California Petroleum Market Trends for Crude Oil and Refining

Transcription

1 California Petroleum Market Trends for Crude Oil and Refining Crude Oil Quality Association Long Beach October 5, 2017 Ryan Eggers, Supervisor Transportation Fuels Data Unit Supply Analysis Office - Energy Assessments Division California Energy Commission Ryan.Eggers@energy.ca.gov (916)

2 California Energy Commission Primary energy policy and assessment agency for the State of California Has several divisions covering: Energy Assessments; Energy Research and Development; Energy Efficiency; Fuels and Transportation; Renewables; Siting, Transmission, and Environmental Protection (power generation licensing) Transportation Fuels Data Unit Energy Assessments Division Administers the Petroleum Industry Information Reporting Act (PIIRA) PRC Division 15, Chapter 15, Sections CCR Title 20, Chapter 3, Article 3 PIIRA company level information is confidential Business sensitive Largely immune to Freedom of Information Act and public records requests 10/5/2017 2

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4 Millions of Barrels 800 California Refinery Oil Sources ( ) 1.65 million barrels per day in 2016 foreign receipts expected to grow Alaska 68.8 Million Barrels Foreign Million Barrels 54.5 % California & Other Domestic Lower 48 Sources Million Barrels Sources: DOGGR, Energy Information Administration, Class 1 Railroads and the California Energy Commission % 34.1 % 10/5/2017 4

5 Millions of Barrels per Year California Oil Production (1865 to 2016) Peaked in 1985 at 424 Million Barrels Crude oil production for over 150 years in California. Declining output now at a level last seen in Million Barrels in Cumulative Crude Oil Production Billion Barrels, Equivalent to 10.1 Months of 2016 Global Demand of Million Barrels Per Day Sources: California Division of Oil, Gas, and Geothermal Resources (DOGGR) and the California Energy Commission. 10/5/2017 5

6 Thousands of Barrels per Year 450,000 Annual Crude Oil Imports into California TOTAL C_B_RAIL 400, ,000 OTHER DOMESTIC MARINE ALASKA SAUDI ARABIA 300,000 ECUADOR 250, ,000 Diversity of foreign sources increasing. IRAQ COLOMBIA BRAZIL 150, ,000 ANGOLA INDONESIA MEXICO 50,000 KUWAIT CANADA 0 ALL OTHERS Sources: Energy Information Administration and the California Energy Commission. 10/5/2017 6

7 Specific Gravity in Degrees January-86 July-87 January-89 July-90 January-92 July-93 January-95 July-96 January-98 July-99 January-01 July-02 January-04 July-05 January-07 July-08 January-10 July-11 January-13 July-14 January-16 Californian Imported Crude Oil Properties Percent Sulfar January-86 July-87 January-89 July-90 January-92 July-93 January-95 July-96 January-98 July-99 January-01 July-02 January-04 July-05 January-07 July-08 January-10 July-11 January-13 July-14 January Since 1992, the weighted average API specific gravity of imported crude oil has been degrees, roughly similar to Alaskan North Slope Since 2010, the weighted average sulfur content of imported crude oil to California has been 1.7 percent Weighted Average Gravity Averge 92 to 16 WEIGHTED AVE SULFUR Sources: Energy Information Administration 10/5/2017 7

8 Thousands of Barrels Per Day 2,500 U.S. Change in Crude Oil Production January 2010 vs. January ,000 2,096 U.S. crude oil production has changed from million barrels per day in January 2010 to million barrels per day during January ,500 U.S. crude oil production is million barrels per day lower than the near-term peak of April California & Alaska oil production continue declining. 1, Texas North Dakota Rest of U.S. California Alaska Source: Energy Information Administration /5/2017 8

9 Thousand Barrels per Day 1,200 1,000 Crude Oil Exports (2012 thru February 2017) Record level of million barrels per day exported. 800 Lifting of oil export restrictions has enabled record exports. Export restrictions lifted Other Countries Central & South America Europe Asia Canada Source: Energy Information Administration. 0 Jan-2012 Mar-2012 May-2012 Jul-2012 Sep-2012 Nov-2012 Jan-2013 Mar-2013 May-2013 Jul-2013 Sep-2013 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan /5/2017 9

10 Jan-2010 Apr-2010 Jul-2010 Oct-2010 Jan-2011 Apr-2011 Jul-2011 Oct-2011 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Apr-2013 Jul-2013 Oct-2013 Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015 Apr-2015 Jul-2015 Oct-2015 Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 Thousands of Barrels Per Day Percentage of U.S. Production 1,200 1, Crude Oil Transportation by Rail Tank Car 3.14 percent of U.S. production as of March Excludes Canadian import movements. Crude-by-rail volumes include oil from U.S. production and Canadian rail imports. National CBR Movements Percentage of U.S. Production 14% 12% 10% 8% Source: Energy Commission analysis of data from the Energy Information Administration. Expanded crude oil pipeline takeaway capacity has allowed oil producers to shift away from more expensive rail transport back to pipeline movements. Domestic oil discounts have narrowed. 6% 4% 2% 0 0% 10/5/

11 Barrels per Month California Crude Oil Imports Via Rail Tank Cars January 2012 March 2012 May 2012 July 2012 September 2012 November 2012 January 2013 March 2013 May 2013 July 2013 September 2013 November 2013 January 2014 March 2014 May 2014 July 2014 September 2014 November 2014 January 2015 March 2015 May 2015 July 2015 September 2015 November 2015 January 2016 March 2016 May 2016 July 2016 September 2016 November 2016 January 2017 March 2017 May ,400,000 1,200,000 1,000,000 Crude by rail increased in late 2016, early 2017, but has since returned to smaller volumes CBR volumes represented less than 0.4 percent of California crude oil supply. 800, , ,000 Source: PIIRA data, Energy Commission analysis. Other States Wyoming Utah North Dakota New Mexico Colorado Canada 200, /5/

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13 California Refineries - Overview Refineries are a primary hub of logistical activity 15 refineries processed million barrels per day of crude oil during facilities produced California fuels Crude oil during 2016 received by Marine vessels (foreign) TBD Marine vessels (Alaska) TBD California source via pipelines TBD Rail/truck 3.0 TBD Process units operate continuously at or near maximum capacity, except during periods of planned maintenance or unplanned outages 10/5/

14 Refinery Locations Northern California Sources: Oil Change International map, Energy Information Administration refinery data, and Energy Commission analysis 10/5/

15 Refinery Locations Southern California Northern California refiners all own their marine terminals, whereas the marine terminal docks in Southern California are owned by the cities of Los Angeles and Long Beach and leased to the refining & logistics companies (such as Kinder Morgan). Sources: Oil Change International map, Energy Information Administration refinery data, and Energy Commission analysis 10/5/

16 Product Slate of California Refineries (2016) Other RBOB 0.51% CARB Diesel 13.37% Conventional Gasoline 5.19% EPA Diesel 3.90% Other Diesel 0.12% Commercial Jet Fuel 13.25% Other 20.47% Military Jet Fuel 0.30% Other Products 4.05% Asphalt & Road Oil 0.74% Residual Fuel Oil 2.41% Liquified Refinery Gases 2.69% Still Gas 4.30% CARB Compliant Gasoline 42.90% Petroleum Coke 6.28% *Note: Does not include ethanol. Source: California Energy Commission 10/5/

17 Gallons California Gasoline & Ethanol Consumption 18,000,000,000 16,000,000,000 Base Gasoline Ethanol 14,000,000,000 12,000,000,000 10,000,000,000 8,000,000,000 Although finished gasoline consumption declined 8.9 percent between 2004 and 2012, strong recovery from the recession and continued population growth have pushed consumption up by 6.9 percent between 2012 and 2016, edging closer to a record high. 6,000,000,000 4,000,000,000 Ethanol use has increased from an average concentration of 3.75 percent by volume in 2003 to percent by volume during ,000,000, Source: California Energy Commission analysis 10/5/

18 Gallons California Diesel Fuel, Biodiesel & Renewable Diesel Consumption 4,000,000,000 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 Finished diesel consumption declined 15.9 percent between the peak in 2007 and the trough in The strong recovery from the recession and associated goods movement by truck and rail pushed consumption back up by 15.5 percent between 2009 and ,500,000,000 1,000,000,000 Diesel Fuel Renewable Diesel Biodiesel 500,000, Source: California Energy Commission analysis 10/5/

19 Gallons California Jet Fuels and Aviation Gasoline Consumption 4,500,000,000 4,000,000,000 Commercial Jet Fuel Military Jet Fuel Aviation Gasoline 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 Commercial jet fuel consumption declined 15.1 percent between the peak in 2007 and the trough in 2009 (same pattern as diesel fuel). The strong recovery from the recession and associated rebound in air passengers and cargo have pushed consumption back up by 29.9 percent between 2009 and 2016 to reach a new record high of 3.87 billion gallons. 500,000, Source: California Energy Commission analysis 10/5/

20 California Gaseous Fuel Consumption The natural gas-based fuels usually displace diesel fuel Hydrogen transportation fuel usually displaces gasoline in light-duty vehicles Hydrogen consumption expected to rise through expanded fueling infrastructure & additional vehicle options LPG 1 (Propane) LNG 2 CNG 3 Hydrogen 4 Consumption Consumption Consumption Consumption Year Gallons Gallons Therms Kilograms ,455,500 27,970,031 98,033, ,317,500 28,307,916 98,291,858 15, ,999,500 28,645, ,150,176 9, ,983,500 28,983, ,058,495 17, ,316,000 22,400, ,325,161 19, ,391,000 18,900, ,599,355 23, ,861,067 29,635, ,456,782 38, ,632,877 32,356, ,186,972 34, ,139,991 35,487, ,230,879 52, ,028,638 30,492, ,369,476 73, ,755,459 31,868, ,759,354 66, ,834,779 33,082, ,462,285 64, ,806,328 34,000, ,989,469 62, ,793,698 31,605, ,408, ,575 Preliminary Values Notes 1. Table 25A Taxable Distributions of Diesel Fuel and Alternative Fuels, to FY data averaged over two years to estimates CY values for years 2003 through Values for 2009 through 2016 obtained from BOE quarterly Use Fuel Tax reports. 2. LNG data from verbal reports to CEC Reporting Unit by suppliers. 3. CNG data obtained from the annual California Gas Reports. Link to reports: 4. National Transit Authority (NTA) annual reports & DMV fuel cell vehicle registrations. FCVs assumed driven 9,600 miles/vehicle/yr & EPA Adjusted Combined Cycle fuel economy NTA Reports, Data Tables, Table 17, Energy Consumption, Other or Hydrogen Fuels 10/5/

21 Share of LCFS Credits by Fuel Type California LCFS Credit Portion by Fuel Type 100% 90% 80% 70% 60% 50% Other (CARBOB, ULSD, H2, Innovative Crude) Renewable Diesel Biodiesel Biomethane 40% Natural Gas 30% 20% 10% Importance of biomethane increasing under the Low Carbon Fuels Standard. Electricity Ethanol 0% Q1 - Q Q Q Q1 - Q Q Q Source: California Air Resources Board Q1 - Q Q Q Q1 - Q Q Q Q1 - Q Q3 - Q Q1 - Q /5/

22 Megawatt Hours 1,800,000 1,600,000 1,400,000 1,200,000 California Transportation Electricity Consumption Light-duty vehicle electricity consumption has grown from 62.2 thousand MWh in 2012 to 727 thousand MWh by 2016, an increase of more than ten times within four years a direct consequence of the growing purchase of battery electric and plug-in electric vehicles. 1,000, , , , ,000 Light-duty Vehicles Medium, Heavy-duty Vehicles & Trolleys Rail Transit Sources: Federal Transit Administration & California Energy Commission analysis of DMV data 10/5/

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24 Western States More Isolated than Rest of U.S. 10/5/

25 California Gasoline Market - Isolated California s gasoline market is nearly self-sufficient, so supplies of gasoline from outside of California are not routinely needed to balance out supply with demand Imports of gasoline and blending components account for only 3 to 6 percent of supply The California market is geographically isolated from other locations in the United States that produce refined products Pipelines connect California refining centers to distribution terminals in Nevada and Arizona, but these pipelines only operate in one direction sending gasoline and other transportation fuels to these neighboring states California market is isolated by time and distance from alternative sources of re-supply during unplanned refinery outages 10/5/

26 Product Pipelines Northern California The pipeline infrastructure in California is controlled by a combination of common carrier and private companies. Kinder Morgan is the sole common carrier of petroleum product pipelines in the State and transports the majority of fuels through its system every day. Other companies, such as Chevron, ExxonMobil, Shell, and Andeavor operate proprietary systems or segments that handle the balance of transportation fuels. Source: Energy Commission revision to Kinder Morgan map 10/5/

27 Millions of Barrels per Month Net exporter Foreign imports rare Gasolines Flows Northern California Domestic imports from WA refiners steady Imports from S. Calif. intermittent & small refinery outages Pipeline exports to Reno Foreign exports growing Domestic exports to PNW declined replaced by WA refiners Exports to S. Calif. normal portion of their supply volumes fluctuate based on refinery outages Imports into Northern California Exports out of Northern California -8 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 NC FOREIGN IMPORT SOUTH TO NORTH TRANSFER NC FOREIGN EXPORT NC PIPELINE EXPORT Source: California Energy Commission Pipeline Exports out of Northern California averaged roughly 500 thousand barrels per month over the entire time period. Remained unchanged in NC INTERSTATE IMPORT NC INTERSTATE EXPORT NORTH TO SOUTH TRANSFER 10/5/

28 Millions of Barrels Diesel Flows Northern California Imports into Northern California Exports out of Northern California -8 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 NC FOREIGN IMPORT NC INTERSTATE IMPORT SOUTH TO NORTH TRANSFER NC INTERSTATE EXPORT NC FOREIGN EXPORT NORTH TO SOUTH TRANSFER NC PIPELINE EXPORT Pipeline Exports out of Northern California averaged roughly 450 thousand barrels per month over the entire time period. Diesel pipeline exports appear to be increasing from an average of 430 thousand barrels in 2007 to 500 in 2015 and 460 in Large net exporter Foreign imports rare Domestic imports from WA refiners not needed Imports from S. Calif. Intermittent & small refinery outages Pipeline exports to Reno Foreign exports growing Domestic exports to PNW small replaced by WA refiners Exports to S. Calif. unusual Source: California Energy Commission 10/5/

29 Product Pipelines Southern California Southwestern system includes portions to deliver transportation fuels into Southern Nevada and Arizona NV Over 85% of supply AZ Over 45% of supply Dependency on Southern California refineries lessened by deliveries from West Texas and Utah 10/5/

30 Millions of Barrels per Month Net importer via marine Usually close to balance Foreign imports when needed & economic Domestic imports rare Gasolines Flows Southern California Imports from N. Calif. normal portion of their supply volumes fluctuate based on refinery outages Pipeline exports to NV & AZ 5 times N. Calif. volumes Foreign exports minimal Domestic exports eliminated Exports to N. Calif. rare volumes fluctuate based on refinery outages Exports out of Southern California -8 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 SC FOREIGN IMPORT NORTH TO SOUTH TRANSFER SC FOREIGN EXPORT SC PIPELINE EXPORT Imports into Southern California Source: California Energy Commission Pipeline Exports out of Southern California averaged roughly 2.4 million barrels per month over the entire time period. SC INTERSTATE IMPORT SC INTERSTATE EXPORT SOUTH TO NORTH TRANSFER 10/5/

31 Millions of Barrels Diesel Flows Southern California Imports into Southern California Exports out of Southern California -8 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 SC FOREIGN IMPORT SC INTERSTATE IMPORT NORTH TO SOUTH TRANSFER SC INTERSTATE EXPORT SC FOREIGN EXPORT SOUTH TO NORTH TRANSFER SC PIPELINE EXPORT Source: California Energy Commission Pipeline Exports out of Southern California averaged roughly 1.8 million barrels per month over the entire time period. Diesel pipeline exports appear to be decreasing from a rough average of 2 million barrels in 2007 to 1.5 million in Large net exporter Foreign imports when needed & economic Domestic imports rare Imports from N. Calif. Related to refinery outages Pipeline exports to NV & AZ 3 times N. Calif. volumes Foreign exports declined Domestic exports eliminated Exports to N. Calif. rare volumes fluctuate based on refinery outages 10/5/

32 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Millions of Barrels per Month Net Export out of Region Net Import into Region 4 3 Net Californian Gasoline Flows Over the entire time span, both Northern and Southern California have on average been net exporters since 2007, averaging roughly 1.9 million and 300 thousand barrels respectively NC NET IMPORTS SC NET IMPORTS Linear (NC NET IMPORTS) Source: California Energy Commission 10/5/

33 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Millions of Barrels per Month Net Export out of Region Net Import into Region Net Californian Diesel Flows Both Northern and Southern California are consistent net exporters of diesel product Source: California Energy Commission NC NET IMPORTS SC NET IMPORTS 10/5/

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35 Refining & Alkylation Alkylation unit most important gasoline blending component source in refinery Catalyst used to convert petroleum feedstocks to higher-value gasoline Sulfuric acid Hydrofluoric acid (HF) Only 2 refineries use HF in Calif. PBF Torrance Valero Wilmington Concerns raised regarding potential for HF vapor cloud to form if containment systems breached Source: Reactor-Resources.com 10/5/

36 Global Alkylation Technology & Capacity Much greater portion of alkylation units in world use HF compared to California UOP & COP use HF Other technology providers use sulfuric acid Source: DuPont 10/5/

37 Proposed Rule 1410 South Coast Air Quality Management District (SCAQMD) has proposed a rule that has the potential to eliminate HF use at refineries in Southern California. PR 1410 has three possible outcomes: No ban (maintain technology neutral policy) Performance-based structure Ban of HF (SCAQMD staff appear to be pursuing this option) Performance-based structure could expand on safety measures Both refineries already utilize Modified HF (MHF) techniques Chemical used in catalyst to reduce ability to form vapor cloud Additional equipment in place to douse alkylation unit in water intended to reduce ability of vapor cloud forming 10/5/

38 HF Ban Implications The concern is that the incremental impacts on gasoline costs for consumers and businesses could be as bad as or worse than those of experienced for the duration that the Torrance ESP was out of operation. Gasoline prices averaged 26 cents per gallon above normal for 17 months Equates to incremental costs of $5.6 billion for motorists & businesses Refiners are unable to simply replace one catalyst with another. Alkylation units would have to be replaced. Uncertainty regarding: Ability to continue operating modified HF units Timing & outcome associated with permit process Cost and economic viability of HF alkylation replacement requirement 10/5/

39 Ability to Maintain Operations Continuing operation of MHF alkylation units at Torrance and Wilmington will be determined by: Sufficient space for such a project within the refinery Location is appropriate for engineering and safety needs If such available space is not feasible, Existing MHF alkylation units will first have to shut down Demolished to make way for new construction Loss of alkylation output (and reduced production from other refinery process units) will decrease local supply refined products for a period of at least two years Impact on gasoline prices expected to be worse than those associated with the Torrance Refinery ESP explosion 10/5/

40 Timing & Outcome of Permit Process Before replacement work could commence, refiners would need to obtain all necessary permits through the CEQA process Outcome is uncertain It is possible that such permits will ultimately be denied Valero Benicia crude-by-rail permit denial recent example Even if granted, timeline could be extensive Chevron Richmond refinery modernization permit approval, 9+ years Initially submitted to City of Richmond during 2006 Final approval received April /5/

41 Cost and Economic Viability If an HF ban were compelled it is uncertain if either or both companies would elect to make such changes to their facilities Alkylation process unit projects are extremely expensive A recent project approved for the Valero Houston refinery is estimated to cost $300 million for an alkylation unit with a capacity of 13,000 barrel per calendar day Capacity of the alkylation units at Valero Wilmington and PBF Torrance are 22,000 and 24,200 barrels per day capacity, respectively These alkylation unit capacities are each nearly twice the capacity, meaning the potential costs for such projects at the two California refineries could, at a minimum, easily approach or exceed $500 million per facility These estimated costs for such a replacement project could be at or near the value of the refinery when one considers that ExxonMobil sold the entire Torrance refinery to PBF Energy for $537.5 million It would therefore be uncertain as to whether such an expenditure could be justified by either or both companies should an HF alkylation ban ultimately be approved by the SCAQMD 10/5/

42 More information on Rule 1410 More information about Rule 1410 Meetings can be found at: No recordings of meetings SCAQMD is posting copies of presentations and related back-up material. Next meeting scheduled: October, /5/

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44 Energy Commission Responsibilities in an Emergency (Energy Supply Shortage) In a large scale emergency events, California s Office of Emergency Services (OES) becomes California s lead agency The Energy Commission role is to monitor, assess, and provide energy supply expertise (for all energy sources) For petroleum fuels, the Energy Commission becomes transportation fuel supply management center Refining is a privately-owned industry, no utility oversight 10/5/

45 Fuel Set Aside Program Two versions of the Fuel Set Aside Program : Informal and Formal Informal version: short term emergencies o Recently used for the Northern California fires o Energy Commission s role to identify fuel sources for emergency services o Facilitate communications for a normal market transaction Formal version: Used for a prolonged and widespread shortage or emergency o Requires Governor Emergency Order directing FSAP implementation o Energy Commission authorized to redirect fuels as directed by the Chairman of the Energy Commission or the designated representative (Fuel Set Aside Officer / FAO) o Formal fuel requests submitted directly from Cal OES or via the internet o Requests can be made by the public, but no guarantee that fuel will be provided 10/5/

46 Fuel Set Aside Business Process Cal OES Tasking Operations Energy Commission Fuel Set Aside Website Fuel Specialist Review and Recommendation Fuel Accounting System (Data Analysts) Public FAO Review & Coordination with CalOES Director Refiners and other fuel sources 10/5/

47 Energy Commission Emergency Response Contact Lead Emergency Response Coordinator: Senior Fuels Analyst: Transportation Fuels Data Unit Supervisor: Justin Cochran Gordon Schremp Ryan Eggers Executive Office California Energy Commission (916) ca.gov th Street, MS-39 Sacramento, CA Energy Assessments California Energy Commission (916) th Street, MS-22 Sacramento, CA Energy Assessments California Energy Commission (916) th Street, MS-20 Sacramento, CA /5/

48 Transportation Fuel Data Unit PIIRA Data Collection and Products Energy Commission Energy Emergency Website: PIIRA forms: Weekly Fuels Watch: Transportation Fuel Outlook, 2017: /5/