Southeast Asian Refining ARTC 2018

Volatility, Change and Opportunity in Southeast Asian Refining

April 27, 2018

The Asia Refining Technology Conference (ARTC), just concluded this week in Kuala Lumpur, Malaysia, provided an insightful look at the opportunities and dynamics facing Southeast Asian refiners in 2018, the year of refinery digitalization. I was struck, as I often am in this part of the world, by the focused attention that conference attendees give to the content — and by the level and insight of the material provided by local presenters. No open seats at ARTC! Petronas, a main sponsor of the event, provided a number of presenters and attendees, as well as some true insight into their thought processes.


The Association of Southeast Asian Nations (ASEAN) region continues to grow steadily, and its economy is projected to continue to do so in the long term. Energy extraction and conversion continue to be key ingredients in the region, with Malaysia, Indonesia and Vietnam holding globally important reserves.


A vibrant and growing local force of technical competence and innovation continues to open new possibilities for innovation. It is an interesting juncture, with important decisions to be made by both industrial and government leadership. A backdrop to this is the upcoming Malaysian national elections in mid-May. Key organizations — in particular the “four Ps”: Petronas, Pertamina, PTT Group and Petro Vietnam — will play a pivotal role.


Yusri Mohamed Yusof, Petronas VP of refining and trading, provided the opening perspective and upbeat note. “ASEAN is central as Asia continues to dominate global growth,” Yusof declared. The macro trends are compelling in Asia, demonstrating why the refining industry looks different here than in other parts of the world. Asian growth drivers, Yusof noted, are driving the entire refining industry in Asia in general and Southeast Asia in particular.


ASEAN, when looked at regionally, is the fifth-largest economy in the world and the third-largest market (behind only China and India). The ASEAN population will rise from 655 million to 738 million by 2030 (13 percent growth in 12 years), with the region’s GDP more than tripling during that period, from $2.7 trillion USD to $8.5 trillion USD. Overall, Asia-Pacific’s middle class will rise to 3.2 billion people by the year 2030, representing two-thirds of the world’s middle class. This means that irrespective of a rapid drive toward sustainability and non-fossil fuel based transport, demand for energy will rise sharply in Asia, and demand for goods derived from chemicals will be a driver of demand for natural gas and refined products.


The ARTC conference made extremely effective use of audience polls throughout the event, providing some interesting windows into how the attendees of the event, many of them quite senior refining leaders in the region, are thinking. One particularly insightful poll during a presentation by Shell posed the question, “When do you feel that electric cars will cause a major disruption to the oil industry?” About half the audience agreed on 2030, while another half chose 2040. 


Shell Global Solutions argued that fading transport fuel demand will be replaced by growing petrochemical demand, providing significant refining opportunity. The discussion was lively.


Karimbir Anand, partner at EY consulting and lead speaker for day two, brought the changing opportunities for refining further into focus, in terms of the impact on Asia’s refining industry. Anand outlined EY’s views on the four most important trends impacting the oil and gas sector in APAC. These are, in order, digital in the oil and gas sector, petrochemical integration, IMO sulfur regulation and electric vehicles.


Petrochemical Integration


In Malaysia the RAPID project, an integrated refining and petrochemicals megacomplex, is well underway, with initial startup projected sometime in 2019. Coupling that with the upcoming IMO low-sulfur marine fuel regs and the upcoming ASEAN vehicle fuel sulfur regs, there was a lot of attention during the conference on alternatives and opportunities to modify refining processes to take advantage of these changes. Of course, all of these changes involve large amounts of CAPEX, which must be financed, long lead times and increasing complexity of production. 


The Digital Refinery