clean fuels upgrade at P-a-P

1
CLEAN FUELS UPGRADE at PETROTRINS POINTE-
A-PIERRE REFINERY
Mendoza, Argentina
October 31, 2006
Steve Hilaire
2
OUTLINE

• Introduction
• Business Background
• Scope
• Economics
• Capital Expenditure
• Results Benefits
• Project Risks
• Status
• Financing Template

3
(No Transcript)
4
Introduction About Trinidad Tobago

• Access to emerging developed markets
• Highly skilled and trained workforce
• Stable economic/political environment
• Global leader in
• Export of Methanol
• Export of Ammonia
• Export of LNG to USA

5
Introduction PETROTRIN History

• 1917 Commence Operations of P-a-P Refinery
• 1940/41 Eastern Refinery Established
• 1952 FCCU Installed
• 1956 Acquisition by Texaco
• 1958 No 1 CRU Gasoline Upgrade BTX
• 1960/62 No 8 CDU, No 1 HTU, No 2 CRU
• 1964/66 Lube Oil Normal Paraffins
• 1972 No 4 VDU No 2 HTU Fuel Oil Desulf
• 1985 Acquisition by State
• 1992/96 Refinery Upgrade Phase 1
• Increased Conversion Full Refining Capacity
• Partial Revamp of FCCU
• Rehab of No 2 HTU, No 2 CRU,
• New Units VBU, Hydrogen, Sulfur, MTBE
• DCS Controls

6
Introduction PETROTRIN OVERVIEW

• Fully State-owned
• Commercially operated
• Integrated
• Exploration
• Production
• Refining
• Marketing

7
Introduction Crude Oil Supply

• Crude capacity 168 MBPCD
• Current conversion capacity 150 MBPD
• Local crude 40 45 (low cetane gas oil)
• Imported crudes
• Venezuela
• Brazil
• Columbia
• Ecuador
• West Africa (high cetane)

8
Introduction Product Supply

• Markets
• Local 100 - 18 of Volume
• Regional 75 - 30 of Volume
• Extra regional 5 - 20 of Volume
• International - 32 of Volume
• Approx 10 volume- unfinished/low value products
• CRU naphtha
• Low octane mogas
• FCCU feed (VGO)

9
Introduction Operational Performance RM
Performance Factors
Petrotrin is highly sensitive to market price
because it is a merchant refiner
Market Price
Sales Revenue
High fuel oil cut low value products reduces
profits Lacks clean fuels capacity
Mix Volumes
High unit operating costs compared to peers
Direct Cost
Financial Performance
OPEX
Indigenous crude only supplies 40 of needs
Profitability Cash Flow ROACE
Other
High spend on maintaining competitiveness of old
infrastructure
Sustaining
CAPEX
Project delays / deferrals have led to missed
opportunities
Growth
There are multiple areas where changes could
improve future financial performance
10
Introduction Operational Performance RM
Current and Planned RM Improvement Initiatives
Market Price
Sales Revenue
Clean fuels upgrade in progress
Mix Volumes
Bottom of Barrel Upgrade (conceptual stage)
Direct Cost
Refinery business improvement project (SGSI)
Performance
OPEX
EP oil winning projects (halt production decline)
Profitability Cash Flow ROACE
Other
Infrastructure upgrade (planning stage)
Sustaining
CAPEX
Growth
Gasoline upgrade (implementation stage)
A mixture of upgrades and operational changes to
improve performance
11
BUSINESS BACKGROUND Driving Forces

• Gasoline Optimisation Program
• Equipment Integrity
• No 1 CRU 3 of 4 Rxs Changed Expect 3 years Max
• No 2 CRU Remaining Life Estimated at 6 8 years
• Sale of Unfinished Low Value Product
• Reformer Feed
• Low Octane Gasoline
• VGO as FCCU Feed
• Tighter Specifications
• Elimination of Lead MTBE Octane Volume Loss
• Lower Benzene, Sulfur, Olefins and RVP
• Increased Octane Demand
• Shortfall of Premium Gasoline to some markets

12
BUSINESS BACKGROUND Driving Forces (Contd)

• Tighter Diesel Specifications
• Sulfur Reduction
• Cetane Increase
• Decrease in aromatics
• Phase II - BOB Upgrade
• High Fuel percent of Product Sales
• Shrinking Fuel Oil Market

13
BUSINESS BACKGROUND Options

• Discontinue Refining Operations
• Huge economic impact on country and South in
  particular.
• New refinery
• Grassroots facility US3-4 Bn
• Upgrade Current refinery
• Performance and Technology

14
Scope Identified

• Gasoline Optimisation Program
• FCCU Upgrade
• Capacity from 26,000 BPSD to 35,000 BPSD
• Product Octane from 81 MON to 83 MON
• Pre-Fractionation
• Remove Benzene from CRU feed
• Provide feed for Isomerisation
• Isomerisation
• New 7,400 BPSD using C5/C6 Naphtha Feed
• Improve Octane from 70 MON to 80 MON

15
PROGRAM SCOPE (Contd)

• CCR Platformer
• Replace Fixed Bed Platformers
• Improve product Octane from 86 MON to 90 MON
• Alkylation
• New using C3/C4 ex FCCU
• New Acid Regen Plant
• Optimize LPG Production
• Offsites Utilities
• New Boiler Water Treating
• Tanks, Transfer Systems
• Power Supply
• Control equipment
• Flare System

16
PROGRAM SCOPE (Contd)

• New ULSD Hydrogenator
• 35,000 BPSD unit
• 8 9 point cetane lift
• lt 25 aromatics
• 8 ppm S

17
Economics Approval

• LP model Runs
• Delta economics
• Base case vs enhanced
• Price/markets scenario forecast
• Optimum configuration determined
• Capex Estimates
• Published/licensor data
• Inflated for time/location/experience
• Economics developed
• Increased margin
• DCFROR
• NPV
• Payback

18
Economics Approval

• Income statement/Cash Flows generated
• Sensitivity/ Risk Analyses developed
• Approval Process
• Executive management
• Board
• Shareholder - Cabinet

19
CAPITAL EXPENDITURE

• New Units ISBL 630 MM
• OSBL, Project Mgmt
• Other 170 MM
• TOTAL (2006) 800 MM
• ORIGINAL ESTIMATE 650 MM
• (2005)

20
PROGRAM BENEFITS

• Gasoline Optimisation Program
• Increase Gasoline Quantity
• Total from 24 to 30
• Eliminate Unfinished Products (Naphtha VGO)
• Improve Gasoline Quality
• Increase MON from 83 to 86
• Reduce Benzene from 1.6 to 0.7
• Reduce sulphur fron 41 ppm to 8 ppm
• Customer Satisfaction
• Lower Olefins in LPG
• Ability to eliminate MTBE

21
PROGRAM BENEFITS (Contd)

• ULSD HTU
• Improve Gas Oil Quality
• Increase Pool Cetane
• Reduce Aromatics/ Pool Sulfur
• Improved Operations of the P-a-P Refinery
• Energy Efficiency Environmental Compliance
• Increase full refining capacity to 168 MBPCD
• Ability to process sour, low cetane crudes
• Petrocaribe (New)
• Products displaced from regional market
• Improved Quality can be marketed elsewhere

22
COUNTRY BENEFITS

• Local Content20 or US 160 million
• Maximize local sub contractors
• Offsite Works by Petrotrin
• Construction Labor 14million hours
• Peak Site Labor 2,800
• Corp Tax / UL US 375 million
• Sustained Operations of P-a-P Refinery
• Security of Fuel Supply / Prices
• Economic Activity

23
PROJECT RISKS

• Market / Product Pricing
• Delay in Tighter Specs / Conservative Prices Used
• Capital Cost Overrun
• Scope of Work
• EPC Contracts Hybrid vs Lump Sum
• Schedule Delays
• Statutory Approval
• Experienced EPC Contractors
• Industrial relations problems
• Skilled sub-contractor labour

24
PROJECT RISKS

• Technology
• Well Proven / State-of the Art
• Environmental
• No new type of effluent
• Refinery systems (current and proposed) adequate
• Funding
• Current Market Conditions Ideal for Loan

25
Status

• Pre Frac/Isomerization
• EPC awarded
• Piling commenced
• Commercial production Dec 2007
• FCCU upgrade
• Discussions on EPC award Hybrid contract
• Project completion date April 2008
• CCR Platformer
• EPC Negotiations complete
• ETC December 2008
• Alky / Acid
• Hybrid contract
• Lump sum for services
• Re imbursable for Equipment/materials

26
Status Points to Note

• Get Project Manager on board early.
• Licensor estimates normally low.
• Dont forget infrastructure and services
• Industry quite busy Innovative bid requests
  required.
• Fast track procurement on long lead items
• Monitoring and control essential

27
GAS OPT PROGRAM- FINANCING PLAN MAJOR
FINANCING OPTIONS
MAJOR OPTION COMMENTS
Bank Loan
Corporate Bond
Structured Commodity Finance
Pre-export loan
Note Fixed Rate funding with minimum 10 Year
tenor and minimum 2 Year moratorium is preferred.
28
FINANCING SCHEDULE
TASK START DATE END DATE
Approvals from Government
Credit Rating Review by Moodys and Standard Poors
Approvals from IADB, JBIC, EIB, CDB, MBIA
Engagement of Financial Advisor
Expressions of Interest from, and short-listing of financial institutions
Tendering, Selection engagement of placement institution
Engagement of Lawyer
Loan Sourcing, Negotiation and Conclusion
29
Muchas Gracias