Compileed&Issued

By
ResearchCorporateStrattegy

Th
heImpacctofUSShaleR
Revolutio
ononOiilImportts

INTHISISSUE

P1:TheImpaactofUSShale
Revolutionon
nOilImports

P2:AnEconoomicPerspectivee
onShaleGasR
Revolution,Worrld
OilNewsBrieffs,OPECForecassts,
PlattsOilPriceeTrends

Currrent trends and resea

arch predictt the
emeergence of the
t
US as a
a selfsufficien
nt oil

[1]
pro
oducer, due to
o the shale oil
o
boom that
t
is
revolutionizing the
t North Ameerican markett. This
mayy impact glob
bal crude oil prices
p
in the longer
l

term
m, the impacct of which is
i apparent in
i the
currrenttrendofd
decreasingcru
udeoilpricesd
despite
the regional frag
gile security siituation. A few
w facts
and
dfiguresfollow
w.
USNetImporrtsofCrudeOilan
ndPetroleum
Prroducts(1000sbpd
d)

P3:GrowthiinPakistansE&P
sector,Midstrreamand
Downstream

1
14000
1
12000
1
10000

P4:ProjectsInformationandd

8000

DetailsfromP
PakistansOilSecctor

4000

But reports an
B
nd analysis telll us that the sshale
r
revolution
will be insufficieent on its ow
wn to
d
drive
coal ou
ut of the USS power fleet or
d
decarbonizeth
heUSenergyseector.
TThe long term
m impact of sh
hale revolution on
G
Gross
Domestic Product (G
GDP) is said to
o be
r
relativelysmall
lat0.46%ofG
GDP.
Bloomberg reported
B
r
thaat imports are
f
forecastedtof
falltozeroby2
2037.

E has forecaasted that US oil production

EIA
n will
r
rise
by 89,000
0 bpd in Septeember, due to
o the
f
fastgrowingsh
haletechnologgy.

6000

Sourcce:USEnergyInfo
ormationAdministtration

2000
0

Given
ntherecentbo
oomandexplo
orationofshalleby
O&G giants,researrchisbeingtarrgetedtostudyythe

nside of shale. The follow

wing results have
down
US oil exporrts peaked aftter 15 years due
d to appeared.
shale revoluttion. The dep
pendence of US
U on
T extraction and use of sh
The
hale gas can aaffect
petroleum im
mports has declined after peeaking
t
the
environm
ment
through
the leakingg of
in2005.
e
extraction
cheemicals and waste
w
into w
water

s
supplies,
th
he
leaking
ofgreenh
ouse
nd gas importts and reduceed gas
Lower oil an
g
gasesduring
extraction, and the pollu
ution
prices. The production
p
of shale
s
gas, incrreased
c
caused
by
the
improper
pro
ocessing
of
na
tural
from0.75to8.5trillioncub
bicfeet.
g
gas.

f
from ovver 11
Net oil imports have also fallen,
M
Most
studies of the subjecct have estim
mated
mb/d in 2007
2
to 6 mb/d in 2014.
t
that
lifecycle
greenhouse
g
gas
emissions
ffrom

s
shale
gas are similar
s
to thosse of conventional
Shale oil is unconvventional oil produced from shale rock frragments.
Shalerockrefersto anysedimentaryrockkwhichcontainskeroggenwhich
n
naturalgas,an
ndaremuchle
ssthanthoseffrom
release petroleumlike liquids upon being heated in the process of
pyrolysis, hydrogenation and thermal dissolution. Formed millions
m
of
c
coal,
usually about
a
half the greenhousee gas
yearsago,bythedeepositionofsiltandorganicdebrisonlake beds,the
e
emissionsofco
oal.(UKDECC,Review2013)
heatandpressure,ttransformedthemateerialsintoshaleoil.Th
herefined
1995

1.

2000

2005

2010

2011

2012

2013

2014

productscanbeuseedforthesamepurpo
osesasthosethatareeacquired
throughcrudeoil.Shalerocksareextractedthroughhydraulic fracturing
combinedwithhorizzontaldrilling.

Page1of4
4

Release#1/August2
2014

RegionalNewsandRankings

Developing Countries Oil

ProductionData:

An Economic Perspective on Shale Revolution

Shale oil and gas will lower energy costs,

leading to a reduced pressure on inflation
and manufacturing costs. This will result in
greaterconsumptionandinvestmentinboth
theUSandoverseas.

In the longer term, the multiplier effects

wouldbegreaterasthiswouldtriggeracycle
oflowinflationandhigherconsumptionand
investment.

HigherGDPgrowthintheUSwouldresultin
an increase in imports, which will work
positivelyfortheAsianmarkets.

Ifshaletechnologyisdeployedglobally,more
countries will reap its benefits and the
worldsGDPgrowthratewillincrease.

It is predicted that by 2020, the shale

revolution will lead to the creation of 1
millionjobsinUSandmanymorearoundthe
world.

The following table ranks countries

according to their technically recoverable
shaleoilresources.

Source:OPECMOMR2014
Oil production for developing
countries forecasted to rise in
2015.

International Crude
PlattsPricesReport

Oil

Brent has seen frequent price

fluctuations for the past one
year,startingata$107.643/bbl
in July13 to rising as high as
$112.455/bbl in June14. The
priceofBrentisfallingandhas
reached$103.74/bblasofAug
14.

RankingofCountriesAccordingtoTechnically
RecoverableShaleOilResources

Similar trends and patterns

were observed for West Texas
Intermediate (WTI). There was
a fall in prices at the start of
201314, where the prices
ranged from $104.660/bbl in
July13 to falling as low as
$97.38/bblinAug14.

The spread between WTI and

Brent reflects the difference
between the two crude
benchmarks, where WTI is the
price oil producers receive and
Brent is the price received
internationally. There has been
a recent divergence between
thetwo,despitesimilarquality.
Thereasonforthisistherecent
production surge in the US
which has built up crude oil
inventories at Oklahoma. This
supply and demand imbalance
has caused WTI to trade lower
thanBrent.
Source:Platts

Page2of4

Rank

Country

1
2
3
4
5
6
7
8
9
10

Russia
US
China
Argentina
Libya
Australia
Venezuela
Mexico
Pakistan
Canada

ShaleOil(Billion
Barrels)
75
58
32
27
26
18
13
13
9
9

Source:USEIA,CNBC

RegionalNewsBrief
Saudi Arabia: Saudi Aramco plans to invest
$40 billion a year over the next decade to
keep oil production capacity steady and to
double gas production. It is expected that a
greater proportion of investment will be in
offshoreprojectsandthatrisingcostsacross
theoilsectormaystrengthenoilprices.

Saudi Aramco announced that to meet the

forecasted demand and to offset the impact of
world events on global supply, the oil industry
will need to add close to 40 million bpd of new
capacityinthenexttwodecades,wherethebulk
ofinvestmentneedstobemadeintheupstream
sector.
Libyas oil industry makes a modest comeback:
thetotaloiloutputreaches650,000bpd,EsSider
port expected to start loading tanker after a
yearlongblockadeandWintershallhasrestarted
productionforRasLanufports.
Iraq:TheMinistryofNaturalResourceshassaid
that despite the incursion by the militants, oil
production from Iraqi Kurdistan remains
unaffected. The militants have not targeted the
oil operations in this location as yet, but
exploration activities might be halted as a
precautionary measure which may affect OPEC
supply.
Source:DouglasWestwood,Dawn,Reuters,WallStreet

AwordfromOPECOutlook

Demandandsupplyforecasts,asperOPEC[2]August
MonthlyOilMarketingReport(MOMR):
Crudeoilpricemovements:TheOPECreference
basket fell from $107.89/b in June to $105.61/b
in July. The price of Nymex West Texas
Intermediate decreased to $102.39/b and Brent
fellto$108.19inthemonthofJuly.

Worldoildemandgrowthforecastfor2014was
revised from 1.13 mb/d to 1.10 mb/d in OPECs
August report due to the lowerthanexpected
performance of the OECD [3] in 2Q14. For 2015,
theforecaststillremainsat1.21mb/d.

NonOPECoilsupplygrowthforecastwasrevised
from 1.47 mb/d in July to 1.50 mb/d in the
August report. For year 2015, the nonOPEC oil
supply growth has been revised lower to 1/27
mb/dascomparedto1.31mb/d.
Source:OPEC,Platts

2.OilProducingandExportingCountries
3.OrganizationforEconomicCooperationandDevelopment

Release#1/August2014

Gro
owthinPakistansOilSSector

UpdateffromPakistans
Economyy:

R
Refinery
Disco
overiesandUp
pdatesfromth
heE&PSector
Mari Petroleum Company Limited (M
MPCL)
overed the larg
gest oil well in
n Pakistan to date.
d
disco
Furth
hermore,shaleeoilandgasp
provetohavea
abig
impa
act on Pakistan
ns oil demand
ds if its potenttial is
explo
ored.

Pakistanss GDP growth rate

for FY 201314 is 4.14
4
percent.

Expected GDP growth for

Pakistan stands at 4.5
oryear2015.
percentfo

MPCL
M
has discovered the largest oil weell in
Pakistan
P
to daate, in the Saakessar Formaation,
Eastern
E
Potohar Region, Jheelum District. This
oilwellhastot
o
talcapacityof 22millionbarrrels,
and
a
an estim
mated 5,500 bpd producction.

Pakistan
P
has been
b
estimateed to have the 9th
largest shale oil
o reserves in the world, att 227
billion
b
barrels, of which 9.1 billion barrelss are
recoverable
r
with todaays technology.
Furthermore,
F
o of the 586
out
6 trillion cubic feet
of
o shale gas,, 105 trillion
n cubic feet are
technically
t
reecoverable. Th
he possibility for
extractionofth
e
heseassetswillgivePakistan
nthe
potentialtoat
p
tainselfsufficiencyinenerggyfor
atleastfivede
a
cades.

Industry contributes 20.8

2
percent in the GDP. It
recorded a growth ratee of
5.8 perceent this year, the
highest since
s
FY 2008
809.
Within
industry,
the
manufacturing
sector
recorded a growth ratee of
5.55perceentforFY201314.

Per capitaa income recorrded

a growth of 3.5 percent in
1.44
201314aascomparedto1
percentlaastyear.

Totalforeeigninvestment has
reached $2979 milllion
duringJullyApril2014,ou
utof
which
foreign
direct
investmen
nt amounted to
$750.9miillion.

Importof
fcrudeoilincreaased
p
this year;
y
by 11 percent
whereas,
local
crrude
n posted a gro
owth
extraction
of2perceent.

Currently,, Pakistan hass a

shortfall of 4,000 MW
W in
powergeneration.

omic
Source::PakistanEcono
Survey2013
314

Source:U
USEIA

Refin
neriesProduction(Midstream
m)

Share (%))
42.4
44
16.2
25
16.1
18
14.3
37
10.7
75

Bycos production share hass increased fro

om 7.3
1
percent in July
percent in yearr 201213 to 10.75
2014.
nstreamSectorr
Down
ThefollowingtaableshowstheestandingofO
Oil
M
MarketingCom
panies(OMCs)intermsofth
heir
percentagesaleeofpetroleumproductsasofJuly
2014.
OMC
Sales(M.Tons))
PSO
1,215,189
9
APL
196,724
4
SPL

190,243
3
PARCO
103,725
5
CPL
86,213
3
HASCOL
76,907
7
TPPL
51,121
1
BYCO
47,333
3
BTCPL
41,656
6
Others
4,255
5

Share(%)
60.36
9.77
9.45
5.15
4.28
3.82
2.54
2.35
2.07
0.21

DomesticRefiningCapacityy,201314
DHODAK ENAR
1%
2%
NRL
17%

PRL
13%

PSO has the largest share off sales of petroleum

wed by APL an
nd then
products in Julyy 2014, follow
ohavingashareof2.35perccentas
Shell,withByco
omparedto1.53percentinttheyear201213.
co

PARCO
27%

ARL
11
1%

BYCO
O
29%
%

Source:MinuteesofPRMeeting
g,OCAC

Asof201314,
A
Bycohastheh
highestpercen
ntage
share
s
of dom
mestic refiningg capacity att 29
percent.
p

Byco
B
surpasseed PARCOs prroduction capacity
after
a
commisssioning of ORCII (phaseI). The
total
t
refining capacity
c
of Byyco is 107,000 bpd
asofnow,inclu
a
udingORCI.

The
T
following table showss the standing of
refineriesinte
r
ermsofproducctionofpetrolleum
products
p
in metric
m
tons in July 2014, where
w
PARCO
P
has th
he highest pro
oduction sharre at
42.44percent.
4

Page3off4

PARCO
P
A
ARL
N
NRL
P
PRL
B
BYCO(ORCI)

Production
n
(M.Tons)
351,98
80
134,76
66
134,23
33
119,20
06
89,20
00

Refine
eriesProjects:
Bycos ISOM Unit has been commissioned
B
c
and is
producing MS with surplus exportable naaphtha.
The introductio
on of Penex Catalyst will ffurther
o485,000metrrictons
enhanceproductionofMSto
per year from existing 135,7
720 metric to
ons per
d to be
yeear. The cost of the projecct is projected
m
much
lower thaan thecosts in
ncurred by thee other
reefineriesintheeindustry.
BycosDieselH
B
HydroDesulfurrizationUnit(D
DHDS):
In
nphaseI,this unitwillhave arevampedcaapacity
of16,000bpdaandwillinclud
dethecommisssioning
ofaDistillateHyydrotreaterthatisplannedttobe

Releasee#1/August2014

ProjectsInformationandDetails

ConsumptionofPetroleum
Products,SectorWise

upgradedandrevamped.Thecapacityofthe
DHDSwillbefurtherenhancedinphaseII.
Boththephasesofthisprojectareexpected
tobecompletedandcommissionedin2016.

Thefollowingfigurepresentsthe
sectorwiseconsumptionofoil
andpetroleumproductsin
Pakistan:

NationalRefineryLimiteds(NRL)ISOMunit:
The engineering plants design is ready and
expected to be commissioned by December
2015. It has been aimed at increasing the
production of motor gasoline by 192,000
metrictonsperyear.

NRLs Two Stage Unit at Lube1 Refinery:

Theprojecthasbeenplannedtoenhancethe
installed crude oil processing capacity from
12,050 bpsd to 17,000bpsdand vacuum
fractionation capacity from 5,200bpsd to
6,600bpsd. The engineering design is
complete and the project is likely to be
commissionedin2015.

NRLs 101 Crude Distillation Unit at Fuel

Refinery: The project has been planned, to
enhance the installed crude oil processing
capacity from 50,000bpsdto 53,000bpsdat
crude distillation unit of fuel refinery. The
projectislikelytobecompletedbyDecember
2015.

SectorwiseO&P
Consumption,2014
Households
Power
Transport
Agriculture
Industry
Othergovt.

The figure shows that

transport constitutes the
largest
proportion
of
consumption of oil and
petroleumproducts.
Source:PakistanEconomic
Survey201314

NRLsDHDSUnit:Theplanthasacapacityof
22,300 bpsd and is expected to be
commissionedbyOctober2014.

Attock Refinery Limiteds (ARL) ISOM Unit:

Currently, ARL is in process of upgrading its
Naphtha Isomerization Unit to enhance
production of PMG by 20,000 tons per
month. Moreover, a power plant expansion
by 18 MW is also included in ARLs up
gradationplan.

ARLs PreFlash Unit: The installation of the

Preflash unit will enhance ARLs crude oil
refiningcapacityfrom43,000to53,400bpd;
hence,increasingtheproductionofessential
middledistillates.

PakistanRefineryLimiteds(PRL)DHDSUnit:
Theplanthasacapacityof22,000bpsdandis
expectedtobecommissionedbyJune2016.

PRLs ISOM Unit: Its construction which is in

progress, once commissioned is expected to
increase gasoline production from 144,000 tons
to270,000tonsperyear.

InfrastructureProjects:

PhaseIIofBycosBypassProject:Theobjective
ofthesecondphaseoftheprojectwastofurther
increase the volume of shipment while utilizing
these HSD tanks for not only diesel storage but
forshipmentthroughthecurrentSPMlinetothe
terminalsatPortQasimdirectly.

Bycos MehmoodKot Terminal Project (MKT):

ThebenefitoftheprojectisthatitwillgiveByco
apresenceinCentralPunjabandimprovesupply
chainforcustomers.

Bycos MKT project will add storage capacity

across upcountry and later on, bigger size tanks
would be constructed at the locations of Byco
storageyard.

Byco Storage Terminals at Machike and

Shikarpur: This project will be completed in
2015.

HascolsStorageFacilities:Asofnow,Hascolhas
recently developed storage facilities at Machike
and Shikarpur. The storage facility at Machike
willbeabletostore6000MTHSD,750MTPMG
and250MTSKO.

Hascolsfurtherplans:Hascolhasacquiredland
at Daulatpur and MehmoodKot where the
construction of storage facilities is scheduled to
becompletedbyMarch2015.
Source:BycosProjectTeamandRespectiveCompanys
Website

Page4of4

Release#1/ August2014