1. Ways & Means: Infrastructure for Security,
Efficiency & Profitability
By
Al Troner
ASIA PACIFIC ENERGY
CONSULTING
Houston, Texas, USA
Phone: +1-281-759-4440; Fax: +1-281-759-4441;
Email: apenergy@apecconsulting.com
Asia Energy Security Summit Colombo, Feb 29 –
March 01, 2012

2. Infrastructure Equals Ways & Means
 Small ticket items often equally important
 Usually plant, often physical things
 Sometimes operational, i.e. problem-solving
 “Big picture” view can’t ignore the small details
 Remember, problem-solving, like trade, uses
two hands
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3. Objectives – The Big Picture
 Decrease cost; improve profitability
 Allow greater choices in base materials, feedstock
 Increase security of supply
 Improve product quality; reduce environmental
damage
 Meeting government mandated regulations
 Increase competitive edge on domestic and
international markets
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4. Nuts & Bolts – Tank Storage
 Simple investment allows sophisticated
operations
 Large cargo shipments, reduced transport cost
 Strategic stocks bolster security
 Allow vast expansion of products trade/refining,
i.e. Singapore
 Singapore’s refinery output less than blended
exports
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5. Singapore Storage Detailed
Capacity
Site Operator Ownership ('000 CM) Products
Vopak 69.5%; PSA Products,
Banyan Basin, Jurong Vopak 30.5% 1,261.32 Chemicals
Horizon Terminals
ENOC 52%; IPG 15%;
SK Energy 15%;
Horizon Singapore Martank BV 10%;
Banyan Basin, Jurong Terminals UAE's Boreh Int'l 8% 1,237.40 Products
Jurong Helios Terminal Chemoil 270.00 Products
Hin Leong 65%,
Jurong Universal Terminal PetroChina 35% 2,300.00 Products
Products,
P. Busing Tankstore Kuo International 929.50 Chemicals
Vopak 69.5%, PSA Products,
P. Sebarok Vopak 30.5% 1,261.00 Chemicals
P. Seraya Oiltanking 100% 1,165.68 Products
Total Operating 8,424.90
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6. Nuts & Bolts – Ports/Berthing
 In 1980s large cargoes easy to track
 Less than a dozen 300,000 DWT
berthing/SBM
 Tankers need large support infrastructure
 Storage, ports & berthing underpin blending
trade
 China’s ballooning infrastructure typical
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7. China Ports
Max. Capacity
Port (DWT) Oil Receiving Operator Startup
Capacity by 2004 900,000
Dagushan Port at Dalian 300,000 Petrochina 2004
Qingdao 300,000 Sinopec by 2004
Zhanjiang Port at Maoming 300,000 Sinopec 2002
Added Capacity by 2011 3,375,000
Zhou Shan port at Zhejiang (1) 300,000 Sinopec 2005
Yangpu port at Hainan 375,000 Sinopec 2006
Huizhou port 300,000 CNOOC 2007
Huangdao Port at Qingdao 450,000 Sinopec 2008
Caifeidan Port at Tangshan 300,000 Sinopec 2008
Xianrendao Port at Yingkou 300,000 Petrochina 2009
Nanjiang port at Tianjin 300,000 Sinopec 2008
Douwei port at Quanzhou, Fujian 300,000 Sinopec 2009
Daxie port at Ningbo 300,000 Sinopec 2009
Xingang Port at Dalian 450,000 Petrochina Under Construction
GRAND TOTAL 4,275,000
Source: China National Statistics Yearbook
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8. Nuts & Bolts – Crude & Products Pipelines
 Distinction on all pipelines – trunk vs. distribution
 Crude generally trunk; products generally distribution
 Asia Pacific lags behind Western & ME Gulf in both
 Pipelines can create captive suppliers or buyers
 Crude pipelines already reshaping trade, prices,
blends
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9. Nuts & Bolts – Gas Pipelines
 Physical nature of gas makes big difference
 Long run-up to commissioning (Trans-ASEAN
pipeline)
 Level of captiveness much higher than oil
 Needs steady, uninterrupted supply and offtake/
consumption
 Heavily impacted by regulatory regime
 Gas trunklines lagging far behind crude
 Gas transport underpins growth in NGL supply
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10. Crude Pipelines to China
Service Length Pipeline Fill
Pipeline
Date (Miles) (MM BBLs)
CPC 2001 948 7.8
BTC 2005 1,061 10.6
West-East Pipeline 2008 2,029 6.0
ESPO-Phase 1 2009 1,713 20.2
West –East Pipeline Expanded * 2012 2,600 13.5
ESPO Expanded * 2014 2,100 46.0
Note: * Partially estimated.
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11. Nuts & Bolts – Expanded Refining
 Recession accelerated refinery closures in
West.
 Mideast downstream grew only slowly.
 Asia Pacific remains expansion leader.
 India’s/China’s share of Asia-Pacific
downstream steadily growing
 China’s expansion outpacing India
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12. India/China Share at Asia-Pacific Refining Capacity
40
33.9 MM B/D
35
28.4 MM B/D
30
25
20
15 52.6%
10 42.6%
5
0
2008 2011
million barrels/day
India/China Asia Pacific
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13. Refining for More Yield of Lighter Products
 Lighter products have higher value per volume
unit.
 Transport fuels generally lighter; focus of
growth
 Lighter product better quality within product
group
 Extracting most value out of residual, VGO
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14. Refining for Better-Quality Products
 Massive, broad-based buildup across Asia
Pacific
 Mideast Gulf has lagged behind.
 Severe secondary capacity for lighter products
 Quality improvement to meet tightening specs
 Asia-Pacific refining almost a third
(32.4%/28.406 MM B/D) of world’s 87.73 MM
B/D.
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15. Asia-Pacific Refining Capacity
1/2008 1/2011 1/2014
MM B/D MM B/D % Rise MM B/D % Rise
Base Capacity (Working capacity incl. Condensate Splitters)
28.406 33.919 19.4% 37.168 9.6%
Severe Secondary (incl. coking, Hydrocracking (HDC), Fluid & Residual
Catalytic Cracking (R/FCC)
8.172 12.114 48.2% 13.329 10.0%
Quality Improvement Units (Distillate Hydrotreating (Dist. HDT), Gas Oil
& Residual Hydrodesulfurization (GO Desulf. & Resid. Desulf)
12.870 17.226 33.8% 18.285 6.1%
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16. Mideast Gulf Refining Capacity
1/2008 1/2011 1/2014
MM B/D MM B/D % Rise MM B/D % Rise
Base Capacity (Working capacity incl. Condensate Splitters)
6.952 7.818 12.5% 9.761 24.9%
Severe Secondary (incl. coking, Hydrocracking (HDC), Fluid & Residual
Catalytic Cracking (R/FCC)
1.118 1.382 23.6% 1.962 42%
Quality Improvement Units (Distillate Hydrotreating (Dist. HDT), Gas Oil
& Residual Hydrodesulfurization (GO Desulf. & Resid. Desulf)
2.489 3.148 26.5% 4.807 52.7%
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17. Refining Infrastructure Observations
 Asia Pacific added lion’s share of new refining since
2000.
 Increasing efficiency, profitability – MAINLY
operational flexibility
 Increasing dieselization of Asia Pacific – including
China
 Mideast’s push to improve product quality has lagged
Asia Pacific.
 China has been Asia Pacific’s leader in adding
capacity.
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18. The Heart of the Matter: India & China
 Demand Giants remain the demand growth drivers.
 China outstripping India in infrastructure, not only in
refining
 This allows imports of crude, products & LNG at less
cost from more suppliers.
 China now focusing on quality as well as India –
squeeze point ADO
 Essential difference – India looks outward, China
inward
 Lack of infrastructure will hamper India’s product
export drive.
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19. India & China – A Comparison in Refining 2008/2011
2008 2011
India as % India as %
India China India China
of China of China
Base Capacity (Working capacity incl. Condensate Splitters)
3.083 9.927 31.1% 4.323 13.517 32.0%
Severe Secondary (incl. coking, Hydrocracking (HDC), Fluid & Residual Catalytic
Cracking (R/FCC)
1.152 3.786 30.4% 1.809 6.303 28.7%
Reforming
299 513 58.3% 437 872 50.1%
Quality Improvement Units (Dist. Hydrotreating, GO & Resid. Desulf.)
1.123 1.863 60.3% 1.869 3.841 48.7%
Of which: GO & Resid. Hydrodesulf.
0.961 1.502 64.0% 1.497 2.929 51.1%
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20. India & China – A Comparison in Refining 2011/2014
2011 2014
India as % India as %
India China India China
of China of China
Base Capacity (Working capacity incl. Condensate Splitters)
4.323 13.517 32.0% 4.906 15.767 31.1%
Severe Secondary (incl. coking, Hydrocracking (HDC), Fluid & Residual Catalytic
Cracking (R/FCC)
1.809 6.303 28.7% 2.049 7.035 29.1%
Reforming
437 872 50.1% 437 1.084 40.3%
Quality Improvement Units (Dist. Hydrotreating, GO & Resid. Desulf.)
1.869 3.841 48.7% 1.973 4.608 42.8%
Of which: GO & Resid. Hydrodesulf.
1.497 2.929 51.1% 1.601 3.388 47.3%
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21. Infrastructure & Pipelines
 Pipelines can make seller or buyer dependent.
 Pipelines are usually single-market focused.
 Pipelines have strategic geo-political impacts.
 Pipelines, particularly for crude, reduce
transport cost.
 Pipelines cannot easily divert supply to
alternative buyers.
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22. Crude Pipeline Impacts
 Will provide Asian refiners dream crude – mid/heavy &
sweet.
 Piped sales encourage sellers to assure supply flow.
 Pipelines avoid maritime chokepoints (Hormuz;
Melaka).
 Incremental piped supply pressures traditional crude
sellers.
 Mideast exporters must reconsider heavy/light, sweet/
sour price deltas.
 New crude blends to emerge?
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23. Listing Emerging Trade Routes
 The Northeast Passage: Circum-polar from Norway,
Western Russia to East Asia
 Expanded Panama Canal: South American crude
from Columbia, Venezuela & Brazil
 East African Exports: New South Sudan and
Uganda pipelines to coast (Kenya, Tanzania?)
 UAE Bypass Trunkline: Crude pipeline bypassing
Hormuz; June 2012.
 Canadian Syncrude Pipelines: Bringing Alberta
production to the Pacific Coast
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24. Transportation Infrastructure
 This sector not sexy, but necessary – like
socks
 But can quickly reshape oil economics
 Impacts cost, operation flexibility and
efficiency
 Too often ignored for big-ticket items, such as
refineries
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25. Operational Ways & Means
 Increasing Ways & Means can be done in other non-
traditional ways:
 By reorganizing use of physical assets, i.e. shifting strategic
stocks to working stock basis.
 By creative use of supporting non-physical assets, i.e.
hedging, paper trade, futures
 Working with government to achieve better supply security
 Always remembering that Ways & Means rely not only
on physical assets
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26. Conclusions
 Oil & gas are physical commodities that must be moved, stored and
processed.
 Ways & Means include physical infrastructure, but also non-physical
operating tools – finance, management, regulation.
 Asia Pacific has become too big for world energy to ignore.
 Yet Asia Pacific has lagged in creating regional energy infrastructure.
 Demand giants China and India will lead Asia Pacific through 2020.
 Yet India is lagging in Ways & Means.
 Better infrastructure increases supply security, while raising
commercial profits, efficiency and operating flexibility .
 Trade, pricing and supply soon will be reshaped by new energy
infrastructure.
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