Eric N. Smith Associate Director

Tulane Energy Institute 3-30-16

2016 International Trade and Customs Conference Export Prospects

Global Production, Consumption and Exports

Saudi Production: Historically, Saudi production tends to ramp up from the beginning of the year into a

summer time peak, to adjust for domestic crude burn at power stations and in an effort to maintain crude

exports. The three year average production increase from January to June is ~300MBbl/d

1.59 mm bbl./d

OPEC Monthly Oil Market Report, February, 2016

Demand for OPEC crude is projected to increase by 1.8 mb/d to 31.6 mb/d. 1Q16 and 2Q16 are expected to increase

by 1.5 mb/d and 1.7 mb/d, respectively, while 3Q16 and 4Q16 are projected to increase by 2.1 mb/d and 1.6 mb/d.

The Call on OPEC in 2015/16

$40

95

9.43 mm bbl./day

Light/Med Crude dominates in the major basins. Heavier Oil, in Ca.

Limited Heavy Oil Production

4.5

6.0

Atmospheric Distillation

Unit

Vacuum Distillation

Unit

Existing North American

Crude Oil Pipelines

Crude Oil Imports

Crude Oil

Crude Oil

Crude Oil

Crude Oil

Crude Oil

Crude Oil

PADD 2

PADD 3

Refined Product and

Crude Oil Exports

Congestion pricing caused by either infrastructure bottlenecks (pipelines) or government export restrictions leads to domestic prices that are lower than world prices.

However, the equilibration may take a decade.

Evidence, the price spread between Brent and WTI is disappearing

3.8 mm bbl/d

3.3 mm bbl/d

2.7 mm bbl/d

2.2 mm bbl/d

.682 mm bbl/d

ethane has a heat content of 1,770 Btu/cf. propane has a heat content of 2,516 Btu/cf.

heat Component content % Contribution

Methane 1010 96.0% 970

Ethane 1770 3.0% 53

Propane 2516 1.0% 25

Composite for US 1048

Typical Effect of Wet Gas components on Aggregate Heat Content

U.S.

One of the eight new bulk Ethane transporters designed to supply INEOS’ converted crackers in Grangemouth, Scotland and Rafines, Norway with Marcellus/Utica Ethane.

LPG = Propane, Butane, Isobutane, Pentane, and Pentanes +

Growth across the board but highest in Asia

Conclusions: • US is now positioned to export light and medium crude oil, although the US will continue to

remain a large importer of sour heavy crudes.

• Refineries will continue to see high utilization with further modifications to handle increased light ends and to increase octane in order to convert surplus Naphtha into gasoline for export. Naphtha Crackers will not be the preferred route to Ethylene.

• We will continue to export surplus Ethanol.

• Exports of Ethane and Propane will both expand significantly, driven by increasing wet shale gas production in the US and lack of domestic consumption growth.

• Exports of olefins derived from Ethane and Propane will expand, with added cracker capacity, and exports of bulk plastic chips derived from olefins will also expand, despite added polymerization capacity.

• Continued conversion of dry natural gas to Methanol will lead to increased exports, for example to China to feed their Methanol to Olefins (MTO) technology.

504-865-5031 esmith11@Tulane.edu Tulane Energy Institute