ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland Bill - PowerPoint PPT Presentation

ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland Bill Haverland ConocoPhillips Company ConocoPhillips Company

Issues to be Discussed � Crude Oil Supply Crude Oil Supply � � Crude Oil Pricing Crude Oil Pricing � � Refining Capacity Refining Capacity � � Products Supply Products Supply � � Products Pricing Products Pricing � � Future of the Industry Future of the Industry �

CRUDE OIL SUPPLY A WORLD LOOK A WORLD LOOK

Crude Oil Supply (2006) World Proven Crude Oil World Proven Crude Oil World Crude Oil Production World Crude Oil Production Reserves Reserves Millions of Barrels Per Day Millions of Barrels Per Day Billions of Barrels Billions of Barrels W. Europe FSU/E. W. Europe Latin 15 FSU/E. Europe Europe America 79 Latin 116 6.3 America 12.6 US/Canada 10.6 201 11.3 36 Asia US/Canada 26.0 743 /Pacific 102 8.4 Africa 9.8 Asia/Pacific Middle East Asia/Pacific Africa Middle Africa Middle East East Total: 85MMB/D Total: 1,292 BB

Crude Oil Demand � Demand has risen by 7 MMBD (9%) since 2002. Demand has risen by 7 MMBD (9%) since 2002. � � Demand at 85 MMBD or 98% of world daily Demand at 85 MMBD or 98% of world daily � delivery capacity. delivery capacity. � Vulnerable to supply disruptions caused by Vulnerable to supply disruptions caused by � storms, accidents, breakdowns, political unrest. storms, accidents, breakdowns, political unrest. � 65% of proven reserves within national oil 65% of proven reserves within national oil � companies and 16% held by Russia. companies and 16% held by Russia. � Traditional companies have full access to 7% of Traditional companies have full access to 7% of � reserves and 12% through partners (if allowed). reserves and 12% through partners (if allowed).

CRUDE OIL PRICING

2005 2006 2003 2004 2000 2001 2002 WTI Price by Year 1998 1999 1996 1997 70 60 50 40 30 20 10 0

6 0 0 2 Q 1 5 0 0 2 Q 1 WTI Price by Quarter 4 0 0 2 Q 1 3 0 0 2 Q 1 2 0 0 2 Q 1 1 0 0 2 80 70 60 50 40 30 20 10 0 Q 1

REFINING CAPACITY

Topping Refinery Topping Refinery GASES NAPHTHA 650- AND GASOIL FEEDSTOCKS “Tea Pot” CRUDE OIL DU Not A Refinery Really Just A Crude Distiller 6OIL or 650+ ASPHALT (if heavy crude)

Simple Refinery Simple Refinery TO MOGAS GASES 650- NHT CRU JET/KER KHT O TO NO.2 DHT CRUDE OIL DU “Hydroskimming” Refinery, many exist all over the world 6OIL or 650+ ASPHALT (if heavy crude)

CCU - - “ Complex ” ” Refinery Refinery CCU “ Complex GASES TO MOGAS 650- TO MOGAS NHT CRU JET/KER KHT O TO 2OIL DHT CRUDE OIL DU GASES TO MOGAS ALKY 650- GASOLINE TO MOGAS 1050 CCU GASOIL TO 2OIL 650+ VAC 1050 6OIL + ASPHALT

CCU/HCU/Coker - - “ CCU/HCU/Coker Very Complex ” ” Refinery Refinery “ Very Complex TO ISOM GASES MOGAS TO NHT CRU MOGAS TO KHT MOGAS TO 2OIL DHT H2 PLANT GASES TO 650-750 HCU MOGAS MTBE CRUDE OIL TO DU GASES ALKY MOGAS TO 750-1050 CCU MOGAS VAC GASES COKER TCU/VIS DEASPHALTER COKE

Refinery Yield (% of Crude Intake) 120% 110% 100% OTHER 90% MOGAS 80% JET 70% LT NAPH 60% HVY NAPH GAS OIL 50% NO.2 40% NO6 or Asphalt 30% COKE 20% 10% 0% TOPPING SIMPLE CCU RFY COKER RFY RFY RFY

U. S. Refining Capacity 18.5 319 more than 30 18 less than 30 17.5 Crude Dist Cap 17 16.5 175 158 131 16 15.5 15 14.5 14 1980 1995 2000 2006 Last New U. S. Refinery Built in 1976 Source: Oil & Gas Journal

Total U.S. Capacity Utilization 100 Forecast (DOE) 95 90% 90 1 Percent utilization 85 History 80 75 • Demand growth has outpaced capacity expansion • Investment focused on clean fuels 70 • Insufficient global capacity to process more difficult crudes 65 60 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: U.S. Department of Energy 1 Percent utilization defined as: gross input to refineries /operable capacity.

U. S. Asphalt Refining Capacity 800 750 # Refineries 98 700 Asphalt Capacity 650 60 72 600 42 550 500 450 400 1980 1995 2000 2006 Production Range: 600 B/D to 60,000 B/D Source: Oil & Gas Journal

U. S. Refining Coking Capacity 60 138 140 # Refineries w/Cokers 120 58 Coke Production, MT/D 120 58 56 100 56 81 54 80 52 60 50 40 50 48 20 46 0 1995 2000 2006

U.S. Coker Construction Projects 2005 - 2011 � Engineering, Procurement & Const. Phase Engineering, Procurement & Const. Phase � � � Total Refineries: 245 MB per day Total Refineries: 245 MB per day Asphalt Refineries: 135 MB per day � Asphalt Refineries: 135 MB per day � � Planning or Early Engineering Phase Planning or Early Engineering Phase � � � Total Refineries: 176 MB per day Total Refineries: 176 MB per day Asphalt Refineries: 121 MB per day Asphalt Refineries: 121 MB per day � � * Source: Argus Asphalt Report * Source: Argus Asphalt Report

SUPPLY/DEMAND PRODUCTS

Supply Source for U. S. Demand Domestic Crude Production Imported Crude Imported Products 20 18 16 14 MMB/D 12 10 8 6 4 2 0 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

U. S. Product Demand, MB/D 10000 9000 8000 7000 1995 6000 2000 5000 2004 4000 2005 3000 2000 1000 0 Gasoline Diesel Jet Resid Asphalt

Historical Asphalt Supply/Demand Millions Tons - Liquid 60 50 40 Supply 30 Demand 20 10 0 1980 1995 2000 2003 2005 2006 Source: Oil & Gas Journal

PRODUCTS PRICING

6 0 0 2 Q 1 5 0 0 2 Q 1 4 0 0 2 Q 1 Prices by Quarter 3 0 0 2 Q 1 2 0 0 2 Q Gasoline 1 WTI 1 0 0 2 Q 1 0 0 0 2 100 90 80 70 60 50 40 30 20 Q 1

6 0 ' Q 1 5 0 ' Q 1 4 0 ' Q 1 Prices by Quarter 3 0 ' Q 1 2 0 ' Q 1 Gasoline Asphalt WTI 1 0 ' Q 1 0 0 ' Q 90 80 70 60 50 40 30 20 10 0 1

6 0 - p e S 6 0 - y a Asphalt vs Coker Feed Value M 6 0 - n a J 5 0 - p e S 5 0 - y a M 5 0 - n a J 4 0 - p e gulf coast coker value S 4 0 - y a M 4 0 - n a J 3 P&P MC Avg 0 - p e S 3 0 - y a M 3 0 WTI - n a J 2 0 - p e S 2 0 - y a M 2 0 - 90 80 70 60 50 40 30 20 10 0 n a J

Economic Analysis – 2005 YE Gasoline/Diesel Pricing Kansas Asphalt Pricing Gasoline/Diesel Pricing Kansas Asphalt Pricing 12/05 YTD: $32.94/BBL* 12/05 YTD: $32.94/BBL* Jan., 06 Price: $70.00/BBL � Jan., 06 Price: $70.00/BBL � ($35/Ton): 6.25/BBL ($35/Ton): 6.25/BBL Less Distribution: 6.00/BBL � Less Distribution: 6.00/BBL � $26.69/BBL $26.69/BBL Net to Refinery: $64.00/BBL � Net to Refinery: $64.00/BBL � Lost Value: $37.31/BBL � Lost Value: $37.31/BBL � * Source * Source – – Poten & Partners Poten & Partners

Coking Economics – 2005 YE � 30,000 BBLS/Day Asphalt Production 30,000 BBLS/Day Asphalt Production � � X 70% X 70% Gasoil Production Gasoil Production � � 21,000 BBLS Gasoil for Gasoline/Diesel 21,000 BBLS Gasoil for Gasoline/Diesel � � X $37.31 X $37.31/BBL Gasoline/Diesel diff. To Asphalt /BBL Gasoline/Diesel diff. To Asphalt � � $783,510 per day added margin $783,510 per day added margin � � $1 Billion / $783,510 = 1,276 days (3.5 years payoff) $1 Billion / $783,510 = 1,276 days (3.5 years payoff) �

Economic Analysis – Recent Update Gasoline/Diesel Pricing Kansas Asphalt Pricing Gasoline/Diesel Pricing Kansas Asphalt Pricing 12/06 MTD: $49.11/BBL* 12/06 MTD: $49.11/BBL* Jan., 07 Price: $62.75/BBL � Jan., 07 Price: $62.75/BBL � ($35/Ton): 6.25/BBL ($35/Ton): 6.25/BBL Less Distribution: 6.00/BBL � Less Distribution: 6.00/BBL � $42.86/BBL $42.86/BBL Net to Refinery: $56.75/BBL � Net to Refinery: $56.75/BBL � Lost Value: $13.89/BBL � Lost Value: $13.89/BBL � * Source * Source – – Poten & Partners Poten & Partners

Coking Economics – Recent Update � 30,000 BBLS/Day Asphalt Production 30,000 BBLS/Day Asphalt Production � � X 70% X 70% Gasoil Production Gasoil Production � � 21,000 BBLS Gasoil for Gasoline/Diesel 21,000 BBLS Gasoil for Gasoline/Diesel � � X $13.89 X $13.89/BBL Gasoline/Diesel diff. To Asphalt /BBL Gasoline/Diesel diff. To Asphalt � � $291,690 per day added margin $291,690 per day added margin � � $1 Billion / $291,690 = 3,428 days (9.4 years payoff) $1 Billion / $291,690 = 3,428 days (9.4 years payoff) �

FUTURE OF THE INDUSTRY