows of jet fuel and burning kerosene have followed two distinctly different patterns. India has generally been able to increase jet fuel production to match demand increases, resulting in minimal trade. In contrast, domestic kerosene consumption has consistently exceeded supply, relying on imports to complete the balance. Since the beginning of the current decade increases in refining capacity have helped reduce kerosene imports and have turned India into a net exporter of jet fuel. As a result, the country is now a net exporter of total jet/kerosene of about 3.0 million tonnes (66,000 B/D). These are expected to increase to 5 million tonnes by 2012 (110,000 B/D). India is now a large structural exporter of diesel, with estimated net exports of 9.3 million tonnes (190,000 B/D) in 2007. India’s exports are projected to rise even further with the start-up of additional refining capacity. Exports from the large west coast refineries are routed to Europe, South America and Asia, and this split trade flow pattern is expected to continue. As demand for heavy fuel oil has been relatively constant since 2000, net trade has been dependent on refinery production. With the increases in capacity since the start of the decade,

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III B – Near-Term Outlook -- 225

India moved from being a net importer to a net exporter in 2003, although at about 2 million tonnes (40,000 B/D) volumes are not large. Net exports are not expected to increase significantly, as although refinery capacity will increase the extra conversion capacity coming on line will ensure that the increases in fuel oil production will be modest in comparison. Middle East The Middle East refining industry consumes locally produced crude oil with limited exception. The slate reflects the patterns of local production and is summarized as follows. MIDDLE EAST CRUDE SLATE (Thousand B/D)
2005 Light Sweet Light Sour Heavy Sour High TAN Total 187 4297 1210 0 5693 2006 197 4365 1185 0 5747 2007 195 4542 1102 0 5839 2008 197 4601 1110 0 5908 2009 200 4719 1112 0 6032 2010 203 4816 1141 0 6160 2011 216 4846 1149 0 6212 2012 220 4977 1181 0 6378

The slate is predominantly light sour with only a small volume of light sweet crude being processed, mainly in Abu Dhabi. There is no high TAN crude in the region. In the period to 2012 crude runs are expected to increase by 630,000 B/D (21 million tonnes per year) to meet growing local demand and export market needs. By 2012, over 50 million tonnes (1.0 million B/D) of new distillation capacity is expected to start up in the Middle East. This does not include the potential 600,000 B/D refinery being considered in Kuwait, as KNPC only recently reported obtaining board approval to increase the capital budget in May 2007, after the cost of the project had escalated beyond expectations. Final governmental approval and project funding are still required for this project to move forward and press reports indicate the ageing Shuaiba refinery may be shut down if the Al Zour project goes ahead. The biggest project included in our balances by 2012 is the 425,000 B/D export refinery planned for Jubail in Saudi Arabia. In addition, several condensate splitter projects have been announced; Qatar is planning to bring on 140,000 B/D of condensate processing capacity at Ras Laffan in 2008, and Iran plans to start up three new trains of condensate splitting capacity, of which we have assumed the first train of 120,000 B/D would be online by 2010. Projected capacity is based on current industry capacity plus the announced projects that are expected to be added over the next several years (Table B-3-5).

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isomerisation and continuous reforming capacity increases have been announced. The forecast assumes that prices are increased to levels closer to the cost of production which should serve to slow demand growth The importance of the region regarding jet/kerosene supplies to European and Asian markets is evident through the large net export volumes from the Middle East. and rapidly rising consumption has resulted in imports increasing. we have classified them as speculative for purposes of this study.% sulfur content material. and as new capacity cannot be added fast enough to keep up with the rapid demand growth imports are set to increase further (see Tables B-3-21 and B-3-22). net imports are about 15 million tonnes (330. but are generally in the 0. The rapid demand growth is a result of government pricing policy. Current levels vary from country to country.2 wt.05 wt. In addition. These currently . Further gasoline production capacity beyond that currently announced will be required in the period to 2012. As demand of unleaded gasoline in the region is increasing as more countries encourage its use.5-1. The increment is expected to be naphtha reforming capacity. along with increases in distillate demand. Even with these capacity additions.5 million tonnes (about 170. some exports are projected to be 0.III B – Near-Term Outlook FIGURE B-3-9 MIDDLE EAST CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 1200 1000 800 600 400 200 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases Other grassroots refinery projects are being considered in the Middle East. will result in hydrodesulphurization and hydrocracking capacity increases going forward. These reductions in diesel sulfur content. Although major changes are not expected before 2009. it has been assumed that most of the region’s diesel demand by 2015 will be for 0.000 B/D). at about 7. In addition. Although it would seem likely that some of these will eventually be built. .% sulfur or less to satisfy import market specifications. Many of these projects are in a conceptual stage of development and start-up for the most advanced projects is not likely to occur until after 2012.0 wt. with Saudi Arabia. It has been assumed that the region will be essentially lead free by 2015. it is expected that beyond 2009 the Middle East region will begin to reduce the sulfur content of diesel.% sulfur content range. Iran is currently the largest importer.226 -. The Middle East has been a net importer of gasoline since 2000. Qatar and Kuwait already producing unleaded gasoline exclusively.000 B/D) and the shortfall is expected to persist even though new refining capacity is being added. in line with other regions. Currently. these plants are expected to be fully utilized and the region is expected to continue to be relatively tight on gasoline supply.

Rising local demand has also resulted in increasing import volumes of gasoil/diesel into the Middle East. There are 60 refineries in the CIS Region. split roughly 50/50 for jet fuel and burning kerosene.000 B/D) by 2012. which are primarily transfers to Fujairah for use in the bunker market. with Saudi Arabia (8. based on existing capacity plus project announcements. By comparison. With the announced and projected increases in refining capacity our outlook is for net exports to increase towards 18 million tonnes (400.000 B/D) are the major exporters. Gross exports are currently about 30 million tonnes (550.000 B/D) of imports. For completeness this section covers developments in the whole of the CIS. The refining industry in the CIS Region as a whole is relatively simple. Although conversion capacity is projected to increase.000 B/D).000 B/D).000 B/D) and Saudi Arabia (8. Crude runs in the CIS Region are expected to continue to recover over the next decade.2 million tonnes – 85.000 B/D) and Bahrain (4. and is approximately 60% in the U.3 million tonnes – 170. . with Jordan. even though the region remains a large net exporter.2 million B/D) by the beginning of 2007. . and the regional average is just 18% of crude distillation capacity. The overall operating rate for the CIS Region is about 70%. Nearly every country in the Middle East with a refinery has a surplus of heavy fuel oil. As would be expected considering the region’s current crude oil slate and refinery configuration. although there are a few refineries with relatively high levels of fuel oil upgrading. and Israel accounting for the remainder.227 average about 16 million tonnes (350. or 39 refineries.S. Lebanon.III B – Near-Term Outlook -. CIS Region The main trading partners with Europe and other regions in the CIS are Russia and Belorussia which until recently received subsidized crude from Russia.3 million tonnes – 150. such that by 2012 we are projecting crude distillation capacity utilization may reach 85%. There is very limited trade in refined products from Azerbaijan. with a large number of hydroskimming and topping refineries.000 B/D) also significant exporters. Russia’s operating rate has increased from below 50% in 1998 to over 80% in 2006. is located in Russia. with some additional volumes moving to Europe. Trade volumes are largely determined by product grade and quality. with Kuwait and Saudi Arabia exporting the largest volumes.000 B/D).1 million B/D) in 1995 to about 165 million tonnes (8. overall distillation capacity increases are expected to result in net exports increasing moderately in the longer term. Kazakhstan and the other southern countries. of which about 65%. and despite increasing domestic demand the additional refining capacity expected to come on line is expected to result in net exports increasing towards 2012. the Middle East produces a large surplus of high sulfur residual fuel oil. at about 10 million tonnes (200. Kuwait is currently the largest exporter. Overall capacity has been downsized from about 200 million tonnes (10.000 B/D). There are only seven refineries with FCC equivalents over 35% of crude distillation capacity. The Far East is the currently the key export market. Net exports are currently about 18 million tonnes (370. as most exports are made according to destination market conditions. such as sulfur levels. although these are balanced in part by about 14 million tonnes (260. the overall industry average in Western Europe is approximately 30%. although Iran (13 million tonnes – 235.

trade flows from the CIS region are influenced significantly by the current tax regime. there are several significant projects planned to come online by 2012. which is light sour. they are also likely to force some of the surplus capacity and the smaller refineries to close. Other significant projects include the eventual completion of the hydrocracking project in the Kirishi refinery and upgrading of the Norsi refinery. With crude exports taxed more . Comparison of the announced projects with required capacity indicates a need for some further gasoline upgrading investment. FCC. In addition to regional refinery supply and product demand. However.2 million B/D (58 million tonnes) over the period to 2012. coking. mainly in Russia (Table B-3-10). FIGURE B-3-10 CIS CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 300 250 200 150 100 50 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases The main new refinery capacity projects that will start in the timeframes of 2012 are the expansion of the Tuapse refinery and the new refinery at Nizhnekamsk.III B – Near-Term Outlook CIS CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 500 4989 2 0 5492 2006 500 5185 0 0 5685 2007 545 5364 0 0 5909 2008 592 5542 0 0 6134 2009 642 5717 0 0 6358 2010 693 5890 0 0 6583 2011 736 5986 0 0 6722 2012 781 6076 0 0 6857 The crude slate in the CIS region is predominantly light sour. Overall crude runs are forecast to increase by 1. but no other requirement. and will lead to some of the key refineries in the region becoming more sophisticated and competitive. These projects include hydrocracking. The Russian export pipeline systems commingle crudes of a wide range of quality to produce the resulting Russian Export Blend or “Urals” quality.228 -. visbreaking and isomerisation capacity additions. There is segregated sweet crude production in Azerbaijan and Kazakhstan and Russian crude processed to the East of the Urals is also light and sweet. . Despite the current low capacity utilization.

000 B/D). and net exports currently average 45 million tonnes (830. most of which is used as feedstocks in European refineries (see Tables B-3-23 and B-3-24). Exports are expected to remain at around this level as refinery capacity increases serve the growing local consumption. compared with gasoil exports trade is small. the additional refinery conversion capacity projects expected will increase gasoil yields and production. as discussed above. developments and refinery projects in PADDs I. United States of America In the United States market. Gasoline trade has been increasing since the start of the current decade. These reductions are partly replaced by increased imports from Africa as shown on Table B-3-25. the fuel oil surplus is expected to be maintained. Light sweet crude runs decline and domestic production declines and imports from the North Sea reduce.2 million B/D (60 million tonnes per year). UNITED STATES CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 5530 5127 4252 311 2006 5473 5041 4410 317 2007 5444 5151 4469 468 2008 5431 5165 4448 641 2009 5483 5167 4385 818 2010 5383 5188 4444 1000 16016 2011 5461 5141 4750 968 16320 2012 5478 5082 4939 936 16435 15220 15240 15532 15685 15853 Between 2006 and 2012 crude runs are expected to increase by 1. II and III are of the greatest relevance to European markets. Exports of gasoil/diesel currently average about 41 million tonnes (830. and by 2012 these are projected to average 47 million tonnes (560. .229 highly than product exports in Russia there is a large incentive for integrated oil companies to maximize crude processing and export the surplus products. Heavy fuel oil is a major product export from the CIS region.000 B/D).III B – Near-Term Outlook -. principally to the European market.000 B/D) in 2006. with increasing refinery throughput resulting in larger net export volumes. future refinery requirements were modeled on a PADD by PADD basis. mainly owing to relatively static domestic demand. Although regional demand is forecast to increase. . The most significant change in the composition of the crude slate is the increase in high TAN crude. such that exports will continue to increase. Owing to their geographic location. Owing to the general configuration of refineries in the CIS region this has resulted in large surpluses of gasoil/diesel and heavy fuel oil.000 B/D). Despite some expected rationalization of the refining industry in the CIS region and the addition of upgrading capacity. net exports are estimated to average 5 million tonnes (100. of which the majority is for the European market. However. reflecting increased imports from Brazil and West Africa. Europe will remain the key export market. The following table shows the future crude slate in the forecast period.

000 B/D) of distillation capacity and an additional 6. Several new projects have been announced.S.000 B/D) of distillation capacity being added. an additional 7. has out-paced increases in gasoline supply resulting in imports of over 30 million tonnes (700. with essentially zero additions to refinery capacity since 2002.000 B/D) of finished gasoline and a further 17 million tonnes (400. produces a major portion of its jet fuel requirements. Over the past ten years. The recent high margins. have encouraged an increase in project activity.000 B/D) of conversion capacity. With the growing surplus in Europe and increased Ethanol blending on both sides of the Atlantic.200 1. Canada and the Caribbean. such that by 2012 we envisage an additional 45 million tonnes (900.230 -. This additional conversion capacity requirement is expected to be principally delayed coking and hydrocracking.6 million tonnes (130. will be required. . The U. but there is substantial trade. the U. industry has invested only to meet quality needs and to process heavier crudes. will continue to rely on imports to meet gasoline demand (Tables B-3-26 and B-3-27). FIGURE B-3-11 U. Imports increased in 2005 as a result of the refinery supply disruptions caused by hurricanes in the Gulf Coast.S. delay and cancellation of some of the U. with the primary sources being Europe.III B – Near-Term Outlook Over the past few years. the availability of surplus gasoline from Europe has held prices down to a level that would not justify investment in gasoline production.000 B/D) of gasoline blendstocks.S. However. projects would not cause a major supply dislocation.1 million tonnes (142. To date. The following compares the announced capacity increases to 2012 with the required capacity in order to balance supply and demand. import volumes are expected to decline as new refinery capacity comes on line from around 2010. increasing gasoline demand in the United States has been met largely by higher levels of imports of both finished gasoline and unfinished gasoline blendstocks. with several additions in conversion capacity as well. As a result the U. particularly for gasoline production.000 800 600 400 200 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases Despite these projected increases in supply. as expressed in FCC equivalent capacity. However. however.S. our analysis suggests that in addition to those projects already announced and expected to be completed. but escalating construction costs and schedule delays are impact the pace and extent of the future investment programme. CAPACITY CHANGES TO 2012 (Thousand Barrels per Day) 1. and although these are expected to decline slightly over the .S. gasoline demand in the U.S.

although imports are expected to remain generally proportional to demand increases. PADD I is the major deficit market in the U. Presently. PADD III serves the southeastern portion of PADD I. with PADD V accounting for most of the rest.S. only 2.III B – Near-Term Outlook -.. but imports have been increasing in recent years. and even slight excesses of supply relative to regional demand can result in the need to export beyond the Western Hemisphere. We expect imports will vary with changing demand changes as this is the balancing source of supply with refiners generally viewing this fuel as a by-product. refinery production of gasoil/diesel relative to gasoline will continue to increase. This is a sensitive balance. Due to the somewhat more robust growth of diesel demand relative to gasoline. Generally. it is likely that the current pricing environment will be maintained for the foreseeable future. The Caribbean is the major source of heavy fuel oil into the U. Most of the gasoil/diesel consumed in the U. THE NEAR–TERM CAPACITY AND PRICE RELATIONSHIPS Since 2004. excess PADD III high sulfur material must be exported. This material is primarily imported from the Caribbean to the East Coast.2 million tonnes (40. but some low sulfur residual fuel oil is moved up from the Gulf Coast. hence the additional hydrocracking capacity projected. while small periodic surpluses of high sulfur residual fuel oil move down to PADD III. There is substantial trade of heavy fuel oil in the United States. Since the southern East Coast primarily uses low sulfur material.. PADD II is essentially in balance. Following the 3 million B/D increase in world demand in 2004. rather than prices returning to their previous range. light sweet crude oil prices have moved from an approximate range of $20$30/B to $50-$70/B – values previously regarded as unsustainable for any appreciable period of time. however. PADD V satisfies its imbalance from the production of residual fuel oil by exporting its surplus. . Such market reactions suggest a constraint of supply able to meet current demand.231 remainder of the current decade.S. most of these exports are into the Western Hemisphere (continental North and South America) blending market and to Caribbean markets such as electric utilities. is produced domestically. but Canada and Africa are also major supply sources. Furthermore. but significant volumes of low sulfur residual fuel oil are imported from Algeria and some from Europe. but at times have peaked to over $75/B. PADD III has two options: it can either move material to other PADDs or export it.000 B/D) of residual fuel oil is exported. the question that has been often been raised is . although volumes are small as refinery conversion of residual fuel oil in California has increased. Exports have also increased in recent years. such that it balances its market demand by either importing or transferring material from PADD III.S. whereas supplies from Europe and North Africa are largely moved to the Northeast market. Gulf Coast refiners use the export market to balance their operations. although this varies considerably according to the region. Key to the pricing debate has been the role of supply. Overall for PADD V. prices for Dated Brent have not only remained consistently over $50/B. About half of the imports come into PADD I. primarily to destinations in Latin America.

with the most recent peaks resulting from the removal of MTBE as a . it is indisputable that the reduced level of spare capacity has increased the industry’s sensitivity and exposure to potential disruptions compared with the late 1990s and the earlier part of the current decade. unscheduled refinery outages are less of a cause for concern and have a much lower potential for disruption when global refining capacity utilization is in the region of 85%90%. nor have refineries had to reduce throughput due to a lack of crude oil. some of the recent market reaction to upsets has been extreme in relation to the magnitude of the event. which are solved through active crude and product trade flows. The apparent constraints in the contracting industry. thus reducing the availability of suitable components for export. Although there is much debate concerning the potential roles of traders. in the current market environment. which is mostly. Gulf of Mexico. There have not been any queues at service stations. but in 2002 gasoline markets remained flat. As the United States is a net importer of gasoline and gasoline components it is both reliant on and sensitive to supplies from Western Europe and other export markets. waiting for fuel deliveries.III B – Near-Term Outlook at which part of the supply chain are the greater constraints: crude oil production or refining capacity? It is important to establish that the world is not “short” of crude oil or refined products. These tighter specifications had the effect of reducing European gasoline production. as tighter specifications were introduced in the EU. markets have peaked each year. With spare capacity of only 2. Venezuela or the U. Sharp upward movements are quickly unwound once the event is put into perspective. The situation was repeated in 2001 as U. than it has when utilization is averaging current levels in the order of over 90%. the most visible example of which is the increase in U. Motor Fuels: Demand and Specifications Market sensitivities are at their highest during and in the run-up to times of peak seasonal demand.. heavy crude that is ill-suited to the remaining spare refining capacity. as most regions have product demand and supply imbalances. When global spare crude oil capacity was in the order of 5-6 million B/D.S. hedge funds. gasoline demand ahead of the summer driving season. the industry could absorb disruptions to crude supply such as those seen in Nigeria. price volatility has also increased markedly.S. Likewise. etc. the loss of production in Kuwait in 1990. such a situation is not by itself a cause for market volatility. What has changed over the past three years is that the amount of spare capacity – crude productive capacity and refining capacity – has fallen. for example. which is of simple configuration with little or no capability to economically process heavier crude. but not exclusively. most of the spare crude oil productive capacity that does remain. . which have added substantially to costs. Gasoline prices spiked sharply in 2000. are also of concern to the market as in order to keep pace with the forecast growth in demand substantial new resources will need to be developed.232 -. as it was in the late 1990s. In addition. Although refinery capacity is operating at higher utilization than historically. or. specifications tightened. Iraq. What has compounded the situation since 2000 has been changing fuel specifications. Since then.S. In addition to the generally higher crude oil prices that are a current feature of the market.0 million B/D the ability to absorb disruptions is severely reduced. However.

such occasions have also resulted in rising crude oil prices – not what would be expected if the concern were over a shortage of products (which would lead to higher refinery margins) rather than a shortage of crude oil. rather than any actual shortages. such that few changes apart from the restoration of the capacity impacted by hurricanes and other operational problems. With full utilization of conversion capacity the only way to increase light product output is through the use of the underutilized simple refinery capacity. but within days they fell equally quickly as markets determined that despite the physical removal of crude oil production and refining capacity. on the other hand. would undoubtedly reduce the pressure on light crude oil prices and help to narrow the light-heavy crude oil price spread. The most visible example was in September 2005.S. demand was about to decline as the summer driving season was ending. in our opinion the reason for higher crude oil prices is a combination of the marker crudes used to represent international prices and the type of refining capacity that currently remains as spare capacity. At times of perceived shortage of light products. the availability of lighter crude oils needs to be maximized in order to limit . Crude Oil Markets The principal marker crudes. helped by higher trade flows from Western Europe as well as the fact that U. when Hurricanes Katrina and Rita resulted in the loss of about 1. Perversely. Heavier crude oils may not have as high naphtha content but can still make suitable feeds for conversion refineries.III B – Near-Term Outlook -. does not always run at full utilization. the latter at a time when regional utilization was already over 95%.233 blending component in U. However. are likely before 2009 at the earliest. as well as similar grades from the North Sea and Africa. are light. the market signal is to increase gasoline output – and hence gasoline prices increase to a level that will encourage the less economic capacity to increase gasoline production.S. owing to the configuration’s high yield of low-value products such as heavy fuel oil. as opposed to simple refining capacity. such as Brent and WTI. In each case. Simple distillation capacity.6 million B/D of refining capacity.5 million B/D of crude oil production and 1. . which in order to maximize light products must be fed by light crude oils – such as Brent and WTI. supplies would still be adequate. When processed in a conversion refinery. but as there is little extra attraction for heavier grades the net effect is to widen the spread between light and heavy crudes. Increases in conversion refining capacity. as discussed this is not an immediate solution and requires long-term investment. the type of refining capacity that is underutilized is typically of simple configuration. In the current market environment. These instances of peaking product prices have been in reaction to limited spare refining capacity. markets have been reacting to potential issues. such as gasoline in the United States. As a result. sweet and have a high naphtha content. prices for these crudes are bid up. As a result. Owing to their favorable economics. However. gasoline and its replacement by ethanol – which has itself raised some technical issues regarding the suitability and availability of components for gasoline blending. conversion refineries are usually running at full utilization excluding shutdown periods. as it may seem. they produce a high gasoline yield as a result not only of their naphtha content but also because of the yield and quality of their vacuum gasoil (VGO) fraction as feed for fluid catalytic crackers. Gasoline prices rose rapidly in response.

IMPACT OF ENVIRONMENTAL CONSTRAINTS ON REFINERY PROJECTS The growing awareness of environmental issues has resulted in both tighter legislation on refinery environmental impact and also greater public resistance to changes to an existing refinery. This can increase the cost of the project and extend the schedule somewhat. Despite the tight controls the industry in Europe and the U.234 -. That said. the capacity forecasts contained in this study are considered to be achievable. Ironically some objectors have moved to the locality of the refinery long after it was in operation. an average of just under five projects per year. There are two notable peaks in 1998 and 2001 in which 11 and 15 projects respectively were completed. New caps on CO2 emissions may also require efficiency improvements to be implemented. The Figure B-3-12 shows the historical addition of major upgrading investments in Europe since 1992.S.S. as there are many refinery sites that could be expanded at lower cost. and less so in the developing regions. This includes upgrading and expansion projects only and does not include all quality related investments. In general the legislative framework is more stringent in the developed regions such as Europe and the U.III B – Near-Term Outlook potential price squeezes. . An application for expansion will often trigger a requirement to improve the overall environmental performance of the site to the Best Available Technology standards. Despite tightening environmental regulations. has been able to continue to expand and upgrade. the difficulty is academic and the real focus of attention is the expansion and upgrading of existing refineries. FIGURE B-3-12 EUROPEAN MAJOR PROJECT ACTIVITY (Number of Projects) 20 18 16 14 12 10 8 6 4 2 0 Projects Trend 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Over the historical period from 1992 a total of 78 projects were completed. the rate . to qualify for international finance. In the developed regions it is considered extremely difficult to obtain permitting for a green field refinery project. new investments even in locations where environmental standards are relatively lax are often required to meet World Bank standards. and as the future pace of capacity additions is not far away from the historical rate. However. which can be considerably more stringent than the local needs. as increased volumes of light crudes would help to maximize utilization of current refining capacity.

In order to understand the current barriers to investment. and in the Middle East as a source of high value employment. the objective of achieving a global reduction in CO2 emissions may not be achieved in the sphere of oil refining if investment in European refineries is prevented or discouraged by the high cost of emissions. In all cases interviewed. the barriers to new project development are less. Although generally high standards of environmental performance are demanded for new facilities. Governments actively support and promote investment in refining and petrochemicals and a means of adding value to the crude oil and natural gas that is produced. but in others savings had to be found elsewhere to offset part or all of the increase. but the system did not prevent this from happening. This issue merits mature debate. This is in addition to Purvin & Gertz ongoing consulting experience assisting clients in project development. All recognized the need to be as good a neighbor as possible and the need to design in best technology. which increases emissions from shipping and also. These covered five major projects that have been implemented in the past three years and one in the permitting phase currently. In some cases an additional allowance was obtained from the host government. . The most time-consuming step appears to be dealing with the inevitable objections from local residents and subsequent appeals. . In one case the anticipated objections from local residents forced the choice of technology. Failure to invest in Europe would require higher volumes of imports. However. as the benefits of the cap and trade system are widely recognized. Purvin & Gertz consulted with the managers of several recent major refinery upgrading projects. the respondents noted that it has become more difficult and time consuming to gain the required permits.III B – Near-Term Outlook -. The net effect is that a costly emissions cap that prevents upgrading projects in Europe could lead to higher global emissions than would have been the case in the investment had been made in a local refinery. In all cases the most significant permitting issue cited was the CO2 emissions increase from the project.235 of project implementation has not slowed and the trend line on the graph indicates a modest increase in activity in the later years. the incremental product would be produced in a far less energy efficient refinery. In developing countries where refining is seen as an integral and necessary component of economic development. in many cases. these again are not seen as barrier to the developments put forward in this study.

Siirt Germany Spain Spain Turkey City Vohburg/lngolstadt Gdansk La Rabida Huelva Cartagena Murcia Batman. Unless Otherwise Noted) Project Type Crude Company Bayernoil Lotos Group CEPSA Repsol Tupras Crude Total Vacuum Bayernoil CEPSA Repsol Tupras Vacuum Total Coker-Delayed BP/Mobil Repsol Repsol Castellon de la Plana Cartagena Murcia Somorrostro Vizcaya Spain Spain Spain Vohburg/lngolstadt La Rabida Huelva Cartagena Murcia Batman.236 -. Siirt Country Germany Poland Spain Spain Turkey 2007 2008 (30) (30) (25) (25) Elefsis Greece Vohburg/lngolstadt Lavera Germany France (16) 2 (14) Lotos Group Agip Gdansk Sannazzaro.III B – Near-Term Outlook TABLE B-3-1 EUROPE: REFINERY PROJECTS (Thousand Barrels per Day. Pavia Poland Italy Litvinov Elefsis La Rabida Huelva Cartagena Murcia Czech Republic Greece Spain Spain Taranto Italy 10 10 Vohburg/lngolstadt Gdansk Rijeka Sannazzaro. . Pavia Taranto La Coruna Germany Poland Croatia Italy Italy Spain 38 26 35 99 19 40 59 15 15 6 6 30 18 48 2009 60 86 146 24 24 20 20 50 50 40 37 77 43 43 2010 2011 2012 110 110 90 90 60 60 50 50 (22) (22) (2) (2) - Coker-Delayed Total Coker-Fluid Petrola Hellas Coker-Fluid Total FCCU FCCU Total Solvent Extraction Bayernoil BP/Mobil Solvent Extraction Total Hydrocracker-Distillate Ceska Refinerska Petrola Hellas CEPSA Repsol Hydrocracker-Distillate Total Hydrocracker-Resid Agip Hydrocracker-Resid Total Hydrocracker-Other Bayernoil Lotos Group INA Agip Agip Repsol Hydrocracker-Other Total .

Siirt Turkey Vohburg/lngolstadt Karlsruhe Godorf Rijeka Lavera Taranto Castellon de la Plana Germany Germany Germany Croatia France Italy Spain 82 18 18 50 18 45 231 6 6 30 30 28 28 2009 50 28 78 10 10 2010 2011 2012 10 10 25 25 (1) (1) (1) (1) - Hydrotreater-Naphtha Total Hydrotreater-Kerosene BP/Mobil BP/Mobil Hydrotreater-Kerosene Total Hydrotreater-Diesel Shell & DEA Oil Lotos Group BP/Mobil BP/Mobil CEPSA Repsol Hydrotreater-Diesel Total Hydrotreater-Gasoline Ceska Refinerska Total SA JSC Mazeikiu Nafta INA CEPSA Tupras Tupras Hydrotreater-Gasoline Total Reformer-CCR Tupras Reformer-CCR Total Reformer-Semi Regen Tupras Reformer-Semi Regen Total Hydrogen-Steam Methane Bayernoil Mineraloel Oberrhein (Esso/OMW) Shell & DEA Oil INA BP/Mobil Agip BP/Mobil Hydrogen-Steam Methane Total (MMSCFD) .III B – Near-Term Outlook -. Unless Otherwise Noted) Project Type Hydrotreater-Naphtha Company Repsol Tupras City Cartagena Murcia Batman. .237 TABLE B-3-1 (CONT'D) EUROPE: REFINERY PROJECTS (Thousand Barrels per Day. Siirt Country Spain Turkey 2007 2008 Lavera Castellon de la Plana France Spain 29 29 Godorf Gdansk Lavera Castellon de la Plana La Rabida Huelva Cartagena Murcia Germany Poland France Spain Spain Spain 1 34 35 Kralupy Donges Mazeikiai Rijeka La Rabida Huelva Aliaga-Izmir Izmit Czech Republic France Lithuania Croatia Spain Turkey Turkey 6 16 32 4 10 10 78 Kirikkale Turkey 23 23 Batman.

Siirt Austria France Turkey 1 5 6 80 80 2009 3 3 2010 2011 2012 60 60 5 5 (2) (2) - Hydrogen-Recovery Total Alkylation-HF PKN Orlen Alkylation-HF Total Repsol Isomerization-C5/C6 Isomerization-C5/C6 Total Sulfur OMV BP PLC Statoil INA Agip Saras SPA Sulfur Total (LT/D) Asphalt OMV BP/Mobil Tupras Asphalt Total .245 Schwechat Lavera Batman.238 -. Unless Otherwise Noted) Project Type Hydrogen-Recovery Company Total SA City Gonfreville L'Orcher Country France 2007 2008 Plock Poland Cartagena Murcia Spain Schwechat Gelsenkirchen Mongstad Rijeka Taranto Sarroch Austria Germany Norway Croatia Italy Italy 60 140 55 270 720 1. .III B – Near-Term Outlook TABLE B-3-1 (CONT'D) EUROPE: REFINERY PROJECTS (Thousand Barrels per Day.

.III B – Near-Term Outlook -.239 TABLE B-3-2 NORTH AFRICA: REFINERY PROJECTS (Thousand Barrels per Day. Unless Otherwise Noted) Project Type Crude Company NAFTEC CNPC/Sonatrach NOC Samir Crude Total Vacuum Vacuum Total Hydrocracker-Other Hydrocracker-Other Total Hydrotreater-Naphtha Hydrotreater-Naphtha Total Hydrotreater-Diesel Hydrotreater-Diesel Total Reformer-CCR Reformer-CCR Total Hydrogen-Steam Methane Samir Mohammedia Morocco NOC NOC Azzawiya Tobruk Libya Libya NOC Samir Azzawiya Mohammedia Libya Morocco NOC NOC Azzawiya Tobruk Libya Libya Samir Mohammedia Morocco Samir Mohammedia Morocco City Skikda Adrar Azzawiya Mohammedia Country Algeria Algeria Libya Morocco 2007 2008 3 3 3 3 Azzawiya Libya Samir Sulfur Total (LT/D) Mohammedia Morocco 2009 2010 2011 2012 100 20 50 170 35 35 25 25 27 27 30 55 85 24 24 80 80 9 9 20 20 13 13 - Hydrogen-Steam Methane Total (MMSCFD) Isomerization-C5/C6 Isomerization-C5/C6 Total Sulfur NOC .

240 -. .III B – Near-Term Outlook TABLE B-3-3 CHINA: REFINERY PROJECTS (Thousand Barrels per Day. Sinopec Group Sinopec Tianjin Petrochemical CNPC Dushanzi Refining CNPC Jinxi Chemical Crude Total Vacuum Fujian Oil Refining CNOOC CNPC Dalian Petrochemical Sinopec Group Sinopec Tianjin Petrochemical Vacuum Total Coker-Delayed CNOOC CNPC Yangzi Petrochemical Coker-Delayed Total CNOOC CNPC FCCU Total Other CCU Guangzhou Petrochemical Sinopec Group Other CCU Total Fujian Oil Refining Guangzhou Guangdong Qingdao Shandong Quanzhou Fujian Huizhou Qinzhou Nanjing Huizhou Qinzhou Guandong Guangxi Jiangsu Guandong Guangxi Quanzhou Huizhou Qinzhou Dalian Qingdao Tianjin Fujian Guandong Guangxi Liaoning Shandong Tianjin City Beijing Quanzhou Huizhou Guangzhou Maoming Qinzhou Wuhan Liaoyang Qingdao Tianjin Karamay Jinxi Province Beijing Fujian Guandong Guangdong Guangdong Guangxi Hubei Liaoning Shandong Tianjin Xinjiang Zhejiang 2007 30 86 60 30 80 286 30 30 10 10 Quanzhou Lanzhou Huizhou Guangzhou Daqing Nanjing Dalian Dalian Tianjin Karamay Wulumuqui Fujian Gansu Guandong Guangdong Heilongjiang Jiangsu Liaoning Liaoning Tianjin Xinjiang Xinjiang 20 24 20 19 29 20 132 Qingdao Shandong 2008 240 90 110 440 120 100 220 84 84 24 24 72 71 41 184 2009 160 200 200 560 96 120 80 296 80 80 100 100 36 36 48 48 24 24 47 47 2010 200 200 100 100 60 60 2011 2012 - FCCU Solvent Extraction Solvent Extraction Total Hydrocracker-Distillate Fujian Oil Refining Lanzhou Refining CNOOC Guangzhou Petrochemical Daqing Petrochemical Yangzi Petrochemical Dalian Petrochemical West Pacific Petrochemical Sinopec Tianjin Petrochemical CNPC Dushanzi Refining Urumqi Hydrocracker-Distillate Total Hydrocracker-Resid Sinopec Group Hydrocracker-Resid Total . Unless Otherwise Noted) Project Type Crude Company Yanshan Petrochemical Fujian Oil Refining CNOOC Guangzhou Petrochemical Maoming Petrochemical CNPC Sinopec Wuhan Oil Refining CNPC Liaoyang Chemical Fiber Corp.

Fushun Petrochemical West Pacific Petrochemical Sinopec Sinopec Group CNPC Dushanzi Refining Hydrotreater-Diesel Total Dalian Petrochemical Sinopec Group City Huizhou Huizhou Guangzhou Qinzhou Qingdao Guandong Guandong Guangdong Guangxi Shandong 2007 20 20 15 15 10 22 40 50 25 25 24 80 50 326 Beijing Huizhou Guangzhou Qinzhou Dalian Qingdao Daqing Guangzhou Dalian Qingdao Karamay Huizhou Huizhou Guangzhou Nanjing Dalian Beijing Guandong Guangdong Guangxi Liaoning Shandong Heilongjiang Guangdong Liaoning Shandong Xinjiang Guandong Guandong Guangdong Jiangsu Liaoning 30 30 20 20 6 6 50 50 165 192 357 2008 24 30 54 24 24 68 60 128 60 60 30 44 74 170 68 238 2 2 110 725 835 2009 20 28 48 100 70 170 47 47 20 28 48 85 85 2010 2011 2012 - Hydrotreater-Kerosene Huizhou Guandong Guangzhou Guangdong Yumen Lanzhou Huizhou Guangzhou Qinzhou Jinling Nanjing Liaoyang Fushun Dalian Qilu Qingdao Karamay Dalian Qingdao Gansu Gansu Guandong Guangdong Guangxi Jiangsu Jiangsu Liaoning Liaoning Liaoning Shandong Shandong Xinjiang Liaoning Shandong Hydrotreater-Diesel Hydrotreater-Resid Hydrotreater-Resid Total Hydrotreater-Gasoline Yanshan Petrochemical Hydrotreater-Gasoline Total Reformer-CCR CNOOC Guangzhou Petrochemical CNPC Dalian Petrochemical Sinopec Group Reformer-CCR Total Reformer-Semi Regen Daqing Petrochemical Reformer-Semi Regen Total Hydrogen-Steam Methane Guangzhou Petrochemical Dalian Petrochemical Sinopec Group CNPC Dushanzi Refining Hydrogen-Steam Methane Total (MMSCFD) CNOOC Alkylation-SF Total CNOOC Guangzhou Petrochemical Yangzi Petrochemical Dalian Petrochemical Sulfur Total (LT/D) Alkylation-SF Sulfur . Unless Otherwise Noted) Project Type Hydrotreater-Naphtha Company CNOOC CNOOC Guangzhou Petrochemical CNPC Sinopec Group Hydrotreater-Naphtha Total CNOOC Guangzhou Petrochemical Hydrotreater-Kerosene Total CNPC Yumen Refinery Lanzhou Refining CNOOC Guangzhou Petrochemical CNPC Jinling Petrochemical Yangzi Petrochemical CNPC Liaoyang Chemical Fiber Corp.III B – Near-Term Outlook -. .241 TABLE B-3-3 (CONT'D) CHINA: REFINERY PROJECTS (Thousand Barrels per Day.

Mangalore Refining Crude Total Vacuum Reliance Petroleum Ltd Hindustan Petroleum CL Mangalore Refining Vacuum Total Coker-Delayed Reliance Petroleum Ltd Essar Oil Mangalore Refining Jamnagar Vadinar Mangalore Jamnagar Visakhapatnam Mangalore City Jamnagar Madras Vadinar Vadinar Mahul Bombay Visakhapatnam Haldia Panipat Cochin Mangalore 2007 30 26 56 Jamnagar Vadinar 60 60 Hindustan Petroleum CL Other CCU Total Visbreaker Essar Oil Visbreaker Total Hydrocracker-Distillate Reliance Petroleum Ltd Jamnagar Vadinar Visakhapatnam 38 38 Jamnagar Vadinar Visakhapatnam Mathura 28 20 10 58 Jamnagar Vadinar Vadinar Visakhapatnam 66 66 Jamnagar Vadinar 2008 60 60 2009 540 34 28 40 642 305 305 160 160 200 200 110 110 130 130 140 140 220 220 2010 2011 40 106 146 35 35 80 40 120 66 66 120 120 2012 - Coker-Delayed Total FCCU FCCU Total Other CCU Reliance Petroleum Ltd Essar Oil Hydrocracker-Distillate Total Hydrotreater-Naphtha Reliance Petroleum Ltd Essar Oil Hindustan Petroleum CL Indian Oil CL Hydrotreater-Naphtha Total Hydrotreater-Diesel Reliance Petroleum Ltd Essar Oil Essar Oil Hindustan Petroleum CL Hydrotreater-Diesel Total Hydrotreater-FCC Feed Reliance Petroleum Ltd Essar Oil Hydrotreater-FCC Feed Total .III B – Near-Term Outlook TABLE B-3-4 INDIA: REFINERY PROJECTS (Thousand Barrels per Day.242 -. Unless Otherwise Noted) Project Type Crude Company Reliance Petroleum Ltd Chennai Refinery Essar Oil Essar Oil Hindustan Petroleum CL Hindustan Petroleum CL Indian Oil CL Indian Oil CL Kochi Refineries Ltd. .

243 TABLE B-3-4 (CONT'D) INDIA: REFINERY PROJECTS (Thousand Barrels per Day. . Unless Otherwise Noted) Project Type Hydrotreater-Gasoline Company Reliance Petroleum Ltd Hindustan Petroleum CL Indian Oil CL City Jamnagar Visakhapatnam Koyali 2007 20 20 Jamnagar Vadinar Visakhapatnam 20 20 40 Vadinar Panipat Jamnagar Jamnagar 110 75 185 Jamnagar Vadinar Mathura 10 10 Jamnagar Vadinar Vadinar 440 440 Mangalore 2008 68 150 218 2009 90 90 85 85 150 150 85 85 42 42 2.025 2.025 2010 2011 16 16 235 235 5 5 2012 - Hydrotreater-Gasoline Total Reformer-CCR Reliance Petroleum Ltd Essar Oil Hindustan Petroleum CL Reformer-CCR Total Hydrogen-Steam Methane Essar Oil Indian Oil CL Reliance Industries Reliance Industries Hydrogen-Steam Methane Total (MMSCFD) Hydrogen-Steam Naphtha Reliance Petroleum Ltd Jamnagar Hydrogen-Steam Naphtha Total (MMSCFD) Alkylation-SF Reliance Petroleum Ltd Alkylation-SF Total Isomerization-C5/C6 Reliance Petroleum Ltd Essar Oil Indian Oil CL Jamnagar Isomerization-C5/C6 Total Sulfur Reliance Petroleum Ltd Essar Oil Essar Oil Sulfur Total (LT/D) Lubes Lubes Total Mangalore Refining .III B – Near-Term Outlook -.

Kuwait National Petroleum Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. Jordan Petroleum Refining Co.III B – Near-Term Outlook TABLE B-3-5 MIDDLE EAST: REFINERY PROJECTS (Thousand Barrels per Day. Oman Refinery Co. Unless Otherwise Noted) Project Type Crude Company National Iranian Oil Co. Saudi Aramco Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Ruwais Sitra Zarqa Rabigh Yanbu Jubail Abu Dhabi Bahrain Jordan Saudi Arabia Saudi Arabia Saudi Arabia National Iranian Oil Co.244 -. National Iranian Oil Co. National Iranian Oil Co. Saudi Aramco/TOTAL FCCU Total Other CCU Other CCU Total Hydrocracker-Distillate Abu Dhabi National Oil Co. Bahrain Petroleum Co. Laffan Refinery Co. Saudi Aramco Isfahan Rabigh Iran Saudi Arabia Abadan Soroush Jubail Iran Iran Saudi Arabia Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Yanbu Jubail Saudi Arabia Saudi Arabia Bandar Abbas Bandar Abbas Isfahan Soroush Mina Abdulla Yanbu Jubail Iran Iran Iran Iran Kuwait Saudi Arabia Saudi Arabia City Abadan Arak Bandar Abbas Bandar Abbas Isfahan Soroush Zarqa Mina Al Fahal Ras Laffan Yanbu Jubail Ras Issa Country Iran Iran Iran Iran Iran Iran Jordan Oman Qatar Saudi Arabia Saudi Arabia Yemen 2007 45 21 66 17 17 30 30 2008 140 140 80 80 11 120 131 2009 88 88 40 40 2010 2011 120 81 30 231 55 32 87 50 50 37 1 38 50 50 2012 30 425 455 200 200 80 80 80 80 60 60 Hydrocracker-Distillate Total . Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Hood Oil Crude Total Vacuum National Iranian Oil Co. . National Iranian Oil Co. Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Vacuum Total Coker-Delayed Coker-Delayed Total FCCU National Iranian Oil Co. National Iranian Oil Co. Jordan Petroleum Refining Co. National Iranian Oil Co.

National Iranian Oil Co. Hydrotreater-Gasoline Total . Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Hydrotreater-Kerosene Total Hydrotreater-Diesel Abu Dhabi National Oil Co. Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Hydrotreater-Diesel Total Kuwait National Petroleum Co. Hydrotreater-Resid Hydrotreater-Resid Total Hydrotreater Lube Polish National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. Unless Otherwise Noted) Project Type Hydrotreater-Naphtha Company Emirates National Oil National Iranian Oil Co. Saudi Aramco Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Hood Oil City Jebel Ali Arak Arak Bandar Abbas Bandar Abbas Bandar Abbas Isfahan Soroush Tehran Mina Al Fahal Ras Laffan Rabigh Yanbu Jubail Ras Issa Country Dubai Iran Iran Iran Iran Iran Iran Iran Iran Oman Qatar Saudi Arabia Saudi Arabia Saudi Arabia Yemen 2007 32 18 8 58 Arak Tehran Ras Laffan Yanbu Jubail Iran Iran Qatar Saudi Arabia Saudi Arabia 33 32 65 Ruwais Sitra Abadan Arak Isfahan Tabriz Tehran Mina Al Fahal Yanbu Jubail Abu Dhabi Bahrain Iran Iran Iran Iran Iran Oman Saudi Arabia Saudi Arabia 70 53 55 18 196 Mina Abdulla Kuwait 18 18 Tabriz Iran Isfahan Iran 2008 70 50 45 165 50 50 70 30 100 8 8 2009 30 15 62 107 2010 2011 12 12 42 96 138 120 120 10 10 2012 30 45 75 20 20 50 50 - Hydrotreater-Naphtha Total Hydrotreater-Kerosene National Iranian Oil Co. National Iranian Oil Co. Laffan Refinery Co.245 TABLE B-3-5 (CONT'D) MIDDLE EAST: REFINERY PROJECTS (Thousand Barrels per Day. National Iranian Oil Co. Laffan Refinery Co. National Iranian Oil Co.III B – Near-Term Outlook -. National Iranian Oil Co. National Iranian Oil Co. Oman Refinery Co. Bahrain Petroleum Co. Oman Refinery Co. National Iranian Oil Co. . Hydrotreater Lube Polish Total Hydrotreater-Gasoline National Iranian Oil Co. National Iranian Oil Co.

Isomerization-C5/C6 Total Sulfur Bahrain Petroleum Co. Jordan Petroleum Refining Co. Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Sulfur Total (LT/D) Lubes . National Iranian Oil Co. . National Iranian Oil Co. National Iranian Oil Co. Unless Otherwise Noted) Project Type Reformer-CCR Company Emirates National Oil National Iranian Oil Co. Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Sitra Abadan Isfahan Yanbu Jubail Bahrain Iran Iran Saudi Arabia Saudi Arabia 35 35 Abadan Arak Bandar Abbas Isfahan Tehran Mina Al Fahal Iran Iran Iran Iran Iran Oman 20 18 10 48 Sitra Abadan Isfahan Zarqa Mina Al Fahal Ras Laffan Yanbu Jubail Bahrain Iran Iran Jordan Oman Qatar Saudi Arabia Saudi Arabia 150 15 165 Bahrain Petroleum Co. National Iranian Oil Co. Oman Refinery Co. National Iranian Oil Co. National Iranian Oil Co. Saudi Aramco Saudi Aramco/ConocoPhillips Saudi Aramco/TOTAL Hood Oil City Jebel Ali Arak Arak Bandar Abbas Bandar Abbas Isfahan Soroush Rabigh Yanbu Jubail Ras Issa Country Dubai Iran Iran Iran Iran Iran Iran Saudi Arabia Saudi Arabia Saudi Arabia Yemen 2007 20 20 Bahrain Petroleum Co. National Iranian Oil Co.III B – Near-Term Outlook TABLE B-3-5 (CONT'D) MIDDLE EAST: REFINERY PROJECTS (Thousand Barrels per Day. National Iranian Oil Co. Lubes Total Asphalt Asphalt Total National Iranian Oil Co. Oman Refinery Co. National Iranian Oil Co. National Iranian Oil Co.246 -. Laffan Refinery Co. Tabriz Iran Sitra Tabriz Bahrain Iran 2008 36 45 81 100 100 340 570 910 8 4 11 6 6 2009 30 32 62 15 27 42 2010 2011 12 12 57 57 590 25 615 10 10 2012 30 45 75 200 200 10 10 800 800 - Reformer-CCR Total Hydrogen-Steam Methane Hydrogen-Steam Methane Total (MMSCFD) Isomerization-C5/C6 National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co. National Iranian Oil Co.

Hydrotreater-Diesel Total . Unless Otherwise Noted) Project Type Crude Crude Total Vacuum Vacuum Total Coker-Delayed Rosneft Tatneft Komsomolsk Nizhnekamsk Russia Russia Rosneft Surgutneftegaz Tuapse Kirishi Russia Russia Company Rosneft Tatneft City Tuapse Nizhnekamsk Country Russia Russia 2007 2008 Samara Nizhnekamsk Salavat Angarsk Odessa Russia Russia Russia Russia Ukraine 17 17 Rosneft Surgutneftegaz Visbreaker Total Hydrocracker-Distillate Rosneft Rosneft Surgutneftegaz Komsomolsk Tuapse Kirishi Russia Russia Russia Tuapse Kirishi Russia Russia Khabarovsk Kherson Russia Ukraine Tuapse Nizhnekamsk Russia Russia Tuapse Russia Khabarovsk Volgograd Salavat Kherson Russia Russia Russia Ukraine 30 20 50 26 17 42 2009 84 84 18 18 32 32 60 60 2010 20 20 30 30 2011 2012 90 140 230 41 41 13 40 53 40 40 14 14 25 27 52 11 20 31 9 9 10 10 24 24 Coker-Delayed Total FCCU Yukos Tatneft Salavat Yukos Lukoil FCCU Total Visbreaker Hydrocracker-Distillate Total Hydrocracker-Other Alliance Group Alliance Oil Co. Hydrocracker-Other Total Hydrotreater-Naphtha Rosneft Tatneft Hydrotreater-Naphtha Total Hydrotreater-Kerosene Rosneft Hydrotreater-Kerosene Total Hydrotreater-Diesel Alliance Group Lukoil Salavat Alliance Oil Co. .III B – Near-Term Outlook -.247 TABLE B-3-6 CIS REGION: REFINERY PROJECTS (Thousand Barrels per Day.

Lukoil Mozyr Komsomolsk Tuapse Volgograd Perm Orsk Kherson Odessa Belarus Russia Russia Russia Russia Russia Ukraine Ukraine 6 8 14 Isomerization-C5/C6 Total Sulfur Rosneft Surgutneftegaz Alliance Oil Co. Sulfur Total (LT/D) Asphalt Asphalt Total Rosneft Komsomolsk Russia Komsomolsk Kirishi Kherson Russia Russia Ukraine - .III B – Near-Term Outlook TABLE B-3-6 (CONT'D) CIS REGION: REFINERY PROJECTS (Thousand Barrels per Day.O. Unless Otherwise Noted) Project Type Company City Country 2007 2008 2009 2010 2011 2012 Reformer-CCR Rosneft Tatneft Lukoil Tuapse Nizhnekamsk Perm Russia Russia Russia 21 21 8 8 9 7 2 18 - 100 100 7 7 175 175 - 30 30 4 4 100 100 - 8 20 28 42 42 2 3 5 38 38 1 1 27 27 - Reformer-CCR Total Hydrogen-Steam Methane Slavneft Rosneft Surgutneftegaz Alliance Oil Co. Mozyr Tuapse Kirishi Kherson Belarus Russia Russia Ukraine 22 22 Hydrogen-Steam Methane Total (MMSCFD) Hydrogen-Steam Naphtha Alliance Group Khabarovsk Russia - Hydrogen-Steam Naphtha Total (MMSCFD) Alkylation-SF Baku Heydar Lukoil Alkylation-SF Total Alkylation-HF Slavneft Alkylation-HF Total Isomerization-C5 P. .248 -. Naftan Refinery Novopolotsk Belarus Mozyr Belarus Baku Perm Azerbaijan Russia 4 4 6 6 - Isomerization-C5 Total Isomerization-C5/C6 Slavneft Rosneft Rosneft Lukoil Lukoil Russneft Alliance Oil Co.

Chevron ConocoPhillips Crude Total Vacuum ConocoPhillips Coffeyville Resources LLC Frontier Oil & Refining Gary .III B – Near-Term Outlook -. Marathon ConocoPhillips ConocoPhillips Flint Hills Resources Motiva Enterprises LLC Petrobras/Astra Total SA CENEX Frontier Oil & Ref.249 TABLE B-3-7 UNITED STATES: REFINERY PROJECTS (Thousand Barrels per Day. Chevron Tesoro Petroleum ConocoPhillips Coker-Delayed Total Wood River Wood River Whiting Coffeyville Catlettsburg Detroit Rosemount Tulsa Tuscaloosa Garyville Borger Borger Corpus Christi Port Arthur Pasadena Port Arthur Laurel Cheyenne El Segundo Golden Eagle Ferndale IL IL IN KS KY MI MN OK AL LA TX TX TX TX TX TX MT WY CA CA WA II II II II II II II II III III III III III III III III IV IV V V V Wood River Coffeyville El Dorado Wynnewood Lake Charles Garyville Borger Borger Port Arthur Pasadena Port Arthur Port Arthur Billings El Segundo IL KS KS OK LA LA TX TX TX TX TX TX MT CA II II II II III III III III III III III III IV V City Wood River Wood River Coffeyville El Dorado Rosemount Toledo Wynnewood Tuscaloosa Shreveport Garyville Artesia Borger Port Arthur Pasadena Port Arthur El Paso Billings Woods Cross El Segundo Ferndale State IL IL KS KS MN OH OK AL LA LA NM TX TX TX TX TX MT UT CA WA PADD II II II II II II II III III III III III III III III III IV IV V V 2007 10 50 20 15 59 5 9 7 175 10 18 30 75 46 12 190 3 25 4 15 46 2008 11 15 15 5 46 21 21 15 50 65 2009 22 22 65 65 2010 15 180 325 520 90 160 20 270 7 30 15 44 5 80 50 231 2011 100 100 50 50 70 37 30 25 162 2012 28 28 14 14 20 20 . Calcasieu Refining Marathon ConocoPhillips ConocoPhillips Motiva Enterprises LLC Petrobras/Astra Total SA Valero Energy Corp. Unless Otherwise Noted) Project Type Crude Company ConocoPhillips ConocoPhillips Coffeyville Resources LLC Frontier Oil & Refining Flint Hills Resources Sunoco Inc. Gary .Williams Energy Corp. ConocoPhillips Chevron Vacuum Total Coker-Delayed ConocoPhillips ConocoPhillips BP Coffeyville Resources LLC Marathon Marathon Flint Hills Resources Sinclair Oil Hunt Refining Co. Hunt Refining Co. Western Refining ConocoPhillips Holly Corp. .Williams Energy Corp. Calumet Lubricants Marathon Navajo Refining ConocoPhillips Motiva Enterprises LLC Petrobras/Astra Valero Energy Corp.

250 -. Marathon Toledo Tuscaloosa St. Gary . ConocoPhillips Coffeyville Resources LLC Shell Flying J ConocoPhillips FCCU Total Philadelphia Wood River Coffeyville Deer Park Bakersfield Ferndale PA IL KS TX CA WA I II II III V V 15 3 5 23 25 25 27 15 42 - - - Hydrocracker-Distillate Sunoco Inc. Charles Artesia Port Arthur Houston Woods Cross Garyville OH AL LA NM TX TX UT LA II III III III III III IV III 51 51 - 10 57 15 15 97 - - 10 55 65 70 70 - - Hydrocracker-Distillate Total Hydrocracker-Other Hydrocracker-Other Total Hydrotreater-Naphtha Marathon Total SA Garyville Port Arthur LA TX III III - 55 16 71 50 50 65 10 75 47 47 80 20 100 30 30 - Hydrotreater-Naphtha Total Hydrotreater-Kerosene Marathon Motiva Enterprises LLC Garyville Port Arthur LA TX III III 18 18 Hydrotreater-Kerosene Total Hydrotreater-Diesel Sunoco Inc. .Williams Energy Corp. Philadelphia Wood River Mandan Lima Wynnewood Lake Charles Borger Port Arthur Port Arthur Pasadena Port Arthur Corpus Christi Kenai Benicia PA IL ND OH OK LA TX TX TX TX TX TX AK CA I II II II II III III III III III III III V V 14 25 20 39 10 22 10 139 Hydrotreater-Diesel Total . Holly Corp. Tesoro Petroleum Valero Energy Corp. Unless Otherwise Noted) Project Type Coker-Fluid Company Tesoro Petroleum Coker-Fluid Total City Golden Eagle State CA PADD V 2007 2008 (42) (42) 2009 2010 2011 2012 - FCCU Sunoco Inc. Hunt Refining Co. ConocoPhillips ConocoPhillips Motiva Enterprises LLC Motiva Enterprises LLC Petrobras/Astra Total SA Valero Energy Corp. Navajo Refining Motiva Enterprises LLC Valero Energy Corp. Valero Energy Corp. ConocoPhillips Tesoro Petroleum Valero Energy Corp.III B – Near-Term Outlook TABLE B-3-7 (CONT'D) UNITED STATES: REFINERY PROJECTS (Thousand Barrels per Day.

Navajo Refining Chevron Hydrogen-Steam Methane Total (MMSCFD) Whiting Lima St. ConocoPhillips Sulfur Total (LT/D) Coffeyville St. . Marathon Chevron Motiva Enterprises LLC Chevron BP Coffeyville Tuscaloosa Garyville Pascagoula Port Arthur Richmond Carson KS AL LA MS TX CA II III III III III V V 24 24 Reformer-CCR Total Reformer-Semi Regen Chevron Chevron BP Chevron Pascagoula Richmond Carson Pascagoula MS CA III V V III - Reformer-Semi Regen Total Reformer-Other MS Reformer-Other Total Hydrogen-Steam Methane BP Valero Energy Corp. Wilmington CA V 7 7 Isomerization-C4 Total Isomerization-C5/C6 ConocoPhillips Wood River IL II - Isomerization-C5/C6 Total Sulfur Coffeyville Resources LLC Marathon Valero Energy Corp. Charles Artesia Richmond IN OH LA NM CA II II III III V 40 40 Alkylation-SF ConocoPhillips Alkylation-SF Total Wood River IL II - Alkylation-HF Flying J Valero Energy Corp. Navajo Refining Valero Energy Corp.251 TABLE B-3-7 (CONT'D) UNITED STATES: REFINERY PROJECTS (Thousands Barrels per Day. Paul Park St. Unless Otherwise Noted) Project Type Company City State PADD 2007 2008 2009 2010 2011 2012 Hydrotreater-FCC Feed BP BP Flying J Whiting Carson Bakersfield IN CA CA II V V 20 20 25 25 40 40 50 28 78 12 12 260 100 360 10 10 64 47 111 (64) (47) (111) 80 80 6 6 4 4 - 5 65 116 60 246 (62) (62) (34) (34) - 100 100 180 180 - - Hydrotreater-FCC Feed Total Hydrotreater-Gasoline ConocoPhillips Petrobras/Astra Shell Wood River Pasadena Deer Park IL TX TX II III III 32 32 Hydrotreater-Gasoline Total Reformer-CCR Coffeyville Resources LLC Hunt Refining Co. Valero Energy Corp.III B – Near-Term Outlook -. Charles Artesia Houston Ferndale KS MN LA NM TX WA II II III III III V 100 50 165 60 375 . Alkylation-HF Total Bakersfield Wilmington CA CA V V 5 5 Isomerization-C4 Valero Energy Corp.

Consortium IPIC/ConocoPhillips National Iranian Oil Co. Ministry of Energy Oman Refining Co. Govt ConocoPhillips Chevron Marathon Valero Sunoco Inc. CA Yuma. MS Robinson. Co.252 -. AZ Company JSC Mazeikiu Nafta SNP Petrom (Arpechim) Naftgas-Petroleum/Industries Alfonso Gallardo Calik/IOC/KMG Petrol Ofisi Socar & Turcas Enerji NAFTEC NAFTEC Sonatrach Govt NOC NOC Government CNPC/Rosneft Dalian Shide Group/SABIC West Pacific Petrochemical CNPC Fushun Petrochemical Sinopec Guangzhou Petrochemical KPC/Sinopec CNPC Sinochem ONGC/Cairn Hindustan Petroleum CL Bharat Petroleum Nagarjuna Group/TIDCO Indian Oil CL Indian Oil CL Abu Dhabi National Oil Co. Kuwait National Petroleum Co. OH U. Iraq Oil Co. Iran National Oil Co. CA Pascagoula. Gulf Coast Warren.III B – Near-Term Outlook TABLE B-3-8 SPECULATIVE REFINERY PROJECTS (Thousand Barrels per Day) Capacity Region Europe Country Lithuania Romania Serbia Spain Turkey City Mazeikiai Pitesti Novisad West Spain Ceyhan Ceyhan Ceyhan Arzew Skikda Tiaret Port Said/Damietta Misurata Sebha Shkira Beijing Dalian Dalian Fushun Guangzhou Guangzhou Pengzhou Zhoushan Barmer Bhatinda Bina Cuddalore Haldia Paradip Ruwais Sitra Ain Sukhna Fujairah Bandar Abbas Bandar Abbas Bandar Abbas Central Iraq Northern Iraq Southern Iraq Al-Zour Mina Abdulla Tripoli Al Duqm Umm Saeed Jizan Dair al-Zour Dair al-Zour Damascus Undecided Aden Marib Mukalla TBD Los Angeles. Charles. Kuwait National Petroleum Co. Ministry of Oil and Mineral Resources Hadhramaut Ref. Valero Arizona Clean Fuels Distillation Cracking Coking 28 11 34 200 300 200 200 11 37 300 350 200 20 120 200 200 200 50 240 200 240 100 180 125 125 300 300 350 50 130 500 300 120 120 70 300 140 615 260 150 200 200 250 140 140 140 70 30 15 50 300 43 200 130 30 600 30 150 50 Potential Start-up 2020 2019 2019 2014 2014 2014 2013 2012 2012 2012 2015 2015 2015 2012 2012 2012 2015 2010 2012 2012 2012 2010 2012 2013 2013 2011 2012 2012 2013 2013 2012 2014 2013 2012 2014 2012 2014 2013 2012 2011 2013 2013 2013 2015 2013 2013 2014 2013 2015 2015 2015 2015 2009 2012 2012 2012 2009 2015 2011 2008 2011 North Africa Algeria Egypt Libya Tunisia China China 40 30 30 44 120 20 45 24 75 44 96 India India 45 75 Middle East Abu Dhabi Bahrain Egypt Fujairah Iran 50 Iraq 50 25 60 35 60 Kuwait Lebanon Oman Qatar Saudi Arabia Syria 20 Yemen United States 20 40 37 25 24 15 35 35 . . Iran National Oil Co. Iraq Oil Co. PA Wilmington. TBD United Refining Co. IL St.S. QP TBD Ministry of Petroleum Ministry of Petroleum Ministry of Petroleum Ministry of Petroleum Aden Refinery Co. LA Toledo. Bahrain Petroleum Co. Iraq Oil Co.

276 4.443 2.213 281 6 3.446 3.636 7 188 3.348 2012 14.151 4.416 11 233 5 3.686 423 2.867 425 2.250 4.681 13.723 2.259 4.557 14.388 3.460 4.046 4.176 2.III B – Near-Term Outlook -.575 7 181 3.630 2.952 2007 14.738 5.738 13.228 254 5 2.718 421 2.859 2008 14.521 14.718 13.955 2009 14.160 14.699 7 195 3.411 235 5 2.005 2.202 255 6 2.794 4.843 427 2.301 244 5 2.253 TABLE B-3-9 EUROPE TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports* Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply * Includes Other / Non Specified 2006 14.353 425 2.912 8 209 3.145 2.465 2.018 8 226 3.647 12.628 12.168 2011 14.728 3 13.463 3.682 382 2.049 2010 14.350 4.639 2.003 14.417 426 2.579 424 2.081 14.376 2.264 14.423 .700 13.817 2.471 4.782 2.294 2.018 4.897 14.393 14.912 4.699 4.575 4.210 4.794 7 202 3.636 4.421 14.695 263 7 3.151 25 471 3.664 12. .162 258 6 2.046 8 216 3.860 2.

254 -.III B – Near-Term Outlook TABLE B-3-10 REFINED PRODUCT BALANCE TOTAL EUROPE (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 157 39 (53) (6) 138 48 18 (11) (1) 54 270 80 (68) (10) (3) 270 132 49 (48) (36) (21) 76 157 71 (47) (0) (19) 161 764 257 (228) (46) (50) 697 2004 166 32 (69) (3) 126 50 25 (13) (6) 57 281 105 (77) (8) (1) 299 128 50 (59) (43) (15) 61 168 81 (59) (0) (21) 168 793 292 (277) (52) (46) 710 2005 162 34 (72) (2) 121 48 29 (14) (5) 59 288 112 (82) (8) (5) 306 125 58 (65) (46) (14) 57 167 79 (60) (0) (13) 173 790 312 (293) (54) (39) 716 2006 161 33 (72) (3) 119 50 30 (14) (6) 60 289 122 (88) (8) (3) 312 124 60 (67) (47) (13) 57 164 83 (61) (0) (15) 171 789 329 (302) (56) (41) 719 2007 158 34 (72) (2) 116 50 31 (13) (6) 62 290 124 (86) (8) (2) 317 123 60 (68) (48) (13) 54 165 85 (60) (0) (17) 174 787 334 (300) (57) (40) 722 2008 156 34 (74) 0 113 51 32 (13) (6) 63 293 125 (86) (9) (0) 324 122 61 (68) (49) (13) 52 166 87 (59) (0) (17) 175 788 338 (301) (58) (36) 727 2009 153 34 (76) 3 110 51 32 (13) (6) 64 296 126 (85) (9) 2 330 121 61 (68) (50) (13) 51 167 86 (60) (0) (16) 177 788 339 (302) (59) (30) 732 2010 151 34 (78) 5 107 52 33 (13) (6) 66 299 127 (85) (9) 6 337 120 61 (68) (51) (13) 50 168 86 (60) (0) (15) 179 789 341 (303) (60) (23) 738 2012 148 33 (81) 7 101 53 35 (13) (6) 68 303 129 (82) (9) 13 349 117 60 (66) (51) (12) 48 171 86 (60) (0) (14) 182 791 342 (303) (60) (13) 748 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane . .

237) (913) (234) 925 3.727) (176) 121 6.685) (47) 2.726 15.585 (1.728 1.897 2.676 907 (1.345 903 (1.168 (4.060 (1.991 7.365 5.107) (1.033 400 (247) (23) 1.464) (6.615 (1.414 890 (879) (652) (392) 1.816) 118 2.383) (5) (218) 3.908 (1.039 3.623 2.086 (1.337 15.480 6.061) (1.191) (840) (261) 1.486 2.103 (1.527 (1.599 (1.424 6.090 664 (290) (130) 1.900 2008 3.580 788 (1.714 1.232) (925) (232) 905 3.447 782 (1.794) (171) (70) 6.079) (1.873 750 (1.141 1.870 (1.106 3.080) (793) (269) 1.109 (1.877 2006 3.941 1.040) (1.077 546 (274) (123) 1.122 723 (291) (130) 1.971 2010 3.914 (1.201 1.550 6.005 2012 3.812 (1.842 2007 3.786 1.919 15.395) (5) (155) 3.397) (5) (173) 4.089 642 (297) (131) 1.642 1.240) (6.278 5.574 16.522 1.893 2.239 1.245) (900) (236) 949 3.222 1.475) (856) (970) (1.284 15.045 2.734 2.144 754 (288) (130) 1.786 787 (1.660 16.234) (135) 3.756) (174) (2) 6.111 704 (291) (130) 1.685) (178) 261 7.786 2005 3.365) (6.587 1.599 1.755 2.048 3.614 15.618 1.108 (1.102 2.666 1.381) (5) (228) 3.692) (45) 2.906 2.571) (172) (27) 6.355 1.067 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 16.767) 61 2.675) (65) 2.397) (197) (55) 5.401) (5) (162) 4.451 1.303 5. .727) 7 2.072 7.252 2.102 685 (293) (130) 1.226 5.243) (883) (239) 978 3.568 1.994 2.607) (76) 2.280 1.912 Note: Total includes Refinery gas and Ethane .107 (1.161 15.782 (1.935 2.908) (6.938 2009 3.395 6.764) (173) (42) 6.741) (175) 41 6.642 (1.496 (1.704 16.368 2.821) (5.012) (1.142 2.414 15.515 2.638 (1.295 (1.096 (1.402) (6.104 7.185 1.577 16.048 626 (294) (104) 1.496 1.920 (1.255 TABLE B-3-11 REFINED PRODUCT BALANCE TOTAL EUROPE (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 3.102 2.453 6.229) (864) (236) 1.214 1.771 779 (1.647 2004 3.150 6.829 1.530 786 (1.162 5.138 (1.676 1.III B – Near-Term Outlook -.641 789 (1.935 (1.203) (928) (228) 867 3.063) (7) (349) 3.625 16.096 16.420) (5) (191) 3.883 6.376) (5) (321) 3.606 16.188 2.668) (167) (100) 6.415) (6.334 5.652 1.560 16.380 3.111) (954) (815) (664) (692) (675) (588) (455) (296) (85) 14.517 15.271 1.647 5.093) (1.696 790 (1.908 (1.387) (5) (194) 3.130 7.422) (6.897) 174 2.556 (1.637 1.

663 1.474 3.III B – Near-Term Outlook TABLE B-3-12 NORTH AFRICA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 1.975 126 423 2.629 33 206 162 81 2.701 12 366 379 2008 1.501 29 184 165 77 1.108 1.454 3.072 130 423 3.613 32 199 163 80 1.578 31 191 164 79 1.587 4.998 1. .617 116 424 2.148 11 468 479 2012 1.460 27 170 167 74 1.878 123 423 2.724 105 275 2.708 1.603 1.618 4.599 1.577 25 163 168 74 1.258 10 484 494 24 167 152 63 1.040 11 451 462 2011 1.481 28 177 166 76 1.433 3.843 12 431 442 2010 1.500 3.625 112 424 2.742 13 334 347 2006 1.698 12 394 406 2009 1.709 119 423 2.645 .602 4.551 3.698 1 109 424 2.512 1.888 1.256 -.777 13 333 346 2007 1.

257 TABLE B-3-13 REFINED PRODUCT BALANCE NORTH AFRICA (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 7 1 (0) 0 7 6 0 (2) (0) 0 4 19 4 (4) (0) 0 20 24 0 (10) (3) 2 13 13 2 (17) 12 11 69 8 (33) (3) 14 54 2004 6 2 (0) (0) 7 6 0 (3) (0) 0 3 21 4 (1) (0) 0 24 24 1 (10) (2) 1 14 14 4 (16) 12 14 71 10 (30) (3) 13 62 2005 6 2 (0) (0) 7 6 0 (3) (0) (0) 3 22 4 (1) (0) 0 25 26 1 (10) (2) 1 16 15 4 (17) 13 14 74 10 (30) (3) 14 65 2006 6 2 (1) (0) 8 5 0 (3) (0) (0) 3 22 4 (1) (0) 0 25 24 1 (10) (2) 1 13 15 4 (17) 12 14 71 11 (31) (3) 13 62 2007 6 2 (0) (0) 8 6 0 (3) (0) (0) 3 22 4 (1) (0) 0 26 24 1 (10) (2) 1 13 15 4 (17) 13 15 73 11 (31) (3) 14 64 2008 6 2 (0) 0 8 6 0 (3) (0) (0) 3 23 4 (1) (0) 0 27 24 1 (11) (2) 1 13 15 4 (17) 13 15 74 12 (32) (3) 14 65 2009 6 2 (1) 0 8 6 0 (3) (0) (0) 3 24 5 (1) (0) 0 28 25 1 (12) (2) 1 13 16 4 (18) 13 15 78 12 (34) (3) 14 67 2010 7 2 (1) 0 8 6 0 (3) (0) (0) 3 25 5 (1) (0) 0 29 25 1 (12) (2) 1 13 17 4 (18) 13 16 80 13 (36) (3) 14 68 2012 7 2 (1) 0 8 7 0 (3) (0) (0) 3 26 6 (1) (0) 0 31 25 1 (12) (2) 1 13 17 5 (19) 13 17 81 14 (36) (3) 15 72 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane . .III B – Near-Term Outlook -.

522 250 (718) (50) 413 1.415 2006 144 52 (13) (1) 182 115 6 (55) (6) (0) 59 440 75 (17) (5) 8 501 437 17 (189) (38) 13 240 333 113 (453) 383 376 1.524 285 (746) (49) 414 1.340 2005 140 41 (6) (1) 174 129 6 (62) (6) (0) 67 442 74 (18) (5) 8 501 475 17 (180) (39) 13 287 335 112 (453) 394 386 1.166 2004 134 38 (3) (1) 168 125 8 (62) (6) 1 66 431 72 (15) (5) 7 489 443 18 (183) (37) 13 254 326 107 (444) 373 363 1.468 263 (727) (49) 402 1.465 2010 155 49 (19) 5 189 136 6 (72) (6) (0) 63 507 104 (28) (6) 9 586 461 16 (216) (39) 13 236 382 134 (490) 401 428 1.501 270 (736) (49) 407 1.575 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .460 243 (706) (49) 392 1. .III B – Near-Term Outlook TABLE B-3-14 REFINED PRODUCT BALANCE NORTH AFRICA (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 153 17 (9) 2 163 128 7 (51) (7) 1 79 393 82 (74) (6) 5 401 434 6 (185) (52) 28 230 313 68 (455) 367 293 1.601 293 (800) (50) 420 1.422 180 (774) (65) 403 1.258 -.357 2007 145 47 (7) (1) 184 121 6 (61) (6) (0) 60 452 82 (15) (6) 8 521 438 17 (191) (38) 13 239 345 118 (463) 388 388 1.428 2009 152 48 (15) 3 187 131 6 (69) (6) (0) 62 491 95 (25) (6) 9 564 457 17 (210) (38) 13 237 371 129 (481) 396 415 1.502 2012 156 51 (23) 9 193 141 7 (76) (6) (0) 66 525 124 (21) (6) 10 632 461 16 (218) (40) 13 232 394 144 (497) 412 453 1.392 2008 147 47 (9) 1 185 124 6 (63) (6) (0) 61 462 91 (13) (6) 8 542 440 17 (193) (38) 13 238 352 124 (468) 393 401 1.641 309 (825) (50) 427 1.678 342 (835) (51) 443 1.

III B – Near-Term Outlook -.684 769 194 10 180 87 1.727 4.751 4.255 2.597 98 6 504 167 962 3.102 1.911 110 13 13 136 7.053 107 14 19 140 6.797 106 10 12 127 9.064 122 16 24 161 6.061 2008 6.082 5.308 4.031 3.918 95 6 608 166 1.530 2006 5.879 108 12 13 132 8. .189 1.322 107 11 12 130 8.513 111 13 14 138 6.276 .340 3.199 2011 8.824 2010 7.806 2007 6.846 1.259 TABLE B-3-15 CHINA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 5.289 2.988 1.623 2012 8.738 3.733 87 5 995 163 1.941 3.442 92 5 711 165 784 4.007 103 1 7 239 169 1.303 2.569 90 5 862 164 934 4.705 4.410 101 6 381 168 996 3.299 109 12 13 134 7.340 2.333 2009 7.282 2.226 4.

.260 -.III B – Near-Term Outlook TABLE B-3-16 REFINED PRODUCT BALANCE CHINA (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 41 (5) (2) 35 9 3 (2) (1) 9 71 0 (1) (0) (3) 68 21 15 (0) (4) 2 37 53 7 (3) 1 58 194 25 (10) (4) (3) 206 2004 53 (5) (0) 47 10 3 (2) 0 10 98 3 (3) (0) (1) 97 20 31 (2) (8) (0) 49 76 11 (4) (1) 83 257 47 (15) (8) (2) 287 2005 54 0 (6) (0) 48 10 3 (3) 10 111 2 (2) (0) 111 23 29 (2) (8) (0) 49 90 12 (5) (0) 97 288 45 (17) (8) (1) 315 2006 56 0 (3) (0) 52 9 6 (4) 11 116 2 (1) (0) 117 22 28 (2) (9) (0) 47 97 12 (4) 1 105 300 47 (14) (9) (0) 332 2007 60 0 (3) (0) 57 10 6 (4) 12 121 4 (1) (0) 0 124 22 28 (2) (9) (0) 48 106 13 (4) 1 116 319 51 (14) (9) 0 356 2008 66 0 (3) (0) 63 11 6 (4) 12 127 4 (1) (0) 1 132 23 29 (2) (10) (0) 49 112 15 (5) 1 123 339 53 (15) (10) 2 378 2009 73 0 (4) (0) 68 12 5 (4) 13 135 3 (1) (0) 3 140 23 29 (2) (10) (0) 49 125 16 (3) 1 138 367 54 (15) (11) 3 410 2010 78 0 (4) 0 74 13 5 (4) 14 142 4 (1) (0) 4 149 23 30 (2) (11) (0) 50 134 17 (3) 4 152 389 57 (14) (11) 7 439 2012 89 0 (4) 0 84 14 5 (4) 16 160 2 (1) (0) 6 168 25 30 (2) (12) (0) 52 150 19 (3) 4 170 437 57 (15) (12) 10 490 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .

469 75 (18) (5) 4 2.949 5.272 43 (18) (5) 126 3.173 289 (78) 16 2.983 370 558 (33) (139) (9) 887 1.382 409 505 (44) (159) (9) 861 2.808 376 (60) 32 3.310 1.448 10.530 409 518 (44) (169) (9) 875 2.215 915 (353) (154) (25) 6.542 1 (72) (4) 1.016 410 (59) 94 3.145 2005 1.548 Note: Total includes Refinery gas and Ethane .727 271 119 (89) 301 2.167 (303) (312) (204) (224) 162 216 9.118 2009 1.521 362 (109) 25 2.041 (299) (174) 6 7.365 35 (18) (5) 2.804 2010 1.424 451 548 (44) (219) (9) 947 3.904 78 (18) (5) 76 3.185 522 (219) (70) (61) 4.369 4.867 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 8.974 312 115 (91) 337 3.863 421 535 (44) (189) (9) 903 2.599 254 118 (88) 284 2.214 202 122 (85) 239 2.099 208 61 (45) 2 227 2.382 375 270 (6) (65) 31 670 1.328 217 122 (86) 253 2.047 290 (93) (9) 2.232 (126) (7) 1.634 2008 1.372 459 (57) 93 3.263 32 (33) (5) 2.429 9.427 2004 1.445 5 (11) (4) (57) 1.885 1.400 6.234 6.468 233 122 (87) 268 2.III B – Near-Term Outlook -.562 964 (329) (144) (53) 6.155 7.943 1.263 428 522 (39) (149) (9) 902 2.160 1.005 56 (54) (5) (25) 1.698 1 (99) (2) 1. .449 951 (305) (164) 1 7.746 288 (71) (15) 1.069 1 (102) 6 1.462 2012 2.752 2006 1.386 325 (80) 17 2.299 1 (80) (7) 1.095 (309) (194) 75 8.404 1 (72) (5) 1.648 6.096 2007 1.603 79 (18) (5) 30 2.695 412 529 (44) (179) (9) 889 2.261 TABLE B-3-17 REFINED PRODUCT BALANCE CHINA (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 964 (106) (38) 820 187 56 (43) (15) 185 1.094 (329) (184) 43 8.819 1 (93) 1 1.762 65 (18) (5) 54 2.040 418 552 (44) (199) (9) 917 3.213 192 (52) 17 1.130 210 70 (57) 223 2.267 0 (130) (7) 1.799 7.476 1.

237 2009 3.602 2011 3.811 2.190 2.924 688 316 66 44 1.422 3.110 693 349 68 43 1.145 2007 2.299 697 381 70 43 2.466 1.214 2008 2.924 3.820 2.III B – Near-Term Outlook TABLE B-3-18 INDIA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe North Europe South Europe Central Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 2.957 2.896 2.557 652 316 82 41 1.299 3.721 2012 3.456 705 445 74 41 2.822 2.557 2.785 2.110 3.896 682 284 64 45 1.109 2.820 676 252 62 46 1.262 -.750 2.194 2.422 701 413 72 42 2. .905 2006 2.456 .417 2010 3.

III B – Near-Term Outlook -. .263 TABLE B-3-19 REFINED PRODUCT BALANCE INDIA (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 8 0 (1) (0) 7 11 2 (0) 1 14 41 (2) (0) 3 42 16 2 (1) (0) (1) 16 27 6 (5) 2 30 103 9 (8) (0) 5 108 2004 11 0 (3) 0 8 15 0 (2) (0) 12 47 1 (7) (0) 1 42 21 1 (2) (0) (2) 18 36 6 (3) 2 40 129 8 (17) (0) 1 121 2005 10 1 (2) (0) 9 15 1 (3) 0 13 47 1 (8) (0) 2 42 20 1 (2) (0) (1) 18 36 7 (5) 3 40 128 10 (21) (0) 4 121 2006 12 0 (2) (1) 9 16 1 (4) 0 13 52 1 (9) (0) 1 44 20 1 (3) (0) (3) 16 40 7 (7) 0 41 141 9 (25) (0) (2) 124 2007 13 0 (3) (1) 10 16 1 (4) 0 14 53 1 (10) (0) 1 45 20 1 (3) (0) (3) 16 42 7 (7) 1 43 145 10 (26) (0) (2) 127 2008 13 0 (3) (1) 10 16 1 (4) 0 14 53 1 (9) (0) 1 46 21 1 (3) (0) (3) 15 44 8 (7) 1 45 147 11 (26) (0) (2) 130 2009 14 0 (3) (1) 11 17 1 (4) 0 14 57 1 (13) (0) 1 46 20 1 (3) (0) (3) 16 47 8 (6) 1 50 156 11 (29) (0) (1) 137 2010 15 0 (4) (1) 11 18 1 (5) 0 14 61 1 (16) (0) 1 47 21 1 (4) (0) (3) 16 50 8 (8) 1 51 166 11 (36) (0) (1) 140 2012 16 0 (4) (1) 12 19 1 (5) 0 14 64 1 (18) (0) 2 49 22 1 (4) (0) (3) 16 53 9 (8) 1 55 174 12 (39) (0) (1) 146 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .

083 12 (185) (0) 22 932 376 15 (62) (0) (48) 281 969 211 (172) 32 1.661 2007 298 9 (60) (20) 227 350 13 (79) 8 292 1.168 252 (185) 33 1.927 2010 359 9 (90) (17) 261 391 14 (109) 8 302 1.580 2005 242 14 (50) (3) 204 313 21 (67) 6 274 966 28 (164) (0) 32 862 366 13 (36) (0) (22) 321 796 175 (128) 92 935 2.104 224 (179) 33 1.041 218 (143) 32 1.143 204 (169) (2) 129 2.054 242 (558) (1) (10) 2.307 2004 257 0 (68) 3 193 310 5 (54) (1) 260 969 17 (149) (0) 24 862 375 14 (33) (0) (33) 322 797 158 (69) 57 943 2.183 3.659 303 (825) (1) 12 3.148 3.264 -.086 262 (554) (1) (6) 2. .487 275 (769) (1) 2 2.684 252 (444) (1) 104 2.728 2008 308 9 (60) (19) 238 350 14 (76) 8 295 1.068 12 (188) (0) 16 908 373 15 (47) (0) (48) 292 903 178 (156) 32 956 2.245 12 (324) (0) 28 961 389 15 (67) (0) (48) 288 1.090 12 (202) (0) 19 920 373 15 (56) (0) (48) 284 942 193 (161) 32 1.168 12 (259) (0) 25 946 369 15 (51) (0) (48) 285 1.995 2012 378 9 (89) (15) 283 402 14 (115) 8 309 1.005 3.310 12 (363) (0) 34 993 401 15 (73) (0) (48) 295 1.708 193 (372) (1) 51 2.596 2006 283 9 (56) (20) 216 344 15 (79) 8 288 1.787 2009 336 9 (78) (18) 250 370 14 (92) 8 299 1.150 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .284 268 (623) (1) (2) 2.971 230 (527) (1) (13) 2.270 3.040 3.III B – Near-Term Outlook TABLE B-3-20 REFINED PRODUCT BALANCE INDIA (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 189 0 (28) (6) 155 239 41 (3) 12 289 828 (33) (0) 64 860 292 32 (9) (1) (18) 296 594 132 (95) 78 708 2.

265 TABLE B-3-21 REFINED PRODUCT BALANCE MIDDLE EAST (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 34 4 (3) 1 36 34 1 (15) (1) (0) 18 86 3 (27) (0) (0) 61 88 14 (41) (13) 1 50 38 1 (52) 39 26 281 23 (138) (15) 41 192 2004 40 13 (5) (1) 47 36 2 (17) (1) (0) 19 92 8 (30) (0) 1 71 87 15 (31) (15) 0 57 51 3 (67) 47 34 306 41 (150) (16) 47 227 2005 39 15 (5) (0) 49 38 2 (20) (1) 0 19 91 9 (28) (0) 1 73 89 14 (31) (15) 0 57 53 3 (68) 47 36 310 44 (151) (17) 49 235 2006 38 18 (4) (0) 52 37 1 (18) (2) 0 19 95 9 (26) (0) 1 79 88 14 (31) (15) 0 57 54 4 (68) (0) 47 37 312 46 (147) (17) 49 244 2007 40 19 (4) (0) 54 37 1 (18) (2) 0 20 99 9 (27) (0) 1 82 87 14 (30) (15) 2 58 55 4 (67) (0) 47 39 318 47 (147) (17) 50 252 2008 41 20 (4) (0) 56 38 2 (18) (2) 0 20 101 9 (27) (0) 1 85 87 14 (30) (15) 2 58 57 4 (67) (0) 47 41 324 49 (146) (17) 51 260 2009 45 20 (6) (0) 59 39 2 (19) (2) 0 20 105 9 (28) (0) 1 88 89 14 (31) (15) 2 59 56 4 (66) (0) 48 42 335 49 (150) (17) 51 267 2010 47 20 (6) (0) 61 39 2 (19) (2) 0 20 109 9 (29) (0) 1 91 91 14 (33) (15) 2 59 58 4 (67) (0) 48 43 345 49 (154) (17) 51 274 2012 52 20 (7) (0) 65 41 2 (20) (2) 0 21 116 10 (30) (0) 1 97 94 14 (35) (15) 2 60 61 4 (68) (0) 48 45 364 50 (160) (18) 51 288 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .III B – Near-Term Outlook -. .

129 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .249 86 (1.983 1.321 92 (1.614 249 (740) (238) 27 912 876 35 (1.416 5.981 2006 899 420 (102) (7) 1.629 257 (570) (276) 33 1.237 85 (1.943 181 (537) (7) 25 1.616 258 (566) (270) 7 1.388 1.368 830 33 (405) (35) 10 434 2.036 1.884 164 (606) (7) 11 1.386 983 6.517 878 37 (437) (37) 10 450 2.413 4.070 193 (549) (7) 24 1.589 260 (552) (273) 33 1.854 1.III B – Near-Term Outlook TABLE B-3-22 REFINED PRODUCT BALANCE MIDDLE EAST (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 792 102 (67) 24 851 736 17 (328) (30) (6) 389 1.449 5.093 775 34 (372) (30) (8) 399 1.039 (3.184 85 (1.668 1.097 1.397 1.357 4.681) (326) 1.044 1.606 1.663 257 (595) (278) 33 1.392 1.447 1.221 469 (166) (7) 1.174 2007 934 434 (98) (7) 1.210 4.064 1.865 192 (574) (7) 24 1.613 260 (559) (271) 7 1.255 1.035 7.616 1.153 190 (567) (7) 24 1.403) (311) 1.674 2010 1.596 260 (549) (274) 33 1.767 469 (3.381 892 6.406) (313) 1.827 2012 1.469) (305) 1.396) (316) 1.441 934 (3.114) (274) 1.008 6.382 936 6.787) (0) 1.002 (3.266 -.198 1.278 90 (1.545) (321) 1.059 465 (149) (7) 1.442 5.432) 1.824) (0) 1.370 835 6.731 1.829) 1.593 270 (569) (268) 9 1.826) (0) 1.422 98 (1.749 66 (547) (7) (6) 1.370 855 (3.091 7.156 815 38 (420) (32) 10 412 1.793 1.022 187 (558) (7) 24 1.072 1.721 257 (633) (281) 33 1.498) (309) 1.419 846 35 (416) (36) 10 439 2.376 869 6.049 1.316 810 32 (390) (34) 10 428 2.813) (0) 1.500 1.346 2008 953 462 (92) (7) 1. .056 1.263 799 31 (384) (33) 10 422 2.452 5.313 94 (1.521 2009 1.808 2005 908 360 (109) (4) 1.080 1.058 2004 934 302 (118) (25) 1.229 191 (583) (8) 24 1.355 96 (1.815) (0) 1.458 6.807) (0) 1.621 1.171 650 5.496 976 (3.211 792 28 (381) (33) 10 416 1.063 (3.446 5.040 (3.748 1.975 1.374 202 (618) (8) 24 1.804) 1.106 464 (145) (7) 1.479) (318) 1.043 (3.

.III B – Near-Term Outlook -.267 TABLE B-3-23 REFINED PRODUCT BALANCE CIS (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 27 0 (4) 0 23 9 9 64 4 (30) 0 37 71 1 (30) (0) 41 40 0 (4) 6 42 211 5 (68) 6 153 2004 31 1 (4) (0) 26 10 10 77 2 (40) 0 39 81 1 (50) (0) 32 45 0 (9) 7 44 243 4 (103) 7 151 2005 32 1 (5) (0) 27 10 10 81 3 (42) 1 42 79 1 (49) (1) 30 49 (9) 8 48 251 5 (105) 7 158 2006 34 1 (6) (1) 28 11 11 84 4 (45) 1 44 79 1 (47) (0) 34 53 (11) 8 50 262 6 (108) 8 168 2007 35 1 (6) (1) 29 12 12 87 4 (46) 1 47 81 1 (47) (0) 34 57 (13) 8 52 271 6 (112) 8 174 2008 37 1 (6) (1) 31 12 12 91 5 (48) 1 49 83 1 (49) (0) 35 59 (14) 9 53 282 6 (117) 8 179 2009 38 1 (6) (1) 32 12 12 95 5 (50) 1 51 85 1 (51) (0) 35 61 (15) 9 55 292 7 (122) 9 185 2010 40 1 (7) (1) 33 13 13 99 5 (52) 1 53 88 1 (53) (0) 36 63 (16) 9 56 302 7 (127) 9 191 2012 42 1 (7) (1) 35 13 13 104 6 (53) 1 57 90 1 (55) (0) 37 65 (16) 10 59 314 7 (131) 10 201 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .

474 23 (919) (0) 577 899 23 (182) 1 742 5. .202 120 (234) (17) 1.768 294 (2.860 94 (975) 17 997 1.223 185 (2.173 347 26 (22) 0 351 2.071 323 22 (21) 0 325 1.559 21 (931) (7) 643 1.251 51 (328) 0 973 6.515 21 (896) (7) 633 1.225) (6) 3.089 117 (221) (17) 968 297 19 (19) 0 296 1.653 57 (858) 16 869 1.669) (6) 4.304 72 (622) 4 758 1.749 2008 1.287 2005 1.107 2012 1.III B – Near-Term Outlook TABLE B-3-24 REFINED PRODUCT BALANCE CIS (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 836 89 (141) 4 787 233 10 (16) 1 229 1.159) (5) 3.290 19 (545) (9) 756 654 15 (61) 1 608 4.570 286 (2.869 2009 1.469 21 (860) (7) 624 1.784 89 (937) 17 953 1.672 339 (2.268 -.247 121 (246) (17) 1.401 321 (2.335 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .018 85 (182) (11) 910 262 12 (22) (0) 252 1.138 2004 1.002 306 20 (20) 0 306 1.190 312 (2.096 47 (279) 0 864 5.015 105 (1.989 2010 1.041 1.407) (6) 3.114 118 (212) (17) 1.169 1.937 100 (1.119 116 (1.979 303 (2.305 125 (240) (17) 1.363 231 (2.053) 17 1.169 48 (308) 0 909 6.114) (6) 3.158 119 (223) (17) 1.449 21 (849) (7) 614 1.609) (6) 4.037 314 21 (20) 0 315 1.604 21 (967) (7) 652 1.308) (6) 3.105 331 24 (21) 0 334 2.508) (6) 3.083) 17 1.132 48 (293) 0 887 5.569 42 (810) 4 806 1.723 83 (914) 17 909 1.043 97 (207) (9) 923 274 16 (19) (0) 271 1.013) 17 1.084 1.318 205 (1.649 21 (996) (7) 668 1.012 46 (221) 0 837 5.625 2007 1.431 2006 1.385) 1 3.435 23 (893) (12) 553 958 37 (181) 0 814 5.205 49 (322) 0 932 6.

178 116 1.065 16.824 2.134 12.065 2.530 15.607 15.666 163 2.590 11.590 1.476 1.449 15.552 1.016 5.502 1.149 2.198 1. .530 29 1.166 2010 16.433 11.439 1.512 2.052 12.853 5.950 14 216 141 3.973 2.461 2.217 1.685 5.627 24 339 205 3.439 12.306 12.428 1.987 2009 15.331 13 1.III B – Near-Term Outlook -.862 2008 15.744 2007 15.673 12 188 147 2.493 15.269 TABLE B-3-25 UNITED STATES TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 15.334 16 1.797 19 226 139 3.220 5.175 13 202 144 2.336 139 2.052 1.202 2.716 15 1.990 2.488 1.164 2.476 11.178 2.241 2.771 203 2.752 2.454 15.197 2.414 2012 16.320 5.320 16.435 4.875 15 1.501 1.126 127 1.134 1.433 1.296 17 1.309 2.148 2.306 1.107 13 209 142 3.501 11.586 2006 15.031 14 1.784 2.459 1.240 5.203 2011 16.738 186 2.571 16 1.607 1.560 154 2.462 13 195 146 2.532 5.092 89 1.438 .803 12 181 149 2.148 16.

270 -. .III B – Near-Term Outlook TABLE B-3-26 REFINED PRODUCT BALANCE UNITED STATES OF AMERICA (Million Tonnes) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 329 28 (7) 13 363 77 8 (2) (0) 83 175 14 (8) 1 182 38 19 (8) 22 (0) 28 150 24 (26) 47 195 770 93 (51) 22 61 851 2004 346 41 (7) 10 390 74 6 (2) (0) 78 187 16 (5) 1 199 36 23 (11) 17 (1) 30 159 29 (29) 43 202 802 115 (54) 17 53 899 2005 339 48 (7) 13 393 74 9 (3) (0) 81 193 16 (7) (1) 201 34 29 (14) 20 1 31 152 33 (29) 40 195 793 135 (59) 20 52 900 2006 339 49 (6) 15 396 70 8 (2) 1 77 198 18 (11) (1) 204 35 19 (15) 18 (1) 20 155 30 (32) 39 192 797 124 (66) 18 52 889 2007 340 48 (6) 18 400 73 7 (2) (0) 78 201 17 (8) 1 211 35 20 (17) 18 0 21 157 29 (33) 42 195 806 122 (66) 18 61 905 2008 343 48 (6) 19 403 73 7 (2) (0) 79 204 18 (8) 1 214 34 21 (15) 18 0 22 159 29 (33) 41 196 813 122 (66) 18 62 914 2009 346 48 (6) 20 407 74 7 (3) (0) 80 208 18 (9) 1 217 34 21 (15) 18 0 21 161 29 (34) 41 197 822 123 (67) 18 61 922 2010 348 48 (6) 21 410 75 7 (3) (0) 81 211 16 (7) 1 221 32 21 (14) 18 0 21 163 29 (35) 41 198 830 121 (65) 18 62 931 2012 352 46 (7) 22 414 77 8 (2) (0) 83 220 16 (10) 2 228 30 21 (11) 18 0 21 168 30 (38) 42 202 847 120 (67) 18 65 947 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane Gasoline trade comprises finished products and blendstocks .

122 1.593 146 (49) (0) 1.749 3.673 167 (39) (1) 1.758 17.372 619 382 (281) 327 3 395 3.779 2005 7.951 1.339 1.178 1.380 17.162 359 (170) 21 4.528 181 (44) 12 1.520 2.570 1.580 295 (173) 20 3.118 628 530 (251) 360 14 560 3.249 363 (189) 13 4.210) (1.122 (150) 447 9.091) (1.793 3.796 1.294 2.515 1.321 4.690 650 (161) 313 8.608 1.409 17.723 17.611 197 (55) (5) 1.704 2.083 (152) 510 9.033 789 (490) 1.641 2010 8.293 4.506 318 (205) 36 4.198 19.492 1.172 634 344 (283) 324 (14) 357 3.920 18.259 4.524 4.317 4.350 709 (628) 1.732 2004 8.316 4.785 1.098 710 (534) 1.578 1.227 17.117 (151) 483 9.III B – Near-Term Outlook -.091 947 (156) 239 9.145 17.012 1.129 1.049 359 (215) (21) 4.695 2.814 325 (110) 28 4.960 2.035 2.724 2.627 162 (59) (1) 1.919 1.751 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 16.210 697 (559) 1.430 1.252 Note: Total includes Refinery gas and Ethane Gasoline trade comprises finished products and blendstocks .568 17.848 1.525 2007 7.800 4.437 613 380 (274) 329 0 391 3.736 2.703 4.716 20.225) (1.252 1.355 4.605 2008 8.544 1.183 695 (559) 1.252 4.751 4.673 2012 8.716 4.086 574 (452) 1.677 4.635 2009 8.508 589 379 (250) 331 0 387 3.547 20.297 4.144 691 (546) 1.678 2.226) 403 318 360 324 325 327 329 331 336 1.610 155 (55) (1) 1.227) (1.896 21.271 TABLE B-3-27 REFINED PRODUCT BALANCE UNITED STATES OF AMERICA (Thousand Barrels per Day) 2000 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 7.767 1.128 (150) 462 9.694 3.577 151 (49) (5) 1.226 1.200 20.732 4.954 329 (138) (27) 4.208 692 (476) 1.671 164 (34) (9) 1.984 20.142 (150) 342 9.076 1.349 20.104 356 (165) 21 4.214) (1.866 19.918 1.611 129 (44) (2) 1.189) (1.256 701 (581) 1.122 (149) 415 9.655 539 376 (201) 336 0 379 3.244 20. .654 (959) (990) (1.318 319 (148) 18 4.316 633 374 (304) 325 8 385 3.667 1.755 1.115 (158) 302 9.722 696 352 (139) 403 (1) 506 3.592 2006 7.058 655 426 (205) 318 (12) 547 3.

In the same manner. to deep water and Arctic development projects that take years to complete. demand is decreased by use of alternative fuels such as coal. cash flow will sustain large capital programs and attract outside capital from the capital markets. Ultimately. As our near-term and long-term price forecasts are developed together this section includes the outlooks to 2020. While we do not project that non-OPEC growth will result in a collapse in world oil prices. an “overshoot” often occurs. The resulting imbalance of supply versus demand forces prices back down. new reserve additions become less economic. When capital investments outside (and to a lesser extent.. Initially. alternative energy supply development is constrained. developing and producing new reserves. and the resulting competition for supply drives prices back up. The time response from expenditures covers a wide range. If prices are too high. the low prices reduce industry cash flow and capital expenditures. natural gas or nuclear energy. supplies will increase because economics favor developing new reserves or producing existing reserves at higher rates. producers are cautious in committing capital. CRUDE OIL PRICE OUTLOOK For the longer term. and by conservation efforts. low prices cause demand to approach capacity limits on production. confidence returns. the shorter term situation is considered and the path of prices towards the forecast long term trend is developed. Because of the time lags involved.III B – Near-Term Outlook B-4 CRUDE OIL AND REFINED PRODUCT PRICE OUTLOOKS In this section our outlook of crude oil and refined product prices is presented. a period of sustained weak prices could impair the outlook for future non-OPEC production. Because of the large need for incremental production to offset the natural decline in many of the world’s producing areas. At the same time. and natural decline rates quickly reduce production capacity. Experts warn of the finite nature of reserves and the decreasing number of unexplored prospects. if prices are too low. Actions by the large producers are again necessary to curb excess supply and give support to prices. prices declined and capital invested outside OPEC slowed.272 -. Producers increase their price targets for capital justification and the cycle starts again. The high decline . and thus the stage is set for another cycle to begin. a large amount of new reserves must be developed. A good illustrative example of this price path was in the period 1997-2000. outside capital seeks more attractive options. PRICE CYCLES The long-term level of crude oil prices is set by the cost of finding. The combination of lower demand and increasing production will eventually produce surplus supply and declining prices. driving prices to lower levels. . but as prices rise and stay at relatively high levels. inside) OPEC led to increases in production sufficient to challenge OPEC’s minimum acceptable production levels. The behavior pattern above suggests that capital investment cycles will lead to price cycles.S. from almost immediate response from stripper wells in the U. demand is stimulated. our price outlook is developed based on the cost of finding. developing and producing the required new production sources discussed above. When prices are high. After presenting the longer-term view.

The exploration and production (E&P) operations of the companies included in the survey span the globe. and their marginal costs should be closely related to world crude oil prices. FIGURE B-4-1 COST OF PRODUCTION AND RESERVE REPLACEMENT (Dollars per Barrel Oil Equivalent . Their E&P activities occur in countries that allow private ownership of reserves and so exclude most OPEC production. The historical cost of producing and replacing reserves is shown in Figure B-4-1 below. if prices exceed costs by a large margin.III B – Near-Term Outlook -. supplies will not be adequate to meet demand and prices will be driven upward. The costs include both oil and gas (expressed as oil equivalents).S. the forecast of crude oil prices must include not only the direct costs of sustaining production operations. Data is compiled annually by the U. Publicly reported data for a survey of public companies with worldwide operations can be used to compile industry average costs. but must also include the costs of finding and developing the reserves necessary to replace the oil produced. Since a barrel of crude oil reserves can only be produced once. companies must continually replace their production with additions to reserves. Therefore.Three-Year Rolling Average) Finding & Developm ent Cost 45 40 35 30 25 20 15 10 5 0 1983 Production Cost Return on Capital Incom e Taxes 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 . The operations of these shareholder-owned companies thus represent the marginal source of crude oil. Department of Energy through its Financial Reporting System. excess supplies are likely to be developed. and is consistent with that reported in SEC filings for the companies.273 rate of existing production results in a rapid capital cycle. forcing prices back down. producing price cycles of five years or less. OPEC oil production is the lowest-cost source of supply. or else suffer liquidation through depletion. If crude oil prices fall below this level and remain there for a sustained period of time. . These costs effectively establish a floor price for crude oil. In general. Thus. Likewise. A single year's data can be misleading since exploration expenses and reserve additions may occur for several years before production of the reserves begins. Costs must also include an adequate return on capital in order to sustain continued reinvestment. COST OF REPLACING AND PRODUCING RESERVES The cost of developing and producing crude oil is an important benchmark in understanding the sustainable level of prices. we show the costs as three year moving averages.

approaching $40/barrel in 2005. In Figure B-4-1. total costs are estimated to be in the $40-$50/barrel range at the current time. This added return is indicated by the return on capital in Figure B-41.S. and is a significant cost for production operations. today’s market has created price expectations that make a return to $50/barrel seem like a catastrophic price collapse to many. leasing costs increase. However. Based on the historical relationship between costs and prices. As prices decline from the current cyclic peak. the Finding and Development (F&D) cost is the cost of property acquisition. The price crash in 1985-86 caused write-downs of reserves and the rolling average costs stayed high until this process was complete. the current high price environment is resulting in rapidly escalating costs. after adjustment for inflation. exploration expenses (including dry hole costs and geological and geophysical costs). Because the costs must be recovered over the life of the reserves. additional return is needed for the companies to recover their cost of capital. before taxes. service companies are able to raise rates. increases in F&D costs have a disproportionate impact on the total replacement cost.III B – Near-Term Outlook Costs were pushed to very high levels by the energy crisis of the 1970s and the anticipation of ever-increasing prices. but sufficiently low to prevent severe demandside responses of the kind seen in the 1980s. costs were in the range of $20/barrel. and development costs divided by the reserves added during each year. Production (or lifting) costs are the cash costs of production experienced by the companies for the year. costs also tend to increase.S. Relative to historical prices. the forecast price level is consistent with our view of future market fundamentals. falling somewhat in the early to mid-1990s but rising in later years. and governments find new ways to tax. . While $50/barrel crude (in constant dollars) as a long-term price appeared unthinkably high relative to the $30/barrel price regime experienced as recently as 2004. During the 1990s. The forecast price level is sufficiently high to support ongoing development of conventional and unconventional energy sources. Our projection for Brent prices is shown below. or will have high operating costs. Demand for production supplies and services increases. Income tax varies with the price of oil and gas. the actual impact of prices at the $50/barrel level has been muted by the sustained decline in the U. As the impact of higher prices raises costs throughout the industry. are unlikely to support a return of the dollar to previous levels over the next few years. Most new non-OPEC reserves will be in hostile environments. costs are expected to continue climbing over the next few years. a trend we expect to continue. However. when prices weaken. Since the return on capital is estimated by applying a factor to the F&D cost.274 -. LONG TERM FORECAST: 2012-2020 The analysis of the cost of finding. As prices increase. such as deepwater or Arctic areas. and is based on a typical production profile. long-term fiscal and financial policies in the U. costs are squeezed. While exchange rates will undoubtedly continue to fluctuate. as for many economies the rising dollar price of crude oil has been offset to some extent by the declining dollar. costs have trended upward more strongly. Conversely. costs are expected to stabilize in the $40/barrel range. In recent years technological improvements have been sufficient to keep costs from increasing substantially. in Figure B-4-2. such as synthetic crudes from oil sands. dollar compared with the Euro and other world currencies. developing and producing new reserves shows that oil prices above $40/barrel (in constant dollar terms) are needed to support the necessary development of new reserves. . Since 2000.

cost $2. The moderate increase in real prices projected for later in the forecast reflects the tighter balance between demand and supply and the continuing need to develop new and alternative energy supplies.7-$4. all increases in production. Based on the success of technology development over the past several decades. and to increase the efficiency of energy consumption. the development costs are high. world prices in the $40-$50 range/barrel (in constant dollars) appear necessary to maintain a continuing flow of development capital.3 billion. large and continuing capital investments will be required.000 B/D. we anticipate that only small real increases in world energy prices will be required. energy prices could remain flat or even decline in real terms. which produces about 500. the Orinoco heavy oil projects in Venezuela produce 120. The magnitude of these future price increases will depend on the success of technology development to supplement traditional energy supplies. For example. requiring major capital infusions to maintain or expand existing production levels. If significant technological breakthroughs are achieved. Even in countries with known untapped reserves. if technological advancement slows. This increase in price is needed to develop more difficult supply sources and to limit demand growth rates in the outer years of the forecast. Regardless. In order to expand production to the extent necessary and make up for the natural decline in mature producing areas. we project that crude prices in real terms (constant $ basis) will begin to increase. Investments to produce unconventional crude oils are even higher. the Shaybah field in Saudi Arabia. With very little spare capacity. . .5 billion to develop in the mid-1990s. Production in many OPEC countries has now reached the mature stage. and future oil prices will have to be sufficiently strong to attract these large capital investments. In the Canadian oil sands.275 FIGURE B-4-2 BRENT CRUDE OIL PRICE FORECAST (Dollars per Barrel) 80 70 60 50 40 30 20 10 1985 1990 1995 2000 2005 2010 2015 2020 Current Dollars Constant 2007 Dollars Sometime after 2010-2015. However.000 B/D of crudes of varying qualities. the future price track will continue to exhibit the volatility and instability that have characterized the market for many years. even in the Middle East.III B – Near-Term Outlook -. will require major investments.000 to 200. with historical capital costs ranging from $1. much larger increases in energy prices would be required in order to induce the necessary investments in energy conservation and development.

As North Sea production declines. Prices have remained volatile in 2007. In this context of disruptive fundamental factors. and their influences on short term crude oil prices. Near Term: 2007-2012 In 2005-2006. falling early in the year owing to mild winter weather in the northern hemisphere. contributing to speculative upward pressure in financial markets. As discussed previously. . the perceived inadequacy of spare OPEC production capacity has helped to stoke fears of future shortages. Brent prices have exceeded $40/barrel since mid-2004. light sweet crude oils and light sweet imports from the North Sea and Africa are generally in parity since imports come in regularly. such that LLS prices are expected to remain at a discount to Brent.S. combined with the strength of Brent relative to USGC markets. Continued development of Canadian production is also expected beyond 2012 and this. From time to time there will be market disruptions which will encourage North Sea flows to North America but the steady flow of North Sea crude to North America seen in the 1990s will not be repeated. recovering as temperatures returned to normal. In addition. U.S. and is then linked by internal U. and moving up sharply again because of U. including strong demand growth. Light Louisiana Sweet (LLS) crude oil is used as the sweet crude benchmark for the USGC. The near-term outlook contains the possibility of more upward volatility as the fundamentals of tight capacity in a growing market remain in place. addressing the issues of the availability of refining capacity and tightness in crude oil supply. Gulf Coast hurricane damage.S mid-continent from Canada are expected to increase. As discussed in Section A-8. is expected to keep WTI at a discount to Brent. there will be less and less excess crude oil to flow to the North American market. Brent prices were strong relative to the USGC market. CRUDE OIL PRICES U. Prices are projected to remain near current levels over the next year.S. supply disruptions such as those in Nigeria. the differential is expected to remain at levels .S. tight refined products markets. a trend expected to continue in the future because of the declining production from the North Sea. the Maya/Isthmus differential is determined almost entirely by the light/heavy price relationships. we expect WTI prices to continue to be relatively weak compared with Brent.276 -. and severe U. Section II contains a detailed review of the short term price drivers. so a continued premium for Brent relative to its value in the USGC market is expected.S transportation economics to WTI. beginning to move down to lower long-term levels in 2009 as crude supplies increase.III B – Near-Term Outlook SHORT TERM FORECAST: 2007-2012 World crude prices have been on a sustained upward track since mid-2003. Long term. Longer Term: 2012-2020 Beyond 2012 we do not expect to see any recovery in North Sea production. geopolitical concerns. gasoline market pressures in late spring. and over $50/barrel since early 2005. since crude oil flows into the U. many factors have contributed to this strength.

. USGC (Dollars per Barrel) 10.277 sufficient to justify expansion of refinery residue conversion facilities.50) (4.S. and Asia. FIGURE B-4-3 ISTHMUS/MAYA DIFFERENTIAL.50 (0. The discussion of light/heavy differentials later in this section describes the rationale for this forecast.00 3.50) 2000 2005 2010 2015 2020 .S.00 6.50) (3. Figure B-4-4 shows the extremely wide light/heavy differentials in the U. in 2006 and 2007 that have resulted in large disparities in the values of Middle East sour crudes between the U.50) (1.50 0. Political disruptions affecting Nigerian crude oil production have also contributed to the high East-West differential.00 4.00 2.III B – Near-Term Outlook -.00 9.00 7.00 2000 2005 2010 2015 2020 ASIAN/MIDDLE EAST CRUDE OIL PRICES The East-West differential.00 5. FIGURE B-4-4 EAST-WEST DIFFERENTIAL (Forecast in Constant 2007 Dollars per Barrel) 1.00 8. defined as the amount Dubai that is “out of the market” compared with competitive Atlantic Basin crude oils. can be used as a measure of the value of Middle East crude oils moved eastwards compared with flows westwards.50) (2. In the 20072012 period we expect the differentials to move back towards the long term equilibrium level.

. transportation and processing in order to meet growing demand. and are the key factor affecting the difference in profitability of an upgraded refinery with residue conversion. accordingly. followed by a period of declining costs. stronger financial incentives are necessary to generate the needed capacity. de-bottlenecking projects and normal replacements of older units typically are sufficient to meet the growth requirement of the market. experience has shown that construction and supply industry capacity can quickly respond to demand changes. such as catalytic cracking.278 -. and the East-West differential is expected to reduce from the very high levels seen during this period over the next five years. At the projected growth rate. we do not expect the unusual circumstances in 2005-2006 to be repeated. We anticipate that construction costs will continue to escalate at rates well in excess of inflation for the next few years. Middle East producers will enjoy the transportation cost savings of shipping crude oil from the Middle East to Asia compared with shipping from Africa to Asia. However.0%-1.III B – Near-Term Outlook In the near term. That is. African producers are indifferent to shipments to Asia compared with the U. instead. completely new facilities will be required. As discussed in Section A-8. . The light/heavy differential is closely linked to the required growth rate in conversion capacity. light/heavy differentials are affected by a complex set of relationships. the commonly-used capital cost indices have lagged behind actual cost escalation for the past few years. the capacity deficit cannot be met merely by de-bottlenecking and expansion of existing units. If the required growth rate of conversion capacity is relatively low. our forecast is based on continued West African parity for East-West movements. resulting in a very strong market for construction services and supplies. As the growth rate exceeds this level. In the longer term out to 2020. compared with a simple hydroskimming refinery. technological improvements. The investment required to construct residue conversion investments has escalated rapidly in recent years. the world must invest heavily in hydrocarbon production. Currently. rather modest returns are sufficient to generate the needed capacity.5%.S. and thus the economics must justify their construction. Capital-intensive heavy crude operations show the highest margins. and shown in Tables B-4-2 and B-4-3. Based on current capital cost analyses. hydrocracking or coking. NORTH AMERICA REFINERY ECONOMICS Margins for various refinery complexity and configuration/crude supply combinations are presented in Figures B-4-5 and B-4-6. At growth rates in the range of 1. REFINING ECONOMICS AND PRODUCT PRICES LIGHT/HEAVY DIFFERENTIALS One of the most important factors affecting refinery economics worldwide today is the light/heavy differential. we are projecting strong growth in construction costs over the next few years.

it is considering the required additions to world refining capacity that long-term margins are expected to remain above 1990s levels.00 2. from 2005 and 2007 respectively. The gasoline sulfur reduction program and reductions in MTBE use have tightened supply.00 14.00 0.00 4. The price forecasts for both products are based on cash operating costs with a low level of capital recovery.00 2000 2005 2010 2015 2020 Coking Cracking Longer Term: 2012-2020 In the long term.00) 2000 2005 2010 2015 2020 Maya Coking Isthmus Coking Isthmus Cracking .00 10.00 6.00 6. providing support for stronger margins over the next few years. FIGURE B-4-6 USGC SOUR CRUDE REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 16.00 0.00 (2.00 7. The coking margin is expected to remain significantly above cracking margins.III B – Near-Term Outlook -. The margin figures and tables incorporate the impact of ultra-low sulfur gasoline and diesel production. . In the longer term.00 8.279 Near Term: 2007-2012 Margins are expected to stay high over the next few years before declining in the 2009-2010 period.00 3.00 2. FIGURE B-4-5 USGC LLS REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 8.00 1. we expect margins to return to levels above the depressed levels of most of the 1990s but below the 2004-2007 average. However. expansions in crude and conversion capacity are expected to ease supply/demand pressures.00 12.00 5. as additional refining capacity comes on line to ease supplies.00 4. and therefore these products result in a limited impact on projected refining margins.

. All prices are the mean of the high-low quotations.280 -.S. Typically. The outlook for refined product prices in the U. limitations on ethanol supplies exacerbated the market tightness in early to mid-2006. The lost octane-barrel contribution of MTBE resulted in more stress on the refining system’s octane capability. and differentials are somewhat more difficult to calculate on a strict refining economics basis because of the seasonal nature of price trends. Although the use of ethanol helped to address the octane shortfall. Under typical conditions we estimate the wintertime premium (first and last quarters of the year) to be near zero. the summer differentials will rise to a level that more than supports the maximized conversion of this material to gasoline through revised cutpoints for FCCU charge. Wintertime balances can be erratic and the typical premium on heating oil during the winter season is both a function of the middle distillate balance. such that octane values. The prices are spot pipeline prices for light products and waterborne prices for residual fuel oil. in 2006. Gulf Coast product prices in constant dollars are shown in Table B4-4. prices are provided for Reformulated Gasoline for Oxygenate Blending (RBOB).S. Often the strongest heating oil period is just prior to the winter as inventories are being added to meet peak winter requirements. Our forecasts are based on a summertime (second and third quarter) heating oil discount averaging approximately $0. Gasoline As MTBE use was phased out throughout the U. As the industry has now shifted to reformulated gasoline (RFG) production with ethanol.S. The relationship between light and heavy products is related to global trends in residue conversion utilization as well as local factors. though peaks well over this level are typical. Gulf Coast market will be influenced significantly in this decade by changing product specifications. gasoline prices and refining margins are higher than they would be if MTBE had remained in use.S. Middle Distillate Fuels Heating oil prices are projected based on a relationship to unleaded regular conventional gasoline. Refinery profitability is related to operating rates and supply/demand factors. rather than finished RFG prices.S. gasoline. The price outlook reflects the phaseout of the use of MTBE in U. both octane values and gasoline prices came under pressure. The lost volume tended to increase capacity utilization. The forecasts for U. The prices of individual light products are a function of supply/demand factors and refining economics. At maximum utilization of cracking capacity the differential often rises above balanced levels.05/U.III B – Near-Term Outlook NORTH AMERICA REFINED PRODUCT PRICES Refined product prices are a function of feedstock costs and the projected level of refinery profitability. the weather conditions and the relative strength or weakness of the gasoline balance. gallon. as discussed elsewhere. forcing movement towards higher-cost octane production economics. The combination of the expected averages yields a long-term forecast for a .

FIGURE B-4-7 CIF NWE REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 7. insurance. Near Term: 2007-2012 Margins in the first half of 2007 have been strong again and our projection through 2008 is for this situation to continue.III B – Near-Term Outlook -.00 3. The refinery economics presented reflect configurations that changed to meet new product specifications in 2004 and 2007. The use of CIF product prices corresponds to a transfer price between refining and marketing based on the alternative cost of purchased product to an inland marketer and implies that refinery products are used locally in inland markets.00) 2000 Sw eet/Sour Hydrocracking Sw eet/Sour Cat Cracking Sw eet Hydroskimm ing 2005 2010 2015 2020 Margins for each refinery are calculated using CIF (cargoes ARA) product prices in Rotterdam and delivered crude prices to Rotterdam based on spot FOB prices plus the costs of freight.S.00 1. allowing for the higher cost of hydrocracking investments. Margins for hydroskimming are expected to recover slightly but remain negative after full costs as the light/heavy spread narrows. and loss. and are also illustrated graphically in Figure B-4-7. Our outlook is for the composite (sweet/sour) hydrocracking net margin to continue to exceed the catalytic cracking margin in 2007 and beyond. the relative upgrading economics for hydrocracking are forecast to be slightly better than for catalytic cracking investments.00 (1. . gallon discount for heating oil relative to conventional ultra low sulfur gasoline on an annual average basis.281 $0. As a result. as discussed below.00) (5. before declining sharply as the streaming of new refining capacity worldwide takes effect. as shown in Figure B-4-8.03/U. NORTH WEST EUROPE REFINERY ECONOMICS Refining Margins Forecast net cash margins for the key Northwest Europe refinery configurations are presented in Tables B-4-5.00) (3.00 5. Hydrocracking margins are expected to continue to be somewhat higher than catalytic cracking margins reflecting the fact we expect diesel prices to remain strong compared with gasoline. .

S. .. but to be much stronger than the levels seen in the 1990s. the ICRF are projected to remain well above the equilibrium level through 2007-2008 before significant new capacity comes onstream. A trend to lower ICRFs is forecast from the recent highs. The forecast refinery economics for the Mediterranean are shown graphically in Figure B4-9 and detailed in Table B-4-6. However. reflecting continued high capacity utilization and higher replacement costs.III B – Near-Term Outlook The outlook for residue conversion economics is expected to follow the worldwide trend in the light/heavy differential discussed previously. MEDITERRANEAN REFINERY ECONOMICS The methodology used to forecast product prices in the Mediterranean market involves the analysis of crude oil price relationships and yardstick refining economics in the region as well as key product price relationships relative to Northwest Europe and other adjacent markets. Middle East and Far East.282 -. . with the equilibrium value being reached in the early part of the next decade as new conversion capacity comes online in the U. FIGURE B-4-8 CIF NWE INCREMENTAL CAPITAL RECOVERY FACTOR (Percent) 70 60 50 40 30 20 10 0 2000 2005 2010 2015 2020 Cat Cracking vs Hydroskim m ing Hydrocracking vs Hydroskim m ing Longer Term: 2012-2020 Longer term refining margins are expected to reach equilibrium at lower levels than in recent years. The equilibrium level is expected to be sufficient to encourage investments in hydrocracking capacity in Europe where the location is favorable and capacity sufficiently large.

EUROPEAN REFINED PRODUCT PRICES The forecast of prices for individual products is developed from the forecast for delivered crude oil prices. a moderate amount of cracked stocks is used in the diesel/gasoil pool. The industry does have significant FCC and hydrocracking capacity.III B – Near-Term Outlook -. The demand for heating gasoil is more than one-third of the total diesel/gasoil pool and provides an outlet for cracked material.00) (3.00 (1. The Mediterranean refining industry processes a higher-sulfur crude slate than the Northwest European region and has lower heating gasoil demand (20-25% of the market) with greater seasonality.00 3.00 1. the equilibrium refining margins for hydrocracking are expected to be a little higher than for catalytic cracking owing to the continued strength of diesel relative to gasoline. Catalytic cracking and hydrocracking margins are also expected to be similar to those in Northwest Europe.00 7.283 FIGURE B-4-9 CIF MED COMPOSITE REFINERY NET MARGINS (Forecast in Constant 2007 Dollars per Barrel) 9. Other product price relationships are also developed as needed to define minor product prices. such as LPG. from major product prices. but because there is less coking capacity. historical product price relationships. remaining strong through to 2008 before declining to the equilibrium level by around 2011.00 5. The equilibrium level is expected to be at lower levels than in recent years but much stronger than the levels seen in the 1990s. Composite hydroskimming margins in the Mediterranean are expected to be below breakeven for the majority of the forecast period. forecast margins for the yardstick refineries.00) 2000 2005 2010 2015 2020 Cat Cracking Hydrocracking Hydroskim m ing Near Term: 2007-2012 Refining margins in the Mediterranean market are expected to follow trends similar to our outlook for Northwest Europe. . Refineries in Northwest Europe generally process a sweeter crude slate than the USGC and are less complex.00) (5. reflecting continued high capacity utilization and higher replacement costs. Selective hydrocracking investments are expected to be achievable as a result. and expected future trends. The Mediterranean industry produces less cracked stocks from a lower . Longer Term: 2012-2020 As in Northwest Europe.

We are now projecting a diesel/gasoil price spread in Northwest Europe of around $27/tonne for 10ppm ULSD in 2007. further capital expenditure is estimated. The full introduction of 50ppm ULSD in Europe in the fourth quarter of 2004 resulted in the diesel price premium versus the benchmark gasoil price increasing to over $75/tonne. while other products grow only moderately or decline. With knowledge that the 10ppm specification is to be introduced. Differentials between 10ppm and 50ppm diesel were averaging around $6-$7/tonne. In order to reach the 10ppm standard. The Mediterranean market is closely linked to Northwest European market and product prices generally move together. most of this investment is likely to be made at the same time as investments to reach 50ppm. although refiners will seek to optimize investments between the 500-50ppm and 50-10ppm steps. In the longer term. The price spike rapidly diminished and the premium averaged $31/tonne for the year and averaged $19/tonne in 2006.284 -. European gasoline prices generally reflect netback prices from the U. . but the differential has fallen recently as the market in Northeast Europe has. and are expected to reflect progressively the relative weakness of the gasoline supply/demand balance and strength of middle distillates in Europe. diesel prices are expected to remain relatively strong compared to gasoline in the longterm future.III B – Near-Term Outlook amount of conversion capacity and has additional fuel oil demand in which to blend off high-sulfur distillates.S with a quality differential. However. to a large extent. the key feature of the price forecast in terms of product price relationships continues to be the strengthening of high quality middle distillate prices compared with other products. The prices are representative of mean quotations for cargoes CIF Northwest Europe. reducing slightly to around $21/tonne in the longer term. The forecast of CIF product prices for Northwest Europe is detailed in Table B-4-7. already moved to 10ppm. with additional pre-investment to modify the new unit for 10ppm. To achieve the 50ppm diesel specification. significant capital expenditure was required in both markets. This relative price strengthening is in line with the growth in demand for kerosene and diesel.S prices due to the steady flow of exports of gasoline to the U. following exceptional levels in 2005. and the 50ppm market is now too thin to enable a reliable assessment of prices by the price-reporting agencies. We have focused on product prices in Northwest Europe. . the level of investment to meet ULSD specifications is expected to be higher in the Mediterranean industry than in Northwest Europe. on balance. Gasoline prices in Northwest Europe recovered relative to diesel in 2006. with some differences depending on trade patterns for individual products. As shown in Figure B-4-10. The market in the Mediterranean is still 50ppm and the price differential between 10ppm diesel and 50ppm diesel is expected to increase to average $8/tonne with full market introduction before falling back to around the $6/tonne level. This assumes that a significant number of refineries will have to invest in new or substantially modified hydrotreating units to meet 50ppm and 10ppm sulfur.S market. in December 2004. Gasoline Gasoline prices in Northwest Europe are strongly related to U.

Diesel Middle Distillates Near Term: 2007-2012 As mentioned.III B – Near-Term Outlook -. with the introduction of the 50ppm specification. although the spreads are expected to fall back from the very high 2005-2006 levels. On this basis. . we assumed a slightly higher level of capital recovery on the investments to reach 10ppm.Gasoil Diesel (10ppm ) . . Given that there are some greater technological risks associated with this step.285 FIGURE B-4-10 NWE GASOLINE PRICE RELATIONSHIPS (Forecast in Constant 2007 Dollars per Tonne) 70 60 50 40 30 20 10 0 (10) 2000 2005 2010 2015 2020 Euro Unleaded . Some firming of the kerosene/gasoil differential is expected compared to pre-2004 levels. but we expect this to level out in the $18-$20/tonne range.Gasoil Euro Unleaded . the diesel/gasoil premium averaged $31/tonne in 2005. the costs for our marginal Northwest Europe refinery to reach 10ppm are treated as incremental investments beyond those for the 50ppm case. FIGURE B-4-11 NWE MIDDLE DISTILLATE PRICE RELATIONSHIPS (Forecast in Current 2007 Dollars per Tonne) 70 60 50 40 30 20 10 0 2000 2005 2010 Kerosene .Gasoil Diesel .Gasoil 2015 2020 Purvin & Gertz has concluded that the costs associated with the further reduction in diesel sulfur (from 50ppm to 10ppm) represent a smaller hurdle for the cracking refinery than has already made the investments necessary to reach 50ppm. increasing a little later with the change to 10ppm diesel. driven by the relative strength of jet fuel prices owing to a strong demand outlook and the anticipated weakness of gasoil prices.

.00 4. Hydroskimming margins improved during 2003-2005 with higher utilization.00) (2. and is shown as the EN 590 standard after 2007 in our forecast.00 0.00 3. we are treating the few weak quarters in 2005 and 2006 as transient events and are projecting that both hydroskimming and topping margins improve in 2007 and beyond to positive variable cost levels.00) 2000 Topping Hydrocracking Hydroskim m ing 2005 2010 2015 Simple Margins The fundamentals of supply and demand do not warrant sustained negative margins in the future. the equilibrium hydroskimming margin is slightly positive on a variable cost basis in Singapore.S.00 2. FIGURE B-4-12 SINGAPORE REFINING MARGINS (Forecast in Constant 2007 Dollars per Barrel) 5. The 10ppm product was available in Europe at the end of 2003. Simple refining capacity is projected to be required to meet demand even in export locations like Singapore.III B – Near-Term Outlook The price differential for 10ppm diesel versus gasoil is shown in the figure.00 1. Korea and India. Refinery capabilities to produce this diesel will determine its price (based on recovery of yield. reflecting its blending value in higher quality middle distillates and the continued growth of jet fuel demand. but not to the same extent as U.00) (4.286 -. in addition to EN 590 diesel. kerosene prices are expected to continue to show a premium over gasoil. In the longer term. However. reflecting the additional costs of production and a low level of return on investment. SINGAPORE REFINERY ECONOMICS Refining margins for the yardstick refineries based on Dubai processing in Singapore are illustrated in Figure B-4-12. We expect the 10ppm diesel premium to gasoil level out at around $25/tonne. Longer Term: 2012-2020 In the longer term. At this point. and European margins.00) (3. and margins are presented in constant dollars in Table B-4-8 at the end of this section. hydrocracking margins improved dramatically due to robust Asian light product demand growth and global market influences.00 (1. but does not cover full costs . production costs and capital recovery components).

. FIGURE B-4-13 EAST OF SUEZ CONVERSION CAPACITY CHANGES (Existing Plus Announced Capacity Additions) (Thousand Barrels per Day of FCC Equivalents) 1. but the remaining conversion capacity additions are in India and South Korea. Looking forward.287 Conversion Margins Near Term: 2007-2012 The spread between simple and complex margins has been maintained as simple margins have become negative. . The relationship between light and heavy products is set by the incremental return on investment in conversion facilities. with hydrocracking used as the key measure in the Asia because of the strong demand for middle distillates.III B – Near-Term Outlook -.000 800 600 400 200 0 1992 1995 2000 2005 2010 2012 Barrels Percent (Percent) 12 10 8 6 4 2 0 Longer Term: 2012-2020 Margins beyond 2012 depend in large part on the speed at which the next group of refinery projects is built and the level of demand growth over the next five years. Note that the “FCC equivalent” calculation takes into account different conversion technologies and equalizes them on a consistent fuel oil conversion basis. the continual need for conversion capacity to balance product demand with crude quality results in a sustained wide spread between simple and conversion margins. The level of conversion being added is illustrated in Figure B-4-13 below. SINGAPORE PRODUCT REFINED PRODUCT PRICES The projections of Singapore spot prices are derived from the crude oil price and refinery margin outlook. where product exports will have an influence on the broader Asian refining margin environment. The overall level of product prices relative to crude is set by the refining margins projected for facilities running Middle East light sour crude. hydrocracking margins are forecast to return to an equilibrium reinvestment level for conversion investments.200 1. Several new high-conversion refineries and a few large cracking expansions in existing refineries are under construction. A moderate decline in conversion margins in the 2008-2010 period is expected owing to the rather large amount of conversion capacity coming onstream. Based on current demand and refinery projects projections. some of this capacity is in China and will have less trade impact.

As the largest volume product. Gasoline While Singapore exports a large quantity of gasoline. All markets are gradually improving diesel quality by lowering the sulfur content. movements of naphtha from North Africa to Asia are projected to continue.288 -. The gasoline specification for Singapore price quotations is relatively loose. and the 0. desulfurization economics are becoming more important. Diesel specifications vary quite widely across Asia. The most direct linkage is with European and Middle East prices. Strong naphtha prices are projected to weaken the gasoline/naphtha margin and reforming for gasoline production is projected to be negative. the price of gasoil is the most important factor influencing refinery margins and conversion returns. The spot market for gasoline is quite thin. Vietnam reduced the diesel sulfur content from 0.III B – Near-Term Outlook The price forecasts for individual products are developed by analyzing cost and market relationships in Singapore.5%S product remains the key traded grade as the key import markets still have relatively high sulfur diesel product. The forecast prices show premia for Asian shipments that provide sufficient incentive to support the forecast level of product flows from the Middle East and India. Because East Asia relies on a steady flow of imports for a significant portion of its product requirements. for example. but remain strong compared with crude oil and naphtha. . Higher fuel oil and natural gas prices have significantly increased reforming fuel costs. The volume of higher sulfur grades above 500ppm is not especially high. Diesel Gasoil/diesel is the key light product in the Asian market. As more Asian countries tighten specifications on diesel sulfur content. Gasoline prices have weakened somewhat in 2005 and 2006 relative to distillates. much of this product actually moves through the distribution and marketing systems of the Singapore refiners with reblending of blendstocks to meet destination specifications. Other than opportunistic shipments. In the near-term. sulfur contents range from 0. Gasoline prices improved substantially relative to crude oil and other light products in 2003 and showed continued strength in 2004. A few oil traders conduct independent blending operations commonly with Chinese blendstocks.5% sulfur to 10ppm in Japan. and gasoline prices are quite volatile. with hydrogen valued as a fuel. gasoline is expected to remain strong relative to crude and in line with middle distillate pricing. although many Asian markets now have gasoline qualities that exceed Singapore export specifications. Changes in the Chinese tax regime have essentially stopped Chinese gasoline exports. However. Singapore forecast prices are shown in Table B-4-9. Prices of the various grades of diesel are based on the incremental operating costs for . For example. 2007.2%S effective January 1. reflecting exports to markets with less stringent specifications. along with shipments of high sulfur heavy fuel oil from Europe. the forecast of Singapore prices is compared with other world markets to ensure consistency with the product trade outlook. Most developed markets will have 50ppm diesel quality by 2008. forecast prices do not generally support direct movements from Europe or the Americas.5%S to 0. currently accounting for about 30% of total product demand. and is nearly twice the gasoline demand.

00) (4.00 (1. The economics of conversion refineries are better with positive margins throughout. reflecting the relatively robust outlook for the forecast period.00) (3. Simple refinery economics are expected to remain negative.00 3.00 2.00) (2. surplus capacity will be operated for export and domestic prices will trend down to export levels. A period of weakness is expected in the period between 2010.00 1. In most of Russia this is already the case for products other than high octane gasoline that is sold at a premium to an export netback. .III B – Near-Term Outlook -. FIGURE B-4-14 ARAB GULF REFINING MARGINS (Dollars per Barrel) 5. Data in Table B-4-11 are given in 2007-dollar terms whereas the graph below is in money of the day.00) 2000 Topping Hydrocracking Hydroskim m ing FCC 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 RUSSIAN REFINERY ECONOMICS The forecast economics of Russian refineries is shown in Figure B-4-15 and Table B-411.00 4. In the forecast period we have not attempted to forecast domestic prices as they continue to vary regionally and will move with the supply and demand balance. as most exports will be made to the Far East region. indicating that hydroskimming crude to export the products would not be economic. but to remain positive.00 0. Assuming that the industry reacts to the current tax stimulus. reflecting the potential for overinvestment in the Asian region around 2010. .289 desulfurization and expected levels of return on investment. MIDDLE EAST REFINERY ECONOMICS There is no change expected in the future period in that Arab Gulf refinery economics will reflect the Singapore market adjusted for freight. Returns are expected to be modest.

00 2. .00 8.00 6.00) (6.00) (4. with lower taxes on crude rather than products and substantially less tax on fuel oil than on clean products.00 4.290 -.00 0.00 (2. .III B – Near-Term Outlook FIGURE B-4-15 RUSSIA REFINING MARGINS (Dollars per Barrel) 10.00) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Hydroskimm ing Export Cat Cracking Export The forecast of export prices for crude oil and refined products assumes that the export tax regime remains as it is currently.

44 72.33 59.76 45.95 61. NWE LLS.73 62. Singapore Oman.25 60.32 57.71 71.06 61.04 66.52 56.05 49.13 48.11 52.70 68.18 59.44 57.81 64.58 56.89 63.84 48.40 64.09 62.12 69.85 57.25 52.72 58. USGC Dubai.94 63.68 62.57 63.24 61.01 59.02 47.00 59.51 61.37 58.69 58.50 56.16 46.48 66.23 53. FOB Dubai.95 66.99 53.50 66.31 56.45 55.78 55. Midland ANS. USWC Dubai.27 59.74 58. USGC Brent.21 64. FOB Maya.53 69.06 57.14 67.12 57.34 61.46 59.72 54.07 57.93 55. James WTI Spot.26 56.05 56.07 60.88 60.32 58.49 57.95 57.49 45.00 62.46 52.11 67.87 Sour Crude Oil Prices Isthmus.41 64.48 60.31 57.26 59.55 61.94 60. USGC WTS Spot.42 65.83 61.95 53.53 60.27 64.05 54.39 61.38 57.55 57.41 49.60 46.34 57.48 62.34 58.61 55.III B – Near-Term Outlook -.33 55.55 54.95 52.28 60.06 66.38 52.23 64. Midland Tapis.40 58.78 65.83 56. FOB Brent.99 55.49 55.36 54.95 56.32 53.52 53.98 63.77 61.88 56.05 59. NWE Dubai.60 54.01 50.01 62.59 57.89 71.34 60.64 54.52 70. USGC Maya.27 56.60 67. FOB Isthmus.57 61.01 47.19 68. St.37 63. FOB 59.59 62.04 59.34 60.09 57.03 57.54 62. .58 57. Cushing WTI Spot.91 58.18 .03 52.52 65.94 50.03 55.06 53.77 61.92 57.11 68.84 70.60 57.57 57.79 53.25 60.48 66.97 62.20 53.00 63.09 56.28 44.07 57. FOB 2007 2008 2009 2010 2011 2012 2015 2020 65.00 60.16 54.51 57.291 TABLE B-4-1 INTERNATIONAL CRUDE OIL PRICES (Current Dollars per Barrel) 2006 Sweet Crude Oil Prices Brent.84 48.05 56.38 51.80 51.

27 2.60 (0.96 67.99 (2.58 2.26 51.12 3.97 23.44 54.89 58.39 1.01) 0.61 Cracking/Coking 53.84 (1.94 6.91 24.95 6.10 1.32) 48.94 4.69 32.25 52.39 0.13) 1.59) 47.S. % of Replacement Cost Light Sweet Cracking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.03 1.12) 66.28 (15.50 76.56 0.10 52.28 5.30 3.60 66.80 58.23 1.39 6.68 2.37 51.62 22.42 6.26 6.44 (17.06 6.77 8.30 57.13) 0.26 52.35 4.03 (2.18 2.94 4.63 66.39 1.71 1.17 1.94 0.60 4.72 1.43 58.95 64.71 Light Sweet Incremental Capital Recovery Factors (%) Hydroskimming/Cracking 50.31 1.51 57.47 14.04 23.84 1.72 54.84 62.29 1.95 4.07 0.09 23.02 Note: Margin projections incorporate production of ultra-low sulfur gasoline (30 ppm) in 2005 and Note: ultra-low sulfur diesel (15 ppm) in 2007 .70 1.20 5.21 47.III B – Near-Term Outlook TABLE B-4-2 U.35 (15.40 (16.30 5.11 0.15 1.03 34.77 2.44 48.77 0.86 1.28 5.78 6.78) 74.12 23.32 67.60 20.95) 52.84 1.39 4.26 0.39 (0.58 1.64 1.96 46.40 0.25 (13.23 1.27 1.11 20.31 0.38 1.20 7.11 48.11 46.07 0.01 47.11 1.28 0.95 1.56 0.93 40.86 1.51 4.06 4.39) 0.03 (2.34 1.95 2.38 5.18 2.77 5.292 -.73 0.30 0.48 20.33 1.42 1. % of Replacement Cost Light Sweet Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.06 0.06 1.18 2.06 1.32 1.21 0.36 1.93 (2.70) 0.83 57. % of Replacement Cost 2007 2008 2009 2010 2011 2012 2015 2020 67.27 0.30 6.26 (13.18 1.29 2.62 0.97) 0.20 0.55 59.94 0.86 52.98 4.60 7.91 1.33 0.43 11.11) 0.60 1.41 1.30) 57.10 20.17 (2.39 0.19 0.17 1.47 66.28) 52.43 0.62) 0.91 1.51 73.07 1.11 57.52 66.33 (17.52 2.21 67.06 (2.63 20.25 1.79 1.26 9.59 64.58 2.27 2.49 2.05 52.02 (1.26 (13.20 2.75 51.55 51.36 58.27 2.28 1.49 2.28 (14.77 0.27 5.94 0.22 46. .27 47.27 1.42 1.20 2.95 0.49) 1.66 1.50 52.85) 0.31 48.02 (2.55 2.37 2.12) 58.81 25.36 8.25 2.94 6.50 56. GULF COAST LIGHT SWEET CRUDE MARGINS (Dollars per Barrel) 2006 Light Sweet Hydroskimming Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.08 0.47 1.43 2.70 27.59 1.19 29.22 1.50 71.03 1.15) 48.12) 0.

61 1.00 24.78 0.71 52.33 44.83 11.12 2.72 1. GULF COAST SOUR CRUDE MARGINS (Dollars per Barrel) 2006 Light Sour Hydroskimming Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.82 48.15 48.22 35.40 43.54 52.23 (12.81 2.80) 0.71 13.78 0.72 0.24 12.13 0.36 9.26 1.99) 52.04 11.43 16.88 2.24 2.41 0.12 30.85 (1.29 3.03 7.76 60.39 47.46 27.45 47.27 12.21 0.39) 0.25 4.34 13.33 2.79 1.24 12.62 0.48 60.02 47.16 5.18 0.28 2.78 0.90 2.11 19.04 0.III B – Near-Term Outlook -.23 (12.25 2.73 0.60 0.19 2.81 1.33 (13.68 1.01 27.26 0.98 0.84 1.27 2.42 14.23 0.80 0.85 (2.61 2.00 28.66 47.45 40.20 43.85 (1.86 1.99 47.57 57.78 4.16 0.72 1.83 Light Sour Incremental Capital Recovery Factors (%) Hydroskimming/Cracking 42.02 1.85 (1.31 18.79 42.27 Cracking/Coking 63.96 5.33 1.66 1.16 0.78 32.70 0.56 64.29 Maya Coking/Coking 34.77 (1.27 50.84 30.40 4.28 66.56 55.78 8.33 35.39 7.42 62.96 10.02 1.96 1.09 0.99 52.41 17.65 2.29 9.64 9.53 49.24 (12.51 3.08 2.45 1.16) 47.89 2.69 60.13 17.51 Note: Margin projections incorporate production of ultra-low sulfur gasoline (30 ppm) in 2005 and Note: ultra-low sulfur diesel (15 ppm) in 2007 .48 1.32 3.18 20.25 19.32 3.97 0.12 43. .69 (0.12 43.85) 0.12 57.13 1.76 1.30 (16.94 2. % of Replacement Cost Light Sour Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.36 (10.96 0.28 36.12 30.56 0.80 7.55) 53.81 17.95 0.65 1.60 53.94 9.00 23.11) 0.28 0.30 60.33 1.25 0.82 2.40 35.34 17.94 2.51 4.06 52.97 (2.293 TABLE B-4-3 U.61 1.02 0.92 7.22 42.47 49.19) 0.40 (9.93 56.97 68.55 2.54 4.58) 68.35 2.24 13.11 71.26 8.80 13.00 23.94 1.04 6.97 1.33 8.00 34.62) 43.78 1.92 0.78 8. % of Replacement Cost Light Sour Cracking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.26 9.13) 44.06 3.30 74.02 2.00 24.70 0.96 50.74 0.12 14.43 52.85 52.46 16.95 8.09 2.74 4.80 0.15 47.23 4.78 4.29 10.10 52.50 0.00 25.11 1.28 30. % of Replacement Cost 2007 2008 2009 2010 2011 2012 2015 2020 61.15 1.41 5.25 2.72 52.41 60.30 4.00 0.23 0.38 22.85 43.87 (1.33 47.27 43.56 1.25 5.49 51.01 39.36 0.02 2.19 0.63 0.83) 0.49 0.60) 43.92 7.76 1.02 7.82 (2.34 12.38 2.46 3.52 60.24 4.05 60.04 42.18) 47.35 0.43 29.99 2.85 0.41 (0.81 62.89 3.64 0.72 52.27 2.87 1.82 1.56 2.85 59.84 10.09 71.06 2.11 0.85 53.43 15.47 36.43 0.14 24.41 10.77 54.27 15.11 1.04 0.25 (13.11 42.35 17.74 8. % of Replacement Cost Heavy Sour Coking Refinery Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.57 3.27 14.32 43.31) 1.96 2.41) 61.18 53.73 2.44 1.64 4.03 2.24 0.78) 0.S.65 12.50 15.30) 0.24 2.27 18.51 0.26 8.52 0.51 8.26 (12.23 4.68 13.94) 0.48 1.

55 153.09 169.99 105.43 158.64 161.III B – Near-Term Outlook TABLE B-4-4 U.95 174. Phase II 2000-2005 Premium Unleaded Gasoline Mid-grade Unleaded Gasoline Regular Unleaded Gasoline 2007 2008 2009 2010 2011 2012 2015 2020 101.57 184.44 168.52 182.54 155.06 158.67 204.01 46.12 157.42 184.70 193.62 143.60 159.74 163.07 95.51 121.99 173.95 194.88 151.48 143.37 176.07 46.98 168.86 112. GULF COAST PRODUCT PRICES (Current Dollars) 2006 Gulf Coast Product Prices.05 207.92 192.37 176.73 186.66 46.80 157.73 111.16 123.35 177.73 Note: Gasoline and RBOB changed to ultra-low sulfur in 2005 190.91 183.33 192. 2 Fuel Oil 0.34 127.48 190.34 180.(¢/Gal.97 166.Low Sulfur (15 ppm) Diesel 1% Sulfur Residual Fuel Oil ($/Bbl.) Reformulated Gasoline (¢/Gal.88 160.45 164.00 165.91 172.75 169.43 45.89 45.99 173.25 172.10 152.95 108.23 43.) Propane Isobutane Normal Butane Natural Gasoline Premium Unleaded Gasoline Mid-grade Unleaded Gasoline Regular Unleaded Gasoline Jet/Kerosene Diesel/No.45 186.84 168.09 44.69 .58 107.44 166.24 127.29 124.33 110.03 198.294 -.27 44. .50 162.97 170.56 89.13 170.89 155.98 194.59 157.34 191.86 163.65 135.98 130.66 160.) 3% Sulfur Residual Fuel Oil ($/Bbl.38 150.32 185.40 163.16 154.23 165.05 101.99 172.40 57.52 119.04 119.48 89.15 Regular (RBOB) 188.47 168.59 177.42 192.59 161.78 54.36 136.82 49.94 88.15 113.96 198.91 154.93 150.59 124.25 105.88 189.05 163.15 115.18 45.59 42.78 157.30 45.45 95.86 170.75 200.05 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Reformulated Blendstock for Oxygenate Blending (¢/Gal.) Phase I 1996-1999.79 132.38 169.61 110.38 136.05% S Diesel Ultra .13 180.98 167.S.15 42.83 42.17 157.82 177.75 125.59 174.83 185.) Premium (PBOB) 209.27 184.06 47.05 47.79 118.08 181.

19 0.93 0.15 0.41 (7.06 46.42) 0.42 0.51 8.37 47.37 6.01 0.31 45. 2004.40 29.45 36.76 0.12 4.39 2.52 52.43 6.50 36.23 0.88 0.50 49.06 0.11) (2.88 66.52 33.51 0. Sweet H'skim Sweet (50%)/Sour (50%) Hydrocracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs.28 0.88 8.43 5.00) 0.69 5.85 (1.27 2.46 22.26 2.03 71.23 2.22 2.32 70.10 55.34 47.37 47.30 24.67 64.42 3.25 2.58 46.95 57.65 0.01 49.27 2.21 0.14 23.68 7.23 66.84 0.22 22.26 8.02 55.35 3.48 1.54 (5.18 0.31) 0.67 49.27 2.52 5.70 51.42 3.13 0.47 51.84 0.11 1.32) 0.81 45.11 0.46 23.30 2.85 24.35 49.17 56.88 Notes: Based on CIF cargoes NWE product prices unless noted.295 TABLE B-4-5 NORTHWEST EUROPE REFINING MARGINS (Dollars per Barrel) 2006 Sweet Hydroskimming Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest onWorking Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Variable Cost Margin.30 0.65 40. FOB Prices Sweet Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs Sweet H'skim (%) Sweet (70%)/Sour (30%) Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Return vs. Notes: Configuration changes in 2000.42 3.40 0.78 0.49 49.08) 0.10 5.91 (5.23 7.90 0.92 25.08 0.69 6.84 44.41 0.27 2.68 9.12 1.50 55.01 63.30 56.27 0.52 5.09 5.36 51.04 64.87 6.80 62.49 4.49 30.39 49.45 5.68 (0.50 51.23 0.87 0.35 71.14 1.30 56.III B – Near-Term Outlook -.12 3.92 0.35 2.97 0.11 1.28 2.34 6.04 24.67 27.10 (5.12 1.36 47.11 1.51 52.41 31.48 50.16 (14.42 5.90 63.25 26.64 40.04 46.08 0.85 0.39 0.33 4.10 50.67 3.04) 0.79 (5.40 65.23) 0.81 5.03 44.06 70.31 7.76 0.69 5.47 0.04 46.28 2.28 51.93) 0. Sweet H'skim 2007 2008 2009 2010 2011 2012 2015 2020 64.20 50.49 7.67 0.77 0.57 48.41 50.53 64.06) 0. .72 26.83 0.10 0. .62 0.10 6.37 29.12 1.36 64.82 43.37 47.32 25.66 (1.35 2.31 33.37 49.05) 0.96 45.67 54.80 6.10 5.22 2.84 0.68 56.40 52.31 6.51 72.26 2.57 63.62) (11.79 4.51 0.63 42.97 7.52) (0.00 56.62 (1.37 49.37 29.13 6.89 0.53 51.84 46.62 (1.53 4.68 27.25 7.14 7.51 10.78 6.23 2.98 (4.98 51.81) 0.33 3.26 2.80 (1.67 3.11 0.35 2.40 47.08 7.06) 50.74 7.19 6.28 2.57 (0.59 5.00 50.08 30.28 2.64 (1.37 51.00 62.31 2.61 56.57 50.52 4.42 3.37 62.52 45.44) 0.12) 0.24 2.34 0.62 0.41 3.60 0.92 52.28 2.86 27.32 5.51 0.12 56.66 (2.97 48.02 26.02 5.48 49.14 0.65) 0.35 3.65 51.39 56.33 2.20 28.41 47.76 7.69 0.71 29.97 46.11 1.29 0.66 45.15 0.36 49.50 7.00 52.68 0.09 6.70 55.05 62.11) (0.37 30.46 4.95 6.59 25.32 0.00 50.32 55.27) 0.19 0.50 6.02 (0.61 (3.53 0.17 6.33 45.59 46.14) 0.48) 0.13 57.04 0.59 0.42 0.36 0.29 2.50 56.39 3.22 2.78 0.42 0.57 6.36 0.45 9.45 0.45 4.79 43.93 11.40 50.80 0.29 2.96 40.78 5.75 70.21 2.20) (0.30 44.51 0.25 2.22 5.15 49.93 (8.72 8.44 0.52 8.41 4.90 6.81 63.92) 0.10 5.49 5.53 5. and 2007 to reflect product quality changes.81 6.05 30.05 22.

39 24.54 71.35 49.23 58.84 63.48 33.53 (0.36 39.22 0.26) (0.46 0.97 0.47 11.47 43.27 55.50 46.39 42.82 9.44) 0.54 43.51 (2.06 41.42 63.51 49.78 43.83 51.44 12.28 2.18 43.14 48.70 48.88 10.41) 0.71 0.63 0.16 4.21 63.99 44.06 50.80) 0.74 44.94 0.08 44.36 41.56 (1.85 0.67) (2.09 5.29 2.28 2.61 5.63 62.58 6.69 9.28 6. 2005.29 2.01 7.78 (8.92 61.53 (0.69) 0.32 0.03 55.01) 0.72) 0.28 2.47 41. Notes: Sour component: 100% Arab Light before 2000.20 33.56 40.57) 0.20 6.39 0.86 0. WC) Hydrocracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Cat Cracking Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Incremental Hskim/Hcrk (%) Incremental Hskim/Ccrk (%) 61.05 7.44 50.03 0.36 41.80) 0.39 40.00 10.64 0.35 2.97 32.47 62.62 (4.25 2.74 0.22 6.20 0.49) 54.62 0.97 0.39 42.13 0.47 25.51 54.14 1.56 (1.28 4.13 1.76 (0. .18 0.79) (2.42 12.57 48.23 4.57) 48.27 2.92) 0.23 7.14 1.94 70.23 7.54 9.29 4.57 37.45) 0.32 32.33 0.32 2.15 1.20 7.38 0.34 5.21 23.24 2.67) 0.15 0.65 70.01) (1.23 55.90 10.31) 0.11 61.01 (1.22 7.50 9.66 0.10 56.99 (3.14 1.84 44.28) (0.19 (7.43 0.79 0.38 54.28 0. 33% Arab Light + 67% Urals from 2000 onwards.71 0.32 61.36 43.25 0.26 2.08) (12.76 69.50 44.33 2. .68 0.71 8.21 63.58 44.05 0.05 8.78 0.98 0.67 42.04 1.16 0.14 10.67 (5. and 2008 to reflect product quality changes.27 2.17 1.00 Notes: Based on CIF cargoes Med product prices Notes: Yardstick configuration changes in 2000.04 6.21 0.21 4.26 4.26 5.29 4.07) 0.54 (1.98 0.83 48.58 62.35 24.18 0.71 7.00 4.18 55.296 -.01 10.69 (16.23 33.50 27.28 7.33 12.27 45.83) 0.37 10.31 4.09 36.55 56.27 2.19 0.96 44.01 48.26 4.28) 44.38 49.30 2.21 0.63 31.60 9.48 51.III B – Near-Term Outlook TABLE B-4-6 MEDITERRANEAN REFINING MARGINS (Dollars per Barrel) 2006 2007 2008 2009 2010 2011 2012 2015 2020 Refinery Economics (40% Sweet/60% Sour).56 38.39 26.81 0.65 0.36 4.58 0.40 1.72 55.26 0.58 7.05) (0.88 0.62 36.59 (0.26 2.22 48.35 40.77 33.46 0.99 9.98 43.04 7.56 21.46 0.34 5.57 32.09 54.97 54.39 44.30 2. $ per barrel unless noted Hydroskimming Product Sales Realization Crude Cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Replacement Cost ($/Annual barrel) Return on Replacement Cost (%) Variable Cost Margin (inc.94 0.16 1.38 10.36 25.01 8.36 48.35 32.21 4.85 32.39 0.08 0.19 50.35 41.62 34.36 24.99 0.52 4.15 1.53 61.93 (5.59 (4.27 2.56 0.19 13.18 55.76 0.71 1.

Notes: (4) Based on maximum gasoil sulfur content of 0. Notes: (3) Based on maximum diesel sulfur content of 350ppmw from 2000-2003. 1%S RFO.15g/l Regular Unleaded Euro Unleaded (2) Super Unleaded (2) Kerosene Diesel EN590 Diesel 10ppm Gasoil (4) (3) (2) 2007 2008 2009 2010 2011 2012 2015 2020 550 564 638 629 632 650 651 608 614 589 308 283 587 593 624 626 643 625 583 587 560 292 272 570 564 593 595 619 615 581 581 554 292 267 559 542 571 573 599 597 562 562 536 309 284 531 516 544 546 572 570 536 536 510 297 271 516 501 529 531 559 558 525 525 497 292 265 517 502 528 530 558 557 525 525 497 301 274 550 534 562 564 593 593 559 559 528 330 301 633 615 647 649 682 681 642 642 607 381 349 RFO. 50ppmw from 2004-2006. 10ppmw from 2007. .1% from 2007.2% through 2006. 0. 10ppmw from 2007.297 TABLE B-4-7 NORTHWEST EUROPE PRODUCT PRICES (1) (Current Dollars) 2006 Last Revised Jun 2007 Current Dollars per Tonne LPG Naphtha Premium 0. 50ppmw from 2004-2006.III B – Near-Term Outlook -. .5%S Notes: (1) Cargoes CIF Rotterdam Notes: (2) Based on maximum gasoline sulfur content of 150ppmw from 2000-2003. 3.

05 0.31 (2.65 49.71 2.44 (1.50 (9.10) 0.83 (2.31 (1.59 (0.28 4.08 0.34 (4.27 0.25 59.55 8.18 3.71 8. % of Replacement Cost Hydroskimming Refinery Product Sales Realization Dubai.78 0.49 (0.06 8.00 20.93 41.86) 53.01) 0.38) 49.58 0.87 1.34 (4.32 62.50 1.29 1.33 54.59 (0.26 0.00 0.00 5.42 1.04 1.20 3.41 1.10 3.86) 44.00) 44.31 1. .12) 0.00) 54.58 46.26 0.28 1.22 1.10 0.13 (0.47 2.00) 48.50) 45.92 10. % of Replacement Cost Incremental Capital Recovery Factors (%) Topping/Hydroskimming Hydroskimming/Hydrocracking 2007 2008 2009 2010 2011 2012 2015 2020 62.81 55.21 60.34 7.73 46.66 54.91 3.66 0.85) 0.00 3.44 1.32 (1.44 (1.80 6.44 1.69 0.32 (2.16 59. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.13 1.68 3.12 0.62 1.91 (2.86 3.00 3.13 0.13 0.00) 32.69 2.70 1.18 46.27 1.32 (1.99 (0.84 3.06 1.73 1.33) 55.03 0.78 1.11 0. % of Replacement Cost Hydrocracking Refinery Product Sales Realization Dubai.97 42.54 1.70 5.23) 0.54) 0.07 3.12 1.76) 43.87 3.92 3.40 3.07 46.00 (1.16 59.60 3.00) 63.03 (0.00 20.60 3.01 (0.15 0.08 (0.00) 49.68 2.38 7.95 1.50 6.60 1.59 7.54 (21.00) 44.50 (9.87) 0.36 1.35 (1.00 21.99 52.11 (0.50 3.32 1.68 2.35 7.35 1.23 1.32 (2.57) 48.35 54.80 70.47 2.50 1.97 52.69 8.38) 63.41 (6.28 1.70 3.00 20.00 20.77) 0.07 41.68 8.48 7.56 0.00 23.73 55.86 62.31 1.04 1.63) 0.59 3.12) 45.96 1.45 7.00 .90 3.01 1.02 52.23 4.28 1.41 (6.58 1.28 35.38 7.23) 0.06 1.00) 69.47 2.71 62.80 42.07 46. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.18 0.88 42.78 1.92 3.28 8.III B – Near-Term Outlook TABLE B-4-8 SINGAPORE REFINERY MARGINS (Dollars per Barrel) 2006 Topping Refinery Product Sales Realization Dubai.25 0.35 7.52 1.73 50.41 62.20 42.18 0.24) 0.81 1.78) 55.32 1.85) 0.24 0.10 42.28 0.03 (0.18) 1.70 0.69 2.78 41.86 42.21 0.91 (1.78 8.70 1.00) 26.52 1.27 1.17 46.26 1.55 50.13 (0.54 (19.34 (1.26) 1.36 1.91 3.298 -.71 2.38) 62.00 (0. Singapore Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.24 1.47 8.

73 48.30 82.87 50.74 49.27 64.97 68.00 44.87 70.5% Fuel Oil.43 50.25 49.66 72.16 46.41 48.86 72.51 73.78 68.00 77.03 55.55 67.15 73.79 79.20 52.07 56.51 49.55 80.60 73.38 80.56 48.73 72.5% Fuel Oil.36 53.72 72.09 64.13 46.32 55.34 67.62 72. IFO 380 61.41 76.74 52.02 46.99 61.21 67.86 82.79 55.83 47.85 69.III B – Near-Term Outlook -.61 50.32 74. .81 66.85 67.40 69.12 70.02 70.44 57.76 63.19 50.42 45.20 72.12 67.299 TABLE B-4-9 SINGAPORE PRODUCT PRICES (Current Dollars per Barrel) 2006 Last Revised Jun 2007 Naphtha Premium Gasoline Unleaded Regular Gasoline Jet Kerosene (Dual Purpose) 0.35 71.5% Gas Oil 500 ppm S Gas Oil Low Sulfur Waxy Residue 3.05 65.00 47.41 60.16 68.45 68. IFO 180 3.61 49.85 73.57 59.61 48.10 63.43 66.61 2007 2008 2009 2010 2011 2012 2015 2020 .56 65.74 81.26 67.49 67.60 76.32 76.73 54.43 69.99 47.73 64.

07) 46.28 0.57 41.88 0.74 0.08 0.50) 53.58 0.16 3.18 7.32 41.03 (3.30 (3.58) 0.81 1. % of Replacement Cost Incremental Capital Recovery Factors (%) Topping/Hydroskimming Hydroskimming/Hydrocracking 2007 2008 2009 2010 2011 2012 2015 2020 59.13 0.30 (3.13 (1.29 (3.75 0.53) 59.79 2.37) 51.27 (0.64 51.65 45.72 3.25 45.71) 0.13) 0.76 0.17 (0.52 (1.14 (1.80 58.01 0.92 0.34 1.94 (3.09 0.15 0.33 (5.27 4.10 61.74 0.82 2.95) 41.34 0.63) 23.84) 0.86) 26.58 0.12 58.48 (9.44) 51.45) 52.34 23.38) 43.95 1.70 3.01 1.64 1.70 0.65 5.93 0.65 1.38 4.31 0.97 1.300 -.00 2.61 (0.72 0.02 0.38 58.67 1.35 2.90 48.35 1.99 0.43 58.35) 41.82 41.39 (0.22 0.29) 0.27) 0.18 8.18 7.65) 35.04 (1.16 (0.74 3.06) 0.63 0.48 41.40 (6.35 1.34 1.46 44.36 45.20 2.38 5.58 .68 0.33 1.52 (19.18 8.33 1.78 1.13 3.28 0.71 48.40 (6.80 2.36) 0.87 0.33 1.65 8.30 (3.35 1.43 (1.56) 46.56 2.72 0.39 45.62) 0.33 (2.31 (8.04) 0.58) 46.25 (0.42 3.54 1.36 0.18 9.93 1.55 (2.52 1.17 (7.85) 42.38 1.08 (0.78 0.52 45.18 8.78 0.32 2.42 0.87) 0. % of Replacement Cost Hydroskimming Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.45) 0.78 3.30 (4.00 1.38) 0.65 61.39 41.86 2.43 1.20 0.38 1.65 1.86 (6.67 6.18 7.15 0.35 3.30 (3.76) 67.37 1.46 0.67 4.52 (1.28 (0.21) 0.62 41.77 0.18 7.48 (9.62) 23.27 1.33 (5.11 0.99 52.43 49.44) 0.59 45.08) 0.37 0.65 0.08 (0.72 0.32 1.01 1.66 47.27 7.52 (18.65 51.87 0.95 53.12) 23.33 (2.III B – Near-Term Outlook TABLE B-4-10 MIDDLE EAST REFINERY MARGINS (Dollars per Barrel) 2006 Topping Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.79 2.70 0.27 0.21) 25.34 1.75 41.83 45.41 51.59 2.33 1.45 4.90 (4.40 1.08 4.48 1.72 6.55 1.66 45.01 45.93 4.55 1.56 60.14 (0.55 0.17 49.41 (0.29 (1.09 4.16 0.17) 0.22 0.60) 0.78 0.17 3. .19 53. % of Replacement Cost Hydrocracking Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.27 61.72 45.65 58.11 3.26 0.67 1.65 0.78 0.08) 0.43 (1.03) 46.58 63.03 52.78) 60.69 2.99 0.27 40.05 0.70) 0.28 0.23 (1.55 1.82 41.26 0.31 2.55 55.32 3.78 6.57) 57.51 3.15 0.18 3.41 1.18 9.38 7.54 2.11 53.65 40.27 (3.32 1.08 7.74 63. % of Replacement Cost Cat Cracking Refinery Product Sales Realization Dubai fob Gross Margin Variable Costs Fixed Costs Net Refining Margin Interest on Working Capital Return.15 0.42 51.73 0.26 (0.06) 0.00 53.75) 60.41) 42.61) 42.15 (0.34 1.04) 0.89) 42.88 0.38) 30.62 (0.72 40.68 61.70 6.17 (1.44 67.27 0.52 5.65 0.26 0.60 40.80 2.28 (2.

03 5.35 2.91 4.10 24.37 2.69 28.92 24.50 28.77 34.35 2.39 25.37 10.36 38.39 2.74 3.85 1.63 26.73 4.26 5.48 0.39 3.65 5.84 1.06 0. .30 33.48 8.88 1.68 0.40 6.85 2.44 29.83 30.47 0.92 0.84 1.80 1.12 2.48 24.83 0.III B – Near-Term Outlook -.99 1.78 1.13 1.72 1.59 24.71 24.03 24.59 7.48 5.91 7.37 0.21 4.25 3.78 1.52 24.60 31.40 27.92 1.73 30.40 4.73 6.65 1.32 2.44 5.35 2.34 2.11 26.77 1.59 1.37 7.74 30.29 1.10 1.81 1.51 1.32 .67 32.78 36.58 4.51 1.42 4.59 3.301 TABLE B-4-11 RUSSIAN REFINERY ECONOMICS (2007 Dollars per Barrel) 2006 2007 2008 2009 2010 2011 2012 2015 2020 Hydroskimming Refinery Export Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin Cat Cracking Refinery Export Product Sales Realization Crude cost Gross Margin Variable Costs Fixed Costs Net Refining Margin 35.12 0.32 0.72 35.12 40.65 7.88 32.60 1.81 0.99 28.33 2.01 1.23 2.07 28.83 7.58 7.62 1.09 30.46 30.40 27.87 2.68 25.01 29.33 24.35 3.42 6.54 32.26 9.

.

Also. with developments such as horizontal drilling and 4-D seismic. production outlooks are most likely to underestimate actual output rates. Increases in upstream technology transformed the industry in the late 1980s and 1990s. operators will effectively determine the lifespan of a particular field according to their view on long-term oil prices. different assumptions regarding supply in the longer-term need to be made. known producing areas are themselves subject to factors that can influence future production profiles significantly. For the near-term outlook. as although these outlooks take into account production profiles from existing fields and those discoveries scheduled to be developed and brought onstream within the next five years. recoverable reserves.303 III C – LONG-TERM OUTLOOK: 2013-2020 C-1 WORLD CRUDE OIL SUPPLY In this section the longer-term crude supply outlook to 2020 is addressed. Furthermore. and decline rates for the more mature provinces. especially where upstream policy and/or operating companies are governmentcontrolled. Accordingly. Previously marginal fields with difficult-to-recover reserves had their lifetimes extended considerably with the advent of new technology. thus increasing output as well. The North Sea in particular has benefited from technological advances.III C – Long-Term Outlook -. Some examples have already been seen. and in some cases can result in lower production profiles than originally projected owing to lack of proper investment and maintenance. These include: • Oil price assumptions. the projections of non-OPEC supply is based on known projects and developments that are due to come onstream. with actual production rates based on the call on OPEC crude. For example. . ultimately. however. In the longer term. for which estimates of both production rates and timing can generally be reliable. they cannot by definition include fields yet to be discovered. • • . Field developments and production levels can be influenced by geopolitical factors. OPEC capacity can likewise be estimated from announced projects. A taxation regime that has a high fixed charge will result in fields being abandoned earlier than if the tax-take is profit related. Market risks/geopolitics. tax policy can influence production rates and. Although this follows on from our crude oil supply outlook for the near term. as discussed in Section B-1. Technology. some fields that can be marginal at a crude oil price of $40/B can be notably profitable with crude oil prices of $60/B. The economics of field recovery can vary significantly according to company estimates or assumptions of long term oil prices.

2 million B/D on current estimates.0 0.6 16. Latin America and Africa. for an increase in total world petroleum demand of 12.2 (4.6) 94.0 (1. As we expect the market dynamics to remain similar to the near-term. we project non-OPEC crude oil production to increase by 1.5 (51.4 (96.0 12.2) 150. and especially the CIS region. FIGURE C-1-1 WORLD CRUDE OIL PRODUCTION: YEAR TO YEAR CHANGES (Million Barrels per Day) 1.1 (2.4) 262.0 2012 2014 2016 2018 2020 OPEC NON-OPEC CRUDE OIL PRODUCTION In the period out to 2020.2 million B/D from 2012 to 2020.6) 67.0) 45.9) 65.7 2016-17 111.6 2017-18 19.5 (119.6 (3. as discussed in Section B-2.4) 34.6 2015-16 (32.6 6.7 37.3 (2.4 5.0 (3. These projected changes are summarized in the following table.2 2019-20 (107.1 40.8 0.7 2014-15 (34.3 (91.5 22. this increases the projected call on OPEC production considerably (Figure C-1-1 and Table C-1-1).III C – Near-Term Outlook Based on these factors.1 (2.4 (2.2 (2.9) 139.6 0.6) 44. NON-OPEC CRUDE OIL PRODUCTION INCREASES (Thousand Barrels per Day) 2012-13 North America Latin America North Sea Africa Middle East CIS Region Asia Europe Total 70.1) 148.3 (11.8) 45.2 Non-OPEC 1.8) 41.2) 162. This compares with our long-term demand projection.6) 40.2 (106. an increase of 13% from that forecast for 2012.9 (2. such that non-OPEC production is likely to run at capacity and OPEC will remain in its role of swing producer.6) 42.6 (7.4 0.7 million B/D to 107. Two key areas are likely to be in steady decline by that time – the United States and the North Sea.7 (6.2) 48.5 (81.6 (110.3 7.0) 326.4 53.9) (138.4 (3.1) 154.7 9. Offsetting these declines will be projected increases in production from Canada.0 2018-19 (83.9 million B/D by 2020.304 -.2) 187. .8 2013-14 32. although actual production may well be higher than that for reasons outlined above.4 (5.6 (9.2) 163.2 0.0) 32.6) 281.4) 44.5 5. overall non-OPEC crude oil production is projected to increase by only 1.7) 144.8 .3) 143.3) 66.5) 171.7) 43.6 (85.

S. however.0 8.0 2. and the development of the deepwater heavy-oil Nob prospect. However.0 4. A great deal of uncertainty surrounds future production from Mexico as well. Combined with continued declines in other producing areas.5 million B/D by 2020.0 9.S. Some projects in the Athabasca region are currently planning to start up in the 2013 onwards timeframe.8 and 8. Gulf of Mexico.S.0 6. compared with 5. . Canada 2014 2016 2018 2020 LATIN AMERICA Production is projected to increase moderately in the longer term. there is the distinct likelihood of further additions to reserves in the deepwater U.2 million B/D in 2012.III C – Long-Term Outlook -.7 million B/D by 2020 (see Figure C1-2). Taking both countries into account.0 2012 U.8 million B/D by 2020. are expected increases in Canadian production from the oil sands and bitumen projects. FIGURE C-1-2 NORTH AMERICA: CRUDE OIL PRODUCTION (Million Barrels per Day) 10. production is projected to fall to 3.S.0 5.9 million B/D over most of the timeframe. compared with 2.2 million B/D by 2020 (Figure C-1-3).0 7. as discussed. however.9 million B/D by 2020. Gulf of Mexico Rest of U.000 B/D from 2012 to 7. much depends on the success or otherwise of the deepwater projects. owing to the stalling of exploration and development programs. Offsetting these declines. and our outlook is for Canadian production to continue increasing in the period under consideration. total U. rising by 240. although we believe that the deepwater projects will be able to support these rates the rate of development of these resources will be key to ultimate production levels. such that Gulf of Mexico production is set to fall to 1. Based on current reserves and production profiles. such as those in the Noxal area. reaching 4.0 1. . only dipping to 8.0 million B/D in 2012. the trend for future production in the region is one of gradual decline after the expected peak in 2010. However.0 3.0 0.4 million B/D by 2020. Currently our outlook is for production to continue slipping. where continued development and recovery from the deepwater fields are forecast to result in production increasing to 2. Much of this increase is assumed to come from Brazil. total North American production is projected to average between 8.305 NORTH AMERICA As discussed in Section B-1.

0 5.0 0. FIGURE C-1-4 AFRICA: NON-OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 4.0 6. and that from Mauritania could see a further small increase. assuming no further disputes or geopolitical disruptions. and thus we are assuming that the likely increase in production to 1.0 2012 Other Non-OPEC Equatorial Guinea Mauritania Chad Sudan 2014 2016 2018 2020 .0 2.000 B/D by 2020. although this does depend on the necessary infrastructure being in place in order to transport increases in production. Most of the increases are expected to be shared by higher rates from Chad and Sudan. Production from Chad is projected to reach 470. averaging about 52. to 200.000 B/D per year and rising to 3.0 2.III C – Near-Term Outlook FIGURE C-1-3 LATIN AMERICA: NON-OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 8.0 4.0 1. .5 million B/D by 2020 (Figure C-1-4).0 million B/D in 2012 can be supported.306 -.0 3.0 2012 2014 2016 Others Brazil Mexico Ecuador 2018 2020 AFRICA Further steady increases in crude oil production are expected from non-OPEC Africa. Output from Equatorial Guinea is expected to remain constant from 2013 onwards.000 B/D by 2015 and then remaining at that rate through to 2020.0 0.0 3.0 1.0 7.2 million B/D in 2020 from 1. The current pipeline transporting crude from Sudan is expandable.

As discussed in Section B-1.000 B/D) will both contribute to the increase. FIGURE C-1-5 CIS REGION: CRUDE OIL PRODUCTION (Million Barrels per Day) 16 14 12 10 8 6 2012 Russia Azerbaijan Kazakhstan Other 2014 2016 2018 2020 ASIA There are few significant changes to our outlook for overall Asian crude oil production for the longer term after 2012. Tianjin and Xinjiang provinces continue to be developed. as Shaanxi.III C – Long-Term Outlook -. levels.6 million B/D in 2012. although as mentioned so far these have proved to be mostly gas discoveries.307 CIS REGION The CIS is the principal region for which are projecting continuing increases in non-OPEC production out to 2020. much will depend on the results of continued drilling in the offshore area. Output from Azerbaijan is already projected to average 1.4 million B/D by 2020 from the 2012 level. our current estimates are for production to increase by about 650.000 b/d from 2012 to 2020. Those trends noted out to 2012 are expected to continue.000 B/D by 2020 (Figure C-1-5). mature areas is expected to decline slowly as new developments partly offset declining production from the older fields. Although precise levels are difficult to project at this juncture. . Production from Russia is forecast to increase by 370. we are not projecting any major increases in output from India. .000 B/D) and Karachaganak (+80. continuing those expected from 2010 onwards. However. but the main factor is expected to be the Kashagan field. assuming continued development of the Azeri-Chiraz-Gunashli fields and other discoveries.000 B/D from 2012. Production in the western. to approach steady production rates of up to 1 million B/D. the increase coming from new developments in Eastern Siberia.000 B/D by 2020 from 2012 levels. with production projected to increase by about 900. such that production from Australia will continue to decline and output from China will continue to be the most robust. The largest increases in production from the region are likely to come from Kazakhstan.000 B/D. and by 2020 our outlook is for it to increase a further 110. Chinese production is projected to increase by about 100. Our outlook is for production from the region to increase by a total of 1. Tengiz (+260.

We expect that exploration will continue.7 million B/D. 2012 2014 2016 2018 2020 . FIGURE C-1-7 OPEC CRUDE OIL PRODUCTION (Million Barrels per Day) 50 Middle East Africa (inc Angola) Venezuela Indonesia 40 30 20 .0 2. The levels of decline are expected to be similar in both the Norwegian and UK sectors.0 0. but it is very difficult to see any discoveries that could even arrest the rate of decline from mature fields.0 3. it is prudent to use this total for current planning purposes.8 million B/D in 2012.0 million B/D level by 2019 (Figure C-1-6). let alone increase overall production levels. owing to expected further discoveries and developments of fields. further increases from African member states and Venezuela are expected as well (Figure C-1-7). with UK production falling below the 1. compared with an estimated 3. FIGURE C-1-6 NORTH SEA CRUDE OIL PRODUCTION (Million Barrels per Day) 4.0 2012 Norw ay UK Denm ark 2014 2016 2018 2020 OPEC CRUDE OIL PRODUCTION Our projection for the additional call on OPEC production from 2012 to 2020 is for an increase by 7. Although much of the additional capacity in the long term is projected to come from the Middle East.III C – Near-Term Outlook NORTH SEA The North Sea is expected to continue its steady decline.6 million B/D. specifically Iraq and Saudi Arabia. By 2020. Our outlook by OPEC region is described below. each falling by about 350.000 B/D in the period under consideration.308 -.0 1. production is forecast to fall to 2. Although it is quite likely that by 2020 the required production from OPEC will be less than this.

0 million B/D by 2020. as discussed in Section B-1. thus hampering development plans.0 million B/D from the current estimated capacity of 11.000 B/D from the UAE. While some increase in capability is possible in the longer term. A recovery in production from Iraq is also expected.8 million B/D. output of about 4.7-1. Investment is also a key to future production from Iran. Some increase in production is also likely from Kuwait.000-600.000 B/D from the Neutral Zone). In addition to the extra 500. . The long-term increase in production from Qatar is expected to be relatively modest. AFRICA It is quite likely that there will be some notable additions to productive capacity in Libya. Nigeria certainly has potential to increase production rates significantly. there is potential for a further 500.7 million B/D by 2020. mostly of Upper Zakum quality. but these could be higher if outside investment is further encouraged through a more favorable tax regime compared with that applied recently.0 million B/D by 2020 assume some resolution to the current divisions.000 B/D forecast to be added by 2012.6 million B/D by 2020 compared with output in 2012 (excluding an additional 60.5 million B/D. With plans to add further to current reserves it is quite probable that these can support projected production rates of 2. although the current rates of decline present a problem to be overcome. with an increase of 2. . As noted. Considering the reserves available and current plans to expand production rates to 5. our outlook is for relative flat output rates out to 2020. Relatively modest production increases are currently expected from Algeria. Most of the increase is expected to come from the deepwater offshore area. The pace of development remains slow. they also take into account the fact that without such unrest these levels could be reached earlier in the next decade. compared with current rates of about 1. although this will depend heavily on political stability and a lasting solution to the current difficulties.0 million B/D by 2020 is not unreasonable. although a considerable amount of investment is likely to be required. but at slower rates. to 3.III C – Long-Term Outlook -. Similar to the current situation in Iraq. with delays in permitting and license awards.0 million B/D. but significant increases are to be expected from the UAE. and while our forecasts of 3. Most of the anticipated increases in Angolan production are scheduled to occur in the near term. As plans include the expansion of production capacity by at least 3. production from Nigeria is also currently affected by internal conflict. there is potential to expand capacity now that sanctions have been removed and overseas companies are returning.309 MIDDLE EAST The largest increase in production is projected to come from Saudi Arabia. these should allow projected production rates in 2020 of about 13 million B/D. although much will depend on the progress and success of the deepwater development programs. In the longer term production is projected to increase further.

especially considering the levels of reserves and the potential for additions. Looking further ahead out to 2020. such that production rates by 2020 could reach 3. by about 4.III C – Near-Term Outlook VENEZUELA AND INDONESIA Without doubt. substantially higher production rates than those currently in effect are possible in Venezuela. Output from Canada is expected to contribute to this increase.2%. output is forecast to continue falling in the long term. Most of the increases will be from Africa and the CIS region. the shares of heavier crudes – heavy sour and highTAN – are expected to continue increasing. average crude gravity is not expected to decrease significantly (Table C-1-2). albeit slowly. Heavy sour crude oil production is projected to increase by over 2. Higher light sour production from the CIS region and Latin America will largely offset the expected declines from the United States. .0 million B/D compared with 2012. from 34. Considering the current political climate it is unlikely that production rates will increase significantly. however. with the share of high-TAN crude increasing while that of light sour fell. Light sweet and heavy sour crudes were both projected to remain essentially unchanged. However. The share of light sweet is expected to fall slightly. such the Orinoco heavy oil deposits.2 million B/D (Table C-13). With declining production rates and declining reserves. with Middle East producers accounting for most of the increase. Sweet synthetic crude from Canada will also contribute to the increase.5 million B/D. Segregated condensate production is expected to continue its increasing trend from the near term.2% in 2013 to just under 33% by 2020 Light sour crude oil is expected to continue to be the dominant crude type.7 million B/D by 2020 from forecast 2012 production. Little further improvement is projected from Indonesian production. but the main increases will be from the established heavy oil producing areas of Latin America and the Middle East. However. The forecast production increase by 2020 is higher than those of other crude types. increasing its share of world crude to 14. both for operating and for investment.000 B/D from 2012 to 4. • Light sweet crude oil production (excluding condensate) is projected to increase by 1.310 -. it is important to stress that as many of the new developments coming on line will be of light sweet crude. there is some potential for change from these two areas as both chief • • • . LONG-TERM CRUDE OIL PRODUCTION OUTLOOK BY TYPE In Section B-1. The outlook for non-segregated condensate is not expected to change much in the long term. with production by 2020 forecast to increase by a further 600.4 million B/D by 2020 from 2012 estimates. although these will be offset by declines from the United States and the North Sea. boosted by gas and LNG expansion plans. in the longer term we have assumed a more favorable operating environment. accounting for 47% of world crude oil production throughout the forecast period. average crude quality was expected to change only little in the medium term.

by about 700. with potential implications for refiners as discussed in section B-1.0 million B/D increase.III C – Long-Term Outlook -. . Brazil and Chad.000 B/D to 2020. Our outlook also assumes that although much of the additional Arab Heavy reserves may be added to capacity. . • Heavy sweet high TAN production is also expected to increase. Partially offsetting these will be some decline in output from the North Sea. The projected increase will be from those fields coming on stream in the next few years in Angola.311 producers – Venezuela and Saudi Arabia – are OPEC members. actual production rates for the markets will be lower than the planned 3.

131 420 10.565 147 2 1.213 3.145 2.988 1.831 84.445 2.880 1.248 2.763 38.226 41.871 2015 1.647 37.165 2.089 417 10.950 665 3.890 2.045 3.2 1.856 2017 1.995 39.409 4.983 1.940 3.220 3.189 86.990 593 3.371 4.1 1.604 608 2.900 2.416 4.342 7.960 4.111 40.680 2.967 2019 1.439 90.700 2.515 4.811 2016 1.692 83.012 413 10.544 600 2.808 1.971 1.127 2.142 4.722 3.795 3.053 415 10.397 89.832 3.857 6.189 3.374 3.660 2.920 3.791 984 11.571 189 3 1.982 6.926 85.923 3.453 43.624 3.567 2.504 82.15 46 32.340 46. .224 570 2.549 2014 1.402 2.18 48 .207 46.950 3.159 1.848 45.15 46 32.770 701 3.14 45 32.193 4.471 7.461 4.227 3.671 964 11.933 1.509 4.720 2.004 12.014 12.177 3.581 245 4 1.523 4.324 578 2.267 2.2 1.039 3.387 2.153 2.970 629 3.326 4.615 3.2 1.101 7.574 204 3 1.1 1.542 4.709 45.504 4.664 615 2.201 3.000 575 3.970 4.052 46.024 13.1 1.728 3.212 4.081 1.366 2.352 87.605 45.121 1.929 46.512 4.15 47 32.925 1.910 3.501 4.424 2.537 4.260 4.219 7.894 1.`312 -.2 1.500 4.443 2.767 1.272 4.780 4.384 3.879 38.987 2.166 423 10.027 3.740 2.459 4.664 2.847 2.608 7.569 179 3 1.17 48 32.673 925 409 10.012 2020 1.930 3.512 45.17 47 32.532 3.497 4.494 4.432 2.340 42.615 3.414 2.2 1.593 954 10.746 974 11.556 4.435 4.722 970 411 10.567 170 2 1.III C – Long-Term Outlook TABLE C-1-1 WORLD CRUDE OIL PRODUCTION (Thousand Barrels per Day) 2013 OPEC Algeria Angola Indonesia Iran Iraq Kuwait Libya Neutral Zone Nigeria Qatar Saudi Arabia UAE Venezuela Total OPEC Non-OPEC Africa China Other Asia Denmark Netherlands Norway UK Other Europe Russia CIS Region Latin America Other Middle East Canada United States Total non OPEC Total World 1.637 2.859 2.439 2.844 1.860 683 3.707 4.484 593 2.750 3.577 214 4 1.358 3.179 3.527 2.487 2.564 146 1.980 3.193 1.930 3.062 Estimated Crude Quality Processed API % Sulphur Opec % 32.730 2.037 1.624 3.935 1.911 2018 1.16 47 32.835 994 11.137 2.724 623 2.707 2.204 426 10.960 647 3.710 2.486 4.424 585 2.753 7.980 611 3.053 2.226 1.749 3.

623 423 4.955 3.441 66 3.202 2.443 399 4.344 4.313 10.968 13.470 145 4.038 36 0 3.272 127 1.428 4.653 65 3.179 36 0 3.075 27.366 2014 141 1.936 351 148 1.198 3.315 4.085 716 623 4.424 2018 125 1.158 36 0 3.803 2.481 3.341 10.750 29.052 1.795 127 1.316 66 3.342 387 4.142 127 1.542 3.131 3 10.218 9.790 25.044 710 613 4.101 720 624 4.069 713 620 4.512 1.386 2.728 12.387 2015 136 1.643 458 2.455 4. .650 455 2.288 2.481 4.475 65 4.064 348 146 1.212 127 1.860 2.645 437 4.951 26.392 28.982 4 10.076 36 0 3.116 36 0 3.192 345 145 1.240 27.040 3.312 415 2.305 1.401 4.916 200 375 23.057 36 0 3.091 717 624 4.445 4.270 376 3.848 1.096 719 624 4.334 2.442 2.675 450 4.078 715 622 4.340 1.485 66 3.372 4.083 1.502 358 151 1.424 9 4.744 465 4.709 1.835 2.252 9.232 201 369 24.533 203 364 25.391 10.679 204 361 26.581 200 382 22.337 419 2.050 13.178 3.402 2016 132 1.645 3 11.820 65 3.010 13.320 343 144 2.241 2.145 66 3.970 127 1.642 1.192 2.076 201 372 24.260 3.707 127 1.193 1.513 411 4.808 354 149 1.133 3.786 2.493 2.986 65 3.439 2020 119 1.506 4.455 3.849 2.630 462 2.218 3.605 1.795 66 3.058 712 617 4.207 1.137 36 0 3.530 160 4.780 127 1.947 30.556 127 1.385 4.755 1.096 36 0 3.193 363 154 1.243 3.924 13.830 13.876 2.313 TABLE C-1-2 WORLD CRUDE OIL PRODUCTION BY REGION AND TYPE (Thousand Barrels per Day) 2013 United States Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Canada Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Latin America Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Middle East Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Africa Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Asia Condensate * Light Sweet Light Sour Heavy Sour High TAN Total China Condensate * Light Sweet Light Sour Heavy Sour High TAN Total 146 1.561 29.406 432 2.084 3 11.445 .929 1.139 3.239 3.869 1.853 3 10.283 10.414 2017 128 1.751 200 378 23.165 2.721 3 10.432 2019 121 1.449 341 143 2.158 3.780 12.878 13.416 1.518 160 4.558 457 2.417 3 11.610 2.859 3 11.384 202 366 24.III C – Long-Term Outlook -.367 10.282 3.181 9.820 2.529 1.351 416 2.869 2.

610 27 15.460 28 14. .053 10.366 697 28.166 10.080 4.038 97 219 462 3.740 116 3.292 12.885 4.721 10.836 10.291 659 29.119 665 29.707 61 188 368 3.521 41.572 27 15.348 29 14.967 38 2.150 4.477 4.012 36 2.e.493 11.945 10.542 113 4.497 28 14.871 43 2.510 690 28.412 10.554 90.654 683 28.694 3.927 10.535 28 14.587 4.549 44 2.364 109 4.624 60 177 353 3.127 84.347 4.410 11.458 111 4.957 671 29.238 38.060 83.990 40.300 86.960 84 207 444 3.802 677 29.863 117 3.445 87.548 10.797 11.801 11.`314 -.846 39.651 114 3.542 39.422 29 14.153 106 4.385 29 14.III C – Long-Term Outlook TABLE C-1-2 (CONT'D) WORLD CRUDE OIL PRODUCTION BY REGION AND TYPE (Thousand Barrels per Day) 2013 Europe Condensate * Light Sweet Light Sour Heavy Sour High TAN Total CIS Region Condensate * Light Sweet Light Sour Heavy Sour High TAN Total Total World Condensate * Light Sweet Light Sour Heavy Sour High TAN Total 2014 2015 2016 2017 2018 2019 2020 45 3.062 * Nonsegregated Condensate * (i.216 705 28.846 69 191 394 3.411 12.187 85.285 10.788 4.650 42.985 82.811 42 2.513 89.790 63 189 376 3.252 108 4.835 12. blended with crude oil) .409 41.553 59 177 328 3.251 40.856 40 2.911 39 2.914 75 195 425 3.

867 2016 1.227 .033 1.315 TABLE C-1-3 WORLD SEGREGATED CONDENSATE PRODUCTION (Thousand Barrels per Day) Country Africa Middle East Asia/Pacific Europe North America South America CIS Region Total 2013 988 1.025 1.III C – Long-Term Outlook -.714 756 49 2 53 394 3.578 732 66 2 65 350 3.060 2019 1.850 785 37 2 66 438 4.668 751 56 2 54 378 3.536 703 69 2 66 341 3.050 1.041 1.133 2020 1.759 766 42 2 51 407 4.008 1.016 1.705 2014 996 1.992 2018 1.790 2015 1.620 747 58 2 69 363 3.925 2017 1.803 774 40 2 50 423 4. .

Europe The following shows the expected crude slate for Europe for the period to 2020. REFINERY SUPPLY AND TRADE 2013-2020 In section B-3 the outlook for demand. The evidence of the last 10 years during which time gasoline shortfalls in the U. In constructing the future balances there has been a recognition that increasing volumes of international trade are likely to occur.S. Refinery production is therefore a constraint and the balancing mechanism for supply and demand is through trade. with the exception that more flexibility is available in respect of refinery capacity additions. particularly Europe where concerns and actions about the threat of global warming are highest. This policy is currently being promoted in Russia and some Middle East countries. trade flows and refinery capacities for each of the study regions are discussed. The approach to the analysis of the longer term balances has been the same as that adopted in the shorter term. shows that imbalances will be preferentially solved by trade and only in the event that shipping cost become unacceptably high would refinery expansion take place. but also the U. Oil is a fungible commodity and as international product specifications converge it will become easier to move products between markets to take advantage of arbitrage opportunities and meet regional imbalances. Some investments will be required to improve product quality as well as to change the yield patterns. The slowing rate of petroleum demand growth in the mature OECD countries. Midwest would have compelling economics to invest to match changing market demands as they are economically cut off from international trade. During the 1980s international trade in refined products represented 14% of production. By 1990 this had grown to 22% and is now around 25%. In this period the refinery output changes mainly reflect the impact of announced projects that are already under construction or are close to being committed. . where energy conservation is expected to receive higher priority. refineries that serve inland markets such as these in central Europe and the U. supply and trade for the study regions in the period up to 2012 was presented. results in a slowing need for refinery expansions. SUPPLY AND DEMAND BALANCES In the following sections the future supply and demand balances.S. In the longer term there is more flexibility in constructing the balances to allow for more refinery projects as there is sufficient time for new projects to be developed and constructed. That said. Substantial capacity additions will be required to balance stronger demand growth in the emerging economies and there is the possibility that some oil producing countries make the decision to invest in refining and export products rather than crude oil.`316 -.S.III C – Long-Term Outlook C-2 DEMAND. Some announced capacity is assumed to be built beyond 2012 and in particular some of the speculative capacity is assumed to be delayed until the period beyond 2013. have been satisfied by exports of a surplus from Europe. .

As in the period to 2012. However as U. Consequently the European refining industry is expected to enter a period of restructuring.000 B/D between 2012 and 2020. reflecting an increase of 0. The main changes in the crude slate reflect the decline in the production and subsequent processing of locally produced high TAN crude. with the utilization of catalytic cracking units reducing and some units being reconfigured to maximize the yield of petrochemicals where outlets for the petrochemical feedstock can be realized economically. The . this reflects the increasing availability of supplies from the Caspian and North Africa which have favorable logistics and allow greater flexibility in meeting clean product needs. demand growth slows and its use of ethanol increases the option to continue increasing exports from Europe reduces.317 EUROPE CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 6403 6851 772 711 2012 6660 6606 797 408 2015 6922 6488 768 350 2016 6972 6490 765 319 2017 7035 6466 764 300 2018 7064 6463 765 292 14584 2019 7093 6478 756 276 14603 2020 7144 6472 756 250 14623 14738 14471 14528 14547 14565 Total crude runs increase by 150. the option exists to increase exports to the U.S. This rate increase falls well within gains achievable through capacity creep. .III C – Long-Term Outlook -. the processing of Azeri light crude is expected to increase as this is a middle distillate rich crude that has a lower gasoline yield than North Sea and North African crudes.S. which falls to less than 2% of the slate and a further small increase in light sweet crude processing. In particular. making it a better fit with European demand. The crude trade outlook for Europe is provided in Table C-2-1. Historically. FIGURE C-2-1 EUROPE CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 600 500 400 300 200 100 0 -100 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases The continuing decline in gasoline consumption coupled with an increase in the use of bio-gasoline is expected to have a significant impact on the European refining industry. and other deficit markets.13% per year. Figure C-2-1 shows the expected refinery capacity changes to 2020. and in the near term period to 2012.

S.3 million B/D) in 2020. with modest increases from Asia and Africa.000 B/D) in 2020.000 B/D) in 2012 to 28 million tonnes (605. FIGURE C-2-2 NET EUROPEAN GASOLINE TRADE. Rapidly growing demand and a failure to keep pace with refinery expansions results in Latin America becoming a significant export destination.4 million B/D). The resulting refinery capacity outlook is shown in Table C-2-2. The main supplier is expected to be the Middle East region.`318 -. FIGURE C-2-3 NET EUROPEAN JET / KEROSENE TRADE. Significant increases in . 2012-2020 (Million Tonnes: +ve = Im ports) 30 25 20 15 10 5 0 2012 2014 2016 2018 2020 Asia CIS Other Africa Latin Am erica Middle East North Am erica Imports of gasoil/diesel are expected to increase by 20 million tonnes per year between 2012 and 2020 to reach 67 million tonnes per year (1. the main importer of which is Mexico.III C – Long-Term Outlook continuing increase in middle distillate demand will require the industry to invest in further hydrocracking and residue upgrading capacity. . There is a modest increase in exports to the U. In addition exports Africa also increase slightly. to reach 55 million tonnes per year (1. Net exports of gasoline continue to increase through the longer term forecast period. 2012-2020 (Million Tonnes: -ve = Exports) 10 0 -10 -20 -30 -40 -50 -60 2012 2014 2016 2018 2020 Asia CIS Other Africa Latin Am erica Middle East North Am erica Net imports of jet/kerosene are forecast to increase from 22 million tonnes (465.

Bunker demand continues to increase modestly in line with the growth in international trade. There is also an increase in imports from Asia.000 B/D to reach 1. Over the period 2012 to 2020 crude runs in the region are expected to increase by only 120. . which are probably bunkering locations. The slate is mainly light and sweet reflecting the local crude oil production. which are assumed to come from the large export refineries in India.319 supply are expected from Russia and the Middle East as export refineries are established in both locations. 2012-2020 (Million Tonnes: +ve = Im ports) 80 70 60 50 40 30 20 10 0 -10 2012 2014 2016 2018 2020 Asia CIS Other Africa Latin Am erica Middle East North Am erica Net exports of fuel oil decline slightly through the period as imports from Russia are expected to decline as the refineries there upgrade and convert more of their straight run material to white oils.7 million B/D. .III C – Long-Term Outlook -. FIGURE C-2-4 NET EUROPEAN GASOIL / DIESEL TRADE. FIGURE C-2-5 NET EUROPEAN HEAVY FUEL OIL TRADE. The main export destinations are Asia and other non-specified destinations. 2012-2020 (Million Tonnes: +ve = Im ports) 30 20 10 0 -10 -20 -30 -40 2012 2014 2016 2018 2020 Asia Latin Am erica Middle East Africa North Am erica CIS Other North Africa Most of the North African countries are crude oil producers and therefore use their own crude in their refineries.

with the exception of Morocco have indigenous gas production and consequently this is used preferentially in industry and for power generation. mainly to improve the quality of the local production. A small amount of cat cracking capacity is also assumed. Despite higher crude runs and the addition of coking and hydrocracking capacity. This leads to a surplus of fuel oil and in the forecast some residue conversion is anticipated. The demand slate in the region is strongly oriented towards middle distillates and consequently investment in hydrocracking will also be required. As noted earlier most of the countries.000 B/D) as demand grows faster than refinery capacity can be expanded. Jet kerosene exports increase as the increase in production from the higher crude runs exceeds the growth in local demand. . AFRICA CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 788 523 189 0 1500 2012 771 711 136 0 1618 2015 805 728 133 0 1665 2016 861 687 132 0 1681 2017 890 674 132 0 1697 2018 900 680 133 0 1712 2019 909 686 133 0 1728 2020 919 692 133 0 1744 The refining industry will need to add conversion capacity above that already announced to rebalance supply with local demand. imports of middle distillates are forecast to increase further to 11 million tonnes per year (225. There is a ready market in south Europe for this material. A change to more market oriented policies in some of the countries may allow faster development of the refining industry in the region and this deficit could be avoided by adding more capacity. FIGURE C-2-6 NORTH AFRICA CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 200 Additional Capacity Required 150 100 50 0 Crude Gasoline FCC Hydrocracking Residue Planned Increases The future supply balances for the region anticipate a small increase in gasoline imports as local production increases mostly balance out the modest increase in demand.`320 -.III C – Long-Term Outlook N. There is a modest amount of investment for gasoline. .

4 million B/D between 2012 and 2020 to keep pace with growing petroleum demand. High TAN crude from West Africa and local production increases. The growing demand will require further investment in refinery capacity.000 3. but despite the increasing volume the share of high TAN crude falls to 11% of the slate by 2020 owing to the larger volumes of light sour Middle Eastern crude.000 2.III C – Long-Term Outlook -. This material is mostly low sulfur residue that is consumed in power generation in the importing countries.000 4.000 1. The changes to 2020 are summarised in Table C-2-10.000 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases . CHINA CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 3406 1152 720 460 5738 2012 5533 989 817 1367 8705 2015 6207 1728 832 1395 10162 2016 6222 2290 836 1402 10751 2017 6300 2809 841 1409 11359 2018 6359 3350 845 1415 11969 2019 6381 3915 850 1421 12567 2020 6379 4436 854 1426 13095 Overall crude runs are expected to increase by nearly 4. . After 2012 the proportion of light sweet crude in the slate declines as incremental crude comes mainly from the Middle East.000 B/D).000 5.321 There is a small increase in fuel oil exports as the increase in residue production from the additional crude exceeds the conversion capacity that is added. showing both currently announced projects and the required future additions. FIGURE C-2-7 CHINA CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 6. In 2020 total exports are 12 million tonnes (210. China The forecast crude slate and runs for China is shown in the table below. Figure C-2-7 illustrates the expected changes in capacity.

As discussed in section C-3.`322 -. as seen in the increasing quantity of supply adjustments. requiring imports to make up short term deficits. The Chinese government is pursuing a policy of self-sufficiency for the main fuels products and therefore the investment in the refining industry will be encouraged. Little major change in China’s net jet/kerosene trade is expected in the longer term. The projected increases in production resulting from the additional refining capacity will be required to match the growing demand. however. The rapid growth in demand makes this a challenging objective and there is the real possibility that the construction schedule will fall behind. which is forecast to continue increasing strongly. The anticipated increases in gasoline manufacturing capacity are expected to more than keep pace with the anticipated increases in China’s gasoline demand out to 2020. The trade balances reflect the outcome of this policy with only very limited volumes of product traded.7 million B/D of crude oil processing will be required above that already announced. which is expected to stay a net importer of gasoline despite the additional capacity planned in the region (Tables C-2-11 and C-2-12).III C – Long-Term Outlook The Chinese refining industry will need to make substantial investments to allow output to keep pace with growing local demand. India The following table shows the forecast crude slate and runs for India to 2020. China is forecast to remain a small net importer of jet/kerosene. With increasing demand for heavy fuel oil both from the bunker sector. China is expected to remain a large net importer of heavy fuel oil. Overall. As the incremental crude is expected to mainly comprise light sour grades a higher level of upgrading will be required. . and based on our assumptions that much of the additional refining capacity will comprise a large proportion of conversion capacity. such that net exports are projected to increase slightly in the longer term. INDIA CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 1110 1278 153 17 2557 2012 1125 1926 253 151 3456 2015 1169 1999 315 220 3703 2016 1183 1975 335 243 3736 2017 1197 1950 356 266 3769 2018 1210 1925 376 289 3801 2019 1224 1900 397 312 3833 2020 1238 1874 417 335 3865 . This will help limit the extra amount of refinery gasoil production required. An additional 4. use of biofuels in China is forecast to increase towards 2020. In the longer term. Additional hydrocracking and coking will be required to meet the growing demand for middle distillates whilst containing the production of fuel oil. with the net trade volumes insignificant relative to domestic production and demand. The total quantity of net imports. is not forecast to change significantly. In order to increase the production and quality of gasoline to the planned standards investment will be required in reforming and isomerization. China is also forecast to remain broadly in balance for gasoil/diesel. These exports are likely to continue to be directed to Hong Kong and the Middle East market.

as higher demand for both jet/kerosene and gasoil/diesel are likely to be met by increased levels of production. with the share of high TAN crudes forecast to double in the 2012-2020 timeframe.III C – Long-Term Outlook -. thus minimizing additional fuel oil production volumes. Following the substantial amount of capacity expected to come on-line by 2012. but following that few major changes are expected.800 1.000 800 600 400 200 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases Overall. their share is forecast to remain about the same at 32%. with the Middle East a key destination. . high TAN crudes. we are not expecting significant additional requirements in the longer-term period. FIGURE C-2-8 INDIA CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 1. The major changes are expected to be an increase in the share of heavy sour and heavy.400 1. as additional refinery conversion capacity is calculated to be required with the extra distillation capacity requirements.000 B/D from 2012 to 2020. The country is forecast to remain a net exporter of gasoline. The planned refinery capacity additions in the near term are set to increase India’s net export balance of middle distillates significantly in the period to 2012.600 1.200 1. as shown in Figure C-2-8 and summarized in Table C-2-14. The split-route export patterns as discussed in section B-3 are expected to remain. India’s net export balance of heavy fuel oil is also not expected to change much. the anticipated increases in refining capacity are not expected to change India’s net balance of trade for each the main refined products categories significantly in the longer term.323 Total crude runs are forecast to increase by about 400. Those increases forecast are generally to match the projected increases in crude runs. . Although runs of light sweet crude are expected to continue increasing to 2020. being met mostly by increasing imports from Africa (Table C-2-13). In the period after 2010 some production may be shut in as export markets may limit if Chinese refinery capacity expansions are realized.

`324 -. FIGURE C-2-9 MIDDLE EAST CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 2.000 B/D between 2012 and 2020.500 2. .000 B/D).000 500 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases The planned increases in refinery capacity are expected to reduce the need for gasoline imports into the region in the period 2012 to 2020. This mainly reflects the planned refineries in Saudi Arabia. The shift to a heavier crude slate requires additional residue conversion capacity. . MIDDLE EAST CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 187 4297 1210 0 5693 2012 220 4977 1181 0 6378 2015 230 5129 1575 0 6934 2016 234 5070 1707 0 7011 2017 238 4990 1860 0 7087 2018 242 4923 2000 0 7164 2019 246 4830 2164 0 7240 2020 249 4779 2288 0 7317 Many of the countries in the region are anxious to expand their refining industry as a means of creating jobs and new industrial opportunities.III C – Long-Term Outlook Middle East The following table shows the expected changes in crude runs and slate for the Middle East region. isomerization and cat cracking.000 1. The region will require increases in distillation capacity and some additional conversion capacity. By 2020 net imports are expected to fall to 12 million tonnes (280. The slate becomes heavier with heavy sour processing increasing from 20% of the slate up to just over 30%. The gasoline shortage in the region will prompt investment in reforming.500 1. Crude runs are expected to increase by just over 900. This outlook in turn depends on the success of measures to reduce the rate of consumption growth in those countries where gasoline is sold at below cost. Kuwait and Iran that will be designed to process heavy crude.

. This will require significant investment in gasoline production to increase both quantity and the quality of the fuels required. Gasoline consumption is expected to continue to grow robustly and quality is expected to move to EU standards in the period to 2020. Over the period to 2020 it is expected that the industry will add cat crackers and hydrocrackers. Much of the Russian investment is expected to be aimed at producing export products for the European market. with a modest increase in the processing of light sweet in Azerbaijan and Kazakhstan. Bunker fuel demand is also expected to increase as trade volumes grow. The gasoline investment includes. Details are shown in Table C-2-20. This drives projects towards hydrocracking to produce middle distillates that are required in Europe. . The crude slate remains predominantly light sour crude. Some residue upgrading is also expected as fuel oil consumption inside of Russia has declined significantly.III C – Long-Term Outlook -. Overall crude runs increase by just over I million B/D as growing local demand and export opportunities increase. As noted earlier. reforming and isomerization. alkylation.325 Robust local demand is expected to consume most of the additional production in the region such that middle distillate exports grow only modestly to a total of 42 million tonnes per year (870. CIS Region The following table shows the forecast for crude oil runs and slate for Russia and the CIS to 2020. refineries in the CIS lack fuel oil upgrading. The cat cracking additions shown below do not include the likely investment to replace many of the existing cat crackers that are of the old and inefficient Thermofor design. The demand for fuel oil in the region is expected to grow as the need for power generation and desalination grows and in some countries the supply of gas is limiting. This is most likely to be expansion of refineries in the southern republics rather than in Russia. CIS CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 500 4989 2 0 5492 2012 781 6076 0 0 6857 2015 921 6340 0 0 7261 2016 970 6426 0 0 7396 2017 1020 6511 0 0 7530 2018 1071 6594 0 0 7665 2019 1124 6676 0 0 7800 2020 1178 6758 0 0 7935 The increase in crude runs is such that some increase in distillation capacity is required in the period beyond 2012.000 B/D).

UNITED STATES CRUDE SLATE (Thousand B/D) 2005 Light Sweet Light Sour Heavy Sour High TAN Total 5530 5127 4252 311 15220 2012 5478 5082 4939 936 16435 2015 5147 5116 5480 957 16700 2016 5139 5147 5519 953 16758 2017 5146 5131 5529 1009 16815 2018 5106 5179 5513 1076 16873 2019 5081 5179 5597 1074 16931 2020 5078 5194 5662 1055 16988 Demand growth in the U. with crude runs also growing only modestly to 17 million B/D. Fuel oil export increase slightly despite increasing conversion levels.4% per year. to reach 60 million tonnes (1. There is no significant change in the composition of the crude slate forecast. The slowing of gasoline growth and the increasing use of ethanol as a blending component reduces the need for gasoline oriented investments considerably.1 million B/D).S.S. an increase of only 0.`326 -. is forecast to slow considerably after 2012. although this is mostly likely to be in projects after 2012. with the majority going to Europe. . growing demand for middle distillates will require the addition of hydrocracking capacity and some expansion of residue upgrading. However. United States The following table shows the forecast crude slate and runs for the U. . Middle distillate exports increase to 55 million tonnes per year (1.1 million B/D) by 2020. In spite of this some distillation capacity is expected to be added.III C – Long-Term Outlook FIGURE C-2-10 CIS CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 400 350 300 250 200 150 100 50 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases There is no change to the trade of gasoline expected through the forecast period as the additional production is used internally to meet growing internal consumption.

Despite the investment in hydrocracking and increasing crude runs. The U.S. The main export destination to lose supply is Europe.III C – Long-Term Outlook -. By 2020 imports reduce to 37 million tonnes (870. leaving imports at or slightly above current levels. . Local production increases plus increased use of Ethanol results in a faster growth of local production than demand. This loss of a growing export outlet will put significant pressure on European refiners. after 2012. increases imports of fuel oil slightly to 11 million tonnes in 2020 (205. . As with distillates the net increase in imports in part achieved by a reduction in exports.S.S. CAPACITY CHANGES TO 2020 (Thousand Barrels per Day) 1400 1200 1000 800 600 400 200 0 Crude Gasoline FCC Hydrocracking Residue Additional Capacity Required Planned Increases One of the more significant changes in the forecast is the expected reduction in the need for gasoline imports to the U.. has been both an importer and an exporter of distillates.000 B/D) as consumption for power generation increases.327 FIGURE C-2-11 U.S. Historically the U.S.S. with net imports growing from 11 million tonnes (240. In the forecast exports are expected to decline. who are the marginal suppliers to the U.000 B/D) in 2020.000 B/D) in 2012 to 19 million tonnes (395. Import increase slightly from the CIS and from Asia to the West Coast of the U. will become increasingly short of middle distillates. the U.000 B/D) from the 42 million tonnes currently. to change their production slate.S.

603 3.151 25 471 3.498 179 3 2.590 14.651 3.479 192 4 2.528 3.099 2.448 6 161 2.`328 -.242 5.231 2.862 13.738 5.423 206 4 2.547 3.575 4.707 14.446 3.542 3.330 6 140 2.867 425 2.840 13.416 11 233 5 3.403 6 154 2.822 2019 14.073 407 2.252 3.187 2.954 413 2.364 3.584 3.458 3.947 14.890 418 2.989 411 2.798 13.153 3.005 2.319 2.651 14.143 2.907 13.517 172 3 2.275 2.759 14.330 4.575 .042 409 2.817 2.471 4.283 6 133 2.695 235 5 2.893 2020 14.151 4.421 2015 14.715 2017 14.555 150 2 2.575 7 181 3.884 13.536 165 3 2.565 3.935 416 2.623 3.897 14.525 14.824 14.652 2016 14.176 2.283 5. .766 2018 14.682 382 2.372 6 147 2.819 13.003 14.403 4.242 6 126 2.448 4.728 3 13.III C – Long-Term Outlook TABLE C-2-1 EUROPE TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports* Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply * Includes Other / Non Specified 2012 14.372 4.738 13.

146 35 6.988 35 6.179 17.656 989 348 3.766 34 5.167 449 465 471 471 471 471 469 469 469 74 74 74 74 84 84 84 84 84 16.610 1.376 119 136 169 26 506 1.657 1.167 6.027 6.329 TABLE C-2-2 EUROPE REFINERY CAPACITY (Thousand Barrels per Day.267 17.513 2.376 1.167 469 84 18.527 2.142 6.179 17.058 6.413 6.664 33 5.063 3.386 1.209 17.513 126 107 107 107 107 107 107 107 107 272 274 274 274 277 277 277 277 277 52 48 48 48 48 48 48 48 48 60 60 60 60 60 60 60 60 60 17 17 41 41 41 41 41 41 41 714 715 715 715 715 720 720 720 720 1.Semi-Regenerative Reformer .628 17.513 2.656 1.989 2.023 1.989 5.376 54 54 54 69 119 119 119 119 119 131 136 136 136 136 136 136 136 136 119 159 169 169 169 169 169 169 169 6 6 6 6 26 26 26 26 26 387 387 387 446 446 506 506 506 506 1.810 3.527 6. Announced Thru 2012 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 35 0 0 0 0 0 0 0 0 0 69 31 Required Additions 2012-2020 0 0 0 0 0 0 0 0 85 0 0 0 0 0 0 0 0 200 0 0 0 0 0 0 0 0 500 820 354 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .III C – Long-Term Outlook -.243 3.989 2.664 1.819 589 6.657 1.063 18.513 2.560 1.023 1.645 1.929 2.670 2.376 1.413 6.023 2.513 2.023 1.305 16.640 6.325 36 Required 2020 17.463 6.810 3.513 2.698 370 1.063 2.413 17.376 119 136 169 26 739 1.023 2.360 1.610 1.376 1. .880 1.935 6.023 2.023 1.023 1.656 989 348 3.819 3.376 1.638 370 1.293 36 6.527 6.610 1.167 6.656 1.167 6.839 34 5.293 36 .878 7053 41 17. MMSCFD FCC Equivalents FCC Equivalents as a % of Crude 2007 2008 2009 2010 2011 2012 2013 2014 Required 2012 17.413 6.063 18.638 401 394 370 370 370 370 370 370 370 1.023 1.912 5.325 17.440 1.826 3.179 1.550 6.657 1.819 3.810 3.819 450 501 579 579 589 589 589 589 589 5.167 469 84 18.435 17.989 2.513 107 277 48 61 41 720 1.527 6. Unless Noted) Required vs.413 17.523 2.810 3.638 6.376 1.513 2.873 18.282 1.376 1.293 36 6. LTPD Hydrogen Plant.657 1.204 2.610 1.819 589 6.023 1.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt POX Sulfur Plant.376 1.820 3.063 18.063 6.656 952 967 989 989 989 989 989 989 989 332 328 338 338 348 348 348 348 348 3.657 1.293 36 6.638 6.929 2.042 1.063 18.063 18.901 2.513 107 277 48 60 41 720 1.

III C – Long-Term Outlook TABLE C-2-3 REFINED PRODUCT BALANCE TOTAL EUROPE (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 162 34 (72) (2) 121 48 29 (14) (5) 59 288 112 (82) (8) (5) 306 125 58 (65) (46) (14) 57 167 79 (60) (0) (13) 173 790 312 (293) (54) (39) 716 2010 151 34 (78) 5 107 52 33 (13) (6) 66 299 127 (85) (9) 6 337 120 61 (68) (51) (13) 50 168 86 (60) (0) (15) 179 789 341 (303) (60) (23) 738 2012 148 33 (81) 7 101 53 35 (13) (6) 68 303 129 (82) (9) 13 349 117 60 (66) (51) (12) 48 171 86 (60) (0) (14) 182 791 342 (303) (60) (13) 748 2015 141 33 (84) 11 93 54 37 (13) (6) 72 305 137 (81) (9) 22 366 115 59 (65) (52) (12) 45 174 87 (60) (0) (14) 186 789 352 (303) (61) (0) 761 2016 139 33 (85) 12 90 54 38 (13) (6) 73 306 139 (81) (9) 25 371 115 59 (64) (52) (12) 44 174 87 (59) (0) (14) 187 789 355 (303) (62) 3 765 2017 137 33 (86) 13 87 55 39 (13) (6) 74 307 141 (81) (9) 28 375 114 59 (63) (53) (13) 44 175 87 (59) (0) (15) 188 788 359 (302) (62) 7 769 2018 135 33 (87) 14 85 55 39 (13) (6) 76 307 143 (81) (9) 31 380 113 59 (62) (53) (13) 43 176 89 (59) (0) (16) 190 787 362 (302) (63) 10 774 2019 133 32 (87) 15 83 56 40 (13) (6) 77 308 146 (81) (9) 34 385 112 58 (62) (54) (13) 43 177 89 (59) (0) (16) 191 786 365 (301) (63) 14 778 2020 131 32 (88) 15 80 56 41 (13) (6) 78 309 148 (81) (9) 38 389 112 58 (61) (54) (12) 42 178 90 (58) (0) (18) 192 785 369 (300) (64) 17 782 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .`330 -. .

163 1.154) (965) (229) 800 3.494) (6.482) (6.172 16.651) (183) 639 7.102 2.972) 248 2.685) (178) 261 7.048 3.655) (182) 573 7.648) (184) 704 7.728 1.172) (1.768 2.142 2.561 6.897) 174 2.335 16.162) (1.293 2.048 626 (294) (104) 1.578 16.130 7.458) (6.155 2016 3.668) (167) (100) 6.052 1.914 (1.887 (1.181) (948) (228) 821 3.821 1.434) (1.005 2012 3.802 1.418 16.727) (176) 121 6.370) (6) (188) 4.107 758 (2.252 2.530 786 (1.599 (1.020 (1.688 6.067 2015 3.078 1.786 787 (1.877 2010 3.983 1.791 (1.634 7.253 768 (1.169) (956) (228) 809 3.110) (992) (228) 775 3.280 2.188 2.041 1.144 754 (288) (130) 1.103 1.957 2.100 1.839 (1.204 765 (2.155 761 (2.432 7.237 2019 3.784 1.659) (181) 509 7.134) (1.252 16.254 2.573 2.499 7.613 6.141 1.638 (1.908 (1.723 (6.143) (1.878 2.091 1.536 16.578 7.168 7.394) (5) (153) 4.301 772 (1.475) (6.109 (1.153) (1.424 6.447 782 (1.489) (6.516 16.331 TABLE C-2-4 REFINED PRODUCT BALANCE TOTAL EUROPE (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 3.606 16.205 865 (275) (131) 1.401) (5) (162) 4.041) 340 1.993) 271 2.191) (840) (261) 1.469) (6.060 (1.664) (180) 449 7.496 1.664 6.782 (1.943 (1.365 7.930 1.185 1.295 (1.066 (1.557 16.237 2.187 835 (279) (130) 1. .965 (1.840 1.372) (6) (190) 4.666 1.816) 118 2.071 (1.196 850 (277) (130) 1.354) (6) (233) 4.179 820 (281) (130) 1.067 (1.639 6.209 2018 3.355 1.397) (5) (173) 4.897 2.011) 296 2.III C – Long-Term Outlook -.012) (1.240) (6.182) (664) (296) (85) 187 262 342 407 495 538 15.183 2017 3.111) (1.203) (928) (228) 867 3.061 756 (2.280 1.976 (1.893 2.968 (1.472 2.726 15.039 1.863 2.002 (1.029) 318 1.070 (1.122 723 (291) (130) 1.308 3.464) (6.649) (184) 771 7.267 2.550 7.278 5.214 879 (273) (131) 1.086 (1.382) (6) (167) 4.049) 358 1.289 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 16.232) (925) (232) 905 3.500 6.924 (1.932 (1.692) (45) 2.480 6.170 804 (283) (130) 1.591 Note: Total includes Refinery gas and Ethane .503 16.858 1.912 16.829 1.139) (974) (229) 791 3.395) (5) (155) 3.595 16.386) (6) (160) 4.284 15.068 (1.660 16.107) (1.652 1.065 1.933 (1.647 16.881 1.074 (1.123) (983) (230) 783 3.587 6.672 2.263 2020 3.

500 3.932 7 569 576 24 167 152 63 1.507 151 422 3.598 9 521 530 2016 1.771 .072 130 423 3.677 1.664 9 532 541 2017 1.728 4.258 10 484 494 2015 1.645 37 228 159 86 2.108 1.708 40 243 158 89 2.459 147 422 3.692 38 235 158 87 2.797 8 551 559 2019 1.364 140 423 3.681 4.712 4.724 105 275 2.411 144 422 3.617 1.`332 -.III C – Long-Term Outlook TABLE C-2-5 NORTH AFRICA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 1.512 1.602 158 422 3.723 41 250 157 90 2.742 13 334 347 2012 1.665 4.497 1.557 1.577 33 206 162 81 2.864 7 560 568 2020 1.744 4. .618 4.697 4.737 1.739 42 257 156 91 2.437 1.755 44 264 155 93 2.554 154 422 3.730 8 542 550 2018 1.

MMSCFD #REF! FCC Equivalents FCC Equivalents as a % of Crude 1.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant.333 TABLE C-2-6 NORTH AFRICA REFINERY CAPACITY (Thousand Barrels per Day. .734 158 0 0 0 0 0 0 39 11 5 0 9 0 0 0 37 34 171 61 7 251 0 121 19 303 63 110 6 2009 1.618 278 0 0 0 0 0 0 39 11 5 0 9 0 0 0 67 99 171 111 7 278 0 241 19 373 193 178 11 Required 2020 1.917 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 2011 1.917 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 2012 1. LTPD Hydrogen Plant. Announced Thru 2012 0 85 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 40 0 25 0 0 0 35 0 50 50 Required Additions 2012-2020 0 130 0 24 0 0 0 0 28 0 20 0 0 0 0 0 40 80 0 50 0 0 7 65 0 220 216 159 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .734 158 0 0 0 0 0 0 39 11 5 0 9 0 0 0 37 34 171 61 7 251 0 121 19 303 63 110 6 2008 1. Unless Noted) Required vs.917 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 2014 1.744 323 0 24 0 0 0 0 67 11 25 0 9 0 0 0 87 139 171 136 7 278 7 271 19 543 359 295 17 .917 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 2013 1.904 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 2010 1.917 193 0 0 0 0 0 0 39 11 5 0 9 0 0 0 47 59 171 86 7 278 0 206 19 323 143 136 7 Required 2012 1.Semi-Regenerative Reformer .III C – Long-Term Outlook -.734 158 0 0 0 0 0 0 39 11 5 0 9 0 0 0 37 34 171 58 7 247 0 121 19 303 63 110 6 2007 1.

`334 -.III C – Long-Term Outlook TABLE C-2-7 REFINED PRODUCT BALANCE NORTH AFRICA (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 6 2 (0) (0) 7 6 0 (3) (0) (0) 3 22 4 (1) (0) 0 25 26 1 (10) (2) 1 16 15 4 (17) 13 14 74 10 (30) (3) 14 65 2010 7 2 (1) 0 8 6 0 (3) (0) (0) 3 25 5 (1) (0) 0 29 25 1 (12) (2) 1 13 17 4 (18) 13 16 80 13 (36) (3) 14 68 2012 7 2 (1) 0 8 7 0 (3) (0) (0) 3 26 6 (1) (0) 0 31 25 1 (12) (2) 1 13 17 5 (19) 13 17 81 14 (36) (3) 15 72 2015 7 2 (1) 1 9 7 0 (4) (0) (0) 3 27 8 (1) (0) 1 34 25 1 (12) (2) 1 12 18 5 (19) 14 18 84 16 (37) (3) 16 77 2016 7 2 (1) 1 9 7 0 (4) (0) (0) 3 28 8 (0) (0) 1 36 25 1 (12) (2) 1 12 18 5 (19) 14 18 85 17 (37) (3) 16 78 2017 7 2 (1) 1 9 7 0 (4) (0) (0) 3 28 9 (0) (0) 1 37 25 1 (12) (2) 1 12 18 5 (19) 14 19 86 18 (37) (3) 16 80 2018 7 2 (1) 1 9 7 0 (4) (0) (0) 3 28 10 (0) (0) 1 38 25 1 (12) (2) 1 12 19 6 (20) 14 19 87 19 (37) (3) 16 82 2019 7 2 (1) 1 9 7 0 (4) (0) (0) 4 29 10 0 (0) 1 39 25 1 (12) (2) 1 12 19 6 (20) 15 19 87 20 (37) (3) 16 83 2020 7 3 (1) 1 9 8 0 (4) (0) (0) 4 29 11 0 (0) 1 41 25 1 (12) (2) 1 12 19 6 (20) 15 20 88 20 (37) (3) 17 85 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane . .

335 TABLE C-2-8 REFINED PRODUCT BALANCE NORTH AFRICA (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 140 41 (6) (1) 174 129 6 (62) (6) (0) 67 442 74 (18) (5) 8 501 475 17 (180) (39) 13 287 335 112 (453) 394 386 1.522 250 (718) (50) 413 1.678 342 (835) (51) 443 1.753 410 (856) (53) 473 1.III C – Long-Term Outlook -.641 309 (825) (50) 427 1.415 2010 155 49 (19) 5 189 136 6 (72) (6) (0) 63 507 104 (28) (6) 9 586 461 16 (216) (39) 13 236 382 134 (490) 401 428 1.734 393 (852) (53) 467 1.575 2015 159 54 (29) 16 199 150 8 (81) (6) (0) 70 553 158 (12) (6) 10 703 460 16 (221) (41) 13 227 412 158 (509) 428 489 1.791 444 (863) (55) 484 1.502 2012 156 51 (23) 9 193 141 7 (76) (6) (0) 66 525 124 (21) (6) 10 632 461 16 (218) (40) 13 232 394 144 (497) 412 453 1. .764 2018 161 57 (28) 16 207 159 9 (86) (7) (0) 74 582 195 (2) (6) 10 779 458 15 (225) (42) 13 219 431 168 (522) 445 523 1.802 2019 162 58 (27) 17 210 162 9 (88) (7) (0) 76 592 208 1 (6) 10 805 457 15 (226) (43) 13 217 437 171 (526) 450 533 1.772 427 (859) (54) 478 1.726 2017 160 56 (28) 16 204 156 8 (85) (6) (0) 73 572 182 (5) (6) 10 753 459 16 (224) (42) 13 222 425 165 (517) 439 512 1.878 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .810 462 (866) (55) 490 1.840 2020 162 60 (27) 17 212 165 9 (89) (7) (0) 78 602 222 4 (6) 11 831 457 15 (227) (43) 13 214 444 173 (530) 456 543 1.830 479 (869) (56) 495 1.688 2016 159 55 (28) 16 202 153 8 (83) (6) (0) 71 563 170 (9) (6) 10 728 460 16 (222) (41) 13 224 418 162 (513) 434 501 1.

828 68 3 746 156 4.`336 -.931 99 6 9 115 12.289 2.424 3.749 71 3 799 157 3.446 8.011 8.733 87 5 995 163 1.082 5.095 4.III C – Long-Term Outlook TABLE C-2-9 CHINA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 5.567 4.439 3.751 4.822 6.969 4. .414 3.027 2017 11.627 74 3 858 158 2.398 79 4 990 160 1.359 4.541 98 6 9 113 13.340 2.452 2016 10.812 2020 13.481 76 4 922 159 2.064 2015 10.053 106 10 12 127 9.385 7.624 2018 11.445 3.224 2019 12.138 97 5 8 111 13.532 9.738 3.432 3.276 102 8 10 121 10.666 .162 4.322 100 7 10 117 11.876 65 2 701 155 4.705 4.402 3.905 7.684 769 194 10 180 87 1.733 101 8 10 119 11.332 122 16 24 161 6.530 2012 8.

666 477 3.666 477 3.568 110 53 48 253 72 0 904 133 1.011 57 3 1 0 152 1.831 155 2.307 4.206 34 4.821 3.307 4.069 34 2.294 750 57 3 1 0 2 1.129 52 Required 2020 14.744 1.307 4.119 34 9.559 6867 47 .698 2.474 105 2.748 40 2012 9.935 0 90 0 0 0 0 465 0 0 261 0 0 0 0 150 697 0 760 0 635 100 1.386 1809 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .077 130 3. Unless Noted) Required vs.666 392 3.011 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 798 180 314 57 382 30 1. Announced Thru 2012 470 556 0 0 0 0 0 0 226 9 401 194 25 0 0 0 0 329 0 15 0 60 0 136 0 1.777 4.069 34 2.107 3.069 34 2.011 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 798 180 314 57 382 30 1.382 Required Additions 2012-2020 4.979 37 2008 8.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant.666 477 3.748 40 2011 9. .011 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 798 180 314 57 382 30 1.069 34 2. LTPD Hydrogen Plant.954 696 1.107 3.069 34 2.925 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 738 180 314 57 382 30 1.371 110 53 0 146 25 0 485 125 770 510 29 3 1 0 2 399 174 172 57 260 0 406 34 1.913 0 4.521 6.824 180 1.318 3.173 5.748 40 2013 9.307 4. MMSCFD FCC Equivalents FCC Equivalents as a % of Crude 7.777 36 2007 8.666 477 3.620 1.685 40 2010 9.666 477 3.369 133 1.494 110 53 0 146 25 0 515 125 770 520 29 3 1 0 2 530 180 192 57 280 30 747 34 1.547 3.339 39 2009 9.069 34 2.684 110 53 0 206 25 0 599 125 794 520 32 3 1 0 2 714 180 266 57 334 30 899 34 2.III C – Long-Term Outlook -.127 180 329 57 442 30 1.666 477 3.748 40 Required 2012 9.011 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 798 180 314 57 382 30 1.307 4.748 40 2014 9.503 110 143 48 253 72 0 1.337 TABLE C-2-10 CHINA REFINERY CAPACITY (Thousand Barrels per Day.294 1.Semi-Regenerative Reformer .089 57 1.011 110 53 48 253 72 0 679 125 894 556 32 3 1 0 2 798 180 314 57 382 30 1.

.III C – Long-Term Outlook TABLE C-2-11 REFINED PRODUCT BALANCE CHINA (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 54 0 (6) (0) 48 10 3 (3) 10 111 2 (2) (0) 111 23 29 (2) (8) (0) 49 90 12 (5) (0) 97 288 45 (17) (8) (1) 315 2012 89 0 (4) 0 84 14 5 (4) 16 160 2 (1) (0) 6 168 25 30 (2) (12) (0) 52 150 19 (3) 4 170 437 57 (15) (12) 10 490 2015 104 0 (4) 1 101 17 5 (4) 18 189 3 (1) (0) 10 201 27 30 (2) (13) (0) 54 174 22 (3) 4 197 511 60 (14) (14) 15 572 2016 111 0 (4) 1 107 18 5 (4) 19 201 2 (1) (0) 12 214 28 30 (2) (14) (0) 55 184 22 (3) 4 207 541 59 (15) (14) 17 602 2017 117 0 (5) 1 113 20 5 (4) 20 214 1 (1) (0) 14 228 29 30 (2) (14) (0) 56 193 21 (3) 4 216 572 58 (16) (15) 19 634 2018 124 0 (6) 2 120 21 5 (4) 0 22 227 1 (1) (0) 15 243 30 30 (2) (15) (0) 57 203 21 (3) 4 225 604 57 (16) (15) 22 666 2019 130 0 (6) 2 126 22 5 (4) 0 23 239 1 (1) (0) 18 258 31 30 (2) (15) (0) 57 212 20 (3) 5 234 634 56 (17) (15) 25 698 2020 135 0 (6) 3 133 23 5 (4) 0 24 251 3 (1) (0) 21 274 31 30 (2) (15) (0) 58 220 19 (3) 6 242 661 56 (16) (16) 29 731 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .`338 -.

101 38 (18) (6) 247 4.763 448 (54) 112 5.040 418 552 (44) (199) (9) 917 3.882 2018 2.752 2010 1.372 459 (57) 93 3.893 31 (18) (6) 363 5.263 428 522 (39) (149) (9) 902 2.924 512 (54) 93 4.944 424 (54) 135 5.109 494 549 (44) (246) (9) 991 3.506 400 111 (93) 419 4.069 1 (102) 6 1.269 557 542 (44) (275) (9) 1.166 1 (137) 68 3.130 507 (54) 96 4.679 2017 2.959 543 543 (44) (268) (9) 1.036 1 (147) 56 2.448 10.397 13.729 14.633 28 (18) (6) 316 4.797 452 106 (93) 4 469 4.167 1.005 4.267 0 (130) (7) 1.234 6.974 312 115 (91) 337 3.946 479 103 (92) 6 496 4.137 (303) (312) (292) (312) (330) (343) (354) (344) (204) (224) (251) (260) (267) (275) (281) (287) 162 216 313 359 406 458 528 625 9.476 11.080 11.III C – Long-Term Outlook -.585 1 (105) 24 2.342 494 (54) 99 4.019 4.904 78 (18) (5) 76 3.133 62 (18) (7) 424 5.854 60 (18) (6) 214 4.424 451 548 (44) (219) (9) 947 3.728 12.449 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 8.365 376 113 (92) 397 3.160 1.203 1.649 14.215 915 (353) (154) (25) 6.152 1.601 567 545 (44) (280) (9) 1.130 210 70 (57) 223 2.367 511 546 (44) (254) (9) 1.655 528 544 (44) (261) (9) 1.339 TABLE C-2-12 REFINED PRODUCT BALANCE CHINA (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 1.887 1 (136) 44 2.016 410 (59) 94 3.079 2019 3.028 15.272 43 (18) (5) 126 3.555 474 (54) 104 5.176 1.432 1 (85) 16 2.429 9.337 15.548 12.125 1.047 4.315 1.462 2012 2.033 4. .727 271 119 (89) 301 2.867 2015 2.737 1 (122) 34 2.060 4.070 13.474 2016 2.365 26 (18) (6) 281 4.098 504 105 (91) 7 525 5.819 1 (93) 1 1.236 1.650 426 110 (93) 443 4.336 12.733 Note: Total includes Refinery gas and Ethane .977 13.047 290 (93) (9) 2.263 32 (33) (5) 2.270 2020 3.

308 3.557 3.703 3.048 2018 3.136 2.324 3.456 3.865 729 704 90 34 2.833 3.736 718 575 82 38 2.833 726 671 88 35 2.703 715 542 80 38 2.107 2020 3.456 705 445 74 41 2.317 3.466 1.865 .III C – Long-Term Outlook TABLE C-2-13 INDIA TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe North Europe South Europe Central Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 2.905 2012 3.327 2.750 2015 3.769 3. .`340 -.557 652 316 82 41 1.313 3.736 3.190 2.801 724 639 86 36 2.320 3.078 2019 3.987 2016 3.018 2017 3.801 3.769 721 607 84 37 2.

.668 985 1325 41 2009 3.084 0 158 30 0 0 0 250 180 459 114 0 0 4 0 41 223 45 174 35 259 63 536 58 3.Semi-Regenerative Reformer .639 1.208 1.084 0 158 30 0 0 0 250 180 459 114 0 0 4 0 41 223 45 174 35 259 63 536 58 3.668 767 1325 41 2008 3.509 0 158 30 0 0 0 530 520 659 168 85 0 4 0 99 333 45 259 55 389 176 792 58 5.693 1.135 2201 52 2012 4.135 1967 49 2011 4.928 1.169 2201 47 Required 2020 4.417 2323 50 . Announced Thru 2012 65 107 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 115 0 0 34 0 Required Additions 2012-2020 545 209 0 0 0 0 0 0 0 0 20 54 0 0 0 0 10 45 0 64 116 54 30 448 0 75 248 121 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .693 1.135 1967 49 2010 3.228 582 1253 40 2007 3.741 0 158 30 0 0 0 530 520 679 168 85 0 5 0 109 378 45 322 171 442 183 1.III C – Long-Term Outlook -.135 2255 52 Required 2012 4.882 1. LTPD Hydrogen Plant.135 2201 52 2013 4.424 0 158 30 0 0 0 530 520 659 114 85 0 4 0 99 333 45 259 55 389 153 742 58 5.928 1.028 1.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant. Unless Noted) Required vs.003 1.389 0 158 30 0 0 0 410 400 659 114 85 0 4 0 83 333 45 259 35 389 153 676 58 5.389 0 158 30 0 0 0 410 400 659 114 85 0 4 0 83 333 45 259 35 389 153 676 58 5.341 TABLE C-2-14 INDIA REFINERY CAPACITY (Thousand Barrels per Day. MMSCFD FCC Equivalents FCC Equivalents as a % of Crude 3.305 58 6.424 0 158 30 0 0 0 530 520 659 114 85 0 4 0 99 333 45 259 55 389 153 742 58 5.882 1.028 1.928 1.084 0 120 30 0 0 0 250 180 399 114 0 0 4 0 31 223 45 134 35 201 43 470 58 3.424 0 158 30 0 0 0 530 520 659 114 85 0 4 0 99 333 45 259 55 389 153 742 58 5.180 1.928 1.240 1.124 1.093 1.028 1.928 1.135 2201 52 2014 4.531 0 158 30 0 0 0 530 520 659 114 85 0 5 0 99 333 45 259 55 389 153 857 58 5.

III C – Long-Term Outlook TABLE C-2-15 REFINED PRODUCT BALANCE INDIA (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 10 1 (2) (0) 9 15 1 (3) 0 13 47 1 (8) (0) 2 42 20 1 (2) (0) (1) 18 36 7 (5) 3 40 128 10 (21) (0) 4 121 2010 15 0 (4) (1) 11 18 1 (5) 0 14 61 1 (16) (0) 1 47 21 1 (4) (0) (3) 16 50 8 (8) 1 51 166 11 (36) (0) (1) 140 2012 16 0 (4) (1) 12 19 1 (5) 0 14 64 1 (18) (0) 2 49 22 1 (4) (0) (3) 16 53 9 (8) 1 55 174 12 (39) (0) (1) 146 2015 18 0 (4) (0) 14 20 1 (6) 0 15 69 1 (21) (0) 2 51 23 1 (5) (0) (3) 17 58 11 (8) 1 60 187 13 (43) (0) 0 157 2016 18 0 (4) (0) 14 20 1 (6) 0 15 70 1 (20) (0) 2 53 23 1 (4) (0) (3) 17 59 11 (8) 1 62 189 14 (42) (0) 0 160 2017 18 0 (4) (0) 14 20 1 (6) 0 15 71 1 (20) (0) 2 54 23 1 (4) (0) (3) 17 59 12 (8) 1 64 191 14 (42) (0) 0 163 2018 18 0 (3) (0) 15 20 1 (6) 0 15 71 1 (19) (0) 2 55 23 1 (4) (0) (3) 17 60 12 (8) 1 65 193 14 (41) (0) 0 167 2019 18 0 (3) (0) 15 20 1 (6) 0 15 72 1 (19) (0) 2 56 23 1 (4) (0) (3) 17 61 12 (8) 1 66 194 15 (40) (0) 0 170 2020 19 0 (3) (0) 16 20 1 (6) 0 15 73 1 (18) (0) 3 58 23 1 (4) (0) (3) 17 62 13 (8) 1 68 196 15 (39) (0) 1 173 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane . .`342 -.

596 2010 359 9 (90) (17) 261 391 14 (109) 8 302 1.245 12 (324) (0) 28 961 389 15 (67) (0) (48) 288 1.383 2016 415 9 (87) (10) 326 421 14 (125) 8 318 1.684 252 (444) (1) 104 2.009 371 (881) (1) 33 3.748 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .396 3.074 420 15 (81) (0) (48) 306 1.052 420 15 (83) (0) (48) 303 1.122 407 (820) (1) 39 3.492 12 (376) (0) 51 1.285 306 (193) 35 1.321 333 (186) 37 1.343 TABLE C-2-16 REFINED PRODUCT BALANCE INDIA (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 242 14 (50) (3) 204 313 21 (67) 6 274 966 28 (164) (0) 32 862 366 13 (36) (0) (22) 321 796 175 (128) 92 935 2. .III C – Long-Term Outlook -.150 420 15 (75) (0) (48) 312 1.338 346 (182) 37 1.047 384 (861) (1) 35 3.970 356 (900) (1) 31 3.538 4.429 12 (414) (0) 47 1.104 224 (179) 33 1.355 357 (179) 38 1.677 2020 435 9 (70) (9) 365 421 14 (121) 8 321 1.605 2019 430 9 (74) (10) 356 421 14 (121) 8 321 1.150 2015 410 9 (92) (11) 316 421 14 (126) 8 316 1.995 2012 378 9 (89) (15) 283 402 14 (115) 8 309 1.179 420 15 (73) (0) (48) 313 1.470 4.570 4.434 3.310 12 (363) (0) 34 993 401 15 (73) (0) (48) 295 1.458 2017 420 9 (82) (10) 337 421 14 (123) 8 319 1.098 420 15 (79) (0) (48) 308 1.085 396 (841) (1) 37 3.414 12 (420) (0) 46 1.461 12 (398) (0) 49 1.267 291 (196) 35 1.123 420 15 (77) (0) (48) 310 1.476 12 (388) (0) 50 1.932 341 (918) (1) 29 3.659 303 (825) (1) 12 3.505 4.487 275 (769) (1) 2 2.445 12 (407) (0) 48 1.183 3.532 2018 425 9 (78) (10) 346 421 14 (122) 8 320 1.270 3.303 320 (189) 36 1.168 252 (185) 33 1.

537 8.696 1.Semi-Regenerative Reformer .400 1.666 136 11. LTPD Hydrogen Plant.896 1.962 2.370 1.464 17 605 31 267 81 0 170 183 385 233 45 6 10 0 222 884 407 668 22 1. Unless Noted) Required vs.363 185 1.259 1.174 1.547 197 2.504 1.026 2.120 2.533 7.993 2. Announced Thru 2012 0 144 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 130 0 104 0 104 0 0 0 2.886 1.357 8.666 1.852 7.079 2.286 8.291 354 535 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .400 2.III C – Long-Term Outlook TABLE C-2-17 MIDDLE EAST REFINERY CAPACITY (Thousand Barrels per Day.666 1.747 2.896 2.761 7.265 19 19 22 22 22 22 24 24 25 .393 7.163 26 Required 2020 8.120 2.277 1. .017 136 12.086 9.676 2.055 1.357 2.902 8.308 1.322 65 65 65 65 185 185 185 185 185 1.286 9.066 2.671 7.993 1.752 17 605 31 267 81 0 387 273 465 233 66 6 12 0 234 944 422 809 22 1.539 1.639 1.047 1. MMSCFD #REF! FCC Equivalents FCC Equivalents as a % of Crude 2007 2008 2009 2010 2011 2012 2013 2014 Required 2012 8.596 1.596 1.299 183 137 Required Additions 2012-2020 605 287 0 0 0 0 0 0 217 90 80 0 21 0 2 0 12 60 15 141 0 184 12 351 0 1.458 1.`344 -.385 2.433 2806 31 7.976 1.696 1.642 1.736 130 130 136 136 136 136 136 136 136 6.642 1.621 7.327 7.639 1.962 1.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant.184 1.162 1.747 1.033 2.096 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 1.671 8.600 17 17 17 17 17 17 17 17 17 605 605 605 605 605 605 605 605 605 31 31 31 31 31 31 31 31 31 249 267 267 267 267 267 267 267 267 81 81 81 81 81 81 81 81 81 0 0 0 0 0 0 0 0 0 90 90 90 90 90 90 170 170 250 183 183 183 183 183 183 183 183 183 275 305 305 305 305 305 385 425 425 103 103 183 183 233 233 233 233 233 36 36 36 36 36 36 36 36 36 6 6 6 6 6 6 6 6 6 10 10 10 10 10 10 10 10 10 0 0 0 0 0 0 0 0 0 122 170 170 212 212 212 222 222 222 524 524 656 656 694 694 754 754 814 407 407 407 407 407 407 407 407 407 304 324 405 467 479 489 564 582 627 22 22 22 22 22 22 22 22 22 832 890 1.458 1.596 6.086 9.320 2.

.III C – Long-Term Outlook -.345 TABLE C-2-18 REFINED PRODUCT BALANCE MIDDLE EAST (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 39 15 (5) (0) 49 38 2 (20) (1) 0 19 91 9 (28) (0) 1 73 89 14 (31) (15) 0 57 53 3 (68) 47 36 310 44 (151) (17) 49 235 2010 47 20 (6) (0) 61 39 2 (19) (2) 0 20 109 9 (29) (0) 1 91 91 14 (33) (15) 2 59 58 4 (67) (0) 48 43 345 49 (154) (17) 51 274 2012 52 20 (7) (0) 65 41 2 (20) (2) 0 21 116 10 (30) (0) 1 97 94 14 (35) (15) 2 60 61 4 (68) (0) 48 45 364 50 (160) (18) 51 288 2015 60 21 (9) (0) 71 43 2 (22) (2) 0 22 127 11 (34) (0) 1 105 99 14 (38) (16) 2 61 65 4 (69) (0) 49 50 395 52 (172) (18) 52 308 2016 61 21 (10) (0) 72 44 2 (22) (2) 0 22 129 11 (33) (0) 1 107 100 14 (38) (16) 2 62 66 4 (69) (0) 49 51 400 52 (172) (18) 52 314 2017 62 22 (10) (0) 74 44 2 (22) (2) 0 22 131 11 (33) (0) 1 110 100 14 (37) (16) 2 62 67 4 (69) (0) 49 52 404 53 (171) (18) 52 320 2018 64 22 (10) (0) 76 44 2 (23) (2) 0 22 133 11 (32) (0) 1 112 100 14 (37) (16) 2 63 68 5 (69) (0) 49 53 409 54 (171) (19) 52 326 2019 65 22 (10) (0) 77 45 2 (23) (2) 0 22 135 11 (32) (0) 1 115 100 14 (37) (16) 2 63 69 5 (70) (0) 49 54 414 54 (171) (19) 53 331 2020 67 22 (10) (0) 78 45 2 (23) (2) 0 23 136 11 (32) (0) 1 117 100 14 (36) (17) 2 63 70 5 (70) (0) 50 55 418 55 (172) (19) 53 335 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .

868) (0) 1.374 202 (618) (8) 24 1.653 931 39 (476) (39) 10 465 2.III C – Long-Term Outlook TABLE C-2-19 REFINED PRODUCT BALANCE MIDDLE EAST (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 908 360 (109) (4) 1.517 878 37 (437) (37) 10 450 2.862) (0) 1.136 1.237 85 (1.827 2012 1.681) (326) 1.392 488 (221) (7) 1.498) (309) 1.614 111 (1.392 1.129 2015 1.452 5.221 469 (166) (7) 1.091 7.482 6.422 98 (1.158 1.441 934 (3.918) (349) 1.043 (3.268 8.732 947 41 (483) (41) 10 474 2.915) (346) 1.163 (3.316 8.101 (3.776 1.365 1.616 258 (566) (270) 7 1.826) (0) 1.663 257 (595) (278) 33 1.229 191 (583) (8) 24 1.592 108 (1.120 (3.850) (0) 1.500 1.857) (0) 1.439 1.865 192 (574) (7) 24 1.197 1.425 498 (223) (7) 1.144 1.156 815 38 (420) (32) 10 412 1.129 1.478 6.495 7.292 8.121 1.599 217 (688) (8) 24 2.829) 1.080 1.218 8.813 258 (695) (288) 33 1.854 1.673 1.261 1.490 514 (230) (7) 1.721 257 (633) (281) 33 1.807) (0) 1.750 231 (656) (9) 24 2.413 4.817 258 (688) (290) 33 1.921) (339) 1.295 1.929) (335) 1.397 1.243 8.828 969 43 (493) (43) 10 487 2.144 1.355 96 (1.799 962 43 (489) (42) 10 483 2.707 2017 1.788 233 (655) (9) 24 2.570 105 (1.044 1.198 1.975 1.137 (3.767 954 42 (486) (41) 10 479 2.555 521 (242) (7) 1.693 939 40 (479) (40) 10 470 2.468 1.827 261 (662) (301) 33 1.422 1.340 1.925) (353) 1.426 1.616 1.547 102 (1.491 6.636 115 (1.853) (0) 1.173 (3.151 1.487 6.833 2018 1.713 228 (661) (9) 24 2.500 7.193 8.820 259 (682) (293) 33 1.247 1.151 (3.106 464 (145) (7) 1.035 7.916) (342) 1.525 99 (1.171 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .457 507 (226) (7) 1.435 1.382 1.065 2020 1.637 221 (677) (9) 24 2.953 2019 1.825 260 (669) (298) 33 1.063 (3.458 6.`346 -.874) (0) 1. .522 519 (235) (7) 1.418 1.097 1.981 2010 1.545) (321) 1.419 846 35 (416) (36) 10 439 2.431 1.822 259 (675) (295) 33 1.376 869 6.576 2016 1.675 225 (668) (9) 24 2.571 1.

418 2. Unless Noted) Required vs.066 281 1.III C – Long-Term Outlook -.012 297 63 1.012 270 63 1.075 282 1.938 207 367 0 0 0 0 232 335 704 19 39 3 4 3 103 268 1.640 403 1.678 472 1.012 270 63 1.979 207 381 0 0 0 0 285 335 744 19 39 3 4 3 111 350 1.012 297 63 1.227 22 1.099 282 1.979 207 381 0 0 0 0 285 335 744 19 39 3 4 3 111 350 1. MMSCFD FCC Equivalents FCC Equivalents as a % of Crude 8.188 2.012 249 63 1.859 22 2013 8.849 22 2012 8.227 22 2.012 297 63 1.264 22 2.264 130 2.264 22 2.365 251 1.Semi-Regenerative Reformer .036 281 1.864 498 1.029 207 381 0 0 0 0 310 373 784 19 96 3 5 3 141 429 1.859 22 Required 2012 8.287 785 2102 25 .678 472 1.859 22 2014 8.489 3.854 207 335 0 0 0 0 232 335 636 19 31 3 4 3 78 208 1. .233 22 2.994 281 1.365 273 1. LTPD Hydrogen Plant.418 2.660 20 2011 8.678 445 1.188 2.012 297 63 1.854 207 335 0 0 0 0 232 335 618 19 21 3 4 3 64 208 1.012 270 63 1.481 18 2007 8.499 18 2008 8.639 20 2010 8.859 22 Required 2020 8.418 2.188 2.854 207 335 0 0 0 0 232 335 686 19 39 3 4 3 96 208 1.264 22 2.268 282 2.540 373 1.027 337 63 1.938 207 367 0 0 0 0 232 335 704 19 39 3 4 3 106 288 1.979 207 381 0 0 0 0 285 335 744 19 39 3 4 3 111 350 1.099 282 1.418 2.188 2.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant.099 282 1.979 207 381 0 0 0 0 285 335 744 19 39 3 4 3 111 340 1.227 22 2.979 207 381 0 0 0 0 285 335 744 19 75 3 4 3 111 350 1.365 273 1.188 2.264 110 2.347 TABLE C-2-20 CIS REGION REFINERY CAPACITY (Thousand Barrels per Day.012 270 63 1.418 2.929 281 1.012 297 63 1.678 472 1.099 282 1. Announced Thru 2012 0 0 0 0 0 0 0 0 0 0 0 0 36 0 0 0 0 0 0 0 0 0 88 0 0 186 27 0 Required Additions 2012-2020 71 50 0 0 0 0 0 0 25 37 40 0 21 0 1 0 30 79 15 40 0 0 20 169 0 423 287 175 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .036 281 1.227 0 1.264 22 2.549 19 2009 8.

III C – Long-Term Outlook TABLE C-2-21 REFINED PRODUCT BALANCE CIS (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 32 1 (5) (0) 27 10 10 81 3 (42) 1 42 79 1 (49) (1) 30 49 (9) 8 48 251 5 (105) 7 158 2012 42 1 (7) (1) 35 13 13 104 6 (53) 1 57 90 1 (55) (0) 37 65 (16) 10 59 314 7 (131) 10 201 2015 44 1 (6) (1) 38 14 14 111 6 56 1 63 94 1 (57) (0) 38 69 (17) 11 62 332 8 (25) 11 215 2016 45 1 (6) (1) 38 15 15 114 6 57 1 65 95 1 (58) (0) 38 70 (18) 11 63 338 8 (25) 11 219 2017 46 1 (7) (1) 39 15 15 117 7 58 1 66 96 1 (58) (0) 39 71 (18) 11 64 344 8 (25) 11 223 2018 47 1 (7) (1) 40 15 15 119 7 59 1 68 97 1 (59) (0) 39 72 (18) 12 65 350 8 (25) 12 227 2019 48 1 (7) (1) 41 15 15 122 7 60 1 69 98 1 (60) (0) 39 73 (19) 12 66 356 8 (25) 12 230 2020 49 1 (7) (1) 41 15 15 125 7 62 1 70 99 1 (61) (0) 39 74 (19) 12 67 362 8 (25) 12 233 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane . .`348 -.

851 2018 1.207 17 1.278 128 1.052) (7) 697 1.083) 17 1.159 17 1.108) (7) 719 1.793 22 (1.812 22 (1.335 380 (494) (6) 4.043 97 (207) (9) 923 274 16 (19) (0) 271 1.027 2020 1.273 368 30 (23) 0 375 2.466 388 (492) (6) 4.653 57 (858) 16 869 1.440 135 1.398 390 33 (24) 0 400 2.363 231 (2.032 7.068 7.452 140 (239) (17) 1.439 1.734 21 (1.286 1.159) (5) 3.340 53 (343) 0 1.597 395 (490) (6) 5.728 402 (487) (6) 5.349 TABLE C-2-22 REFINED PRODUCT BALANCE CIS (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 1.713 21 (1.235 17 1.119 116 (1.337 380 32 (24) 0 389 2.428 55 (366) 0 1.386 134 1.305 125 (240) (17) 1.431 2012 1.482 144 (242) (17) 1.385 1.137 17 1.672 339 (2.III C – Long-Term Outlook -.669) (6) 4.551 136 1.649 21 (996) (7) 668 1.331 131 1.512 150 (247) (17) 1.773 22 (1.354 1.305 374 31 (23) 0 382 2.321 1.423 136 (237) (17) 1.101 7.070 364 (498) (6) 4.756 2017 1.435 23 (893) (12) 553 958 37 (181) 0 814 5.414 1.384 54 (353) 0 1.495 136 1.080) (7) 709 1.085 7.543 155 (253) (17) 1. .169 1.117 7.182 17 1.203 373 (496) (6) 4.107 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane .656 2016 1.406 54 (359) 0 1.094) (7) 714 1.051 7.393 133 (236) (17) 1.363 53 (348) 0 1.335 2015 1.318 52 (338) 0 1.038) (7) 690 1.754 21 (1.251 51 (328) 0 973 6.942 2019 1.265 17 1.066) (7) 703 1.368 386 33 (24) 0 395 2.428 395 34 (25) 0 405 2.173 347 26 (22) 0 351 2.

182 10 161 153 2.501 1.438 11 902 913 16.481 2.604 177 3.294 2018 16.929 2.988 3.300 2.682 11 861 872 16.052 1.798 10 792 802 16.501 11.633 9 140 158 3.995 2.450 2019 16.496 10 147 156 3.990 2016 16.340 2.684 188 3.803 12 181 149 2.203 2.701 174 3.512 2.530 2015 16.752 2.627 24 339 205 3.553 192 3. .392 2.856 10 767 777 16.100 2017 16.198 1.973 2.605 2.815 4.912 9 731 741 16.705 9 133 160 3.207 2.241 2.234 10 154 155 3.712 902 12.296 13 1.III C – Long-Term Outlook TABLE C-2-23 UNITED STATES TOTAL CRUDE OIL SUPPLY/DEMAND (Thousand Barrels Per Day) 2005 Total Runs Production Imports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Imports Exports Africa Asia Canada China Europe CIS Region Japan Latin America Middle East United States Subtotal Exports Total Supply 15.873 4.758 4.052 12.676 825 13.101 2.968 .815 731 13.220 5.435 4.052 2.530 15.512 2.740 10 825 835 16.712 8 126 161 3.586 2012 16.713 861 13.771 203 2.607 1.931 4.535 178 3.092 89 1.700 4.548 165 3.705 792 13.`350 -.780 29 1.637 2020 16.758 767 13.065 16.

275 75 75 5 766 1.351 TABLE C-2-24 UNITED STATES REFINERY CAPACITY (Thousand Barrels per Day.370 5.232 2. Announced Thru 2012 142 199 0 0 0 0 0 0 31 0 12 0 6 0 0 0 0 64 0 0 0 6 361 10 0 1.735 372 4.722 11 23 426 315 113 149 2.293 1.268 2.629 2.671 8.888 2.402 8.475 909 33.919 2.578 11 23 426 315 113 149 2.764 2.269 75 74 5 752 1.246 75 74 5 741 1.828 2.855 5.307 2.735 372 4.489 372 4.524 909 34.Semi-Regenerative Reformer .519 14294 77 2014 18.490 6.882 8.500 1.181 12995 73 2008 17.339 13319 74 2010 18.452 5.465 909 32.442 5.100 239 131 Required Additions 2012-2020 316 210 0 0 0 0 0 0 184 0 20 0 0 0 1 0 14 169 0 0 0 37 149 49 0 1.255 631 511 Existing plus Announced at End of Year 2006 Crude Distillation Vacuum Distillation Thermal Cracking Visbreaking Solvent Deasphalting Residue HDS Residue Hydrocracking Fluid Coker Delayed Coker VGO HDS Fluid Catalytic Cracking Resid Catalytic Cracking Alkylation Polymerization MTBE Unit TAME Unit Isomerization Hydrocracker Reformer .628 11 23 426 315 113 149 2.735 444 1.808 444 1.444 2.135 5.722 11 23 426 315 113 149 2.500 1.350 2.519 14188 77 2013 18.314 2.135 5.452 5.639 8.530 8. Unless Noted) Required vs.232 2.307 2.642 11 23 426 315 113 149 2.288 909 32.232 2.402 5.860 8. .269 75 74 5 752 1.293 1.980 5.452 5.764 2.307 2.293 1.Continuous BTX Extraction Naphtha Hydrotreating Gasoline Desulfurization Distillate Hydrotreating Asphalt Sulfur Plant.010 909 31.680 8.167 909 31.389 14830 78 .997 2.519 14294 77 Required 2012 18.735 372 4.141 12836 73 2007 17.232 2.275 75 74 5 752 1.052 11 23 426 315 113 149 3.495 909 32.880 5.775 5.389 1.452 5.482 2.519 14154 77 2012 18.776 444 1.452 5.269 75 74 5 752 1.680 8.293 1.980 5.776 444 1.495 909 32.378 372 4.378 372 4.314 2.880 5.287 11 23 426 315 113 191 2.293 1.764 2. LTPD Hydrogen Plant.776 444 1.962 5.135 5.238 909 32.400 5.III C – Long-Term Outlook -.987 9.814 8.293 1.452 5.308 11 23 426 315 113 149 2.269 75 74 5 752 1.135 5.735 372 4.293 1.919 2.269 75 74 5 752 1.710 444 1.259 13167 74 2009 17.532 2.307 2.263 75 74 5 748 1.776 444 1.980 5.435 909 32.307 2.980 5.735 372 4.857 2.735 372 4.758 14320 77 Required 2020 18.465 909 32.980 5.097 11 23 426 315 113 191 2.776 444 1.776 444 1.500 1.135 5.880 5. MMSCFD FCC Equivalents FCC Equivalents as a % of Crude 17.502 8.339 13854 75 2011 18.788 444 1.675 2.687 444 1.235 5.764 2.269 75 74 5 752 1.764 2.308 11 23 426 315 113 149 2.629 2.135 5.354 372 4.072 2.841 11 23 426 315 113 149 2.837 2.135 5.379 2.835 5.251 75 74 5 748 1.735 372 4.980 5.814 5.

.`352 -.III C – Long-Term Outlook TABLE C-2-25 REFINED PRODUCT BALANCE UNITED STATES OF AMERICA (Million Tonnes) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 339 48 (7) 13 393 74 9 (3) (0) 81 193 16 (7) (1) 201 34 29 (14) 20 1 31 152 33 (29) 40 195 793 135 (59) 20 52 900 2012 352 46 (7) 22 414 77 8 (2) (0) 83 220 16 (10) 2 228 30 21 (11) 18 0 21 168 30 (38) 42 202 847 120 (67) 18 65 947 2015 356 45 (7) 24 419 80 8 (2) (0) 86 228 16 (9) 3 238 29 20 (10) 19 0 20 172 30 (39) 41 204 864 120 (66) 19 68 967 2016 357 45 (7) 25 420 80 8 (1) (0) 87 230 16 (8) 4 242 28 20 (10) 19 0 20 173 30 (39) 41 205 869 120 (65) 19 69 973 2017 359 45 (7) 25 422 81 8 (1) (0) 88 232 16 (7) 4 245 28 20 (10) 19 0 20 173 31 (40) 41 206 873 120 (64) 19 70 980 2018 359 44 (7) 26 423 81 8 (1) (0) 89 234 16 (6) 4 249 28 20 (9) 19 0 19 174 31 (40) 41 207 877 120 (63) 19 72 986 2019 360 44 (7) 27 425 82 8 (1) (0) 89 236 16 (6) 5 252 27 20 (9) 19 0 19 175 31 (40) 41 207 881 120 (62) 19 73 992 2020 361 44 (7) 27 426 83 8 (1) (0) 90 238 16 (5) 5 255 27 20 (9) 19 0 19 176 31 (40) 41 208 885 120 (62) 19 74 998 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Note: Total includes Refinery gas and Ethane Gasoline trade comprises finished products and blendstocks .

769 180 (23) (1) 1.675 21.410 721 (646) 1.925 4.656 2.252 21.942 517 371 (181) 344 0 362 3.654 2.544 1.907 4.913 1.293 4.215 492 366 (159) 353 0 346 3.292 4.652 18.592 2012 8.857 1.353 TABLE C-2-26 REFINED PRODUCT BALANCE UNITED STATES OF AMERICA (Thousand Barrels per Day) 2005 Gasoline Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 7.201) (1.186) (1.751 2015 8.849 Jet/Kerosene Gasoil/Diesel Heavy Fuel Oil Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Other Products Production Imports Exports Int'l Bunkers Supply Adjustments Consumption Total Production Imports Exports Int'l Bunkers Supply Adjustments Consumption 17.790 2017 8. .957 1.442 730 (658) 1.947 22.888 4.800 4.743 176 (31) (1) 1.473 740 (670) 1.325 Note: Total includes Refinery gas and Ethane Gasoline trade comprises finished products and blendstocks .667 1.954 329 (138) (27) 4.846 2020 8.002 2.321 4.094 2.379 1.259 4.786 335 (130) 91 5.700 334 (165) 72 4.960 2.446 1.831 18.299 4.731 174 (36) (1) 1.210 22.350 709 (628) 1.226 1.804 21.785 1.303 4.006 19.026 2.489 743 (675) 1.113) 360 336 342 344 347 349 351 353 1.294 18.656 2.889 1.145 18.782 181 (21) (1) 1.299 4.304 4.957 4.149 498 368 (165) 351 0 350 3.033 (156) 624 9.917 19.942 4.028 (157) 640 9.795 183 (21) (1) 1.653 2.919 1.924 1.872 335 (100) 109 5.226) (1.127) (1.652 2.868 4.656 (1.813 2018 8.012 511 370 (176) 347 0 358 3.611 197 (55) (5) 1.784 2016 8.832 2019 8.829 335 (115) 100 5.081 505 369 (170) 349 0 354 3.115 (158) 302 9.756 178 (26) (1) 1.041 20.673 167 (39) (1) 1.423 1.506 318 (205) 36 4.355 1.033 789 (490) 1.654 2.118 628 530 (251) 360 14 560 3.743 334 (145) 80 5.426 725 (654) 1.969 2.144) (1.050 (154) 559 9.091) (1.042 (155) 591 9.198 21.330 1.III C – Long-Term Outlook -.655 539 376 (201) 336 0 379 3.749 3.083 (152) 510 9.178 1.400 1.742 18.940 1.871 523 373 (187) 342 0 366 3.821 1.046 (155) 575 9.082 22.866 1.161) (1.658 334 (178) 57 4.037 (156) 608 9.457 735 (665) 1.

As fleet vehicles represent only a small portion of the overall vehicle population the effect on fuel demand.`354 -. although its application is likely to be restricted to centrally fuelled fleet vehicles because of infrastructure limitations. Methanol use is expected to be inconsequential. announced in January 2007. because of negative factors as toxicity. such as ethanol and biodiesel. other alternative fuels are also being promoted. as well as reduce U. would both reduce European demand for mineral gasoline further.and CTL-related fuels. some of which are already in current use to certain degrees.S. if this imbalance were to be extended to the point where marginal European distillation (rather than conversion) capacity were forced to close. thus increasing the production surplus. Furthermore. The 2005 objective was not met and as the Commission has regarded as extremely unlikely that the current 2010 objective would be met it has decided to reinforce the current legislative framework with the current proposal. significant penetration of alternative fuels will have very important implications for refiners. This replaces the current directive. For example. LPG is currently used as transportation fuel in some markets (see section A-2 regarding its use in European countries) and its use is projected to continue to grow. such as gas-to-liquids (GTL) and coal-toliquids (CTL). refining industry profitability is likely to be impacted. Increasing use of biogasoline in Europe and the U. development of which is accelerating. Conversely. import requirements for European mineral gasoline. In differing ways. Compressed natural gas (CNG) is also currently in use. there is also considerable potential for fuels from other sources. a potential benefit from the use of biodiesel would be a reduction in the region’s gasoil/diesel import requirements. However. . adopted in 2003. reducing the need for additional conversion capacity. this would reduce gasoil/diesel production – thus increasing European middle distillate import requirements. which had the objectives of replacing 2% by energy content of gasoline and diesel for transport by biofuels by 2005 and 5. is for a minimum energy content of 10% by 2020. BIOFUELS The current target from the European Commission regarding biofuels. which is already facing an increasing production surplus and a limited number of outlets in which to place it. is likely to be small. The primary alternative fuels presently at issue are biofuels.S. .III C – Long-Term Outlook C-3 IMPACT OF BIOFUELS AND OTHER ALTERNATIVE FUELS Much attention is currently focused on the development of alternative fuels for use as transportation fuels.75% by 2010. unless full conversions were to be made. If rapid changes were to occur. and these will be the principal points of discussion. For Europe. increasing use of biodiesel would help meet the worldwide demand increases for middle distillate. although its share of overall transportation fuel is expected to remain small. logistics and economics. In addition to biofuels and GTL. increasing use of ethanol or other biogasoline blendstocks would have potentially serious implications for the European refining industry. therefore. but in all cases reduced mineral fuels demand would change the outlook for capacity requirements. For example.

National governments have recognized that funding biofuels is not sustainable. . France. given the inherently unfavorable economics relative to conventional fuels. over the long term biofuels will unquestionably become more important. Germany and Spain – will reach the 10% target. progress towards the 10% target is unlikely to be even between biogasoline and biodiesel. In addition. it will not be possible to meet the 2020 10% biofuel targets using domestically produced feedstocks alone. Worldwide.75% by 2010 will not be met until later in the forecast period. . wood pulp. increasing European diesel demand is likely make achieving biodiesel energy content targets more challenging. However. our projection is not only that the original indicative target of 5. Although we expect some countries with the required mandates – such as Belgium. the CO2 balance for land currently used for biofuel production in some cases is being brought into question. the eventual impact is by no means a clear issue at this point. In developing regions. etc. especially if much of the biofuel is imported due to high local production costs. and the development of “second-generation” biofuels such as those derived from waste. Spain and the United Kingdom are expected to exceed the 10% energy requirements for biogasoline in order to better meet the overall biofuel energy target. we estimate that most other countries will fall short.III C – Long-Term Outlook -. and that additional feedstocks will need to be imported. At the present time it is not clear that true second generation biofuels (biomass conversion) can be achieved technically or commercially and with a positive contribution to reducing greenhouse gas emissions. such as the practice of clearing rainforests for ethanol and palm oil production. In the EU. In our view. Most of the larger petroleum countries in Europe are unwinding their biofuel excise duty exemptions and replacing them with biofuel mandates and obligations – which places the burden of the higher cost of the fuel onto the consumer. Although there has been some difficulty meeting early targets in other countries as in the EU. has been through relief of excise tax on the biofuel component of the blend. for example. however. typically in the 8%-9% range. In addition. increasing disposable income and rising living standards are increasing the demand for land for food production. and there remain significant issues regarding the future development of biofuels and the likelihood of meeting some of the proposed targets. such that some countries such as France.355 The main means of promotion. it will not be possible to meet current EU targets without the use of secondgeneration biofuels. biomass. as evidenced by sharply rising cereal and other commodity prices. it is generally accepted that even allowing for full use of available EU agricultural land. Although in our forecast we have assumed that tax incentives and biofuel mandates/obligations in EU countries will encourage the development of biofuels. but also that biofuel usage in 2020 will fall short of the revised target of 10%. a number of other countries have also announced plans for increasing the use of biofuels – ethanol and biodiesel – as a replacement for part of the traditional fuel supply (Tables C-3-1 to C-3-6). Italy. including that currently used for set-aside. such as was experienced recently in Germany. The principal concerns are those regarding the use of available agricultural land for biofuel instead of food.

S.S. Currently.S.9 Fuel ethanol production currently consumes over 20% of U. most of which is expected to be provided by ethanol blended into gasoline. and Brazil now appears to be . Ethanol use in gasoline will grow in a number of countries. notably Brazil. it is widely thought that ethanol will have to be produced from cellulosic feedstocks in order to increase production significantly in the U. Longer term. but ethanol is also blended with gasoline (minimum 25% ethanol) that can be widely used.51/gallon (€0.1 Oceania 0 . FIGURE C-3-1 ETHANOL IN GASOLINE (Million Tonnes) C anad a 0 . 14 . 3 0 .S.10/litre). The U. C-3-2 and C-3-5). which grows very well domestically.2 C anad a 1. However.`356 -. which typically had the effect of curtailing ethanol used for fuel until sugar prices eased. having replaced MTBE as the oxygenate in reformulated gasoline. This exemption is available for all blended ethanol regardless of whether the ethanol is sourced in the U. Exports to the U. regulations require that the country meets a volumetric target for the use of renewable fuels. currently has an ethanol excise tax exemption of $0. The main research hurdle is to improve enzymes that convert cellulose to sugars and yeasts to increase conversion significantly and improve selectivity to ethanol.7 2020 Total 59. when sugar prices rose. There are many proposals that. which is passed back to the producer.3 Eur o p e 2 2 .S. or imported. U. Historically. corn supply and the large number of new ethanol plants being built will continue to drive corn demand in the near term. 7 Lat i n A mer ica 6 .6 2006 Total 22. . even though cellulosic ethanol is not yet commercially viable. Midwest states have historically promoted fuel ethanol because of the region’s link to agriculture. the Brazilian sugar producers converted more of their molasses supply to sugar at the expense of ethanol production..8 A sia 5. S.. has imposed a $0. with North America remaining the largest market for ethanol (Figure C-3-1 and Tables C-3-1.2 U .III C – Long-Term Outlook Ethanol Ethanol is already used extensively in the U.1 Eur o p e 1. would increase the ethanol requirements beyond the level that is feasible from corn. It is also used in other markets. if enacted.11/litre) secondary tariff on imported ethanol to offset the tax credit. in order to preserve the benefit of the blending credit for the domestic ethanol industry. and Asia have been increasing.S.2 A f r ica 0 .S. Brazil’s ethanol supply is produced from sugar cane. Flexi-fuel vehicles capable of burning both fuels are also in use.5 U .54/gallon (€0. Ethanol is burned directly in some automobiles that are designed to run on pure alcohol.S.S.8 Lat in A mer i ca 9 . the U.

0 . India.2 O ceania 0 .1 U . In Europe. Biodiesel Biodiesel is produced traditionally from the trans-esterification of vegetable oils or animal fats. European biodiesel supplies are based on domestically grown rapeseed and imported feedstock such as rapeseed and palm oils.III C – Long-Term Outlook -. Oils or fats are reacted in the presence of a catalyst (methanol and potassium hydroxide) to form the biodiesel and a glycerin byproduct. and Thailand have been considering ethanol for use in gasoline but progress has been slow. as elsewhere.3 Europe will remain the largest consumer of biodiesel (Figure C-3-2 and Tables C-3-3. Japan is currently testing ethanol blends.S. such as the jatropha plant or algae.3 2020 Total 42.1 A sia 7. diverting food crops to fuel use is a major issue. FIGURE C-3-2 BIODIESEL IN DIESEL (Million Tonnes) A si a 0 . concerns about the clearing of forests to make room for the growth of more sugar cane are on the increase. nevertheless some use of ethanol in gasoline is likely to evolve. and palm oils are the most common feedstock. and in order to meet the proposed 10% biofuel target pure ethanol blending will be required. Mixtures of petroleum-based diesel and biodiesel can be used in most diesel engines without noticeable performance degradation. but infrastructure problems caused delays in the implementation of this regulation. and it is expected that they will begin using ethanol in the future. Other non-food sources of feedstock. could potentially be available in the future. the focus will be more on biodiesel as diesel demand is increasing while gasoline demand is declining. India was going to require E5 blends (gasoline with a 5% ethanol content) in late 2006. and the country is a large producer of ethanol. and will be the principal route for developing biogasoline. rapeseed. ethanol is likely to be used to produce ETBE as a replacement for MTBE.357 more focused on increasing sugar cane harvests with the objective of producing steady and growing supplies of ethanol.8 U . 1.5 C anad a 0 . which is of limited value.5 Lat in A mer ica 2 .2 A f r ica 0 . Biodiesel is more attractive in a high crude- . However. In many places this transition has already been made.3 Eur o p e 3 .2 2006 Total 4. Japan. Vegetable oils from soybeans. However. . In Asia.S. Thailand has begun replacing imported MTBE with domestically produced ethanol. C-34 and C-3-6).6 Eur o p e 3 0 . China. China has its own biofuels targets.

but we expect that most of these projects will not be built. In Malaysia. Additional volumes of biodiesel are expected to be derived from the esterification of used cooking oils. Malaysia. however. Currently. The primary feedstock is soybean oil and imported palm oil. Biodiesel qualifies as a renewable fuel for the 2005 Energy Act requirements. provided the feedstock is available. the United States consumed about 0. In 2006. Brazil has vast amounts of available land that could be used for energy crops and it could become a significant exporter of biodiesel. India. Thailand and South Korea have all set targets for biodiesel blends that are expected take effect in the next few years.III C – Long-Term Outlook price environment as its production cost. A long list of potential projects has been announced over the past several years.000 B/D) Palm project in Qatar. such as vegetable oils and animal fats. The cost of biodiesel is primarily driven by the cost of feedstock. which reportedly had a cost increase from $7 billion when . with the added benefit of making high-quality liquid fuels and lube products. food supply chain is about 15 million tonnes. but its use will likely be limited to less than 2% because of supply constraints. is in excess of $600 per tonne and has recently traded in the $800-$900/tonne range. The environmental advantages of many of these alternatives remain questionable. Feedstock sources vary by country. soybean plantings will likely not grow as fast. .`358 -. or RME. palm oil is the primary feedstock. European vegetable oils cost from $400/tonne for palm oil to nearly $680/tonne for rapeseed oil in 2005. The main route through which biodiesel is expected to develop is through the use of Rapeseed Methyl Ester. there are no serious Federal initiatives to require the use of biodiesel blends. with by-product credits. principally jatropha. Several countries in Asia have plans to increase use of biodiesel.3-million tonne (154. With corn plantings increasing to meet ethanol demand. Rapeseed oil reached a peak of $840/tonne in mid-2006 when demand was higher than expected due to the growth of German demand. Indonesia. Africa and Asia. and all have problems associated with economics of supply and distribution. for example. OTHER ALTERNATIVE FUELS: GAS-TO-LIQUIDS AND COAL-TO-LIQUIDS There has recently been considerable interest in developing GTL projects in the Middle East. China.2% of the diesel pool) and consumption is growing rapidly. The production costs of biodiesel vary but are generally $100-$150/tonne of biodiesel. The Indian government is encouraging production from non-edible oilseed trees. One factor is the recent escalation in engineering and construction costs. typically in the form of excise duty exemptions. Total vegetable oil consumption in the U. thus limiting extra supplies of soybean oil. These projects have been regarded as ways to increase the development of otherwise difficult-to-realize natural gas reserves in these regions.S. Brazil allows up to 2% biodiesel in diesel and it will become mandatory after 2008.5 million tonnes of biodiesel (about 0. To compete with mineral diesel it has therefore required subsidies. Recent developments to process fatty acids in refining processes to create what is known as ‘green fuel’ could assist the supply of biofuels. ExxonMobil shelved its 7.

started producing in Qatar in January 2007. but they are not really characteristic of the newer projects being considered. but with inadequate reserves of oil and gas – examples include China. Another factor is increased demand for LNG. Other GTL projects of note that have a high probability of getting built include Escravos in Nigeria and a smaller project at Pointe-à -Pièrre in Trinidad & Tobago.359 announced to reportedly $15-$18 billion when the project was abandoned.III C – Long-Term Outlook -. but will probably not achieve that production level until next year. Two existing GTL projects continue to operate. FIGURE C-3-3 FISCHER-TROPSCH LIQUID FUELS PRODUCTION: GTL (Million Tonnes) 14 12 10 8 6 4 2 0 2000 2005 2010 2015 2020 Latin Am erica Middle East Asia Africa CTL technology was commercialized on a large scale in South Africa by Sasol in response to trade sanctions against the apartheid regime. Sasol II and III have a combined liquids capacity of about 7. a development project for which is in place to prolong its life. Phase 1 of the Oryx project. some gas that may have been considered stranded in the past is now being reconsidered for export as LNG. Coal to liquids looks particularly attractive in countries that have abundant coal reserves and large energy requirements. Shell broke ground for the first phase of their two-phase 6. some countries such as Qatar have experienced increased domestic and pipeline demand for their gas. a JV between Qatar Petroleum (QP) and Sasol. . The PetroSA project in South Africa is operating below capacity owing to a shortage of natural gas feed. Furthermore. Oryx I has a capacity of 1.6 million tonne (140. and we have factored the product volumes from these projects into our balances (Figure C-3-3). .6 million tonnes (34. Significantly.000 B/D) Pearl GTL plant in Qatar despite an increase in expected costs similar to those of Palm.000 B/D). Some large GTL projects are still going forward.1 million tonnes (150. and now provides about 28% of South African liquid fuel requirements. we expect CTL liquid fuels production will be much larger than GTL (Figure C-3-4). As a result. as is the case in Iran. the United States and India. The Shell Bintulu project in Malaysia started up in 1993.000 B/D). but the design yield of naphtha and diesel from this project is much lower than would be expected from more recent large-scale projects.

suggesting potential. A benefit of Fischer-Tropsch fuels is that they have very low sulfur content. The main fuel products for CTL/GTL are diesel and naphtha (Figure C-3-5). very good blending properties (high cetane index. zero polyaromatics). Meanwhile. Use of sequestration technology can ameliorate the emissions concern. Lubes Naphtha JetKero 2005 2010 2015 2020 Most of the announced. while indirect liquefaction involves an intermediate step to create a synthetic gas (“syngas”). in the case of diesel fuels. but transportation costs are usually prohibitive. The major drawback for CTL technology (and for coal in general) is that carbon dioxide emissions are much higher than for other fuels. good burning properties and. India has not yet announced any large projects. FIGURE C-3-5 FISCHER-TROPSCH LIQUIDS PRODUCTION (Million Tonnes) 60 50 40 30 20 10 0 2000 Diesel Other Prods. commercial-scale CTL projects are in China and the United States (Figure C-3-6). but it significantly raises the cost of the projects.III C – Long-Term Outlook FIGURE C-3-4 FISCHER-TROPSCH LIQUID FUELS PRODUCTION (Million Tonnes) 60 50 40 30 20 10 0 2000 CTL GTL 2005 2010 2015 2020 There are two technological routes to liquids from coal.`360 -. the Indian Investment Commission . there is a shortage of carbon dioxide for enhanced oil recovery. . Ironically. Most projects use the indirect route via Fischer-Tropsch chemistry. although Sasol recently opened an office in Mumbai. Direct liquefaction produces liquids from coal in a single reaction step.

but the first commercial-scale.000 B/D) of liquid fuels. Many projects are designed to produce chemicals. coal-fed CTL plant is scheduled to startup in Medicine Bow.361 recommended CTL as a feasible technology for India. Plants have been announced in the Appalachians and Illinois. Wyoming and North Dakota. CTL technology is also of interest in some other parts of the world. . with the largest announced capacity being 1.000-tonne (5. Generally they are much smaller scale than the Chinese plants. The first stage will have a capacity of about 1.000 B/D) plant designed to utilize anthracite coal waste is projected to start up in Pennsylvania in 2010. including ammonia.000 B/D) of liquids. . The United States also has some CTL projects planned. A small demonstration plant is being considered in Germany. as well as the western states of Montana. and the Prime Minister has directed the Planning Commission to develop a CTL action plan.9 million tonnes (40. Wyoming. China has a long list of approved CTL projects. while the entire project will have a capacity of about 8.0 million tonnes per year (19. FIGURE C-3-6 FISCHER-TROPSCH LIQUID FUELS PRODUCTION: CTL (Million Tonnes) 50 40 30 20 10 0 2000 Africa North Am erica Asia Oceania 2005 2010 2015 2020 The next commercial-scale CTL project is a direct liquefaction plant projected for first stage startup in late 2007 in the Inner Mongolia Autonomous Region of China. and a 2.000 B/D). such that China will be the world CTL leader by the next decade.8 million-tonne (60.III C – Long-Term Outlook -. The volumes of GTL/CTL included in our petroleum balances are shown in Table C-3-7 and C-3-8). A 240.9 million tonnes (188. and we expect that significant capacity will be built. in addition to fuels.000-B/D) plant is planned for Australia. in late 2011.

9 0.6 3.7 15.2 9.0 7.6 4.0 23.5 7.9 14.3 3.3 625.05 19.2 2013 12.8 5.8 0.5 7.1 39.0 156.0 913.97 7.3 37.4 7.3 41.0 0.9 156.0 0.0 480.5 25.6 1.6 22.9 20.9 0.6 10.0 0.4 3.7 10.1 22.82 14.4 17.5 0. Canada TOTAL WORLD 134.9 199.6 0.8 527.S.9 2020 18.4 36.2 24.97 1.7 0.7 18.2 492.8 4.0 0.0 168.14 17.4 10.2 5.9 10.1 1.0 0.0 0.2 0.00 0.6 39.0 134.4 0.0 0.0 0.5 26.2 11.0 0.9 2.9 38.3 2008 1.0 0.4 9.0 2.3 164.9 24.5 147.6 0.8 2.0 2.3 5.0 414.6 29.0 0.2 2.5 0.0 0.6 160.0 136.0 0.2 1.8 28.7 37.9 0.5 10.00 0.7 20.99 12.56 41.0 0.6 6.2 3.0 0.8 0.6 587.1 3.4 2.0 142.7 2015 17.3 0.9 4.0 74.2 615.3 0.6 0.0 198.2 0.1 39.1 6.6 149.3 668.5 3.5 2006 0.7 9.7 172.6 0.9 20.1 0.34 33.1 178.7 23.0 0.5 1.0 211.9 2012 10.0 0.7 564.09 114.9 1. .9 3.82 50.9 0.4 32.0 0.0 141.0 0.3 3.3 2.6 0.0 4.0 139.3 2.5 0.6 0.9 0.0 171.9 1.0 383.7 7.0 56.0 0.3 16.8 1.17 26.0 0.1 0.0 549.5 2.0 4.6 2010 6.0 7.9 8.1 9.8 396.0 0.3 31.5 6.2 144.4 708.4 25.9 137.9 15.0 0.0 19.7 868.3 495.3 0.7 6.9 35.3 575.8 4.3 1.0 37.3 2.4 1.4 4.9 28.00 0.0 592.4 230.3 8.7 6.6 2.1 1048.4 27.3 4.0 523.3 152.8 0.09 18.2 0.0 266.2 2009 3.7 27.0 Latin America Argentina Brazil Colombia Costa Rica Middle East Oceania Australia North America U.6 9.0 0.9 0.6 1.0 5.9 5.0 84.7 14.9 1.6 27.9 162.5 1.0 230.56 12.7 3.7 8.0 4.0 3.0 0.6 317.5 799.1 20.7 538.8 1001.5 3.0 1.2 0.6 1.4 2007 0.9 6.1 0.4 0.0 0.4 10.9 15.0 2.00 0.2 0.5 2014 14.0 0.9 4.6 4.6 5.0 0.7 22.3 0.3 10.00 3.0 0.7 3.0 146.5 19.7 3.17 8.3 1.5 0.6 0.4 1094.0 0.2 157.8 .6 3.8 1308.8 0.0 140.3 2.1 38.`362 -.0 2.8 7.1 13.0 18.0 0.7 30.0 185.1 0.4 29.0 3.9 3.5 4.0 0.6 609.5 2011 8.5 456.9 3.8 167.9 2.34 10.2 16.8 1.6 3.9 3.7 0.3 0.0 570.2 18.4 188.4 554.9 0.0 0.9 0.0 0.4 0.6 37.7 25.2 0.0 32.8 152.0 0.7 12.0 18.0 0.0 512.8 30.14 59.6 22.4 954.05 6.3 718.0 112.2 1.III C – Long-Term Outlook TABLE C-3-1 WORLD ETHANOL SUPPLIED IN GASOLINE (Thousand Barrels per Day) 2005 Africa South Africa Asia China India Indonesia Japan Philippines Thailand CIS Europe France Germany Italy Poland Spain United Kingdom 0.3 3.0 9.0 0.0 1.0 319.99 3.00 0.6 22.7 14.6 3.4 0.

28 0.00 9.09 27.48 1.12 25.87 0.21 0.83 1.00 0.09 7.00 0.54 0.68 0.00 22.68 39.00 6.00 12.23 0.92 .30 0.72 0.44 0.73 45.00 0.86 7.21 0.00 0.14 23.00 23.20 0.00 0.04 0.98 0.23 0.15 0.00 0.04 0.67 2010 0.15 0.00 0.00 0.25 0.13 9.16 0.03 0.S.00 25.06 26.83 0.50 0.23 0.99 8.18 0.93 0.00 0.31 0.85 2011 0.36 24.02 0.60 0.00 9.00 7.13 0.00 18.88 26.17 0.11 0.02 0.05 0. Canada TOTAL WORLD 6.90 6.18 0.00 0.09 0.20 0.16 0.363 TABLE C-3-2 WORLD ETHANOL SUPPLIED IN GASOLINE (Million Tonnes) 2005 Africa South Africa Asia China India Indonesia Japan Philippines Thailand CIS Europe France Germany Italy Poland Spain United Kingdom 0.21 0.00 6.13 1.06 0.76 50.15 7.16 2007 0.39 1.69 1.40 36.48 1.10 0.57 0.89 0.78 0.68 0.95 22.50 0.54 0.70 41.06 0.39 0.68 0.00 0.17 0.14 0.07 0.00 0.15 32.00 0.57 0.36 1.64 0.00 3.00 8.92 0.82 0.08 0.01 0.00 0.78 0.00 14.00 0.11 0.14 0.43 0.77 1.00 7.83 28.51 1.00 0.15 0.53 0.31 0.24 0.86 24.30 0.08 0.00 0.15 2008 0.87 0.71 1.06 0.85 0.24 0.37 1.09 0.16 0.30 0.18 0.17 6.28 0.37 2020 0.13 0.88 Latin America Argentina Brazil Colombia Costa Rica Middle East Oceania Australia North America U.47 0.01 0.85 1.00 0.14 0.01 0.34 0.12 27.22 0.38 0.00 0.00 6.65 1.88 1.01 0.48 1.00 6.71 7.11 0.41 0.71 0.12 0.00 0.00 6.99 18.63 14.58 0.79 1.13 0.20 8.78 2.16 0.21 0.03 0.09 0.29 0.12 0.03 25.21 0.09 0.00 0.49 0.35 0.00 0.19 0.12 7.22 3.26 1.71 43.83 5.18 0.49 0.77 0.85 1.00 0.00 10.15 28.36 0.12 0.00 0.09 0.00 0.04 0.66 0.00 0.07 2006 0.16 0.00 0.05 0.61 1.64 26.53 0.47 1.00 6.00 0.00 0.00 0.17 2014 0.17 0.72 0.68 2.00 0.00 0.43 0.29 0.04 0.89 0.00 1.91 0. .94 1.45 0.25 0.75 7.00 5.47 2009 0.16 1.00 0.37 0.01 0.18 0.20 0.00 0.08 0.50 0.14 1.30 1.65 0.06 2013 0.09 0.33 0.18 7.00 0.31 0.56 0.04 0.18 1.89 1.03 0.00 0.46 1.55 0.41 0.40 0.46 1.60 0.27 0.75 47.67 6.25 0.43 30.00 20.58 6.84 7.17 0.III C – Long-Term Outlook -.11 0.56 1.48 1.02 0.84 0.08 0.28 0.27 2015 0.06 0.14 1.00 0.03 0.35 0.00 0.20 0.82 59.32 0.35 0.03 0.11 32.14 0.03 1.14 0.96 2012 0.45 0.65 0.44 0.39 1.10 22.18 0.57 1.00 2.68 1.36 0.33 0.12 0.53 0.04 0.04 1.00 0.73 0.00 0.05 0.04 0.41 0.00 0.37 0.06 7.03 6.91 0.00 0.18 1.55 10.00 0.21 1.00 0.62 6.03 0.00 17.10 1.06 0.15 0.04 0.00 0.00 0.

5 1.0 0.6 32.0 0.0 397.3 0.6 60.4 10.4 2012 1.0 11.3 0.9 0.6 8.0 54.8 2.7 28.3 46.0 0.4 1.0 5.6 43.1 9.0 594.8 18.9 1.2 4.3 2.3 39.5 72.2 15.0 0.9 7.9 8.0 0.2 0.0 3.0 1.5 0.4 1.2 1.4 8.3 1.0 0.5 0.8 1.6 0.3 3.1 7.1 2007 0.6 2.0 65.1 0.9 10.1 3.9 11.2 12.2 6.7 1.8 0.4 7.5 20.5 5.3 3.8 1.1 2014 1.2 3.1 37.0 0.2 12.3 0.2 1.0 0. .1 0.1 0.0 0.4 2009 0.2 1.2 44.6 55.7 1.2 0.5 0.1 0.5 1.6 5.0 0.9 2015 2.4 4.8 27.1 0.3 8.0 41.9 2011 1.0 1.0 284.6 2.2 12.1 0.1 10.5 0.7 14.8 0.5 .0 0.1 5.5 0.0 0.0 0.0 71.5 1.0 9.9 0.5 0.8 6.3 14.9 60.9 2.6 2.8 102.7 0.1 2.8 59.0 0.0 0.6 15.6 0.7 2.1 12.0 0.8 22.8 1.1 0.1 29.0 0.3 1.0 2.2 37.0 0.4 2.8 1.`364 -.4 31.6 1.2 2.6 1.0 4.4 4.0 8.3 0.6 0.0 327.1 9.1 0.0 3.4 0.9 0.7 10.4 8.0 1.1 8.6 0.9 0.0 0.0 9.9 2.4 3.6 11.1 2013 1.0 0.8 53.1 103.3 2.9 1.2 8.III C – Long-Term Outlook TABLE C-3-3 WORLD BIODIESEL SUPPLIED IN DIESEL (Thousand Barrels per Day) 2005 Africa South Africa Asia China India Indonesia Japan Malaysia Philippines South Korea Thailand CIS Europe Austria Belgium Bulgaria Croatia Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden Switzerland United Kingdom 0.6 3.0 431.7 1.3 2.9 26.1 0.0 248.1 5.2 2.1 1.4 0.5 0.9 0.8 4.3 0.6 3.9 7.2 0.6 1.7 55.9 3.8 1.0 0.0 0.3 0.1 1.8 4.0 0.1 0.0 0.4 11.8 0.8 0.3 0.0 1.6 1.6 4.7 35.0 7.4 41.1 0.0 1.5 2.0 150.8 16.7 1.8 2.5 0.9 16.5 0.9 24.1 2.1 3.0 0.7 7.7 20.9 1.0 188.0 18.3 3.5 0.8 0.1 0.8 49.3 0.2 1.1 0.0 0.2 0.1 6.0 2008 0.2 12.2 1.0 0.8 23.8 0.2 10.0 0.1 65.6 2.7 1.7 0.0 363.5 1.0 0.8 5.4 9.7 1.2 76.0 0.0 0.8 1.7 15.7 7.8 0.4 0.7 4.6 1.5 40.0 0.3 0.1 0.7 2.9 2020 2.9 0.2 1.6 2010 0.4 0.4 0.7 4.9 1.5 1.1 1.0 0.7 37.2 1.7 33.2 0.3 4.0 1.1 0.1 0.6 6.6 0.0 0.8 2.4 0.3 10.8 3.4 1.1 2.0 1.5 42.6 15.8 2.0 0.2 0.5 7.7 7.1 0.0 70.0 0.5 24.5 0.7 0.5 3.1 2.1 0.8 10.1 0.0 0.0 0.4 14.0 2.4 0.2 2.6 0.9 6.1 3.1 1.4 6.3 0.3 0.3 3.9 2.4 10.5 13.7 2.9 5.2 35.1 28.0 0.1 0.0 0.1 12.0 1.0 1.2 154.6 0.4 1.0 5.1 0.5 5.6 45.0 13.2 0.0 0.5 7.4 1.2 0.6 0.4 8.0 63.1 0.7 1.2 0.2 6.1 4.7 6.3 21.9 5.7 1.9 2.3 59.0 0.2 80.2 39.9 0.4 39.6 0.7 0.6 3.3 0.1 5.3 28.5 0.7 17.2 0.3 0.4 3.0 0.0 0.8 87.8 0.9 3.2 2.4 0.0 0.5 1.0 0.2 11.3 0.7 0.5 15.5 51.6 5.3 2.9 0.2 5.6 1.8 0.6 0.6 1.9 19.2 0.8 1.7 1.6 82.0 0.9 35.7 2.0 0.5 3.1 4.8 16.1 1.8 1.0 0.7 0.4 12.9 65.6 9.6 48.1 1.8 2.6 5.1 0.7 0.0 12.0 0.6 0.6 3.1 22.8 52.4 12.4 19.0 46.7 2.6 13.9 76.2 0.4 56.6 50.7 0.3 5.4 0.6 65.6 8.1 5.8 5.5 2.8 4.3 1.2 0.6 4.0 0.0 2.0 107.4 42.8 13.1 0.9 3.0 0.0 0.3 2.6 2006 0.3 1.

3 1.5 0.3 2008 12.9 442.3 0.7 27.0 1.0 10.III C – Long-Term Outlook -.8 0.6 2014 34.9 0.0 0.0 0.3 20.0 14.0 2.0 1.2 0.0 12.5 22.4 2011 21.0 374.8 0. Canada TOTAL WORLD 0.5 0.3 0.4 2.7 2012 25.9 2009 14.8 2010 17.0 0.1 28.0 12.0 0.9 0.0 0.4 0.4 21.0 0.3 0.8 2020 43.7 0.6 0.7 833.8 0.4 6.) WORLD BIODIESEL SUPPLIED IN DIESEL (Thousand Barrels per Day) 2005 Latin America Argentina Bolivia Brazil Chile Middle East Oceania Australia North America U.5 6.7 2.9 0.5 0.0 0.8 9.4 1.0 0.0 85.4 26.4 7.8 4.1 20.2 0.9 16.8 10.2 12.2 0.S.0 59.1 19.0 0.4 0.8 35.0 2.2 0.5 2006 0.365 TABLE C-3-3 (CONT.0 6.1 2.3 27.5 .6 0.0 0.0 0.3 0.3 0.0 0.4 29.1 5.6 2007 10.2 2015 39.8 1.1 1.0 0.6 0.7 14. .5 16.0 16.3 0.1 18.7 23.0 0.0 9.5 29.4 0.0 9.7 1.0 0.5 5.0 0.8 18.4 0.0 0.0 0.1 552.2 14.0 0.8 2.0 0.0 192.8 3.6 18.0 0.0 321.0 139.0 4.0 244.0 2013 30.2 607.7 1.8 0.9 4.0 0.0 0.0 0.5 19.0 2.4 6.0 0.3 0.0 0.2 23.7 0.0 0.0 496.0 1.0 0.2 25.7 29.0 1.

00 0.02 0.09 0.11 0.11 0.10 0.20 0.10 0.01 0.01 0.55 0.51 0.05 0.36 1.25 0.09 0.24 0.01 0.09 1.82 0.09 0.00 0.20 0.00 0.00 0.32 0.00 18.39 0.01 0.10 1.09 0.77 0.00 0.64 0.00 0.28 0.03 0.00 0.03 0.08 0.10 0.03 0.09 4.04 0.64 0.48 2009 0.06 0.11 0.00 0.70 0.43 0.12 0.56 2.13 2.07 2.22 0.11 1.08 0.03 0.35 0.82 0.42 0.05 1.46 0.01 0.00 0.62 0.76 0.08 0.55 0.21 0.35 3.04 0.05 0.37 0.00 0.00 0.02 0.15 0.16 0.11 7.28 0.88 2014 0.39 0.38 0.30 2008 0.20 0.70 0.54 0.00 14.04 0.57 0.09 0.08 0.08 0.14 0.34 0.09 1.90 0.58 2.36 0.01 0.08 2015 0.38 0.02 0.04 0.59 0.57 0.04 0.02 0.17 0.00 0.13 3.00 12.18 0.65 0.31 0.00 0.00 3.16 0.00 0.85 0.70 0.05 0.70 1.16 0.18 0.29 0.00 0.04 1.35 0.04 2.11 2.02 0.21 0.05 0.02 0.14 0.22 0.16 2.22 0.06 0.00 0.21 0.14 2.12 0.52 0.28 2020 0.00 0.01 0.64 0.08 0.27 2011 0.11 5.27 0.03 0.04 0.42 0.64 0.05 0.09 0.02 0.00 0.41 0.00 0.03 0.07 2.20 0.04 0.01 0.07 1.00 0.68 2013 0.30 3.06 0.00 0.01 0.86 0.43 0.00 0.15 0.`366 -.01 0.87 0.02 0.20 0.16 0.66 0.04 0.01 0.13 0.63 0.00 0.28 0.11 2.00 0.13 0.05 0.06 0.77 0.18 0.24 0.09 3.03 0.11 0.44 2012 0.21 0.11 0.00 30.10 0.01 0.00 1.04 0.00 0.04 1.11 0.III C – Long-Term Outlook TABLE C-3-4 WORLD BIODIESEL SUPPLIED IN DIESEL (Million Tonnes) 2005 Africa South Africa Asia China India Indonesia Japan Malaysia Philippines South Korea Thailand CIS Europe Austria Belgium Bulgaria Croatia Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden Switzerland United Kingdom 0.01 0.00 0.03 0.04 0.78 0.10 1.00 16.00 0.51 0.00 0.03 2.12 0.01 0.28 0.20 0.17 0.37 0.01 0.07 2.09 0.80 0.10 0.01 0.97 0.05 0.13 4.01 1.00 0.32 0.06 0.05 0.79 2010 0.04 0.33 0.03 0.10 5.56 0.14 1.67 0.00 0.04 0.45 0.07 0.00 0.00 0.00 0.47 0.00 0.07 0.81 0.03 2006 0.14 2.91 2.05 3.06 0.00 2.01 0.60 0.65 0.02 0.10 0.06 0.24 0.16 0.40 0.00 20.92 0.02 1.25 2.01 0.40 0.62 0.05 0.05 0.01 0.20 3.83 3.33 .42 0.00 0.06 0.06 0.03 0.05 0.00 0.02 0.57 0.00 0.00 0.60 0.18 0.00 0.05 2.17 0.89 0.04 0.03 0.08 0.05 1.79 0.00 0.19 0.02 0.03 0.45 1.05 0.01 0.10 0.01 0.00 7.00 0.27 0.59 0.03 0.08 0.80 0.22 0.37 2.06 3.03 0.00 0.14 0.03 0.20 3.02 0.03 0.45 0.30 0.71 0.00 0.10 0.00 0.28 0.82 0.55 0.12 2.20 0.00 0.01 0.00 0.00 1.02 0.10 0.29 0.46 0.06 0.49 0.02 2.42 4.00 0. .07 1.48 0.00 0.02 0.02 0.26 0.00 0.44 0.81 0.01 0.01 0.37 0.45 0.00 0.67 1.26 0.05 0.22 0.00 0.13 2.08 2.89 1.00 0.00 5.08 0.16 0.25 0.10 0.28 0.73 2.08 0.03 0.88 0.00 0.11 0.02 0.37 0.13 0.08 0.00 0.25 3.08 0.01 0.64 0.08 0.01 0.16 0.07 0.12 0.20 0.08 0.04 0.03 0.28 0.06 2007 0.12 0.02 0.00 0.00 0.00 0.12 0.23 0.02 0.02 0.13 0.00 0.08 3.24 0.00 21.09 0.64 0.18 0.03 0.51 0.04 0.00 0.65 0.00 0.20 0.05 0.00 9.55 0.89 3.00 0.18 3.45 0.26 0.06 1.00 0.00 0.06 0.71 0.92 0.12 0.01 1.01 0.04 0.47 0.33 0.07 0.09 1.38 0.42 0.47 0.07 0.00 0.45 0.42 0.21 0.23 0.00 0.01 0.61 0.02 0.30 0.

.00 0.02 0.00 0.11 0.75 0.S.31 30.47 0.00 0.05 0.11 1.41 0.00 0.22 0.00 19.00 3.47 0.07 2008 0.00 0.02 2006 0.01 0.14 0.28 0.73 0.25 0.35 2007 0.52 0.07 0.01 1.09 1.81 1.14 0.22 2014 1.00 0.00 0.00 9.34 1.50 0.00 0.07 1.51 0.00 0.00 0.51 1.00 0.09 0.62 0.00 0.75 0.62 0.17 0.30 22.07 0.94 0.00 0.30 0.04 0.10 0.19 0.22 0.94 0.00 0.00 0.51 0.62 0.00 7.00 0.00 0.83 0.00 0.86 0.14 0.44 2013 1.99 0.01 1.00 0.01 0.86 0.09 0.00 0.III C – Long-Term Outlook -.00 0.05 0.99 0.34 42.38 0.00 0.00 0. Canada TOTAL WORLD 0.00 0.00 0.04 0.53 0.86 2020 2.02 0.07 0.32 .00 0.52 0.367 TABLE C-3-4 (CONT.31 28.00 0.04 2015 1.25 0.45 1.80 2009 0.14 1.62 0.00 0.01 1.05 0.50 0.02 0.00 0.01 1.12 1.00 4.09 0.00 0.30 25.00 0.00 0.05 0.39 1.90 0.00 0.32 2011 1.) WORLD BIODIESEL SUPPLIED IN DIESEL (Million Tonnes) 2005 Latin America Argentina Bolivia Brazil Chile Middle East Oceania Australia North America U.00 0.94 0.75 0.03 0.00 0.00 0.73 0.00 16.03 1.00 12.17 0.00 0.00 0.43 2010 0.00 0.00 0.04 0.12 0.03 2012 1.98 0.31 0.

00 9.72 5.35 0.00 0.36 5.23 0.01 5.00 6.80 5.05 8.43 0.52 0.00 1.32 2.00 0.50 4.38 2.51 5.58 5.23 1.50 0.00 0.50 1.33 10.62 7.00 33.50 33.57 5.39 0.96 12.15 7.87 7.00 0.00 1.87 7.00 0.88 0.35 7.78 2.00 2.50 0.97 6.22 0.00 11.18 1.00 0.58 6.00 0.78 1.00 0.00 3.00 12.27 1.59 0.68 7.00 0.45 0.00 0.05 5.00 33.50 4.95 2015 2.00 0.10 0.25 6.69 11.60 6.59 8.63 0.87 5.00 0.78 5.79 3.33 0.00 1.00 5.60 5.00 0.00 4.80 1.00 3.76 3.83 3.00 2.00 33.00 2.13 0.44 1.00 0.66 2.00 0.00 0.50 20.50 2.83 4.00 7.66 6.66 0.50 6.30 0.00 0.83 7.00 0.25 0.23 3.00 34.00 0.92 4.85 4.25 2011 1.65 5.00 2.67 33.00 0.00 3.06 4.56 1.17 33.50 0.32 7.44 0.50 0.19 5.00 3.50 2008 0. .88 1.46 0.62 3.52 5.00 3.00 33.20 0.79 1.92 4.26 3.00 0.87 9.00 2.83 33.33 33.00 0.83 4.52 13.00 0.85 2012 1.61 7.04 0.89 5.00 0.00 34.78 0.21 1.00 4.08 8.50 8.60 0.85 4.00 1.56 2.00 4.17 2.00 0.71 2.32 0.00 5.31 8.13 5.00 4.00 4.03 0.S.56 1.72 3.50 Latin America Argentina Brazil Colombia Costa Rica Middle East Oceania Australia North America U.00 8.52 2.00 0.00 0.00 0.97 9.00 0.00 0.22 0.44 2.50 0.32 5.78 7.63 0.89 1.42 2.13 0.18 1.50 3.12 5.82 4.52 0.63 0.00 4.92 5.48 0.49 5.50 2013 1.00 6.08 6.67 0.00 0.81 3.32 1.06 4.39 3.00 1.29 2.50 3.22 0.23 4.99 0.50 0.00 0.45 5.00 0.20 3.50 2007 0.89 0.71 6.00 0.67 3.00 0.00 3.00 0.00 0.16 0.11 0.50 3.61 1.00 0.00 0.45 8.00 0.00 5.00 4.59 2.`368 -.11 0.00 0.13 0.00 0.40 5.50 0.32 0.00 0.75 5.59 5.00 1.00 4.75 3.93 2.00 0.00 0.00 0.00 5.50 0.75 0.40 0.50 1. Canada TOTAL WORLD 7.00 7.III C – Long-Term Outlook TABLE C-3-5 WORLD ETHANOL IN GASOLINE (Percent) 2005 Africa South Africa Asia China India Indonesia Japan Philippines Thailand CIS Europe * France Germany Italy Poland Spain United Kingdom * Note: Percent by Energy 0.04 5.00 1.89 0.50 0.56 0.70 2.67 1.03 7.20 5.50 2.67 3.38 0.00 4.00 5.68 1.80 3.33 2.30 5.43 5.12 3.00 0.00 1.03 0.00 4.31 7.00 4.48 20.41 11.89 2.00 6.92 4.35 5.00 5.81 6.25 2.44 2010 0.89 0.22 2006 0.00 0.00 10.57 3.63 1.00 5.63 2009 0.19 .33 0.00 0.44 1.00 0.00 0.50 5.00 0.00 1.00 0.38 0.84 7.95 2.75 2020 2.00 1.30 7.75 0.00 0.70 3.00 33.00 1.00 0.96 2.00 0.38 5.00 0.58 2.87 0.60 5.00 0.02 0.00 0.20 2014 1.54 2.91 6.18 4.75 0.88 4.25 1.00 2.00 4.

22 3.25 3.00 3.97 7.62 5.71 6.67 1.00 10.00 2.95 0.77 0.22 0.14 0.56 0.73 4.45 6.00 0.00 0.94 7.63 7.03 2.50 5.11 6.50 4.00 0.00 0.63 1.00 0.00 0.III C – Long-Term Outlook.98 6.34 0.92 1.00 5.21 1.06 1.88 7.24 3.27 0.75 0.59 10.23 2.00 0.14 0.03 5.94 1.64 3.55 3.40 1.25 5.09 7.18 1.80 3.40 0.13 5.47 1.00 0.11 8. -.33 7.30 1.60 5.81 4.10 0.96 6.88 7.23 0.20 0.50 0.20 9.00 0.36 7.64 1.24 6.50 0.10 3.00 0.58 2.50 3.00 8.00 0.77 7.34 1.70 0.19 1.85 7.38 2020 0.00 1.88 4.00 0.71 0.92 6.00 0.00 0.11 0.00 2010 0.19 0.50 1.04 0.75 1.94 5.47 3.06 4.49 0.32 0.45 0.45 7.75 1.00 5.00 0.00 0.00 6.97 7.32 3.58 0.71 7.60 0.76 3.30 6.84 8.45 1.29 1.50 0. .18 1.89 1.81 6.79 0.76 1.08 3.57 0.86 0.25 0.88 7.28 3.56 6.00 1.18 7.52 1.45 0.19 3.00 0.60 5.65 9.67 2.71 1.15 0.67 2.51 0.39 3.61 0.13 0.04 0.51 5.25 5.37 4.08 6.15 5.00 10.33 0.00 1.99 0.57 2.06 4.15 7.00 5.43 0.75 5.00 0.30 1.20 0.00 0.56 2.00 2.35 4.45 5.38 0.00 2.40 1.00 0.00 0.50 .24 5.03 1.61 5.81 0.04 1.00 3.71 2.06 1.00 0.00 3.67 7.53 1.66 2.32 6.00 2.00 2.00 0.09 3.50 0.42 0.50 0.00 7.00 0.00 1.25 2008 0.00 0.94 7.97 5.71 1.00 1.61 6.04 0.92 4.23 2.50 0.00 1.25 1.04 2.94 5.78 0.00 8.57 0.30 4.92 0.83 3.60 5.50 0.85 0.00 0.29 0.42 1.00 0.54 0.18 3.67 0.50 0.43 1.00 0.68 2012 0.04 0.50 2.10 2013 0.25 2011 0.53 2014 0.88 7.14 3.28 5.88 2009 0.00 0.44 0.01 0.60 5.43 2.63 0.16 0.00 0.75 4.94 5.45 5.50 8.57 7.95 2015 0.45 3.50 0.58 7.00 9.00 0.00 12.31 2.38 9.25 10.00 0.21 2.00 0.88 7.50 2.31 4.74 2.50 10.00 4.22 3.65 0.12 0.00 0.00 0.00 2.80 8.07 3.28 1.94 2.89 0.00 0.00 0.00 4.61 6.06 6.09 7.52 2.71 3.08 0.28 0.08 0.67 3.00 5.98 2.16 0.41 7.00 0.00 3.18 4.12 0.50 0.25 0.23 0.46 5.25 4.71 5.74 5.23 7.00 6.00 0.88 6.70 9.30 0.26 0.00 5.25 2007 0.36 5.88 3.45 0.64 5.58 2.18 0.00 9.00 0.00 9.69 7.19 5.18 5.88 5.94 6.86 3.67 0.50 10.60 4.75 2.00 0.77 5.03 1.55 0.30 7.30 2.10 0.38 0.52 0.08 3.69 6.23 1.00 4.00 3.23 3.32 4.59 6.55 7.55 0.50 0.03 4.11 1.35 0.00 0.58 0.64 1.52 7.00 2.85 0.25 3.09 5.68 0.00 0.87 0.50 9.03 4.51 7.38 0.60 2.25 1.00 8.20 0.43 0.50 1.03 4.75 0.16 4.50 1.50 7.48 3.11 6.33 5.75 2.83 0.00 7.18 0.14 0.70 3.50 0.23 3.09 0.86 0.28 2.85 1.45 1.24 1.43 6.75 2.00 1.03 6.50 1.26 2.63 4.00 9.00 3.15 0.50 1.97 6.00 8.75 1.14 0.28 7.00 0.00 10.85 4.00 5.30 5.00 4.00 5.12 5.00 0.50 0.00 1.15 0.50 3.50 1.13 2006 0.48 6.00 0.70 2.00 6.14 0.00 1.17 6.45 6.50 0.75 4.03 6.50 2.16 1.86 6.09 5.87 0.94 2.30 2.96 3.65 0.67 7.61 2.71 0.18 7.34 0.26 1.369 TABLE C-3-6 WORLD BIODIESEL IN DIESEL (Percent) 2005 Africa South Africa Asia China India Indonesia Japan Malaysia Philippines South Korea Thailand CIS Europe * Austria Belgium Bulgaria Croatia Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden Switzerland United Kingdom * Note: Percent by Energy 0.29 5.86 4.96 6.00 8.50 3.00 0.73 6.13 0.89 2.50 5.54 7.29 0.

64 0.67 3.33 1.00 0.00 5.50 0.00 0.10 0. Canada TOTAL WORLD 0.00 0.88 0.00 0.23 0.29 0.00 0.00 0.43 0.45 1.34 0.60 2010 1.20 0.63 1.48 1.00 0.59 0.40 0.00 0.00 0.00 0.12 .39 2020 2.00 0.43 0.91 2014 2.69 0.00 0.57 0.79 1.00 1.38 0.42 5.50 5.49 5.18 4.47 1.00 0.29 2009 1.50 0.00 0.00 3.66 2013 1.00 0.23 0.00 2.23 0.33 4.00 0.00 0.00 0.00 1.00 0.00 2.00 0.19 0.83 0.75 0.28 0.88 0.12 0.00 2.16 2015 2.00 0.00 4.67 0.00 2.00 2.00 0.00 3.43 2006 0.00 3.00 2.00 0.04 2011 1.70 2.44 2.13 0.41 0.67 4.25 1.39 0.53 0.00 0.00 0.00 0.55 0.38 0.00 0.94 3.00 2.60 0.370 -.25 0.88 0.12 0.00 0.56 0.00 0.38 0.S.00 0.80 0.00 0.00 0.38 0.31 2012 1.00 0.) WORLD BIODIESEL IN DIESEL (Percent) 2005 Latin America Argentina Bolivia Brazil Chile Middle East Oceania Australia North America U.63 0.49 0.50 1.00 0.00 2.80 1.56 1.60 2007 0.50 0.75 0.00 0. .00 0.13 0.00 3.00 0.III C – Long-Term Outlook TABLE C-3-6 (CONT.47 1.01 2.00 0.33 3.00 0.01 0.00 0.00 0.96 2008 0.34 0.00 3.17 1.28 0.00 0.41 0.76 0.

III C – Long-Term Outlook. -. TOTAL WORLD 160 160 160 155 155 155 156 156 156 159 159 2 2 161 162 162 37 37 200 166 166 67 67 2 2 235 169 169 94 94 3 3 8 8 274 172 172 136 136 3 3 13 13 324 176 176 157 157 3 3 36 36 371 179 179 178 178 3 3 46 46 406 183 183 219 219 3 3 62 62 467 187 187 260 260 3 3 65 65 515 206 206 529 529 4 4 63 63 140 140 942 GTL Africa Nigeria South Africa Asia Malaysia CIS Europe Latin America Trinidad & Tobago Middle East Qatar Oceania North America TOTAL WORLD 34 34 13 13 46 31 31 13 13 44 28 28 13 13 40 28 28 13 13 24 24 64 28 28 13 13 1 1 31 31 72 28 28 13 13 2 2 31 31 73 28 28 13 13 2 2 67 67 109 28 28 13 13 2 2 128 128 170 45 17 28 13 13 2 2 157 157 217 58 31 28 13 13 2 2 165 165 238 59 31 28 13 13 2 2 170 170 244 59 32 28 13 13 2 2 173 173 248 63 35 28 13 13 3 3 190 190 268 . .371 TABLE C-3-7 FISCHER-TROPSCH COAL-TO-LIQUIDS FUELS & GAS-TO-LIQUIDS FUELS (Thousand Barrels per Day) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 CTL Africa South Africa Asia China CIS Europe Germany Latin America Middle East Oceania Australia North America U.S.

4 0.3 0.3 0.1 3.8 1.4 1.0 6.6 0.6 0.6 0.1 1.6 44.6 0.3 1.3 0.1 0.3 0.S.1 0.4 6.9 1.3 1.8 11.3 0.6 0.7 17.7 1.0 8.2 2.1 8.5 8.8 1.6 1.0 9.4 0.2 2.1 6.3 7.6 0.1 0.1 1.1 0.1 0.1 3.0 1.1 9.2 8.1 0.6 0.6 0.1 0.5 0.0 2.1 11.6 0.1 8.2 3.4 3.4 0.1 24.6 6.6 0.1 0.6 0.3 1.4 7.6 0.4 0.3 0.1 7.3 1.1 8.4 1.6 8.4 7.2 0. .7 24.2 0.8 1.6 0.6 0.1 1.2 0.0 8.3 9.0 3.8 12.2 3.6 0.0 6.3 10.6 15.6 0.2 3.4 12.8 7.5 1.0 4.3 0. TOTAL WORLD 7.1 0.5 1.III C – Long-Term Outlook TABLE C-3-8 FISCHER-TROPSCH COAL-TO-LIQUIDS FUELS & GAS-TO-LIQUIDS FUELS (Million Tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 CTL Africa South Africa Asia China CIS Europe Germany Latin America Middle East Oceania Australia North America U.5 0.1 7.3 0.3 1.3 7.3 8.1 0.7 1.1 1.4 7.2 8.8 9.8 8.2 2.6 0.1 0.3 0.3 7.1 0.4 GTL Africa Nigeria South Africa Asia Malaysia CIS Europe Latin America Trinidad & Tobago Middle East Qatar Oceania North America TOTAL WORLD 1.8 1.2 11.4 7.3 1.1 0.9 0.3 7.1 2.3 8.0 1.6 0.5 1.8 3.9 8.6 0.4 7.5 8.1 1.7 7.5 2.5 0.7 3.0 12.1 0.1 8.2 5.7 1.1 0.6 0.7 9.7 .3 0.9 2.6 7.1 1.3 0.4 8.1 0.9 24.4 7.5 8.7 1.3 12.2 3.1 6.6 0.372 -.9 22.4 1.5 3.4 10.8 7.6 2.5 1.6 0.0 11.1 7.3 0.5 7.3 0.1 0.1 3.0 8.5 4.2 2.0 8.2 0.2 19.6 10.1 0.6 1.5 1.

1 metric ton. and Umm al-Quwain. Dubai. Gulf Coast Vacuum gasoil West Texas Intermediate CRF/ICRF CTL EPA ETBE EU FCC FCC Equivalent FOB GTL HDS HSD IEA LLS LPG LSD/ULSD MTBE NGL o API OPEC pa RBOB RFCC RFG RME SECA SUV TAN Tonne tpy UAE Urals USGC VGO WTI .S. 35 Imperial gallons.S. expressed as milligrams of potassium hydroxide per gram of crude (mgKOH/g). Comprises the Emirates of Abu Dhabi. Russian export blend crude oil U. -.000 kilograms tonnes per year United Arab Emirates. Catalytic process to remove sulfur from oil products High speed diesel International Energy Agency Louisiana Light Sweet Liquified petroleum gas Low-sulfur diesel / ultra low sulfur diesel Methyl tertiary butyl ether Natural gas liquids Degree API.clean gasoline required in some U. and Uzbekistan Capital recovery factor / Incremental capital recovery factor Coal to liquids Environment Protection Agency: a U. . Russia. Sharjah. 159 litres Diesel fuel produced from agricultural products rather than mineral oil Gasoline containinig ethanol or ETBE derived from agricultural products Corporate Average Fuel Efficiency: a standard measure of fuel economy in the U. Kyrgyzstan. consisting of eleven former Soviet Republics: Armenia. An unfinished gasoline prepared for ethanol blending Residue Fluid Catalytic Cracker Reformulated gasoline . regions Rapeseed Methyl Ester Sulfur Emission Control Area Sports Ultility Vehicle Total Acid Number. Azerbaijan. Ras al-Khaimah.III C – Long-Term Outlook. Government body Ethyl tertiary butyl ether European Union Fluid Catalytic Cracker Residue conversion processing capacity expressed as an equivalent to an FCC unit Free on board Gas to liquids Hydrodesulfurisation.S. usually for crude oils and condensates Organisation of Petroleum Exporting Countries Per annum Reformulated Blendstock for Oxygenate Blending.373 GLOSSARY GLOSSARY AND ABBREVIATIONS API B/D Barrel Biodiesel Biogasoline CAFE CIF CIS American Petroleum Institute Barrels per day 42 US Gallons. insurance and freight Commonwealth of Independent States. 1. Belarus. A measure of the acidity of crude oil. Ajman. Tajikistan. Measure of density.S. Carriage. Kazakhstan. Ukraine. Georgia. Fujairah. Moldova.

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