pipeline capacity and the crude differential -...

Pipeline Capacity and the Crude Differential

A Presentation to the Wyoming Pipeline Authority

Tuesday, April 25, 2006

Reno Jct., WY

Clearbrook, MN

Guernsey, WYCasper, WYSinclair 22,500

Salt Lake City, UTBig West 25,000ChevronTexaco 45,000Holly Corp 25,000Silver Eagle Refining 12,500Tesoro 60,000

Rawlins, WYSinclair 72,000

Denver, COSuncor 88,000

Mandan, NDTesoro 58,000Billings, MT

ConocoPhillips 58,000ExxonMobil 60,000Cenex 56,000 St. Paul, MN

Flint Hills Resources 298,000MarathonAshland 70,000

Hardisty, AB

Cushing, OK

Cheyenne, WYFrontier 52,000

Regina, SK

Newcastle, WYWyoming Refining 12,500

Great Falls, MTMontana Refining 8,200

Chicago, ILExxonMobil 238,000BP PLC 399,000CITGO 159,000

Wood River, ILConocoPhillips 306,000McPherson, KS

NCRA 79,000

El Dorado, KSFrontier 110,000

Other CarriersBelle Fourche & Bridger Systems

Major Pipelines & Refining Capacities

Agenda1. Problem Definition: Geographic Market Risk

– Crude production in the Rocky Mountains is at risk of shutting in due to lack of pipeline space

– Some crude production in the Rocky Mountains receives large discounts because it lacks market access

2. Problem Cause3. Problem Development4. Proposed Solutions and the Problems they solve

Supply• Increased domestic production causes exports to lower paying regions• Incremental domestic production and incremental Canadian imports

compete for pipeline space Demand• Seasonal slack decreases demand• Expected and long term unexpected refinery shutdowns shock demandOther• Quality differences• Pipeline constraints on northern and southern exits from Rocky

Mountains

PROBLEM CAUSEPROBLEM CAUSE

Summary of Causes

Two North Dakotas

North Dakota LightWyoming SweetBenchmark

Guernsey, Mandan & ClearbrookGuernseyMarket

38-4231-33Gravity ~61,000 bpd~43,000 bpdVolume

All othersBowman County

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Jan-

01

Mar

-01

May

-01

Jul-0

1

Sep-

01

Nov

-01

Jan-

02

Mar

-02

May

-02

Jul-0

2

Sep-

02

Nov

-02

Jan-

03

Mar

-03

May

-03

Jul-0

3

Sep-

03

Nov

-03

Jan-

04

Mar

-04

May

-04

Jul-0

4

Sep-

04

Nov

-04

Jan-

05

Mar

-05

May

-05

Jul-0

5

Sep-

05

Nov

-05

Bar

rels

per

Mon

th

Bow man Billings Bottineau Burke Divide Dunn Golden Valley McKenzie Stark Williams

BOWMAN



FALLON

RICHLAND

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Two Montanas

NDS or LSWyoming SweetBenchmark

Guernsey, Mandan & ClearbrookGuernseyMarket

Dramatic IncreaseSteady IncreaseTrend~56,000~20,000 bpdVolumeRichland Fallon


Reno Jct., WY





Mandan, Tesoro 58,000Billings, MT

ConocoPhillips 58,000ExxonMobil 60,000Cenex 56,000



Wyoming Topics

•Two Markets: Casper/ Guernsey

•Wyoming produces 140,000 bpd of General Sour, Asphaltic, Condensate and Powder River Basin sweet

•Salt Creek CO2 Flood + 20-25mbpd

•Southwest Wyoming Condensate Production

•Future tertiary projects in the Big Horn and horizontal plays in the Powder River Basins may be in jeopardy

Wyoming Production

Powder River

Ft. Laramie/ Guernsey

Little Missouri

Baker

Wyoming

MontanaNorth Dakota

South Dakota

Nebraska

Alexander

Billings

Mandan

Rawlins

Cheyenne

Newcastle

Casper

Osage

Enbridge 80,000

RMPL 15,000

RM

PL 15,000

Poplar 40,000Express 282,000

Frontier 65,000

RMPL 40,000

IN THE PAST YEAR, BOTH NORTHERN AND SOUTHERN ROCKY MOUNTAINS EXITS HAVE CURTAILED NOMINATIONS•Enbridge becomes apportioned on February 2005

•Platte becomes apportioned on December 2005, seven months after completing Express expansion


Platte 144,000

South DakotaBowman County Production

Ft. Laramie/ Guernsey

Wyoming

MontanaNorth Dakota

Nebraska

Billings

Mandan

Rawlins

Cheyenne

Newcastle

Casper

Sources: Montana Oil & Gas Commission; North Dakota Industrial Commission, Energy Information Administration

Montana ProductionNorth Dakota Production without Bowman County


A general statement

•Richland County’s problem is lack of space on Enbridge and lack of access to Salt Lake

•Wyoming’s, Bowman County’s and Fallon County’s problem is lack of capacity leaving Guernsey, WY

Wyoming Production


Supply

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Jan-

04

Feb-

04

Mar

-04

Apr-

04

May

-04

Jun-

04

Jul-0

4

Aug-

04

Sep-

04

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb-

05

Mar

-05

Apr-

05

May

-05

Jun-

05

Jul-0

5

Aug-

05

Sep-

05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

PADD IV Production PADD IV Foreign Imports (Canadian) PADD IV Domestic Imports

14% Overall Increase due to :-50,000 bpd or 17% increase in PADD IV Production

-20,000 bpd or 73% increase in PADD II Imports

-13,000 bpd or 5% increase in Canadian Imports Processed in PADD IV

Source: Energy Information Administration

SOLUTIONSSOLUTIONS

Near Term Solutions

Reno Jct., WY

Cle







Hardisty, AB

Cushi


Regina, SK



McPhersNCRA 79,000

El DorFrontier 11

Segregate Quality Streams to Guernsey •Currently in effect•Butte segregates Light Sweet Stream (LS) (.2%wt S 38+ API)

Segregate LS to Salt Lake City •6 months•Belle Fourche creates a new route for delivering LS to RMPL for delivery into Frontier PL at Casper

SOLUTIONSSOLUTIONS

Reno Jct., WY

Cle







Hardisty, AB

Cushi


Regina, SK



McPhersNCRA 79,000

El DorFrontier 11

•Build new pipeline leaving Guernsey to Cushing (2-3 Years) or other Midwest Destination

•Ties all Rocky Mountain production directly to NYMEX contract and reduces geographic market risk

•Many rumored projects…

•Enbridge increases capacity on North Dakota system (18 Months).

•Helps Richland County, MT production and proposed Bakken production in N.D.

•If Enbridge loops line from Alexander to Tioga, Belle Fourche could deliver more CCA barrels to Clearbrook Market.

Long Term Solutions

Pipeline Capacity and the Crude Differential

A Presentation to the Wyoming Pipeline Authority

Tuesday, April 25, 2006

pipeline capacity and the crude differential -...

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