Α.
In general
The operations of
Hellenic Petroleum Group of Companies include refining (75% of activities),
petrochemicals (12,3%), engineering services, local and international trading,
participation in electricity production, natural gas supply and distribution
and renewables.
The Group is
operating in five (5) countries and 60% of the products are exported. The South
East European market is a highly competitive market, mainly due to the fact
that the non EU-refineries operating in the area have high CO2 emissions, low
salaries and low maintenance costs. According to the latest fitness test, the
EU refineries lack by almost 4$/bbl against the Middle East refineries.
For 100.000 tons
of CO2 emissions in a EU refinery, correspond almost to 130.000 tons in a non
EU refinery.
On the top of
that, HELPE Group is in an unfavorable competitive position due to the
political situation in Greece, the capital controls and the reputation of the
Greek Banking system. This creates an uneven cash flow and a non-competitive
capital cost.
B. Vision
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The companies of the future must as a minimum
satisfy the following:
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C.1. Global developments
C.1.1. In a multipolar world
Since the early
1990s the modernization of Asia, in the context of the growing globalization
defines to a great extend the global economy, which in the beginning of the 21st
century, after the completion of the Eurozone stabilization, it is based on
three basic pillars: America, Europe and Asia (driven by China).
For some, the
modernization of Asia is considered alongside with the Renaissance and the
Industrial Revolution one of the most significant developments in global
economic history.
The combination
of the technological progress’ globalization and the massive increase of debt
levels in the developed world was the decisive factor for creating a large part
of the wealth that was created globally in recent years.
C.1.2. Wealth is moving East
It is estimated
that China and India in 2020 will produce
more than 20% of global GDP versus 15% in the US, which in the early 1990s
accumulated 22%, versus China’s and India’s 8,5%.
In the long term
the Top 50 of the world’s financial centers will be dominated by cities like
Delhi, Shanghai, Bombay and Beijing. By 2030 the percentage of the centers
located in the US will be reduced to 6% from 22% in 1950.
C.1.3. Developments in the global economy in 2016
The developments in the global economy for 2016, is
commonly accepted that, “are formed on the one hand, by the decisive influence
of the phenomenon of climate change and on the other hand, they are formed by
the structure and the operation of the development model of the contemporary
period, the deregulation of the institutional frameworks of national economies
and the dominance of the financial capital..”, (World Economic Forum,
2015).
Furthermore, I
would like to mention some events of major importance, with special emphasis on
the developments in 2015: the termination of the seven year period of quantitative
easing, the zero interest rates by the Federal Bank of the USA (Fed) , and the launch of the change of China’s economic
model.
It is also
evident that when it comes to formulating the future global developments, a key
role will play:
- The reorganization of the commercial routes in the framework of the Trans Pacific Partnership Agreement
- Further strengthening of China’s role in the Asian continent, a part of which is the recent approach between China and Taiwan, but also
- China’s planning of the Chinese Silk Road, which is of major importance for Europe and Western Asia
These events of major importance impose
in Europe the need of reassessing the geopolitical factor, on which I would
like to refer in more detail later on.
C.1.4. The geopolitical risks in 2016 overshadow
the economic developments
“As geopolitical risks, according to
political analysts from international leading banks, have risen to levels not
seen since the days of the fall of the Berlin Wall in 1989, and at the same
time the conflict in Syria is turning into one of the biggest geostrategic
mazes, some analysts estimate that, it is politics and the geopolitical
landscape that will be the greatest risks to the financial markets and not the
financial problems.
D.2. The oil environment
The economic crisis resulted in a sharp
decline in demand of petroleum products and refining margins, with a direct
impact on the profitability of the industry worldwide.
The refining sector has entered a period
of reorganization and redeployment worldwide. The economic crisis has forced
many oil companies (such as ENI, Shell, Total, INEOS) to reevaluate their
strategy by deciding to reduce their activities in certain countries, either by
shutting down/shelling less competitive refineries or by turning their refineries
into repositories.
Especially in Europe, 22 refineries of
total capacity of 2.6 million barrels per day have terminated their operations
since 2008, which amounts to 13% of Europe’s total refining capacity, of which
1,8m barrels per day involve EU Countries.
Instead, refineries in the Middle East
and in Asia have increased their share on the global refining output by 30%
between the years 2005 and 2014. (World Oil and Gas Review, 2015, p. 112-114)
Increased
competition in the Mediterranean, among other factors, is particularly
important for the competitive presence of the greek refineries, given that, as
it was previously mentioned that, under the pressure of the shrinking domestic
market, 60% of the production is exported.
In addition, non-EU refineries are not
burdened with compliance costs, with products’ quality standards and acceptable
environmental performances of the production activity, that apply in the
EU. This fact combined with the absence
of such standards in the non-EU markets, to which the majority of the
industry’s products is addressed, disadvantages European and greek refineries,
with the unfavorable prospect that this situation will worsen in the near
future.
E.3. EU
Energy Roadmap 2050
The European
energy planning in force is espoused by the main decision to take action
globally in order to tackle climate change. The main objective of
decarbonisation is attempted to be reached with political commitments, actions
and measures for:
- High energy efficiency and energy saving
- Competitive presence of differentiated emissions technologies, on the assumption that public accepts nuclear energy and carbon capture and storage technology (CCS)
- High share of Renewable Energy Sources (RES), in order to constitute 75% of the gross final consumption and 97% of the electricity consumption by 2050 and last,
- Low share of nuclear energy
F.1. Hellenic Petroleum’s role and strategy
The strong
pressures on the refining industry mentioned above, highlight but also impose
as the Group’s main medium-term objective, to ensure international competitive
presence in the refining sector, which is a prerequisite for any planning or
role searching in the recovery endeavor.
Ensuring the
Group’s international competitive presence will be achieved by maintaining
Hellenic Petroleum’s competiveness indicators among the top 25% of the most
competitive refineries, which according to Solomon ranking, is the company’s
primary objective and basic obligation towards its shareholders and it involves
planning and implementing actions in areas such as the improvement of energy
efficiency, integration of innovation and development of human capital (skills,
expertise).
In the context of
the medium term planning, Hellenic Petroleum Group adapts the European
positions on the transformation of the energy system, innovative business
models and reorientation towards actions related to energy and products of a
new era (RES, gas networks, and electricity), while at the same time it
strengthens its position in the oil industry as it is defined in the context of
the European energy transformation.
HELPE has also gained significant experience in Exploration & Production activities, being a partner in 17 joint ventures with reputable oil companies during the last few years. As of 2014, Group’s activities are focused in Greece, through the participation as an Operator (50%) in the international joint venture HELPE UPSTREAM for the lease of the offshore region of Patraikos Gulf. Recently we have submitted offers in international tenders for another 5 oil promising blocks in Western Greece (3 offshore and 2 onshore blocks), so far obtaining the award of exploration rights for two areas.
It is a changing
world. Many ideas will gradually fade out, some will change and some new will
emerge. The consumer of tomorrow is a “smart consumer”. The gas station of
tomorrow will be an energy supermarket selling hydrogen, gasoline, diesel,
electricity and who knows what else.
In the refinery
business it takes almost ten years for a new project to grow from the basic
design to commissioning. It is our duty to analyze the energy needs of the 2025
citizen-consumer, design the energy products, produce them and distribute them.
This entails the gradual transformation of the Hellenic Petroleum from a
refinery to an energy group.
We take special
pride, though, of our involvement in setting up a Refugee Temporary Hospitality
Center on the island of Chios, which can accommodate more than 1,000 refugees
in decent conditions. The so-called “HELPE Village” was put in operation last
February, and was greeted very warmly by our employees, who are collecting
basic necessity and personal hygiene items for the refugees. The current social
environment of Greece needs these kinds of activities from big companies like
us, and that’s just goes to show the strength and resilience of the energy
sector not only in paving the way for the country’s economic recovery, but also
in spreading and supporting the ideals of solidarity and human kindness to
those in need.
