December 14, 2016

Focus on Refinery Product Flows

Stratas Advisors

Gasoline Imports in 2014

CISandtheMiddleEastarethelargestgasolineexporterstoAsia.WhileChinaandIndiadonotimportgasolineasthey
haveenoughrefinerycapacitytomeetdomesticdemand,othercountriesremainimporters.Forexample,Malaysiahasa
substantialdeficitindomesticgasolineproductionandreliesheavilyongasolineimporttomeetover50%ofdemand.

Gasoline Exports in 2014

SmallvolumesofgasolineareexportedtoEurope,MiddleEastandAfrica.Indiaistheonlymajorgasolineexporterof

gasolinetomarketsoutsideofAsia-Pacific.MostofotherAsiancountriesaregasolineimporters.Oneofthereasonsisthe
lackoflightoilprocessingcapacityanddeepconversioncapacity.Theclosingofthegapwillrequiremajorinvestments,

whichpresentsaproblemforthesmallerAsianeconomies.

Middle Distillate Imports in 2014

CISisessentiallytheonlyregiontocomplementdomesticsupply.Chinahadbeenamajorimporterduetoheavy
industrializationinlastdecadeandhasrepresentedabouthalfoftheregionsimports.Investmentsinrefinerycapacity

withinCIShaveenabledexportstoAsia-Pacific.Inparticular,Russianinvestmentinhydroprocessingtomeetmore
stringentfuelspecificationcoupledwithadditionsofdeepconversioncapacityhaveresultedinRussiabeingamajor

suppliertoAsiancountries.
Middle Distillate Exports in 2014

Indiasshareofexportsisabouttwo-thirdsoftotalexportsfromAsia-Pacific.Indiahasinvestedheavilyindeepconversion
capacityandadditionalrefinerycapacitysince2000.Theinvestmentinhydroprocessinganddeepconversionhashelped

Indianrefinerstomeetmorestringentfuelspecificationsandmeetthegrowingdemand.

MiddleEastandEuropearethemajorexporterofnaphthatoAsia.Europehasbeenabletoincreasethesupplyofnaphthabecauseofitsavailabilitystemmingfromthe

decliningdemandforgasoline.Three-quartersofnaphthaimportsareroutedtoChina.Chinasimportofnaphthaisneededforitspetrochemicalindustry.Aswiththerest

ofAsia,Chinaspetrochemicalindustryismostlynaphthabased.Mostofthenaphtha-basedpetrochemicalindustryhasbeenaddedinAsiatomeetdomesticdemandwith

investmentstakingplaceinChina,SouthKoreaandIndia.
Naphtha Exports in 2014

Asiahasessentiallynoexportsofnaphtha.

Fuel Oil Import to Asia in 2014

Africa,EuropeandMiddleEastaremajorsuppliersoffueloil.HalfoffueloilimportsmovetoIndiaandChina(Chinafueloil
importisthreetimesmorethanIndia)withtherestofAsiaimportingtheotherhalfoffueloil.Theinvestmentindeep

conversioncapacityinChinaandIndiatomeethighermiddledistillatedemandandtheresultingreductioninfueloil
productionhasledtohigherimportsforfueloilinChinaandIndia.

Fuel Oil Exports in 2014

OnlylimitedexportoffueloilisreportedinAsia.ExportsaremainlyfromIndia.

Product Flows

TheoutlookfortheimportsandexportsofproductstoandfromtheAsia-Pacificregionisprovidedbelowfor2020and

2030.

Gasoline Imports in 2020

ImportsfromCISareexpectedtodecline,whileimportsfromEuropeandNorthAmericaareexpectedtoincreasein
comparisonwiththelevelsof2014.ImportsfromNorthAmericawillbetheresultofelevatedrefineryrunsintheU.S.
becauseofcost-advantagedrefineryinputs.ImportsfromEuropewillincreasebecauseEuropeanrefinerieswillhave

excesscapacityincomparisontotheneedsofEurope.Incontrast,CISwouldneedtomakeinvestmentsinlightoil
processingcapacitytoincreasegasolineproductionandtomeetfuturegasolinespecifications.

Gasoline Exports in 2020

GasolineexportsfromAsiawilldecline.OnlyIndiaisexpectedtoremainagasolineexporter.
Gasoline Imports in 2030

GasolineimportsfromEuropewilldeclinewhileimportsfromMiddleEastandNorthAmericawillincrease.Itisexpected
thatChinaandIndiawillnotanyimports.Instead,theimportrequirementwillbeassociatedwiththerestoftheregion,
includingAustralia,whichisexpectedtoincreaseitslevelofimports.

Gasoline Exports in 2030

GasolineexportswillbeessentiallyeliminatedfromAsiain2030.

Middle Distillate Imports in 2020

ImportsfromtheCISregionareexpectedtoincrease.Additionally,theMiddleEastisexpectedtoemergeasasupplierof

middledistillatestoAsia-Pacificby2020.MiddledistillateimportstoChinaareexpectedtoremainstablewhileimportsto

restofAsia-Pacific(exceptforIndia,whichisexpectedtoremainanexporter)areexpectedtoincrease.

Middle Distillate Exports in 2020

ExportsfromAsiatoMiddleEastareexpectedtobeeliminatedby2020.Thefocusofexportsisexpectedtoshifttoward

Africawhiletheoveralllevelofexportsisreduced.Indiasshareofexportsisexpectedtobeabouttwo-thirdsofthetotal

forAsia-Pacific.Chinaisnotexpectedtobeanexporterofmiddledistillatesoutsideoftheregion.

Middle Distillate Imports in 2030

ImportsfromtheMiddleEastareexpectedtoincreasesignificantlyby2030.ImportstoChinaareexpectedtoremain

stablewiththeincreaseinimportsassociatedwiththerestofAsia-Pacific(exceptforIndia,whichwillremainanexporter
ofmiddledistillates).

Middle Distillate Exports in 2030

By2030,essentiallyonlyAricawillremainanoutletforexportsfromAsia-Pacific.Furthermore,itisexpectedthatalmostall

oftheexportswillcomefromIndia.

Naphtha Imports in 2020

TheMiddleEastandEuropewillbemajorprovidersofnaphthatoAsia-Pacific.Importstotheregionareexpectedto

increaseslightlyincomparisonwith2014withthree-quartersofnaphthaimportsgoingtoChina.Withethaneexpectedto

remaincheaperthannaphthaaspetrochemicalfeedstock,theadditionofmoreethylenecapacityintheU.S.willhavean

impactonnaphthaimports.Insteadofimportingnaphtha,theAsiancountrieswillimportsomepetrochemicalsdirectlyfrom

theU.S.

Naphtha Exports in 2020

SinceAsia-Pacificwillbeshortofnaphtha,essentiallynoexportsareexpected.

Naphtha Imports in 2030

ImportsofMiddleEastnaphthaareexpectedtocontinuetogrow.Chinaisexpectedtoremainthemajorimporterof
naphtharepresentingapproximatelythree-quartersoftheregionsimports.

Naphtha Imports in 2030

WithAsia-Pacificexpectedtoremainshortofnaphtha,essentiallynoexportsareexpectedfromtheregion.

Fuel Oil Imports in 2020

Asia-Pacificisexpectedtoremainanimporteroffueloilwiththeregionaddingconversioncapacity.ImportstoIndiaand
ChinaareexpectedtorepresentedapproximatelyhalfoftheregionsimportswithChinasimportssomefourtimesthatof

India.

Fuel Oil Exports in 2020

OnlylimitedexportsoffueloilareexpectedwiththeexportsmainlyfromIndia.
Fuel Oil Imports in 2030

ImportsfromRussiaareexpectedtoincreasesignificantly.Chinaisexpectedtobethemajorimporter(representing
approximatelyhalfoftheregionsimports)withimportstoIndiaremainingstableandimportstotherestoftheregion
declining.

Fuel Oil Exports in 2030

Exportsfromregionareexpectedtobeessentiallynon-existentby2030.

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