Global Middle Distillate Availability

Rodrigo Favela Fierro, Exec. Director for Refining,

Planning and Evaluation, Hart Energy

Global Crude and Petroleum Product Trends Crude Oil to Biofuels Conference

Rodrigo Favela – Executive Director for Refining, Planning & Evaluation

Primary Energy Demand Growth

BP Outlook, 2011

• Primary Energy Market share: Oil reduction; Carbon, Hydro, Nuclear maintain; and Gas and Renewable increment

• Refining market near–term overcapacity until 2015 (low refining margins and volatility).

• Beyond 2015, growth in demand will consume surplus supply and improve margins.

Regional differentiation :

Industrialized nations:

No significant growth because of low population growth, higher prices and new conservation policies.

Focus on rebalancing demand (more diesel), rationalizing capacity, and accommodating biofuels

Developing regions :

2.5% annual growth because of expanding populations and economies

Focus will be on refining capacity expansion and cleaner fuels.

Global Refining and Fuel Markets

Global Refined Product Demand Outlook, 2010-2030

Source: WRFS – Hartenergy, 2011

86.6

102.9

113.5

0

20

40

60

80

100

120

140

2010 2020 2030

Mill

ion

Bar

rle

s p

er

Day

Demand Increment> 27 MMBpd – Half of increment Diesel

Oil Supply>

Increment from Brazil, FSU, Oil Sands, Saudi and Iraq – decrement from non-OPEC

Other (affecting refinery output) > Biofuels and NGLs, CNG vehicles

0

5

10

15

20

25

30

35

40

2010 2013 2015 2017 2020 2025 2030

< 10 ppm 11 - 50 ppm > 50 ppm

Gasoline Diesel

0

5

10

15

20

25

30

35

40

2010 2013 2015 2017 2020 2025 2030

< 10 ppm 11 - 500 ppm > 500 ppm

Gasoline and Diesel Demand Growth and Quality Outlook

Source: WRFS – Hartenergy, 2011

• Both gasoline and diesel markets will continue to evolve into less than 10 ppm ULS fuels . Gasoline first, diesel with slower evolution

• High sulfur diesel will retain 25% of the diesel demand, industrial and bunker • Demand for marine diesel will increase, because lower sulfur requirements IMO

Increased Crude/Liquids Thousand Barrels per Day

Global Crude Oil Quality Trends API°, %Sulfur

0.90

1.00

1.10

1.20

1.30

31.0

31.5

32.0

32.5

33.0

33.5

34.0

2009 2010 2015 2020 2025 2030

Crude Oil Outlook

• Crude oil production will increase from 73.5 MMbpd to 93.0 MMpbd by 2030 • Heavy crude oil, biofuels and condensate/NGL will have the largest contribution to

liquid supply – Impact on distillate yields • Heavy crude oil production will increase from 9.4 MMbpd to 16.1 MMpbd by 2030.

Growth in all regions except Europe/FSU, concentrated on the Americas.

Shale 6%

SCO 9% GTL/CTL

9%

Biofuels 19%

Condensate/NGL

14%

HCO 38%

Light/Medium Oil

5%

Regional Capacity Expansions

12.0

6.8 2.8 0.6 0.8 0.0 0.0 23.0

0

5

10

15

20

25

Conversion 8.34 5.42 2.89 1.9 0.83 1.66 2.07 23.11

Hydroprocessing 5.5 2.53 1.83 1 0.81 0.72 0.45 12.84

Significant expansion to exceed historical growth and planned additions – Distillation , Hydroprocessing, Coking and Hydrocracking

Escalating gasoline and distillate imbalance in Europe.

The distillate shortfall in Europe will continue to grow – less volume available from traditional CIS supply, Middle East, North Africa and Brazil will export to Europe

Declining gasoline demand in North America. Europe to export gasoline to other regions

Asia-Pacific will maintain its own supply/demand balance but will shift from marginal exporter to marginal importer of gasoline

Latin America will increase its own production and will shift from importer to marginal importer of diesel

Middle East is projected to become the world marginal refined product supply center.

Changes in Product Trade Patterns

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2000 2005 2010 2015 2020

Ligh

t -

Hea

vy D

iffe

ren

tial

-5.00

0.00

5.00

10.00

15.00

20.00

2000 2005 2010 2015 2020

Die

sel -

Gas

olin

e

L/H Differential = 19.2 WTI 3-2-1 Crack = 10.0 Diesel – Gasoline = 2.5

WTI = 112.0 INCREASED VOLATILY

Average: 2015-2020

Fuente: Hartenergy, Bloomberg

Crude Oil Price and Refinery Margins Outlook

25.90

99.64

61.93

91.41

119.07

0

20

40

60

80

100

120

140

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

US$

/Bar

rel

History Forecast

Conclusions

• Energy demand will grow by 39% in the next 20 years, driven by population and GDP growth in developing countries.

• Global refined product will increase by 27.1 MMBD, and 50% will be diesel

• Global crude oil quality will stay almost constant in average, but additional heavy crude oil will compensate incremental condensate output reducing primary diesel yields.

• ULS fuels, sulfur restrictions in residuals, higher combustion efficiency and reductions in carbon footprint will tighten even more the diesel balance and penalize both residuals and heavy crude oils.

• Refinery expansions , hydrocracking and residual processing will significantly exceed historical growth and planned additions.

• Refinery economics will improve in the second half of this decade as global economics recover and the refining industry emerges from a consolidation –reconfiguration process

Países industrializados

Países en desarrollo

Europa del Este

Mundo México

Canadá

Estados Unidos

Alemania

Reino Unido

Japón

Brasil

China

2025

Developed

Countries

East

Europe

Rest of

World

Mexico

Canada

USA

Germany

UK

Japan

Brazil

China

PIB PER CAPITA

(1997 US$/ Habitant)

VEHICLES PER 1000 PEOPLE

2001

India

Energy Intensity Evolution

Planned / Expected Capacity Changes for Asia Pacific, 2010 - 2018

2,595

1,252 830

650 350 120

971

4,826

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000