Chris Hunt. Director General UK Petroleum Industry Association

Transcription

1 Chris Hunt Director General UK Petroleum Industry Association

2 First the adverts UK Petroleum Industry Association UKPIA Trade Association for the UK oil refining industry & its marketing activities Cover new legislation on: conventional fuels, biofuels, air quality, climate change, safety, other environmental issues Communications Emergency planning Nine Members BP Valero ConocoPhillips ExxonMobil INEOS Murco Essar Shell Total Marketing/Retail No refining Refining and Branded wholesale marketing Refining and Marketing Refining and limited marketing

3 UKPIA members: vital to the UK economy Provide secure energy supplies, feedstocks and special products Operate all 7 UK major refineries Supply 34% of UK primary energy needs and source ~85% of inland fuel demand Supply important feedstocks for other industrial sectors and processes - petrochemicals, lubricants and greases*, heating fuels, solvents, carbon electrodes Operate 36 distribution terminals and 1500 miles of commercial pipelines Own ~1900 of the 8700 filling stations in the UK and serve around 5M customers every day Major investors in the UK economy Major employers Major contributors to UK economy Substantial collectors of tax revenue Close to 3 billion invested in fixed assets over the last 5 years, mostly to meet tighter fuel and environmental standards and to enhance process safety jobs supported across the UK directly/indirectly Important sector for chemical/engineering graduates, related vocational skills, training and apprenticeships Value of refining to UK economy estimated at ~ 6 billion Each large refinery estimated to inject ~ 60+ million locally (UKPIA estimates) In 2010/11, the downstream oil sector collected 34 billion in duty and VAT on fuels * The UK has over 100 speciality lubricants and grease manufacturers, mostly SMEs, with significant exports having global importance.

4 UK refineries crude capacity ~1.5 million barrels/day Main Fuel Refineries Owner Capacity (bpcd) Fawley ExxonMobil , 000 Grangemouth Petroineos 196,650 Petroineos Killingholme (Humber) Phillips ,000 Lindsey Total 218,000 Milford Haven Murco 130,000 Pembroke Valero 209,000 Stanlow Essar 267,000 Essar Phillips 66 Total Murco Seven operational refineries ~ 1.5 mb/d - ~ 4 th largest capacity in EU Valero ExxonMobil

5 Even up to 2030 and beyond, oil is a major source of world energy By Sector Quadrillion BTUs 700 By Fuel Quadrillion BTUs Res/Comm Wind, Solar, Biofuels Hydro, Geo Biomass Nuclear 400 Industrial 400 Coal 300 Transportation 300 Gas Power Generation 100 Oil Courtesy of ExxonMobil. IEA s Outlook = very similar.

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7 The challenges facing Refining: Legislative burden and competitiveness

8 NEC National Emission Ceilings CAFE Clean Air For Europe Directive LCP Large Combustion Plant Air Emissions IPPC Integrated Pollution and Control PRTR Pollutants Release and Transfert Register Transparency Declaration CO2 CARE Package & EU ETS Directive CO2 Quotas BREF/BAT Air Quality Legislation Climate Legislation Renewables Directive & FQD 7a Soil, Water and Waste Legislation Fuel Products Legislation Waste Directive Fuels Quality Directive Soil Directive Proposal Product Specifications 8 Protection of groundwater against pollution Directive Water Framework Directive Suppression/reduction of the emissions of priority dangerous substances Environmental Liability Directive Reduction/ Suppression of dangerous substances REACH Substances Directive Energy Institute Jul y 2011 Source: EUROPIA Marine Fuel changes, IMO

9 EU Products and Demand Source: CONCAWE

10 UK Scenario..

11 A Perfect Storm The refining industry in the UK and the threat of a perfect storm

12 Environmental legislation imposes a significant challenge to refining margins

13 The pain.. FQD Article 7a: Strong UK Government support needed for competitiveness fitness checks by EC Cost: ~ $2-18 per barrel at tonne/co2; would exceed gross margin across EU refineries (Source: Wood Mackenzie) EU ETS Phase III: Competitive disadvantage against non-eu refineries, particularly in India and the Middle East, which already supply the UK with jet fuel and other products. Cost: up to 75M ( 86M)/year using an allowance cost of 15/t CO2e. IED: Timescale is unmanageable where investment in new abatement technology is required to meet the revised emissions limits. Cost: given Environment Agency priorities to reduce NOx and SOx emissions, significant investment costing around 100M/year (UKPIA Estimates) is likely to be required from around 2015 onwards, with corresponding increases in operating costs. CRC: In 2010, recycling of revenue from allowances to CRC participants was abandoned, transforming the Scheme into an additional tax burden on industry. Cost: over 20M/year during Phase I (UKPIA estimates). Additional cost for refineries during Phase I, which has been extended to 2014/2015, amounts to over 14M/year. Carbon Floor Pricing: The ending of the exemption from CCL for CHP plants and withdrawal of LECs jeopardises recent investments by UKPIA members in CHP, reducing returns at an early stage in the investment cycle. Introduction of CPS to gas used for electricity generation in refineries introduces significant cost and competitive disadvantage with EU and non EU refineries. Cost: over 20M/year for UK refineries (UKPIA estimates), but also compromises further investment in CHP plants. 13

14 Industry/UK Government Refining Strategy vital DECC study to examine the legislative and other impacts upon on UK refining due Q This now presents government with a vital opportunity to develop a policy framework for refining that ensures the UK continues to have a robust industry well placed to meet our future energy needs. UKPIA welcomes and is actively supporting this study but will continue vigorous lobbying on all these issues and development of a policy framework, to ensure positive action is taken before it is too late.

15 EU level activity..

16 A Permanent Forum Source: EUROPIA

17 EU Refining Forum Fitness Checks.. Source: EUROPIA

18 Fit to invest? - Or just to survive? Source: EUROPIA

19 UKPIA messages 1. Oil will continue to play a major role in the UK s energy mix for many years. 2. Refining is a strategic asset & must be recognized as such 3. UK study and EU level dialogue must lead to positive actions to address policy issues and develop a policy framework before it is too late!

20 When they re gone they re gone!!!!