Read Microsoft PowerPoint - Final Presentationcp.pptx text version

1

The Prospects for Bakken Crude From a Refiners Perspective

presented by

John R. Auers P E R Auers, P.E.

Sr. VP - Turner, Mason & Company [email protected] Bakken Infrastructure Development Summit November 16, 2010

2

Turner, Mason & Company

· International engineering consulting practice since 1971 · Downstream focus · Publish semi-annual Outlook for subscribers: Petroleum supply/demand Survey of refinery projects Detailed price forecast (crude/products) · Publish Annual World Crude Outlook with EIG Detailed forecast of world crude production Integrated approach considering supply and demand

3

Presentation Agenda g

· Current Situation · Bakken vs. Competitors p · Light Sweet Crude Supply/Demand · The Future

4

Current Situation

· Bakken Production "Stranded"

Production Growing Logistics to Markets Limited

· Price Severely Discounted vs Competitive Crudes vs. · US Refining Margins Have Fallen ­ Several g g Refineries Have Been Shuttered · Some Regional Refiners Converting to Heavy Sour Crude

5

Bakken Crude Production

SE Saskatchewan

500 Bakke Producti en ion, MBPD 450 4 0 400 350 300 250 200 150 100 50 0

North Dakota

Montana

2005

2010

2015

2020

6

Bakken Logistics to Market Limited g

7

Bakken Crude Price vs WTI

Guernsey, WY

4

Clearbrook, MN

USMC Cracking Yield

2

Bak kken minu WTI, $/ us /bbl

0

5/3/2010

-2

6/3/2010

7/3/2010

8/3/2010

9/3/2010

10/3/2010

-4

-6

-8

-10

-12

8

Margins M i Off Sh l F Sharply From G ld A Golden Age

15.00 14.00 13.00 12.00 11.00 10.00 9.00 8.00 7.00 6.00 Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

321 crack yearly average, $/bbl

9

US Crude Oil Runs

15,400 15,200

Barrels Per Day

15,000 15 000 14,800 14,600 14,400 14,200 14,000 , 13,800 2006 2007 2008 2009 2010 YTD

10

Recent US Refinery Shutdowns y

Owner Alon Valero Sunoco PBF Western Western Refinery Bakersfield, CA Aruba * Eagle Pont, NJ Delaware Ci DE l City, Bloomfield, NM Yorktown, VA Capacity (MBPD) 65 235 150 210 17 70 Total 747

* Serves U.S. market predominantly

Date of Closure Jan 2009 Jul 2009 Oct 2009 Nov 2009 Dec 2009 Sep 2010

11

PADD II Refiners Moving to Heavy Crude

· Most of Canadian Oil Sands Coming to Market as Heavy Crude Heavy crude production to grow by 1.0 MMBPD in ten years Canadian light crude production to decline slightly · Multiple projects in US Midwest under construction to process heavy Canadian crude ConocoPhillips/Cenovus Wood River -2011 BP Whiting ­ 2012 Marathon Detroit ­ 2013 Husky Lima ­ 2014/15 BP/Husky Toledo - 2016 · Total decline in light sweet crude demand of 325 MBPSD

12

Bakken vs. C kk Competitors

Slide 12

13

Bakken vs. Competitors p

· Bakken is a Light Sweet Crude

> 31 API and < 1.0% Sulfur 1 0% Requires less downstream processing Numerous competitors p

· Superior in Quality to Benchmark WTI · Bottoms Crackable

L Low Metals/Concarbon i R id M t l /C b in Resid

14

Numerous Light Sweet Crudes Refined in US

Domestic West Texas Intermediate (WTI) Light Louisiana Sweet (LLS) Bakken Thunder Horse West Africa Bonny Light Escravos Qua Iboe / Yoho Brass River Saharan Blend Other North America Syncrude Sweet Hibernia / Terra Nova Olmeca Ol Cabinda Soyo/Nembo Es Sider Zuetina Z ti Kitina N'Kossa Rabi Blend Other Azeri Li ht A i Light Sokol CPC Blend North Sea Brent Ekofisk Forties Gulfaks Statjford Oseberg

15

Bakken Vs. WTI ­ Key Qualities

Property P

API Gravity , Sulfur, wt% Distillation Yield, volume % Lt Ends C1-C4 Naphtha C5-360 °F Kerosene 360-500 °F Diesel 500-650 °F Vacuum Gas Oil 650-1050 °F Vacuum Residue 1050+ °F 3.5 36.3 14.7 14.3 26.1 5.2 3.4 32.1 13.8 14.1 27.1 9.4

Bakken B kk

41 0.2

WTI

39 0.32

16

Typical Cracking Yields - USMC

Yield, Volume %

C3-C4 Gasoline Jet/Kerosene Diesel Residual Fuel Oil, 1% S Oil

Bakken

-3.1 58.4 16.5 17.5 7.9 79

WTI

-2.9 55.8 14.4 17.0 13.7 13 7

17

USMC Refining Yield Value

6 Month-Rolling Averages

3.00

2.50

Bakken n-WTI, $/B BBL

2.00

1.50

1.00

0.50

0.00 Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

18

Bottoms Qualities Bakken vs. WTI

West Texas Vacuum Resid 1050+

Yield, Vol. % API Gravity Sulfur, Wt. % Vanadium, ppm Nickel, ppm Concarbon, Wt. %

Bakken

5.2 14.0 0.75 2 7 11.3

Intermediate

9.4 11.4 1.09 87 41 18.2

19

Bottoms Crackable Crudes

Canadian Vacuum Resid 1050+ 1050

Yield, Vol. % API Gravity Sulfur, Wt. % Vanadium, ppm Nickel, Nickel ppm Concarbon, Wt. %

Bakken

5.2 14.0 0.75 2 7 11.3

LLS

5.6 13.2 0.79 3 59 13.2

Syncrude

0.0 NA NA NA NA NA

20

Refining Yield Value

6 Month-Rolling Averages USGC LLS - Bakken

2.00

USMC Sycrude - Bakken

Differe ential to Bakken, $/ B /BBL

1.50

1.00

0.50

0.00 Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

-0.50

21

Light Sweet C d h S Crude Supply/Demand

Slide 21

22

Crude Oil Production Vs. Reserves- World

Reserves

Light Sweet

16% 64% 84%

Production

Light Sweet

36%

23

Crude Oil Production Vs. Reserves- North America

Reserves

Light Sweet

3 3%

Production

Light Sweet

33% 67% 7

97%

24

US Crude Runs - 2009

Total = 14.3 MMBPD

Light Sweet 4.8 MBPD 34%

Imports 2.7 MBPD 55% Domestic 2.2 MBPD 45%

25

Bakken Market Area

V

IV

II

I

III

26

PADD II/IV Crude Runs - 2009

Total= 3.7 MMBPD

Light Sweet 1.6 MMBPD 42%

Domestic Imports 1.2 MMBPD 0.4 MMBPD 76% 24%

27

PADD II/IV Domestic LS Crude Sourcing, MBPD

Bakken Other Regional Production Transfer from PADD 3

275

477

417

28

PADD II/IV Light Sweet Crude Imports-2009, MBPD

Canada

27 46

Algeria

Others

296

29

Estimated Bakken Disposition-2009 p

MBPD North Dakota N th D k t Canada Other PADD II PADD III PADD IV Total 54 20 145 1 55 275

30

PADD III Crude Runs - 2009

Total= 8.3 MMBPD

Light S i h Sweet 2.7 MMBPD 32%

Domestic Imports 1.4 MMBPD 1.3 MMBPD 51% 49%

31

PADD III Imports of Light Sweet Crude

2008

500

Light Sweet Crude Imports, MB S e BPD

2009

1H2010

450 400 350 300 250 200 150 100 50 0 Nigeria Canada Algeria Mexico Angola United Other Kingdom

32

Top PADD II/III/IV Sweet Crude Importing Refineries

( (Thousands of Barrels p Day) per y)

Company BP PRODUCTS NORTH AMERICA SUNOCO INC VALERO EXXONMOBIL EXXONMOBIL CORP FLINT HILLS RESOURCES LP CITGO REFINING & CHEMICAL INC TOTAL PETROCHEMICALS USA INC CONOCOPHILLIPS CONOCOPHILLIPS PASADENA REFINING SYSTEMS INC BP PRODUCTS NORTH AMERICA SHELL CHEMICAL LP Location BP WHITING REFINERY TOLEDO MEMPHIS JOLIET BEAUMONT CORPUS CHRISTI CORPUS CHRISTI PORT ARTHUR SWEENY ALLIANCE PASADENA BP TEXAS CITY REFINERY MOBILE State IN OH TN IL TX TX TX TX TX LA TX TX AL PADD II II II II III III III III III III III III III Avg 2008-2010 70 50 48 17 129 113 71 59 57 50 44 43 43

33

The F Th Future

Slide 33

34

Forecasting i T h F ti is Tough

"Prediction is very difficult, especially of the future ." - Neils Bohr "No one can possibly know what is about to No happen: It is happening, each time, for the first time, for the only time." ­ James Baldwin

35

TM&C Crude And Refined Products Outlook

· Issued bi-annually · 2010 Mid Year Outlook issued in late Jul Mid-Year July · Worldwide coverage g · Primary Areas of Focus

P d td Product demand d Crude and refined product prices Refinery construction forecast

36

TM&C/EIG World Crude Oil Outlook

· Forecast of world crude production by country and grade through 2020. pp · A new approach to reserve estimation · Reserve and production forecasts categorized by grade type · Integrated approach which considers supply and demand for different crude grades based on refining capacity additions and modifications · 2010 WCOO currently available; 2011 WCOO to be issued in early 2011

37

Key Questions

· Refinery Demand for LS Crude

Overall Outlook for US Refining Industry Projects to Convert to Heavier Grades

·R i Regional P d ti of LS C d l Production f Crude · Effect of the above on Demand for Bakken

38

Economic & Demand Assumptions

· GDP Growth

Worldwide GDP to recover to long-term average of 3.7% in next 2 to 3 years US GDP growth will average 2 6% long term 2.6%

· Petroleum Product Demand

Worldwide growth to average 1.4%/year through 2025, led by developing countries US demand growth to average 0.3%; somewhat stronger in next two years as it recovers from recession lows Distillate to grow faster than gasoline

39

Crude Price Outlook

WTI Cushing Price

120 110 100 $ per barrel p 90 80 70 60 50 40 30 20

Actual Forecast

· World crude spare capacity gradually tightens from over 5 MMBPD to below 3 MMBPD by 2015 · Oil prices to follow an increasing trajectory, but will be very volatile. · Sustained periods above $100/B or below $60/B are not expected.

40

PADD II/IV Clean Product Demand Outlook

(Total ­ MBPD) Actual 2009 Gasoline Diesel JetA/Kero Total PADD 2/4 % Annual Growth 2834 1253 297 4384 Forecast 2015 2840 1410 330 4580 0.4 Growth 2009 to 2020 (84) 247 53 216 0.4

2010 2856 1320 307 4483 2.3

2020 2750 1500 350 4600 0.1

41

TM&C Price and Margin Outlook

($/B)

Actual 2010 YTD WTI (Cushing) LLS - WTI USMC 3:2:1 Crack(WTI) USGC 3:2:1 Crack (LLS) 77.98 3.09 8.98 6.00 Forecast 2011 82.00 3.00 9.25 5.80 2015 87.00 1.60 11.00 7.50 2020 98.00 1.70 13.00 9.00

42

US Regional Outlook

· East Coast refiners have the most challenging future p product imports p Exposure to p Lower complexity than competing USGC supply Very limited ability to run cheaper crudes g y More regulatory risk · Complex US Gulf Coast refiners continue to be "price setters"

Largest refineries and more complex than all but US West Coast

Region has surplus capacity/depends on exports to other regions Profitability very affected by magnitude of heavy crude discount

43

US Regional Outlook (cont.)

· Mid-Continent and Rocky Mountain refiners are in a "sweet spot" Advantaged crude costs Region short on products/product prices at premium vs USGC vs. Relatively complex configurations · W t Coast refiners h West C t fi have th most complex configurations and th the t l fi ti d the most protected markets Decline in local crude production Sl Slower growth d th demand outlook d tl k Unfavorable regulatory environment

44

Regional R fi R i l Refinery C fi Configuration ti

Region

MidContinent Rockies East Coast Gulf Coast West Coast

Average Crude Capacity MBPD

151 43 133 164 137

Cat Cracking Capacity

33% 32% 47% 35% 32%

Hydrocracking Capacity

7% 5% 2% 10% 21%

Coking Capacity

10% 14% 4% 16% 22%

Upgrading Capacity

51% 50% 52% 62% 75%

Upgrading ability is total conversion capacity as percentage of distillation capacity

45

Regional Refining Margins

25 20 $/BBL 15 10 5 0 USGC Golden Age USAC Transitional USMC 2010-2015 USWC 2016-2020

46

Refinery Rationalization ­ U.S. y

· Continued tight margins and excess capacity will challenge the viability of some plants · Slowdowns, consolidations and sales will be more prevalent than shutdowns · At-risk plants include:

Smaller/less complex plants Non-core/low performing facilities Plants with financially weak owners Facilities unable to meet new regs economically

· Do not expect shutdowns in PADD II or IV

47

PADD II Projects To Decrease LS Crude Demand

Expected Company C ConocoPhillips/Encana BP Holly Marathon M h Husky BP/Husky Location i Wood River, IL Whiting, IN Tulsa, OK Detroit, MI D i Lima, OH Toledo, OH Completion C l i 2011 2012 2012 2013 2014/15 2016 80 8 35 60 565 0 (120) (40) ( ) Heavy 130 260 Crude Capacity, MBPD Medium di Lt. S Sour (80) (220) (35) (25) ( ) (15) (30) (325) Lt. S Swt. Total l 50 40 (35) 15 20 30 120

48

PADD II/IV LS Crude Demand

1800

Th housand Ba arrels Per Day D

1600 1400 1200 1000 800 600 400 200 0

2009

2010

2015

2020

2009-2020 Decline

Slide 48

49

US / Canadian LS Crude Production

2,500 2 500

US

Canada

Th housand Barrels Pe Day B er

2,000

1,500

1,000

5 500

0 2009 009 2010 0 0 2011 0 2012 0 2013 0 3 2014 0 4 2015 0 5 2016 0 6 2017 0 7 2018 0 8 2019 0 9 2020 0 0

Per 2010 World Crude Outlook

50

US Non-Bakken LS Crude Producton

1,800

Th housand Barrels Pe Day B er

1,600 1,400 ,4 1,200 1,000 800 600 400 200 0

2010

2015

2020

51

PADD II/IV LS Crude Production

Bakken 1000 900 800 700 600 500 400 300 200 100 0 2009 2010

Slide 51

Other

Tho ousand Barre Per Day els

2015

2020

52

PADD II/IV Demand for LS Crude Imports/Transfers

900 800 700 600 500 400 300 200 100 0 2009 2010

Slide 52

T Thousand Ba arrels Per Da ay

2015

2020

53

Estimated US Bakken Disposition MBPD

2009 2010 2015 2020 North Dakota N th D k t Canada Other PADD II PADD III PADD IV Total 54 20 165 1 55 295 55 20 220 15 65 375 55 30 245 50 70 450 55 30 220 24 70 400

54

PADD II/IV LS Crude Sourcing

Bakken Other PADD II/IV Canadian Imports Other Imports PADD III Transfers

120% 100% 80% 60% 40%

27% 31% 5% 19% 31% 2% 19% 34% 27% 33%

13% 2% 23%

13% 2% 24%

20%

18% 22%

29%

28%

0% 2009 2010 2015 2020

55

Final Thoughts

· Bakken is a highly desirable crude g y

Important and growing part of PADD II/IV crude slate Higher valued than benchmark WTI Logistical limitations cause Bakken to be "stranded" and to trade at a g substantial discount to its refining value

· Prospects for the US refining industry will improve over the next decade

PADD II/IV refiners will continue to enjoy regional advantages Overall regional crude demand will stay strong

· Conversion to heavy crude will reduce regional LS crude demand

Total reduction is about 300 MBPD Despite this drop, most of the increased volume of Bakken will be accomodated within PADD II/IV through reductions of WTI and imported crude in regional crude slates

56

Final Thoughts (cont ) (cont.)

· Southern and Eastern PADD II refineries will be the primary targets for Bakken B kk crude d

Those refineries which are capable of FCCU bottoms cracking would be prime candidates

· B kk volumes moving t PADD III will b relatively li it d ( Bakken l i to ill be l ti l limited (<50 MBPD) under consensus production forecasts

If more optimistic growth targets are achieved, PADD III could see much more Bakken Long haul imported LS crudes from west Africa would be most impacted Long-haul

· With removal of logistical limitations, Bakken will be priced at quality parity with competitive crudes ­ WTI and LLS

$ $0.50 t $ to $1.00+ more th WTI and a similar amount b l than d i il t below LLS and d Syncrude at the refinery gate - with the actual value dependent on key price relationships such as gasoline vs. diesel and resid vs. light products

57

Presenter

John R. Auers ­ Senior Vice President Email: [email protected] E il j @t

Telephone 214-754-0898

Address Ste 2920, L.B. 38 2100 Ross Ave. Dallas, Texas. 75201 D ll T

Information

Microsoft PowerPoint - Final Presentationcp.pptx

57 pages

Find more like this

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate

997