Consulting,Wood Mackenzie, the topic was ‘Downstream business models and their strategies for success’. First to the podium was Jonathan
Leitch,Senior Analyst Oils Research at Wood Mackenzie,who told delegates that overcapacity and closures are still on the horizon in the medium to long term for the Atlantic basin refining sector. He said that although refining margins recovered slightly in 2010,this did not herald the start of a new recovery for Atlantic basin refiners, who can still expect similar margin levels in 2011. He explained that in 2010,global oil
demand recovered to pre-crisis levels and is expected to grow strongly by 1.5mn to 2mn b/d year-on-year. Much of the increase in demand is expected to come from developing economies in Asia,the Middle East,Latin America, Africa and the Former Soviet Union, driven in particular by increasing car ownership in these emerging markets. Crucially for refiners in the Atlantic basin,demand in Europe and the US will continue its trend of decline,since peaking in 2007. Falling demand in the region,coupled with new global
capacity coming onstream in 2011,will lead to a ‘continued challenging envi- ronment’ for refiners,Leitch said, unless refineries are shut down. He noted that a significant number of refining assets have already been sold, are slated for closure or have idle capacity,equivalent to some 2.3mn b/d of capacity,of which some 1.3mn b/d look firm. International oil companies (IOCs) will continue to rationalise in a bid to focus on key refineries with the scale and efficiency to deliver appro- priate returns,but are unlikely to exit the refining sector altogether,he said. Leitch’s presentation also highlighted
the main factors that are likely to affect refining in the Atlantic basin – weak economic growth,high oil prices,legis- lation for biofuels and carbon legislation,all of which will impact the operating costs of refineries. However, there is a ‘positive side to the story’ in that there are some good assets avail- able on the market that are expected to attract new entrants to the region. ‘The Atlantic basin is a big market, there are gains to be made and it is still attractive for long-term players. Let’s not forget that the transport sector in
Europe and the US will remain a 20mn b/d market out to 2020,’ he concluded. Joe Gorder,Executive Vice President, Marketing & Supply,Valero,then out- lined how independent refiners could take advantage of current trends in the global refining market place. Valero claims to be the world’s largest inde- pendent refiner,operating 14 refineries with 2.6mn b/d of throughput capacity. It is also one of the US’ largest fuel retailers,with 5,800 branded service stations,as well as one of the largest ethanol companies in the US,operating 10 plants with a total production capacity of 1.1bn g/y (equivalent to 72,000 b/d). Echoing the demand trends outlined
by Leitch,Gorder noted that diesel demand has grown much larger than gasoline globally,is expected to recover past prior highs and to grow rapidly, and provides a significant export oppor- tunity for US refiners. Meanwhile,a strong demand for waterborne light- sweet crude oils is creating large feedstock discounts,while Gulf coast heavy sour coking margins are leading the recovery in the US refining sector. ‘Independent refiners such as Valero can
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