Challenges and Opportunities of the North American Petroleum - PowerPoint PPT Presentation

Challenges and Opportunities of the North American Petroleum Justin Kringstad Trisha Curtis Renaissance Trisha Curtis, Director of Research, Upstream and Midstream Energy Policy Research Foundation, Inc. (EPRINC) ESCP Europe Business School January 31 st , 2014

About EPRINC • Founded in 1944 • Not-for-profit organization that studies energy economics and policy issues in the oil, natural gas, and petroleum product markets • Provides objective and technical analysis on a wide range of energy issues • Funded largely by the private sector and occasional U.S. government contracts www.eprinc.org 2

EPRINC Embassy Series • Engagement with Washington’s energy policy community • Collaboration among the diplomatic community to provide both an interesting venue and constructive policy discussion • The series offers an opportunity to gain a greater understanding of U.S. energy policy in an era of expanding U.S. supplies of oil and gas 3

Recent and Upcoming Projects/Events • Pipelines, Trains, and Trucks • RINs around the Rosy – EPA Administrator app – will be released shortly for iOS / iPhone • Department of Defense contract: Global Implications of the North American Petroleum Renaissance • Clingengdael Presentation • Presentations at Chatham House and Imperial College London • Next Embassy Event • Collaborative research efforts with the University of Texas on petroleum exports • Williston Basin Petroleum Conference Presentation 4

Importance of the North American Lens 20 18 16 Saudi Arabia 14 Million Barrels Russia 12 per Day USA 10 Iraq 8 Canada 6 4 N. America 2 0 2013 2015 2017 2019 2021 2023 Source: Wood Mackenzie (includes NGLs) 5

Outline 1. Breakdown of U.S. and Canadian Oil Production 2. Infrastructure Challenges in Moving Rising Volumes of North American Crude Oil 3. Regulatory Concerns Source: EIA 6

North American Oil Production and Forecast 16000 Avg 2013 Oil 14000 Production 12000 Thousand Barrels Per Day U.S. 7.4 mbd Canada Oil 10000 Production Canada 3.3 mbd 8000 U.S. Oil 6000 Production 4000 2000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jan-Oct 2013 2014 2015 2016 2017 2018 2019 2020 Source: EIA, Canadian CAPP forecast, EPRINC U.S. forecast, EPRINC Mexico , and EPRINC estimates 7

Jan 2014 EPRINC’s Forecast for Major U.S. Shale Plays 7,000,000 EPRINC forecasts an 6,000,000 additional 2.5 mbd by 2020 5,000,000 Periphery 4,000,000 Permian Eagle Ford 3,000,000 Bakken EPRINC's May 2013 Forecast 2,000,000 1,000,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: HPDI data with EPRINC forecast estimates 8

Canadian Long-Term Production Forecast 8,000 Over 3 mbd increase by 2030 7,000 Thousands of Barrels per Day 6,000 Mining 5,000 In Situ 4,000 Conventional Light 3,000 2,000 Conventional Heavy 1,000 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 Source: Canadian Association of Petroleum Producers 9

U.S. Total Imports, U.S. Production, U.S. Canadian Imports 12000 10000 U.S. Imports 7.8 mbd 8000 U.S. Production 7.7 mbd U.S. Imports from Canada of Crude Oil Mbbl/d 6000 U.S. Field Production of Crude Oil Mbbl/d 4000 U.S. Imports of Crude Oil Mbbl/d Canadian Imports 2.6 mbd 2000 0 201… 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: EIA 10

U.S. Activity 11

Permit Activity Willis illiston on Basin asin Powder der Riv iver er Basin asin DJ B J Basin asin (Niobr Niobrar ara R a Res eser ervoir oir) Uint inta a Basin asin Utica ica Per ermia mian n Anadar nadarko B o Basin asin Basin asin (Mis issis issipp ippian ian, Gr , Gran anit ite e Was ash, M h, Mis issis issippi ippi Lime Lime Ea Eagle F le For ord d and ot and other her s stac acked ed play plays) Reser eservoir oir Source: HPDI January 18 2014, Past 90 Days 12

Drilling Then and Now Source Rocks and Reservoir Rocks Accumulations Source: From PIECE Course Workbook, Mark J Kaiser, Houston, July 2008, “Introduction to USA Petroleum Industry” 13 13

North American Potential…Shale Oil Plays 14 14

So how much oil is there…? Source: EPRINC 15 15

State Production Trends 3000 North Dakota Field Production of Crude Oil Mbbl/d 2500 Alaska Field Production of Crude Oil Mbbl/d Thousand Barrels Per Day 2000 Colorado Field Production of Crude Oil Mbbl/d 1500 California Field Production of Crude Oil Mbbl/d 1000 New Mexico Field Production of Crude 500 Oil Mbbl/d Texas Field Production of Crude 0 Oil Mbbl/d Jan-81 Apr-82 Jul-83 Oct-84 Jan-86 Apr-87 Jul-88 Oct-89 Jan-91 Apr-92 Jul-93 Oct-94 Jan-96 Apr-97 Jul-98 Oct-99 Jan-01 Apr-02 Jul-03 Oct-04 Jan-06 Apr-07 Jul-08 Oct-09 Jan-11 Apr-12 Jul-13 Source: EIA 16

U.S. Rig Count 2,500 2,000 1,500 # of Rigs Oil Gas 1,000 Total 500 0 Source: Baker Hughes 17

Part of the U.S. story Source: NationalAtlas.gov 18

The Soaring Eagle Ford 19

Eagle Ford Wells Source: HPDI Nov 2013 20

Source: HPDI Nov 2013 Thousand Barrels Per Day 1000000 1200000 200000 400000 600000 800000 0 1/1/2005 4/1/2005 7/1/2005 10/1/2005 1/1/2006 4/1/2006 7/1/2006 10/1/2006 1/1/2007 Eagle Ford Production 4/1/2007 7/1/2007 10/1/2007 1/1/2008 4/1/2008 7/1/2008 10/1/2008 1/1/2009 4/1/2009 7/1/2009 10/1/2009 1/1/2010 4/1/2010 7/1/2010 10/1/2010 1/1/2011 4/1/2011 7/1/2011 10/1/2011 1/1/2012 4/1/2012 7/1/2012 10/1/2012 1/1/2013 4/1/2013 7/1/2013 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000 4500000 GAS LIQ 21

The Prolific Permian Basin 22

Source: HPDI Oct 2013 Thousand Barrels Per Day 1000000 1200000 1400000 1600000 1800000 2000000 200000 400000 600000 800000 0 1/1/1980 1/1/1981 Permian Basin Production 1.38 mbd 1/1/1982 1/1/1983 1/1/1984 1/1/1985 1/1/1986 1/1/1987 1/1/1988 1/1/1989 1/1/1990 1/1/1991 1/1/1992 1/1/1993 1/1/1994 1/1/1995 1/1/1996 1/1/1997 1/1/1998 1/1/1999 1/1/2000 1/1/2001 1/1/2002 1/1/2003 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 GAS LIQ 23

EPRINC November Revised Permian Forecast Source: EPRINC 24

Bakken: The Case Study 25

Williston Basin Production 1,200,000 1,000,000 800,000 North Dakota 600,000 Eastern Montana South Dakota TOTAL 400,000 North Dakota accounts for almost 10% of US Production 200,000 Almost all new production is from 0 the Bakken/Three Forks Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Source: NDIC 26

Bakken Drilling Source: Triangle Petroleum Corporation, Presentation Bakken Product Markets and Take-Away Denver Jan 31-Feb 1 2012 27

Decline Rates Source: HPDI, Bakken 28

Infrastructure Challenges 29

Pipeline Choke Points Source: EPRINC Choke Point Map using Hart ArcGIS Mapping software 30

All Canadian Pipeline Export Options are Full • Kinder Morgan’s Transmountain line off BC coast - currently 300,000 b/d capacity-recent announcements to expand up to 800,000 b/d (early 2017) • (Now Spectra) Platte line to Wood River 280,000 b/d-full • Enbridge mainline system currently transporting over 1.5 mbd with potential capacity around 2.5 mbd — Northern Gateway off BC coast planned 525,000 b/d, several other planned expansions, light oil access +400,000 b/d • TransCanada’s Keystone 581,000 b/d-full — XL would add 700,000 b/d, Energy East Pipeline Project 500 to 800k Source: Canadian Energy Pipeline Association 31

Market Saturation Source: CAPP Crude Oil Forecast June 2013 32

Where light sweet Bakken and heavy (blended bitumen) needs to go… Total Coking Capacity vs. Atmospheric Crude Distillation Capacity by PADD Cokers = 10,000,000 60 Operable Heavy 9,000,000 Atmospheric refining Crude Oil 50 8,000,000 Distillation Barrels Per Calendar Day capability Capacity 7,000,000 Number of Refineries 40 6,000,000 Thermal Cracking 5,000,000 30 Coking Downstream 4,000,000 Charge 20 Capacity 3,000,000 2,000,000 10 Operating Refineries 1,000,000 - 0 PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 East Coast Midwest Gulf Coast Rockies West Coast Source: AFPM map, EIA data for graph 33

Regional Pricing Disparities $160.00 WTI $140.00 $120.00 Bakken (North $100.00 Dakota Light Sweet Flint $80.00 Hills) WCS (Western $60.00 Canadian Select) $40.00 Brent $20.00 $0.00 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 • Western Canadian Select -$18.50 to WTI Source: Flint Hills, EIA, CME Group, and estimates 34

The Rise of Rail 35