On the supply side of the equation, the story is also changing. A tremendous surge in refinery residuum conversion capacity is being built. This step change is more than what is needed to balance incremental crude supply with demand growth. Consequently, over the next five years, this new coking, hydrocracking, and FCC capacity will largely eliminate today's overhang of residuum. However, it will not be balanced: straight-run residuum and VGO supplies will tighten more than cracked stocks. Cracked fuel oil will still be the lowest priced product of last resort.

• An in-depth outlook of the factors driving each region’s future fuel oil and other heavy product usage. Demand trends by region/country and by sector show how decreases in some areas are being offset by increases in others, resulting in net positive growth for the future.
  
  
• A detailed look at the production of heavy products, examining changes in crude slate, refinery runs, and refinery residuum conversion. Refinery capacity trends will drive straight-run feedstock balances tighter, while cracked stocks remain more amply supplied.
  
  
• Analysis of the trade flows for residual feedstocks and fuel oil and how they will evolve as supply, demand, and product quality requirements change.
  
  
• Regional price forecasts relative to crude and other products, residual fuel oil quality differentials, prices relative to competing fuels, arbitrage opportunities, seasonality effects, and the key factors that will drive these relationships.
  
  
• Regional reference case projections through 2020, by year, as well as alternative scenarios that test the impact of key variables on those projections.

A simple extrapolation of recent trends in fuel oil demand, supply, and price will not give a reasonable forecast for future trends.

BOTTOM OF THE BARREL shows how a detailed and nuanced look at the underlying trends builds up to very different conclusions for the future.

1. To what extent will the global balances for residuum tighten, and what will be the implications for price spreads, refining margins, and crude differentials?
   
   
2. How will the supply/demand and price relationships for straight-run feedstock versus cracked stocks change?
   
   
3. How are the balances for low-sulfur expected to be different from high-sulfur fuel oil?
   
   
4. How will these trends affect future refinery operations and margins?
   
   
5. What changes in trade patterns and arbitrage relationships can be expected?

The Table of Contents:

1. Residual Fuel Oil and Other Heavy Product Demand
   1. Annual: 1995 – 2020
   2. By Country
   3. By Sector
      
      
2. Refinery Resid Conversion Capacity Summary
   1. Annual: 1995 – 2020
   2. By Unit Type
   3. By Region
      
      
3. Resid Supply
   1. Annual: 1995 – 2020
   2. Crude Production by Type, by Region
   3. Straight-Run Resid, VGO, Cracked Stock Production by Region
      
      
4. Prices
   1. Annual: 1995 – 2020
   2. By Region
   3. By Quality
      
      
5. Trade
   1. Annual: 1995 – 2010, 2015, 2020
   2. Net Inter-Regional Trade

• Crude producers know the importance of product supply/demand balances that set relative values for products and consequently impact crude-quality price differentials. This study helps them identify and evaluate the future refinery value for heavy versus light crudes and thus the potential value of heavy crude upgrading.
  
  
• Refiners need to plan capacity changes based on the outlook for product demand, feedstock supply, and relative pricing. By providing a firm basis in evaluating future changes in these factors, which define refinery residuum conversion margins, the study helps refiners evaluate the future profitability for different refinery configurations.
  
  
• Trading companies want to anticipate regional supply/demand changes and price dynamics. This analysis aids in planning terminal and shipping infrastructure needs to best capture future trading opportunities.
  
  
• Shipping companies know that their single largest expense is for bunker fuel, and they face uncertainty both on its price and regulations on quality. BOTTOM OF THE BARREL provides a residual fuel oil price basis under different demand and regulatory scenarios.
  
  
• Policy makers need timely insight into how proposed changes in product quality regulations will affect supply, demand, price, and industry profitability. This study enables them to better evaluate the impact of future regulatory changes.
  
  
• Electric utilities and other end-users constantly consider how changing fuel oil price dynamics will influence service choices and future capacity decisions. The study makes end-users better equipped to adapt to supply and price shifts, and it helps new project developers make more effective evaluations of fuel supply options and project viability.
  
  
• Financial institutions must make sound evaluations of how changing market conditions will affect the economics and financing of new refining and marketing ventures. This study allows for more informed decision-making on potential projects.

• Country-level demand by sector, with quality breakouts
• Regional residuum supply, with the impact of refinery capacity changes broken out
• Inter-regional residuum trade flows
• Price forecasts, both absolute and relative to crude/products, by region and quality

Dr. Mark Schwartz (President) works closely with PIRA's Global Oil and Natural Gas groups to evaluate the key assumptions underlying their outlooks and to develop plausible alternative assumptions and outcomes. Before joining PIRA in 2002, he was the Chief Economist of ExxonMobil Corp., where he was responsible for developing the company’s long-range economic and energy outlook. During his 25 years at Exxon he also had assignments in Upstream Planning, Treasurers, and Corporate Planning functions. Mark holds a Ph.D. in economics from the University of Pennsylvania.

Doug Bulger (Managing Director) heads up the Project Consulting Group. Before joining PIRA in April 2005, Doug was Manager – Supply & Trading for Shell Canada Limited, and previously Manager – Refinery Supply for Deutsche Shell AG in Hamburg, Germany. In these positions, Doug led Crude and Products Supply, Supply Strategy and Optimization, Marine, Logistics and Risk Management teams. During his 29 years at Shell, Doug was also an Advisor in Corporate Strategies at Shell Canada undertaking studies in Strategy Development, Competitive Positioning, Acquisition and Corporate Restructuring. He holds a B.Eng. in chemical engineering from McGill University and an MBA from the University of Calgary.

David A. Zinamon (Managing Director, Refining and Environmental Affairs) specializes in refined products, refinery operations, NGLs, alternative fuels and environmental matters, particularly as they affect petroleum product markets. Among other activities he is responsible for PIRA’s World Refinery Database. Dave also authors PIRA’s monthly NGL market report. Dave joined PIRA in 1984 after seven years of international energy consulting experience with Chem Systems. This followed several years of manufacturing, marketing and planning positions with Celanese Chemical, GAF Corp., and Airco. He has a B.Ch.E. from City College of New York and an M.B.A. from Rutgers University.

F.W.A. (Bill) Fuller (Sr. Director, International Oil) had over 30 years of energy forecasting and analytical experience with Exxon International before joining PIRA in 1997. He now oversees PIRA’s analysis and forecasting of near-term industry oil balances, with particular emphasis on international supplies, and monitors events impacting PIRA’s oil market view. Bill has a B.S. in chemical engineering from Cornell University.

Kenneth M. Bogden (Director, Freight Markets) is responsible for PIRA’s monthly Freight Market Outlook. Prior to joining PIRA in 2005, Ken worked for ExxonMobil for 27 years, primarily in its oil supply and trading and planning functions. He also served as Coordinator of Transportation Planning for Exxon International. Ken has a B.S. in chemical engineering from Lafayette College and an M.B.A. from Columbia University.

Joseph T. (Joe) Pezzino (Director) maintains PIRA's Worldwide Refinery Database, including capacity analysis, product quality implications, and margins. Before joining PIRA in 2000, he led refinery process tech services, economics, and planning during a 30-year career at Mobil. He also worked in Corporate Supply & Distribution and subsequently at Mobil Research specializing in supply chain optimization. Joe has an M.B.A. and B.S. in chemical engineering from S.U.N.Y. at Buffalo.

Dr. Naing Oo (Associate Director) joined PIRA’s Global Oil Group in 1995. He focuses on quantitative and econometric analysis for forecasting oil demand and prices. He is also involved in analysis on crude and product balances and trade flows. Naing holds a Ph.D. in economics from the City University of New York.

Clayton Vernon (Director of Energy Modeling) is responsible for PIRA's global energy demand model. Clayton came to PIRA from Bank of America, where he was in charge of Fundamentals Analysis for their Commodities Trading group. Prior to joining B of A, Clayton was Director of Fundamentals Analysis for Enron in Houston. Clayton has an M.S. in econometrics from the University of Texas at Austin and a B.S. in mathematical physics from Rice University in Houston.

Su Hyung Ryu (Senior Analyst) focuses on crude and product price forecasts. Su maintains and develops integrated oil demand and pricing models and information systems. Since joining PIRA in 1998, she has participated in numerous benchmarking and competitive analysis projects, crude and product marketing assessments, and asset valuations. Prior to joining PIRA, Su worked at Citibank Global Banking, where she analyzed and developed investment database applications. She holds M.S. in business computer information systems from Baruch College in New York.

Neal Kumar (Senior Analyst) supports the on-going requirements of maintaining and expanding PIRA’s global refinery database, as well as other key activities of the global oil group. Prior to Joining PIRA, Neal worked at Koch Industries in Washington, DC, where he provided economic, political, and legislative analysis for international investments, and domestic refining and policy issues. Prior to working for Koch, he worked as a Foreign Policy and Defense research intern at the American Enterprise Institute, with a focus on the Former Soviet Union. Neal holds a B.A. in economics and history from Northwestern University and an M.A. in Russian studies with a concentration in the political economy of emerging markets from the European University at St. Petersburg, Russia.