1. Avails of MGO, still tight?
Øivind Munthe-Kaas, Wilhelmsen Marine Fuels as
2. 2
Disclaimer
This presentation may contain forward-looking expectations which
are subject to risk and uncertainties related to economic and market
conditions in relevant markets, oil prices, currency exchange
fluctuations etc. Wilh. Wilhelmsen Holding group and Wilh.
Wilhelmsen group undertake no liability and make no representation
or warranty for the information and expectations given in the
presentation.
3. 3
WILHELMSEN MARINE FUELS (WMF)
o Part of the Wilh. Wilhelmsen group
o A bunker broker company
o Reputable with a good market standing
o Well established credit lines with all suppliers
o Offices in Oslo, London and Singapore. Highly qualified and expreienced
personnel
o Large volumes in key ports – 2012 vol. was 3.5 M tonnes
4. 4
2015 CHALLENGES-Outline
o The current situation in the distillate market in Europe
in general
o Nordic countries+Baltics
o Northwest Europe
o Mediterranean
5. 5
2015 CHALLENGES- DIESEL MARKET IN EUROPE
o Europe is short on diesel, net importer
(30-40 mill mt out of demand of 250 mill mt)
o Diesel is the largest oil product by demand in Europe, and is showing the
strongest growth globally
o Refineries are struggling to make profits, imports will increase as
percentage of total sales
o Russian refineries will upgrade, have the potential to increase supply
o Several South European refineries have boosted diesel output
8. 8
2015 CHALLENGES- DIESEL MARKET IN EUROPE
o Since 2008, 15 European refineries have closed with a capacity
of 1.7 mbpd.
Refinery runs have dropped to below 80% from 85% in 2006.
o A further 620 000 bpd of hydroskimming capacity could be closed
until 2018.
9. 9
ON-ROAD SULPHUR CONTENT IN DIESEL
- EXPECTED REGIONAL ON-ROAD DIESEL SULPHUR CONTENT IN PPM
Source: Hart’s WRFS and IFQC
80% of European middle distillate production is diesel fuel with sulphur content
below 0.05%
10. 10
PRELIMINARY CONCLUSION AND RECOMMENDATION
The extra distillate demand generated by the 2015 changeover from fuel oil to distillates within the ECAs represents an
increase of 5-7% of the total distillate demand in OECD Europe/North America. This addition is insignificant to the total
market balance for distillates in the Atlantic basin.
However, as Europe is already short on distillates, the changeover will increase the tightness in distillate markets and
lead to further price increases.
As North America is currently a net exporter of distillates the situation here is expected to be less tight. Furthermore it is
estimated that North American refiners can increase their yield (% of output) of distillates by 4-5% percentage points
without major investments.
Total demand in Europe and North America in Million b/d
2000 2009 2015
Additional ECA demand for middle distillates* 0,6
Middle distillates 13,5 14,0 14,8
Light distillates 14,4 14,1 15,0
Fuel oil 3,5 2,3 1,8
Others 8,1 7,8 8,3
Total 25,9 24,3 25,1
* Assuming 100% changeover from Fuel oil to MGO in ECA's
Source: BP Statistical review of energy 2010, WPMF research 2010
2015 changeover
MT Barrels Bpd
North European ECA 22 000 000 139 700 000 382 740
North American ECA 15 000 000 95 250 000 260 959
Total volume change 643 699
Source: EPA, Purvin & Gertz
11. 11
2015 CHALLENGES- DIESEL MARKET IN EUROPE
o Russian refineries have the potential to boost diesel output.
20 refineries are planning upgrades, this could boost diesel ouput by 12 mill mt.
o Most of the refineries are located in the ”European” part of Russia and would
naturally send their exports westwards.
12. 12
MGO 0.1% AVAILS- NORDIC COUNTRIES
o Norway:
Current situation:
MGO readily available along the Norwegian coast, both 0.1% and 0.05%
sulphur. Statoil main supplier, sourced from Mongstad refinery.
o Mongstad and Slagen can produce around 6-7 mill mt of diesel per year,
consumption for the domestic car market is 3.5 mill mt. This leaves around
3 mill mt for the marine market. The marine market is estimated at around
1.4 mill mt.
o Both Denmark and Sweden are net exporters of distillates currently
13. 13
MGO 0.1% AVAILS- NORTHWEST EUROPE
o LNG is not seen as an option short-term. The majority of vsls operating in
ECA will run on MGO
Source: Lloyds register LNG fuelled deep sea
shipping, Aug 2012
14. 14
MGO 0.1% AVAILS- MEDITERRANEAN
o MED: currently avails is good. Do not expect any particular avails problems
in 2015. High production of 10ppm gasoil (automotive diesel) which can be
used for Marine as well.
o Several refineries have upgraded the last years, increasing distillate
output.
o Saudi-Arabia is establishing export refineries along the Red Sea, these will
be important suppliers of distillates to the Med-region
15. 15
HFO-MGO Spread
Spread depends on several factors:
o Absolute oil price level
o Profits for distillates
o Fuel oil availability
o Economic growth
16. 16
GASOIL TRADES AT A PREMIUM TO BRENT, FUEL AT A DISCOUNT
0
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Fuel & Gasoil crack (per MT)
Gasoil 0.1% FOB NWE crack
Rdam 3.5% fuel crack
Diff (right axis)