1. Global Refining – Key Strategic Challenges and Opportunities –
… if, where, and how money is to be made
Franz B. Ehrhardt, CEO, CASCA Consulting, L.L.C.
Middle East Petroleum Conference
Dubai, April 3-5, 2005

2. Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved
Issues
Global Refining Capacity
The Issue of Heavier Crude Oils
Tightening Product Specifications
Environmental Implications
Operational Excellence
Lowering Consumption?!
Emerging Alternative Motor Fuels
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

3. Global Refining Capacity
Global capacity 82 MM bpd
Global demand 81.5 – 82.5 MM bpd
Previous excess capacity fully absorbed
Considerable production shortfall
350 – 400 Billion $ needed next 25 years
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

4. The Issue of Heavier Sour Crude
Heavier Crude long, Sweet Crude short
Differentials of up to 16 $ (Maya)
50 – 60 % Resid
Shortage of Heavy Sour Processing
and bottoms upgrading capacity
Over-Supply of low value Fuel Oil
Bottoms Upgrading - Delayed Coking
Earnings Bonanza
Valero example – 2 year payback
Much more bottoms upgrading
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

5. Tightening Product Specifications
Global trend to cleaner fuels
Gasoline Sulfur from 300 ppm to 30 in USA and from 160 to 10 in Europe
Diesel Sulfur from 500 ppm to 15 in USA and from 350 to 10 in Europe
Widely differing product specifications (18 in US alone)
Boutique products cause shortages .. and high prices
Clean fuels reduce yield by up to 5-6%
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

6. Environmental Implications
Emerging global standards for environmental protection, preservation, and remediation
Substantial investments required, difficult to recoup
20 billion $ to meet Tier II in the US
Impact on refining capacity expansion, mainly US and Europe
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

7. Operational Excellence
Continuous upwards trends of operating costs
Significant gaps to global best practices benchmarks .. up to 30-35%
Improvement example MM $/yr
1.3 – 2.0 $/barrel
Substantial improvement potential
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

8. Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved
Lowering Consumption ?!
Higher price never had a lasting impact
Europeans are used to $/barrel crude oil cost (taxation)
5.50 – 7.00 $/gallon, demand increases
Very little room for reduction in the US
Growth machine Asia
Energy consumption: Europe-50 BOE, US-65
BOE, China-5.3 BOE, India-2.5 BOE
Oil, 1.7 barrel/person China, India .7
Tremendous upward demand impact
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

9. Emerging Alternative Motor Fuels
Ethanol – only with high subsidies
Bio Diesel – same issue
Hybrid cars – economics and acceptance
Hydrogen – very long term
Fossil fuels will be with us ..
Natural Gas to Liquids – realistic potential
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

10. Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved
Conclusion
Demand is unlikely to slow down much
Refining capacity shortage will keep margins high, at least for 3-5 years
Heavy sour crude processors and resid-upgrader will benefit greatly
Substantial investments required for cleaner fuels and environmental stewardship
November 8, 2018
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved

11. THANK YOU! Global Refining
– Key Strategic Challenges and Opportunities –
… if, where, and how money is to be made
Franz B. Ehrhardt, CEO, CASCA Consulting, L.L.C.
Middle East Petroleum Conference,
Dubai, April 3-5, 2005
THANK YOU!