1 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
OMV Refining & Marketing
Impact of shale gas, tight oil and oil sands on European refining and petrochemical Industry Brussels, Sep.20th, 2013
2 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
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3 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
4 Refineries in Austria, Germany, and Romania with total capacity ~22 mn t/a Germany: Burghausen (3.5 mn t ), Bayernoil (4.5 mn t, JV, on sale)
Austria: Schwechat (9.6 mn t)
Romania: Petrobrazi (4.2 mn t)
20% market share in the Danube region High product quality and environmental standards Strong retail brand and high-quality, innovative
non-oil business (VIVA) Active in 13 countries with around 4,400 filling
stations in 2012 (incl. Petrol Ofisi) Total ~ 3,300 employees
OMV Refining & Marketing as European Company is Supplying over 200 mn People with Energy
OMV filling station network
4 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Unconventional oil and gas has the potential to change the refining and petrochemical
industry globally.
5 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Light sweet crude supply to the US potentially re-routed to Europe
And these are the reasons… Lower energy costs
Gas price advantage [EUR/MWh]
source: BP statistical review of world energy 2013
Sources: Amercian Chemistry Council (ACC); EIA, NCG, Platts, IHS: America’s Energy Future: The Unconventional Oil and Gas Revolution and the US Economy, Oct. 2012;
Reuters
Ethane cracker production cash cost advantage
0
500
1.000
1.500
0 50 100 150
Pro
duct
ion
cash
cos
ts [U
SD
/t]
Cum. ethylene capacity [Mta] source: HIS-CMAI, various years
Lower production costs
Light crude re-routing
2006 2012
-63%
In total, 2.4 mbd of light crude supply to the US in 2011 (14 % of consumption)
0.6
0.4
1.4
- 68 % - 63 % 2.4 mbd
01020
304050
Q1/13 Q1/12 Q1/11 Q1/10 Q1/09 Q1/08
-68%
Net Connect Germany (NCG)
Henry Hub (US)
Platts Japan Korea Marker (LNG Price)
Re-routing to Europe
2011 future
6 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
There are huge reserves of unconventionals - globally.
7 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Unconventionals - Shale Gas & Gas Liquids, Light Tight Oil, and Oils Sands – are distributed globally …
source: HIS 2013, EIA 2012, Hart Energy et al.
Oil sands
Shale gas
Light tight oil
8 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
… and the estimated production costs are in the range of other production methodologies. Gas reserves and production costs
Oil reserves and production costs
Source: IEA, Resources to Reserves 2013 Source: IEA, Resources to Reserves 2013
700 500 400 600
4
0 300
12
10
8
6
2
0 200 100 800
production cost [USD/MBtu]
remaining technically recoverable gas resources [tcm]
Deepwater Arctic Sour gas Shale gas Tight gas Coal bed methane Conventional gas
50
10
3.000
70
30
4.000 5.000
110
6.000
20
60
100
0 1.000
90
2.000
120
80
40
0
production cost [USD/bbl]
remaining technically recoverable oil resources [bn bbl]
Ultra-deepwater
Extra heavy oil & bitumen
Arctic Non-CO2-EOR CO2-EOR Other conventional oil MENA conventional oil
LTO
Kerogen oil
9 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Today, the main barriers are above ground: policy & public
opinion, land access, and product-to-processing site infrastructure.
10 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Current crude pipeline network is currently unable to handle the new situation ... Canadian oil sand and Bakken US shale oil cannot
be supplied to US refineries at the Gulf Coast.
… but major projects are commissioned soon and planed for the midterm future Starting with the Seaway Pipeline reversal 2012,
domestic light sweet crudes are entering the Gulf Coast region; an expansion is already planned
The Canadian heavy crude pipelines capacity starts to increase from 2015 onwards, but full capacity expected in 2017. Major projects like Keystone XL discussed controversially due to environmental issues.
Large volume flows of unconventional is currently limited by logistics – not only in North America
North American pipeline and expansion project
11 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
The most important above ground issues include: Policy / Public opinion Land access Business terms Supply Chain Midstream infrastructure Water availability and management Other regulatory
Current political boundary conditions in EU vary, but many of the countries are reluctant to shale gas production so far
Indication of political / public opinion on shale gas / fracking
sources : various
Poland
Ukraine
Spain
Denmark
France
Germany
Romania
United Kingdom
Lithuania
more negative more positive
12 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Advantaged feedstock affect petrochemical industry.
13 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
The cash costs for production of ethylene are affected by lower feedstock and lower energy costs, simultaneously Ethane based shale gas in the US shifts the global cost curve significantly.
Naphtha – Rest of the World Ethane- Middle East Ethane - North America
source: IHS WPC 2013
0
500
1.000
1.500
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
Pro
duct
ion
cash
cos
ts [U
SD
/t]
Cum. ethylene capacity [Mta]
2012: ~ 100 USD/bbl 2006: ~ 60 USD/bbl
margin
Ethylene price 2012
Demand 2012
14 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
There are on-purpose monomer production technologies available
which are already competitive.
15 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
The shift towards ethane crackers in North America resulted in a supply gap for propylene and other higher molecular petchem products affecting local prices.
Propane is the most available gas liquid.
Propane dehydration (PDH) is the most evolving technology in North America and North East Asia.
Propane Dehydration is the fastest emerging on-purpose technology
Propylene to ethylene Price Ratio
Share of propane dehydration capacity of total propylene capacity
source: IHS-CMAI, 2013
source: Nexant. 2ß12
0
10
20
2014 2013 2012 2011 2010 2009 2008 2007 2017 2016 2015
0,5
1,0
1,5
2010 2008 2012 2016 2006 2014
North East Asia North America
USA Western Europe
forecast
16 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Unconventionals have already affected global crude price
differentials.
17 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Due to global availability of light crudes, and increasing demand for heavy feedstock, shrinking differentials are observed Demand is still growing especially in Asia
absorbing most of produced heavy crudes. Canada seeks an additional outlet to Chinas
refineries for its oil sands. Global conversion capacities is still growing. More than doubling of US tight oil production
(mainly light shale plays) expected.
Further North American light tight oil most
probably re-routes light crudes to Europe
North Americas light sweet crude production and the global demand for heavy crudes decrease the light-heavy-spread
Price benefit in % of Urals and CPC to Brent
Light sweet crude supply to the US potentially re-routed to Europe
source: BP statistical review of world energy 2013
source: Platts 2013
In total, 2.4 mbd of light crude supply to the US in 2011 (14 % of consumption)
0.6
0.4
1.4
Re-routing to Europe
-5,0%
0,0%
5,0%
10,0%
2006 2008 2009 2010 2012 2013
Urals [%benefit]CPC [%benefit]
2011 future
18 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Domestic refining and petrochemical industry will play a
significant role in future, especially if vertical and horizontal
integration exists.
19 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Yield Shift to High Value Chemicals: Liquid Based Crackers are Competitive due to their By-Products
source: internal data, 2012
production costs based on ethylene [costs/t ethylene]
6.6 x by product credits
expenses
liquid ethane feedstock:
expenses incl. feedstock costs, variable OPEX, fixed OPEX
20 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Strong business integration and further increased asset utilization
Source: Annual reports, OMV analysis.
Competition 2012 1 OMV 2012 OMV 2015
Competition 2012 1 OMV 2012 OMV 2015
1 OMV’s European competitors: BP Europe, ENI Europe, Exxon Europe, Lotos, MOL, Neste, NIS, Phillips 66 Europe, PKN. Orlen, Repsol Europe, Rompetrol, Shell Europe, Total Europe, Tupras.
E&P Refining
Retail
Petrochemical
Refining
Petrochemicals sales vol. % of refining capacity
Retail sales vol. % of refining capacity
Own crude oil % of refining capacity
Refining
Refinery utilization rate
>25% 18%
12%
>47% 42%
24%
>13%
6% 10%
79%
~90% 88%
Competition 2012 1 OMV 2012 OMV 2015
Competition 2012 1 OMV 2012 OMV 2015
21 | OMV Refining & Marketing, Dr. Alois Virag, Sep. 20th, 2013
Starting in North America, global unconventional oil and gas reserves have the potential to change our business.
Low energy prices and low feedstock prices stimulate refining and petrochemical business incl. upcoming new technology to balance the limited supply of higher hydrocarbon petrochemical feedstock.
Increasing domestic availability of light sweet crude pressurises the heavy-light differential.
Integration into upstream, downstream, and in petrochemicals as well as cost performance leadership deliver the basis for a vital oil and gas business in Europe
OMV as highly integrated oil and gas player
is prepared to play a significant role in the future.
Summary