Energy and commodity price benchmarking and market insights

Transcription

1 Energy and commodity price benchmarking and market insights London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg Market Reporting Consulting Events

2 Argus is a leading energy price reporting agency World s largest independently held energy price reporting agency Price indexation, news, data and analysis for energy and commodity markets Founded 1970, nearly 600 full-time staff in 23 countries In Middle East & Asia since 1986: Singapore, Tokyo, Beijing, Sydney, Dubai 8000 price assessments a day across 80 energy publications 1

3 Argus prices are used across the energy industry Argus Sour Crude Index TM (ASCI TM ): price benchmark for Middle East crude exports to US Argus Far East Index TM (AFEI TM ): price benchmark for LPG in Asia Official oil price reference for many governments US products market benchmark Principal provider of price indexation for physical and derivative coal markets in Europe (API 2 TM ), South Africa (API 4 TM ) and Asia- Pacific (API 5 TM, API 6 TM, API 8 TM ) Argus TTF used by Gazprom in Russian gas exports to Europe 2

4 Asia-Pacific condensate demand growth requires new price for arbitrage flows Tokyo Alejandro Barbajosa October

5 Shifts in demand & supply lead to balanced market Asia-Pacific & Middle East petchem splitter start-ups: Mideast Gulf condensate demand climbs, reducing surplus for export Refiners focus on light sweet crude feedstock, relegate condensate Atlantic basin cargoes become key component of Asia-Pacific supply US exports: infrastructure & quality constraints may limit shipments Argus Condensate Index (ACI): transparent Asia-Pacific landed price 4

6 Splitters add 380,000 b/d of Asian demand in 2014 Flexible new South Korea & Singapore splitters take sweet or sour condensate: Samsung Total at Daesan: 140,000 b/d Started receiving supplies in July SK Energy at Incheon: 140,000 b/d Started receiving supplies in July Jurong Aromatics: 100,000 b/d Ramping up towards capacity following delays Qatari term supplies traded on Dubai and QCP basis, or new Tasweeq formula Asia-Pacific grades such as Australian NWS based on spot prices Splitting capacity b/d Singapore South Korea China Source: Argus calculations 5

7 Additional 370,000 b/d capacity to start in Persian Star, Iran: 120,000 b/d by 2015 Ras Laffan, Qatar: 146,000 b/d by 2016 Lotte/Hyundai: 100,000 b/d by mn b/d East of Suez splitting capacity Source: Argus calculations 6

8 Qatari exports set to shrink as domestic use grows Deodorized Field Condensate (DFC) and Low-Sulphur Condensate (LSC) exports averaging 500, ,000 b/d Existing 146,000 b/d Ras Laffan splitter runs on untreated condensate and DFC Second 146,000 b/d Ras Laffan splitter expected to come on stream in 2016, detracting from export volumes b/d Qatar Demand Qatar Export Source: Argus calculations 7

9 Sanctions, domestic use cap Iran s exports potential Iran exports at 220,000 b/d in 1 st -half 2014 SPC (South Pars Condensate) phase b/d Iran condensates Output to double to 120,000 b/d from current 60,000 b/d, after start-up in March SPC phases May come on stream next year, expected to peak at 75,000 b/d 200 SPC phases Slated to start up by 2017, but uncertain Persian Star Bandar Abbas splitter may absorb 120,000 b/d from next year Two more splitters with capacity of 120,000 b/d each are planned 0 Source: Argus calculations Output inc Output w/o Domestic use Exports 8

10 Arbitrage cargoes supplement Asia-Pacific supply Country Project Volume, 000 b/d Operator Australia Northwest Shelf 4-5 cargoes/mth, or 95kb/d Woodside Pluto 20 Woodside East Timor Bayu Undan 32.5 Conoco Philips Pakistan Several Cargoes sold into Thailand, maybe Bangladesh by Glencore, Trafigura Equatorial Guinea Alba, Alen Cargoes sold into Thailand, South Korea in by Vitol, Glencore Libya Melittah Cargoes sold into South Korea by Vitol, Trafigura Kazakhstan Zhaikmunai Cargoes marketed by Trafigura Bolivia Cargoes marketed by Trafigura 9

11 Australia, Indonesia account for most new supply Country Project Volume, 000 b/d Est. start up Operator Australia Gorgon Q 2015 Chevron Indonesia Wheatstone 15 4Q 2016 Chevron Ichthys 100 2H 2017 Inpex Prelude 35 1H 2017 Shell Browse & Sunrise Donggi/ Bangka/ Gendalo After 2020 Woodside Several China Liwan 20 Nov 2014 Husky, CNOOC Malaysia Kimanis 20? End 2014? Petronas 10

12 Refiners turn to light crude, free up condensates 11

13 US condensate output surges, seeks export outlets Markets comfortable pricing condensate against Argus LLS & WTI as there is no homogenous quality for spot trade/new benchmark API gravity of 45 degrees is basis for light crude/condensate pricing, with discount of 30c/bl per each incremental degree US condensate has recently traded at $4-$6/bl discounts to LLS; Freight from the USGC to Asia has recently been at about $6/bl Including Eagle Ford, total US condensate production is about 700, ,000 b/d, expected to double by 2020 Total Eagle Ford output is about 1.3mn b/d, out of which 20pc-40pc is condensate, or as much as 500,000 b/d; may reach 700,000 b/d Texas stabilization capacity around 400, ,000 b/d 12

14 US producers circumvent condensate export ban No change to export ban for unprocessed crude and condensate Enterprise & Pioneer authorized to export distilled condensate, others waiting for clearance First cargoes head to Asian refiners, not splitters Quality and freight limitations: Paraffinic, distillate-rich blend with some heavy residue Smaller than Aframax size per shipment, unless collated Segregation and storage may limit US exports to about 200,000 b/d 13

15 Legalities of US condensate, crude exports The Enterprise/Pioneer exports are not granted export licenses, rather they got a private letter from the Bureau of Industry and Security (BIS) conferring an EAR99 designation. EAR99 designation indicates that a particular item is subject to the Export Administration Regulations (EAR), but not listed with a specific Export Control Classification Number (ECCN) on the Commerce Control List (CCL). NLR is the designator of a transaction that has a "No License Required" authorization. NLR may be used for either EAR99 items, or items on the CCL that do not require a license for the destination in question, provided no general prohibitions apply 14

16 US condensate priced at discounts to LLS, WTI 15

17 Towards a global reference price for condensate Asia-Pacific as key petrochemicals demand center requires a reference condensate price to overcome regional fragmentation About 750,000 b/d of new splitter capacity to be added in to rely partly on arbitrage supplies Argus Condensate Index (ACI) derived from two most liquid and visible grades in Asia: Qatari Deodorized Field Condensate (DFC) & Australian North West Shelf (NWS) condensate New marker for delivered supplies must reflect Asian market fundamentals with Singapore timestamp 16

18 NWS overly influenced by North Sea fundamentals 17

19 Argus Condensate Index: CFR Singapore marker December-loading DFC: Dec Ice Brent - Dec EFS + DFC spot diff + dirty VLCC ME Gulf to Singapore December-loading NWS: Dec Ice Brent + Nov DFL + NWS spot diff + dirty Aframax NWA to Singapore Take the lowest of the two as the most efficient price: alternation 18

20 Alternation between NWS & DFC as lowest price 19

21 ACI Asia-Pacific marker for arbitrage flows 20

22 ACI allows price comparisons across qualities (16 October, 2014) 21

23 ACI reconnects condensate price to Asian market 22

24 Conclusion: Fragmented condensate trade evolves into global market Global light crude surplus reduces need for condensate as a sulphur and API cutter in crude distillation units (CDUs) Splitters benefit from less competition from CDU operators New arbitrage supplies from West Africa, the Mediterranean and North America will complement traditional sources in ME Gulf and Australia Increasing arbitrage flows require new delivered price reference for Asia; Argus Condensate Index (ACI) 23

25 Thank you Alejandro Barbajosa VP, crude & LPG, Middle East & Asia-Pacific Phone: URL: Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, DEWITT, FMB, FUNDALYTICS, METAL-PAGES, JIM JORDAN & ASSOCIATES, JJ&A, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit for more information. Disclaimer All data and other information presented (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

26 Upcoming Argus Conference Argus Asian Crude 2014 Emerging trading hubs & arbitrage opportunities November 2014 Carlton Hotel, Singapore Finding new markets for Atlantic basin crude in Asia-Pacific Refinery upgrades and implications for key demand hubs: China and India Can crude arbitrage flows continue to flourish without new trading hubs? US crude & condensate exports: how much, how soon and where to? Condensates: Increased NGL production and the role of expanding splitter capacity Developing futures markets and hedging opportunities for crude in Asia Hear from key individuals representing BAPCO, Petrochina, HPCL, Institute of Energy Economics Japan, Ecobank, Clearsource Trading London and DME.