asphalt pricing in a volitile oil world
TRANSCRIPT
ASPHALT SUPPLY IN A VOLATILE OIL WORLD
Bill HaverlandBill HaverlandConocoPhillips CompanyConocoPhillips Company
Issues to be Discussed
Crude Oil SupplyCrude Oil SupplyCrude Oil PricingCrude Oil PricingRefining CapacityRefining CapacityProducts SupplyProducts SupplyProducts PricingProducts PricingFuture of the IndustryFuture of the Industry
CRUDE OIL SUPPLY
A WORLD LOOKA WORLD LOOK
Crude Oil Supply (2006)World Crude Oil ProductionWorld Crude Oil ProductionMillions of Barrels Per DayMillions of Barrels Per Day
World Proven Crude Oil World Proven Crude Oil ReservesReserves
Billions of BarrelsBillions of Barrels
W. Europe
US/Canada
Asia/PacificAfrica
Middle East
FSU/E. Europe
Latin America
11.3
6.310.6
8.49.8
FSU/E. Europe
W. Europe15 Latin
America
US/Canada
Asia/Pacific
Africa
Middle East
743
201
11679
10236
Asia/Pacific
Africa
26.0
12.6
Middle East
Total: 1,292 BBTotal: 85MMB/D
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
WTI Price by Year
0
10
20
30
40
50
60
70
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
WTI Price by Quarter
01020304050607080
1Q 20
01
1Q 20
02
1Q 20
03
1Q 20
04
1Q 20
05
1Q 20
06
REFINING CAPACITY
Topping RefineryTopping Refinery
DUCRUDE OIL
GASES NAPHTHA AND
6OIL or ASPHALT(if heavy crude)
GASOIL FEEDSTOCKS
650-
650+
“Tea Pot”Not A RefineryReally Just A
CrudeDistiller
Simple RefinerySimple Refinery
650- CRUNHT
KHT
DHT
GASES TO MOGAS
JET/KERO
6OIL or ASPHALT(if heavy crude)
TO NO.2
DUCRUDE OIL
650+
“Hydroskimming” Refinery,many exist all over the
world
CCU CCU -- ““ComplexComplex”” RefineryRefinery
CRUNHT
KHT
DHT
ALKY
CCU
DUCRUDE
OIL
GASES
VAC
GASES650-1050
TO MOGAS
TO MOGASJET/KERO
TO 2OILTO MOGAS
TO 2OIL
650-
650+
TO MOGAS
6OIL
ASPHALT
GASOLINEGASOIL
1050+
CCU/HCU/Coker CCU/HCU/Coker -- ““Very ComplexVery Complex”” RefineryRefineryISOM
CRUNHT
KHT
DHT
HCU
ALKY
CCU
DU
GASES
CRUDE OIL
GASES
VAC
GASES
650-750
750-1050
COKER
GASES
COKE
H2 PLANT
TCU/VIS
DEASPHALTER
TO MOGASTO MOGASTO MOGAS
TO MOGASTO MOGASTO MOGAS
TO 2OIL
MTBE
Refinery Yield (% of Crude Intake)
0%10%20%30%40%50%60%70%80%90%
100%110%120%
TOPPINGRFY
SIMPLERFY
CCU RFY COKERRFY
OTHERMOGASJETLT NAPHHVY NAPHGAS OILNO.2NO6 or AsphaltCOKE
U. S. Refining Capacity
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
1980 1995 2000 2006
more than 30less than 30Crude Dist Cap
Last New U. S. Refinery Built in 1976Source: Oil & Gas Journal
319
175 158 131
6065707580859095
100
1980 1985 1990 1995 2000 2005 2010 2015 2020
Total U.S. Capacity Utilization
Source: U.S. Department of Energy1 Percent utilization defined as: gross input to refineries /operable capacity.
Perc
ent u
tiliz
atio
n1
History
Forecast (DOE)
90%
• Demand growth has outpaced capacity expansion• Investment focused on clean fuels• Insufficient global capacity to process more difficult crudes
U. S. Asphalt Refining Capacity
72
98
60
42
1980 1995 2000 2006400
450
500
550
600
650
700
750
800
# RefineriesAsphalt Capacity
Production Range: 600 B/D to 60,000 B/DSource: Oil & Gas Journal
U. S. Refining Coking Capacity
50
585681
120138
46
48
50
52
54
56
58
60
1995 2000 20060
20
40
60
80
100
120
140# Refineries w/CokersCoke Production, MT/D
U.S. Coker Construction Projects2005 - 2011
Engineering, Procurement & Const. PhaseEngineering, Procurement & Const. PhaseTotal Refineries: 245 MB per dayTotal Refineries: 245 MB per dayAsphalt Refineries: 135 MB per dayAsphalt Refineries: 135 MB per day
Planning or Early Engineering PhasePlanning or Early Engineering PhaseTotal Refineries: 176 MB per dayTotal Refineries: 176 MB per dayAsphalt Refineries: 121 MB per dayAsphalt Refineries: 121 MB per day
* * Source: Argus Asphalt ReportSource: Argus Asphalt Report
PRODUCTS SUPPLY/DEMAND
Supply Source for U. S. Demand
02468
101214161820
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
MM
B/D
Domestic Crude Production Imported Crude Imported Products
U. S. Product Demand, MB/D
0100020003000400050006000700080009000
10000
Gasoline Diesel Jet Resid Asphalt
1995200020042005
Historical Asphalt Supply/DemandMillions Tons - Liquid
0
10
20
30
40
50
60
1980 1995 2000 2003 2005 2006
SupplyDemand
Source: Oil & Gas Journal
PRODUCTS PRICING
Prices by Quarter
2030405060708090
100
1Q 20
00
1Q 20
01
1Q 20
02
1Q 20
03
1Q 20
04
1Q 20
05
1Q 20
06
WTIGasoline
Prices by Quarter
0102030405060708090
1Q '0
0
1Q '0
1
1Q '0
2
1Q '0
3
1Q '0
4
1Q '0
5
1Q '0
6
WTIGasolineAsphalt
Asphalt vs Coker Feed Value
0102030405060708090
Jan-02
May
-02Sep
-02Ja
n-03M
ay-03
Sep-03
Jan-04
May
-04Sep
-04Ja
n-05M
ay-05
Sep-05
Jan-06
May
-06Sep
-06
WTIP&P MC Avggulf coast coker value
Economic Analysis – 2005 YE
Gasoline/Diesel PricingGasoline/Diesel Pricing
Jan., 06 Price: $70.00/BBLJan., 06 Price: $70.00/BBLLess Distribution: 6.00/BBLLess Distribution: 6.00/BBL
Net to Refinery: $64.00/BBLNet to Refinery: $64.00/BBL
Kansas Asphalt PricingKansas Asphalt Pricing
12/05 YTD: $32.94/BBL*12/05 YTD: $32.94/BBL*($35/Ton): 6.25/BBL($35/Ton): 6.25/BBL
$26.69/BBL$26.69/BBL
Lost Value: $37.31/BBLLost Value: $37.31/BBL
** Source Source –– Poten & PartnersPoten & Partners
Coking Economics – 2005 YE30,000 BBLS/Day Asphalt Production30,000 BBLS/Day Asphalt ProductionX 70%X 70% Gasoil ProductionGasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel21,000 BBLS Gasoil for Gasoline/DieselX $37.31X $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 PricingGasoline/Diesel Pricing
Jan., 07 Price: $62.75/BBLJan., 07 Price: $62.75/BBLLess Distribution: 6.00/BBLLess Distribution: 6.00/BBL
Net to Refinery: $56.75/BBLNet to Refinery: $56.75/BBL
Kansas Asphalt PricingKansas Asphalt Pricing
12/06 MTD: $49.11/BBL*12/06 MTD: $49.11/BBL*($35/Ton): 6.25/BBL($35/Ton): 6.25/BBL
$42.86/BBL$42.86/BBL
Lost Value: $13.89/BBLLost Value: $13.89/BBL
** Source Source –– Poten & PartnersPoten & Partners
Coking Economics – Recent Update
30,000 BBLS/Day Asphalt Production30,000 BBLS/Day Asphalt ProductionX 70%X 70% Gasoil ProductionGasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel21,000 BBLS Gasoil for Gasoline/DieselX $13.89X $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
Current Realities
Crude production at maximum rates based on Crude production at maximum rates based on exiting infrastructureexiting infrastructureU.S. refining running at maximum capacityU.S. refining running at maximum capacityNo new refineries in the near termNo new refineries in the near termExisting refinery expansions must fill gapExisting refinery expansions must fill gapIncrease crude capacity and conversion Increase crude capacity and conversion capabilities to meet light product demandcapabilities to meet light product demandAsphalt must keep pace with conversion feed Asphalt must keep pace with conversion feed values to encourage productionvalues to encourage productionAsphalt not as politically charged as fuelsAsphalt not as politically charged as fuels
Factors Influencing Asphalt Price
Absolute price of crude (WTI benchmark)Absolute price of crude (WTI benchmark)Light/Heavy crude price differentialLight/Heavy crude price differentialLight product Light product ““crack spreadcrack spread””Coking economicsCoking economicsImpact of clean fuels (sweet Impact of clean fuels (sweet crudescrudes))Heavy crude availability (Venezuela)Heavy crude availability (Venezuela)Transportation costsTransportation costsSupply/DemandSupply/Demand
Future For Asphalt
More heavy crude being run (availability and price)More heavy crude being run (availability and price)Clean fuels capital behind refiners, upClean fuels capital behind refiners, up--graders next?graders next?Asphalt is more expensive in a $60.00+ crude worldAsphalt is more expensive in a $60.00+ crude worldAsphalt has to trend faster with crude oil pricesAsphalt has to trend faster with crude oil pricesAsphalt has to be more competitive with light productsAsphalt has to be more competitive with light productsTransportation costs rising Transportation costs rising –– Rail, Barge, TerminallingRail, Barge, TerminallingRefiners less willing to shoulder price riskRefiners less willing to shoulder price riskState asphalt price indexes reduce supplier/contractor risk State asphalt price indexes reduce supplier/contractor risk
QUESTIONS
Worldwide Coker Additions
Refinery Coker Additions Refinery Coker Additions –– 1,570M Barrels1,570M BarrelsCrude Crude UpgradersUpgraders -- 1,214M1,214MTotal Total ResidResid Destruction Destruction -- 2,784M*2,784M*
*Reduces world asphalt and #6 oil supply*Reduces world asphalt and #6 oil supplySource Source –– Argus Asphalt ReportArgus Asphalt Report
Light-Heavy Product Price Spread Drives Refinery Investment Cycle
0
5
10
15
20
25
30
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
1995-2000Six New Cokers