Clean and Dirty Product Trades: US, Asia, and the Middle East Nancy Yamaguchi Trans-Energy Research Associates, Inc. INTERTANKOs Washington Tanker Event.

Clean and Dirty Product Trades: US, Asia, and the Middle East

Nancy YamaguchiTrans-Energy Research Associates, Inc.

INTERTANKO’s Washington Tanker Event

April 6-10, 2003

Objectives

• Inaugurate golf season with Bob, John and Oyvind

• Assess recent trends in clean & dirty product trade in three major markets: US, Asia, and the Middle East

• Explore future of product trades by creating clean/dirty product balances in key markets

• Assist with market session and planning

Good planning is a must...

Levels of trade in markets affected by:

• Level 1: Simple volumetric imbalance

• Level 2: Imbalance in specific products, perhaps seasonal

• Level 3: Imbalances caused by fuel quality standards

• Level 4: Trade based on geopolitics, established relationships, niche markets

Developments in Asia

• “Asian Crisis” 1997 caused demand slump• Production capacity expanded nonetheless• Many new exporters emerged, and some trades

moved to short-haul• Volatility remains, yet demand is recovering, and

trade patterns are shifting• Explore C&D trends in 4 Asian submarkets:

Australasia, East Asia, Southeast Asia, South Asia

1. Developments in Australasia

• Australia and New Zealand characterized by in-and-out trade of nearly all products

• Market is smallest of the 4 main AP regions: less than 1 mmb/d demand and 1 mmb/d refinery capacity

• Small decline in dirty trade• Slight rise in clean imports forecast

Australasia Dirty Trade

-40

-30

-20

-10

0

10

20

30

40

50

60

kb

/d

ImportExportNet Trade

Australasia Clean Trade

-100

-75

-50

-25

0

25

50

75

100

kb

/d

Clean ImportsClean ExportsNet Clean

2. Developments in East Asia• Largest market: 13.7 mmb/d refinery capacity and

12.9 mmb/d of demand• Essentially all countries are major product traders• Major net importers are Japan and China • Major net exporters are South Korea and Taiwan

(excluding LPG and naphtha)• Trade has fluctuated dramatically as demand,

refinery capacity and throughput have changed• Weak outlook for near-term growth of imports:

slight decline in dirty, slight rise in clean

East Asia Dirty Trade

0

100

200

300

400

500

600

700

kb

/d

Dirty ImportsDirty ExportsNet Dirty

East Asia Clean Trade

0

200

400

600

800

1000

1200

1400

1600

kb

/d

Clean ImportsClean ExportsNet Clean

3. Developments in Southeast Asia

• Major market with 3.6 mmb/d of demand and 4.2 mmb/d of refinery capacity

• “Asian Crisis” 1997 caused demand slump• Refinery capacity continued to come onstream• Thailand emerged as an exporter• Singapore cut refinery runs but remained a major

entrepot• Weak outlook for near-term growth in imports

Southeast Asia Dirty Trade

-100

0

100

200

300

400

500

600

700

800

kb

/d

Dirty ImportsDirty ExportsNet Dirty

Southeast Asia Clean Trade

-600

-400

-200

0

200

400

600

800

1000

1200

kb

/d

Clean ImportsClean ExportsNet Clean

4. Developments in South Asia

• Large market with 2.6 mmb/d of demand and 2.7 mmb/d of refinery capacity

• India’s refining industry has expanded enormously, and many refinery projects still are on the books

• Dirty trade has stagnated• Clean imports fell, exports appeared• Demand is growing, so expect a slight reversal of

this trend

South Asia Dirty Trade

0

20

40

60

80

100

120

140

160

kb

/d

Dirty ImportsDirty ExportsNet Dirty

South Asia Clean Trade

0

100

200

300

400

500

600

kb

/d

Clean ImportsClean ExportsNet Clean

US Product Trade Trends• Despite size of Asian markets, US market remains the

giant (20 mmb/d demand, 16.5 mmb/d refinery capacity)

• Few opportunities for refinery expansion

• Near-term outlook appears poor

• Dirty imports will grow then level off within the next decade

• Clean product imports will grow strongly after the middle of the decade

• Strict product quality may temporarily shut out potential suppliers

US Refineries: Fewer and Larger

-

20

40

60

80

100

120

140

Avg. Size

0

50

100

150

200

250

# of Refs

Average Refinery Size

Number of Refineries

Growth in US Clean and Dirty Imports

0

1

2

3

4

5

6

7

8

mm

b/d

Clean Products

Dirty Products

The USDOE/EIA forecasts growth of over 5 mmb/d in US clean product imports and 1.4 mmb/d

of dirty products between 2000 and 2025

Forecast US Dirty Imports by Source

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

mm

b/d

Unknown

Mideast/Other

Africa

Asia

Europe

Americas/Caribs

Forecast US Clean Imports by Source

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

mm

b/d

Unknown

Mideast

Africa

Asia

Europe

Americas/Caribs

Growth in Mideast Exports

• Goal to become product exporter and gas exporter as well as crude exporter

• Many plans geared toward Asian market have been rethought

• Volatility remains, but product export capability will grow

• Fuel quality improvement is emerging goal, looking to EURO and US, esp. middle distillates

Mideast Clean and Dirty Exports

0

0.5

1

1.5

2

2.5

3

1997 1998 1999 2000 2001 2002 2003 2005 2008

mm

b/d

Clean Net Exports

Dirty Net Exports

Middle Eastern clean exports will double between 2002 and 2008, while dirty

product exports will stagnate and decline

Mideast Product Exports by Type

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1997 1998 1999 2000 2001 2002 2003 2005 2008

kb/d

LPG

Naphtha/Gasoline

Mid Dist

Fuel Oil

Conclusion

• Volatility in oil demand and output naturally causes volatility in trade and shipping

• Asian markets slumped, appear to be recovering, but imports will rise little in near-term

• US market flat in near-term, but expect major growth in imports beginning in the coming decade (clean growth, dirty growth then stagnation)

• Mideast clean exports will grow dramatically, and will include high-quality fuels destined for Europe and the US, and will require modern DH tonnage