demand for u.s. “unconventional” crude · amrit naresh esai energy, llc center for strategic...
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Demand for U.S. “Unconventional” Crude
Amrit NareshESAI Energy, LLC
Center for Strategic and International StudiesFebruary 2018
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Demand for U.S. Shale in the U.S.
Demand for U.S. Shale Outside of the U.S.
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If the Price is Right,…..
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U.S. Market Close to Saturation
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US Crude Imports by Source
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1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
000 b/dExpected Sources of Crude Oil for the U.S.
Canada Mexico rest of Latin America
Africa Arab Gulf US crude Production
Higher Exports Support Imports
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USGC Medium & Heavy Crude Demand Unlikely to Fall Much Further
0
500
1000
1500
2000
2500
3000
3500
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
USGC Refinery Crude Demand: Medium ('000 b/d)
IMPORTS DOMESTIC TOTAL DEMAND
2000
2200
2400
2600
2800
3000
3200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S. Refinery Crude Demand: Heavy ('000 b/d)
IMPORTS DOMESTIC TOTAL DEMAND
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US Light Crude Imports have been Pushed out of the Market
0
1,000
2,000
3,000
4,000
I II III IV V
2017 US Light Crude Demand by PADD & Source ('000 b/d)
Domestic Imports
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S. Light Crude Demand ('000 b/d)
Domestic Imports Total Demand
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Especially out of the USGC
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017
Texas Gulf Coast Light Crude Imports By Sub Region ('000 b/d)
Corpus Christi Houston Port Arthur
0
50
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016 2017
Louisiana Gulf Coast Light Crude Imports By Sub Region ('000 b/d)
LA Lake Charles MS
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A Bit More Light Crude Demand in USGC
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2014 2015 2016 2017 2018 2019 2020
PADD III Light Crude Demand By Refinery Region ('000 b/d)
New Mexico Texas Inland Texas Gulf Coast
Louisiana Gulf Coast North Louisiana-Arkansas
Medium
Light
0
1,000
2,000
3,000
4,000
5,000
6,000
2011 2012 2013 2014 2015 2016 2017
PADD III Domestic Crude Demand ('000 b/d)
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U.S. Crude Debuts Around the World
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US Crude Export Destinations - 2017 average daily volume (‘000 bbls)
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Maximum Monthly Crude Exports to European Countries in 2017 – Over 750,000 b/d
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69
72
64
Maximum Monthly U.S. Crude Exports to Asian Countries in 2017
Over 1.0 million b/d
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Foreign Markets Can Take More
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Finding the Right Refinery
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Including New Capacity
(500)
-
500
1,000
1,500
2,000
2,500
3,000
2017 2018 2019 2020 2021 2022
Regional Distilation Capacity Additions ('000 b/d)
North America Latin America Europe FSU Middle East Africa Asia
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Few capacity expansions are expected in Latin America to 2022
Any additional capacity that is added will be to process medium and heavy crudes
Mexico is investing in some residual fuel oil upgrading
Any new refinery in Brazil will be to process Lula or heavier crude oils
IMO specification changes may encourage additional light processing at existing refineries. Compliance will limit any increase though.
A Bit More to Latin America Light Crude Demand
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2012 2013 2014 2015 2016 2017 2018 2019 2020
Latin America Light Crude Oil Demand ('000 b/d)
Mexico Brazil Argentina Venezuela Other
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More to Asia
Most new distillation capacity in Asia will increase feedstock flexibility
Policy has forced Japan’s refiners to increase residual upgrading capabilities• It will favor heavier crudes
Japan & Korea will be under pressure to lower throughput as oil demand growth slows
IMO specification changes may encourage additional light processing at existing refineries.
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Light Sweet Crude Gets a Shot in The Arm
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2012- 3.5% Oceans2015 - 0.1% ECAs – US & NWE
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2012- 3.5% Oceans2015 - 0.1% ECAs – US & NWE
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2016 – China - 0.5% ECA
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January 1, 20200.5% Oceans, 0.1% US & NWE ECAs
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How will shipowners satisfy demand?
0
1000
2000
3000
4000
5000
2020 2020
IMO 2020 Bunker Changes
HSFO - Noncompliance HSFO - Scrubbers IMO Compliant Fuel IMO 0.5% Gasoil LNG
('000 b/d)
Gasoil (ECAs)
Non-compliantHSFO
IMO 0.5%
Gasoil (ECAs)
LNG
HSFO (Scrubbers)
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Depending on Prices, Refiners May Use Every Avenue Available!
Crude Slate:
(Lighter, sweeter crude)
Investment:(HSFO Upgrading &
Hydrotreatment)
Pull LSFO From Inland Markets
Divert VGO & Heavy Gasoil
Higher Throughput
Blending
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Conclusions – Triangulating results
• US Refiners can take a bit more shale
• Trade Flows Indicate significant foreign interest in US crude
• IMO creates demand for sweet crude (also widens sweet/sour spread)
• Crude market is a blending market
• OPEC cut has strengthened medium sour crudes relative to light sweet, making light sweet competitive crude
• OPEC’s Production in 2019 is Critical Factor
• The global barrel is still a little short light sweet crude
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Condensate Condensate Condensate Condensate Condensate
Light LightLight Light Light
MediumMedium
Medium MediumMedium
Heavy Heavy
Heavy Heavy Heavy
Extra Heavy
Extra HeavyExtra Heavy Extra Heavy Extra Heavy
(6,000)
(4,000)
(2,000)
0
2,000
4,000
6,000
8,000
2016 2017 2018 2019 2020
Global Crude Oil Balance by Quality
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Thank You
ESAI Energy researches, collects, analyzes, forecasts, and serves customers in all of these areas across the energy value chain.
Contact me at [email protected] for more insight.
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Texas & Louisiana Gulf Coast’s Crude Demand
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2016 2017 2018 2019 2020 2021 2022 2022-2017
OECD
North America 24.1 24.2 24.5 24.7 24.9 25.1 25.2 1.0
of which US 19.7 19.9 20.2 20.4 20.5 20.7 20.7 0.9
Europe 14.6 14.9 15.1 15.1 15.1 15.0 15.0 0.0
Pacific 8.2 8.2 8.2 8.2 8.2 8.1 8.0 (0.2)
Sub-Total 46.9 47.4 47.8 48.0 48.2 48.2 48.2 0.8
OECD Annual Change 0.5 0.4 0.2 0.1 0.1 -0.1
Non-OECD
Other Asia 12.9 13.3 13.7 14.1 14.4 14.6 14.8 1.5
China 11.6 12.2 12.6 12.9 13.2 13.4 13.6 1.5
Middle East 9.0 9.0 9.2 9.4 9.6 9.8 10.0 0.9
Latin America 7.5 7.5 7.6 7.7 7.8 8.0 8.1 0.6
FSU 4.2 4.2 4.3 4.3 4.5 4.6 4.7 0.5
Africa 3.8 3.9 4.0 4.1 4.2 4.3 4.4 0.5
Eastern Europe 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.0
Sub-Total 49.6 50.7 51.9 53.1 54.2 55.2 56.2 5.5
Non-OECD AnnualChange 1.0 1.3 1.2 1.1 1.0 0.9
Total Oil Demand 96.5 98.0 99.7 101.1 102.4 103.5 104.3 6.3
1.5 1.7 1.4 1.3 1.1 0.9
Global Govt Stocking 0.2 0.2 (0.0) 0.1 0.0 0.1 0.0
Global Annual Change 1.8 1.6 1.5 1.3 1.2 0.9
Crude and Field Cond.
OECD 15.7 16.0 17.0 17.6 18.1 18.4 18.7 2.7
FSU 13.7 13.9 13.9 14.1 14.3 14.4 14.5 0.7
Africa 1.8 1.6 1.4 1.5 1.4 1.4 1.4 (0.1)
Latin America 4.1 4.2 4.4 4.5 4.7 4.8 5.0 0.8
Middle East 1.2 1.2 1.2 1.2 1.2 1.2 1.2 (0.0)
China 4.0 3.8 3.7 3.6 3.6 3.5 3.5 (0.4)
Other Asia 2.4 3.1 3.0 2.9 2.8 2.8 2.7 (0.4)
NonConv Crude** 2.9 3.2 3.5 3.6 3.8 4.0 4.2 1.0
Other non-OPEC 0.1 0.1 0.1 0.1 0.1 0.1 0.1 (0.0)
Crude/Cond. Sub-Total 46.0 47.1 48.2 49.2 50.1 50.7 51.3 4.3
Crude Annual Change 1.0 1.1 1.1 0.9 0.6 0.6
Processing Gain 2.6 2.6 2.7 2.7 2.7 2.7 2.7 0.1
Non-OPEC NGLs 4.3 4.5 4.7 4.9 5.0 5.1 5.2 0.7
Non-OPEC ethane 2.0 2.2 2.4 2.6 2.6 2.8 2.8 0.7
NonConv Fuels 3.0 3.1 3.3 3.4 3.6 3.6 3.7
Other Supply Sub-Total 11.9 12.4 13.1 13.5 13.9 14.2 14.5 2.1
Other Supply Annual Change 0.5 0.7 0.5 0.4 0.3 0.3
Total 58.0 59.5 61.2 62.8 64.0 64.9 65.8 6.3
Total Annual Change 1.5 1.8 1.5 1.3 0.9 0.9
OPEC NGLs (inc. cond.) 6.0 6.0 6.2 6.4 6.8 6.9 7.1 1.1
Call on OPEC Crude 32.8 32.7 32.2 32.1 31.6 31.7 31.4 (1.3)
Act OPEC & Forecast 33.1 32.3 32.2 32.2 32.2 32.2 32.2
Global Surplus/Deficit 0.3 (0.4) 0.0 0.1 0.6 0.5 0.8
Global Oil Balance with Outlook to 2022
OPEC Supply
Oil Demand
Non-OPEC Supply
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Global Refining Capacity Additions ('000 b/d)
DISTILLATION 2017 2018 2019 2020 2021 2022
North America* 50 165 18 - - -
Latin America - 40 30 - - 165
Western Europe (158) 200 - - - -
Eastern Europe - - - - - -
FSU 79 239 - 616 108 24
Middle East (98) 74 545 470 1,005 (28)
Africa - - 20 248 110 100
Pacific (62) 608 1,370 1,485 940 152
Total (189) 1,326 1,983 2,819 2,163 413
CDU 2017 2018 2019 2020 2021 2022
North America* - 80 18 - - -
Latin America - 40 30 - - 165
Western Europe (158) 200 - - - -
Eastern Europe - - - - - -
FSU 79 239 - 616 108 24
Middle East (98) 74 425 220 825 (88)
Africa - - 20 248 110 100
Pacific (112) 608 1,370 1,340 940 152
Total (289) 1,241 1,863 2,424 1,983 353
Condensate Splitter 2017 2018 2019 2020 2021 2022
North America* 50 85 - - - -
Latin America - - - - - -
Western Europe - - - - - -
Eastern Europe - - - - - -
FSU - - - - - -
Middle East - - 120 250 180 60
Africa - - - - - -
Pacific 50 - - 145 - -
Total 100 85 120 395 180 60
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Global Refining Secondary Capacity Additions ('000 b/d)
COKING 2017 2018 2019 2020
North America - - - -
Latin America - 13 23 -
Western Europe 50 40 - -
Eastern Europe - - 28 -
FSU 6 - - 116
Middle East - 37 - -
Africa - 25 - 15
Pacific 78 - - 160
Total 134 115 51 291
CATALYTIC CRACKING
North America (85) - - -
Latin America - - 25 -
Western Europe (36) - - -
Eastern Europe - - - -
FSU 17 10 35 -
Middle East - - - 62
Africa - - - -
Pacific 183 80 140 90
Total 79 90 200 152
HYDROCRACKING
North America 30 - - -
Latin America - - - -
Western Europe - 66 - -
Eastern Europe - - - -
FSU 101 48 167 144
Middle East 66 120 55 -
Africa - 40 - 84
Pacific 140 60 90 105
Total 337 334 311 333
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Global Crude Demand Growth is Mixed
(1,000)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2017 2018 2019 2020 2021 2022
'000 b/d
Cumulative Crude Demand Growth (By Quality)
Condensate Light Medium Heavy Extra Heavy
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Weightings Assumptions WorksheetTier SRFO % VR% Light Medium Heavy
1 35% 100% 0% 0%2 40% 75% 25% 0%3 45% 20% 80% 0%4 50% 0% 85% 15%5 55% 0% 65% 35%6 60% 0% 20% 80%7 35% 10% 0% 0%8 0% 0% 0%
Refinery Upgrading Capacity
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Condensate Condensate Condensate Condensate Condensate
Light Light
LightLight Light
MediumMedium
Medium MediumMedium
Heavy Heavy
HeavyHeavy
Heavy
Extra Heavy
Extra Heavy
Extra Heavy Extra HeavyExtra Heavy
(6,000)
(4,000)
(2,000)
0
2,000
4,000
6,000
8,000
2016 2017 2018 2019 2020
Global Crude Oil Balance by Quality