Wyoming: At the Crossroads of the Boom Trisha Curtis Director of Research, Upstream and Midstream Energy Policy Research Foundation, Inc. (EPRINC) Wyoming Pipeline Authority October 15th, 213
Thousand Barrels Per Day North American Oil Production 12 1 July U.S. Oil Production 7.5 mbd 8 6 Canadian Production of Crude Oil 4 2 U.S. Field Production of Crude Oil Source: EIA 2
Million Barrels Per Day EPRINC s Forecast for Major U.S. Shale Plays 6 5 4 EPRINC forecasts an additional 1.5 mbd by 222 3 2 Periphery Permian Eagle Ford Bakken 1 28 29 21 211 212 213 214 215 216 217 218 219 22 221 222 Source: HPDI data with EPRINC forecast estimates 3
Thousands of Barrels per Day CAPP 213 Updated Production Forecast 8, 7, Over 3 mbd increase by 229 6, 5, 4, 3, 2, Mining In Situ Conventional Light Conventional Heavy 1, Source: CAPP 4
# of Rigs U.S. Rig Count 25 2 15 1 Oil Gas Total 5 Source: Baker Hughes 5
Permit Activity Williston Basin Powder River Basin Uinta Basin DJ Basin (Niobrara Reservoir) Utica Anadarko Basin (Mississippian, Granite Wash, Mississippi Lime and other stacked plays) Permian Basin Eagle Ford Reservoir Source: HPDI September 213, Past 9 Days 6
Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Barrels Per Day Current Shale Oil Play Production 1,4, 1,2, 1,, Bakken - North Dakota Eagle Ford - Texas 8, 6, 4, 2, Permian Basin - Texas and New Mexico Niobrara/Codell - Colorado Anadarko Basin Source: NDPA, HPDI 7
Million Barrels Per Day EPRINC U.S. Forecast vs. Others 11 1 DB 9 IEA 8 EIA 7 WoodMac 6 5 PIRA 4 EPRINC Source: EPRINC Forecast and Estimates compiled from Deutsche Bank Report Dec 212 Future of US Oil 8
Thousand Barrels Per Day U.S. Total Imports, U.S. Production, U.S. Canadian Imports 12 1 8 6 4 U.S. Imports 7.6 mbd U.S. Production 8 mbd U.S. Imports from Canada of Crude Oil U.S. Field Production of Crude Oil 2 U.S. Imports of Crude Oil Source: EIA Canadian Imports 2.5 mbd 9
Thousand Barrels Per Day Global Shifts in Crude Oil Flows 3 25 2 15 1 5 Saudi Arabia - Medium Sour/Light Sour Algeria - Light Sweet/Ultra Light Nigeria - Light Sweet/Medium Sweet Ecuador - Heavy Sour Iraq - Medium Sour Brazil - Heavy/Medium Sour and Medium Colombia - Heavy Sour/Medium Sour Mexico - Heavy Sour/Medium Sour Venezuela - Heavy Soure/Medium Sour Kuwait - Medium Sour Russia - Medium Sour Source: EIA, ENI World Oil Book 1
Jan-9 Sep-9 May-91 Jan-92 Sep-92 May-93 Jan-94 Sep-94 May-95 Jan-96 Sep-96 May-97 Jan-98 Sep-98 May-99 Jan- Sep- May-1 Jan-2 Sep-2 May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-12 Sep-12 May-13 Thousand Barrels Per Day Wyoming Oil Production 35 3 25 July Production 173, b/d 2 15 1 5 Source: EIA 11
Jan-81 Apr-82 Jul-83 Oct-84 Jan-86 Apr-87 Jul-88 Oct-89 Jan-91 Apr-92 Jul-93 Oct-94 Jan-96 Apr-97 Jul-98 Oct-99 Jan-1 Apr-2 Jul-3 Oct-4 Jan-6 Apr-7 Jul-8 Oct-9 Jan-11 Apr-12 Jul-13 Thousand Barrels Per Day 3 Compared to Top Producing States 25 2 North Dakota Field Production of Crude Oil Mbbl/d 15 1 Wyoming Field Production of Crude Oil Mbbl/d 5 Texas Field Production of Crude Oil Mbbl/d Source: EIA 12
Jan-9 Dec-9 Nov-91 Oct-92 Sep-93 Aug-94 Jul-95 Jun-96 May-97 Apr-98 Mar-99 Feb- Jan-1 Dec-1 Nov-2 Oct-3 Sep-4 Aug-5 Jul-6 Jun-7 May-8 Apr-9 Mar-1 Feb-11 Jan-12 Dec-12 Thousand Barrels Per Day Compared to Neighbors... 35 3 25 Wyoming Field Production of Crude Oil Mbbl/d 2 15 Utah Field Production of Crude Oil Mbbl/d 1 5 Colorado Field Production of Crude Oil Mbbl/d Source: EIA 13
Wyoming Wells All Wells 213 Wells Source: HPDI Oct 213 14
Wyoming 213 Wells by Type Source: HPDI Oct 213 15
# of Rigs Wyoming Rig Count 12 1 8 6 4 2 1/7/2 1/7/21 1/7/22 1/7/23 1/7/24 1/7/25 1/7/26 1/7/27 1/7/28 Source: Baker Hughes 16
# of Rigs 1 9 8 7 Wyoming Rig Count vs. Texas and North Dakota 6 5 4 Wyoming Texas North Dakota 3 2 1 Source: Baker Hughes 17
Permits in Past 9 Days Source: HPDI Oct 213 18
Wyoming Rig Count by Product and Type Source: HPDI 19
Wyoming Pipelines Source: CAPP, ArcGIS Hart Energy 2
Wyoming s Play in Crude by Rail Source: Wyoming Pipeline Authority Base Map 21
U.S. Federal Land Map Source: NationalAtlas.gov 22
Canadian Pipeline Export Options Kinder Morgan s Transmountain line off BC coast - currently 3, b/d capacity-recent announcements to expand up to 8, b/d (early 217) (Now Spectra) Platte line to Wood River 28, b/d-full Source: Canadian Energy Pipeline Association Nearly full pipelines creates need for XL and Gateway opportunities for rail Enbridge mainline system currently transporting over 1.5 mbd with potential capacity around 2.5 mbd Northern Gateway off BC coast planned 525, b/d, several other planned expansions TransCanada s Keystone 581, b/d-full XL would add 7, b/d, Energy East Pipeline Project 5 to 8k 23
Market Saturation Source: CAPP Crude Oil Forecast June 213 24
Pipeline Choke Points Source: EPRINC Choke Point Map using Hart ArcGIS Mapping software 25
Thousand Barrels Per Day Shifting Crude Flows 25 2 15 1 5 Midwest (PADD 2) Receipts by Pipeline from Gulf Coast (PADD 3) Gulf Coast (PADD 3) Receipts by Pipeline from Midwest (PADD 2) New Capacity 213-215 (mbd) Inbound: Cushing, Ok 1.97 Outbound: Cushing, OK 1.55 Inbound: Gulf Coast 3.52 Source: EIA, EPRINC 26
Pipelines and Proposed Projects The majority of this new pipeline capacity, roughly 7.7 mbd (as estimated by EPRINC), is composed of pipeline reversals, expansions, twinning, repurposing, and retrofitting. Source: CAPP Crude Oil Forecast June 213 27
Barrels Per Calendar Day Number of Refineries Where light sweet Bakken and heavy (blended bitumen) needs to go 1,, 9,, 8,, 7,, 6,, 5,, 4,, 3,, Total Coking Capacity vs. Atmospheric Crude Distillation Capacity by PADD Cokers = Heavy refining capability 6 5 4 3 2 Operable Atmospheric Crude Oil Distillation Capacity Thermal Cracking Coking Downstream Charge Capacity 2,, 1,, 1 Operating Refineries - PADD 1 East Coast PADD 2 Midwest PADD 3 Gulf Coast PADD 4 Rockies PADD 5 West Coast Source: AFPM map, EIA data for graph 28
Canadian vs. Total Foreign Imports by PADD 16 14 12 1 8 6 4 2 PADD I East Coast 2 (PADD 1) Total Foreign 15 Imports 1 East Coast (PADD 1) 5 Imports from Canada PADD II Midwest (PADD 2) Total Foreign Imports Midwest (PADD 2) Imports from Canada 6 5 4 3 2 1 PADD III Gulf Coast (PADD 3) Total Foreign Imports Gulf Coast (PADD 3) Imports from Canada 3 25 2 15 1 5 PADD IV Rocky Mountain (PADD 4) Total Foreign Imports Rocky Mountain (PADD 4) Imports from Canada 14 12 1 8 6 4 2 PADD V 28 29 21 211 212 Jan-July 213 West Coast (PADD 5) Total Foreign Imports West Coast (PADD 5) Imports from Canada Source: EIA Data 29
Jan-8 Jun-8 Nov-8 Apr-9 Sep-9 Feb-1 Jul-1 Dec-1 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Regional Pricing Disparities $16. $14. WTI $12. $1. $8. $6. $4. Bakken (North Dakota Light Sweet Flint Hills) WCS (Western Canadian Select) $2. $. Brent Western Canadian Select -$33 to WTI Source: Flint Hills, EIA, CME Group, and estimates 3
Cushing Stocks - Thousand Barrel $/ Barrel Cushing Stocks vs. WTI Brent Differential 6, 5, 4, 3, 2, 1, 35 3 25 2 15 1 5-5 -1-15 Cushing OK Ending Stocks excluding SPR of Crude Oil Thousand Barrels WTI Brent Differential (Brent minus WTI) Source: EIA 31
Thousand Barrels Per Day $/ Barrel Thousand Barrels Per Day $/ Barrel 8 Rising Production and Imports 3 7 6 5 4 3 2 1 25 2 15 1 5-5 -1 U.S. Imports from Canada of Crude Oil U.S. Field Production of Crude Oil WTI Brent Differential (Brent minus WTI) 3 25 2 15 1 5 3 25 2 15 1 5-5 -1 U.S. Imports from Canada of Crude Oil Midwest (PADD 2) Imports from Canada of Crude Oil WTI Brent Differential (Brent minus WTI) Source: EIA 32
$/ Barrel Price of Canadian Crude Imports $14 $12 $1 $8 $6 $4 U.S. production surge Lack of adequate outbound capacity to refining centers Market saturation Venezuelan and Mexican crude Canadian crude U.S. Landed Costs of Nigerian Crude Oil U.S. Landed Costs of Mexican Crude Oil U.S. Landed Costs of Venezuelan Crude Oil U.S. Landed Costs of Canadian Crude Oil $2 Cushing OK WTI Spot Price FOB $/bbl $ Europe Brent Spot Price FOB $/bbl Source: EIA Landed Cost: The dollar per barrel price of crude oil at the port of discharge. Includes charges associated with the purchase, transportation, and insuring of a cargo from the purchase point to the port of discharge. Does not include charges incurred at the discharge port (e.g., import tariffs or fees, wharfage charges, and demurrage). 33
Thousand Barrels Per Day Crude Oil Composition by Refining District 9, 8, 7, 6, 5, 4, 3, 2, 1, Domestic Alaska Foreign Light Sweet Foreign Light/Medium Sour Foreign Heavy Domestic Crude PADD I PADD II PADD III PADD IV PADD V Source: CAPP 213 Refinery Survey 34
28 28 28 28 29 29 29 29 21 21 21 21 211 211 211 211 212 212 212 212 213 213 213 $/Barrel Refinery Acquisition Cost of Crude Oil $16 $14 $12 $1 $8 $6 $4 $2 $ East Coast (PADD 1) Crude Oil Composite Acquisition Cost by Refiners $/bbl Midwest (PADD 2) Crude Oil Composite Acquisition Cost by Refiners $/bbl Rocky Mountain (PADD 4) Crude Oil Composite Acquisition Cost by Refiners $/bbl West Coast (PADD 5) Crude Oil Composite Acquisition Cost by Refiners $/bbl Gulf Coast (PADD 3) Crude Oil Composite Acquisition Cost by Refiners $/bbl Brent Source: EIA 35
Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 % Percentage Refinery Utilization by PADD 12 1 East Coast (PADD 1) Percent Utilization of Refinery Operable Capacity % 8 Midwest (PADD 2) Percent Utilization of Refinery Operable Capacity % 6 Gulf Coast (PADD 3) Percent Utilization of Refinery Operable Capacity % 4 2 Rocky Mountains (PADD 4) Percent Utilization of Refinery Operable Capacity % West Coast (PADD 5) Percent Utilization of Refinery Operable Capacity % Source: EIA 36
PADD II will be importing more HEAVY crude.absorbing more Canadian crude and pushing out light sweet Bakken crude COP/Cenovus Wood River Source: John Auers Turner Mason, NDPA Refinery Year Crude Demand Impact MBPD End of 211 Light Heavy -95 +13 Marathon Detroit End of 212-65 +8 BP Whiting Mid to Late 213-17 +25 NCRA/McPherson 215-15 +3 BP/Husky Toledo 218-45 +6 Total -39 +55 37
BNSF S Crude By Rail Destination System Source: BNSF 38
Jan 8 Apr 8 Jul 8 Oct 8 Jan 9 Apr 9 Jul 9 Oct 9 Jan 1 Apr 1 Jul 1 Oct 1 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Barrels Per Day Daily Crude by Rail Shipment in U.S. and Canada 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, U.S. Average Barrels Per Day of Petroleum and Petroleum Product Canadian Average Barrels Per Day of Petroleum and Petroleum Product EPRINC's U.S. Daily Crude by Rail Estimate - 77, b/d EPRINC's Canada Daily Crude by Rail Estimate - 13, b/d Source: AAR; Crude and petroleum product includes liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc. U.S. operations exclude U.S. operations of CN and CP. Canadian operations include CN and CP and their U.S. operations. One carload holds 3, gallons (or 714.3 barrels). 39
Pipeline and Rail Severely limited due to lack of Keystone XL and lack of historical build out to the coasts system designed to import into the Gulf and move up New markets Diversification Neat Barrels Nimble - Quickly adjustable Optionality for Canadian and U.S. crude, NGLS, and other petroleum products Source: EPRINC Maps using Hart Energy data and ArcGIS Mapping software 4 4
Can Get to the Markets Pipelines Can t and WON T CN CP UP NS BNSF Origins will stay the same destinations will change with the market. FXE CSXT Source: EPRINC map using ArcGis 41
Spare Capacity Source: NDPA 42
Williston Basin Crude Transportation Williston Basin Production: 955, b/d North Dakota: 875, b/d South Dakota: 5, b/d Eastern Montana: 75, b/d Tesoro Refinery: 68, b/d Truck to Canadian Pipeline: 12, b/d Rail: 67, b/d Source: NDPA, EPRINC Estimates Pipeline: 241, b/d 43
Potential Issues, Hurdles, and Regulatory Concerns Oil prices Water Usage Oil spills (rail and pipeline) Environmental Concerns Regs on Federal Land-Fracking Infrastructure Delays- PERMITTING Lack of prudent policy: failing to connect what is happening on the ground to what is understood in Washington Costs incurred 44
Spills on Rail Source: WSJ 45
Issues and Regulations AP PHOTO/THE CANADIAN PRESS, PAUL CHIASSON, NATIONAL POST 46
Conclusions Since 28 the U.S. and Canada have added over 3 mbd of crude to global production, helping offset issues in Libya and the Middle East. Pipelines are being built, but right now their is tightness in the system and an increasing need for Gateway, XL, and other Coastal options for US and Canadian crude. Bakken crude has to get to the U.S. East and West Coasts (via rail) and heavy Canadian needs to get to the Gulf and West Coast (via pipeline and rail). Roughly 7.7 mbd of new capacity (as estimated by EPRINC) is comprised of pipeline reversals, expansions, twinning, repurposing, and retrofitting. There are serious regulatory and permitting hurdles which deserve consideration. Even with a narrowing spread, rail is a serious option for US producers distanced from refining centers, especially Bakken and Canadian crude markets exist where pipelines do not (especially with XL delay and Gateway uncertainty). Market has changes for producers and refiners with optionality, market and regulatory uncertainty Rail will be here in the long term, the question is simply how much and where. Refineries are going to play a vital role in this renaissance as they adapt to high volumes of light sweet and heavy crude oils. 47
Thousand Barrels Per Day Exports of Petroleum Product 5 4 3 2 U.S. Exports of Petroleum Coke Mbbl/d U.S. Exports of Finished Petroleum Products Mbbl/d 1-1 -2 U.S. Exports of Distillate Fuel Oil Mbbl/d U.S. Exports of Finished Motor Gasoline Mbbl/d Total U.S. Petroleum Net Imports Source: EIA 48
Jan-4 Jun-4 Nov-4 Apr-5 Sep-5 Feb-6 Jul-6 Dec-6 May-7 Oct-7 Mar-8 Aug-8 Jan-9 Jun-9 Nov-9 Apr-1 Sep-1 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Thousand Barrels Per Day East Coast PADD I Imports by Country of Origin 2 18 16 14 12 1 8 6 4 2 Canada (Thousand Barrels Per Day) Heavy and Synthetic Iraq (Thousand Barrels Per Day) Medium Sour Angola (Thousand Barrels Per Day) Medium Sweet/ Light Sweet Venezuela (Thousand Barrels Per Day) Medium Sour/Heavy Sour Saudi Arabia (Thousand Barrels Per Day) Medium Sour/Light Sour Nigeria (Thousand Barrels Per Day) Light Sweet/ Medium Sweet ALL PADD 1 Imports (Thousand Barrels Per Day) East Coast (PADD 1) Operating Crude Oil Distillation Capacity Source: EIA 49
Jan-93 Oct-93 Jul-94 Apr-95 Jan-96 Oct-96 Jul-97 Apr-98 Jan-99 Oct-99 Jul- Apr-1 Jan-2 Oct-2 Jul-3 Apr-4 Jan-5 Oct-5 Jul-6 Apr-7 Jan-8 Oct-8 Jul-9 Apr-1 Jan-11 Oct-11 Jul-12 Thousand Barrels Per Day Gulf Coast PADD III Imports by Country of Origin 1 9 8 7 6 5 4 3 2 1 Mexico (Thousand Barrels Per Day) Heavy Sour/ Medium Sour Venezuela (Thousand Barrels Per Day) Heavy Sour/Medium Sour Saudi Arabia (Thousand Barrels Per Day) Medium Sour/ Light Sour Iraq (Thousand Barrels Per Day) Medium Sour Canada (Thousand Barrels Per Day) Heavy and Synthetic Kuwait (Thousand Barrels Per Day) Medium Sour Colombia (Thousand Barrels Per Day) Heavy Sour/Medium Sour ALL Gulf Coast PADD III Imports (Thousand Barrels Per Day) Gulf Coast (PADD 3) Operating Crude Oil Distillation Capacity Source: EIA 5
Jan-4 May-4 Sep-4 Jan-5 May-5 Sep-5 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 Thousand Barrels Per Day West Coast PADD V Imports by Country of Origin 35 3 25 2 15 1 5 Ecuador (Thousand Barrels Per Day) Heavy Sour Colombia (Thousand Barrels Per Day) Heavy Sour/Medium Sour Angola (Thousand Barrels Per Day) Medium Sweet/Light Sweet Iraq (Thousand Barrels Per Day) Medium Sour Canada (Thousand Barrels Per Day) Heavy and Synthetic Saudi Arabia (Thousand Barrels Per Day) Medium Sour/Light Sour ALL PADD V Imports West Coast (PADD 5) Operating Crude Oil Distillation Capacity Source: EIA 51
Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Domestic RAC $/Barrel Foreign RAC $/Barrel Refinery Acquisition Cost of Crude Oil 14 12 1 Rocky Mountain (PADD 4) RAC Midwest (PADD 2) RAC 14 12 1 Rocky Mountain (PADD 4) RAC Gulf Coast (PADD 3) RAC 8 6 4 2 Gulf Coast (PADD 3) RAC West Coast (PADD 5) RAC East Coast (PADD 1) RAC 8 6 4 2 East Coast (PADD 1) RAC Midwest (PADD 2) RAC West Coast (PADD 5) RAC Source: EIA 52