Wyoming: At the Crossroads of the Boom Trisha Curtis Director of - - PowerPoint PPT Presentation

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Wyoming: At the Crossroads of the Boom Trisha Curtis Director of - - PowerPoint PPT Presentation

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Wyoming: At the Crossroads of the Boom Trisha Curtis Director of Research, Upstream and Midstream Energy Policy Research Foundation, Inc. (EPRINC) Wyoming Pipeline Authority October 15th, 2013 North American Oil Production 12000 July U.S.

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SLIDE 1

Wyoming: At the Crossroads

  • f the Boom

Trisha Curtis Director of Research, Upstream and Midstream Energy Policy Research Foundation, Inc. (EPRINC) Wyoming Pipeline Authority October 15th, 2013

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SLIDE 2

North American Oil Production

2

Source: EIA

2000 4000 6000 8000 10000 12000 Thousand Barrels Per Day Canadian Production of Crude Oil U.S. Field Production of Crude Oil

July U.S. Oil Production 7.5 mbd

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SLIDE 3

1 2 3 4 5 6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Million Barrels Per Day Periphery Permian Eagle Ford Bakken

EPRINC’s Forecast for Major U.S. Shale Plays

Source: HPDI data with EPRINC forecast estimates

EPRINC forecasts an additional 1.5 mbd by 2022

3

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SLIDE 4

CAPP 2013 Updated Production Forecast

4

Source: CAPP

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Thousands of Barrels per Day Mining In Situ Conventional Light Conventional Heavy

Over 3 mbd increase by 2029

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SLIDE 5

Source: Baker Hughes

5

U.S. Rig Count

500 1000 1500 2000 2500 # of Rigs Oil Gas Total

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SLIDE 6

Source: HPDI September 2013, Past 90 Days

Wil illi liston

  • n

Bas Basin in Powder Riv River Ba Basin in Uint Uinta Ba Basin in DJ DJ Bas Basin in (Ni

(Niobrara R Reser servoir ir)

An Anadarko Ba Basin in

(M (Mis issi sissi ssippian ian, , Granit ite Wash, sh, Mis issi sissi ssippi i Lime ime and other st stacked plays) plays)

Permi mian Ba Basin in Ea Eagle le Ford Reservoir ir Ut Utica ica

Permit Activity

6

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SLIDE 7

Source: NDPA, HPDI

7

Current Shale Oil Play Production

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Barrels Per Day Bakken - North Dakota Eagle Ford - Texas Permian Basin - Texas and New Mexico Niobrara/Codell - Colorado Anadarko Basin

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SLIDE 8

EPRINC U.S. Forecast vs. Others

8

Source: EPRINC Forecast and Estimates compiled from Deutsche Bank Report Dec 2012 “Future of US Oil”

4 5 6 7 8 9 10 11 Million Barrels Per Day DB IEA EIA WoodMac PIRA EPRINC

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SLIDE 9

2000 4000 6000 8000 10000 12000 Thousand Barrels Per Day U.S. Imports from Canada of Crude Oil U.S. Field Production of Crude Oil U.S. Imports of Crude Oil 9

U.S. Total Imports, U.S. Production, U.S. Canadian Imports

Source: EIA

U.S. Imports 7.6 mbd U.S. Production 8 mbd Canadian Imports 2.5 mbd

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SLIDE 10

Global Shifts in Crude Oil Flows

Source: EIA, ENI World Oil Book

10 500 1000 1500 2000 2500 3000 Thousand Barrels Per Day Saudi Arabia - Medium Sour/Light Sour Algeria - Light Sweet/Ultra Light Nigeria - Light Sweet/Medium Sweet Ecuador - Heavy Sour Iraq - Medium Sour Brazil - Heavy/Medium Sour and Medium Colombia - Heavy Sour/Medium Sour Mexico - Heavy Sour/Medium Sour Venezuela - Heavy Soure/Medium Sour Kuwait - Medium Sour Russia - Medium Sour

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SLIDE 11

50 100 150 200 250 300 350 Jan-90 Sep-90 May-91 Jan-92 Sep-92 May-93 Jan-94 Sep-94 May-95 Jan-96 Sep-96 May-97 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Thousand Barrels Per Day

Source: EIA

11

Wyoming Oil Production

July Production 173,000 b/d

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SLIDE 12

Source: EIA

12

Compared to Top Producing States

500 1000 1500 2000 2500 3000 Jan-81 Apr-82 Jul-83 Oct-84 Jan-86 Apr-87 Jul-88 Oct-89 Jan-91 Apr-92 Jul-93 Oct-94 Jan-96 Apr-97 Jul-98 Oct-99 Jan-01 Apr-02 Jul-03 Oct-04 Jan-06 Apr-07 Jul-08 Oct-09 Jan-11 Apr-12 Jul-13 Thousand Barrels Per Day North Dakota Field Production of Crude Oil Mbbl/d Wyoming Field Production of Crude Oil Mbbl/d Texas Field Production of Crude Oil Mbbl/d

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SLIDE 13

Source: EIA

13

Compared to Neighbors....

50 100 150 200 250 300 350 Jan-90 Dec-90 Nov-91 Oct-92 Sep-93 Aug-94 Jul-95 Jun-96 May-97 Apr-98 Mar-99 Feb-00 Jan-01 Dec-01 Nov-02 Oct-03 Sep-04 Aug-05 Jul-06 Jun-07 May-08 Apr-09 Mar-10 Feb-11 Jan-12 Dec-12 Thousand Barrels Per Day Wyoming Field Production of Crude Oil Mbbl/d Utah Field Production of Crude Oil Mbbl/d Colorado Field Production of Crude Oil Mbbl/d

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SLIDE 14

Source: HPDI Oct 2013

14

Wyoming Wells

All Wells 2013 Wells

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SLIDE 15

Source: HPDI Oct 2013

15

Wyoming 2013 Wells by Type

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SLIDE 16

Source: Baker Hughes

16

Wyoming Rig Count

20 40 60 80 100 120 1/7/2000 1/7/2001 1/7/2002 1/7/2003 1/7/2004 1/7/2005 1/7/2006 1/7/2007 1/7/2008 # of Rigs

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SLIDE 17

Source: Baker Hughes

17

Wyoming Rig Count vs. Texas and North Dakota

100 200 300 400 500 600 700 800 900 1000 # of Rigs Wyoming Texas North Dakota

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SLIDE 18

Source: HPDI Oct 2013

18

Permits in Past 90 Days

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SLIDE 19

Source: HPDI

19

Wyoming Rig Count by Product and Type

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SLIDE 20

Source: CAPP, ArcGIS Hart Energy

20

Wyoming Pipelines

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SLIDE 21

Source: Wyoming Pipeline Authority Base Map

21

Wyoming’s Play in Crude by Rail

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SLIDE 22

Source: NationalAtlas.gov

22

U.S. Federal Land Map

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SLIDE 23

Canadian Pipeline Export Options

Source: Canadian Energy Pipeline Association

  • Kinder Morgan’s Transmountain

line off BC coast - currently 300,000 b/d capacity-recent announcements to expand up to 800,000 b/d (early 2017)

  • (Now Spectra) Platte line to

Wood River 280,000 b/d-full

  • Enbridge mainline system

currently transporting over 1.5 mbd with potential capacity around 2.5 mbd—Northern Gateway off BC coast planned 525,000 b/d, several other planned expansions

  • TransCanada’s Keystone 581,000

b/d-full—XL would add 700,000 b/d, Energy East Pipeline Project 500 to 800k

Nearly full pipelines creates need for XL and Gateway

  • pportunities for rail

23

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SLIDE 24

Market Saturation

Source: CAPP Crude Oil Forecast June 2013

24

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SLIDE 25

Pipeline Choke Points

Source: EPRINC Choke Point Map using Hart ArcGIS Mapping software

25

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SLIDE 26

Shifting Crude Flows

26

Source: EIA, EPRINC

New Capacity 2013- 2015 (mbd) Inbound: Cushing, Ok 1.97 Outbound: Cushing, OK 1.55 Inbound: Gulf Coast 3.52

500 1000 1500 2000 2500 Thousand Barrels Per Day Midwest (PADD 2) Receipts by Pipeline from Gulf Coast (PADD 3) Gulf Coast (PADD 3) Receipts by Pipeline from Midwest (PADD 2)

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SLIDE 27

Pipelines and Proposed Projects

Source: CAPP Crude Oil Forecast June 2013

27

The majority of this new pipeline capacity, roughly 7.7 mbd (as estimated by EPRINC), is composed

  • f pipeline reversals,

expansions, twinning, repurposing, and retrofitting.

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SLIDE 28

10 20 30 40 50 60

  • 1,000,000

2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000 PADD 1 East Coast PADD 2 Midwest PADD 3 Gulf Coast PADD 4 Rockies PADD 5 West Coast Number of Refineries Barrels Per Calendar Day Operable Atmospheric Crude Oil Distillation Capacity Thermal Cracking Coking Downstream Charge Capacity Operating Refineries

Where light sweet Bakken and heavy (blended bitumen) needs to go…

Source: AFPM map, EIA data for graph

Total Coking Capacity vs. Atmospheric Crude Distillation Capacity by PADD Cokers = Heavy refining capability

28

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SLIDE 29

29

Canadian vs. Total Foreign Imports by PADD

Source: EIA Data 200 400 600 800 1000 1200 1400 1600

PADD I

East Coast (PADD 1) Total Foreign Imports East Coast (PADD 1) Imports from Canada 500 1000 1500 2000

PADD II

Midwest (PADD 2) Total Foreign Imports Midwest (PADD 2) Imports from Canada 1000 2000 3000 4000 5000 6000

PADD III

Gulf Coast (PADD 3) Total Foreign Imports Gulf Coast (PADD 3) Imports from Canada 50 100 150 200 250 300

PADD IV

Rocky Mountain (PADD 4) Total Foreign Imports Rocky Mountain (PADD 4) Imports from Canada 200 400 600 800 1000 1200 1400 2008 2009 2010 2011 2012 Jan-July 2013

PADD V

West Coast (PADD 5) Total Foreign Imports West Coast (PADD 5) Imports from Canada

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SLIDE 30

Regional Pricing Disparities

Source: Flint Hills, EIA, CME Group, and estimates

  • Western Canadian Select -$33

to WTI

30

$0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 WTI Bakken (North Dakota Light Sweet Flint Hills) WCS (Western Canadian Select) Brent

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SLIDE 31
  • 15
  • 10
  • 5

5 10 15 20 25 30 35 10,000 20,000 30,000 40,000 50,000 60,000 $/ Barrel Cushing Stocks - Thousand Barrel Cushing OK Ending Stocks excluding SPR

  • f Crude Oil

Thousand Barrels WTI Brent Differential (Brent minus WTI)

Cushing Stocks vs. WTI Brent Differential

31

Source: EIA

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SLIDE 32

Rising Production and Imports

32

Source: EIA

  • 10
  • 5

5 10 15 20 25 30 1000 2000 3000 4000 5000 6000 7000 8000 $/ Barrel Thousand Barrels Per Day U.S. Imports from Canada

  • f Crude Oil

U.S. Field Production of Crude Oil WTI Brent Differential (Brent minus WTI)

  • 10
  • 5

5 10 15 20 25 30 500 1000 1500 2000 2500 3000 $/ Barrel Thousand Barrels Per Day U.S. Imports from Canada of Crude Oil Midwest (PADD 2) Imports from Canada of Crude Oil WTI Brent Differential (Brent minus WTI)

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SLIDE 33

$0 $20 $40 $60 $80 $100 $120 $140 $/ Barrel U.S. Landed Costs of Nigerian Crude Oil U.S. Landed Costs of Mexican Crude Oil U.S. Landed Costs of Venezuelan Crude Oil U.S. Landed Costs of Canadian Crude Oil Cushing OK WTI Spot Price FOB $/bbl Europe Brent Spot Price FOB $/bbl

Price of Canadian Crude Imports

Landed Cost: “The dollar per barrel price of crude oil at the port

  • f discharge. Includes charges associated with the purchase,

transportation, and insuring of a cargo from the purchase point to the port of discharge. Does not include charges incurred at the discharge port (e.g., import tariffs or fees, wharfage charges, and demurrage).”

  • U.S. production surge
  • Lack of adequate
  • utbound capacity to

refining centers

  • Market saturation

33

Source: EIA

Venezuelan and Mexican crude Canadian crude

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SLIDE 34

Crude Oil Composition by Refining District

34

Source: CAPP 2013 Refinery Survey

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 PADD I PADD II PADD III PADD IV PADD V Thousand Barrels Per Day Domestic Alaska Foreign Light Sweet Foreign Light/Medium Sour Foreign Heavy Domestic Crude

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SLIDE 35

Refinery Acquisition Cost of Crude Oil

Source: EIA

35

$0 $20 $40 $60 $80 $100 $120 $140 $160 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 $/Barrel East Coast (PADD 1) Crude Oil Composite Acquisition Cost by Refiners $/bbl Midwest (PADD 2) Crude Oil Composite Acquisition Cost by Refiners $/bbl Rocky Mountain (PADD 4) Crude Oil Composite Acquisition Cost by Refiners $/bbl West Coast (PADD 5) Crude Oil Composite Acquisition Cost by Refiners $/bbl Gulf Coast (PADD 3) Crude Oil Composite Acquisition Cost by Refiners $/bbl Brent

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SLIDE 36

Refinery Utilization by PADD

Source: EIA

36

20 40 60 80 100 120 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 % Percentage East Coast (PADD 1) Percent Utilization

  • f Refinery Operable Capacity %

Midwest (PADD 2) Percent Utilization

  • f Refinery Operable Capacity %

Gulf Coast (PADD 3) Percent Utilization

  • f Refinery Operable Capacity %

Rocky Mountains (PADD 4) Percent Utilization of Refinery Operable Capacity % West Coast (PADD 5) Percent Utilization of Refinery Operable Capacity %

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SLIDE 37

PADD II will be importing more HEAVY crude…

Source: John Auers Turner Mason , NDPA

….absorbing more Canadian crude and pushing out light sweet Bakken crude

37

Refinery Year Crude Demand Impact MBPD Light Heavy COP/Cenovus Wood River End of 2011

  • 95

+130 Marathon Detroit End of 2012

  • 65

+80 BP Whiting Mid to Late 2013

  • 170

+205 NCRA/McPherson 2015

  • 15

+30 BP/Husky Toledo 2018

  • 45

+60 Total

  • 390

+505

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SLIDE 38

Source: BNSF

38

BNSF’S Crude By Rail Destination System

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SLIDE 39

39

Daily Crude by Rail Shipment in U.S. and Canada

Source: AAR; Crude and petroleum product includes liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc. U.S. operations exclude U.S. operations of CN and CP. Canadian operations include CN and CP and their U.S. operations. One carload holds 30,000 gallons (or 714.3 barrels).

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Barrels Per Day U.S. Average Barrels Per Day of Petroleum and Petroleum Product Canadian Average Barrels Per Day of Petroleum and Petroleum Product EPRINC's U.S. Daily Crude by Rail Estimate

  • 770,000 b/d

EPRINC's Canada Daily Crude by Rail Estimate

  • 130,000 b/d
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SLIDE 40

40

Pipeline and Rail

Source: EPRINC Maps using Hart Energy data and ArcGIS Mapping software

  • Severely limited due to lack of

Keystone XL and lack of historical build out to the coasts – system designed to import into the Gulf and move up

40

  • New markets
  • Diversification
  • Neat Barrels
  • Nimble - Quickly adjustable
  • Optionality for Canadian and U.S. crude, NGLS,

and other petroleum products

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SLIDE 41

Can Get to the Markets Pipelines Can’t and WON’T

FXE UP BNSF CP CN CSXT NS

Source: EPRINC map using ArcGis

41

Origins will stay the same…destinations will change with the market.

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SLIDE 42

Spare Capacity

Source: NDPA

42

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SLIDE 43

Williston Basin Crude Transportation

Source: NDPA, EPRINC Estimates

43

Tesoro Refinery: 68,000 b/d Truck to Canadian Pipeline: 12,000 b/d Rail: 670,000 b/d Pipeline: 241,000 b/d

Williston Basin Production: 955,000 b/d North Dakota: 875,000 b/d South Dakota: 5,000 b/d Eastern Montana: 75,000 b/d

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SLIDE 44

Potential Issues, Hurdles, and Regulatory Concerns

  • Oil prices
  • Water Usage
  • Oil spills (rail and pipeline)
  • Environmental Concerns
  • Regs on Federal Land-Fracking
  • Infrastructure Delays-

PERMITTING

  • Lack of prudent policy: failing

to connect what is happening

  • n the ground to what is

understood in Washington

  • Costs incurred

44

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SLIDE 45

Spills on Rail

45

Source: WSJ

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SLIDE 46

Issues and Regulations

46

AP PHOTO/THE CANADIAN PRESS, PAUL CHIASSON, NATIONAL POST

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SLIDE 47

Conclusions

  • Since 2008 the U.S. and Canada have added over 3 mbd of crude to global production,

helping offset issues in Libya and the Middle East.

  • Pipelines are being built, but right now their is tightness in the system and an

increasing need for Gateway, XL, and other Coastal options for US and Canadian crude.

  • Bakken crude has to get to the U.S. East and West Coasts (via rail) and heavy Canadian

needs to get to the Gulf and West Coast (via pipeline and rail).

  • Roughly 7.7 mbd of new capacity (as estimated by EPRINC) is comprised of pipeline

reversals, expansions, twinning, repurposing, and retrofitting. There are serious regulatory and permitting hurdles which deserve consideration.

  • Even with a narrowing spread, rail is a serious option for US producers distanced from

refining centers, especially Bakken and Canadian crude—markets exist where pipelines do not (especially with XL delay and Gateway uncertainty).

  • Market has changes for producers and refiners with optionality, market and regulatory

uncertainty

  • Rail will be here in the long term, the question is simply how much and where.
  • Refineries are going to play a vital role in this renaissance as they adapt to high

volumes of light sweet and heavy crude oils.

47

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SLIDE 48

Source: EIA

48

Exports of Petroleum Product

  • 2000
  • 1000

1000 2000 3000 4000 5000 Thousand Barrels Per Day U.S. Exports of Petroleum Coke Mbbl/d U.S. Exports of Finished Petroleum Products Mbbl/d U.S. Exports of Distillate Fuel Oil Mbbl/d U.S. Exports of Finished Motor Gasoline Mbbl/d Total U.S. Petroleum Net Imports

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SLIDE 49

East Coast PADD I Imports by Country of Origin

Source: EIA

49

200 400 600 800 1000 1200 1400 1600 1800 2000 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Thousand Barrels Per Day Canada (Thousand Barrels Per Day) Iraq (Thousand Barrels Per Day) Angola (Thousand Barrels Per Day) Venezuela (Thousand Barrels Per Day) Saudi Arabia (Thousand Barrels Per Day) Nigeria (Thousand Barrels Per Day) ALL PADD 1 Imports (Thousand Barrels Per Day) East Coast (PADD 1) Operating Crude Oil Distillation Capacity

Heavy and Synthetic Medium Sour Medium Sweet/ Light Sweet Medium Sour/Heavy Sour Medium Sour/Light Sour Light Sweet/ Medium Sweet

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SLIDE 50

Gulf Coast PADD III Imports by Country of Origin

Source: EIA

50

1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Jan-93 Oct-93 Jul-94 Apr-95 Jan-96 Oct-96 Jul-97 Apr-98 Jan-99 Oct-99 Jul-00 Apr-01 Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Thousand Barrels Per Day Mexico (Thousand Barrels Per Day) Venezuela (Thousand Barrels Per Day) Saudi Arabia (Thousand Barrels Per Day) Iraq (Thousand Barrels Per Day) Canada (Thousand Barrels Per Day) Kuwait (Thousand Barrels Per Day) Colombia (Thousand Barrels Per Day) ALL Gulf Coast PADD III Imports (Thousand Barrels Per Day) Gulf Coast (PADD 3) Operating Crude Oil Distillation Capacity

Heavy Sour/ Medium Sour Heavy Sour/Medium Sour Heavy Sour/Medium Sour Medium Sour/ Light Sour Heavy and Synthetic Medium Sour Medium Sour

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SLIDE 51

West Coast PADD V Imports by Country of Origin

Source: EIA

51

500 1000 1500 2000 2500 3000 3500 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 Thousand Barrels Per Day Ecuador (Thousand Barrels Per Day) Colombia (Thousand Barrels Per Day) Angola (Thousand Barrels Per Day) Iraq (Thousand Barrels Per Day) Canada (Thousand Barrels Per Day) Saudi Arabia (Thousand Barrels Per Day) ALL PADD V Imports West Coast (PADD 5) Operating Crude Oil Distillation Capacity

Medium Sour Heavy and Synthetic Medium Sour/Light Sour Medium Sweet/Light Sweet Heavy Sour/Medium Sour Heavy Sour

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SLIDE 52

Refinery Acquisition Cost of Crude Oil

Source: EIA

52

20 40 60 80 100 120 140 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Domestic RAC $/Barrel Rocky Mountain (PADD 4) RAC Midwest (PADD 2) RAC Gulf Coast (PADD 3) RAC West Coast (PADD 5) RAC East Coast (PADD 1) RAC 20 40 60 80 100 120 140 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Foreign RAC $/Barrel Rocky Mountain (PADD 4) RAC Gulf Coast (PADD 3) RAC East Coast (PADD 1) RAC Midwest (PADD 2) RAC West Coast (PADD 5) RAC