Post on 17-Dec-2015
J ACOBSCONSULTANCY
Petcoke Prices – Do They Relate to Anything?
Ben Ziesmer
McCloskey Group Petcoke Conference — 2008 Houston, TX June 10 & 11
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Petroleum Coke Prices($/MT fob Vessel, load port)
0
20
40
60
80
100
120
140
160
Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08
WEST COAST
HGI > 50GULF COAST/CARIBBEAN
S>2%
S<2%
HGI < 50
$/MT
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Fuel Prices – Mediterranean Market
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
$/MMBtu, cif Mediterranean Residual Fuel Oil
South African Steam Coal
>50 HGI Petcoke
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Fuel Prices – Mediterranean Market
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06
$/MMBtu, cif Mediterranean Residual Fuel Oil
South African Steam Coal
>50 HGI Petcoke
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
USGC/Caribbean Market Petcoke vs.South African Steam Coal
$/MMBtu CIF Mediterranean
0%
25%
50%
75%
100%
125%
Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Petcoke Pricing –A New Paradigm?
Cement industry – from secondary fuel to preferred fuel Many kilns use 100% petcoke
Ash in fuel becomes part of clinker
Supply certainty important
Coal supplier dependability concerns
Power industry – still secondary fuel Must be lower cost on $/MMBtu basis
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Fuel Prices – Asia
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
$/MMBtu,cif Japan
High Sulfur Residual Fuel Oil
Australian Steam Coal
>2% Sulfur USWC Petcoke
Source: Pace Petroleum Coke Quarterly©
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
USWC Petroleum Coke vs.Australian Thermal (Steam) Coal
$/MMBtu CIF Japan (USWC)
0%
25%
50%
75%
100%
125%
150%
Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
USWC <2% Sulfur
USWC >2% Sulfur
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Australian & South African Steam Coal
0.00
1.00
2.00
3.00
4.00
5.00
6.00
May-02 May-03 May-04 May-05 May-06 May-07 May-08
$/MMBtu
Australian FOB Newcastle
South African FOB RBCT
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
USGC & USWC Petroleum Coke
$/MMBtu CIF Mediterranean (USGC/Caribbean) or CIF Japan (USWC)
0%
25%
50%
75%
100%
125%
150%
Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
USGC/CaribbeanUSWC >2% SUSWC <2% S
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Illinois Basin vs. South Africa Steam Coal
0.00
1.00
2.00
3.00
4.00
5.00
Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07
$/MMBtu
South African FOB RBCT
IL Basin 2.5% S FOB barge
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Illinois Basin vs. South Africa Steam Coal
0.00
1.00
2.00
3.00
4.00
5.00
May-02 May-03 May-04 May-05 May-06 May-07 May-08
$/MMBtu
South African FOB RBCT
IL Basin 2.5% S FOB barge
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Utah vs. Australian Steam Coal
0.00
1.00
2.00
3.00
4.00
5.00
6.00
May-02 May-03 May-04 May-05 May-06 May-07 May-08
$/MMBtu
Australian FOB Newcastle
Utah Coal FOB mine
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Petroleum Coke EUA Penalty vs.Burning Natural Gas
0
10
20
30
40
50
60
Jan-07 Mar-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Mar-08
$/MT Phase 1 Phase 2
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Indifference Price of Petcoke vs. Natural Gas including EUA Cost
200
250
300
350
400
11/2/07 12/28/07 2/22/08 4/18/08
$/MT Phase 1 Phase 2
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
U.S. Climate Change Legislation –Lieberman-Warner
Oil refineries – Have to acquire CO2 credits based on carbon in crude Assumes all carbon in crude becomes CO2
Refiners can allocate CO2 cost among products as they see fit
Coal – End user accounts for CO2 emissions Generating stations & industrial plants need CO2 credits for
emissions
No double counting → CO2 from burning petcoke should not count as CO2 emissions
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Lieberman-Warner & Petcoke
CO2 emissions ~3 tons/ton petcoke burned
How CO2 affects petcoke value Internal U.S. – increases value
worth premium to coal as CO2 already counted
Exports
Developing countries – no effect
EU – should decrease value due to EUA cost
WTO – Potential problem if export price is lower than domestic price
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Summary
USGC petcoke prices are not directly correlated with South African coal prices New pricing paradigm?
Neither <2% S nor >2% S petcoke prices are directly correlated with Aussie steam coal prices
Premium of <2% S over >2% S petcoke has varied Steel industry primarily uses coking coal
Coking coal premium over steam coal
Steel industry has been easing sulfur requirements
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Summary
U.S. coal prices not correlated with international coal prices When international coal very high, U.S. coal can move into
Atlantic Basin export market
CAIR scrubbers changing U.S. coal market
U.S. petcoke fueled project potentially exposed to international vs. domestic coal price risk
CO2 emission regulations can produce unexpected changes EUA currently not high enough to push users from petcoke
to natural gas
J ACOBSCONSULTANCYPetcoke Conference—2008 Houston, Texas June 10
& 11
Disclaimer StatementThe presentations prepared by Jacobs Consultancy Inc., (“Jacobs”) for the Petcoke Conference 2008, and the forecasts, estimates, opinions, analysis, evaluations, or recommendations contained therein are for the sole use and benefit of Conference attendees.
Jacobs and its affiliates shall have no liability whatsoever to third parties for any defect, deficiency, error, or omission in any statement contained in or in any way related to the presentation. Neither Jacobs nor any person acting on Jacobs’ behalf makes any warranty, express or implied, or assumes any liability with respect to use of or reliance on any information, technology, engineering or methods disclosed or discussed in the presentation. Any forecasts, estimates, projections, opinions, or conclusions reached in the presentation are dependent upon numerous technical and economic conditions over which Jacobs has no control, and which may or may not occur. Reliance upon such opinions or conclusions by any person or entity is at the sole risk of the person relying thereon. The data, information and assumptions used to develop the presentation were obtained or derived from documents or information furnished by others. Jacobs did not independently verify or confirm such information and does not assume responsibility for its accuracy or completeness. Any forecasts, or cost or pricing estimates in the presentation are considered forward looking statements and represent Jacobs' current opinion and expectations of a likely outcome. They do not anticipate possible changes in governmental policies, governmental regulations, military action, embargoes or production cutbacks, regional conflicts or other events or factors that could cause forecasts or estimates to differ materially from what is contained in our forward-looking statements. The presentation is dated as of the date Jacobs completed its work. Jacobs has no obligation to update or revise the presentation or to revise any opinions, forecasts or assumptions because of events, circumstances or transactions occurring after the date of the presentation.