“Global Competition and the Role for Europe’s Refineries”
John Cooper, Director General
Brussels, 1 March 2016
6th EU Refining Forum, 1st of March 2016
•
Forum overview
•
Balancing Policy Objectives
•
Fitness Check
•
Addressing Climate Change
•
Competitiveness – Getting a complete picture
•
Energy Costs
•
ETS Reform
•
Transport Decarbonisation
Page 2
6th EU Refining Forum, 1st of March 2016
Cost build-up for EU refineries vs non-EU export oriented refineries
 Generic EU refinery, 200 kbd  Generic Middle-East refinery, 250 kbd  $ / bbl of crude
1.72$ / bbl
IED 1.45
ETS**0.27
EU-only
Regulatory
COMPETITIVE
DISADVANTAGE
4.4 $ / bbl
4.5
≈2.0 Product
7.2 $ / bbl
freight to EU*
0.7
Energy 1.1
0.5 Energy
Maintenance
Maintenance
1.6
1.6
& Other
& Other
Labour Labour
NOTE:
*Product freight to EU - $ / bbl of product delivered to the EU
**ETS – estimated av. impact on EU refineries in phase IV
- Assumed identical crude cost
Crude cost
Crude cost
2.8 $ / bbl
Source: Solomon Associates, Concawe
Page 3
6th EU Refining Forum, 1st of March 2016
EU refineries at competitive disadvantage vs non-EU export oriented refineries
COST BUILD-UP
Unit: $/bbl
16
Crude oil
Labour
Maintenance & other
Energy
IED
14
ETS
12 Product freight
to Europe
10
8
6
Regulation
1.72
1.72* *
4.5
1.5
2.0
0.7
0.5
1.6
1.7
1.1
2.1
1.6
2.1
4
0.8
0.9
2
Refinery assumptions:
- EU generic refinery 200
kbd;
- Middle East/Russia/US
generic 250 kbd
*Crude assumptions:
- Middle East, EU, US –
identical crude cost;
- Russia (source: JBC)
≈ 4 $/bbl
Crude oil
discount*
** Estimate of US compliance
costs
0
Middle East
US
Russia
EU
Source: Solomon Associates, Concawe, EIA, JBC
Page 4
6th EU Refining Forum, 1st of March 2016
Expected evolution of ETS cost for EU refineries from phase II to phase IV
(1)
(2)
(3)
Source: Concawe, based on Linear Reduction Factor 1.74% per year & impact of CSCF, assuming total EU refining throughput at 650Mt/y
Source: Concawe, based on the 15th July 2015 COM proposal for ETS revision Linear Factor 2.2% per year é estimated impact of CSCF, assuming EU refining
throughput at 600 Mt/y, 0.5% yearly improvement in carbon efficiency and cost of ETS certificate at 30€/ton
Note that in Phase II surplus allowances to the estimated value of 750 M€ were allocated (source: JRC draft refining fitness check report)
Source: Concawe & WoodMackenzie
Page 5
“GLOBAL AND EU ENERGY CHALLENGES & TRANSPORT ISSUES
Indicative Carbon Costs in Transport & Power Sector
Cost in $/Tonne
Carbon mitigated or reduced
$500+
Transport
range
Power
Focus of transport
energy GHG
policies
Bar width indicates scope
of decarbonisation available
Focus of
Power
Generation
GHG
policies
range
A true market in GHG reduction would
support the next lowest cost technologies
$80
* Economy-wide carbon price
$20
Focus of
vehicle
efficiency
policies
Fuel switching
in power
Efficiency
Renewables in
power
Reforestation*
CCS*
1st Gen Advanced
Biofuels
Transport
Electrification
* Carbon sequestration will increase the available carbon budget
Page 6
“GLOBAL AND EU ENERGY CHALLENGES & TRANSPORT ISSUES
Conclusions
•
The Refining Forum is strongly appreciated as a key part of the dialogue between
Commission and Industry and should continue on a permanent basis
•
The Refining Fitness Check should be refreshed on a regular basis and used to assess the
global impact of new regulations on the competitiveness of the ref industry
•
Strong competitiveness challenges remain for the sector
•
Energy costs are expected to continue to be the biggest element of international
competitive disadvantage
•
ETS costs will rise as a result of Phase IV adding to the competitive disadvantage,
and necessitating full carbon leakage protection
•
European energy strategy should recognise the longer term role of refineries, petroleum
fuels and petchem products
•
We should keep Europe’s fuels and other strategic oil products refined in the EU
•
Transport decarbonisation strategies should take consideration of cost of carbon
abatement and offer flexibility to avoid highest cost approaches
Page 7
THANK YOU
FOR YOUR
ATTENTION
This document was presented by
FuelsEurope
Contact:
[email protected]
FuelsEurope
165, Boulevard du Souverain
1160 Brussels - Belgium
T: +32 2 566 91 00
www.fuelseurope.eu