CRUDE BY RAIL REFINER S PERSPECTIVES. Presented by Joseph Israel, February 2013

Transcription

1 CRUDE BY RAIL REFINER S PERSPECTIVES Presented by Joseph Israel, February 2013

2 2 Background Profitability Profile Refinery profitability profile is driven by: Location Feedstock and production parity points = efficient access to the right sources of crude oil and right products markets Configuration Hardware complexity = Converting the right crude oil to the right products with maximum volumetric expansion Efficiency Efficient/Reliable operations Effective cost structure Prior 2011: Relatively Stable Parity points Short term focus: Efficiency Long Term focus: Configuration Domestic supply growth Constrained Logistics After 2011: Dynamic Parity points Focus: Access the right crude

3 3 Location Past Dynamics U.S. Crude Supply and Movement prior Domestic versus foreign sour movements and the disposition of light sweet balance over time Canadian Foreign Domestic

4 Location Domestic Crude Developments U.S. Crude Supply parity points have significantly shifted, providing new opportunities for refiners, producers, as well as midstream players Canadian Crude growth 4 Bakken Permian Basin Canadian Foreign Domestic Eagle Ford US to become world s top oil producer by 2020, going up from current 7-8 MMBD to 11 MBD

5 Pricing and Transportation cost Dynamics 5 Wellhead prices are typically determined by a netback of the marginal barrel produced. Alberta 161 Bakken $14-17/Bbl Enbridge Lakehead $12-14/Bbl Canadian crude production +1.5 MMBD (50%) by 2020 to 4.5 MMBD Bakken crude production +0.4 MMBD (50%) by 2020 to 1.2 MMBD Eagle Ford +0.4 MMBD (65%) to 1 MMBD Permian Basin +0.7 MMBD (55%) by 2020 to 2 MMBD 115 Express-Platte White Cliffs 30 TEXAS PANHANDLE BORGER MIDLAND ODESSA VY- Cushing CENTER COP WICHITA FALLS Amdel 590 CUSHING DRUMRIGHT Seaway 350 Midland JAL WTG 335 CORSICANA LONGVIEW 350 Eagle Ford Seaway Sunoco lines x Exxon Mobil SHELL Lakehead & Southern Access BP Spearhead W R 1140 CHICAGO LINE 6B 623 Mustang ChiCap 275 PATOKA 219 CAPLINE Mid Valley Refineries 340 Toldeo Lima SARNIA Pipeline Capacities,MBD

6 Result Pricing Disparity 6 WTI / LLS Separation WCS / Maya Separation $/Bbl 90 $/Bbl WTI LLS Bakken Clearbrook WCS Maya Rail / barges / trucks are needed to clear the market and set the differentials US refineries are focused on crude flexibility and logistics More than 13 MMBD (million barrels per day), representing in excess of 75% of the US refining industry, will enjoy various degrees of crude cost advantage compared to global peers by 2014 Reduced crude imports to USA Reduced oil products imports to USA Increased oil products exports from USA

7 Transitioning to Domestic North American Crude 7 75% % Imported Crude Oil/Crude Runs 70% 65% 60% 55% 50% 45% Railcars per day Going toward 2.5 MMBD crude by rail capacity by mid 2014 = Over 15% of crude runs

8 8 60.0% U.S.+CANADIAN RAIL TRAFFIC - Railcars Loadings 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % Agricultural & food products Chemicals Petroleum Coal Forest Products Metallic ores and metals Motor Vehicles Nonmetallic minerals Other % Data compiled by the Association of American Railroads and released by the U.S.Energy Information Administration Domestic oil production trends are changing commodities mix shipped by rail

9 Learning the Rail Business 9 Producers, refiners and Midstream players are learning the rail business together: Railcars availability Railcars utilization/optimization (size, capabilities) Loading capabilities, services Offloading Gains & Losses equipment, best practice Customs Railroads Commercial aspects - Demurrage, Detention

10 Summary 10 Crude by Rail is needed to clear the market Industry is learning together about rail operations Shifting from quick solutions mode to efficiency Shifting from minimum rules to best practice Market dynamics should support rail activity in the coming 3-5 years and potentially longer term, especially on the heavy crude side, due to pipeline viscosity limits