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EU Refinery sector Fitness check · 2014. 11. 12. · JRC EU Refining Sector Fitness Check Progress...
Transcript of EU Refinery sector Fitness check · 2014. 11. 12. · JRC EU Refining Sector Fitness Check Progress...
JRC
EU Refining Sector Fitness Check
Progress Update 22 May 2014
Robert Marschinski - European Commission, JRC
(jointly with D.Bakhtieva, L.Delgado, P.Eder, M.Mraz,
U.Temurshoev)
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Content
• Fitness Check: objective, approach, concepts
• Example 1: Renewable Energy Directive
• Example 2: int'l competitiveness of EU refining
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Fitness Check - Petroleum Refining Sector
Review of EU environmental and energy legislation affecting the European refining sector during the time period 2000-2012:
1. Assess economic impacts of legislation
cost impact on EU refineries
oil products market impact
international competitiveness impacts
2. Identify policy inconsistency, redundancy, excessive burden
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Conceptual Framework for 10 Directives
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02/04/2014 EU refinery sector Fitness check 5 Benefits from legislation
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Methodology: 3 Pillars
DATA on EU refineries' investments and configuration (JRC/EUROPIA
CONCAWE/SOLOMON)
DATA from specialized company on global prices, product trade and refining margins
OURSE MODEL: Economic model of global refining market, 9 regions, of which 2 EU
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Methodology: 3 Pillars
DATA from specialized company on global prices, product trade and refining margins
Legislative cost impact e.g. investments in - desulphurisation units - refinery SO2 abatement - energy efficiency
Competitiveness impact e.g. in terms of EU refining's - net cash margins - utilization rates - return on investment
OURSE MODEL: Economic model of global refining market, 9 regions, of which 2 EU
DATA on EU refineries' investments and configuration (JRC/EUROPIA
CONCAWE/SOLOMON)
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Content
• Fitness Check: objective, approach, concepts
• Example 1: Renewable Energy Directive
• Example 2: int'l competitiveness of EU refining
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Renewable Energy Directive
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0%
1%
2%
3%
4%
5%
6%
0
50
100
150
200
250
300
350
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
millio
n t
on
s o
f o
il e
qu
ivale
nt
Biofuels in road transport in EU27
biofuels fossil road fuels share biofuels
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Renewable Energy Directive
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-50
-40
-30
-20
-10
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
millio
n t
on
s o
il e
qu
ivale
nt
EU: diesel deficit & gasoline galore
EU diesel/gasoil imports biodiesel consumption EU gasoline exports biogasoline consumption
Additional EU gasoline exports due to bio-gasoline
Reduction of EU diesel imports due to bio-diesel
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Effect of EU biofuel policy on petroleum sector ambiguous:
• Positive for Bio-Diesel • reducing EU diesel deficit and dependence on imports
• in 2012, diesel imports would have had to be 79% higher without biodiesel
• Negative for Bio-Gasoline • problem of EU gasoline excess capacity is reinforced
• in 2012, without bio-gasoline either
(i) EU gasoline exports could have been lowered by 6%, or
(ii) EU utilization rates could have been up to 3 percentage points higher
• Next: OURSE model for further quantification (and validation)
• However: impact of 3 Mtoe increase in bio-gasoline remains small compared to 52 Mtoe drop in fossil gasoline demand over 2000-12
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Renewable Energy Directive
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Content
• Fitness Check: objective, approach, concepts
• Example 1: Renewable Energy Directive
• Example 2: int'l competitiveness of EU refining
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Int'l competitiveness of EU refining
-50
0
50
100
150
200
250
300
350
2000 2002 2004 2006 2008 2010 2012
[$
/b
arrel]
- i
nd
exed
to
EU
28
in
year 2
00
0
EU-28 INDIA Korea/ Singapore Middle East
RUSSIA US Gulf Coast US East Coast
Data source: Solomon Associates
Net cash margins: EU28 and competitor regions
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Int'l competitiveness of EU refining
-50
0
50
100
150
200
250
300
350
2000 2002 2004 2006 2008 2010 2012
[$
/b
arrel]
- i
nd
exed
to
EU
28
in
year 2
00
0
EU-28 INDIA Korea/ Singapore Middle East
RUSSIA US Gulf Coast US East Coast
Data source: Solomon Associates
Net cash margins: EU28 and competitor regions
2000 2012
Korea/ Singapore 34 159
Middle East 23 72
US Gulf Coast 113 251
US East Coast 116 244
Ø 72 181
EU28 100 143
EU28 vs. Ø +28 -38
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Int'l competitiveness of EU refining
Net Cash Margin = Gross Margin – Personnel Cost – Energy Cost – Other Cost
Hence, the EU's backslide with respect to its competitors is the net effect resulting from backslides (or gains) in these four underlying components.
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Int'l competitiveness of EU refining
net effect= -66
Net Cash Margin = Gross Margin – Personnel Cost – Energy Cost – Other Cost
+28
-38
+1 -3
-63 -1
Gross Margin
Personnel
Energy Other
JRC computation with Solomon Ass. data
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Int'l competitiveness of EU refining
net effect= -66
Net Cash Margin = Gross Margin – Personnel Cost – Energy Cost – Other Cost
+28
-38
+1 -3
-1
Gross Margin
Personnel
Energy Other
-13
-50
Energy cost deterioration vis-à-vis USA
Energy cost deterioration vis-à-vis KOR/SIN & MidEast
JRC computation with Solomon Ass. data
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Int'l competitiveness of EU refining
net effect= -66
Net Cash Margin = Gross Margin – Personnel Cost – Energy Cost – Other Cost
+28
-38
+1 -3
-1
Gross Margin
Personnel
Energy Other
-13
-50
Energy cost deterioration vis-à-vis USA
Energy cost deterioration vis-à-vis KOR/SIN & MidEast
The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs.*
* Preliminary finding with caveats, e.g. strong data limitations
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Int'l competitiveness of EU refining
* Preliminary finding with caveats, e.g. strong data limitations
The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs over the years 2008-2012.*
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Int'l competitiveness of EU refining
Figure: Washington Post
The observed sharp drop of EU refining margins versus those of its competitors is to 74% (=50/68) attributable to the deterioration of EU energy costs vis-à-vis US energy costs over the years 2008-2012.*
* Preliminary finding with caveats, e.g. strong data limitations
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Final remarks on EU competitiveness
1. Loss of EU competitiveness seems evident, but due to current data limitations no definite conclusions should be drawn
2. Energy costs play a very significant role, but how exactly do they propagate into markets and EU refining economics?
3. Net Cash Margin only one possible indicator of competitiveness (but perhaps the most important)
4. Need for further analysis, e.g.: • if US energy cost effect is 74%, what are the other 26% ?
• cost = price x quantity analyse relative role of energy prices vs. energy intensity
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BACK-UP SLIDES
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Conceptual Framework for 10 Directives
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3 methodological pillars:
• 1) Estimating cost impacts by using primary data on compliance costs from EU refineries (joint JRC / CONCAWE / Solomon refinery questionnaire).
• 2) Statistical descriptive analysis of refinery sector and competitiveness impacts based on global time series data. The acquisition of such data from a third party is currently undertaken.
• 3) Modelling the legislative and market driven impacts on the refining sector, using the global OURSE model.
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APPROACH
SURVEY TO
REFINERIES
(detailed view)
STATISTICAL
ANALYSIS
(intermediate)
OURSE
MODELLING
(aggregate
view)
Review of
literature
Costs impact of
legislation
Direct (a) X
Indirect (b) X X
Competitiveness impacts of
legislation (c)
X X
Benefits of legislation (x) (x) X
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Questionnaire: Process
• Questionnaire developed by JRC in consultation with CONCAWE • Is data actually recorded by refinery?
• Is it relevant?
• Is it 'inaccessible' because commercially sensitive?
• 2-step approach chosen for reasons of efficiency • Step 1: industry consultant SOLOMON extracts relevant data from its
existing database (~¾ of all needed data)
• Step 2: facilitated by CONCAWE, all remaining data is requested directly from refinery via questionnaire
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Questionnaire: Process
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JRC/ CCW
Solomon
Refinery site
Refinery agrees that data can be used in study. Sign consent
letter
empty
Only consolidated +
Aggregated data + trend data
Solomon provide consent letter to refineries, and indicate what data to be
collated.
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Questionnaire: Data Coverage
• Time horizon 1998 – 2012 (only even years)
• SOLOMON part:
• Organization and staff
• Capacity and production (inputs & outputs)
• Complexity and investments (desulphurisation units..)
• Cost structure (variable, fixed, energy costs…)
• Detailed energy in- & outputs, and energy efficiency
• Biofuel inputs
• Refinery part: • Pollution (SOx, NOx ..) and related investments
• Effects from strategic oil stocking obligations
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Questionnaire: Data Coverage
• Data will be reported to JRC in aggregated format:
• 9 geographical groups of 'peers'
• 5 types of refinery complexity
• Stand-alone refinery vs. refinery as part of petrochemical complex
• Data is anonymized
• Some data will only be reported in terms of its relative change with respect to the 1998 base year (i.e. as index)
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