Pipelines, Trains, and Trucks Infrastructure Booms and Busts?

Transcription

1 Pipelines, Trains, and Trucks Infrastructure Booms and Busts? Rockies Oil & Gas Conference E. Russell Braziel RBN Energy, LLC April 12, 212 Source of NGL volume balances and forecasts: The Great NGL Surge! from BENTEK Energy and Turner, Mason and Company. Crude oil projections from the BENTEK report Crude Awakening: Shale Boom Hits Oil Pipelines, Trains, and Trucks Infrastructure Booms and Busts?» Big Picture» Rockies Crude oil Production up Capacity constrained Refineries profitable Differentials Volatile» Rockies Natural Gas and NGLs Gas production flat/down, but wet and associated gas increasing Processing capacity and pipeline takeaway capacity increasing Processing plants profitable NGL Differentials Volatile 2 1

2 U.S. Active Rig Locations Williston Basin Bakken Shale (Oil Play) Pinedale/Jonah Tight Gas Niobrara Shale Play (Oil Play) Uinta Piceance Woodford Shale Gas Play Marcellus Shale Gas Play Permian Basin Oil Targets Granite Wash, Cleveland, Miss. Barnett Shale Gas Play Eagle Ford Shale Play Fayetteville Shale Gas Play Haynesville Shale Gas Play U.S. Active Rigs Ver Dir Hor Source RigData and BENTEK: Lower 48 States, Jan. 15, Crude to Gas Price Ratio» Crude to gas ratio at historic high levels; above 5X 4 2

3 Oil Plays Provide Superior Returns Bakken 5% Pinedale 15% Uinta 29% Piceance 11% Granite Wash Permian Niobrara 48% 96% 66% Cleve/Tonk 1% 88% 2% Ark/Wood 1% Miss Lime 6% Marcellus Dry/Wet Fayetteville Haynesville 46% 9% Eagle Ford Oil/Wet 58%/ 53% 63% 5 Rig Counts: Crude vs. Gas 1,8 1,6 1,4 1,2 1, » Crude rig count has increased from 2 in mid 29 to 1,3 today» Natural gas rig count increased from 7 mid 29 to 1, in 21, but has now declined back to 67» Natural gas well productivity has doubled in the past 3 years, so the production impact of fewer rigs has been muted Oil Gas Source: Baker Hughes 6 3

4 Crude Oil Outlook Through 216 s b/d 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, , EIA, Excludes NGLs and Other Liquids 7 Tight Oil Plays Growth 211 to 216 Bakken +55 Anadarko +25 Niobrara (DJ/PRB) +15 Permian Growth ,2 Mb/d Eagle Ford 8 4

5 PRB Bakken 1,2 1, Bakken PADD II 5 12 Uinta Uinta Powder River Basin Denver Julesberg 2 DJ PADD II Bakken To Clearbrook $ Billings Powder River Basin Casper Guernsey Guernsey $ Salt Lake City Uinta Denver Denver Julesberg 1 5

6 Clearbrook and Guernsey vs. Cushing Vs Clearbrook vs. Guernsey» Warm Winter = Massive production increases» Canadian Production» Slack Demand» Unfinished rail terminals» Refinery turnarounds Source: PLatts 11 Brent vs. Cushing Crude Prices $/Bbl Brent Cushing WTI» Flows south to Gulf from Cushing constrained» Windfall for Rockies and midcontinent refinery crack spreads and margins» Will experience continued volatility for several years 12 6

7 Plains Rocky Mountain Pipeline System Great Falls PADD IV Bakken Williston Enbridge Baker Mandan GR 23 Bear Tooth Billings Sinclair Casper Alzada Powder River Basin Guernsey 215 ONEOK Bakken Crude Express Pipeline 2 Newcastle PADD II Salt Lake City Uinta Cheyenne Denver Julesberg Denver 13 Crude Market Implications $12 $14 $

8 Crude Market Implications» Investments in pipelines, truck terminals and refineries will increase the volume of Rockies crude run in local refineries.» Canadian crude imports will be backed out of the Rockies market» Small volumes of Canadian heavy crude will continue to be required by a few refineries» Discounts of Rockies crudes to Gulf markets will continue and will remain volatile for years» Attractive margins will encourage Rockies refineries to compete aggressively for barrels 15 Rockies Natgas Production Outlook 1.5 Williston Basin (North Dakota) Gross Gas Production Bcf/d Gathered Production Flared Production 16 8

9 North Dakota Flared Natural Gas Natural Gas Production Monitor 17 Rockies Natgas Drilling Declining Great Plains 218/+55 2/ Williston 3/1 23/+5 Big Horn Powder River 31/ 3 Green River 47/+13 DJ Uinta 37/+6 Piceance Liquids Rich/Oil 24/ 1 Rig Declines» Increased drilling activity is in the Bakken, the Niobrara (PRB & DJ) and Uinta» Other basins such as the Green River and Piceance are experiencing declines Note: Rig count as of 2/3/12 and Change in rig count from Feb. 211; 18 9

10 Wet Gas Production Drives NGLs 3.5 Raw Mix Production, MMb/d PADD I PADD III PADD II PADD IV PADD V 19 Gas Infrastructure Production Build Out Drives Essential NGLs To Maintaining Growth (Announced Increases Through 214) PADD IV +115 PADD II +17 PADD I +275 PADD III +39 End 216 versus current production 2 1

11 Gas Infrastructure Production Build Out Drives Essential NGLs To Maintaining Growth (Announced Increases Through 214) PADD IV Mb/d PADD II +17 PADD I +275 PADD III +39 End 216 versus current production 21 Rockies Processing Capacity Increasing 1.5 MMb/d Infrastructure Build Out Essential To Maintaining Growth (Announced Increases Through 214) 64 MAPL 46 45» ND ONEOK Stateline I & II, 2; Plains Ross, 75, Hess Tioga 13» UT QEP Iron Horse II & Red Wash 3; Newfield Pleasant Valley 4; Western Gas Chipeta 3» CO DCP LaSalle 11, Williams Parachute Creek 35 Incremental Capacity (MMcf/d) Source: Bentek 22 11

12 Conway Price Differential Cnts/Gallon Conway Ethane» Since early 211, Conway NGL prices have weakened, especially ethane» Increased volumes are moving into Conway from Overland Express and other PADD II sources 23 Conclusions» Surplus natural gas supplies have driven natural gas prices down; Crude oil prices remain strong Producers have shifted drilling budgets to liquids rich gas and crude oil plays» In the Rockies crude oil market Production up; Capacity constrained Lots of new infrastructure coming online Refineries profitable; Differentials Volatile» In the Rockies gas and NGL markets Gas production flat/down, but wet and associated gas increasing Processing capacity and pipeline takeaway capacity increasing Processing plants profitable NGL Differentials Volatile 24 12

13 E. Russell Braziel 3814 Lake Street Houston, TX, 7798 Office: Direct: rbraziel@rbnenergy.com rbnenergy.com 25 13