Asphalt Supply 101 David C. Punnett Manager Business Development Asphalt and Fuel Supply, LLC
Always Consider Your Surroundings
Always Consider Your Surroundings, The Sequel
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
Total US crude production 7500 6500 '000 b/d 5500 4500 3500 Source: EIA illuminating the markets
barrels per day US shale production 2,800,000 2,300,000 1,800,000 1,300,000 800,000 300,000 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
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 mn b/d Shale oil and deepwater production forecast 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Deepwater Gulf of Mexico US Shale Oil Source: EIA illuminating the markets
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
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
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 2011 2015 2020 2025 2030 Total Canadian 3.0 3.8 4.7 5.6 6.2 Eastern Canada 0.3 0.2 0.2 0.2 0.1 Western Canada Conventional 1.1 1.3 1.3 1.2 1.1 Oil sands 1.6 2.3 3.2 4.2 5.0 Source: CAPP illuminating the markets
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
Refinery Facts 1982 301 operating refineries 2011 148 operating refineries 1982 17.9 million barrels of crude oil input capacity 1994 15 million barrels of crude oil input capacity 2013 17.2 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
Map of U.S. Asphalt Producing Refineries (2012) Asphalt Producing Refineries
Map of U.S. Asphalt Producing Refineries and Asphalt Terminals (2011) Asphalt Producing Refineries Asphalt Terminals
What Impacts Asphalt Supply? Utilization Rates - % utilization is calculated as gross crude inputs divided by latest reported monthly operable capacity Annual Utilization Rates: 2006 89.7% 2007 88.5% 2008 85.3% 2009 82.8% 2010 85.4% 2011 86.3% 2012 89 plus % 2013 88.7%
What Impacts Asphalt Supply? Cokers = Units of Mass Destruction Coking capacity has increased from 1990 2013 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
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 $-
Current Asphalt Supply Information What is the current/outlook supply situation? What is the price going to do? Nebraska Argus posted prices July, 2012 $575-595, Aug, 2013 $575-595, Current $560-575 July,2014?
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