Digitalisation is a key survival tool for downstream in the coming five years

Refining, by its nature, is a challenging business. It is a highly capital-intensive commodity industry, which means its earnings are highly volatile over the short-term.

Major investments take many years to come to fruition, during which time, the basis for the investment decision could well have changed. The technical barriers to entry are low, with many investment decisions involving factors other than commercial return, such as security of supply and platform for industrial development.

This presentation will cover:

1. Refining margins over the past decade, detailing why margins enjoyed a sustained boost over recent years.
2. The global refinery earnings profile (net cash margin) for 2018, a period when refining margins were relatively attractive. This shows the distribution of refinery earnings performance and the relatively small differences in earnings across a broad swathe of the refining system.
3. The impact of COVID-19 on oil demand/refinery utilisation. In April 2020, oil demand was over 20 million bpd lower than April 2019, which has impacted refinery utilisation, product stocks and refinery profitability.
4. Our outlook for recovery of the refining market over the short-term, so assess when refining margins return to more traditional levels.
5. The outlook for oil product demand growth for the long-term, highlighting the role of the energy transition.
6. Refinery capacity additions that are considered firm over the investment horizon and the associated impact on global/regional refinery utilisation, along with the forecast gross refining margins for our indicator configurations.
7. The earnings profile for European assets during the margin downturn, highlighting the proportion of the assets projected to be cash negative.
8. Weak refining margins are necessary, but often insufficient, to drive closures, so the sites at high risk of closure will be identified.
9. The role of chemicals in enhancing the value from operational refining sites.
10. Brief case studies on the potential from digitalisation, covering the impact of unplanned outages, operating cost reduction and crude selection/optimisation. These case studies are to serve as an introduction to the subsequent sessions in the conference, so will be indicative of the opportunity available.

Speaker

Alan Gelder
VP Refining, Chemicals & Oil Markets, Wood Mackenzie

Alan is a VP for refining, chemicals and oil markets within Wood Mackenzie’s research organisation. He has been with Wood Mackenzie for over 15 years in various consulting and research roles and is now Global Downstream SME, with over 30 years of industry experience.

Alan is a chemical engineer by training. He started work with Exxon in process design and planning, before becoming a consultant with Chem Systems, now Nexant. He joined Wood Mackenzie in 2005.