The future of refining in Europe

www.eni.it
Maurizio Maugeri VP eni R&M
 Agenda

9 WorldandEurope oilproductsdemandandsupply

9 enianswers forcurrent crisis

9 Need forinstitutional support to refining

2
 World demand growth driven by Far East, Market
transports remain fundamental challenges

(bnton) 2010 2020 2025

+ 0,8 +0,2
World 4,0 4,8 ~5,0

9 Non OECD economies will drive oil

Mton demandgrowth
2000

9 China, India, Middle East >60% of

1500
incrementaloildemand

1000

500

Asia Middle North Latin Greater SubSaharan

Pacific East America America Europe FSU Africa

9Demanddrivenby transports
9~70%(670Mton) middledistillateincrease by2025

3
 Far and Middle East leads the way in world demand
growth and new refining capacity additions challenges
Market

MBd
Oilincrementaldemand20102020
Oilincrementaldemand20102020 Primaryrefiningcapacity20102020
Primaryrefiningcapacity20102020
Cina and
India

Middle
East

North
America

Latin
America

Europe
OECD

Russia

Africa

Total

NewrefiningcapacityinAsia,MiddleEastandLatinAmerica

Matureeconomiesarereducingrefiningcapacityof~2Mb/dinnext5yearsofwhich
Europeisclosingformorethan600kbd withnoforeseennewinvestments

* Includes other not specified geographical areas 4

 Europe steady demand growth in the future Market
leaded by transports challenges

Oilproductsdemand Lowerconsume ofgasoline

Mt Growthofdiesel/gasoildemand
400
Growthof jet/kero demand
300
Dropoffueloil usein:
200
inland

100
bunker
Demandincreaseformaritime diesel/gasoil
0
2000 2005 2009 2010 2015 2020 2025

Gasoline Diesel/Gasoil Jet\Kero Fueloil

7% 2%

12%
2010 2015 2020 2025
Mt
Gasoline 100 100 90 85
Diesel/Gasoil 305 320 325 330 57%
Jet\Kero 60 70 80 85 22%
Fueloil 82 80 79 78
547 570 574 578
Trasports Petrochemicals
CivilUsesSevicesAgriculture Industry
Thermoelectrical

5
 Europe growing dieselization, Market
ratio gasoil/gasoline reversing challenges

Mtoe DemandEU27
450 Demandintransports
400
400
350
300 300
250
200 200
150
100 100
50 0
0 2010 2020 2030
2010 2020 2030
Road&Rail Marine Aviation
Transport Construction Industry Other Electric F&L

Demanddiesel/gasoline road (incl.biofuels)

210 3,5
9 Globaldemanddecreasing of ~ 10%
170 2,8
9 Road transport oil products demand reducing,
partially compensated by that for aviation and 130 2,1

Mtoe
marine
9 Estimate by 2030 road transport gasoline and 90 1,4
dieseldemand:trendgasoil consumption inEU
50 0,7
double vsgasoline
1990 1995 2000 2005 2010 2015 2020 2025 2030

Gasoil Gasoline Gasoil/gasoline ratio

Fonti:elaborazionienisudatiWM,Parpinelli,IEA
6
 Europe - supply not matching demand Market
challenges

Mt SURPLUS 2009
2010
80 2015
2020
2025
60
Substitution
Substitution with
with natural
natural
Insostituzioneconilgas
gas
gas in
in thermal
thermal plants
plants and and
nellalimentazionedellecentrali
40 with
with gasoil
gasoil inin bunker
bunker
termicheeconilgasolioneibunker

20

20

40 Reducing
Reducing production
production for
Produzioneincaloperaumento for
high
high conversion
conversion refineries
refineries
Raffinerieadaltaconversione
60

80 RefinerySupply2010e2025
100 728Mton 752Mton
LPG BENZINA JET/KERO LSFO HSFO
DIESEL/GASOIL LPG

DEFICIT Naphtha

Gasoline
2,3%
7,9% MiddleDistillates
19,4%

Residual fuel
Gasoline anddieselunbalance inEurope 47,4%
Other

Source:enielaboration onWM,Parpinelli data

7
 Europe structural market changes Market
challenges

Oilprices(WTIvs BRENT) Refiningcapacity,throughputandutilizationrates

mbl/d 100%
140 $/bl 18,0

120 BRENT
89.6% 90%
100 16,0
83,2%
80 80%

WTI
60 14,0
70%
40

2010 2011 12,0 60%

20
2005 2006 2007 2008 2009 2010

0 RefiningCapacity RefiningThroughput % Refineryutilization rates

Newoperators
TRADINGHOUSES INDEPENDENTS NOCs

CNPC

Fonti:elaborazionienisudatiWM,Parpinelli
8
 Europe disadvantages vs big refineries in Market
Asia and Middle East challenges

Med Refineries margins structurally

Margini di contribuzione benchmark(1) per area
Contribution margins benchmarks lower,mainly for:
9 Surplusof refiningcapacity
9 Asia and Middle East refineries
competition
9 More competitive, with big
plants highly complex
9 Lower labour costs
9 Lower mainteincnce costs
9 Environmental regulations
less severe
9 Fiscaladvantages
9 Old and mature plants (realized
mainly in 60, with high
mainteinance costs)
(1) Margini di contribuzione benchmark ($/bl) = margine di riferimento FOB al netto dei costi variabili per utilities (- 4% O.C. BTZ)

9 Severe environmental rules

(emission trading,biofuels)

9
 Market
Europe what to expect in the next future challenges

Supply/demandbalance
9 Consumptionsreduction

9 GasolineexportstoUSAreduction

9 Refiningovercapacity

9 Unbalance:gasolinesurplus,dieselshortage

Systemconstraints
9 Severeenvironmentalconstraints(biofuel,
CO2,authorizationiter)

Optimizationandrationalizationof 9 Highlabourcosts
EUrefiningsystem
9Diseconomyofscale

9Plantsmaturity

10
 Europe A rationalization process Market

ongoing since 2009

challenges

9 9refineries closed ~30Mton capacity (further 11aatrisk)

9 9refineries sold (from majorto independents orto statecompanies of producing countries
~45Mton)

Refineries inEurope
Closures since 2009
Atrisk of closure
Grangemouth
Operational
Teeside

Stanlow
Lindsey
Killingholme Wilhelmshaven Schwedt
Sold
Milford Haven Elbe Hamburg
Coryton
Leuna
Pembroke
Fawley
Dunkirk
Karlsruhe Ingolstadt
Gonfreville Petit
Corounne Reichstett
Burghausen

Mantova
Cremona Arpechim
Trecate
Venezia
Berre Sannazzaro
ACorunaa Busalla
Bilbao Falconara
Livorno
LaverFortdeFrance
Tarragona
Oporto Roma
Izmit
Puertollano Castellon Taranto Kirikkale
Milazzo
Sines Sarroch Izmir
Augusta
Palos Gela Priolo
Cartagena
Gibraltar

11
 Bunker: gradual fuel oil substitution Market

with middle distillates challenges

FOconsume forthermoelectricsandindustry dropsgradually,whileitisexpectedgrowingin

bunker forinternationalmaritimecommerce atleastuntil2025

Fueloilconsumebysector Oilconsumeforbunker

mln ton mln toe

700 300 2018 2025
Endoffesibility phase
600 250
500
200
400
150
300
100
200

100 50

0 0
1990 1995 2000 2005 2010 2015 2020 2025 2030 1990 1995 2000 2005 2010 2015 2020 2025 2030
Civil Industry Thermo-elettrical Bunker Olio
Fuel combustibile
oil gasolio
Gas oil

0,5% forextraECAs in2020subjecttoafeasibilitytobecompletedwithin2018

Incaseofnegativeresultslimitpostponedto2025

12
 The Mediterranean Sea Market
challenges
1% of world water surface, a third of worlds merchant shipping traffic

9 ~ 1/3 of worlds total merchant

shipping traffic either trades to
seaports or passes through the
Mediterranean
9 Medislessthan1%watersurface
oftheplanet

MediterraneanTankers
MediterraneanTankers
Mton
450 421 Emissions*
400
~1,7Mton/y
350
300
250
200 9 Over 200.000 merchant vessels of over 100 gross
150
101
tonnage are believed to cross the Mediterranean Sea
100 eachyear
50
0
9 More than 2000 ferries, 1500 cargo ships and 2000
localcommercialcraft (including300tankers*)operate
Oil Oilproducts
permanentlyintheMediterranean
Source: adpted from David Hughes Mediterranean Round-up
worldbunkering, 31 May 2010

*Sox 13
 World oil supply by 2030 mainly from Market
OPEC and unconventional challenges

Oilproduction(Mbl/d) Incremental oilproductionby 2030(Mbl/d)

100
Iraq 5,3
80
SaudiArabia 3,9

60 Brasile 3,1

Canada 2,3
40
Kazakhstan 2,3

20
EAU 1,1
NonOpec
0 Venezuela 1,2 Opec

2010 Declining New 2030

production production

14
 Feedstock quality Market
World heavy oil supply growing challenges

Mbl/d
120 102,3
100,2 102,5
94,8
100
82,4 82,3
30,9 30,8 30,3
80 29,9
24,2 25,2
60
48,8 50,4 49,5
40 47,0
43,5 42,5
20 18% 22%
14,7 14,6 17,9 20,5 21,3 22,5
0
2008 2010 2015 2020 2025 2030

HOEHO MEDIUM LIGHTEXTRALIGHT

Heavy andextraheavy crudegrowth 20082020 +5,8Mb/d

20082030 +7,8Mb/d

*Oil+NGL
Source: WoodMackenzie 15
 Heavy oil production Market
concentrated in three regions challenges

80%of NorthAmericaHeavy andEHO

+0,2Mb/d productionfrom Canada
20082030
20082030 mainly
mainly Iraq +3,3
Canada +2,0 SaudiArabia +2,1
Messico 1,5 Iran +0,4
USA 0,3 +5,6Mb/d

68%of MiddleEast
HEHOfrom Iraq
+1,1Mb/d

20082030
mainly
LatinAmericaHEHOfrom
Brazil +0,7
Brazil andVenezuela
Venezuela +0,4

HeavycrudeproductioniscurrentlydominatedbyMexicosMayagrade
by2020significantincreasesinCanadian,IraqiandSaudiproductionareexpected

Source: WoodMackenzie
16
 Market
The refinery constraints challenges

Heavier crudeoil quality means refinery

configuration andcrudemixshould be optimized,
taking into accountforcutcosts andprofitability

Feedstockquality

Productsquality &
environmentalregulations

Fuel mixdemandandquality changed over time

together with specifications,setby legislation rules

17
 Agenda

9 WorldandEurope oilproductsdemandandsupply

9 enianswers forcurrent crisis

9 Need forinstitutional support to refining

18
 eni main leverages: Enisanswers

integration, flexibility, efficiency and technological leadership

9 Production cycles integration

9 Adaptation of production
among refineries to
tomixrequirements
advantage of synergies and
Integration
Integration Flexibility
Flexibility 9 Maxrunsforheavy/sour
maximize conversion plants
use crude
9 Interchange of semifinished 9 Increase % of spot crude
andresidues purchase
9 Integratedplanning

9 Fix costs, maintenance,

energy consumptions
Technological 9Processandenvironmental reduction
Technological Efficiency
leadership technologies Efficiency
leadership 9 Logistics (rationalization
9Fuelquality depots/ contracts re
negotiation)

19
 Enisanswers
Technological leadership
Fuels andlubricants Tecnologieambientali

9 New lubricants and fuels Blu+ Pilot plant for treating, reducing and
developed. Studies ongoing to distribute inactivating refinery waste/muddies, (less than
gasoil Milan Formula to all the sale 97%)
network

Biofuels
9 Hydrotreating technology of vegetable oils
(EcofiningTM,eniUOP),
9 Testing forproducing biodieselof 2 generation Refiningprocesses
from microalgae ongoing atGelarefinery
9 Totalconversion (ESTproject)
9 Derivatives from bio ethanol have been
9 New catalyst sistems for improving
studying to bypass problems deriving from
hydrotreating processes (ProMilanFormula)
direct ethanol use
Ethanol
9 New proprietary
Microalga
derivatives technology of high
e

efficiency for hydrogen

production

20
 Enisanswers
Technologies for Petroleum Residue Upgrading
Severalcommercialtechnologiesconversionofvacuumresiduatolighterproducts
IncreaseoflowH/CofresiduatohigherH/Cofproductsviathermalorcatalytic:

carbonrejection(thermal)
Cokingoffershighfeedstockflexibility
but
poorerqualityofdistillates
lossofliquidyield,
ca.30%wtoflowvaluecoke
hydrogenaddition(catalytic)
Fixed/Movingbed(lowmetalscontentfeed)
Ebullating bed(relativelyhighermetalsfeed)
but
limitsthemaximumconversionachievable
fueloilremainsafatalproduct

>90MTPYpetcoke producedworldwide 9MBPSDfueloilproducedintheworld

21
 Eni believes in flexibility and complexity and is Enisanswers

developing a breaktrough technology: EST

EniSlurryTechnology(EST)
EniSlurryTechnology(EST)
Abreakthroughtechnology
Abreakthroughtechnology

DOWNSTREAM
DOWNSTREAM
UPSTREAM
UPSTREAM
9
9 Upgradingrefineryconfiguration
Upgradingrefineryconfiguration
9
9Valorizationofunconventionaloil
Valorizationofunconventionaloil 9
9 Producing
Producingadditional
additionaldistillates
distillatesfrom
from
9
9Upgrading
Upgrading bitumen
bitumen produced
produced from
from residues(zerofueloil
residues(zerofueloil zerocoke),
zerocoke),
theworldhugereserves
theworldhugereserves withoutincreasingtoppingcapacity
withoutincreasingtoppingcapacity

Italsoprovidesthenecessaryfitbetweentherigidityofsupply
Italsoprovidesthenecessaryfitbetweentherigidityofsupply
andvariabilityofrefinedproductsdemand
andvariabilityofrefinedproductsdemand

22
 Enisanswers

The first industrial plant at Sannazzaro

Endof2012

23
 Agenda

9 WorldandEurope oilproductsdemandandsupply

9 enianswers forcurrent crisis

9 Need forinstitutional support to refining

24
 Refining support measures Supporting measures
Assets protection and strengthening

Protection Strengthening

9 Fiscal advantages and incentives

9 Green labeling for EU oil products and favouring investments (hydrocracking
traceability forimports edeep conversion)
9 Less penalizing CO2emissions rules 9 JVor merging initiatives promotion
9 Standardization of environmental/energy 9 Safety valves and outplacement
rules andauthorization iter incentives
9 Fiscal incentives and innovative 9 Support to EU proprietary
mechanism for sites reconversion and technologies
reclamation 9 Slowing down biofuels rules
application andspeeding upgasoil for
bunkeruse

Coordinated actions with category associations under

theaegis of national andEUinstitutions

25
 Supporting measures
Conclusions

9 Oilwillremaintheprimaryenergysourceatleastforthenext30years
9 TheEuropean Med refiningscenarioisgloomy andprobably will continueinthe
next future
9 Existingunbalancesonproductsandoilsiderequiremaxflexibility
9 The technological leverage is crucial to provide flexibility and relaunch the
refiningbusiness,aswell asintegration andefficiency leverages
9 Eni has developed a proprietary technology which will be crucial in the
competitive environment of the next future. Maximum value to the technology
withheavyandextraheavyoil,lowgaspricesandnoemissioncosts
9 Assets rationalization isnecessary to changetheproductionstructure
9 Actions aiming to descourage unfair competition andpreserve astrategic sector
areneeded
9 Environmentalboost should be addressed inarational andconcretewayforthe
communitywellbeing

26