Supplementary information concerning IMO 2020 regulations
Due to an increase in interest regarding the exposure of Corral Petroleum Holdings AB (publ) and Preem AB to the new shipping regulation announced by the International Maritime Organization (IMO), this additional information is being posted for all investors. Please note that the matters discussed below include forward-looking statements about our current expectations with respect to the future. Because forward-looking statements are subject to change based on future events and circumstances, we cannot guarantee that those expectations will prove correct.
We expect that when the new IMO sulphur specification for bunker fuel oil comes into effect January 1, 2020, the price for heavy fuel oil (HFO) will drop due to reduced demand, and the price for gasoil will increase due to increased demand. What the net effect for the refining industry will be remains to be seen, but it is anticipated that especially “landlocked” and smaller/simpler refineries with relatively high fuel oil production will struggle the most.
Preem AB runs its refineries in Lysekil and Gothenburg as one 340,000 barrels per-day refining system where we have high upgrading (72% gasoline/diesel versus Europe average of 59%), and ample desulphurization capacity. We believe Preem’s refining system is thus in a significantly better position than the average European refiner. Lysekil typically runs a high-sulphur (HS) crudeslate, while Gothenburg runs low-sulphur (LS). This pattern will most likely continue in general following the implementation of the IMO regulations, but with operations continuously optimized to reflect HS/LS crude differentials and the HFO versus diesel cracks spread.
We plan for the new Vacuum Distillation Unit in Lysekil to start up in Q1 2019. This unit will produce Vacuum Gasoil from HFO, and with this unit in operation we will have less than 20% HFO left in the product slate from the two Preem refineries.
In addition we also plan to start up the new Hydrogen Production Unit in Gothenburg in Q1 2019, which will significantly increase Preem refineries’ desulphurization capacity as well as further increasing the economically attractive renewable transportation fuels production capacity in the Gothenburg refinery.
We believe that the Preem refining system is very efficient, and focused on flexibility and continuous optimization. We feel that we are thus well prepared to handle the new challenges -- and opportunities -- that will occur on the crude and products side with the implementation of the new IMO regulations.
In parallel with the two projects mentioned above we are also cooperating with US firm Beowulf Energy in examining the possibilities for a potential future residue hydrocracker plant in Lysekil to better meet the long-term demand for transportation fuels. The purpose of this cooperation is to develop a residue hydrocracker design basis for future investment decisions, and in parallel commence with the process of obtaining the necessary permits. A previous press release regarding this initiative is reproduced below for your information.
For further information, please contact:
Investor Relations Manager
Tel: + 46-10-450 10 21
Press-release submitted May 16th 2016:
Preem signs major cooperation agreement with US firm Beowulf Energy
Preem and Beowulf Energy LLC (US) have signed a cooperation agreement to examine the possibilities of a new residue hydrocracker plant in Lysekil to better meet the demand for transportation fuels. The purpose of the cooperation agreement is to develop the residue hydrocracker design basis for future investment decisions, and in parallel commence with the process of obtaining the necessary permits. The aim is to upgrade as much of the heavier fractions (heavy oil) as possible to sulphur free gasoline and diesel fuel.
One of the driving forces behind studying this type of project is the new rules for sulphur content in bunker fuel, which will reduce the market for heavy oil. With the help of a new plant, Preem would expect to produce up to 90 percent sulphur-free fuel from the nearly 2.5 million cubic meters of heavy oil produced annually at the refinery.
“The analysis, detailing and permitting process is estimated to take 2 to 3 years, and if it is confirmed attractive this would be an important strategic investment opportunity in line with Preem’s efforts to utilize the raw material in the best way possible and minimize environmental impact,” says Preem’s CEO Petter Holland. “It would also make us more flexible and competitive in the future. This is a complex project and a potentially very important competitive improvement, so we have chosen to go forward together with Beowulf Energy, which has a unique mix of skills and expertise in the energy sector as well as experience with project implementation and financing of this type of project.”
”We are delighted to partner with Preem on such a noteworthy project,” said Paul B. Prager, Chairman and CEO of Beowulf Energy. ”This is an important and environmentally progressive development that addresses fuel market and generates significant economic benefits for Lysekil, Sweden and the region.”
Questions or comments about Preem should be directed to: Helene Samuelsson Manager Corporate Communications +46 07 450 1222
Questions or comments about Beowulf Energy should be directed to: Michael Enright Managing Director 212 343 9224 (o) 646 775 8919 ©
Preem is the largest fuel company in Sweden, with a refining capacity of more than 18 million m³ of crude oil every year. We refine and sell gasoline, diesel, heating oil and renewable fuels to companies and consumers in Sweden and abroad. Preem has a nationwide service network with close to 600 fuel stations for private and commercial traffic. Preem has over 1,200 employees, of which 900 work at our two refineries in Gothenburg and Lysekil, Sweden.
Beowulf Energy LLC is a U.S.-based energy infrastructure project developer, investor and asset manager which, since 1990, has acquired, developed and/or operated over US $6.0 billion of shipping, power and energy infrastructure assets globally. The company’s in-house expertise spans multiples disciplines, enabling it to provide an integrated and active management approach involving investment and operational professionals. Headquartered in New York, Beowulf Energy has regional offices covering North America, the Caribbean, Europe and MENA, and a history in Eastern Europe and South Asia.