Permian Markets and Takeaway Infrastructure Refinery Capacity for Light Sweet Crude July 15, 2015
Danny Collier Vice President Commercial Optimization
Total US and Canada Refinery Capacity US
crude refining capacity is 17,800 KBD Canada refining capacity is 2,050 KBD Valero Quebec Refinery received first WTI from Midland in December 2013 – 1975 Energy Policy and Conservation Act restricted crude oil exports but left trade with Canada and Mexico unimpaired –
Assuming
89% utilization, 17,600 KBD is available for processing US crude oil
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United States Crude Production US crude oil production averaged 7,441 KBD in 2013 and was 8,191 KBD in March 2014 Two year growth has averaged ~900 KBD/yr
U.S. Field Production of Crude Oil (Thousand Barrels per Day) 8,000 KBD
6,000 4,000
7,441 KBD average 2013
2,000 0
Primary 2013 growth was from Texas and North Dakota Source: US Energy Information Administration
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Western Canada Crude Production Western Canada crude oil production averaged 3,472 KBD 2013 Two year growth has averaged ~270 KBD/yr
KBD
Western Canada Oil Supply 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
3,472 KBD average 2013
Canada allows crude oil exports, but logistics are constraining so these grades typically clear to the Canadian and US refining markets Source: Canadian Association of Petroleum Producers
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Production versus Refinery Capacity Refinery
capacity for US plus Canada provides 17,600 KBD demand Total US plus Western Canada production provides 10,900 KBD supply 6,700 KBD capacity remains for consuming incremental US and Western Canada crude oil production based on 2013 average
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Light Crude Capability The
available refining capacity of 6,700 KBD is not capable immediately for light crude Actual capability is highly dependent on exact crude composition and individual refinery constraints Most US refineries from 1995-2010 were limited by coker capacity or heavy fuel oil yield – As supply has shifted lighter, coker capacity utilization has decreased and naphtha yields have become a predominant concern –
Imports
can provide insight to displacement comparisons and current light crude capacity 6
KBD
US and Canada Crude Imports by Region 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
North Sea 2,316 2,439
662
664
1,289 1,172 1,593 1,613
2,598
601 1,183 1,432
2,383 2,353 2,291
Far East
2,352 2,093
2,173
858
911
922
984
935
875
917
1,114
1,177
1,124
996
1,783
1,840
2,027 2,314 2,151
706 1,068 1,213
2,483
Eastern Europe
1,707 1,208 842
762 746
Africa
763
Latin America (other)
874
Venezuela Mexico Middle East
African crude imports (typically light sweet) have reduced most significantly over last 5 years Source: US Energy Information Administration and Canadian Association of Petroleum Producers
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US and Western Canada Displacing Imports
Heavy grade imports from Mexico, Venezuela, and other Latin America countries declined with incremental Canadian production ~ 3,500 KBD in 2005 to ~2,400 KBD in 2013 – Western Canada production increased by 1,100 KBD over same time period –
Africa imports dropped from 2,500 KBD in 2007 to 740 KBD in 2014 –
US light sweet crude production replaced these imports
Middle East crudes have higher naphtha content than other imports excluding Africa so demand for these grades is expected to reduce in 2014
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Crude Quality
US sweet crudes yield ~38 volume % naphtha and lighter If sweet crude naphtha content increases, refinery capacity to handle additional production reduces –
3 API increase, could reduce a 5,000 KBD light crude handling capability to 4,400 KBD WTI
Bakken
Eagle Ford
Arab Medium
Basrah
Maya
Cold Lake
WTI – 44 API
API
41
42
45
31
30
21
22
44
Sulfur
0.3
0.2
0.2
2.6
3.1
3.8
3.4
0.3
Naphtha and lighter
38%
39%
37%
25%
25%
19%
22%
43%
Distillate
29%
32%
31%
26%
25%
22%
17%
27%
VGO
25%
24%
25%
28%
30%
26%
31%
23%
Resid
8%
5%
7%
21%
20%
33%
30%
7%
Light Crude
Medium Crude
Heavy Crude
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Refinery Capacity and Imports - 2013 Alaska/BC 225 KBD
PADD 5 Washington 630 KBD San Francisco 830 KBD
Los Angeles 1,130 KBD
Hawaii 150 KBD
897 KBD Imports
Alberta 620 KBD
Eastern Canada 725 KBD Ontario 420 KBD
PADD 4 630 KBD PADD 2 3,810 KBD PADD 3 - Inland 1,045 KBD
PADD 1 1,140 KBD
555 KBD
562KBD
PADD 3 - Coastal 8,110 KBD
3,690 KBD 10
Incremental US Light Crude Processing Capacity by Region
Eastern Canada is estimated at 400 KBD over 2013 average levels US Gulf Coast is estimated at 1,000 KBD over 2013 average rates based on a medium sour crude displacement –
PADD 3 is expected to move from a coker limited system to a naphtha limited system
US East Coast is estimated at 400 KBD over 2013 average levels US West Coast is estimated at 300 KBD over 2013 average levels
Before new capital investments, US refinery system could take >2,000 KBD light sweet crude above 2013 consumption
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New Capacity Additions in US
New light crude distillation unit capacity totals 300-600 KBD in next 3 years Flint Hills (Corpus Christi) – Valero (90 KBD Houston, 70 KBD Corpus Christi, 25 KBD McKee) – Marathon (30 MBD, Robinson) –
Condensate splitter announcements total 500-800 KBD in same time frame Kinder Morgan (100 KBD, Houston) – Trafigura (50 KBD, Corpus Christi) – Marathon (25 KBD Canton, 35 KBD Catlettsburg) – Magellan (50 KBD, Corpus Christi) –
Refinery capacity additions (including condensate splitters) are expected to be 800-1400 KBD
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Conclusions
US refinery capacity is adequate to handle light crude production growth of ~2,000 KBD without additional investment Announced and expected new capacity is adding another ~1,000 KBD in the next three years US refinery system is expected to continue investing in light crude processing capacity as long as economics are supportive Light crude (~40 API gravity) should be separated from condensate (~55 API gravity) in order to maximize US refinery processing capacity for light sweet crude
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