12th Annual Energy Caribbean Conference

Analysing the Downstream Market: The Disappearance of Caribbean Refineries

Mado Bachan

Vice President, Refining and Marketing

Petrotrin

03rd October 2012

“Creating a Culture of Transparency:

Revenue Reporting 2014”

2014 June 5 - 6

Mado BachanVice President, Refining and Marketing

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AGENDA

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Overview of Petrotrin’s Refining and Marketing 

Operations

Current Trends in the Global Refining Industry 

Petroleum Subsidies from the Refiner’s Perspective

Overview of Petrotrin’s Refining and Marketing

Operations

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The Pointe-a-Pierre Refinery • 168,000 barrels per day (BPD) full conversion capability

• Capable of processing a variety of crude oils

Refinery processes a mix of crude oils with an average API gravity of about28°

Utilizes locally produced and imported crude oil

• Main refined petroleum products include:

LPG

Motor Gasoline

Jet Fuel

Diesel

Fuel Oil

FY2012/2013 Crude Oil Supply

Foreign Purchases54.9%

3rd Party Processing

0.7%

Internal Production

39.9%

Other Local Producers

4.5%

West Africa37%

Russia23%

Colombia40%

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Sales & Marketing• Products enter five (5) market channels:

Local

Regional

Extra‐Regional

International

Bunkers (fuel oil and gasoil)

• Sole provider of refined products in Trinidad and Tobago (except lube oils)

• Continued long‐standing relationships in the other markets with state oilcompanies, the majors, and oil trading companies

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Typical Product Sales

Regional 23%

Local 17%

Extra Reg.24%

Int'l32%

Bunkers4%

LPG7%

Mogas44%

Bitumen2%

Kero10%

Diesel37%

Subsidized Volumes of Gasoline and Diesel

-

5,000

10,000

15,000

20,000

25,000

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

barr

els

per

day

Premium Gasoline Super Gasoline Diesel

Illegal diesel bunkering activities discovered in 2011 September

Source: Ministry of Energy and Energy Affairs

Premium Gasoline price increase from TT$3.00/litre to TT$4.00/litre in September 2008

Premium Gasoline price increase from TT$4.00/litre to TT$5.75/litre

in October 2012

Current Trends in the Global Refining Industry

9

10

• Worldwide oversupply of refining  capacity; placing a cap on refining margin 

Pressure on Global Refining Margins

17

18

19

20

21

22

23

24

70

75

80

85

90

95

100

105

2010 2011 2012 2013 2014 2015

MM

BPD

MM

BPD

Global Crude Throughput Global Refinery Capacity Global Spare Capacity (RHS scale)

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Pressure on Global Refining Margins • Shale oil and gas revolution in the

US

Significant increases in US oilproduction

Prohibition on oil exports leading toregional oversupply and discountedcrude in the US

Relatively cheap natural gas forrefinery fuel and hydrogenproduction

US refiners have a significant costadvantage – ramped up utilisationrates transforming US from a netimporter to net exporter of refinedproducts at very competitive pricing

Net effect is a reduction in refiningmargins not only for Petrotrin butmost non‐US refiners.

-

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015

US

$/b

bl

Chicago WTI USG LLS Singapore Dubai NWE Brent

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

2008 2009 2010 2011 2012 2013

MM

BPD

US Product Imports US Product Exports

Petroleum Subsidies from

the Refiner’s

Perspective

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Petroleum Subsidy

Where:

• The Reference Price is the sum of the following:The Ex Refinery Price is set by the Ministry of Energy and EnergyAffairs, and tracks International PricesExcise DutyFilling and Handling Cost.Wholesaler Margin.

• The Regulated Price is the price (excluding VAT), which theWholesalermust sell to the Retailer.

Subsidy = Reference Price – Regulated Price

Subsidy for Premium Gasoline (95 RON), Super Gasoline (92 RON) and Diesel

0

50

100

150

200

250

300

350

400

450

500

550

600

Premium 95 RON Super 92 RON Diesel

TT

cen

ts/li

tre

Regulated Price Subsidy Pump Price

Fiscal Year 2013

Subsidy varies with international oil prices and local demand

0.00

20.00

40.00

60.00

80.00

100.00

120.00

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

US$

/bbl

TT

$MM

TOTAL SUBSIDY Dated Brent

• The LPG subsidy is absorbed by:1) Government 2) Petrotrin 

• By Regulation, the following elements are fixed by the Government:

Petrotrin sells LPG to the Wholesaler at Ex Refinery price of TT cents 30.75 / lb

The Wholesaler Margin is fixed at TT cents 31.00 / lb

The Wholesaler sells to the Filling Plant at TT cents 6.304 / lb

• Government Subsidy = (30.75 + 31.00) – 6.304= TT cents 55.45 / lb

LPG Subsidy

Petrotrin’s Contribution to the LPG Subsidy

Petrotrin’s Contribution

Contributors to the LPG Subsidy

• Approximate domestic demand for LPG = 2,000 bpd

• Government = TT$77.9 Million/year

• Petrotrin = TT$205.8 Million/year

Subsidized price versus International market price for LPG cylinder

• Fixed Consumer Price for LPG = TT$ 1.05 / lb

• Subsidized price that Consumer pays for 20 lb LPG cylinder = TT$ 21.00

• International Market Price for LPG   = TT$ 1.77 / lb 

• Market price that Consumer would have had to pay for 20 lb LPG cylinder = TT$ 35.45 

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Refining taxation higher than others

0

10

20

30

40

50

60

Petrotrin ALNG P/Lisas NPMC

Tax

Rat

e, %

Tax Rate Unemployment Levy

21

• Petrotrin supplies LPG to the local market at lower than market prices,

foregoing ~ TT$200 Million annually

• Wholesalers unable to fulfill their contractual payment obligation to Refiner:

Receipt of subsidy by Wholesaler from Government lags sale of products

• On the other hand, R&M business:

pays market value for its feedstock, including purchases from its Upstream business

– higher cash outlay at higher prices

must fulfill payments for feedstock since they are governed by strict commercial

terms

• Market fundamentals project weak refining margins for non‐US refiners

Petroleum subsidies negatively impact Petrotrin’s cash flow position

Thank You

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