ICIS CHINA OIL MARKET SEMINAR 2017 Big Import and Big Export: China - - PowerPoint PPT Presentation

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ICIS CHINA OIL MARKET SEMINAR 2017 Big Import and Big Export: China - - PowerPoint PPT Presentation

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PRESENTATION SLIDES FROM THE CHINA MARKET SEMINAR ON 27 SEPTEMBER 2017 ICIS CHINA OIL MARKET SEMINAR 2017 Big Import and Big Export: China Oil Markets New Play CHINAS OIL DEMAND CHINAS OIL SURPLAS (IMPORT) (EXPORT) - The impact of

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ICIS CHINA OIL MARKET SEMINAR 2017 Big Import and Big Export: China Oil Market’s New Play

PRESENTATION SLIDES FROM THE CHINA MARKET SEMINAR ON 27 SEPTEMBER 2017

CHINA’S OIL DEMAND (IMPORT)

  • The impact of economics structure

migration and energy policies on oil consumption

  • Cleaner energy plan and

development substitutes

  • Opportunities and barriers of China’s

crude imports

  • Vehicle fuel upgrading plan and

demand for blending stocks

CHINA’S OIL SURPLAS (EXPORT)

  • Refining expansion and supply

forecast

  • Refined products balances
  • Which products will be in surplus in

China and what are the historical and upcoming trends

>> ACCESS THE PRESENTATION SLIDES >> ACCESS THE PRESENTATION SLIDES

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www.icis.com

2

Click here to enquire about ICIS China Oil and Refinery Solutions

ICIS China Oil and Refinery Solutions

We provide an end-to-end market data solution for China’s dynamic oil market – crude/petroleum, gasoline/naphtha, gasoil and so much more

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CHINA PETROLEUM ANNUAL REPORT CHINA INDEPENDENT REFINERY ANNUAL REPORT

>> ENQUIRE ABOUT THE REPORT

To support international oil players, ICIS has launched the 2017/2018 version of the China Oil and Refinery Annual Studies.

ICIS China Oil and Refinery Annual Studies

CLICK HERE TO ENQUIRE NOW

The annual report captures the development of China’s independent refiners with historical statistics, market research and analysis of the significant issues expected to shape the industry over the next five years.

  • Refining units and capacity with regional

breakdowns

  • Feedstock mix by region plus origin, specification

and destination data

  • Analysis of margins and operating rates
  • Storage and transportation facilities used by

independent refiners

  • The impact of quotas, taxes and policies
  • The expansion plans and outlook for independent

refiners for 2018-2022 To support both local and international oil players, ICIS publishes a detailed annual study with unparalleled data and analysis including all of the following:

  • Critical supply and demand data and analysis for

up to five years ahead

  • A review of China’s complex refining industry (both

state-run and independent) with import and export data

  • An in-depth look at the infrastructure operations,

capacity, ownership and logistics of China’s oil industry

  • Macroeconomics and policy changes and trends
  • Supplementary maps showing refinery capacities,

pipeline and oil distribution at a glance, as well as data files to give you direct access to raw data from the report

>> ENQUIRE ABOUT THE REPORT

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www.icis.com

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China oil market 2017

Where is the dragon heading?

Liao Na Vice President, China, ICIS

PRESENTATION SLIDES FROM THE CHINA MARKET SEMINAR ON 27 SEPTEMBER 2017

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China’s economic structure migration and impact on petroleum market

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Migration 1: KPI shifts from quantity to quality

Economic growth from aggressive to sustainable Environmental KPI jumps on local officers

Speed up elimination of outmoded capacity Drive up product prices

Middle-class population reached 200 million by 2015, 20% of total population; and expect to grow up to 700million by 2020 Proactive fiscal policy to support supply-side restructuring

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GDP growth outlook

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2025E 2030E 2035E 2040E

Source: NBS,IMF,ICIS 4.9% 5.5%

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Migration 2: Monetary policy from loose to prudent

Central bank survey: 22% of bankers felt tightening while 75% felt moderate The weighted interest rate for RMB loans to financial institutions rose to 5.53% in March, 0.26 point higher MOM Notes financing rate rose for two consecutive quarters, to 4.77% at end of March M2 supply growth slacked since last Nov and reached record-low by end Aug at 8.9% YOY, balancing at 16.5trillion yuan

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Migration 3: Drivers shifts from industrialization to urbanization

2017 H1: final consumption contributed 63% to GDP growth, capital investment 33%, export less than 4% 57.35% of population lived in cities by 2016; to increase to 60% by 2020 and 70% by 2030 World biggest vehicle production and sales with stable growth of 4-5%; new energy car sales increased 30%

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China urban agglomeration map

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Migration 4: momentums shifts from secondary to tertiary

46.8% 40.5% 34% 27% 22% 43.1% 50.5% 59% 68% 75%

2010 2015 2020E 2030E 2040E 3rd sector 2nd sector 1st sector

Source: NBS, Academy of Social Sciences, PetoChina Research Institute

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China’s energy policies and impact on oil consumption

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13 2025 2025 2030 2030 2030 2030 2030 2035？？ 2040 2050 2050 2050 2010 2030 2050

Netherlands Norway Germany India California, USA * Belgium * Switzerland * China UK France Sweden * Europe * Brand NEV sales target China strategy

20-30% of total vehicle sales would be NEV by 2025 400,000 units by 2020; 1.5m units by 2025, mostly battery electric vehicles (BEV) 15-25% of total vehicle sales would be NEV by 2025 China made for most models 100,000 units in 2017; 15-25% of total vehicle sales would be NEV by 2025 Already launched 6 new models 10-25% of total vehicle sales would be NEV by 2020 At least 2 models by 2020, and all 13 models would be introduced to China in future 2/3 of total vehicle sales would be NEV by 2030 hybrid electric vehicles (HEV) to make up 50% by 2020 HEV and PHEV to account for 70% of total sales by 2050; FCV and EV to make up 30% China made 2 plug-in hybrid electric vehicle (PHEV) models by 2018; to promote EV by joint-ventures 20% of total vehicle sales would be EV by 2020 To launch several budget EV models 300,000 units by 2020 10% of total vehicle sales would be NEV by 2020; to launch 9 NEV models in China

Curb on fossil-fuel powered vehicles

* Likely timetables Source: ICIS, company websites

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China’s car forecast

CAGR Passenger Cars EV HEV 2015-2020E 11% 64% 49% 2020-2025E 6% 26% 23% 2025-2030E 3% 18% 12% 2030-2035E 2% 13% 10% 2035-2040E 1% 9% 8%

The population of electric vehicles and hybrid electric vehicles is expected to reach 81.2m units and 10.7m units respectively by 2040, posting a CAGR of 23% and 18%, respectively.

2016 2017 YOY 2018 growth 2019 growth Shared bike* 1.2 bil yuan 10.3 bil yuan 736% 73% 33% 28mil users 209mil users 646% 43% 26% 2015 2017 2018 Shared car ** 66 bil yuan 380 bil yuan 1.8 tril yuan 8 mil time/yr 37 mil time/yr 160 mil time/yr

Source: *iiMedia Research; **RolandBerger Source: CAAM

Rough calculation: shared transportation to replace 500kt – 1,000kt gasoline demand in 2017, while the impact will grow up to 4mil ton by 2020

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China’s gasoline consumption is expected to peak at around 2030 Continual improvement on energy efficiency of vehicles Bike-sharing & car-sharing Development of NEVs

50,000 100,000 150,000 200,000 250,000 2010 2012 2014 2016 2018E 2020E 2022E 2024E 2026E 2028E 2030E 2032E 2034E 2036E 2038E 2040E

Source: ICIS

(10,000) (5,000) 5,000 10,000 15,000 20,000 Gasoline surplus

Source: ICIS

China’s gasoline demand

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Global gasoline balance

  • 150.0
  • 100.0
  • 50.0

0.0 50.0 100.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 million tonnes

Regional Gasoline Balance

North America South & Central America Europe Former USSR Africa Middle East Northeast Asia Asia & Pacific

Europe remains the major global supplier of gasoline; Peak gasoline demand in North America expected by early 2020s, with the region turning surplus before 2025

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China’s gasoil demand

100,000 120,000 140,000 160,000 180,000 2010 2012 2014 2016 2018E 2020E 2022E 2024E 2026E 2028E 2030E 2032E 2034E 2036E 2038E 2040E

Source: ICIS

China’s industrial sector shows sings of recovering entering 2017 Power consumption by industrial and manufacturing sectors Growth rate of Industrial value-added Freight traffic of highways

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Global gas oil balance

NE Asia and Former USSR are the key surplus regions in the largely oversupplied market in the short term; IMO implementation in 2020 is however expected to tilt the global balance to deficit again

  • 250.0
  • 200.0
  • 150.0
  • 100.0
  • 50.0

0.0 50.0 100.0 150.0 200.0 250.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 million tonnes

Regional Gas Oil Balance

North America South & Central America Europe Former USSR Africa Middle East Northeast Asia Asia & Pacific

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Cleaner energy plan and development of substitutes

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China’s changing energy mix: less coal, more clean

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China’s natural gas consumption structure

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Power generation City-gas Industrial/Commercial users Chemical

China’s Natural Gas Consumption Structure (2011-2021E)

Source: ICIS China

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China’s natural gas demand to see robust growth

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 产量 净进口量 bcm

Status Quo & Forecast of China’s Natural Gas Supply & Demand (2012-2021E)

Source: NBS, ICIS China

♦Note: Non-conventional natural gas is not included

bcm is short for “billion cubic metres”

Output Net imports

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Asia is the main hub of global LNG import

LNG import (-mil ton annual) 2015 YOY 2014 Japan 84.5

  • 5%

89.2 S.Korea 33

  • 12%

37.62 China 19.6 3% 18.98 Taiwan 14.4 7% 13.45 India 14.7 1% 14.54 Pakistan 0.9 nil

  • SE Asia

8.6 37% 6.3 Total 175.7

  • 2%

180.09

Source: ICIS

World Imported LNG Demand 2015

Asia Europe S.America N.America Middle East Asian countries LNG import

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Opportunities and barriers of China’s crude import

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25 10 20 30 40 50 60 Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Crude throughput Net imports Production m tonnes

Strategic & commercial crude inventory (number of days)*

China replaces US as largest crude oil buyer

Source: NBS, GAC, OGP, ICIS

China’s crude imports in the first eight months of 2017 increased by 12.3% year on year to 281m tonnes Lower domestic crude production and higher crude throughput of refineries, as well as oil injection into Jinzhou SPR base led to the high imports.

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Independents as main contributor in throughput growth

10000 20000 30000 40000 50000 60000 2014 2015 2016

Sinopec PetroChina Other majors Independents

20% 30% 40% 50% 60% 70% 80% 90% 100% Shandong independents Sinopec & PetroChina

Source: ICIS China

5000 10000 15000 20000 25000 30000 35000 40000 45000 2016 (Jan-Sept) 2017 (Jan-Sept)

Sinopec PetroChina Other majors Independents

40% 45% 50% 55% 60% 65% 70% 75% 80% 85% Shandong independents Sinopec & PetroChina

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Independents take more shares in throughput

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sinopec PetroChina Other majors Independents

Source: ICIS China

Environmental audit Throughput cut by Sinopec

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1000 2000 3000 4000 5000 6000 7000 8000

2017 YTD crude imports Unused quotas for 2017 Imported crude throughput ceiling Import crude throughput ceiling pending NDRC approval

Unit: '000 tonnes

2016 crude imports Unused quotas for 2016

Crude import by independent refiners

Note: Updated in August 2017 Source: ICIS China

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29 5 10 15 20 25 30 35 40 45 0.8 0.85 0.9 0.95 1

API

Sulphur

Independents favor medium-sulphur crude for better cost management

Independents’ Crude Imports -by API and Sulphur Independent Refiners’ Crude Imports - by Region

29% 22% 22% 14% 9% 2% 2% South America Russia Africa Middle East Asia USA Europe

Source: ICIS

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Refinery expansion slowing down in China

China’s refinery expansion will slow down. No new refining projects after 2025 Average run rate of Chinese refineries (independent refiners included) will inch up to 70-76% after 2020, which indicates 25-30% oversupply in domestic refining capacity Crude throughput is expected to rise to over 600m tonnes by 2019 and over 790m tonnes by 2040

62% 64% 66% 68% 70% 72% 74% 76% 78% 200 400 600 800 1000 1200 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E 2036E 2037E 2038E 2039E 2040E Throughput Capacity Run rate m tonnes/year

Source: ICIS

CAGR= 4.4% CAGR= 2.8% CAGR= 3.1% CAGR= 0.4% CAGR= 0%

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Near 70% crude would be imported by 2021

50% 55% 60% 65% 70% 4,000 6,000 8,000 10,000 12,000 14,000 2017E 2018E 2019E 2020E 2021E Domestic output Net imports Dependence on imports '000 bbl/day Source: ICIS China

China’s dependence on imported crude is expected to hit further new highs in the coming five years. Import dependence is on course to reach 69% by 2021

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Summary of opportunities & challenges

Environment and tax are the sharpest swords on the oil & refining sectors, esp for independent refineries Excess capacity of most of industries to speed up clearing China is to see a wide increase of general product prices due to higher environmental &

  • perational cost

China’s new economic drivers are: new investment (industrial transformation investment), new consumption (final consumption) and new export (one-belt-one-road) China to see its oil peak since 2030 whether in sake of cleaner air or state energy security Investment relative to new energy & EP technology will see booming opportunities New demand will come along with anything relative to improve life quality and experience

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Click here to enquire about ICIS China Oil and Refinery Solutions

ICIS China Oil and Refinery Solutions

We provide an end-to-end market data solution for China’s dynamic oil market – crude/petroleum, gasoline/naphtha, gasoil and so much more

slide-34
SLIDE 34

CHINA PETROLEUM ANNUAL REPORT CHINA INDEPENDENT REFINERY ANNUAL REPORT

>> ENQUIRE ABOUT THE REPORT

To support international oil players, ICIS has launched the 2017/2018 version of the China Oil and Refinery Annual Studies.

ICIS China Oil and Refinery Annual Studies

CLICK HERE TO ENQUIRE NOW

The annual report captures the development of China’s independent refiners with historical statistics, market research and analysis of the significant issues expected to shape the industry over the next five years.

  • Refining units and capacity with regional

breakdowns

  • Feedstock mix by region plus origin, specification

and destination data

  • Analysis of margins and operating rates
  • Storage and transportation facilities used by

independent refiners

  • The impact of quotas, taxes and policies
  • The expansion plans and outlook for independent

refiners for 2018-2022 To support both local and international oil players, ICIS publishes a detailed annual study with unparalleled data and analysis including all of the following:

  • Critical supply and demand data and analysis for

up to five years ahead

  • A review of China’s complex refining industry (both

state-run and independent) with import and export data

  • An in-depth look at the infrastructure operations,

capacity, ownership and logistics of China’s oil industry

  • Macroeconomics and policy changes and trends
  • Supplementary maps showing refinery capacities,

pipeline and oil distribution at a glance, as well as data files to give you direct access to raw data from the report

>> ENQUIRE ABOUT THE REPORT

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www.icis.com

35

China oil market 2017: Hidden force in a confined market

Li Li Head of Asia Oil Analytics, ICIS

PRESENTATION SLIDES FROM THE CHINA MARKET SEMINAR ON 27 SEPTEMBER 2017

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2017: Half Off, Half On

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Key words in 2017

Research/Forecast Report Realit y Price War Private break in End of Gasoline car??? Export Quota E10 Integrate d Jumbo The rise

  • f

Teapots Strong excavators indicator Poor car sales growth Excise tax loophole

  • n

blending HSE “storm”

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Gasoline market in 2017

10.4 9.4 10.3 10.5 9.8 9.9 9.6 10.1 9.3 10.3 10.3 10.3 10.8 9.2 10.4 9.6 10.5 10.3 9.6 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

  • mil tonnes

Gasoline demand by month in 2016&2017(mil tonnes: NBS)

2016 2017

Weak demand growth

  • Weak car sales growth
  • Pressure from Sharing economy
  • 400-mil registered users
  • Million tons of gasoline

saving

  • Fast growing of public

transportation availability

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Gasoil market in 2017

Strong truck sales growth Strong excavator sales growth Good performance in infrastructure sector

15.0 13.6 14.8 14.6 14.5 14.6 14.7 14.4 14.4 15.6 15.3 15.9 15.3 13.8 15.6 14.6 15.2 15.1 14.8 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Gasoil demand by month in 2016&2017(mil tonnes: NBS)

2016 2017

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Refining capacity additions in 2017

Yunnan Petrochemical, 260 kbd, Non-integrated, PetroChina(Saudi Aramco showing interests)-showed up in market in August, 2017. Huizhou Petrochemical, 200 kbd, integrated(CSPC with Shell), CNOOC- to show up in market in October, 2017. Teapots’ run rates: from 49%（ 2016 ） to 62% YTD （ 2017 ） 2017.

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Escalated surplus in 2017

Refinery output growth outpaced market demand growth. Surplus peaked during Q2. Sinopec started war in north region to defend market share.

45.9 41.5 44.9 44.8 44.2 45.1 45.3 44.3 43.8 47.1 45.8 47.8 47.6 43.1 47.5 44.5 46.6 46.1 45.5 47.1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Crude throughput by month in 2016&2017(mil tonnes: NBS)

2016 2017

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Export market and government intervene

Sudden turn Pending for teapots Embarrassing Q2 Restrained rhythm

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43

Click here to enquire about ICIS China Oil and Refinery Solutions

ICIS China Oil and Refinery Solutions

We provide an end-to-end market data solution for China’s dynamic oil market – crude/petroleum, gasoline/naphtha, gasoil and so much more

slide-44
SLIDE 44

CHINA PETROLEUM ANNUAL REPORT CHINA INDEPENDENT REFINERY ANNUAL REPORT

>> ENQUIRE ABOUT THE REPORT

To support international oil players, ICIS has launched the 2017/2018 version of the China Oil and Refinery Annual Studies.

ICIS China Oil and Refinery Annual Studies

CLICK HERE TO ENQUIRE NOW

The annual report captures the development of China’s independent refiners with historical statistics, market research and analysis of the significant issues expected to shape the industry over the next five years.

  • Refining units and capacity with regional

breakdowns

  • Feedstock mix by region plus origin, specification

and destination data

  • Analysis of margins and operating rates
  • Storage and transportation facilities used by

independent refiners

  • The impact of quotas, taxes and policies
  • The expansion plans and outlook for independent

refiners for 2018-2022 To support both local and international oil players, ICIS publishes a detailed annual study with unparalleled data and analysis including all of the following:

  • Critical supply and demand data and analysis for

up to five years ahead

  • A review of China’s complex refining industry (both

state-run and independent) with import and export data

  • An in-depth look at the infrastructure operations,

capacity, ownership and logistics of China’s oil industry

  • Macroeconomics and policy changes and trends
  • Supplementary maps showing refinery capacities,

pipeline and oil distribution at a glance, as well as data files to give you direct access to raw data from the report

>> ENQUIRE ABOUT THE REPORT