Transcript Slide 1

Global Refining
Trends, Challenges, Opportunities
Presentation to PEMEX Refining,
Strategic Planning
Franz B. Ehrhardt
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Contents
I. Overview & Background
II. Trends:
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Economic
Technology
Political
Society
Corporate
III. How to win, Conoco examples
IV. Who will win
V. How to create competitive advantages
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Overview & Background
• Adequate Refining Capacity in the World
• Geographic Capacity & Product Imbalances
• Arbitrage Will Determine Product Flow
• Middle Distillate Short, Gasoline Balanced, Resid Long
• Shortfall of Upgrading & Conversion Capacity
• Significant Percentage of Outdated Refineries
• Very Large Capital Requirements to Reach World Class
• Heavy Crude Share will rise
• Margin Pressures from Capacity Maximization
• Mega-Mergers of Major Oil Companies
• Restructuring, Refinery Closures
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Economic Trends
• No Economics for Merchant Refineries
• No Economics for Grass Roots Refineries
• Expansion and Upgrading Attractive
• Resid Producers Pay Penalty
• Wide Gap in Operating Costs, Margins, and Efficiency
Optimization
• Cost Reductions & Productivity Improvements, Added Pressure from
Mergers
• Heavy Crude Processing Still (Again) Attractive
• Petrochemicals Still Volatile, Wide Swings
• Crude Price Trend Flat to Light Increase
• High Investments in Environmental & Safety Projects
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
4
Technology Trends
• Bottoms/Resid Upgrading
• De-Sulphurization to Meet New Standards
• Heavy Sour Crude Processing
• Gasoline Reformulation
• Emission Reduction
• Energy Management
• Full Safety Integration
• Transfer of Technology and Operating Know-How
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
5
Political Trends
• Completion of Refinery & Marketing Privatization
• Encouragement of Foreign Investment and
Technology
• Elimination of Crude & Product Subsidization
• Elimination of Earnings Guarantees
• Environmental, Occupational Health, & Safety
issues High on Political Agendas
• Government to Government Deals
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Societal Trends
• Rapid Increase in Public Environmental
Awareness & Concerns
• High Pressure for Emission Reduction (Air, Soil, &
Water)
• Increasing Demand for Remediation
• Public Demand for Clean Fuels
• Public Demand for High Safety Standards
Completion of Refinery & Marketing Privatization
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Corporate Trends
• Mega-Mergers Between Oil Companies
• Emergence of National Companies as Regional
Players
• State Company - Major Company
Mergers/Alliances
• More Players in Global Competition
• Rigorous Cost Reduction, Cost Optimization,
Outsourcing, Productivity Improvement
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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How to Win
- Conoco Examples
• Resid Upgrading With Delayed Coking, Proprietary Process
• Heavy Crude Conversion; Petrozuata
• Heavy Crude Processing Specialization
• Coke Specialization (Calcining)
• High Complexity/Conversion; Humber, Lake Charles
• Refinery Consolidation; Karlsruhe
• Expertise Consolidation; Partnerships in Petronas, Czech Republic
• Low Cost Operation, Cost Optimization
• Technical Support for Partners; Petronas; KNPC; Trinidad
• Highest Environmental & Safety Standards; USA Leader
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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Who Will Win
• Upper Range of Conversion, Complexity, &
Resid Upgrading
• Lowest Cost, Highest Productivity
• Economy of Scale
• Full Logistics Capability
• Marketing Integration
• High Environmental & Safety Standards
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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How to Create Competitive Advantages
(The Management Tools)
1) Establish Objective
2) Create Mindset
3) Penetrate Organization
4) Reward New Behavior
July 21, 2015
Copyright© 2000 CASCA Consulting, L.L.C. All rights reserved
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