Impacts of Recent Hurricanes and the Outlook for Energy Markets

Transcription

1 Impacts of Recent Hurricanes and the Outlook for Energy Markets Presentation to Baton Rouge Rotary Club November 8, 2005 David E. Dismukes Center for Louisiana State University

2 Summary on Impacts of Hurricanes Hurricanes were incredibly destructive to energy business and ramifications are going to be long lived (locally and nationally). Hurricanes created more destruction than offshore production storms clearly showed the interrelationship of all types of energy infrastructure in the Gulf the 4 Ps production, processing, pipes, and power. Hurricanes created more destruction than just that along the Gulf price ramification were felt nationally and impacts felt globally in energy markets. In the near term, this will be the most expensive heating season on record for American consumers. Price and supply wildcards: weather and industrial activity. The claims of demand destruction potentially overstated in very near term not in intermediate to longer term. Energy markets are likely to not be back on their feet prior to the next hurricane season. Potentially setting ourselves up for a major supply-demand realignment.

3 Katrina versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production 120% 100% Katrina (Landfall: August 29, 2005) Dennis (Landfall: July 10, 2005) Ivan (Landfall: September 16, 2004) 80% percent 60% 40% 20% 0% Landfall Source: Minerals Management Service

4 Refineries Impacted by Katrina Gulf Coast, Port Arthur and Lake Charles Company Location Processing Capacity Status (barrels per day) (as of August 31) ExxonMobil Baton Rouge, LA 493,500 reduced runs ChevronTexaco Pascagoula, MS 325,500 shutdown Citgo Lake Charles, LA 324,300 total supply loss ConocoPhillips Belle Chasse, LA 247,000 shutdown Marathon Garyville, LA 245,000 shutdown ConocoPhillips Lake Charles, LA 239,400 total supply loss Motiva (Shell) Convent, LA 235,000 shutdown Motiva (Shell) Norco, LA 226,500 shutdown Total Port Arthur, TX 211,500 reduced runs ExxonMobil Chalmette, LA 187,200 shutdown Valero St. Charles 185,000 shutdown Murphy Meraux 120,00 shutdown Valero Krotz Springs, LA 80,000 reduced runs Shell Chemical Saraland, AL 80,000? Shell Chemical St Rose, LA 55,000 shutdown Placid Oil Port Allen, LA 48,500 reduced runs Source: Energy Information Administration, Department of Energy

5 Total Immediate Refinery Impact LA/MS/AL Gulf Coast Refiners (reduced runs and shutdowns) 2,528 thousand bbls/day 15% of US operating capacity Port Arthur/Lake Charles (reduced runs and supply loss) 775 thousand bbls/day 5% of US operating capacity Midwest (reduced runs supplied by Capline Pipeline) 1,628 thousand bbls/day 10% of US operating capacity Remaining US Operating Capacity 12,075 thousand bbls/day 70% of US operating capacity Total Refinery Impact 4,931 thousand bbls/day 30% of US operating capacity Source: Energy Information Administration, Department of Energy

6 Gasoline Price Increases August 30, 2005 to September 6, Regional Changes in Gasoline Prices (cents per gallon) 60.1 Mid-Atlantic 54.9 Northeast 51 South Atlantic 46.9 Midwest 39.5 South 38.5 Mountain 25.3 West 44.7 US Colonial / Plantation Pipeline Systems < > Source: American Petroleum Institute

7 Critical Terminals Impacted by Katrina ExxonMobil Baton Rouge Refinery

8 Critical Electricity Transmission Lines Impacted by Katrina ExxonMobil Baton Rouge Refinery

9 Critical Terminals and the Power-Pipeline Infrastructure ExxonMobil Baton Rouge Refinery

10 Katrina versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production 100% 90% Katrina (Landfall: August 29, 2005) Dennis (Landfall: July 10, 2005) Ivan (Landfall: September 16, 2004) 80% 70% percent 60% 50% 40% 30% 20% 10% 0% Landfall Source: Minerals Management Service

11 Number of Natural Gas Processing Facilities Out Capacity 2004 as of Average Plant Location Jan 1, 2005 Throughput Status (MMcf/d) (as of September 10) Dynegy Yscloskey, LA 1,850 1,343 serious damage Dynegy Venice, LA 1, serious damage Enterprise Prod. Toca, LA 1, assessment ongoing BP Pascagoula, MS 1, temporary pipeline outages ExxonMobil Garden City, LA 630 n.a. waiting on power Duke Energy Bay, AL temporary pipeline outages Marathon Burns Point, LA waiting on power ExxonMobil Grand Isle, LA waiting on power Source: Energy Information Administration, Department of Energy

12 Shell Mars Tension Leg Platform Source: Shell.com

13 Shell Mars Tension Leg Platform Source: Shell.com

14 Ocean Warwick Dauphin Island, AL

15 Semi-Sub Stuck Under Bridge North Mobile Bay

16 Venice Port, Supply & Crew Bases

17 Chevron Refinery Pascagoula, MS

18 Then, Along Comes Rita

19 Platforms/Structures Impacted by Rita

20 Shut-in Statistics Crude Oil Percent Rita Percent Total Percent Shut-in of Daily Cumulative of Annual Cumulative of Annual Oil GOM Oil Shut-in Oil GOM Oil Shut-in Oil GOM Oil Date Production Production Production Production Production 1 Production (bbls/day) (%) (bbls) (%) (bbls) (%) week ending 9/23/05 1,486, % 4,840, % 30,280, % week ending 9/30/05 1,467, % 15,341, % 40,828, % week ending 10/7/05 1,162, % 21,748, % 50,105, % week ending 10/14/05 1,008, % 25,897, % 57,642, % week ending 10/21/05 986, % 30,803, % 64,547, % week ending 10/28/05 1,017, % 35,918, % 71,613, % 31-Oct-05 1,015, % 1,015, % 74,664, % 1-Nov-05 1,000, % 2,015, % 75,664, % 2-Nov , % 2,973, % 76,622, % 3-Nov , % 3,764, % 77,413, % 4-Nov , % 4,545, % 78,193, % 7-Nov , % 773, % 80,526, % Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management Service

21 Rita versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production 100% 90% 80% Rita (Landfall: September 24, 2005) Katrina (Landfall: August 29, 2005) Dennis (Landfall: July 10, 2005) Ivan (Landfall: September 16, 2004) 70% percent 60% 50% 40% 30% 20% 10% 0% Landfall Source: Minerals Management Service

22 Total Immediate Refinery Impact Port Arthur/Lake Charles (shutdowns and damaged facilities) 1,715 thousand bbls/day 10% of US operating capacity Houston/Texas City (shutdowns and damaged facilities) 2,292 thousand bbls/day 13.5% of US operating capacity Corpus Christi (shutdown and reduced runs) 706 thousand bbls/day 4% of US operating capacity Remaining US Operating Capacity 11,954 thousand bbls/day 70% of US operating capacity Midwest (reduced runs from supply loss) 338 thousand bbls/day 2% of US operating capacity Total Refinery Impact 5,052 thousand bbls/day 30% of US operating capacity Source: Energy Information Administration, Department of Energy

23 Shut-in Statistics Natural Gas Percent Rita Percent Total Percent Shut-in of Daily Cumulative of Annual Cumulative of Annual Oil GOM Oil Shut-in Oil GOM Oil Shut-in Oil GOM Oil Date Production Production Production Production Production 1 Production (bbls/day) (%) (bbls) (%) (bbls) (%) week ending 9/23/05 7, % 21, % % week ending 9/30/05 7, % 77, % % week ending 10/7/05 6, % 111, % % week ending 10/14/05 5, % 135, % % week ending 10/21/05 5, % 161, % % week ending 10/28/05 5, % 189, % % 31-Oct-05 5, % 5, % % 1-Nov-05 5, % 10, % % 2-Nov-05 5, % 15, % % 3-Nov-05 4, % 20, % % 4-Nov-05 4, % 25, % % 7-Nov-05 4, % 4, % % Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management Service

24 Rita versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production 100% 90% Rita (Landfall: September 24, 2005) Katrina (Landfall: August 29, 2005) Dennis (Landfall: July 10, 2005) Ivan (Landfall: September 16, 2004) 80% 70% 60% percent 50% 40% 30% 20% 10% 0% Landfall Source: Minerals Management Service

25 Number of Natural Gas Processing Facilities Out Capacity Throughput (MMcf/d) (MMcf/d) Mississippi and Alabama Plants BP Pascagoula 1, DEFS Mobile Bay RDS Yellowhammer Total 1, ,175.0 East Louisiana Plants DYN Venice 1, EPD Toca 1, DYN Yscloskey 1, ,343.0 Total 4, ,947.8 West Louisiana Plants DYN Barracuda BP Grand Chenier WMB Johnson Bayou EPD Sabine Pass DYN Stingray Total 1, ,036.0 Central Louisiana Plants DYN Lowry EPD Cow Island AHC Sea Robin EPD Calumet 1, Norcen Patterson I DUK Patterson II EPD Pelican Total 4, ,669.8 Grand Total 12, ,828.6 Assumed Total GOM Production 10,000.0 Percent of Total 78.3%

26 Henry Hub, September 25, 2005 Source: LIOGA

27 Entergy Transmission Source: Entergy.com

28 Single Well Caisson Western GOM Source: MMS

29 Natural Gas Pipeline Leak Source: MMS

30 Chevron Typhoon TLP

31 Longer Run Impacts of Hurricanes Katrina and Rita

32 Estimated Decrease in Refining Production from both Katrina and Rita 6,000 Refining capacity should return to normal soon, but there will be a stubborn five percent of total capacity that has unknown return date not good for tight markets 100% 5,000 Total Lost Production Lost Production as a Percent of US Total Capacity 90% 80% thousand bbls per day 4,000 3,000 2,000 70% 60% 50% 40% 30% percent of US capacity 1,000 20% 10% 0 0% Landfall Source: Assumes 95 percent capacity factor; assumes 4 week recovery for facilities damaged by Rita.

33 Cumulative Refining Production 4,000 3,500 Impacts of Katrina result in a loss of million barrels, or 4 percent of total production, by the end of the year. Impacts of Katrina and Rita result in a loss of million barrels, or over 5 percent of total, by the end of the year. Cumulative Production - Business as Usual Cumulative Production - After Katrina Cumulative Production - After Katrina and Rita 3,000 2,500 million bbls 2,000 1,500 1, Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Source: Assumes 95 percent capacity factor

34 Estimated Return of Existing Crude Production 1,800 1,600 If crude production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time. 100% 90% thousand bbls per day 1,400 1,200 1, % 70% 60% 50% 40% 30% 20% percent of daily GOM production (%) % 0 Landfall Ivan Rita days after landfall Katrina % of Daily GOM Production - Ivan % of Daily GOM Production - Katrina % of Daily GOM Production - Rita 0% Note: Assuming recovery of 2,685 barrels per day for remaining days.

35 Estimated Return of Existing Natural Gas Production 10 9 If natural gas production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time. 100% 90% bcf per day % 70% 60% 50% 40% 30% 20% Percent of Daily GOM Production (%) 1 10% 0 0% Landfall Ivan Katrina Rita % of Daily GOM Production - Ivan % of Daily GOM Production days - Katrina after landfall % of Daily GOM Production - Rita Note: Assuming recovery of bcf per day for remaining days.

36 Where Have We Been? Where Are We Now?

37 Forecast for Energy Commodity Prices Natural Gas Futures $16 $ Actual Futures $12 $10 $ per Mcf $8 $6 $4 $2 $0 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Note: Prices recorded on November 7, 2005 Source: Federal Reserve Bank of St. Louis; and Nymex.com

38 Energy Market Outlook Fall Signal Winter Signal Overall 6 Mo. (Sep-Oct) (Nov-Mar) Market Trend Bullish, weather, supply concerns Bullish, weather, supply concerns - daily super spikes probable Bullish, low injections, set up chronic tight market conditions -- potential lows going into next injection season Range: Range: Range: Short term (September-October) weather futures prices are bullish for natural gas in the South and West, but neutral in the East and Midwest Forecast of $58 to $70 crude through the end of Refining capacity challenges will keep pressure on refined product prices. Diminishing natural gas surpluses especially in the aftermath of Katrina and Rita. Storage forecasts combined with production shut-ins call into question the supply adequacy heading into the winter season given our preliminary winter assessments. Is 3.2 tcf adequate in the face of 50 percent plus shut-ins? Katrina and Rita impacts felt until next hurricane season. Usage wild cards: weather & industrial activity

39 Outlook for Winter Gas Demand Winter Winter Difference Average Average Average Sector (Bcf) (Bcf/d) (Bcf) (Bcf/d) (Bcf) (Bcf/d) Residential 3, , Commercial 1, , Industrial 3, , (116) (0.8) Electric 1, , Lease, Plant and Pipeline Fuel Total 11, , Source: Energy Ventures Analysis, Inc.

40 Industrial Production Index Jan-01 Apr-01 Index (Seasonally Adj) Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05

41 Historic and Forecasted Winter Season Industrial Gas Usage Forecast bcf/d / / / / / / /2006 Source: Energy Ventures Analysis, Inc.

42 Questions, Comments, & Discussion