Transcript Document

JACOBS
CONSULTANCY
Petcoke Prices –
Do They Relate to Anything?
Ben Ziesmer
McCloskey Group
Petcoke Conference — 2008
Houston, TX June 10
Petroleum Coke Prices
($/MT fob Vessel, load port)
160
$/MT
140
120
100
80
WEST COAST
60
S<2%
S>2%
40
GULF COAST/CARIBBEAN
HGI > 50
20
HGI < 50
0
Apr-05
Oct-05
Petcoke Conference—2008
11
Apr-06
Oct-06
Houston, Texas
Apr-07
Oct-07
June 10 &
Apr-08
JACOBS
CONSULTANCY
Fuel Prices – Mediterranean Market
14.00
12.00
$/MMBtu, cif
Mediterranean
Residual Fuel Oil
South African Steam Coal
10.00
>50 HGI Petcoke
8.00
6.00
4.00
2.00
0.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Fuel Prices – Mediterranean Market
9.00
8.00
$/MMBtu, cif
Mediterranean
Residual Fuel Oil
South African Steam Coal
7.00
>50 HGI Petcoke
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan-90
Jan-92
Jan-94
Petcoke Conference—2008
11
Jan-96
Jan-98
Houston, Texas
Jan-00
Jan-02
Jan-04
June 10 &
Jan-06
JACOBS
CONSULTANCY
USGC/Caribbean Market Petcoke vs.
South African Steam Coal
$/MMBtu CIF Mediterranean
125%
100%
75%
50%
25%
0%
Apr-00
Apr-02
Petcoke Conference—2008
11
Apr-04
Houston, Texas
Apr-06
June 10 &
Apr-08
JACOBS
CONSULTANCY
Petcoke Pricing –
A New Paradigm?

Cement industry – from secondary fuel to
preferred fuel
 Many kilns use 100% petcoke
 Ash in fuel becomes part of clinker
 Supply certainty important
 Coal supplier dependability concerns

Power industry – still secondary fuel
 Must be lower cost on $/MMBtu basis
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Fuel Prices – Asia
16.00
14.00
$/MMBtu,
cif Japan
High Sulfur Residual Fuel Oil
Australian Steam Coal
>2% Sulfur USWC Petcoke
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
Source: Pace Petroleum Coke Quarterly©
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
USWC Petroleum Coke vs.
Australian Thermal (Steam) Coal
$/MMBtu CIF Japan (USWC)
150%
USWC <2% Sulfur
USWC >2% Sulfur
125%
100%
75%
50%
25%
0%
Apr-00
Petcoke Conference—2008
11
Apr-02
Apr-04
Houston, Texas
Apr-06
June 10 &
Apr-08
JACOBS
CONSULTANCY
Australian & South African Steam
Coal
6.00
$/MMBtu
Australian FOB Newcastle
5.00
South African FOB RBCT
4.00
3.00
2.00
1.00
0.00
May-02
May-03
Petcoke Conference—2008
11
May-04
May-05
Houston, Texas
May-06
June 10 &
May-07
May-08
JACOBS
CONSULTANCY
USGC & USWC Petroleum Coke
$/MMBtu CIF Mediterranean (USGC/Caribbean) or CIF Japan (USWC)
150%
USGC/Caribbean
USWC >2% S
USWC <2% S
125%
100%
75%
50%
25%
0%
Apr-00
Petcoke Conference—2008
11
Apr-02
Apr-04
Houston, Texas
Apr-06
June 10 &
Apr-08
JACOBS
CONSULTANCY
Illinois Basin vs. South Africa Steam
Coal
5.00
$/MMBtu
South African FOB RBCT
4.00
IL Basin 2.5% S FOB barge
3.00
2.00
1.00
0.00
Jun-02
Jun-03
Petcoke Conference—2008
11
Jun-04
Jun-05
Houston, Texas
Jun-06
June 10 &
Jun-07
JACOBS
CONSULTANCY
Illinois Basin vs. South Africa Steam
Coal
5.00
$/MMBtu
South African FOB RBCT
4.00
IL Basin 2.5% S FOB barge
3.00
2.00
1.00
0.00
May-02
May-03
Petcoke Conference—2008
11
May-04
May-05
Houston, Texas
May-06
May-07
June 10 &
May-08
JACOBS
CONSULTANCY
Utah vs. Australian Steam Coal
6.00
$/MMBtu
Australian FOB Newcastle
5.00
Utah Coal FOB mine
4.00
3.00
2.00
1.00
0.00
May-02
May-03
Petcoke Conference—2008
11
May-04
May-05
Houston, Texas
May-06
May-07
June 10 &
May-08
JACOBS
CONSULTANCY
Petroleum Coke EUA Penalty vs.
Burning Natural Gas
60
$/MT
Phase 1
Phase 2
50
40
30
20
10
0
Jan-07
Mar-07
Apr-07
Petcoke Conference—2008
11
Jun-07
Aug-07
Oct-07
Houston, Texas
Dec-07
Feb-08
June 10 &
Mar-08
JACOBS
CONSULTANCY
Indifference Price of Petcoke vs.
Natural Gas including EUA Cost
400
$/MT
Phase 1
Phase 2
350
300
250
200
11/2/07
12/28/07
Petcoke Conference—2008
11
2/22/08
Houston, Texas
4/18/08
June 10 &
JACOBS
CONSULTANCY
U.S. Climate Change Legislation –
Lieberman-Warner

Oil refineries – Have to acquire CO2 credits based on
carbon in crude
 Assumes all carbon in crude becomes CO2
 Refiners can allocate CO2 cost among products as they see fit

Coal – End user accounts for CO2 emissions
 Generating stations & industrial plants need CO2 credits for
emissions

No double counting → CO2 from burning petcoke
should not count as CO2 emissions
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Lieberman-Warner & Petcoke

CO2 emissions ~3 tons/ton petcoke burned

How CO2 affects petcoke value
 Internal U.S. – increases value
 worth premium to coal as CO2 already counted
 Exports
 Developing countries – no effect
 EU – should decrease value due to EUA cost

WTO – Potential problem if export price is lower than
domestic price
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Summary

USGC petcoke prices are not directly correlated with
South African coal prices
 New pricing paradigm?

Neither <2% S nor >2% S petcoke prices are directly
correlated with Aussie steam coal prices

Premium of <2% S over >2% S petcoke has varied
 Steel industry primarily uses coking coal
 Coking coal premium over steam coal  
 Steel industry has been easing sulfur requirements
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Summary

U.S. coal prices not correlated with international coal
prices
 When international coal very high, U.S. coal can move into
Atlantic Basin export market
 CAIR scrubbers changing U.S. coal market

U.S. petcoke fueled project potentially exposed to
international vs. domestic coal price risk

CO2 emission regulations can produce unexpected
changes
 EUA currently not high enough to push users from petcoke
to natural gas
Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY
Disclaimer Statement
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forecasts, estimates, opinions, analysis, evaluations, or recommendations contained therein are for the sole use
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Petcoke Conference—2008
11
Houston, Texas
June 10 &
JACOBS
CONSULTANCY