condensate markets, export & takeaway capacity 2014 - final

© 2014, Genscape Incorporated. All rights [email protected] US: +1 502 583 3435 | EU: +31 20 524 4089

Revealing Demand Segments and

Specifications to Identify and Quantify Market

Opportunities for Different Condensate Grades

Jodi Quinnell, Manager, Crude Oil Analytics – Genscape

Eric Peterson, Senior Business Analyst – ARB Midstream

October 22, 2014

© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and

Quantify Market Opportunities for Different Condensate Grades2

Agenda

Condensate Supply

• Supply Regions

• Quantity and Quality of the Production

• Impact of Recent Price Drop on Production

Condensate Demand

• Splitters, Refining Demand and Diluent

• Eagle Ford and Corpus Balance

• Additional Demand Needed to Balance Market



Genscape’s Mission: Providing Transparency

Genscape’s mission is to

ensure greater transparency

in the commodities and energy

markets by providing the most

accurate and complete

fundamental data possible.

Price

Quantity

Supply

Demand

Fundamental Data includes:

• Production and Production Capacity

• Storage Levels and Storage Capacity

• Transportation Capacity and Volumes



Genscape: Crude Oil Supply Chain

Supply &

Production

Acquisition &

Storage

Primary

Distribution

Product

Storage

End Consumer

Demand

Secondary

Distribution

How much oil will

be produced?

How much oil is

already sitting in

storage?

How much oil is

going to this port?

How much oil is

ready for export?

How much oil is

sitting on tankers?

How much do

customers want?

While others estimate, Genscape monitors and measures real-time production at every point of the supply chain.



What is Condensate?

Condensate is a low-density mixture of hydrocarbon liquids that are present as gaseous components

in the raw natural gas produced from many natural gas and oil fields. It condenses out of the raw gas

if the temperature is reduced to below the hydrocarbon dew point temperature of the raw gas.

Condensate is also referred to as gas condensate, or sometimes natural gasoline because it contains

hydrocarbons within the gasoline boiling range.

• Lease Condensate- Light liquid hydrocarbons recovered from lease separators or field facilities at

associated and non-associated natural gas wells. Mostly pentanes and heavier hydrocarbons.

Normally enters the crude oil stream after production.

• Plant Condensate- Liquid hydrocarbons recovered at inlet separators or scrubbers in natural gas

processing plants at atmospheric pressure and ambient temperatures. Mostly pentanes and heavier

hydrocarbons.

Source: Wikipedia, EIA



Oil and Horizontal Rigs At Near All Time Highs

Source: Spring Rock, Rig Data

Total U.S. Rigs Total Rigs by Play

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

No

. o

f R

igs

Gas Oil Horz

0

100

200

300

400

500

600

No

. o

f R

igs

Eagle Ford Permian Bakken Niobrara



$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

0

200

400

600

800

1000

1200

1400

1600

1800

$/b

bl

No

. o

f R

igs

Oil Rig Forecast 9/19 Oil Rig Forecast 10/10 Oil Prices 9/19 Oil Prices 10/10

Rigs Forecasted to Decline Through Forecast Period..

But Will Still Be Sufficient To Grow Production

Source: Spring Rock, Rig Data

Forecast



U.S. and Canadian Crude Oil Production (Year-on-Year Changes)

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 2015 2016 2017 2018

Mb

/d

U.S. CanadaSource: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices



U.S. Production (crude oil + lease condensate) over 11 million b/d by year

end 2019, 65% of that is light and condensate

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Mb

/d

Heavy (<22°) Intermediate (>22° and <38°) Light (>38° and <45°) Condensate (>45°) Not Reported

~65%

Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices

2.8

MM

b/d



Higher the crude API generally the more light end material yields

0

5

10

15

20

25

30

35

40

45

50

API C1 to C4 Naphtha Middle Distillates Gas Oil AtmosphericResidue

% Y

ield

or

AP

I

Venez Merey

Canadian Heavy

Mexican Maya

Bonny Light

Angola Soyo

Bakken

Eagle Ford



Eagle Ford region largest contributor to overall condensate growth, but

other areas also producing condensate

-59

+281

+2,067

+614

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Heavy(<22°)

Intermediate(>22° and

<38°)

Light (>38°and <45°)

Condensate(>45°)

Mb

/d

2014

2019

0

50

100

150

200

250

300

350

400

Mb

/d

2014 to 2019 Growth By Play




S. Texas Production (crude oil + lease condensate).. Over 2.7 million b/d by 2019, 88% of

that is light and condensate, suited for refining and or/splitting

-

500

1,000

1,500

2,000

2,500

3,000

Mb

/d

Heavy (<22°) Intermediate (>22° and <38°)

Light (>38° and <45°) Condensate (>45°)


1.1

MM

b/d

~88%

0

200

400

600

800

1,000

1,200

1,400

1,600

Mb

/d

2014

2019



“We’re working on options to handle the growing light

crude production in the Delaware Basin in Southeast New

Mexico in order to preserve the Permian crude qualities in

the Midland Basin.” –OXY 2Q Earnings Call

“In the Delaware Basin, we commenced production on

two high rate oil wells targeting the Delaware Sands.

Initial 30 day production from these two wells averaged in

excess of 1,000 BOE per day and consisted of nearly 90%

light oil.” –Devon 1Q Earnings Call

Is Permian production getting lighter with increased horizontal drilling?

0%

10%

20%

30%

40%

50%

60%

70%

Perc

en

tag

e o

f P

rod

uc

tio

n

Horz

Ver

0%

10%

20%

30%

40%

50%

60%

70%

Perc

en

tag

e o

f P

rod

uc

tio

n

Delaware-Horz

Midland- Horz



Wattenberg Field in DJ Basin main source of condensate production

-

50

100

150

200

250

300

350

400

450

500

Mb

/d

DJ Basin Crude + Condensate

Heavy (<22°) Intermediate (>22° and <38°)

Light (>38° and <45°) Condensate (>45°)

19

0 M

b/d

~67%




Natural Gasoline competing with higher API condensates and expected to

add +100 Mb/d climbing to over 500 Mb/d by end of 2018

0

100

200

300

400

500

600M

b/d

PADD 1 PADD 2 PADD 3 PADD 4 PADD 5

10

0 M

b/d



What could impact the Condensate outlook?

900

1,100

1,300

1,500

1,700

1,900

2,100

Mb

/d

$90 Oil and $4 Gas

$80 Oil and $4 Gas

$70 Oil and $4 Gas

Current Forecast (as of 10/10 Crude Oil and Gas Prices)


Contact Us:

USALouisville

Genscape, Inc.445 E. Market Street Suite 200Louisville, KY 40202

EuropeAmsterdam

Genscape International, Inc.Damrak 20A1012 LH AmsterdamThe Netherlands

© 2014, Genscape Incorporated. All rights [email protected] US: +1 502 583 3435 | EU: +31 20 524 4089

Chris Shea

Sales Director, Oil

[email protected]

Tom DeMartino

Sales Director, Oil

[email protected]

To request a free trial or learn more, visit:

Genscape.com

Introduction to ARB Midstream

• Denver based infrastructure development company providing midstream solutions

• Strong financial support from private equity

• Utilize in-depth fundamental analysis to identify value propositions of our assets

• Emphasis on early stage development opportunities

• Developing a new crude-by-rail terminal• Niobrara Connector “NiCon”

• Centrally located in the DJ Basin

• Unit train capable

• Scheduled in-service date: Q3 2015

18

A look at current Eagle Ford takeaway infrastructure

19

776

247

1,469Houston

Texas City

Sweeney

Three Rivers

Corpus Christi

Majority of Eagle Ford production suited for refining and/or splitting

0

200

400

600

800

1,000

1,200

1,400

1,600

Intermediate Light 45°-55° 55°-65° 65°-75° 75°+

Mb

pd

2014 2019

20Source: Genscape

Refining and Blending

Gulf coast waterborne imports of light crude nearly pushed out entirely

2,360,064

1,934,527

1,102,223

1,794,404

1,567,247

127,322

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Heavy Intermediate Light

Wa

terb

orn

e Im

po

rts (

bp

d)

PADD 3 Waterborne Imports – Q1 2009 vs Q1 2014

Q1 2009 Q1 201422

Imports of Light +

Condensate have

declined by ~1MM bpd

since 2009. U.S.

production over that time

has grown by 2.6MM

Source: EIA

790

100

1,469

776

1,440

739642

1,876

247 St. James

Lake

Charles

Houston

Texas CityPort

ArthurSweeney

Corpus

Christi

Three

Rivers

Baton

Rouge

Over 8 MMbpd refining capacity in the gulf, but refinery configuration and competition from other basins limits market size for Eagle Ford

Source: Company Information, EIA

Imports into Corpus ~350,000 bpd, outbound movements have grown to over 720,000 bpd

(600,000)

(400,000)

(200,000)

-

200,000

400,000

600,000

800,000

Imp

ort

s v

s E

xp

ort

s (

bp

d)

Port of Corpus Christi Crude Movements

Condensate - In Condensate - Out Crude - In Crude - Out

24Source: Port of Corpus Christi

Most barged volumes out of Corpus going to Gulf refiners, but a small percentage is heading to eastern seaboard

25

Texas City

HoustonPort Arthur St. James

Baton

Rouge

Corpus

ChristiEast Coast

Source: Clipper Data, EIA

Exports

Splitters

Co

nd

en

sa

te S

plitt

er

Condensate

LPGs

3-7%

Naphtha

30-35%

Distillate

30-35%

Bottoms

20-25%

Splitters separate the condensate feedstock into several streams

Gulf Coast splitter capacity reaches 460,000 bpd by 2018

28

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Ca

pa

city (

bp

d)

BASF/Total KM1 Castleton KM2 Martin Targa Trafigura

Source: Company Information, Argus

The Corpus market can handle another 400,000 bpd of additional demand above and beyond current exports and splitters that have been announced to date

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Supply Demand

Su

pp

ly &

De

ma

nd

(b

pd

)

Corpus Christi Supply-Demand Balance(2018)

Additional Demand

Houston Pipes

CC Barge/Ship

CC Splitters

CC Refining

29

Diluent

30

MT

MI

UT

WA

OR

NV

CA

AZ NM

KSCO

ID

ND

SD

NE

OKAR

LA

MS

AL

GA

FL

SC

NC

VA

WV

ME

VT

NY

PA

MN

IA

MO

WI

TN

OH

NH

MA

RIWY

KY

INIL

TX

Routes to Edmonton:

1. Capline to Chicap, Chicap to

Southern Lights, Southern

Lights to Hardisty or

Edmonton

2. KMCC to Explorer to Cochin

3. Rail: Mont Belvieu to

Edmonton

Edmonton

123

Diluent Routes to Edmonton

Canadian Imports of diluent to exceed 500,000 bpd by 2017

32

-

100

200

300

400

500

600

700

Can

ada

Sup

ply

/De

man

d (

Mb

/d)

Canada Diluent Supply/Demand

Canadian Production Enbridge Southern Lights KM Cochin Imports - Rail Demand - Diluent

Conclusions

• U.S. Condensate Supply Continues to Grow Rapidly

• Crude oil and lease condensate production from South Texas forecast to exceed 2.45 million bpd by 2018

• Incremental increase of 950kbpd

• U.S. Supply is Mostly Super Light and Condensate

• 65% of the production is superlight crude oil and condensate

• STX Takeaway Capacity Not an Issue

• Plenty of access to the various markets

• Glut Hits Corpus, Various Sources of Demand

• Refining and Blending

• Splitters

• Diluent

• Additional demand required to balance Corpus market by 2018

33

Eric Peterson

Senior Business Analyst

[email protected]

(208) 403-3742

www.arbmidstream.com

condensate markets, export & takeaway capacity 2014 - final

Documents

gas condensate

revealing demand segments

genscape incorporated

different condensate

refining demand

market opportunities

raw natural gas

raw gas