Download - Naftanext04242014final
Logistics Engineering Supply Chain
New Energy:
The Game Changer in North America
By Taylor Robinson & Graham Brisben
Prepared for:
April 24, 2014
NAFTANEXTEnergizing Sustainable Trade Corridors Across North America
2
Boutique consulting firm with team members throughout North America Established in 2001
Over 90 clients and 250 engagements
Significant shale development practice since 2010
Practice Areas Logistics
Engineering
Supply Chain
Consulting services Strategy & optimization
Assessments & best practice benchmarking
Logistics assets & infrastructure development
Supply Chain design & operations
Hazmat training, auditing & risk assessment
M&A/investments/private equity
Industry verticals Energy
Bulk commodities
Manufactured goods
Financial services
About PLG Consulting
New Energy: The Game Changer in North America
Partial Client List
3
Today’s Agenda
Taylor
What is “new energy” and why is it a game changer?
Impact of new crude oil, natural gas and NGL supply streams
Downstream impact on NAFTA manufacturing industries
What is the impact to Mexico?
Will the rest of the world catch up in shale?
Graham
Changes in North America energy logistics
New Energy: The Game Changer in North America
4
What is behind the North American energy revolution?
Resources• N.A. shale plays
• Western Canadian oil sands
Technologies examples• Hydraulic fracturing
• Horizontal drilling
• Steam Assisted Gravity Drainage (SAGD)
• Evolving exploration and production technologies
• Tremendous productivity gains drives cost reductions
• Logistics infrastructure “re-plumbing” in
progress
• Product abundance… overabundance
• Imports displaced… exports grow
• Recoverable resources grow…sustainability
• Globally competitive power and material cost structure
• Manufacturing industries grow/return to North America
Recoverable Resources &
Enabling Technologies
Continuous Improvement
Energy Revolution
5
Unconventional Energy Resources
North America Shale
Source: EIA, May 2011
Western Canada Oil Sands
Source: CAPP, About Oil Sands, June 2013
New Energy: The Game Changer in North America
New production technology developed by small
entities allowing numerous players to enter market
“Mass production” methodologies developed
Multi-billion dollar capital investments required by
few players
Technology allowing for economic recovery of
world’s third largest reserve
6
Convergence of hydraulic fracturing and
horizontal drilling in past decade
Fracking first used in 1947
Revolutionary advances since 2009
Yields 3-10x the initial production rate of conventional
wells
US uniquely positioned for the techniques
Private mineral rights
Drilling intensity (wells per acre)
90% of rig fleet equipped for horizontal drilling
Location of shale plays
Rapid ROI for E&P companies
Typical well earns back capital cost in 1-2 years
Depending on play productivity, “break even” price of
~$65/bbl (WTI) for oil and $3.50/Mbtu for gas
Liquid plays providing highest returns currently and a
majority of drilling rigs are focused on liquids
Intentional dry gas drilling still flat
Shale Technology Introduction
GAS OIL THERMAL
Source: Baker Hughes
New Energy: The Game Changer in North America
7
New fracking techniques include:
More well bores per well pad
Directional bores to multiple shale layers
Reduced well spacing per acreage – increases
Zipper wells – stimulating two wells in tandem
Optimal lateral lengths
Lateral lengths had tripled since the start of horizontal
drilling, but this trend is being challenged by new practices
Zone fracturing
Micro-fracture testing at multiple points vs. one average
test that enables highest extractions of each zone
Shorter, fatter fractures
Bigger holes in casing combined with additional sand and
water use
Productivity gains continue!
Time required for drilling 15,000+ ft. well cut in half in last
two years (9 days vs. 18 days)
Eagle Ford example – new well oil production per rig has
increased by 150% over past 3 years
Lowers break even costs drive profitability improvements
New Fracking Techniques Drive Increased Production At Lower Costs
Source: Marathon, February 2014
New Energy: The Game Changer in North America
Source: EIA Drilling Productivity Report, April 2014
8
Oil (bitumen) recovery uses two main methods
- mining and drilling (in situ)
20% of the Oil Sands reserves are close enough to the
surface to be mined using shovels and trucks (3% of oil
sands land area)
80% of the Oil Sands reserves will be recovered in situ by
drilling wells (97% of oil sands land area)
Steam Assisted Gravity Drainage (SAGD) is
most popular method
Two parallel wells are drilled
Upper well has high pressure steam continuously injected
Lower well recovers softened bitumen
Diluent is added to the bitumen (15~30%)
Diluent is very light oil or “condensate”
Enables the product to flow through pipelines and be
loaded into rail cars
Bitumen extraction has become profitable as
extraction technologies improved
Economical at ~ $ 45 - $ 65/bbl
Oil Sands Production Processes
Mining
Source: www.epmag.com
Drilling - SAGD
New Energy: The Game Changer in North America
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North American Crude Oil Growth
Source: Valero Investor Presentation, March 2014
Western Canadian oil sands crude is heavy/sour
Canada has the 3rd largest oil reserves in the world
Largest single play in North America
Heavy/sour crude has a natural home at US Gulf Coast with ~2.8
MM bpd demand
Increasing exports to Asia in the future
Shale play crudes are light/sweet
Bakken, Eagle Ford and Permian are “Big 3”
US crude is quickly displacing much of the imports at USGC and
Midwest refineries
US crude oil production is highest since 1988 at 7.9MMbbls/day
US crude oil cannot be exported without federal
authorization today (except to Canada)
Petroleum products can be exported and net exports have grown
to 1,950 kbpd in 2014-Q1 (gasoline, diesel)
Light shale crude quickly displacing foreign imports and may lead
to over-supply situation
Large amounts of very light crude (“condensate”) from shale is
driving investment into splitters (processing units) to enable
product export from USGC
New Energy: The Game Changer in North America
Source: Enbridge Investor Presentation, April 2014
North American Crude Supply Growth: 2013-2025
10
Shale Supply Chain and Downstream Impacts
Feedstock (Ethane)
Byproduct (Condensate)
Home Heating (Propane)
Other Fuels
Gasoline
Diesel
Gas
NGLs
Crude
Proppants
OCTG
Chemicals
Water
Cement
Generation
Process Feedstocks
All Manufacturing
Steel
Fertilizer (Ammonia)
Methanol
Chemicals
Petro-chemicals
Other Petroleum Products
Inputs Wellhead Direct
Output Thermal Fuels Raw Materials
Downstream Products
Jet Fuel
New Energy: The Game Changer in North America
Availability of low cost hydrocarbons positively impact all the North American industrial economy
11
Shale Gas History and Future Demand
Gas production has increased over past five years with a significantly lower gas rig count
1,000 rigs at peak down to ~300 rigs
Drilling productivity continues to increase production per well
and lower costs
And the Liquids (Crude, NGL) wells produce dry natural gas as a
by-product
Abundant US gas recoverable reserves
Low cost reserves in accessible locations near population
Marcellus gas production is the “eighth largest country” already
US will become a net gas exporter by 2020
US gas demand will grow due to:
Coal-fired generation plant converting to gas
More industrial use – steel, fertilizer, methanol
Mexican export via pipeline and LNG export overseas
Increasing use as transportation fuel
US gas cost competitiveness is sustainable
Supply will overwhelm demand as prices approach $5
US government and capital constraints will likely limit LNG
export to protect US from world gas market price
New Energy: The Game Changer in North America
Rig Count by Class vs. Gas Production
Source: Bentek, September 2013
Source: RBN Energy, January 2014
12
Shale Gas Is Important To Competitive Power Costs
Natural gas is ~5X cheaper than oil on a BTU-basis
Innovation will convert more transportation
fuels and other energy requirements to
natural gas
US electricity prices are the lowest in the industrial world
US industries now have substantial power
cost advantage
Gas drives an increasing share of the US
electricity generation capacity
Will continue to displace coal due to stricter
environmental regulations on coal-fired
facilities
Natural gas is a cleaner burning fuel compared to other hydrocarbons
New Energy: The Game Changer in North America
WTI & Henry Hub Natural Gas Energy Equivalent Pricing
Source: EIA, February 2014
~5X
Source: International Energy Agency, October 2013 *estimate
13
Dry and Wet Gas Turn Into Downstream Products
All shale plays have gas as a major
or minor portion of the product stream
Processing required at each step
Raw Natural Gas(1500+ BTU)
Processing Plant
Consumer Quality Dry Natural Gas
Methane
Ethane42 – 65%
Propane~28%
Normal Butane~8%
Iso-Butane~9%
Natural Gasoline~13%
NGLs (3 -9 gallon / MCF)
Y-Grade
Key Petrochemicals
$/MMBtu
Methane $4.53
Ethane $3.64
Propane $11.41
Iso-Butane $16.01
Normal Butane $11.43
Natural Gasoline $20.35
Source: Opis, April 2014 & CME Group, April 2014
“Dry”
“Wet”
New Energy: The Game Changer in North America
Ethane overabundance
causing deflatedpricing
14
Processing infrastructure being installed to
handle increased NGL supply
New facilities near shale plays
Domestic ethane supplies to quadruple by 2025
Exports of NGLs will continue to grow
NGLs are building blocks in chemical supply chain
US has shifted their petrochemical supply stream to >90%
ethane-based to leverage supply/cost advantage
Overabundance of NGLs Will Grow
Source: IHS Chemical, September 2013
New Energy: The Game Changer in North America
Source: IHS Energy
15
2008 2010 2012 2014 2016 2018 2020
Shale Development: The Evolving Transportation Impacts
Source: American Chemistry Council, February 2014
>$100B of Chemical Expansion Announced
Phase III – “Manufacturing”: Raw material cost driven
Phase I – Industries using gas as primary
feedstock have global cost competitiveness;
new US factories being built
Phase II – Downstream products require
significant processing facilities investment and
lead time
Phase III – US material cost advantage will
enable traditional manufacturing to return to
the North America as about 65% of the cost of
manufactured product is material cost
Shale Gas Phased Impact To NA Industrial Renaissance
Phase II - Downstream Products: Resins, Chemicals
Phase I - Gas & Power-intensive Industries: Steel, Fertilizer, Methanol
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Phase I - Steel, Methanol, & Fertilizer Manufacturing in US
Shale gas boom makes direct-reduced iron steel
economical
Gas strips oxygen from iron core to make high purity/quality
pellets – lower cost vs. scrap steel
$2B+ in new US projects announced
DRI-derived steel of higher quality than that scrap steel
U.S. methanol production – 10 projects announced
Methanol is used in numerous downstream chemical products
Captures price spread between low-cost natural gas and
methanol allowing move to higher value foreign markets
US currently represents 10% of the global market demand and
imports 89% of its supply
Natural gas is a feedstock for ammonia production
Represents ~70% of cash costs (CF Industries)
12MM mt new domestic manufacturing capacity announced
Imports will quickly be displaced
Source: IHS Energy, September 2013
New Energy: The Game Changer in North America
Falling Gas Prices a Boon to DRI Production
Source: GE Capital presentation, November 2013
17
Phase II - Low Cost NGLs Provides Significant Cost Advantages for Chemicals and Resins
US has a large structural cost advantage due to gas-based ethane for downstream products
Europe and Asia are tied to crude-based naptha as a feedstock for their
downstream processing
US production cost of ethylene is ~40% less than Europe and Asia
However, US ethylene cracker and processing capacity is tight and ethylene prices are inflated in the short term
Ethane cracker margins have been as high as 50-60 cents/lb
Additional cracker capacity expected in 2016/2017
Margins/prices will moderate as more capacity comes online
New US resin facilities also on the drawing board
Excess resin capacity will promote globally competitive prices and large
export increases
k to
ns k to
ns
New Energy: The Game Changer in North America
Source: Townsend Solutions, December 2013
Source: Townsend Solutions , December 2013
30,000
40,000
50,000
2012 2013 2014 2015 2016 2017 2018 2019 2020
North America Ethylene Expansions
Actual Capacity Additional CapacitySource: Townsend Solutions , December 2013
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Phase III - Material Cost Advantage Is Key Cost Driver to Future North American Manufacturing Growth
Materials normally accounts for 60-70% of manufacturing cost of goods sold (COGS)
Most product cost competition is won or lost here
Shale gas giving NA cost advantage for steel, plastics and chemicals
Total labor cost is ~20% of COGS for NA manufacturers
China labor cost in $ will continue to rise due to inflation and currency
appreciation
Mexico labor has increased competitiveness vs. China, will recapture
manufacturing share for medium/high labor manufacturing
Transportation & Logistics costs are in “Other” 15%
Asia/China has 5~10% cost disadvantage due to extra ~ 1 month shipping
lead time (major cash flow disadvantage)
Mexico has “near shore” advantage vs. Asia
Transportation costs continue to rise – proximity to market advantage
Energy cost is usually less than 5% for final manufacturer
However, energy costs are buried in raw material costs and transportation
and can be more substantial in energy-intensive products
US/Canada has a tremendous advantage vs. industrialized world
Mexico’s power costs will become more competitive with shale gas
New Energy: The Game Changer in North America
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Energy Revolution Impact To Mexico
Shale gas exports to Mexico
Mexico is net importer of natural gas and demand will
grow due to increased use for power generation
US imports via pipelines will grow by ~50% over next 5
years
Privatization of Mexican oil industry may
help reverse production slide
Shale potential in Mexico – Eagle Ford first mover?
Increased interested in deep water oil drilling
However, western Canadian bitumen is a
natural competitor to Mexican Maya
Low cost materials to Mexico from US will
stimulate further manufacturing growth
New Energy: The Game Changer in North America
Source: EIA, March 2014
Source: EIA, October 2012
20
December 2013 energy bill that removed the
prohibition against private investment in oil and
gas industry
Legal framework for oil and gas development is still not finalized which will be important for private investment to understand taxes and contracts before investing
Mexico’s proximity to US refineries and their
relative low costs of production make it potentially
attractive to US companies
Developers of deep water resources in Gulf of Mexico
Developers of shale plays such as part the Mexican portion of the Eagle Ford
Mexico still in early stages of shale oil drilling
Only a few wells with modest results have been drilled
Pemex plans to drill up to 75 shale exploration wells through 2015
US companies could leverage technology and experience to improve economics to make commercial production viable
Estimated first private investment contracts could materialize by 2015 with first investments seen in 2016
Liberalization of Mexican Oil Industry
New Energy: The Game Changer in North America
Source: OGJ, April 2014
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Russia
Siberian reserves are said to be 80X of Bakken
Total, Shell, Exxon, Statoil all investing
Second place soon?
China
Reserves in remote, mountainous locations
Technology transfer challenges
Only one oil company involved – stifles innovation
Argentina
Concerns with governmental regulation, price controls
Struggling with high cost proppants
Poland
Reserves not productive so far – Exxon, Marathon gave up
Encouraging recent results?
UK
Some gas reserves
Government support, but intense environmental opposition
Is Shale Energy A North American Phenomenon?
New Energy: The Game Changer in North America
Source: EIA, June 2013
0
10
20
30
40
50
60
70
80
Shale Oil Resources (Billion bbls)
0
200
400
600
800
1,000
1,200
Shale Gas Resources (Tcf)
Technically Recoverable Resources, Source: EIA, June 2013
22
Shift from coastal to mid-continent
supply points necessitated “re-
plumbing” the flow of carbon-based
energy in North America
Pipeline reversals, repurposing, new starts
Crude by rail comes of age – born in the Bakken
Waterborne imports being displaced
as shale oil and oil sands production
comes online
Infrastructure built rapidly to help
facilitate new energy movements
The “Re-Plumbing” of Hydrocarbons in North America
New Energy: The Game Changer in North America
Source: Enbridge, April 2014
Oil Sands
Bakken
Eagle Ford
Permian
Marcellus
Source: EIA, PLG Analysis (Google Earth), April 2014
23
Repurposing and retirement of some
existing pipelines
New natural gas production has localized the
supply of natural gas for certain areas, therefore,
decreasing the need for some existing natural gas
pipelines
Some natural gas pipelines being converted to
crude oil
New natural gas pipelines are being
built to transport natural gas out of
Marcellus
Together the proposed Atlantic Sunrise project
and Sabal Trail project would connect Marcellus all
the way to Central Florida
Many other smaller pipeline projects are occurring
to move Marcellus natural gas
Historic reversals of import/export
trade flows
Northeast US-Canadian Maritimes
New Patterns in Natural Gas Supply & Demand
New Energy: The Game Changer in North America
Source: Enbridge, April 2014
Natural Gas Movements
24
Natural Gas Liquids (NGLs)
Pipelines from Utica/Marcellus
Mariner East to Marcus Hook, PA for export
Mariner West exports to Sarnia, ON
ATEX to Mt. Belvieu, TX
Proposed Utica Marcellus Texas Pipeline to Mt.
Belvieu, Texas (conversion of natural gas
pipeline for most of the route)
New NGL export projects
Facility expansions and new construction
projects in Ferndale, WA and Port of Longview,
WA
Further expansions proposed by Enterprise
and Targa in their Gulf Coast export facilities
Phillips 66, Energy Transfer,
Williams/Boardwalk and Occidental have all
proposed export facilities out of the Gulf Coast
Natural Gas Liquids Pipelines and Export
New Energy: The Game Changer in North America
Source: MarkWest, PLG analysis, March 2014
Sarnia, ON
Mt Belvieu, TX
Marcus Hook, PA
Source: RBN Energy, January 2014
25
Basic Facts About Crude Oil – Grades and Qualities
New Energy: The Game Changer in North America
Heavy/sour
Higher sulfur content, yield for asphalt & diesel
Sources include
Western Canada (largest single play in North America)
Venezuela
Mexico, Alaska North Slope
Middle East (light/sour)
Significant investments made ($48B since 2005) at select
refineries to install coker units that will allow processing of
heavy/sour
Heavy/sour crude has a natural home in Midwest and US
Gulf Coast (~2.8 MM bpd demand at USGC)
Light/sweet
Brent, WTI, and US shale play crudes (Bakken, Permian,
Niobrara, Eagle Ford) are light/sweet
US is close to saturation point on light/sweet crude at mid-
continent and USGC refining areasSource: RBN Energy
26New Energy: The Game Changer in North America
Light/Sweet Crude Logistics
Sources: EIA, PLG analysis (Google Earth)
Pacific Northwest Refiners
California Refiners
2,525kbpd
PADD VDemand
Midwest Refiners
3,375kbpd
PADD II Demand
East Coast Refiners
PADD I Demand1,075kbpd
LA Gulf Coast Refiners
TX Gulf Coast Refiners
PADD III Demand
8,150kbpd
Bakken
Eagle Ford
Permian
Rail
Pipeline
Marine
Light/Sweet
Heavy/Sour
ANS
Brent
Brent
27New Energy: The Game Changer in North America
Sources: EIA, PLG analysis (Google Earth)
Light/Sweet
Heavy/Sour
Pacific Northwest Refiners
California Refiners
2,525kbpd
PADD VDemand
Midwest Refiners
3,375kbpdPADD II Demand
LA Gulf Coast Refiners
TX Gulf Coast Refiners
PADD III Demand
8,150kbpd
Oil SandsHeavy/Sour Crude Logistics
Rail
Pipeline
Marine
Mexican Maya
28
Refined Products Market Dynamics
New Energy: The Game Changer in North America
U.S. shifted to net exporter of refined
products
Mitigated the impact of declining domestic demand
International demand increasing, especially for diesel
Exports of diesel to Latin America and Europe
Gasoline exports to Latin America
Outlet for increasing domestic crude oil which
cannot be exported without being processed
Source: Valero Investor Presentation, March 2014Source: Valero Investor Presentation, March 2014
Source: Valero Investor Presentation, March 2014
29
All oil sands pipelines are under
intense scrutiny and subject to court
challenges
None of these developments will
proceed at a pace that will match
anticipated production levels
Canadian Oil Producers adopting CBR
as a risk mitigation measure to ensure
access to markets in North America
and offshore
Main driver of crude by rail out of
Western Canada will be delta between
pipeline capacity and crude oil
production
Expect Keystone XL to be built but
with more delays
Western Canada Crude Oil Pipelines
New Energy: The Game Changer in North America
Likely Built at Some Point
Trans Mountain Express
(Kinder Morgan)
Alberta Clipper (Enbridge)
Keystone XL (TransCanada)
Unlikely
Northern Gateway
(Enbridge)
Energy East
(TransCanada)
30
Large pipeline build to Texas Gulf
Coast
1.45 MMb/d added in 2012-2013 and 1.92
MMb/d to be added in 2014-2015
Large pipeline projects from Cushing
including Keystone Gulf Extension and
Seaway pipelines
Other pipeline projects from Permian,
Eagle Ford, and Midwest
Bakken pipeline export capacity
projected to increase to 715 kbpd
in 2014 from only 280 kbpd in 2010
(NDPA, January 2014)
US Crude Oil Pipelines
New Energy: The Game Changer in North America
Pipeline Capacity to Texas Gulf Coast
Source: RBN Energy, December 2013
31
Correlation of Operating Rig Count with Sand and Crude Carloads Handled
STCC 14413 (sand) and 13111 (petroleum) Source: US Rail Desktop, Baker Hughes, Surface Transportation Board, PLG Analysis, March 2014
0
500
1,000
1,500
2,000
2,500
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2007 Avg. 2008 Avg. 2009 2010 2011 2012 2013
Op
era
tin
g O
nsh
ore
Rig
s
Ca
rlo
ad
s H
an
dle
d
Operating On Shore Rigs
All Sand Carloads
Petroleum Carloads
New Energy: The Game Changer in North America
32
Shale Related Rail Traffic Still Small Relative to Coal Volumes
0
500,000
1,000,000
1,500,000
2,000,000
2,500,0002
00
8
20
09
20
10
20
11
20
12
20
13
SandCrude Coal
Ca
rlo
ad
s
Quarterly Data
Sand
Crude
Coal
Railcars Handled: Sand, Crude, & Coal
STCC 14413 (sand), 13111 (petroleum), 11212 (coal) Source: US Rail Desktop, Surface Transportation Board, PLG Analysis, February 2014
New Energy: The Game Changer in North America
33
The Importance of Price Differentials to Crude by Rail
Differentials made rail attractive Bakken and WTI differential as high as ~$20/bbl vs. Brent
in 2012
CBR enables producers to sell at trading hubs with higher benchmarks
Market response: E&P, midstream players willing to rapidly deploy significant capital to enable access and capitalize on spreads Multi-modal logistics hubs in shale plays and at
destination markets (i.e. Cushing, OK, St. James, LA, Pt. Arthur, TX, Albany, NY, Bakersfield, CA)
Lease and purchase of railcar fleets
Refineries install unit train receiving capability Particularly coastal refineries previously captive to
waterborne imports (i.e. Philadelphia, PA, St. John, NB, Washington state)
Pipeline capacity underutilized Rail captures 73% Bakken takeaway by April 2013
Differentials are both an incentive – and a risk – for crude by rail 3Q 2013 a cautionary note
Source: North Dakota Pipeline Authority, January 2014, PLG Analysis
New Energy: The Game Changer in North America
Source: North Dakota Pipeline Authority, PLG Analysis, April 2014
0
200
400
600
800
1,000
1,200
Ja
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-14
Mbbl/d ND Crude Production and Rail Transport
ND Production Crude by Rail
34
Source: AAR, North Dakota Pipeline Association, Surface Transportation Board, PLG Analysis, February 2014
Crude by Rail Statistics
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
-
50,000
100,000
150,000
200,000
250,000
300,000
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
Petroleum & Petroleum Products (carloads/quarter) Crude Originated (carloads/quarter) Williston Crude by Rail (bbls/day)
Carloads/Quarter Bbls/Day
WTI-Brent equilibrium
3Q3012
WTI-Brent equilibrium
3Q3013
New Energy: The Game Changer in North America
35
Shale Development and Crude By Rail: Current Market Dynamics
Adverse 3Q 2013 market forces have reversed
WTI-Brent spread now ~$5.50/bbl
CBR rebound driven by Bakken to coasts
Weak long-term outlook for Bakken CBR to USGC
Key driver: LLS now aligned with WTI, not Brent
“Next wave” of CBR development:
Canadian Oil Sands
Terminal investments in Alberta and PADD II and III
Over 1,300 kbbl/day planned AB loading capacity through 2015
NOT like the Bakken – more challenges
Complexities of heavy/sour product handling (steaming, diluent,
unit train challenges)
Fewer destinations
Existing – and growing – mode competition to logical markets
(pipelines and barge)
Tank car market reorienting to coiled/insulated
car types (~2/3 of CBR fleet order backlog)
Source: EIA, April 2014
New Energy: The Game Changer in North America
Brent vs. WTI Spread ($/bbl)
Source: RBN Energy, April 2014
36New Energy: The Game Changer in North America
Crude Rail Terminals Through 2017
85 load terminals
Largest and most efficient
in Bakken
69 unload terminals
Majority on the Coasts and
Mississippi River
Source: www.CBRforecast.com
37
Bakken and Oil Sands Crude Oil Takeaway Forecast
New Energy: The Game Changer in North America
Source: www.CBRforecast.com
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2013 2014 2015 2016 2017 2018
Base Case Takeaway (kbpd)
Pipeline
Crude by Rail
Local Refining
38
High Profile Accidents Changing Crude by Rail
Rail industry has a strong safety record, but optics of
CBR accidents are overwhelming any positive statistics
Industry, government, media focus on tank car design
Railroad operating practices, maintenance equally
important
Railroad operating rule changes on hazmat train handling
Increased scrutiny, insurance requirements
Short line and regional railroads in particular
May have consequences in CBR freight rates
Increased product testing, documentation and
traceability (FRA directive)
Oil chemistry varies by well/pad
Concerns with extremely low flash and boiling points
Bakken terminals at varying levels of compliance
New Energy: The Game Changer in North America
39
Bakken Crude Higher Volatility
New Energy: The Game Changer in North America
40
LNG Export Opportunity
Political/policy battle between domestic industrial users and producers
Only FERC approved LNG export terminal is Cheniere Energy’s Sabine Pass LNG in Sabine, LA
Proposed US LNG Export Terminals to FERC (in Bcfd):
There are 12 other US potential export terminals along with 3 Canadian proposed sites and 10 other Canadian potential sites
Supply Sources
Oil PricesDestination
Markets
Capital
New Energy: The Game Changer in North America
Data in $US/MMbtu
Source: Waterborne Energy from FERC presentation, February 2014
Location Bcfd Location Bcfd
Freeport, TX 1.8 Lavaca Bay, TX 1.38
Corpus Christi, TX 2.1 Elba Island, GA 0.35
Coos Bay, OR 0.9 Sabine Pass, LA 1.40
Lake Charles, LA 2.2 Lake Charles, LA 1.07
Hackberry, LA 1.7 Plaquemines Parish, LA 1.07
Cove Point, MD 0.82 Sabine Pass, TX 2.1
Astoria, OR 1.25
41New Energy: The Game Changer in North America
Panama Canal Expansion Has been delayed and now expected at full
capacity by 2016
Current Panamax vessel size excludes all but 10% of LNG vessels from using the canal
After expansion, 80% of LNG fleet will be able to use the canal with vessel capacities up to 100 MMcf
Benefits for N.A. LNG Exports Using the expanded Panama Canal will be a
natural fit for the large number of proposed Gulf Coast export facilities wanting to reach the growing Asian LNG market
Trip time cut from 64 days to 44 days, greatly improving the competitive position of LNG exports by reducing transportation cost
Panama Canal Expansion and North American Exports of LNG
Source: Enbridge, April 2014
Source: Enbridge, April 2014
Logistics Engineering Supply Chain
This presentation is available at:www.plgconsulting.com/category/presentations
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Thank You !
For follow up questions and information, please contact:
Graham Brisben, CEO+1 (708) 386-0700 / [email protected]
Taylor Robinson, President+1 (508) 982-1319 / [email protected]