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Alexander Demidov, General Director of the Belarusian company Naftan, is attending the CIS & CEE Downstream Project Management. He will join the brainstorming round table and discuss: “How to build a productive and effective project team within an organisation”.
A special technical site visit to Haydar Aliev Baku refinery will be organized for attendees of Downstream Caspian and Central Asia to be held in Baku (28-30 Nov.) Follow the link to learn more about the event.
Expecting the 4th CIS & CEE Downstream Project Management conference GBC talked to David Wech, Managing Director JBC Energy about global downstream industry trends.
In Vienna David will speak about global downstream dynamics: Current Strength and its Persistence. David Welch has extensive knowledge of energy markets gained from more than 13 years of supporting national and international oil and gas companies as well as government-related agencies on upstream and downstream projects.
David has played an instrumental role in the success of JBC Energy in recent years, developing many of the firm’s research reports and the company’s supply, demand and price forecasting model (SuDeP), which is used by companies throughout the world.
1. Which 3 key trends do you see in the global downstream sector?
The current refining environment can be characterised as one of limited spare capacity. This will spur investment into new projects in the medium-term, but structurally weaker crude prices will make it difficult for producer countries to get in on the action. Consequently, new projects are likely to sprout up in India and China rather than the Middle East.
- In terms of demand, we project strong growth for light-ends coming from the petrochemical industry throughout the next decade. Consequently, we expect more investment into steam crackers, while those refiners with flexibility to supply into either the gasoline or petchem pools may have a competitive advantage.
Over the long-term, the ability of electric vehicles and bans on diesel passenger cars to disrupt transport demand is a major issue. Our current projections are quite conservative with gasoline and diesel demand peaking towards the end of the next decade, but we recognise the potential for much greater disruption and are therefore monitoring the EV scene closely.
2. What do you think is trending in the project development in the CEE countries compared to the CIS region?
Although the two regions face very similar challenges, i.e. the need for modernisation and increasing output quality, they differ in one major aspect – the incentive to modernise. CEE countries are closer to the European market and have better export margins. This creates a greater incentive to produce higher-value products, both lighter and of higher quality. For instance, Belarus’ Naftan, which operates the Novopolotsk refinery expects to start up a hydro treater by the end of this year which will enable it to stop producing 50ppm diesel and export only 10ppm diesel. Meanwhile, for CIS countries, the main incentive to modernise lays in the need to reduce import dependence, which is the case in Kazakhstan for example. Here, the role of the government in pushing for modernisation is larger.
3. In your opinion, what are the main revamp and construction projects that service providers should keep an eye on?
We see several important projects to keep a close eye on over the coming years. Two of them are in Belarus. The Mozyr refinery in Belarus is currently implementing a modernisation program, which includes a new hydrocracker and potentially a reformer. The Novopolotsk refinery is also planning to modernise with a new delayed coking unit. Meanwhile, PKN Orlen may build a new visbreaking at its Plock refinery by 2020. Additionally, in Azerbaijan, the Haydar Aliyev refinery is currently undergoing modernisation works that are aimed at increasing refining depth of the plant by the end of the decade.
4. Who are the current downstream market drivers and what should we expect to see over the next 5 years?
- The current market environment is highly conducive for refiners. The low oil prices have boosted demand and this demand has allowed global crude intake to surge without triggering a collapse in margins. Simpler refineries have also been able to raise their runs on the back of narrow light/heavy crude and product spreads.
- Looking forward, a low flat price environment and ample crude supply should remain in place over the next few years as the OPEC/non-OPEC cuts are eventually lifted. We don’t expect to see any crunch in crude supplies as the low oil price round has structurally brought E&P costs down. Consequently the buyers’ crude market is likely to stay with us, although CEE refiners may find availability of Russian crude a little tighter as more Russian crude is sent to the Far East as new infrastructure projects are brought online. Higher consumption is also eating into forward demand cover, thereby rebalancing the product market faster than many had anticipated. A big challenge but also opportunity for refiners in the next few years will be changing product outputs to reflect the new 0.5% global bunker fuel environment from 2020.
5. We are looking forward to welcoming you at the 4th Downstream Project Management Conference. Could you please let us know what your expectations are for the upcoming conference?
I’m looking forward to hearing first hand accounts of some of the key downstream projects being planned in Russia and Europe. It will also be nice to meet other industry colleagues and network.