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ASPHALT SUPPLY IN A ASPHALT SUPPLY IN A VOLATILE OIL WORLDVOLATILE OIL WORLD
Bill HaverlandBill HaverlandConocoPhillips CompanyConocoPhillips Company
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Issues to be DiscussedIssues to be Discussed
Crude Oil SupplyCrude Oil SupplyCrude Oil PricingCrude Oil PricingRefining CapacityRefining CapacityProducts SupplyProducts SupplyProducts PricingProducts PricingFuture of the IndustryFuture of the Industry
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Crude Oil Supply/DemandCrude Oil Supply/Demand
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Crude Oil SupplyCrude Oil Supply2008 Forecasted World 2008 Forecasted World
Crude & Gas Oil Crude & Gas Oil ProductionProduction
Millions of Barrels Per Day
2007 World Crude & Gas 2007 World Crude & Gas Oil ProductionOil Production
Millions of Barrels Per DayMillions of Barrels Per DayMillions of Barrels Per Day
Non-OPEC
OPEC
FSU
36.7
36.6
12.6
Non-OPEC
OPEC
FSU
37.3
37.2
13.0
Total: 86 MMB/D Total: 87.5 MMB/DSource: US DOE
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Crude Oil SupplyCrude Oil SupplyThe world will rely on OPEC to increase The world will rely on OPEC to increase production to meet the 2008 Demandproduction to meet the 2008 DemandOnly Saudi Arabia, Kuwait, & UAE have Only Saudi Arabia, Kuwait, & UAE have notable reliable spare capacitynotable reliable spare capacityNigeria and Iraq have capability to Nigeria and Iraq have capability to increase supply, but are likely to remain increase supply, but are likely to remain unreliableunreliableNonNon--OPEC supply vs. projections have OPEC supply vs. projections have disappointed in recent yearsdisappointed in recent yearsCanada is becoming increasingly Canada is becoming increasingly importantimportant
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Crude Oil DemandCrude Oil Demand
World demand has risen by 8.4 MMBD World demand has risen by 8.4 MMBD (10+%) over the past 5 years(10+%) over the past 5 years2008 Projected Demand at 87.5 MMBD, 2008 Projected Demand at 87.5 MMBD, within a couple million barrels per day of within a couple million barrels per day of the world daily deliverable capacitythe world daily deliverable capacityVulnerable to supply disruptions caused by Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political storms, accidents, breakdowns, political unrestunrestDriven by developing countriesDriven by developing countries
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Crude Oil DemandCrude Oil Demand(MBPD)(MBPD)
Source: Goldman Sachs/IEA
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Crude Oil PricesCrude Oil Prices
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WTI Price by QuarterWTI Price by Quarter
0102030405060708090
100
1Q 20
01
1Q 20
02
1Q 20
03
1Q 20
04
1Q 20
05
1Q 20
06
1Q 20
07
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LightLight--Heavy Crude PricesHeavy Crude Prices
0
10
20
30
40
50
60
70
80
90
100
1Q 02
3Q 02
1Q 03
3Q 03
1Q 04
3Q 04
1Q 05
3Q 05
1Q 06
3Q 06
1Q 07
3Q 07
WTIMAYABOWWTI-BOW
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RefiningRefining
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Topping RefineryTopping Refinery
DUCRUDE OIL
GASES NAPHTHA AND
650-
650+
Not A RefineryReally Just A
CrudeDistiller
GASOIL FEEDSTOCKS
6OIL or ASPHALT(if heavy crude)
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Simple RefinerySimple Refinery
650- CRUNHT
KHT
DHT
GASES MOGAS
JET/KERO
NO.2
6OIL or ASPHALT(if heavy crude)
DUCRUDE OIL
650+
“Hydroskimming” Refinery,many exist all over the
world
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CCU CCU -- ““ComplexComplex”” RefineryRefinery
CRUNHT
KHT
DHT
ALKY
CCU
DUCRUDE
OIL
GASES
VAC
GASES650-1050
MOGAS
MOGAS
JET/KERO
2OILMOGAS
650-
650+
ASPHALT
GASOLINEGASOIL
1050+
2OIL
MOGAS
6OIL
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CCU/HCU/Coker CCU/HCU/Coker -- ““Very ComplexVery Complex””RefineryRefinery
ISOM
CRUNHT
KHT
DHT
HCU
ALKY
CCU
DU
GASES
GASES
VAC
GASES
650-750
750-1050
COKER
GASES
CRUDE OIL
COKE
H2 PLANT
TCU/VIS
DEASPHALTER
MOGAS
MOGAS
JET/KERO
MOGAS
MOGAS
MOGAS
2OIL
MTBE
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Refinery Yield Refinery Yield (% of Crude Intake)(% 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
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U. S. Refining CapacityU. S. Refining Capacity
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
1980 1995 2000 2006
# Of RefineriesCrude Dist Cap
Last New U. S. Refinery Built in 1976 Source: Oil & Gas Journal
319
175 158131
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U. S. Asphalt Refining CapacityU. 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
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U. S. Refining Coking CapacityU. S. Refining Coking Capacity
50
5856
1.681.96
2.33
46
48
50
52
54
56
58
60
1995 2000 20060
0.5
1
1.5
2
2.5# Refineries w/CokersCoker Capacity MBPD
Source: Oil & Gas Journal & EIA
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Historical Asphalt Historical Asphalt Supply/DemandSupply/Demand
Millions Tons Millions Tons -- LiquidLiquid
0
10
20
30
40
50
60
1980 1995 2000 2003 2005 2006
SupplyDemand
Source: Oil & Gas Journal/Asphalt Institute
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Crude/Product PricesCrude/Product Prices
0102030405060708090
100
1Q'02
1Q'03
1Q'04
1Q'05
1Q'06
1Q'07
WTIGasolineAsphaltGC 3%
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Coking Economic ExampleCoking Economic Example
Gasoline/Diesel PricingGasoline/Diesel Pricing
DEC., 07 Price: $98.50/BBLDEC., 07 Price: $98.50/BBLLess Distribution: $6.00/BBLLess Distribution: $6.00/BBL
Net to Refinery: $92.50/BBLNet to Refinery: $92.50/BBL
70% Coker Yield:70% Coker Yield: 21,000 BPD21,000 BPD
Gasoline/Gasoline/DslDsl Net: $1,942,500Net: $1,942,500
Kansas City Asphalt PricingKansas City Asphalt Pricing
DEC 07:DEC 07: $50.90/BBL*$50.90/BBL*($45/Ton): $8.04/BBL($45/Ton): $8.04/BBL
$42.86/BBL$42.86/BBL
Asphalt Make 30,000 BPDAsphalt Make 30,000 BPD
Asphalt Net $1,285,800Asphalt Net $1,285,800
Lost Value: $656,700 per dayLost Value: $656,700 per day
** Source Source –– Poten & PartnersPoten & Partners
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Current Coking Economic Example Current Coking Economic Example ContinuedContinued
$656,700 per day added $656,700 per day added marginmargin
$1 Billion / $656,700 = 1,523 $1 Billion / $656,700 = 1,523 days (4.2 years payoff) days (4.2 years payoff)
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U.S. Coker Construction U.S. Coker Construction Projects 2005 Projects 2005 -- 20112011
Planning, Engineering, or Planning, Engineering, or Construction PhaseConstruction PhaseTotal Refineries: 360 MB per dayTotal Refineries: 360 MB per dayAsphalt Refineries: 197 MB per dayAsphalt Refineries: 197 MB per day
Source: Argus Asphalt ReportSource: Argus Asphalt Report
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FUTURE OF THE FUTURE OF THE INDUSTRYINDUSTRY
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Current RealitiesCurrent RealitiesCrude oil and refined products are a part of a Crude oil and refined products are a part of a global marketglobal marketCrude production is near maximum rates based Crude production is near maximum rates based on existing infrastructureon existing infrastructureU.S. refining running at maximum capacity (less U.S. refining running at maximum capacity (less turnaround & unplanned down time activities)turnaround & unplanned down time activities)No new refineries in the near termNo new refineries in the near termMany refinery expansions plannedMany refinery expansions plannedAsphalt must keep pace with conversion feed Asphalt must keep pace with conversion feed values to encourage productionvalues to encourage productionItIt’’s all about hydrocarbon values all about hydrocarbon value
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Factors Influencing Asphalt Factors Influencing Asphalt PricePrice
Absolute price of crude (WTI)Absolute price of crude (WTI)Light/Heavy crude price differential Light/Heavy crude price differential and heavy crude availabilityand heavy crude availabilityRelative prices of other refined Relative prices of other refined products (gasoline, 6 Oil)products (gasoline, 6 Oil)Refinery configuration/reliabilityRefinery configuration/reliabilityLogistical costsLogistical costsSupply/demandSupply/demand
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Future For AsphaltFuture For AsphaltMany refinery expansion/coker projects Many refinery expansion/coker projects plannedplannedMore heavy crude being run More heavy crude being run Asphalt is more expensive in a $90.00+ crude Asphalt is more expensive in a $90.00+ crude worldworldAsphalt has to trend faster and be more Asphalt has to trend faster and be more competitive with product/crude pricescompetitive with product/crude pricesTransportation costs rising Transportation costs rising –– Rail, Barge, Rail, Barge, TerminallingTerminallingHigh volatility will dominate the market High volatility will dominate the market
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QUESTIONSQUESTIONS