September 22, 2015

Publication: BMI Research - Industry Forecast Scenario

Philippines Oil & Gas Report - Refining - Q4 2015

BMI View : Philippines' relatively small market and lack of domestic crude resources will see it likely lose out in
South East Asia's quest to expand its refining capacity. R efinery upgrades are expected to raise utilisation rates in
the country's two refineries and increase refined oil production over the next 10 years.
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Refining Capacity and Refined Products Production (Philippines 2013-2018)
2013

2014

2015f

2016f

2017f

2018f

f = BMI forecast. Source: EIA, BMI

Crude oil refining capacity, 000b/d

290.0

290.0

290.0

290.0

290.0

290.0

Crude oil refining capacity, % y-o-y

6.2

0.0

0.0

0.0

0.0

0.0

Crude oil refining capacity, utilisation, %

52.9

56.0

58.3

61.2

64.2

67.4

Refined products production, 000b/d

153.6

162.5

169.0

177.4

186.3

195.6

Refined products production, % y-o-y

-6.8

5.8

4.0

5.0

5.0

5.0

Refined products production & ethanol, 000b/d

156.7

165.7

172.3

180.9

189.9

199.3

Refined products production & ethanol, % y-o-y

-6.6

5.7

4.0

5.0

5.0

5.0

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Refining Capacity and Refined Products Production (Philippines 2019-2024)
2019f

2020f

2021f

2022f

2023f

2024f

f = BMI forecast. Source: EIA, BMI

Crude oil refining capacity, 000b/d

290.0

290.0

290.0

290.0

290.0

290.0

Crude oil refining capacity, % y-o-y

0.0

0.0

0.0

0.0

0.0

0.0

Crude oil refining capacity, utilisation, %

68.1

68.8

69.5

70.2

70.2

70.2

Refined products production, 000b/d

197.6

199.5

201.5

203.5

203.5

203.5

Refined products production, % y-o-y

1.0

1.0

1.0

1.0

0.0

0.0

Refined products production & ethanol, 000b/d

201.4

203.4

205.6

207.7

207.8

207.9

Refined products production & ethanol, % y-o-y

1.0

1.0

1.0

1.0

0.1

0.1

The Philippines has two refineries, Petron's Limay refinery in Bataan and Shell's Tabangao facility in Eastern
Visayas with combined nameplate capacity of 285,000b/d. Petron has announced plans to upgrade its 180,000b/d
facility to process a greater variety of blends, increase its production of higher-value products and to equip its output
to meet Euro-IV standards. Nonetheless, the firm has not stated any expansion in its refining capacity.
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Refining Capacity Forecast
(2013-2024)

f = BMI forecast. Source: DOE, EIA, BMI

In June 2014, Shell also disclosed plans to carry out upgrades at its 110,000b/d refinery such that it can produce
fuels to meet Euro-IV grade diesel and gasoline, though like Petron's plant, there has been no talk on expanding the
facility's capacity.
Filipino Energy Secretary Jose Rene Almendras announced on March 7 2012 that two foreign firms were looking to
build new refineries in the Philippines, with one already in talks with Philippine National Oil Company (PNOC)
over an investment site. Although he declined to name the potential investors, he added that PNOC was offering
foreign investors land deals on Luzon, the country's largest island. One of the two companies could be Thailand's
state-owned PTT, which announced its intentions to build a 200,000b/d facility in the Philippines.
These plans are too tentative for us to expect an increase in the country's refining capacity. Moreover, the Philippines
will have to compete with other South East Asian countries for downstream investment. Its relatively small volume
of oil production, its distance from the rest of the region and a relatively small market next to Indonesia or mainland
South East Asia make it a less attractive prospect for downstream investors wishing to target the entire regional
market for growth. Hence, we forecast that the country will not see growth in its refining capacity and only moderate
growth in its refined fuels production from improvements made to Limay.
Refined Oil Products Production
The utilisation rate of refineries in the Philippines has fell from a peak of about 80.0% in 2006 to 55.6% in 2013.
However, 2014 saw a slight recovery to 59.0% according to the DOE. We expect maintenance to see utilisation rate
below 60% but a gradual increase beyond 60% from 2016, when Petron's refinery completes its modernization to
raise its efficiency. Hence, total refined petroleum product output is forecast to rise from 162,470b/d - according to
figures from the DOE - in 2014 to 197,560b/d in 2019.
Modernisation will also see a switch in the Philippines' production mix. We expect the share of residual fuel oil to go
down and the share of higher-value products such as gasoline, diesel and LPG to increase.
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Philippines Refined Oil Products Production By Type
2013-2024

f = BMI forecast. Source: DOE, EIA, BMI

September 22, 2015

Publication: BMI Research - Industry Forecast Scenario

Philippines Oil & Gas Report - Refined Fuels Consumption - Q4 2015

BMI View : A weaker oil price environment will support the uptrend in the Philippines' refined fuels consumption
over the next decade. Strong auto sales growth through to 2019 will increase demand for transport-related fuels,
while proliferation of condominiums and government push for LPG as an alternative transport fuel will encourage
greater uptake of the fuel among consumers.
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Refined Products Consumption* (Philippines 2013-2018)
2013

2014

2015f

2016f

2017f

2018f

f = BMI forecast. Source: DOE, EIA, BMI

Refined products consumption, 000b/d

321.9

341.1

347.9

351.3

354.9

360.1

Refined products consumption, % y-o-y

6.5

6.0

2.0

1.0

1.0

1.5

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Refined Products Consumption* (Philippines 2019-2024)
2019f

2020f

2021f

2022f

2023f

2024f

f = BMI forecast. Source: DOE, EIA, BMI

Refined products consumption, 000b/d

366.0

372.8

380.4

388.9

398.2

408.5

Refined products consumption, % y-o-y

1.7

1.9

2.0

2.2

2.4

2.6

Oil demand continued to grow at about 6% y-o-y in 2014, rising from 321,890b/d in 2013 to 341,100b/d in 2014,
according to the Philippines' Department of Energy (DOE).
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Refined Products Production and Consumption Forecast

(2013-2024)

f = BMI forecast. Source: DOE, EIA, BMI

Historical data from the Philippines' Department of Energy (DOE) show that most of the Philippines' oil
consumption goes into the commercial sector, though the transport sector's share of oil demand has also been on the
rise since 2006.
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Commercial Takes The Bulk
Oil Use In The Philippines, 2006-2010 ('000b/d)

Source: Department of Energy

We forecast the Philippines' refined fuels consumption to grow by 16.4% over the next 10 years, from 341,100b/d in
2014 to 408,470b/d by 2024. A lower oil price environment could be a boon for oil consumption. It provides
ammunition for transport demand for oil to continue on the uptrend. Strong auto sales growth up to 2019 will
increase the Philippines' demand for transport-related fuels. Our Autos team expects total vehicle sales to grow by
36.1% over the next five years. The rise in car ownership will be underpinned by robust economic growth - our
Country Risk team expects the country's real GDP growth rate to average about 5.2% per annum over the next
decade.
As shown in the chart below, the country's economic growth will translate into a pick-up in passenger car sales and
more road mileage, which in turn will lead a rise in consumption of diesel and gasoline.
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Keeping Oil On The High
Philippines - Real GDP Growth

f = BMI forecast. Source: BMI, National Statistical Coordination Board

Industrial growth will also support oil consumption. In 2014, diesel and fuel oil reported strong growth of 6.3% and
7.1% y-o-y, and we expect this to continue. Additionally, we anticipate strong growth in LPG consumption over the
next decade. This will be underpinned by the proliferation of condominiums in the country, which will prompt a
shift towards LPG from fuel wood as a primary cooking fuel among households. Moreover, the government outlined
its plans to promote greater adoption of LPG as an alternative transport fuel among its vehicle fleet through to 2030,
which poses further upside risk to our forecast.

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