David St. Amand. 3 February Page 1

Transcription

1 David St. Amand 3 February 2015 Page 1

2 The Wilson Gillette Report Jones Act Product Tankers and Large ATBs (over 140k BBLs capacity) Current Jones Act Fleet and Deployment Newbuilds The Jones Act Orderbook Current Charters (who and how much) Demand by Segment - Cross Gulf Clean - West Coast - Chemicals and Specialties - Military Sealift Command - Alaskan Tanker Trade - Lower 48 Light Tight Oil (LTO Frac Oil) Forecast Demand Forecast Supply Bottom Line - Forecast Term Charter Rates to 2020 (Tankers and ATBs) Crude Exports Crude Prices Scary Pipelines 3 February 2015 Page 2

3 The Jones Act s Product Tanker and Large ATB Fleet comprise 74 tank vessels Jones Act 32 Product Tankers and 42 ATBs: The Eagle Ford (ex Kodiak) has landed as a Product Tanker Jones Act Tank Vessels 0ver 143k BBLs ANS Tankers Product Tankers Large ATBs Product Tankers and Large ATBs Total Number Total Capacity 11,780 10,672 8,370 19,042 30,822 Minimum Capacity Maximum Capacity 1, ,300 Average Capacity 1, Source: Navigistics Consulting as of 1/20/2015 Alaska North Slope (ANS) fleet undergoing change with two 115k DWT newbuilds for XOM at Aker Philadelphia - Liberty Bay delivered July 2014 Eagle Bay due by end January (ANS ~ 4/2015) - Kodiak sold to Seacor/Access renamed Eagle Ford (loaded Corpus Christi 1/9-13/2015) - Sierra (late 70s built 125k DWT double-hull tankers) sold to Occidental/Keystone (not clear owner/charterer) - ANS trade may have surplus tankers. Prod. Tankers defined as 30 52k DWT (up to 373k BBL cap plus Eagle Ford at 570k BBL) - excludes dedicated large ANS tankers (all over 100k DWT) - Sierra and Eagle Ford included in forecast of lower 48 trades 2015 onwards. Large ATBs (143k BBL capacity and above) included in supply analysis - excludes smaller harbor ATBs (our focus is on coastal PADD to PADD vessels). 3 February 2015 Page 3

4 The Jones Act s Product Tanker and Large ATB Deployment (December 2014) Over one third of the Jones Act product tanker and large ATB fleet now moves crude oil % of Capacity West Coast 18% MSC 4% Tankers & Barges Clean US Gulf 34% Number of Vessels Crude Oil 36% Chemicals 8% Number Clean USG Chemicals Crude Oil West Coast MSC Total Tankers Barges Tankers & Barges % of Number 34.2% 9.6% 34.2% 19.2% 2.7% 100.0% West Coast trade includes tank vessels in crude oil service (product tankers in ANS service and ATBs in LTO service) Source: The Wilson Gillette Report by Navigistics Consulting 3 February 2015 Page 4

5 There has been a Shift in Deployment to Crude Oil % of Capacity West Coast 18% MSC 4% Tankers & Barges December 2014 Clean US Gulf 34% West Coast 20% MSC 4% Tankers & Barges August 2014 Clean US Gulf 32% Crude Oil 36% Chemicals 8% Crude Oil 33% Chemicals 10% Dirty US Gulf 1% West Coast 27% Crude Oil 25% MSC 4% Clean US Gulf 38% Dirty US Gulf 1% Chemicals 5% Source: The Wilson Gillette Report by Navigistics Consulting Tankers & Barges December 2013 West Coast 25% Crude Oil 24% MSC 4% Tankers & Barges April 2014 Clean US Gulf 37% Dirty US Gulf 2% Chemicals 8% 3 February 2015 Page 5

6 The Jones Act s Product Tanker and Large ATB Trade Issues Jones Act Supply is increasing: Product tankers (50k DWT) 14 on order at NASSCO and Aker Philadelphia totaling 4.6 million barrels capacity. Large ATBs (over 143k BBL capacity) Nine on order totaling 1.7 million barrels of capacity (breaking news: Gunderson-Kirby option for 185k BBL ATB triggered/exercised) Total Firm orders of 6.3 million barrels capacity is 34 percent of current fleet. In addition, Jones Act vessel owners hold seven Shipyard building options (unexercised) for new product tankers and large ATBs with a potential capacity of 1.6 million barrels. Also two ANS tankers (Sierra and Kodiak 125k DWT each) are transferring after sale to lower 48 crude oil trade in But delivery of newbuilds does not start until second half 2015: The existing orderbook is scheduled for delivery between 2q2015 and 2q2017. It is reported that 4.0 million barrels of the 6.3 million barrels of Jones Act s vessels capacity on order is already under charter. 3 February 2015 Page 6

7 The Jones Act s Product Tanker and Large ATB Trade Issues Jones Act Orderbook (October 2014): Shipyard Owner Type Delivery Options Capacity, kbbls Options NASSCO APT Tanker 4q NASSCO APT Tanker 1q NASSCO APT Tanker 2q NASSCO APT Tanker 3q NASSCO APT Tanker 2Q Aker Phila. Crowley Tanker 3q Aker Phila. Crowley Tanker 4q Aker Phila. Crowley Tanker 2q Aker Phila. Crowley Tanker 3q NASSCO Seabulk Tanker 2q NASSCO Seabulk Tanker 4q NASSCO Seabulk Tanker 1q Aker Phila. Philly Tanker Tanker 3q Aker Phila. Philly Tanker Tanker 2q VT Halter Bouchard Barge 2q VT Halter Bouchard Barge 3q DonJon Seacor Barge 2q Gunderson Kirby Barge 3q Gunderson Kirby Barge 1q Fincantieri (Bay) Kirby Barge 3q Fincantieri (Bay) Kirby Barge 2q Fincantieri (Bay) Moran Barge 2q Fincantieri (Bay) Moran Barge 2q Total Orderbook ,285 1,585 Page 7

8 Based on Firm Shipyard Contracts the Jones Act s Product Tanker and Large ATB Fleet will Recover from OPA-90 Retirements by ,000 24,000 Total Fleet Fleet Capacity, Barrels 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Retired Barges Current Large Barges Current Tankers Newbuild Barges Newbuild Tankers 2,000 0 Retired Tankers OPA-90 Double-Hull retirements downsized the fleet through 2012 (all retired by 1/1/2015). By 2017 the Jones Act fleet is expected to have replaced all OPA-90 retired capacity Beginning in 2019 it is anticipated that age based retirements will impact the fleet. Page 8

9 Jones Act Market Recent Events ExxonMobil sold the Kodiak (built k DWT) re-named Eagle Ford on 11/7/2014 to Seacor/Access leasing no announcements by anybody. Chartered to P66 for 18 months to move Eagle Ford to market (first voyage CC to LOOP) ExxonMobil reported to have sold the Sierra (built k DWT sister ship to the Eagle Ford) to Keystone/Marathon for moving LTO to market. Anticipate closing end 1Q2015 early 2q2015. American Phoenix (built 2012) sold for $157 million to Genesis Energy, L.P. Crowley sold the Florida and Pennsylvania to Kinder Morgan for $270 million en bloc. 15 January 2014 Page 9

10 All about PADDs 15 January 2014 Page 10

11 PADD 3 to PADD 1 Clean Products The European refinery industry is expected to go through further rationalization. The U.S. refining industry has been going through the opposite due in part to the growth in U.S. crude oil production (LTO reduces feedstock costs) and the natural gas surplus reducing refinery energy costs. How will this change? While the U.S. East Coast (PADD 1) was importing gasoline from Europe, PADD 3 refiners were exporting distillate to Europe. The increasing penetration of LTO into PADD 3 refineries, however, will likely increase gasoline yields while decreasing distillate yields (e.g., diesel and jet/ kero) due to the differing qualities of LTO and the displaced imported crudes. This will put pressure on PADD 3 refiners to find markets for the additional gasoline production. This will likely lead to increased movements from PADD 3 to PADD January 2014 Page 11

12 PADD 3 to PADD 1 Clean Products EIA s This Week in Petroleum March 26, 2014 Major changes in the Atlantic Basin gasoline market U.S. exports to Caribbean and West Africa Europe moves to U.S. declining 15 January 2014 Page 12

13 PADD 3 to PADD 1 Clean Products 15 January 2014 Page 13

14 The U.S West Coast (PADD 5) is difficult to assess from a traditional balances perspective due to a variety of factors including the following: Lack of defined stable product movements. There is an imbalance of supplies in the various regions with the Southern California (refinery deficient) and Portland, OR (no refineries) areas being net importers and Northern California and the Puget Sound areas being net exporters. Intercompany moves by companies with multiple refineries in PADD 5 (e.g., Chevron and Tesoro) obfuscate the basic expected trade pattern. The movement of vessels between trades such as Tesoro s rotation of its three term chartered product tankers between Alaskan crude oil service (e.g., the Valdez to Nikiski run and Valdez to Puget Sound/San Francisco Bay Area/ Southern California) and clean product service also tends to make forecasting balances problematic. Lack of timely data on intrastate moves in California as well as the lack of intra PADD moves also clouds the issue. West Coast/PADD 5 demand looks stable West Coast 15 January 2014 Page 14

15 Chemicals and Specialties Low Natural Gas price driving U.S. chemical renaissance but will this end with the crude price collapse? Chemicals may increase with massive capital investment (are those for export?)! Less than 10% of Jones Act moves involve chemicals 15 January 2014 Page 15

16 The Military Sealift Command (MSC) currently utilizes three Jones Act eligible tankers in support of the U.S. military. They have two AMPT 50 kdwt product tankers, the Empire State and the Evergreen State, on time charter as follows: Empire State Commenced October 5, 2010 and expires September 30, 2013 with one 12-month option and one 11-month option. (max. expiration date: August 31, 2015). Current rate $53,500 per day. 15 January 2014 Military Sealift Command Evergreen State Commenced January 4, 2011 and expires September 30, 2013 with one 12-month option and one 11-month option. (max. expiration date: August 31, 2015). Current rate $53,500 per day. In addition, MSC has the Maersk Peary (34k DWT - U.S.-flag but not coastwise eligible, built in Korea in 2004) on time charter at $38, per day with maximum expiration (two 12-month and one 11-month options) of March 31, The fourth MSC tanker is the USNS Lawrence H. Gianella (30k DWT - a U.S. Navy owned T-5 tanker built in coastwise eligible - sister ship to the Houston). MSC has two RFPs looking for Jones Act tank vessels (tankers and/or ATBs). Page 16

17 The Jones Act s Product Tanker and Large ATB Trade Overview Jones Act Demand is Increasing but Supply Constrained: Every Light Tight Oil (LTO or Frac Oil) forecast has been low But how will the crude oil price collapse impact LTO production and investment? Exports of ANS (in U.S.-Flag tankers) will probably grow with Puget Sound refineries running Bakken (not exportable) blended with Canadian heavy crudes (creating an ANS lookalike) Gasoline/Distillate movements PADD 3 (GOM) to PADD 1 (Florida and potentially north) is impacted by European refinery issues (reduced imports) and PADD 3 refinery (increased production) this is the Jones Act balancing move (balanced with gasoline imports to Florida) Chemicals are increasing as well (driven by increasing natural gas production but will the crude oil price collapse stall the increase as natural gas feedstock advantage is eliminated?) Page 17

18 Other Jones Act s Product Tanker and Large ATB Trade Issues Exports, crude price collapse, and new pipelines Oh My! Will crude oil / condensate exports impact the Jones Act? How will the crude oil price collapse impact LTO production and investment? And don t forget about the threat from new pipelines. Page 18

19 The Crude Oil Export Issue Banned for 40 years but looks to be weakening if not going away, how will that impact the Jones Act? Page 19 Continued

20 The Crude Oil Export Issue Banned for 40 years but looks to be weakening if not going away, how will that impact the Jones Act? Not by much Page 20

21 The Crude Oil Export Issue The key is to watch imports of light crude Imports of Crude API>35 kbds From Countries other than Canada Imports of Crude API>35 kbds From Countries other than Canada Crude Oil Imports API>35 All Countries Except Canada 1, PADD 1 PADD 3 PADD 5 PADD 2Q2013 2Q2014 3Q2014 3Q14-2Q (301) (254) (6) U.S. Total (561) Imports of Crude API>35 From Countries other than CA as % of Runs PADD 1 PADD 3 PADD 5 Total 2Q % 3% 6% 7% 2Q % 1% 6% 3% 3Q2014 8% 0.3% 5% 2% As long as U.S. imports light crude (API>= 35 ) then refineries are not maxed out on light crude. PADD 3 close to saturation point for light crude oil. Page 21

22 The Crude Oil Export Issue Exports have not taken off with BIS Rulings on Condensate Exports Exports of Crude Oil by PADD and Destination, kbds PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 Total To Canada Other (ex ANS) Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Dept. of Commerce s Bureau of Industry and Security (BIS) controls crude oil exports. BIS FAQs on crude oil exports on website Page 22

23 Crude oil price collapse impact on Jones Act Depends on how low crude prices go. $ $ $ Crude Oil Price, $ per Barrel $ $ $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 BRENT Arab Light WTI LLS Sustained $40/barrel or lower should give OPEC the production relief it needs. Page 23

24 Crude oil price collapse impact on Jones Act Marginal cost of production is the driver Bakken Cost of Production and Rig Count by North Dakota County Source: North Dakota Dept. of Mineral Resources, Presentation by Director Lynn D. Helms to ND House Appropriations Committee 1/8/2015 Page 24

25 Crude oil price collapse impact on Jones Act Marginal cost of production is the driver Bakken Production Forecast Barrels Oil Production per Day (BOPD) by Crude Oil Price Source: North Dakota Dept. of Mineral Resources, Presentation by Director Lynn D. Helms to ND House Appropriations Committee 1/8/2015 Bakken Production (North Dakota) was 1,187,206 BOPD in November 2014 (average price $69.41) Bakken price at wellhead fell to $29.25/barrel (January 14, 2015) Page 25

26 Crude oil price collapse impact on Jones Act The largest Jones Act crude oil move is Eagle Ford from Corpus Christi Eagle Ford Waterborne Movements from Corpus Christi, kbds Texas Other PADD 3 PADD 1 ATB & Tanker Inland-TX Inland-Other P3 Total Jones Act Exports 1Q Q Q Oct-Nov Source: Navigistics analysis of Port of Corpus Christi data The major driver of the crude price collapse on the Jones Act product tanker and large ATB trade is how it impacts Eagle Ford production. EIA is showing expected shortterm increases in Eagle Ford production (Jan. 15 DPR) and total Lower 48 production Lower 48 Crude Oil Production, MBDs 9 Lower 48 Forecast Crude Production, MBDs Actual Forecast 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 Source: EIA Short-Term Energy Outlook, Jan Page 26

27 New Pipelines Depends on where they go. Phillips 66 and Energy Transfer Partners, LP announced an open season beginning 12/1/2014 for a Nederland to St. James crude oil pipeline. Plains All American s proposed Diamond Pipeline from Cushing to Valero s Memphis refinery likely leads to Capline reversal creating a crude oil pipeline from Cushing to St. James. Kinder Morgan s Palmetto Pipeline, petroleum products along expanded Plantation pipeline to new pipeline from Belton, SC to Jacksonville, FL. Successful open season closed 10/31/2014 announced capacity 167kBD start July Page 27

28 New Pipelines Depends on where they go. Keystone XL to the U.S. Gulf with Jones Act tankers could be cheaper than Bakken by rail to Northeast refineries (would a Capline reversal do the same?). - My bet: no matter what Congress does, Keystone XL will not be built (Alberta Clipper, Flanagan South, and Seaway Twin/Keystone Market Link filled the void). TransCanada s Energy East, if it stops at Montreal/Quebec (instead of going to St. John, NB), could (with a reversed Portland Pipeline likely empty with Enbridge s Line 9 reversal) provide another route for Bakken to Northeast refineries that would be cheaper than rail and involve Jones Act tankers. Page 28

29 Other potentially projects that could impact Jones Act Will they actually succeed?: BORCO Bahamas gasoline blending project (approved by U.S.) to take U.S. gasoline components (via non-jones Act vessels), blend, and move to U.S. as finished gasoline (via non-jones Act vessels). Not happening Hovensa Refinery in U.S. Virgin Islands was under agreement to be sold and re-opened running U.S. LTO and shipping refined petroleum products to U.S. via non-jones Act vessels (U.S. Virgin Islands has a Jones Act exemption). - Virgin Island s Government blocked the sale Page 29

30 One thing not to worry about, the Jones Act (despite Sen. McCain) Questions? David St. Amand Navigistics Consulting 1740 Massachusetts Avenue Boxborough, MA USA Source: John Auers (Turner, Mason) Surviving the Flood of Light Crude Oil Conference (August 2014) RBN Energy and Turner, Mason Page 30