Asphalt Supply 101. David C. Punnett Manager Business Development Asphalt and Fuel Supply, LLC

Transcription

1 Asphalt Supply 101 David C. Punnett Manager Business Development Asphalt and Fuel Supply, LLC

2 Always Consider Your Surroundings

3 Always Consider Your Surroundings, The Sequel

4 Gluts and disconnects Glut at Cushing put WTI in deep contango Prompt values heavily pressured Increasing flows to Cushing outnumbered outflows Cushing stocks built rapidly De-bottlenecking then moved the glut Reversed, converted and new pipelines Cushing now at much lower levels WTI flipped to backwardation (vs contango) USGC now beginning to disconnect illuminating the markets

5 Total US crude production '000 b/d Source: EIA illuminating the markets

6 barrels per day US shale production 2,800,000 2,300,000 1,800,000 1,300, , ,000 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 US Bakken (b/d) Eagle Ford (b/d) Permian Basin (b/d) Source: Manitoba Petroleum Branch, Montana Board of Oil and Gas, North Dakota Oil and Gas Division, Saskatchewan Dept. of Energy and Resources, Texas Railroad Commission. illuminating the markets

7 mn b/d Shale oil and deepwater production forecast Deepwater Gulf of Mexico US Shale Oil Source: EIA illuminating the markets

8 USGC fundamentals have shifted More crude is making its way to the USGC Back out USGC imports currently 735k b/d West Coast 125k b/d East Coast 22k b/d Pipeline reversals Seaway pipeline Longhorn pipeline New pipeline projects Houston-Houma pipeline Seaway twin 450,000 b/d planned start 1Q 2014 Gulf Coast Pipeline Project 700,000 b/d planned start end-2013 Crude by rail Bakken, Canadian heavy illuminating the markets

9 Increasing volumes making it down to Cushing And to the USGC Canadian crude Canadian production is set to continue rising Heavy Canadian could compete with LatAm grades Colombia and Venezuela already diverting exports Some 100,000 b/d currently pipelined to USGC Another ~100,000 b/d between rail and barging illuminating the markets

10 Oil sands development continues to Over 100 projects in total build Circa 40 operating commercial projects 20 projects under construction Production to rise 10pc in 2013 to 3.63mn b/d Led by surging oil sands volumes in Alberta Canadian Crude Oil Production million b/d Total Canadian Eastern Canada Western Canada Conventional Oil sands Source: CAPP illuminating the markets

11 Increased risks to consider in decisionmaking Difficult to predict full price extent of increased crude movements to USGC Uncertainty over potential size of USGC glut Questions remain on the possibility of crude exports Unlikely to happen But not discarded completely Keystone Pipeline Role of the east and west coasts in soaking up more domestic crude still to be determined Bakken, Canadian Bakken already being backed out of east coast Eagle Ford to California illuminating the markets

12 Refinery Facts operating refineries operating refineries million barrels of crude oil input capacity million barrels of crude oil input capacity million barrels of crude oil input capacity 1982 Asphalt Production approx 750,000 bbls/day 2012 Asphalt Production approx 400,000 bbls/day 2013 Asphalt Production approx 350,000 bbls/day

13 Map of U.S. Asphalt Producing Refineries (2012) Asphalt Producing Refineries

14 Map of U.S. Asphalt Producing Refineries and Asphalt Terminals (2011) Asphalt Producing Refineries Asphalt Terminals

15 What Impacts Asphalt Supply? Utilization Rates - % utilization is calculated as gross crude inputs divided by latest reported monthly operable capacity Annual Utilization Rates: % % % % % % plus % %

16 What Impacts Asphalt Supply? Cokers = Units of Mass Destruction Coking capacity has increased from by 1.4 million bbls / day A few examples: ConocoPhillips Wood River, IL 65,000 b/d Completed in 2011 Total Petrofina Pt Arthur, TX 50,000 b/d Completed in 2011 Motive Pt Arthur, TX 95,000 b/d To Complete in 2012 Marathon Detroit, MI 28,000 b/d To Complete in 2012 BP Whiting, IN 102,000 b/d To Complete in 2013 HolyFrontier may take out of operation its 5,000 b/d coker located in Tusla, OK

17 Sep-10 Nov-10 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 Sep-13 Nov-13 Jan-14 What Impacts Asphalt Pricing? Roofing Demand Residual Fuel Oil Crude Prices/Refinery Economics/Cokers/Bunkers Asphalt Demand Natural Disasters International Markets Transportation Trucks, Rail, Barge Bunker Fuel (WTI vs Brent Graph Below) $30 $25 $20 $15 $10 $5 $-

18 Current Asphalt Supply Information What is the current/outlook supply situation? What is the price going to do? Nebraska Argus posted prices July, 2012 $ , Aug, 2013 $ , Current $ July,2014?

19 You hear about how many fourth quarter comebacks that a guy has and I think it means a guy has screwed up the first three quarters. - Peyton Manning

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