ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland ConocoPhillips Baxter Burns Ergon
CRUDE OIL SUPPLY A WORLD LOOK
Crude Oil Supply (2006) World Crude Oil Production Millions of Barrels Per Day FSU/E. Europe Middle East 12.6 26.0 Africa 9.8 W. Europe 6.3 10.6 11.3 8.4 Total: 85MMB/D Latin America US/Canada Asia/Pacific Asia/Pacific Africa World Proven Crude Oil Reserves Billions of Barrels FSU/E. Europe 743 W. Europe 79 15 116 Latin America US/Canada 201 36 102 Middle Middle East East Total: 1,292 BB Asia /Pacific Africa
Crude Oil Demand Demand has risen by 7 MMBD (9%) since 2002. Demand at 85 MMBD or 98% of world daily delivery capacity. Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political unrest. 65% of proven reserves within national oil companies and 16% held by Russia. Traditional companies have full access to 7% of reserves and 12% through partners (if allowed).
CRUDE OIL PRICING
WTI Price by Year 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD
1Q 2007 1Q 2006 WTI Price by Quarter 80 70 60 50 40 30 20 10 0 1Q 2001 1Q 2002 1Q 2003 1Q 2004 1Q 2005
REFINING CAPACITY
U. S. Refining Capacity 18.5 18 17.5 17 16.5 16 15.5 15 14.5 319 175 more than 30 less than 30 Crude Dist Cap 158 131 14 1980 1995 2000 2006 Last New U. S. Refinery Built in 1976 Source: Oil & Gas Journal
U. S. Asphalt Refining Capacity 800 98 # Refineries Asphalt Capacity 750 700 72 60 650 600 42 550 500 450 1980 1995 2000 2006 400 Production Range: 600 B/D to 60,000 B/D Source: Oil & Gas Journal
U. S. Refining Coking Capacity 60 58 56 54 52 # Refineries w/cokers Coke Production, MT/D 81 120 56 58 138 140 120 100 80 60 50 48 50 40 20 46 1995 2000 2006 0
U.S. Coker Construction Projects 2005-2011 Planning, Engineering, or Construction Phase Total Refineries: 360 MB per day Asphalt Refineries: 197 MB per day * Source: Argus Asphalt Report
Refinery Yield (% of Crude Intake) 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% OTHER MOGAS JET LT NAPH HVY NAPH GAS OIL NO.2 NO6 or Asphalt COKE 10% 0% TOPPING RFY SIMPLE RFY CCU RFY COKER RFY
PRODUCTS SUPPLY/DEMAND
Supply Source for U. S. Demand Domestic Crude Production Imported Crude Imported Products MMB/D 20 18 16 14 12 10 8 6 4 2 0 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Historical Asphalt Supply/Demand Millions Tons - Liquid 60 50 40 30 Supply Demand 20 10 0 1980 1995 2000 2003 2005 2006 Source: Oil & Gas Journal
Crude Oil Sources
Crude Oil Imports Into USA from the Top Six Countries As of June 2007 (1000 Barrels Per Day) 1 2 3 4 5 6 Canada Saudi Arabia Mexico Venezuela Nigeria Iraq 1,874 1,501 1,392 1,135 893 573
Canada s Historical Crude Supply Volumes To The USA Have Been Doubling Every Decade Since 1988 1988 1998 2007 Current as of June 2007 Estimate 2011 Estimate 2015 Estimate 2020 Estimate 681 1,266 1,874 2,100 2,400 3,000 4,600
CANADIAN EXPORTS - 2007-2020 Important Points: 1. Canada is expected to complete 2007 with over 2,000,000 bbls per day export to the USA. 2. By 2020 Canada expects to be exporting on a moderate growth estimate 4,600,000 bbls per day to the USA over a 100% increase. 3. Approximately half (2,300,000) of this daily amount will be DILBIT that is heavy asphaltic crude cut with a diluent. (25% natural gas diluent and 75% heavy asphaltic oil.) 4. The remaining half (2,300,000) will be SYNBIT which is made up of 50% synthetic crude from the Athabasca Tar Sands Upgraders and 50% heavy asphaltic oil.
CANADIAN EXPORTS - 2007-2020 Summary: The most important point is that over the next decade, the USA s number one crude oil supplier (Canada) will be increasing the volume of good asphaltic crude to the USA by 100% While the main target market for this heavy Canadian crude is refined cokers for the refiner capable of making asphalt there should be ample availability of a suitable high quality asphaltic crude. The majority of refiners of old had to make asphalt. Today s refinery can make a choice. Simply put, asphalt has got to compete with the rest of the barrel or light products.
PRODUCTS PRICING COKER ECONOMICS
1Q 2007 1Q 2006 1Q 2005 Prices by Quarter 110 100 90 80 70 60 50 40 30 20 WTI Gasoline 1Q 2000 1Q 2001 1Q 2002 1Q 2003 1Q 2004
1Q '07 1Q '06 1Q '05 Prices by Quarter 100 90 80 70 60 50 40 30 20 10 0 WTI Gasoline Asphalt 1Q '00 1Q '01 1Q '02 1Q '03 1Q '04
Asphalt vs Coker Feed Value 90 80 70 60 50 40 30 20 10 0 WTI P&P MC Avg Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 gulf coast coker value Sep-06 Jan-07 May-07 Sep-07
Current Coking Economics Gasoline/Diesel Pricing Aug., 07 Price: $95.00/BBL Less Distribution: 6.00/BBL Net to Refinery: $89.00/BBL Kansas City Asphalt Pricing Aug 07: $54.50/BBL* ($40/Ton): $7.15/BBL $47.35/BBL Lost Value: $41.65/BBL * Source Poten & Partners
Current Coking Economics 30,000 BBLS/Day Asphalt Production X 70% Gasoil Production 21,000 BBLS Gasoil for Gasoline/Diesel X $41.65/BBL Gasoline/Diesel diff. To Asphalt $874,650 per day added margin $1 Billion / $874,650 = 1,143 days (3.1 years payoff)
FUTURE OF THE INDUSTRY
FUTURE FOR U. S. ASPHALT More heavy crude being produced and run Asphalt will have to trend faster with crude oil prices and be competitive with light products continued volatility Transportation cost rising and supply at maximum (marine/rail) A continued push towards new products for pavement preservation due to limited dollars Warm mix asphalt Increase technical know how to deal with different asphalts or coker bottoms to produce pg grade materials Recycling
QUESTIONS